What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-23 · 310 added, 448 removed, 966 unchanged (44% of the section changed)

34 unchanged sentences

Description of the

Matter As discussed in Note 2, the Company recognizes revenue from the sale of communications services offered through software solutions, which are generally derived from usage and monthly service fees.

Usage revenue includes voice communication (primarily driven by inbound minutes, outbound minutes and toll-free minutes) and messaging communication (driven by the number of messages) that traverse the platform and network.

Revenue for these services is recognized in the period the usage occurs.

Monthly service fees include the provisioning and management of phone numbers and emergency services access, which is recognized on a ratable basis as the service is provided, which is typically one month.

The processing and recording of revenue from voice and messaging data usage is highly automated and involves capturing and pricing significant volumes of data across multiple systems.

Similarly, the provisioning and management of phone numbers and emergency services access is also highly automated and involves capturing and pricing the quantity of phone numbers in service and the quantity of phone numbers with emergency services access during the month.

Matter As discussed in Note 2, the Company recognizes revenue from the sale of cloud communications services offered through software solutions, which are predominantly derived from (i) reoccurring sources such as per minute voice usage and voice calling, per text message usage and other usage services and fees and (ii) monthly recurring charges arising from phone number services, 911-enabled phone number services, messaging services and other services.

Revenue for reoccurring fees earned from customers accessing and using the Company’s communications platform is recognized in the period the traffic traverses the Company’s network.

Revenue from recurring fees is recognized on a ratable basis as the service is provided, which is typically one month.

The processing and recording of revenue from reoccurring sources and recurring charges is highly automated and involves capturing and pricing significant volumes of data across multiple systems.

Given the complex automated systems utilized to capture, process, and ultimately record revenue, performing procedures to audit revenue required a high degree of auditor judgment and extensive audit effort.

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This included involvement of audit professionals with significant experience in the use of information technology (IT) to support business operations and related controls.

With the involvement of our IT professionals, we identified the significant systems used to capture and process voice usage, phone number services, emergency services access, and messaging volume, and tested the IT general controls over those systems, including testing of user access and change management controls.

In addition, our audit procedures included testing of other manual reconciliation and analytical review controls designed to determine the accuracy and completeness of data processed and transferred across multiple platforms in connection with the recognition of revenue for voice and messaging usage, the quantity of phone numbers in service, and the quantity of phone numbers with emergency services access during the period.

To test the Company’s revenue, our audit procedures included, among other procedures, performing data analytics by extracting data from the Company’s systems to evaluate the completeness and accuracy of recorded revenues, testing a sample of revenue transactions, which included evaluating the transaction price based on inspection of customer contracts and approved rate tables, as well as testing the mathematical accuracy of the recorded revenue based on the voice and messaging usage, as well as the quantity of phone numbers in service and quantity of phone numbers with emergency services access during the period.

We have served as the Company’s auditor since 2012.

With the involvement of our IT professionals, we tested the IT application and general controls including user access and change management controls over the significant systems used to capture and process voice usage, phone number services, 911 services access, messaging services and other services.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2012.

Raleigh, North Carolina

32 unchanged sentences

Cash and cash equivalents $ 131,987 $ 113,641

Restricted cash 981 836

Marketable securities 21,488 71,231

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10,000,000 shares authorized;

0 shares issued

0 shares issued and outstanding

Class A voting common stock:

$ 0.001 par value;

100,000,000 shares authorized as of December 31, 2022 and 2021;

23,379,000 and 23,177,988 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Class B voting common stock, $ 0.001 par value;

20,000,000 shares authorized as of December 31, 2022 and 2021;

1,965,170 shares issued and outstanding as of December 31, 2022 and 2021

100,000,000 shares authorized;

24,206,140 and 23,379,000 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Class B voting common stock:

$ 0.001 par value;

20,000,000 shares authorized;

1,958,028 and 1,965,170 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 391,048 364,913

20 unchanged sentences

Net gain on extinguishment of debt 12,767 40,205 —

Gain on business interruption insurance recoveries 4,000 — —

Interest expense, net ( 808 ) ( 3,048 ) ( 28,784 )

1 unchanged sentence

Total other income (expense), net 16,154 41,630 ( 28,958 )

Income (loss) before income taxes 17,306 ( 31,195 ) ( 28,972 )

Income tax benefit (provision) 2,264 3,833 ( 15,005 )

Net income (loss) $ 19,570 $ ( 27,362 ) $ ( 43,977 )

(Loss) income before income taxes ( 19,303 ) 17,306 ( 31,195 )

Income tax benefit 2,960 2,264 3,833

Net (loss) income $ ( 16,343 ) $ 19,570 $ ( 27,362 )

Earnings per share:

Net income (loss) per share:

Net (loss) income per share:

Basic $ ( 0.64 ) $ 0.77 $ ( 1.09 )

Diluted $ ( 0.64 ) $ ( 0.48 ) $ ( 1.09 )

Numerator used to compute net income (loss) per share:

Numerator used to compute net (loss) income per share:

Basic $ ( 16,343 ) $ 19,570 $ ( 27,362 )

9 unchanged sentences

2023 2022 2021

Net income (loss) $ 19,570 $ ( 27,362 ) $ ( 43,977 )

Other comprehensive (loss) income

Unrealized gain on marketable securities, net 314 — —

Foreign currency translation ( 31,855 ) ( 41,150 ) 27,900

Unrealized gain on employee benefit plan, net 367 169 —

Total other comprehensive (loss) income ( 31,174 ) ( 40,981 ) 27,900

Net (loss) income $ ( 16,343 ) $ 19,570 $ ( 27,362 )

Other comprehensive income (loss)

Unrealized (loss) gain on marketable securities, net ( 248 ) 314 —

Foreign currency translation, net 15,698 ( 31,855 ) ( 41,150 )

Unrealized (loss) gain on employee benefit plan, net ( 30 ) 367 169

Total other comprehensive income (loss) 15,420 ( 31,174 ) ( 40,981 )

Total comprehensive loss $ ( 923 ) $ ( 11,604 ) $ ( 68,343 )

15 unchanged sentences

Conversion of Class B voting common stock to Class A voting common stock 530,955 1 ( 530,955 ) — — — — 1

Equity consideration for Voxbone acquisition 663,394 1 — — 106,379 — — 106,380

Foreign currency translation — — — — — ( 41,150 ) — ( 41,150 )

Unrealized gain on employee benefit pension plan — — — — — 169 — 169

Stock-based compensation — — — — 14,537 — — 14,537

1 unchanged sentence

Balance at December 31, 2021 23,177,988 23 1,965,170 2 502,477 ( 13,040 ) ( 76,867 ) 412,595

Issuance of debt conversion option — — — — 66,908 — — 66,908

Debt conversion option issuance costs, net of tax — — — — ( 2,019 ) — — ( 2,019 )

Capped call option purchase price — — — — ( 25,500 ) — — ( 25,500 )

Exercises of vested stock options 20,468 — — — 163 — — 163

1 unchanged sentence

Equity awards withheld for tax liability ( 50,690 ) — — — ( 2,134 ) — — ( 2,134 )

Conversion of Class B voting common stock to Class A voting common stock 530,955 1 ( 530,955 ) — — — — 1

Adjustment to opening retained earnings due to adoption of ASU 2020-06 — — — — ( 156,248 ) — 8,750 ( 147,498 )

Unrealized gain on marketable securities — — — — — 314 — 314

Foreign currency translation — — — — — ( 31,855 ) — ( 31,855 )

1 unchanged sentence

Stock-based compensation — — — — 20,655 — — 20,655

Net loss — — — — — — ( 27,362 ) ( 27,362 )

Net income — — — — — — 19,570 19,570

Balance at December 31, 2022 23,379,000 23 1,965,170 2 364,913 ( 44,214 ) ( 48,547 ) 272,177

2 unchanged sentences

Equity awards withheld for tax liability ( 46,313 ) — — — ( 941 ) — — ( 941 )

Adjustment to opening retained earnings due to adoption of ASU 2020-06 — — — — ( 156,248 ) — 8,750 ( 147,498 )

Unrealized gain on marketable securities — — — — — 314 — 314

Conversion of Class B voting common stock to Class A voting common stock 7,142 — ( 7,142 ) — — — — —

Unrealized loss on marketable securities — — — — — ( 248 ) — ( 248 )

Foreign currency translation — — — — — 15,698 — 15,698

Unrealized gain on employee benefit pension plan — — — — — 367 — 367

Unrealized loss on employee benefit pension plan — — — — — ( 30 ) — ( 30 )

Stock-based compensation — — — — 26,662 — — 26,662

BANDWIDTH INC.

5 unchanged sentences

Shares Amount Shares Amount

Stock-based compensation — — — — 20,655 — — 20,655

Net income — — — — — — 19,570 19,570

Net loss — — — — — — ( 16,343 ) ( 16,343 )

Balance at December 31, 2023 24,206,140 $ 24 1,958,028 $ 2 $ 391,048 $ ( 28,794 ) $ ( 64,890 ) $ 297,390

6 unchanged sentences

Cash flows from operating activities

Net income (loss) $ 19,570 $ ( 27,362 ) $ ( 43,977 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Net (loss) income $ ( 16,343 ) $ 19,570 $ ( 27,362 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities

Depreciation and amortization 41,717 35,599 36,642

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Proceeds from sales and maturities of marketable securities 130,120 108,681 —

Purchase of other investments — — ( 230,780 )

Proceeds from sales and maturities of other investments — — 40,000

Proceeds from sale of business 1,253 1,558 —

Acquisition, net of cash acquired — — ( 400,493 )

Net cash (used in) provided by investing activities ( 133,449 ) 2,833 ( 455,085 )

Net cash provided by (used in) investing activities 30,849 ( 133,449 ) 2,833

Cash flows from financing activities

9 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash 610 881 189

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 217,667 ) 250,852 ( 103,567 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 17,685 ( 217,667 ) 250,852

Cash, cash equivalents, and restricted cash, beginning of period 114,622 332,289 81,437

Cash, cash equivalents, and restricted cash, end of period $ 132,307 $ 114,622 $ 332,289

Reconciliation of cash, cash equivalents, and restricted cash, end of period

Cash and cash equivalents $ 131,987 $ 113,641 $ 331,453

Restricted cash included in prepaid expenses and other current assets 320 981 836

Total cash, cash equivalents, and restricted cash, end of period $ 132,307 $ 114,622 $ 332,289

BANDWIDTH INC.

4 unchanged sentences

Supplemental disclosure of cash flow information

Cash paid for interest $ 18 $ 1,476 $ 579

Cash (received from) paid for interest $ ( 1,500 ) $ 18 $ 1,476

Cash paid for taxes $ 7,203 $ 3,932 $ 1,999

Right-of-use assets obtained in exchange for new operating lease liabilities $ 156,025 $ 3,421 $ 526

Property, plant and equipment obtained in exchange for new finance lease liabilities $ — $ — $ 462

Supplemental disclosure of noncash investing and financing activities

Purchase of property, plant and equipment, accrued but not paid $ 6,871 $ 1,741 $ 3,760

Lease incentive $ 5,791 $ 4,677 $ —

Value of common stock issued in acquisition $ — $ — $ 106,379

Acquisition holdback $ — $ — $ 8,595

Equity awards withheld for tax liabilities, accrued but not paid $ 121 $ 127 $ 247

Unrealized gain on marketable securities, accrued but not realized $ 314 $ — $ —

Acquisition of equipment through finance leases $ 147 $ 160 $ 113

Purchase of property and equipment through lease incentive $ 57,329 $ 5,791 $ 4,677

Purchase of property and equipment through use of escrow deposits $ 20,674 $ — $ —

See accompanying notes.

5 unchanged sentences

The Company’s headquarters are located in Raleigh, North Carolina.

The Company is an international cloud-based, software-powered communications platform-as-a-service (“CPaaS”) provider that enables enterprises to create, scale and operate voice or messaging communications services across any mobile application or connected device.

As a result of certain changes in the Company’s business during the quarter ended March 31, 2022, the Company re-evaluated its segment reporting and determined that one segment was appropriate, rather than the previously reported segments comprising “CPaaS” and “Other”.

The primary drivers for this change were the Company’s strategic alignment of its operating departments and the sale of legacy assets.

All previously reported segment information has been recast to conform with the one segment structure.

The Company is a global cloud-based, software-powered communications platform-as-a-service (“CPaaS”) provider that enables enterprises to create, scale and operate voice or messaging communications services across any mobile application or connected device.

Summary of Significant Accounting Policies

1 unchanged sentence

The consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Cost Alignment

During the quarter ended March 31, 2022, the Company changed its presentation of certain costs to align with benchmarked definitions of cost of revenue, research and development, sales and marketing, and general and administrative expenses.

As part of the benchmarked definitions, the Company has included allocations of facilities and shared IT costs based on employee headcount within the cost of revenue, research and development, sales and marketing, and general and administrative expense categories.

Additionally, the product management function is now included in research and development rather than general and administrative as previously reported and the customer billing and collections function and the amortization of acquired customer relationship intangible assets are now included in sales and marketing rather than general and administrative as previously reported.

Management believes use of the benchmarked definitions will increase comparability to peers and therefore usability of its financial statements.

All periods presented have been conformed to the current definitions of cost of revenue, research and development, sales and marketing, and general and administrative expenses.

There was no impact to revenue or net income for any periods presented due to the change in presentation.

The consolidated balance sheets, consolidated statements of changes in stockholders’ equity and consolidated statements of cash flows are not affected by these changes.

Notes to Consolidated Financial Statements (continued)

The following is a comparison of the change in costs to the prior period:

Year ended December 31, 2021 Year ended December 31, 2020

As reported As previously reported As reported As previously reported

(In thousands)

Statement of Operations

Cost of revenue $ 277,094 $ 272,384 $ 189,203 $ 185,252

Research and development 69,505 55,173 54,555 42,059

Sales and marketing 82,333 51,817 61,216 40,552

General and administrative 64,212 113,770 51,644 88,755

Reclassification

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The preparation of the Company’s consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the amounts reported in these financial statements and accompanying notes.

These estimates in the consolidated financial statements include, but are not limited to, allowance for doubtful accounts, reserve for expected credit losses, reserve for sales credits, recoverability of long lived and intangible assets, fair value of acquired intangible assets and goodwill, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability and equity components of the Company’s Convertible Notes (as defined herein), estimated period of benefit, valuation allowances on deferred tax assets, certain accrued expenses and contingencies, economic and demographic actuarial assumptions related to pension and other postretirement benefit costs and liabilities.

These estimates in the consolidated financial statements include, but are not limited to, allowance for doubtful accounts, reserve for expected credit losses, reserve for sales credits, recoverability of long lived and intangible assets, fair value of acquired intangible assets and goodwill, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability components of the Company’s Convertible Notes (as defined herein), estimated period of benefit, valuation allowances on deferred tax assets, certain accrued expenses and contingencies, economic and demographic actuarial assumptions related to pension and other postretirement benefit costs and liabilities.

Although the Company believes that the estimates it uses are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates.

5 unchanged sentences

• determination of the transaction price;

Notes to Consolidated Financial Statements (continued)

• allocation of the transaction price to the performance obligations in the contract;

• recognition of revenue, when, or as, the Company satisfies a performance obligation.

Notes to Consolidated Financial Statements (continued)

Nature of Products and Services

Revenue consists primarily of the sale of communications services offered through Application Programming Interface (“API”) software solutions to large enterprise, as well as small and medium-sized business, customers and is generally derived from usage and service fees.

Service fees include the provision and management of phone numbers and emergency services access.

The majority of the Company’s revenue is generated from reoccurring fees earned from customers accessing and using the Company’s communications platform.

Access to the Company’s communication platform is considered a series of distinct services with continuous transfer of control to the customer, comprising one performance obligation.

Reoccurring fees are recognized in revenue in the period the traffic traverses the Company’s network.

For the years ended December 31, 2022, 2021 and 2020, the revenue from reoccurring fees represented $ 445.7 million, $ 392.5 million, and $ 260.6 million of total revenue, respectively.

Revenue from recurring fees is recognized on a ratable basis as the service is provided, which is typically one month.

For the years ended December 31, 2022, 2021 and 2020, the revenue from recurring fees represented $ 116.9 million, $ 91.1 million and $ 76.5 million of total revenue, respectively.

The remaining $ 10.6 million, $ 7.3 million, and $ 6.0 million of revenue for the years ended December 31, 2022, 2021 and 2020, respectively, are generated from other miscellaneous services.

Infrequently, Bandwidth’s contracts with customers may include multiple performance obligations.

15 unchanged sentences

These costs are recorded within sales and marketing expenses.

Nature of Products and Services

Revenue consists primarily of two categories:

(1) cloud communications and (2) messaging surcharges, which are described and quantified below.

Year ended December 31,

2023 2022 2021

(In thousands)

Cloud communications $ 478,892 $ 474,576 $ 449,656

Messaging surcharges 122,225 98,576 41,251

Total revenue $ 601,117 $ 573,152 $ 490,907

Cloud Communications

Cloud communications revenue consists of the sale of communications services offered through Application Programming Interface (“API”) software solutions to customers and is derived from (i) reoccurring sources such as per minute voice usage and voice calling, per text message usage and other usage services and fees, and (ii) monthly recurring charges arising from phone number services, 911-enabled phone number services, messaging services and other services.

The majority of the Company’s cloud communications revenue is generated from reoccurring fees earned from customers accessing and using the Company’s communications platform.

Access to the Company’s communications platform is considered a series of distinct services with continuous transfer of control to the customer, comprising one performance obligation.

Reoccurring fees are recognized in revenue in the period the

Notes to Consolidated Financial Statements (continued)

traffic traverses the Company’s network.

For the years ended December 31, 2023, 2022 and 2021, the revenue from reoccurring cloud communications fees represented $ 346.9 million, $ 354.0 million, and $ 355.3 million of total revenue, respectively.

Revenue from recurring fees is recognized on a ratable basis as the service is provided, which is typically one month.

For the years ended December 31, 2023, 2022 and 2021, the revenue from recurring cloud communications fees represented $ 132.0 million, $ 120.6 million and $ 94.4 million of total revenue, respectively.

Messaging surcharges

Messaging surcharge revenue consists of pass-through messaging surcharges imposed by the major mobile carriers in North America and is recognized in revenue during the period in which the messaging traffic traverses the Company’s network.

Contract Assets and Liabilities

19 unchanged sentences

Personnel costs (including non-cash stock-based compensation expenses) arise for employees who are responsible for the delivery of services, and operations and maintenance of, the communications network.

Notes to Consolidated Financial Statements (continued)

Operating Expenses

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Sales and marketing expenses consist of salaries and related personnel costs, commissions, and costs related to advertising, marketing, brand awareness activities, sales support and professional services fees, and customer billing and collections functions.

Sales and marketing expenses include depreciation, amortization of acquired

Notes to Consolidated Financial Statements (continued)

customer relationship intangible assets, and allocated costs of facilities and information technology utilized by our sales and marketing staff.

Sales and marketing expenses include depreciation, amortization of acquired customer relationship intangible assets, and allocated costs of facilities and information technology utilized by our sales and marketing staff.

General and Administrative

8 unchanged sentences

The Company utilizes money market funds as an investment option and only invests in AAA rated funds.

Restricted Cash

Restricted cash consists primarily of employee withholding tax liability and employee benefits contributions not yet remitted.

The Company has classified this asset as a short-term asset in order to match the expected period of restriction.

Marketable Securities

11 unchanged sentences

There have been no impairment charges for any unrealized losses during the period.

The Company determines realized gains and losses on the sale of marketable securities using the specific identification method and records such gains and losses in other income (expense), net on the consolidated statements of operations.

The Company determines realized gains and losses on the sale of marketable securities using the specific identification

Notes to Consolidated Financial Statements (continued)

method and records such gains and losses in other income (expense), net on the consolidated statements of operations.

Accounts Receivable and Current Expected Credit Losses

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The Company regularly reviews the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, current economic trends, and reasonable and supportable forecasts about the future.

Relevant risk

Notes to Consolidated Financial Statements (continued)

characteristics include customer size and historical loss patterns.

Relevant risk characteristics include customer size and historical loss patterns.

Management has evaluated the expected credit losses related to trade accounts receivable and determined that allowances of approximately $ 1.1 million and $ 1.2 million for uncollectible accounts and customer balances that are disputed were required as of December 31, 2023 and 2022, respectively.

6 unchanged sentences

Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents, marketable securities and trade accounts receivable.

Cash deposits may be in excess of insured limits.

The Company believes that the financial institutions that hold its cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

The Company maintains its cash, cash equivalents and marketable securities with high credit-quality financial institutions.

Certain balances held by such financial institutions exceed federally-insured limits.

With regard to customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss.

The Company believes that no additional credit risk beyond amounts provided for by the allowance for doubtful accounts are inherent in accounts receivable.

As of December 31, 2022, no individual customer represented more than 10% of the Company’s accounts receivable, net of allowance for doubtful accounts.

As of December 31, 2021, one individual customer represented approximately 10 % of the Company’s accounts receivable, net of allowance for doubtful accounts.

As of December 31, 2023 and 2022, no individual customer represented more than 10% of the Company’s accounts receivable, net of allowance for doubtful accounts.

For the years ended December 31, 2023, 2022 and 2021, no individual customer represented more than 10% of the Company’s revenue.

1 unchanged sentence

Property, plant and equipment, net is stated at cost, less accumulated depreciation and amortization.

Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of those assets as follows:

Computer hardware and software 1 to 7 years

Internal-use software development costs 4 to 7 years

Furniture and fixtures 2 to 5 years

Land Indefinite

Leasehold improvements Shorter of the estimated lease term or 4 to 7 years

Maintenance and repairs are charged to expense as incurred.

Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of those assets.

Refer to Note 6, “Property, Plant and Equipment” to these consolidated financial statements, for the useful lives of the Company’s property, plant and equipment as of December 31, 2023 and 2022.

Deferred Costs

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Capitalized costs of platform and other software applications are included in property, plant and equipment, net.

These costs are amortized over the estimated useful life of the software on a straight-line basis over four to seven years .

These assets are placed into service when ready for use and amortized over the estimated useful life of the software on a straight-line basis over four years .

Management evaluates the useful life of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

4 unchanged sentences

Amortization of Intangibles

Intangible assets determinable economic lives are carried at cost, less accumulated amortization.

Intangible assets with determinable economic lives are carried at cost, less accumulated amortization.

Amortization is computed over the estimated useful life of each asset on a straight-line basis.

1 unchanged sentence

Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company’s long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions.

Intangible assets without determinable economic lives are carried at cost, not amortized and reviewed for impairment at least annually.

Intangible assets without determinable economic lives are carried at historical cost and reviewed for impairment at least annually.

Refer to Note 7, “Goodwill and Intangible Assets” to these consolidated financial statements, for the useful lives of the Company’s intangible assets as of December 31, 2023 and 2022.

4 unchanged sentences

In performing qualitative assessments, consistent with ASC 350-20-35-3C, the Company considers, among other factors, macroeconomic conditions (both in the United States and internationally), the Company’s overall financial performance (including, but not limited to, comparisons to prior periods, current period internal expectations, and comparable peer companies), broader industry and market considerations, and the trading price performance of the Company’s Class A common stock.

As of December 31, 2022, the Company completed its annual qualitative assessment under ASC 350 to determine whether the existence of events or circumstances indicated that it was more likely than not that the fair value of its reporting unit was less than its respective carrying value.

The Company concluded that based on the

As of December 31, 2023, the Company completed a quantitative assessment under ASC 350 and determined that there was not an impairment of goodwill.

Notes to Consolidated Financial Statements (continued)

relevant events and circumstances, it was more likely than not that the reporting unit’s fair value exceeded its related carrying value and therefore no quantitative assessment was required.

The estimated fair value of the Company’s one reporting unit was based on the income approach and the market approach.

Significant assumptions used within the discounted cash flow method under the income approach included estimated revenue projections and a risk adjusted discount rate.

Significant assumptions used with the market approach included estimated revenue projections and an appropriate risk adjusted earnings multiple.

No goodwill impairment charges were recorded for the years ended December 31, 2023, 2022 and 2021.

9 unchanged sentences

The measurement period ends once all information is obtained, but no later than one year from the acquisition date.

On November 2, 2020, the Company acquired all shares of Voice Topco Limited through a Share Purchase Agreement (“SPA”).

During the year ended December 31, 2021, the Company made measurement period adjustments to reflect facts and circumstances in existence as of October 31, 2020, the effective date of the SPA (the “Effective Date”).

The adjustments primarily related to certain state and local tax liabilities as well as an adjustment related to the finalization of the net working capital adjustment, which were not reasonably estimable at the Effective Date and consisted of a $ 1.0 million increase to goodwill and $ 1.0 million increase to accrued expense and other current liabilities.

Additionally in 2021 and in accordance with the SPA, the Company paid the selling stockholders $ 7.6 million, which included $ 7.4 million of the amount held in escrow as a holdback amount and $ 0.2 million in interest earned from the escrow.

Advertising Costs

5 unchanged sentences

The Company accounts for stock-based compensation expense related to all stock-based awards based on the fair value of the award on the grant date.

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is generally three or four years .

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is generally three or four years for stock options and restricted stock units granted to employees, and one year for restricted stock units granted to non-employee members of the Board of Directors.

The fair value of the restricted stock units is determined using the fair value of the Company’s Class A common stock on the date of grant.

The Company uses the Black-Scholes option pricing model, net of estimated forfeitures, to measure the fair value of its stock options.

Notes to Consolidated Financial Statements (continued)

The Company has elected to estimate expected forfeitures, and, as such, the Company must also determine a forfeiture rate to calculate the stock-based compensation expense for awards.

1 unchanged sentence

As of December 31, 2023, all outstanding stock options are fully vested.

Notes to Consolidated Financial Statements (continued)

The Company accounts for income taxes under the asset and liability method.

13 unchanged sentences

Earnings per Share

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

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

Diluted net income per share is calculated by giving effect to all potentially dilutive common stock when determining the weighted-average number of common shares outstanding.

For purposes of the diluted net income (loss) per share calculation, options to purchase common stock, restricted stock units and redeemable convertible preferred stock are considered to be potential common stock.

For purposes of the diluted net (loss) income per share calculation, options to purchase common stock, restricted stock units and redeemable convertible preferred stock are considered to be potential common stock.

Foreign currency translation

4 unchanged sentences

Revenue and expenses are translated at average exchange rates in effect during each reporting period .

The net effect of currency

Notes to Consolidated Financial Statements (continued)

translation adjustments is included in shareholder’s equity as a component of accumulated other comprehensive loss in the accompanying consolidated balance sheets.

The net effect of currency translation adjustments is included in shareholder’s equity as a component of accumulated other comprehensive loss in the accompanying consolidated balance sheets.

Foreign currency transaction gains and losses are realized upon cash settlement of transactions denominated in currencies others than the functional currency.

They result from exchange rate changes during the period of time between the consummation and cash settlement of such transactions.

When realized, foreign currency transaction gains and losses are recognized in current period earnings as incurred.

The Company recorded $ 0.2 million in related gains during the year ended December 31, 2022 and less than $ 0.1 million in related losses in each of the years ended December 31, 2021 and 2020 included in other income (expense), net in the Company's consolidated statements of operations.

Unrealized gains and losses result from the process of remeasuring foreign currency assets and liabilities into the appropriate functional currency at exchange rates in place as of the reporting date.

Unrealized gains and losses are reported net in foreign currency translation on the accompanying consolidated statements of comprehensive loss.

When realized, foreign currency transaction

Notes to Consolidated Financial Statements (continued)

gains and losses are recognized in current period earnings as incurred, and included in other income (expense), net in the Company’s consolidated statements of operations.

Foreign exchange gains and losses, which result from the process of remeasuring foreign currency assets and liabilities into the appropriate functional currency at exchange rates in place as of the reporting date, are included in other income (expense), net in the Company’s consolidated statements of operations.

Fair Value of Financial Instruments

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The Company has elected to present comprehensive loss and its components as a separate financial statement.

Comprehensive income refers to net income and other revenue, expenses, gains and losses that, under

Comprehensive income refers to net income and other revenue, expenses, gains and losses that, under generally accepted accounting principles, are recorded as an element of stockholders’ equity but are excluded from the calculation of net income.

Business Interruption Insurance Recovery

Beginning in September 2021, the Company’s communications network was subjected to a distributed denial of service attack (the “DDoS Attack”) that caused intermittent communications services disruptions affecting certain of its markets and customers.

During the period of the DDoS Attack, the Company maintained certain insurance coverage, including business interruption insurance, intended to cover such circumstances.

In June 2023, the Company resolved its claim with an insurer, pursuant to which the Company was entitled to receive $ 4.0 million in proceeds from business interruption insurance.

The proceeds of the insurance payment were received in full in July 2023 and were recorded within gain on business interruption insurance recoveries on the Company’s consolidated statements of operations in the year ended December 31, 2023.

Notes to Consolidated Financial Statements (continued)

generally accepted accounting principles, are recorded as an element of stockholders’ equity but are excluded from the calculation of net income.

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which is intended to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity.

For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock, and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and EPS guidance on the basis of feedback from financial statement users.

ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021.

Early adoption was permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company adopted the new guidance on January 1, 2022 using the modified retrospective approach resulting in decreases in accumulated deficit of $ 8.8 million, additional paid in capital of $ 156.2 million, and deferred tax liability of $ 1.0 million.

The Company also recorded an increase in the Convertible Notes balance of $ 148.4 million as a result of the reversal of the separation of the convertible debt between debt and equity.

The adoption of this standard decreased the amount of non-cash interest expense to be recognized in current and future periods as a result of eliminating the discount associated with the equity component.

For the year ended December 31, 2022, the combined interest expense of the Convertible Notes was $ 27.5 million lower upon the adoption of ASU 2020-06.

The number of diluted shares increased as a result of transitioning from the treasury stock method to the as-if converted method which impacted the earnings per share for the year ended December 31, 2022.

The transition did not impact the years ended December 31, 2021 and 2020, as the Company incurred a net loss in both reporting periods.

In May 2021, the FASB issued Accounting Standards Update 2021-04, Earnings Per Share (Topic 260), Debt —Modifications and Extinguishments (Subtopic 470-50), Compensation--Stock Compensation (Topic 718), and Derivatives and Hedging--Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2021-04”), which is intended to provide clarity surrounding the treatment for a modification or an exchange of a freestanding equity-classified written call option.

The amendments also provide guidance for the recognition and measurement of earnings-per-share (“EPS”) for certain modifications or exchanges of freestanding equity-classified written call options for entities that present EPS.

The amendments do not affect a holder’s accounting for freestanding call options.

ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption was permitted, including adoption in an interim period.

The Company adopted the new guidance on January 1, 2022.

The Company did not have any modifications or exchanges of freestanding written call options classified in equity during the reporting period and therefore did not have an impact on its financial statements.

Recent Accounting Pronouncements Not Yet Adopted

The Company did not have any applicable recent accounting pronouncements not yet adopted.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis.

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

Early adoption is permitted.

The Company is evaluating the effect of adopting this new accounting guidance on its financial statements, but does not intend to early adopt.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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

The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate).

The amendments also require entities on an annual basis to disclose disaggregated amounts of income taxes paid.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company is evaluating the effect of adopting this new accounting guidance on its financial statements, but does not intend to early adopt.

Fair Value Measurements

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All marketable securities are considered to be available-for-sale and are recorded at their estimated fair values.

Unrealized gain and losses for available-for-sale securities are recorded in other comprehensive loss.

Unrealized gains and losses for available-for-sale securities are recorded in accumulated other comprehensive loss.

Notes to Consolidated Financial Statements (continued)

The Company evaluated 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 assets measured at fair value as of December 31, 2022 and 2021:

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

Amortized cost or carrying value Unrealized gains Unrealized losses Fair value measurements on a recurring basis

5 unchanged sentences

Money market account $ 120,724 $ — $ — $ 120,724 $ — $ — $ 120,724

Commercial paper 28,254 — — 28,254 — — 28,254

Total included in cash and cash equivalents 120,724 — — 120,724 — — 120,724

1 unchanged sentence

Time deposits 20,000 — — 20,000 — — 20,000

treasury securities 14,718 74 — 14,792 — — 14,792

Corporate debt securities 23,412 — ( 97 ) — 23,315 — 23,315

Commercial paper 1,422 66 — 1,488 — — 1,488

1 unchanged sentence

Total financial assets $ 142,146 $ 66 $ — $ 142,212 $ — $ — $ 142,212

Fair value measurements on a recurring basis

Amortized cost or carrying value Unrealized gains Unrealized losses Fair value measurements on a recurring basis

December 31, 2022

4 unchanged sentences

Money market account $ 36,728 $ — $ — $ 36,728 $ — $ — $ 36,728

Commercial paper 28,254 — — 28,254 — — 28,254

Total included in cash and cash equivalents 64,982 — — 64,982 — — 64,982

Marketable securities:

Time deposits 6,645 — ( 15 ) 6,630 — — 6,630

treasury securities 14,718 74 — 14,792 — — 14,792

Corporate debt securities 23,412 — ( 97 ) — 23,315 — 23,315

Commercial paper 26,142 352 — 26,494 — — 26,494

Total marketable securities 70,917 426 ( 112 ) 47,916 23,315 — 71,231

Total financial assets $ 135,899 $ 426 $ ( 112 ) $ 112,898 $ 23,315 $ — $ 136,213

Notes to Consolidated Financial Statements (continued)

The Company classifies its marketable securities as current assets as they are available for current operating needs.

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As of December 31, 2023, the Company anticipates that it will recover the entire amortized cost basis of its marketable securities before maturity.

Notes to Consolidated Financial Statements (continued)

During the year ended December 31, 2022, there were $ 74.3 million in maturities of marketable securities.

There were no maturities in marketable securities during the years ended December 31, 2021 and 2020.

Proceeds from sales of marketable securities were $ 34.4 million for the year ended December 31, 2022.

There were no sales in marketable securities during the years ended December 31, 2021 and 2020.

Interest earned on marketable securities was $ 1.2 million for the year ended December 31, 2022.

There was no interest earned on marketable securities during the years ended December 31, 2021 and 2020.

During the years ended December 31, 2023 and 2022, there were $ 91.8 million and $ 74.3 million, respectively, in maturities of marketable securities.

There were no maturities in marketable securities during the year ended December 31, 2021.

Proceeds from sales of marketable securities were $ 38.3 million and $ 34.4 million for the years ended December 31, 2023 and 2022, respectively.

There were no sales in marketable securities during the year ended December 31, 2021.

Interest earned on marketable securities was $ 2.0 million and $ 1.2 million for the years ended December 31, 2023 and 2022, respectively.

There was no interest earned on marketable securities during the year ended December 31, 2021.

The interest is recorded in other income (expense), net, on the accompanying consolidated statements of operations.

As of December 31, 2022, the accrued interest receivable, net of allowance for credit losses, was $ 0.3 million.

Accrued interest receivable is recorded in prepaid expenses and other current assets on the accompanying consolidated balance sheet.

As of December 31, 2023 and 2022, the accrued interest receivable, net of allowance for credit losses, was $ 0.3 million.

Accrued interest receivable is recorded in prepaid expenses and other current assets on the accompanying consolidated balance sheets.

As of December 31, 2023, the fair value of the 2026 Convertible Notes and 2028 Convertible Notes, as further described in Note 8, “Debt,” to these consolidated financial statements, was approximately $ 145.5 million and $ 157.6 million, respectively.

8 unchanged sentences

The money market account is included in cash and cash equivalents in the consolidated balance sheets as of December 31, 2023 and 2022.

Notes to Consolidated Financial Statements (continued)

Financial Statement Components

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Total accounts receivable, net $ 78,155 $ 74,465

Notes to Consolidated Financial Statements (continued)

Components of allowance for doubtful accounts and reserve for expected credit losses are as follows:

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(In thousands)

Allowance for doubtful accounts:

Balance, beginning of period $ ( 1,191 ) $ ( 1,661 )

11 unchanged sentences

Accrued sales, use, VAT and telecommunications related taxes 8,467 7,799

Current portion of finance lease 143 177

Income tax payable — 2,235

1 unchanged sentence

Total accrued expenses and other current liabilities $ 69,014 $ 62,577

Right-of-Use Asset and Lease Liabilities

Notes to Consolidated Financial Statements (continued)

Other liabilities consisted of the following:

As of December 31,

(In thousands)

Lease incentive $ — $ 10,468

Other liabilities 386 708

Total other liabilities $ 386 $ 11,176

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

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The Company has entered into various operating lease agreements for office space and finance lease agreements for automobiles.

Notes to Consolidated Financial Statements (continued)

The Company previously sub-leased approximately 17,073 square feet of office space to a related party, Relay, Inc.

1 unchanged sentence

The lease term under this non-cancellable lease expired in July 2022.

As of December 31, 2022, the Company had various leased properties in the United States and internationally, with remaining lease terms of five months to 4 years, some of which include options to extend the leases for up to 5 years.

None of the options to extend the leases are recognized in operating lease ROU assets or lease liabilities.

The Company has one lease with an early-termination option, which it does not expect to exercise.

The components of lease expense recorded in the consolidated statement of operations were as follows:

The Company primarily leases facilities for office space under non-cancelable operating leases for its U.S.

and international locations.

As of December 31, 2023, non-cancelable leases expire on various dates between 2024 and 2043, some of which include options to extend the leases for up to 20 years.

The components of lease expense recorded in the consolidated statements of operations were as follows:

Year ended December 31,

2 unchanged sentences

Operating lease cost $ 15,655 $ 7,750 $ 6,818

Finance lease cost:

Depreciation of assets 183 218 20

Interest on lease liabilities 14 18 2

Sublease income — ( 206 ) ( 384 )

1 unchanged sentence

During the years ended December 31, 2023, 2022 and 2021, short-term operating lease expense was $ 0.6 million, $ 0.6 million, and $ 1.3 million, respectively.

Supplemental balance sheet information related to leases was as follows:

As of December 31,

Leases Classification 2022 2021

(In thousands)

Operating lease assets Operating right-of-use asset, net (1) $ 9,993 $ 14,061

Finance lease assets Property, plant and equipment, net (2) 307 373

Total leased assets $ 10,300 $ 14,434

Operating Operating lease liability, current $ 7,450 $ 5,807

Finance Accrued expenses and other current liabilities 143 177

Operating Operating lease liability, net of current portion 4,640 10,958

Finance Other liabilities 172 202

Total lease liabilities $ 12,405 $ 17,144

________________________

(1) Operating lease assets are recorded net of accumulated amortization of $ 17.7 million and $ 14.8 million as of December 31, 2022 and 2021, respectively.

(2) Finance lease assets are recorded net of accumulated depreciation of $ 0.3 million and $ 0.2 million as of December 31, 2022 and 2021, respectively.

Notes to Consolidated Financial Statements (continued)

Supplemental cash flow and other information related to leases was as follows:

Operating lease assets are recorded net of accumulated amortization of $ 20.3 million and $ 17.7 million as of December 31, 2023 and 2022, respectively.

Other supplemental information related to operating leases were as follows:

Year ended December 31,

2023 2022 2021

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 7,580 $ 6,227 $ 5,301

Financing cash flows from finance leases 190 212 28

$ 7,770 $ 6,439 $ 5,329

Weighted average remaining lease term (in years) 19.30 2.12 2.95

Operating leases 2.12 2.95 3.79

Finance leases 2.53 2.44 2.99

Weighted average discount rate 8.76 % 4.58 % 4.78 %

Operating leases 4.58 % 4.78 % 4.81 %

Finance leases 5.48 % 3.91 % 4.00 %

Maturities of lease liabilities were as follows:

Maturities of operating lease liabilities were as follows:

As of December 31,

Operating Leases Finance Leases

(In thousands)

2024 $ 23,313

2024 2,614 104

2025 1,587 51

Thereafter 378,808

Total lease payments 490,704

3 unchanged sentences

Long-term lease obligations $ 220,548

Future Corporate Headquarters

On June 4, 2021, the Company purchased approximately 40 acres of undeveloped land (the “Property”) in Raleigh, North Carolina, from the State of North Carolina (the “State”) for $ 30.0 million.

Additionally, as consideration for the Property, the Company agreed to construct, at its expense, a parking lot and related improvements (the “Parking Improvements”) on land owned by the State adjacent to the Property.

Subsequent to the purchase of the Property, the Company sold a portion of the Property constituting approximately 23.76 acres (the “Conveyed Parcel”) to USEF Edwards Mill Owner, LLC (the “Developer”) for $ 17.5 million.

The Company retained approximately 17.06 acres of the Property, which was recorded at cost and is included in the Company’s consolidated balance sheets as a component of property, plant and equipment, net.

A lease incentive was recognized for the difference between the consideration received from the Developer for the Conveyed Parcel and the cost basis of the Conveyed Parcel and is included as a component of other liabilities on the consolidated balance sheets.

Notes to Consolidated Financial Statements (continued)

December 31, 2022, the balance of the lease incentive, including additional incentives obtained during project development, was $ 10.5 million.

On May 27, 2021, the Company entered into a Lease Agreement (the “Lease”) with the Developer for the Conveyed Parcel, together with improvements for office and related infrastructure to be constructed thereon, collectively constituting approximately 534,000 gross square feet (the “Project”).

The lease became effective upon closing of the sale of the Conveyed Parcel to the Developer.

When construction of the Project is completed, the Company intends to relocate its corporate headquarters to the Project.

The lease term will commence upon substantial completion of the final building to be delivered, as evidenced by a certificate of occupancy issued by the City of Raleigh (the “Commencement Date”), and continue for a period of twenty ( 20 ) years (the “Initial Term”).

It is anticipated that the Commencement Date will occur in mid-2023.

New Corporate Headquarters

On August 1, 2023, the Company commenced a lease for a new corporate headquarters in Raleigh, North Carolina.

The lease term will continue for a period of twenty ( 20 ) years (the “Initial Term”).

The Company has the option to renew the Initial Term for two ten-year periods at a rental rate equal to 100 % of the then-prevailing market rental rate for comparable buildings in the Raleigh, North Carolina, market.

Upon the effective date, the Company deposited $ 2.5 million with the Developer as security on the lease.

Additionally, the Company made deposits of $ 21.7 million to fund certain improvements expected to be constructed as part of the development of the Project.

Deposits are recorded in other long-term assets on the Company’s consolidated balance sheets.

No ROU assets or lease liabilities have been recognized in connection with the lease as of December 31, 2022.

Future lease payments are included in Note 12, “Commitments and Contingencies,” to these consolidated financial statements.

The Company relocated its corporate headquarters to the leased property during the third quarter of 2023.

Upon commencement of the lease, the Company recognized ROU assets of $ 156.0 million and operating lease liabilities of $ 223.1 million.

The operating lease liabilities include $ 67.8 million of incentives provided by the landlord throughout development of the new corporate headquarters.

Assets obtained through lease incentives are reported in property, plant and equipment, net, on the consolidated balance sheets.

The Company also has recorded $ 2.5 million in security deposits and $ 1.0 million in escrow deposits to fund additional improvements.

Deposits are reported as a component of other long-term assets on the Company’s consolidated balance sheets.

Notes to Consolidated Financial Statements (continued)

Property, Plant and Equipment

Property, plant and equipment, net consisted of the following:

As of December 31,

(In thousands)

As of December 31, Useful

(In thousands) (In years)

Furniture and fixtures $ 16,036 $ 16,494 5

Computer and office equipment 14,160 5,419

Telecommunications equipment 80,251 76,963

Leasehold improvements 6,410 6,970

Computer and office equipment 13,669 14,160 2 to 5

Telecommunications equipment 82,991 80,251 5 to 7

Leasehold improvements 75,437 6,410 5 to 15

Software 12,552 7,051 3

1 unchanged sentence

Automobile 507 665 3

Land 23,090 17,269

Land 27,771 23,090 Indefinite

Land Improvements 930 — 20

Total cost 255,802 171,798

8 unchanged sentences

The Company capitalized $ 10.6 million, $ 3.8 million, and $ 3.9 million of software development costs for the years ended December 31, 2023, 2022 and 2021, respectively.

Notes to Consolidated Financial Statements (continued)

Amortization expense related to capitalized software development costs were $ 2.2 million, $ 1.8 million, and $ 2.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2022, unamortized implementation costs related to cloud computing arrangements are $ 0.3 million, of which $ 0.1 million are included in prepaid expenses and other current assets and $ 0.2 million are included in other long-term assets.

The Company leases automobiles under leases accounted for as finance leases with expiration dates ranging from February 7, 2023 to June 23, 2026.

Amortization expense related to capitalized software development costs was $ 3.2 million, $ 2.2 million, and $ 1.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023, unamortized implementation costs related to cloud computing arrangements were $ 0.1 million, which is included in prepaid expenses and other current assets.

The Company leases automobiles under leases accounted for as finance leases, which expire on various dates between 2024 and 2026.

As of December 31, 2023, cost and accumulated depreciation of the assets under finance leases recorded by the Company were $ 0.5 million and $ 0.3 million, respectively.

As of December 31, 2022, cost and accumulated depreciation of the assets under finance leases recorded by the Company were $ 0.7 million and $ 0.3 million, respectively.

The Company recognized an impairment of $ 0.5 million, $ 0.5 million, and $ 0.2 million during the years ended December 31, 2022, 2021 and 2020, respectively, related to capitalized software development costs that provided no future benefit and therefore were impaired.

This expense is reflected within other income (expense), net as of December 31, 2022 and cost of revenue as of December 31, 2021 and 2020 in the accompanying consolidated statements of operations.

The Company recognized an impairment of $ 0.5 million during each of the years ended December 31, 2023, 2022 and 2021, related to capitalized software development costs that provided no future benefit and therefore were impaired.

This expense is reflected within other income (expense), net as of December 31, 2023 and 2022 and cost of revenue as of December 31, 2021 in the accompanying consolidated statements of operations.

Notes to Consolidated Financial Statements (continued)

The Company recognized depreciation expense, which includes amortization of capitalized software development costs, as follows:

7 unchanged sentences

Total depreciation expense $ 24,443 $ 18,419 $ 17,523

Notes to Consolidated Financial Statements (continued)

Goodwill and Intangible Assets

The changes in carrying amount of goodwill were as follows:

The change in the carrying amounts of goodwill was as follows:

(In thousands)

Balance as of December 31, 2021 $ 344,423

Measurement period adjustment 999

Impact of foreign currency translation ( 28,815 )

Foreign currency translation adjustments ( 18,018 )

Balance as of December 31, 2022 326,405

Impact of foreign currency translation ( 18,018 )

Foreign currency translation adjustments 9,467

Balance as of December 31, 2023 $ 335,872

Notes to Consolidated Financial Statements (continued)

Intangible Assets

19 unchanged sentences

Total intangible assets, net $ 222,007 $ ( 44,637 ) $ 177,370

Notes to Consolidated Financial Statements (continued)

The Company recognized amortization expense as follows:

11 unchanged sentences

Thereafter 78,165

Notes to Consolidated Financial Statements (continued)

Revolving Credit Facility

On June 6, 2022, the Company entered into a credit agreement (the “Credit Agreement”) among the Company, as borrower, the lenders from time to time party thereto, and Silicon Valley Bank as administrative agent, issuing lender and swingline lender.

On August 1, 2023, the Company entered into a credit agreement (the “Credit Agreement”) among the Company, as borrower, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent, swingline lender and letters of credit issuer.

The Credit Agreement provides for a $ 50.0 million revolving credit facility (the “Credit Facility”), including a $ 15.0 million sublimit for the issuance of letters of credit and a swingline subfacility of up to $ 5.0 million.

The Credit Facility matures on June 6, 2025.

The Credit Facility has an accordion feature that allows for an increase in the total borrowing size up to $ 25.0 million, subject to certain conditions.

The Credit Facility matures on the earlier of (a) August 1, 2028 or (b) the date that is 91 days prior to the scheduled maturity date or mandatory conversion date of any of the Company’s outstanding convertible notes.

Interest on borrowings under the Credit Facility accrues at an annual rate tied to a base rate or the Secured Overnight Financing Rate (“SOFR”), at the Company’s election.

Loans based on SOFR bear interest at a rate equal to SOFR plus an applicable margin between 1.50 % and 2.00 % depending upon the Company’s consolidated adjusted quick ratio for the immediately preceding quarter, and loans based on the base rate bear interest at a rate equal to the base rate plus an applicable margin between 0.50 % and 1.00 % depending upon the Company’s consolidated adjusted quick ratio for the immediately preceding quarter.

The Company is required to pay a quarterly commitment fee equal to 0.0625 % on the unused portion of the borrowing commitment.

The Credit Agreement requires that the Company meet a minimum quick ratio on a quarterly basis if the Company does not maintain the minimum liquidity amount of $ 70.0 million in cash and cash equivalents at all times.

Loans based on SOFR bear interest at a rate equal to term SOFR for the applicable interest period plus 10 basis points plus an applicable margin between 2.25 % and 2.75 %, and loans based on the base rate bear interest at a rate equal to the base rate plus an applicable margin between 1.25 % and 1.75 %, in each case of the foregoing, depending upon the Company’s consolidated EBITDA for the most recent period of four consecutive fiscal quarters for which financial statements have been delivered under the Credit Agreement.

The Company is required to pay a quarterly commitment fee equal to between 0.05 % and 0.0625 % on the unused portion of the borrowing commitment, depending upon the Company’s consolidated EBITDA for the most recent period of four consecutive fiscal quarters for which financial statements have been delivered under the Credit Agreement.

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver.

As a result, SVB ceased normal banking operations for a period of time.

Given these circumstances, on March 14, 2023 (the “Notice Date”), the Company gave notice to SVB of its desire and intent to terminate the commitments (the “Termination”) under that certain credit agreement, dated as of June 6, 2022, among the Company, as borrower, the lenders from time to time party thereto, and SVB, as administrative agent, issuing lender and swingline lender.

As of the Notice Date, there were no outstanding borrowings under this credit agreement.

The Termination became effective on March 15, 2023.

As of December 31, 2023, unamortized debt issuance costs were $ 0.6 million, of which $ 0.1 million were included in prepaid expenses and other current assets and $ 0.5 million were included in other long-term assets.

As of December 31, 2022, unamortized debt issuance costs were $ 0.4 million, of which $ 0.2 million were included in prepaid expenses and other current assets and $ 0.2 million were included in other long-term assets.

As of December 31, 2023, there were no borrowings under the Credit Facility and the Company was in compliance with all financial and non-financial covenants for all periods presented.

The available borrowing capacity under the Credit Facility was $ 50.0 million as of December 31, 2022.

Notes to Consolidated Financial Statements (continued)

Convertible Senior Notes and Capped Call Transactions

2026 Convertible Notes

On February 28, 2020, the Company issued $ 400.0 million aggregate principal amount of 0.25 % Convertible Notes due March 1, 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2026 Convertible Notes”).

In February 2020, the Company issued $ 400.0 million aggregate principal amount of 0.25 % Convertible Notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2026 Convertible Notes”).

The interest on the 2026 Convertible Notes is payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2020.

The 2026 Convertible Notes may bear special interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the indenture governing the 2026 Convertible Notes (the “2026 Indenture”) or if the 2026 Convertible Notes are not freely tradeable as required by the 2026 Indenture.

The 2026 Convertible Notes will mature on March 1, 2026, unless earlier repurchased, redeemed by the Company, or converted pursuant to their terms.

The total net proceeds from the 2026 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2026 Capped Calls (as defined herein), and debt issuance costs, paid by the Company, were approximately $ 344.7 million.

Each $0.001 principal amount of the 2026 Convertible Notes is initially convertible into 10.9857 shares of the Company’s Class A common stock, par value $ 0.001 per share, which is equivalent to an initial conversion price of approximately $ 91.03 per share.

The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest.

In addition, upon the occurrence of a make-whole fundamental change, as defined in the 2026 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2026 Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.

The 2026 Convertible Notes will be redeemable in whole or in part at the Company’s option on or after March 6, 2023, but before the fortieth ( 40 th ) scheduled trading day before the maturity date, at a cash redemption price equal to 100 % of the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, if the last reported sale price of the Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the redemption notices were sent;

and the trading day immediately before such notices were sent.

Prior to the close of business on the business day immediately preceding September 1, 2025, the 2026 Convertible Notes may be convertible at the option of the holders only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s Class A 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”) in which the trading price per $0.001 principal amount of 2026 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 the Company’s Class A common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on its Class A common stock;

(4) if the Company calls such 2026 Convertible Notes for redemption.

Notes to Consolidated Financial Statements (continued)

On or after September 1, 2025, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2026 Convertible Notes may, at their option, convert all or a portion of their 2026 Convertible Notes regardless of the foregoing conditions.

Prior to and during the nine months ended September 30, 2021, the conditional conversion feature of the 2026 Convertible Notes was triggered as the last reported sale price of the Company’s Class A common stock was more than or equal to 130 % of the conversion price for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on or after June 30, 2020 (the last trading day of the calendar quarter), and therefore the 2026 Convertible Notes were convertible, in whole or in part, at the option of the holders between July 1, 2020 through September 30, 2021.

The conditional conversion feature of the 2026 Convertible Notes was not triggered from October 1, 2021 through December 31, 2022 as the last reported sale price of the Company’s Class A common stock was not more than or equal to 130 % of the conversion price for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days (the last trading day of the calendar quarter).

Whether the 2026 Convertible Notes will be convertible following such period will depend on the satisfaction of this condition or another conversion condition in the future.

The Company continues to classify the 2026 Convertible Notes as a long-term liability in its consolidated balance sheets as of December 31, 2022, based on contractual settlement provisions.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock, or a combination of cash and shares of Class A common stock, at the Company’s election.

It is the Company’s current intent to settle the principal amount of the 2026 Convertible Notes with cash.

No sinking fund is provided for the 2026 Convertible Notes.

Upon the occurrence of a fundamental change (as defined in the 2026 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2026 Convertible Notes for cash at a price equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In accounting for the issuance of the 2026 Convertible Notes, prior to the adoption of ASU 2020-06, the Company separated the 2026 Convertible Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was $ 125.2 million and was determined by deducting the fair value of the liability component from the par value of the 2026 Convertible Notes.

The difference represented the debt discount that was amortized to interest expense at an effective interest rate of 6.763 % over the term of the 2026 Convertible Notes.

The carrying amount of the equity component was $ 57.5 million and is recorded in additional paid-in-capital.

The equity component was not remeasured as long as it continued to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 6.907 % over the contractual terms of the 2026 Convertible Notes.

Upon adoption of ASU 2020-06 on January 1, 2022, the Company reversed the separation of the debt and equity component representing the conversion option and accounted for the 2026 Convertible Notes in their entirety as debt.

The Company also reversed the amortization of the debt discount, with a cumulative adjustment to retained earnings on the adoption date.

In accounting for the transaction costs related to the 2026 Convertible Notes, prior to the adoption of ASU 2020-06, the Company allocated the total amount incurred to the liability and equity components of the 2026 Convertible Notes based on the proportion of the proceeds allocated to the debt and equity components.

Issuance costs attributable to the liability component were approximately $ 8.2 million, were recorded as an additional debt discount and amortized to interest expense using the effective interest method over the contractual terms of the 2026 Convertible Notes.

Issuance costs attributable to the equity component of $ 3.7 million were netted with the equity component in stockholders’ equity.

Upon adoption of ASU 2020-06 on January 1, 2022, the Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost

The excess of the principal amount of the liability component over its carrying

Notes to Consolidated Financial Statements (continued)

that will be amortized as interest expense at an effective interest rate of 0.513 % for the term of the 2026 Convertible Notes with a cumulative adjustment to retained earnings on the adoption date.

During November 2022, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 Convertible Notes to repurchase approximately $ 160.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $ 117.2 million.

The Repurchases closed on November 28, 2022.

amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 0.509 % over the contractual terms of the 2026 Convertible Notes.

Each $1,000 principal amount of the 2026 Convertible Notes is initially convertible into 10.9857 shares of the Company’s Class A common stock, par value $ 0.001 per share, which is equivalent to an initial conversion price of approximately $ 91.03 per share.

During March 2023, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 Convertible Notes to repurchase approximately $ 65.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $ 51.3 million.

These repurchases closed on March 6, 2023.

The Company entered into similar agreements to repurchase approximately $ 160.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $ 117.2 million that closed in November 2022.

Following these repurchases, approximately $ 175.0 million principal amount of the 2026 Convertible Notes remain outstanding.

The Company had previously entered into capped call transactions with certain financial institutions in connection with the 2026 Convertible Notes.

All of these transactions are expected to remain in effect notwithstanding the repurchases.

Following the Repurchases, approximately $ 240.0 million principal amount of the 2026 Convertible Notes remain outstanding.

The difference between the consideration used to repurchase the 2026 Convertible Notes and the carrying value of the 2026 Convertible Notes resulted in a gain of $ 40.2 million recorded within other income (expense), net on the Company’s consolidated statements of operations in the year ended December 31, 2022.

The difference between the consideration used to repurchase the 2026 Convertible Notes and the carrying value of the 2026 Convertible Notes resulted in gains of $ 12.8 million and $ 40.2 million recorded within net gain on extinguishment of debt on the Company’s consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively.

2028 Convertible Notes

On March 16, 2021, the Company issued $ 250.0 million aggregate principal amount of 0.50 % Convertible Notes due April 1, 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2028 Convertible Notes” and, together with the 2026 Convertible Notes, the “Convertible Notes”).

In March 2021, the Company issued $ 250.0 million aggregate principal amount of 0.50 % Convertible Notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the “2028 Convertible Notes” and, together with the 2026 Convertible Notes, the “Convertible Notes”).

The interest on the 2028 Convertible Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021.

The 2028 Convertible Notes may bear special interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the indenture governing the 2028 Convertible Notes (the “2028 Indenture”) or if the 2028 Convertible Notes are not freely tradeable as required by the 2028 Indenture.

The 2028 Convertible Notes will mature on April 1, 2028, unless earlier repurchased, redeemed by the Company, or converted pursuant to their terms.

The total net proceeds from the 2028 Convertible Notes, after deducting initial purchaser discounts, costs related to the 2028 Capped Calls (as defined herein), and debt issuance costs, paid by the Company, were approximately $ 217.0 million.

The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 0.442 % over the contractual terms of the 2028 Convertible Notes.

Each $1,000 principal amount of the 2028 Convertible Notes is initially convertible into 5.5781 shares of the Company’s Class A common stock, par value $ 0.001 per share, which is equivalent to an initial conversion price of approximately $ 179.27 per share.

The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest.

In addition, upon the occurrence of a make-whole fundamental change, as defined in the 2028 Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2028 Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.

The 2028 Convertible Notes will be redeemable in whole or in part at the Company’s option on or after April 6, 2025, but before the fortieth (40 th ) scheduled trading day before the maturity date, at a cash redemption price equal to 100 % of the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, if the last reported sale price of the Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately before the date the redemption notices were sent;

and the trading day immediately before such notices were sent.

On or after April 6, 2025 until the close of business on the scheduled trading day immediately preceding the maturity date, the 2028 Convertible Notes may be convertible at the option of the holders only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter), if the last reported sale price per share of the Company’s Class A common stock exceeds 130 % of the conversion price for each of at least 20 trading days, whether or not

Other Terms of the Convertible Notes

The Convertible Notes are effectively subordinated to the Company’s future senior secured indebtedness to the extent of the value of the collateral securing that indebtedness.

The Convertible Notes are the senior, unsecured obligations of the Company and are equal in right of payment with the Company’s future senior unsecured indebtedness, if any, senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Convertible Notes and the Convertible Notes will be structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and preferred equity, if any, of the Company’s subsidiaries.

The Convertible Notes may bear special interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the indenture governing the applicable Convertible Notes (each, a “Notes Indenture” and collectively, the “Notes Indentures”) or if the Convertible Notes are not freely tradeable as required by the applicable Notes Indenture.

The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid interest.

In addition, upon the occurrence of a make-whole fundamental change (which includes the calling of any Convertible Notes for redemption), as defined in the applicable Notes Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a

Notes to Consolidated Financial Statements (continued)

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”) in which the trading price per $0.001 principal amount of 2028 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 the Company’s Class A common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on its Class A common stock;

(4) if the Company calls such 2028 Convertible Notes for redemption.

On or after October 1, 2027, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2028 Convertible Notes may, at their option, convert all or a portion of their Convertible Notes regardless of the foregoing conditions.

The conditional conversion feature of the 2028 Convertible Notes was not triggered during the years ended December 31, 2022 and 2021, as the last reported sale price of the Company’s Class A common stock was not more than or equal to 130 % of the conversion price for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days (the last trading day of the calendar quarter).

Whether the 2028 Convertible Notes will be convertible following such period will depend on the satisfaction of this condition or another conversion condition in the future.

The Company continues to classify the 2028 Convertible Notes as a long-term liability in its consolidated balance sheets as of December 31, 2022, based on contractual settlement provisions.

holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.

The Company may redeem the Convertible Notes, in whole or in part, at its option at any time, and from time to time, on or after (i) March 6, 2023 for the 2026 Convertible Notes, or ii) after April 6, 2025 for the 2028 Convertible Notes, in each case, on or before the fortieth ( 40 th ) scheduled trading day immediately before the maturity date, at a cash redemption price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding the redemption date, if the last reported sale price of the Class A common stock has exceeded 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading date immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including, the trading date immediately before the date on which the Company provides the related redemption notice.

No sinking fund is provided for the Convertible Notes.

The Convertible Notes will be convertible at certain times and upon the occurrence of certain events in the future.

Further, on or after September 1, 2025 for the 2026 Convertible Notes, and on or after October 1, 2027 for the 2028 Convertible Notes, in each case, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Convertible Notes may convert all or a portion of their Convertible Notes regardless of these conditions.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Class A common stock, or a combination of cash and shares of Class A common stock, at the Company’s election.

It is the Company’s current intent to settle the principal amount of the Convertible Notes with cash.

No sinking fund is provided for the 2028 Convertible Notes.

Upon the occurrence of a fundamental change (as defined in the 2028 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2028 Convertible Notes for cash at a price equal to the principal amount of the 2028 Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In accounting for the issuance of the 2028 Convertible Notes, prior to the adoption of ASU 2020-06, the Company separated the 2028 Convertible Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature.

The carrying amount of the equity component representing the conversion option was $ 66.9 million and was determined by deducting the fair value of the liability component from the par value of the 2028 Convertible Notes.

The difference represents the debt discount that was amortized to interest expense at an effective interest rate of 5.125 % over the term of the 2028 Convertible Notes.

The carrying amount of the equity component was $ 39.4 million and was recorded in additional paid-in-capital.

The equity component was not remeasured as long as it continued to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest rate of 4.959 % over the contractual terms of the 2028 Convertible Notes.

The Company also reversed the amortization of the debt discount, with a cumulative adjustment to retained earnings on the adoption date.

In accounting for the transaction costs related to the 2028 Convertible Notes, prior to the adoption of ASU 2020-06, the Company allocated the total amount incurred to the liability and equity components of the 2028

Notes to Consolidated Financial Statements (continued)

Convertible Notes based on the proportion of the proceeds allocated to the debt and equity components.

Issuance costs attributable to the liability component were approximately $ 5.5 million, were recorded as an additional debt discount and amortized to interest expense using the effective interest method over the contractual terms of the 2028 Convertible Notes.

Issuance costs attributable to the equity component of $ 2.0 million were netted with the equity component in stockholders’ equity.

Upon adoption of ASU 2020-06 on January 1, 2022, the Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost that will be amortized as interest expense at an effective interest rate of 0.442 % for the term of the 2028 Convertible Notes with a cumulative adjustment to retained earnings on the adoption date.

As discussed above, upon adoption of ASU 2020-06, the Company reversed the separation of the debt and equity components of the 2026 Convertible Notes and the 2028 Convertible Notes, and accounted for the Convertible Notes wholly as debt.

Additionally, the issuance costs of the 2026 Convertible Notes and the 2028 Convertible Notes were accounted for as debt issuance costs in their entirety.

There is no longer a net carrying amount for the equity component as of the adoption date, January 1, 2022.

The net carrying amount of the liability components of the 2026 Convertible Notes and the 2028 Convertible Notes were as follows:

During the years ended December 31, 2023 and 2022, the conditions allowing the holders of the 2026 Convertible Notes and the 2028 Convertible Notes to convert were not met.

The Convertible Notes may be convertible thereafter if one or more of the conversion conditions specified in each respective Notes Indenture are satisfied during future measurement periods.

The Company continues to classify the Convertible Notes as a long-term liability in its consolidated balance sheets as of December 31, 2023, based on contractual settlement provisions.

Upon the occurrence of a fundamental change (as defined in the applicable Notes Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2026 Convertible Notes or 2028 Convertible Notes for cash at a price equal to the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The net carrying amount of the liability components of the Convertible Notes were as follows:

As of December 31,

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Principal $ 175,000 $ 240,000

Unamortized discount N/A ( 92,034 )

Unamortized debt issuance costs ( 1,891 ) ( 3,805 )

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Principal 250,000 250,000

Unamortized discount N/A ( 60,488 )

Unamortized debt issuance costs ( 4,583 ) ( 5,649 )

2 unchanged sentences

Notes to Consolidated Financial Statements (continued)

The net carrying amount of the equity components of the 2026 and 2028 Convertible Notes were as follows:

As of December 31,

2026 Convertible Notes:

(In thousands)

Proceeds allocated to the conversion options (debt discount) N/A $ 125,152

Issuance costs N/A ( 3,742 )

2026 Convertible Notes net carrying amount N/A $ 121,410

2028 Convertible Notes:

Proceeds allocated to the conversion options (debt discount) N/A $ 66,908

Issuance costs N/A ( 2,019 )

2028 Convertible Notes net carrying amount N/A $ 64,889

Total net carrying amount N/A $ 186,299

The following table sets forth the interest expense recognized related to the 2026 and 2028 Convertible Notes:

The following table sets forth the interest expense recognized related to the Convertible Notes:

Year ended December 31,

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Contractual interest expense $ 465 $ 997

Amortization of debt discount (1)

Amortization of debt issuance costs 940 1,915

2 unchanged sentences

Contractual interest expense 1,250 1,250

Amortization of debt discount (1)

Amortization of debt issuance costs 1,064 1,062

1 unchanged sentence

Total interest expense $ 3,719 $ 5,224

________________________

(1) Upon adoption of ASU 2020-06, the debt discount associated with the equity component on convertible debt outstanding was reversed, which resulted in a decrease in the amount of non-cash interest expense to be recognized going forward.

On January 1, 2022, the Company adopted ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), using the modified retrospective approach resulting in decreases in accumulated deficit of $ 8.8 million, additional paid in capital of $ 156.2 million, and deferred tax liability of $ 1.0 million.

The Company also recorded an increase in the Convertible Notes balance of $ 148.4 million as a result of the reversal of the separation of the convertible debt between debt and equity.

For the years ended December 31, 2023 and 2022, the combined interest expense of the Convertible Notes was $ 29.2 million and $ 27.2 million lower, respectively, upon the adoption of ASU 2020-06.

The transition did not impact the years ended December 31, 2023 and 2021, as the Company incurred a net loss in both reporting periods.

In connection with the offering of the 2026 Convertible Notes and the 2028 Convertible Notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the “2026 Capped Calls” and the “2028 Capped Calls,” respectively and, collectively, the “Capped Calls”).

The 2026 Capped Calls and the 2028 Capped Calls each have an initial strike price of approximately $ 91.03 and $ 179.27 per share, respectively, subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Convertible Notes and the 2028 Convertible Notes.

The 2026 Capped Calls and the 2028 Capped Calls have initial cap prices of $ 137.40 and $ 260.76 per share subject to certain adjustments, respectively.

The 2026 Capped Calls and the 2028 Capped Calls cover, subject to anti-dilution adjustments, approximately 4,394,276 and 1,394,525 shares of Class A common stock for the 2026 Convertible Notes and 2028 Convertible Notes, respectively.

Notes to Consolidated Financial Statements (continued)

Capped Calls are generally intended to reduce or offset the potential dilution to the Class A common stock upon any conversion of the 2026 Convertible Notes and 2028 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.

The initial strike price of the Convertible Notes corresponds to the initial conversion price of the 2026 Convertible Notes and the 2028 Convertible Notes.

The Capped Calls are generally intended to reduce or offset the potential dilution to the Class A common stock upon any conversion of the 2026 Convertible Notes and 2028 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.

The Capped Calls expire on the earlier of (i) the last day on which any convertible securities remain outstanding and (ii) March 1, 2026 for the 2026 Capped Calls and April 1, 2028 for the 2028 Capped Calls, subject to earlier exercise.

2 unchanged sentences

The Capped Call transactions are recorded in stockholders’ equity and are not accounted for as derivatives.

The net cost of $ 43.3 million and $ 25.5 million incurred to purchase the 2026 Capped Calls and the 2028 Capped Calls, respectively, was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.

The Convertible Notes are effectively subordinated to the Company’s future senior secured indebtedness, including the Credit Facility, to the extent of the value of the collateral securing that indebtedness.

The net cost to purchase the Capped Calls was recorded as a reduction to additional paid-in capital in the accompanying consolidated balance sheets.

Notes to Consolidated Financial Statements (continued)

The following table sets forth key terms and costs incurred for the Capped Calls related to the Convertible Notes as of December 31, 2023:

2026 Convertible Notes 2028 Convertible Notes

(In thousands, except share and per share amounts)

Initial approximate strike price per share, subject to certain adjustments $ 91.03 $ 179.27

Initial cap price per share, subject to certain adjustments $ 137.40 $ 260.76

Net costs incurred $ 43,320 $ 25,500

Class A common stock covered, subject to anti-dilution adjustments 1,922,498 1,394,525

All of the Capped Calls were outstanding as of December 31, 2023.

Geographic Information

The Company generates its revenue primarily in the United States.

Revenue by geographic area is detailed in the table below (which is determined based on the customer billing address):

The Company generates its revenue primarily in North America.

Revenue by geographic area is detailed in the table below, which is apportioned based on the destination of the service:

Year ended December 31,

1 unchanged sentence

(In thousands)

United States $ 514,036 $ 433,463 $ 324,449

International 59,116 57,444 18,664

North America $ 514,048 $ 484,105 $ 433,463

Rest of World 87,069 89,047 57,444

Total $ 601,117 $ 573,152 $ 490,907

The Company’s long-lived assets were primarily held in the United States as of December 31, 2022 and 2021.

As of December 31, 2022 and 2021, long-lived assets held outside of the United States were $ 10.8 million and $ 9.2 million, respectively.

During the three months ended March 31, 2023, the Company changed its methodology for apportioning the revenue by geographic area, from basing the revenue on the customer billing address to basing the revenue on the destination of the service, in order to provide a more transparent metric and to be consistent with other information provided publicly.

Accordingly, 2023 and 2022 have been conformed to the updated methodology, however due to data limitations, 2021 is presented under the previous methodology.

The Company’s long-lived assets were primarily held in North America as of December 31, 2023 and 2022.

As of December 31, 2023 and 2022, long-lived assets held outside of North America were $ 4.5 million and $ 9.1 million, respectively.

Stockholders’ Equity

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As of December 31, 2023 and 2022, the Company had authorized 10,000,000 shares of undesignated preferred stock, par value $ 0.001 , of which no shares were issued and outstanding.

As of December 31, 2022 and 2021, the Company had authorized 100,000,000 shares of Class A common stock, par value $ 0.001 per share, with one vote per share and 20,000,000 shares of Class B common stock, par value $ 0.001 per share, with ten votes per share.

Notes to Consolidated Financial Statements (continued)

As of December 31, 2022, 23,379,000 and 1,965,170 shares of Class A common stock and Class B common stock, respectively, were issued and outstanding.

As of December 31, 2021, 23,177,988 and 1,965,170 shares of Class A common stock and Class B common stock, respectively, were issued and outstanding.

As of December 31, 2023 and 2022, the Company had authorized 100,000,000 shares of Class A common stock, par value $ 0.001 per share and 20,000,000 shares of Class B common stock, par value $ 0.001 per share.

Shares of Class B common stock are convertible into shares of Class A common stock on a 1 :1 basis upon the stockholder’s voluntary written notice to the Company’s transfer agent or a transfer by the stockholder, subject to limited exceptions for transfers for estate planning purposes.

Notes to Consolidated Financial Statements (continued)

Voting Rights

9 unchanged sentences

Stock-based awards available for grant under the 2017 Plan 2,330,616 1,879,368

4,646,215 3,585,369

Total 7,494,255 4,646,215

Stock-Based Compensation

2010 Stock Option Plan

As of July 26, 2010, the Company adopted the 2010 Equity Compensation Plan (the “2010 Plan”).

Equity Incentive Plans

The Company adopted the 2010 Equity Compensation Plan (the “2010 Plan”) on July 26, 2010.

On November 9, 2017, the 2010 Plan was terminated in connection with the Company’s initial public offering.

1 unchanged sentence

However, the 2010 Plan continues to govern the terms and conditions of the outstanding awards granted thereunder.

Amended and Restated 2017 Incentive Award Plan

The Company’s Amended and Restated 2017 Incentive Award Plan (as amended from time to time, the “2017 Plan”) became effective on November 9, 2017.

The Company’s Second Amended and Restated 2017 Incentive Award Plan (as amended from time to time, the “2017 Plan”) became effective on November 9, 2017.

The 2017 Plan provides for the grant of stock options, including incentive stock options and non-qualified stock options, stock appreciation rights, restricted stock, dividend equivalents, restricted stock units, and other stock or cash-based awards to employees, consultants and directors of the Company.

A total of 1,050,000 shares of the Company’s Class A common stock were originally reserved for issuance under the 2017 Plan.

These available shares automatically increase each January 1, beginning on January 1, 2018, by 5 % of the number of shares of the Company’s Class A common stock outstanding on the

Notes to Consolidated Financial Statements (continued)

final day of the immediately preceding calendar year.

These available shares automatically increase each January 1, beginning on January 1, 2018, by 5 % of the number of shares of the Company’s Class A common stock outstanding on the final day of the immediately preceding calendar year.

On January 1, 2023, the shares available for grant under the 2017 Plan were automatically increased by 1,168,950 shares.

On May 18, 2023, stockholders approved an amendment to the 2017 Plan that increased the number of shares available for grant by 2,500,000 shares.

The terms of the stock option grants are determined by the Company’s Board of Directors.

1 unchanged sentence

The stock options have a contractual life of ten years .

Restricted stock units (“RSUs”) granted to employees and non-employee members of the Board of Directors under the 2017 Plan are generally subject to a time-based vesting condition.

The compensation expense related to these awards is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period.

Vesting schedules may differ as between different categories of award recipients.

Restricted stock units (“RSUs”) granted to employees, non-employee members of the Board of Directors and other Service Providers (as defined in the 2017 Plan) under the 2017 Plan are subject to an immediate or time-based vesting condition as specified by the underlying compensation plans.

Vesting schedules may differ between different categories of award recipients.

Stock compensation expense is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period.

Depending on the nature of the

Notes to Consolidated Financial Statements (continued)

underlying compensation plan, certain share-based payment arrangements may be classified as liability-based awards resulting in classification as accrued expenses on the consolidated balance sheets with the corresponding offset to stock-based compensation expense.

As of December 31, 2023, awards granted under the 2010 Plan consisted of stock options and awards granted under the 2017 Plan consisted of stock options and RSUs.

Stock Options

The following summarizes the stock option activity for the periods presented:

The following summarizes the stock option activity for the year ended December 31, 2023:

outstanding Weighted-

7 unchanged sentences

Exercised ( 61,349 ) 6.74

Forfeited or cancelled — —

Forfeited or expired ( 912 ) 9.46

Outstanding as of December 31, 2023 97,480 $ 12.75 2.97 $ 332

1 unchanged sentence

Options vested and expected to vest as of December 31, 2023 97,480 $ 12.75 2.97 $ 332

Year ended December 31,

2022 2021 2020

(In thousands)

Aggregate intrinsic value of stock options exercised $ 635 $ 9,297 $ 54,088

Total estimated grant date fair value of options vested — 247 416

Aggregate intrinsic value is computed based on the difference between the option exercise price and the fair value of the Company’s common stock as of December 31, 2022, based on the Company’s Class A common stock price as reported on the NASDAQ Global Select Market.

The total intrinsic value of stock options exercised for the years ended December 31, 2023, 2022 and 2021 was $ 0.4 million, $ 0.6 million and $ 9.3 million, respectively.

Aggregate intrinsic value is computed based on the difference between the option exercise price and the fair value of the Company’s common stock at the time of such option exercises.

No options were granted for the year ended December 31, 2023.

As of December 31, 2021, all outstanding stock options were fully vested.

As of December 31, 2023, the Company had no unrecognized compensation cost related to non-vested stock options.

All outstanding stock options were fully vested prior to the current year.

Notes to Consolidated Financial Statements (continued)

Restricted Stock Units

The following summarizes the RSU activity for the period presented:

The following summarizes the RSU activity for the year ended December 31, 2023:

Number of awards outstanding Weighted-average grant date fair value (Per share)

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Vested ( 804,962 ) 31.29

Forfeited or cancelled ( 138,077 ) 67.35

Forfeited ( 167,059 ) 28.77

Nonvested RSUs as of December 31, 2023 5,066,159 $ 18.41

Year ended December 31,

2023 2022 2021

Weighted average grant date fair value of RSUs granted (per share) $ 11.35 $ 30.43 $ 143.31

Total fair value of RSUs vested (in thousands) 25,186 15,038 12,571

As of December 31, 2023, total unrecognized compensation cost related to non-vested RSUs was $ 79.4 million, which will be amortized over a weighted-average period of 2.35 years.

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Operating Leases

The Company leases office space under operating lease agreements that expire over the next 4 years.

The Company leases office space under non-cancelable operating lease agreements that expire on various dates through July 2043.

As of December 31, 2023, the Company has $ 496.1 million in future minimum rent payments for its current office space.

See Note 5, “Right-of-Use Asset and Lease Liabilities” to the consolidated financial statements, for additional details on the Company’s operating lease commitments.

See Note 5, “Leases,” to the consolidated financial statements, for additional details on the Company ’ s operating lease commitments.

Contractual Obligations

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Notes to Consolidated Financial Statements (continued)

On May 27, 2021, the Company entered into the Lease with the Developer for the Conveyed Parcel, together with the Project.

The respective obligations of the Company and the Developer under the Lease were conditioned upon the Developer acquiring fee simple title to the Conveyed Parcel, which occurred on June 4, 2021.

The Lease term will commence upon the Commencement Date and continue for the Initial Term.

It is anticipated that the Commencement Date will occur in mid-2023.

If the Commencement Date does not occur within one hundred twenty ( 120 ) days from the scheduled Commencement Date, the Company shall be entitled to certain rent abatements, as described in the Lease.

If the Commencement Date does not occur within twelve ( 12 ) months of the scheduled Commencement Date, the Company may terminate the Lease.

The Company has the option to renew the Initial Term for two ten-year periods.

Base rent payments will begin on the Commencement Date.

The initial base rent will increase by 1.85 % on each anniversary of the Commencement Date.

Total lease payments over the Initial Term are approximately $ 495.7 million.

See Note 5, “Right-of-Use Asset and Lease Liabilities” to the consolidated financial statements, for additional details on the Company's operating lease commitments.

Legal Matters

The Company is involved as a defendant in various litigation, including, but not limited to, (a) lawsuits alleging that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws in various jurisdictions, and (b) an action brought by a non-practicing entity related to alleged patent infringement.

The Company is involved as a defendant in various litigation, including, but not limited to, lawsuits alleging that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws in various jurisdictions.

The Company intends to vigorously defend these lawsuits and believes that it has meritorious defenses to each.

However, litigation is inherently uncertain, and any judgment or injunctive relief entered against the Company or any adverse settlement could adversely affect the Company’s business, results of operations and financial condition.

Notes to Consolidated Financial Statements (continued)

Employee Benefit Plans

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The defined benefit obligation is calculated annually by an independent actuary using the Projected Unit Credit Method.

Notes to Consolidated Financial Statements (continued)

The following table summarizes information for the pension plans:

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Interest cost 146 35

Actuarial gain ( 418 ) ( 237 )

Actuarial loss (gain) 13 ( 418 )

Benefits paid ( 41 ) —

Taxes, insurance premiums and administrative expenses ( 61 ) ( 50 )

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Employer contribution 393 332

Benefits paid ( 41 ) —

Taxes, insurance premiums and administrative expenses ( 61 ) ( 50 )

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Funded status, net liability $ 320 $ 321

Notes to Consolidated Financial Statements (continued)

The following table presents the balance sheet location of the Company’s pension liability for the Company’s non-U.S.

defined benefit pension plans:

As of December 31,

(In thousands)

Other liabilities $ 321 $ 916

The Company’s pension liability for the Company’s non-U.S.

defined benefit pension plans was $ 0.3 million as of December 31, 2023 and 2022, which is included in other liabilities on the accompanying consolidated balance sheets.

The following table summarizes information for the Company’s pension plans with an accumulated benefit obligation in excess of plan assets:

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Fair value of plan assets 3,607 3,181

Notes to Consolidated Financial Statements (continued)

The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs arising from the services rendered by the employee and records the other components of net periodic benefit cost in other income (expense), net .

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Return on plan assets ( 41 ) ( 26 ) ( 14 )

Amortization of actuarial gain ( 27 ) — —

Net periodic pension cost 342 277 403

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Unrecognized net actuarial (gain) loss beginning of year ( 705 ) ( 227 ) 17

Actuarial (gain) loss on benefit obligation ( 418 ) ( 237 ) 15

Actuarial (gain) loss on fair value of plan assets ( 72 ) ( 6 ) 2

Actuarial gain recognized during year 27 — —

Actuarial loss (gain) on benefit obligation 13 ( 418 ) ( 237 )

Actuarial gain on fair value of plan assets — ( 72 ) ( 6 )

Impact of foreign currency translation ( 118 ) 12 ( 1 )

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Any change in these assumptions will impact the present value of the defined benefit obligation.

Notes to Consolidated Financial Statements (continued)

The actuarial gains and losses recognized in the pension expense are determined using the so-called “10% corridor” method, i.e.

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The other assumptions for pension obligations are based in part on market conditions.

Notes to Consolidated Financial Statements (continued)

Significant assumptions used in determining benefit obligations and net periodic benefit cost are as follows:

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Notes to Consolidated Financial Statements (continued)

The following table presents domestic and foreign components of income (loss) before income taxes for the tax years ended December 31, 2022, 2021 and 2020:

The following table presents domestic and foreign components of (loss) income before income taxes for the tax years ended December 31, 2023, 2022 and 2021:

Year Ended December 31,

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International ( 20,062 ) ( 13,288 ) ( 3,648 )

Income (loss) before income taxes $ 17,306 $ ( 31,195 ) $ ( 28,972 )

Benefit (provision) for income taxes from operations consists of the following:

(Loss) income before income taxes $ ( 19,303 ) $ 17,306 $ ( 31,195 )

Benefit for income taxes from operations consists of the following:

Year Ended December 31,

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Total 7,141 6,599 8,318

Income tax benefit (provision) $ 2,264 $ 3,833 $ ( 15,005 )

Income tax benefit $ 2,960 $ 2,264 $ 3,833

Notes to Consolidated Financial Statements (continued)

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Total 15.3 % ( 13.1 ) % 12.3 %

For the year ended December 31, 2023, the Company recognized an income tax benefit of $ 3.0 million on pre-tax book loss of $ 19.3 million, resulting in an effective income tax rate of 15.3 %.

For the year ended December 31, 2022, the Company recognized an income tax benefit of $ 2.3 million on pre-tax book income of $ 17.3 million, resulting in an effective income tax rate of ( 13.1 )%.

Although the Company has pre-tax book income on a global basis, the Company recognized an income tax benefit due to the valuation allowance position within the U.S.

For the year ended December 31, 2021, the Company recognized an income tax benefit of $ 3.8 million on pre-tax book loss of $ 31.2 million, resulting in an effective income tax rate of 12.3 %.

For the year ended December 31, 2020, the Company recognized an income tax expense of $ 15.0 million on pre-tax book loss of $ 29.0 million, resulting in an effective income tax rate of ( 51.8 )%.

In 2023, the Company’s valuation allowance in the U.S.

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non-deductible expenses that are offset by the valuation allowance consist primarily of non-deductible executive compensation under Internal Revenue Code 162(m).

As a result of ASU 2020-06, the company decreased its deferred tax liability by $ 37.2 million related to debt with a corresponding increase of $ 36.2 million to valuation allowance.

The net impact of these income tax changes related to ASU 2020-06 increased additional paid in capital by $ 30.0 million and accumulated deficit by $ 29.0 million, and decreased deferred tax liability by $ 1.0 million.

Notes to Consolidated Financial Statements (continued)

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Deferred revenue 1,915 1,949

Stock-based compensation - deferred tax asset 3,216 2,278

Section 174 20,997 —

Stock-based compensation 3,363 3,216

Capitalized research and development expenses 40,306 20,997

Accrued lease incentive — 2,645

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Operating lease assets 39,780 3,072

Debt — 38,411

Other liability — 289

Total deferred tax liabilities 104,999 50,825

Net deferred tax liability $ ( 33,021 ) $ ( 38,466 )

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its deferred tax assets.

The Company primarily considered the historic performance of Bandwidth, the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.

Based on an analysis of these factors, the Company maintained that in 2022 a valuation allowance against U.S.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets.

The Company primarily considered its historic performance, the nature of its deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.

Based on an analysis of these factors, the Company determined that in 2023, a valuation allowance against U.S.

deferred tax assets was required.

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federal net operating loss carryforwards, $ 16.3 million in U.K.

loss carryforwards, and $ 10.9 million in federal tax credits.

loss carryforwards, and $ 12.8 million in U.S.

federal tax credits.

federal net operating loss carryforwards were generated after the enactment of the Tax Cuts and Jobs Act (the “Act”) and as such do not expire, but can only be utilized to offset up to 80% of taxable income in any given year.

The federal tax credits start to expire at various dates beginning in 2038.

federal tax credits begin to expire in 2039.

As of December 31, 2023, the Company had approximately $ 63.9 million in state net operating loss carryforwards.

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deferred tax assets.

For the year ended December 31, 2022, the Company recognized interest and penalties of $ 0.3 million related to income taxes within income tax expense.

For the year ended December 31, 2021, the Company did not incur any material tax interest or penalties with respect to income taxes.

For the years ended December 31, 2023 and 2022, the Company recognized interest and penalties of $ 0.3 million related to income taxes within income tax expense.

The Company expects no material changes in the twelve months following December 31, 2023 in its uncertain tax positions.

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states and foreign jurisdictions.

The tax years 2017 - 2021 remain open to examination by the major jurisdictions in which the Company is subject to tax.

Related Parties

On April 20, 2015, the Company created a wholly owned subsidiary, Relay, Inc.

(f/k/a Republic Wireless, Inc.) (“Relay”), which was incorporated in Delaware.

On November 30, 2016, the Company completed a pro-rata distribution of the common stock of Relay to its stockholders of record as of the close of business.

The Company has certain involvement with Relay via an ongoing Master Agreement and a Facilities Sharing Agreement that expired in July 2022.

Amounts charged under these arrangements totaled $ 1.1 million, $ 1.8 million, and $ 2.2 million for the years ended December 31, 2022, 2021 and 2020, respectively, and are included in revenue on the Company’s consolidated statements of operations.

Amounts due under these arrangements totaled less than $ 0.1 million as of December 31, 2022 and 2021, and are reported in accounts receivable, net of allowance for doubtful accounts in the accompanying consolidated balance sheets.

The tax years 2020 through 2022 remain open to examination by the major jurisdictions in which the Company is subject to tax.

Notes to Consolidated Financial Statements (continued)

Basic and Diluted Income (Loss) per Common Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is computed by giving effect to all potential shares of common stock, including stock options and stock related to unvested restricted stock awards.

Basic and Diluted (Loss) Income per Common Share

Basic net (loss) income per share is computed by dividing net (loss) income by the weighted-average number of shares of common stock outstanding during the period.

The Company is in a net loss position for the years ended December 31, 2023 and 2021, and therefore diluted shares equals basic shares.

The components of basic and diluted income (loss) per share are as follows:

The components of basic and diluted (loss) income per share are as follows:

Year ended December 31,

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Earnings per share

Net income (loss) attributable to common stockholders $ 19,570 $ ( 27,362 ) $ ( 43,977 )

Net income (loss) per share:

Net (loss) income attributable to common stockholders $ ( 16,343 ) $ 19,570 $ ( 27,362 )

Net (loss) income per share:

Basic $ ( 0.64 ) $ 0.77 $ ( 1.09 )

Diluted $ ( 0.64 ) $ ( 0.48 ) $ ( 1.09 )

Numerator used to compute net income (loss) per share:

Numerator used to compute net (loss) income per share:

Basic $ ( 16,343 ) $ 19,570 $ ( 27,362 )

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(1) Upon the adoption of ASU 2020-06, net income is adjusted for the reversal of the net gain on extinguishment of debt and add back of interest expense as part of the calculation for diluted Non-GAAP earnings per share.

See Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements, for additional details on the adoption of ASU 2020-06.

See Note 8, “Debt,” to the consolidated financial statements, for additional details on the adoption of ASU 2020-06.

Notes to Consolidated Financial Statements (continued)

The following common share equivalents were excluded from the weighted average shares used to calculate net income (loss) per common share because their effects would have been anti-dilutive:

The following common share equivalents were excluded from the weighted average shares used to calculate net (loss) income per common share because their effects would have been anti-dilutive:

As of December 31,

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The diluted shares were calculated based on the initial conversion rate of 10.9857 and 5.5781 shares per $0.001 of the aggregate principal amount for the 2026 Convertible Notes and 2028 Convertible Notes, respectively.

See Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements, for additional details on the adoption of ASU 2020-06 and Note 8, “Debt” to the consolidated financial statements, for additional details on the Company’s Convertible Notes.

See Note 8, “Debt” to the consolidated financial statements, for additional details on the adoption of ASU 2020-06 and for additional details on the Company’s Convertible Notes.

(2) As of December 31, 2021, the Company used the treasury stock method to calculate the dilutive impact of the 2026 Convertible Notes and the 2028 Convertible Notes because at that time the Company expected to settle the principal amount of these notes in cash and any excess in shares of the Company’s Class A common stock.

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As of December 31, 2021, the conversion spread for the 2028 Convertible Notes was anti-dilutive as the average market price of the Company’s Class A common stock for a given period did not exceed the conversion price of $ 179.27 per share.

Notes to Consolidated Financial Statements (continued)

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data