What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-28 · 206 added, 222 removed, 1054 unchanged (29% of the section changed)

108 unchanged sentences

Total liabilities 676,633 803,658

Commitments and contingencies

Commitments and contingencies (Note 12)

Stockholders’ equity:

10 unchanged sentences

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

1,958,028 shares issued and outstanding as of December 31, 2024 and December 31, 2023

Additional paid-in capital 435,927 391,048

18 unchanged sentences

Operating loss ( 20,059 ) ( 35,457 ) ( 24,324 )

Other income (expense), net:

Other income:

Net gain on extinguishment of debt 10,267 12,767 40,205

1 unchanged sentence

Interest expense, net ( 1,861 ) ( 808 ) ( 3,048 )

Other income (expense), net 195 4,473 ( 174 )

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

Other income, net 2,700 195 4,473

Total other income 11,106 16,154 41,630

(Loss) income before income taxes ( 8,953 ) ( 19,303 ) 17,306

18 unchanged sentences

Net (loss) income $ ( 6,524 ) $ ( 16,343 ) $ 19,570

Other comprehensive income (loss)

Other comprehensive (loss) income

Unrealized (loss) gain on marketable securities, net ( 61 ) ( 248 ) 314

Foreign currency translation, net ( 23,306 ) 15,698 ( 31,855 )

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

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

Unrealized gain (loss) on employee benefit plan, net 152 ( 30 ) 367

Total other comprehensive (loss) income ( 23,215 ) 15,420 ( 31,174 )

Total comprehensive loss $ ( 29,739 ) $ ( 923 ) $ ( 11,604 )

5 unchanged sentences

common stock Class B voting

common stock Additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ equity

common stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders’ equity

Shares Amount Shares Amount

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

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

2 unchanged sentences

Equity awards withheld for tax liability ( 118,357 ) — — — ( 2,296 ) — — ( 2,296 )

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

Unrealized loss on marketable securities — — — — — ( 61 ) — ( 61 )

Foreign currency translation — — — — — ( 23,306 ) — ( 23,306 )

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

Unrealized gain on employee benefit pension plan — — — — — 152 — 152

Stock-based compensation — — — — 47,008 — — 47,008

BANDWIDTH INC.

Consolidated Statements of Changes in Stockholders ’ Equity

(In thousands, except share amounts)

Class A voting

common stock Class B voting

common stock Additional paid-in capital Accumulated other comprehensive income (loss) Accumulated deficit Total stockholders’ equity

Shares Amount Shares Amount

Net loss — — — — — — ( 6,524 ) ( 6,524 )

14 unchanged sentences

Deferred taxes and other ( 4,452 ) ( 5,942 ) ( 5,557 )

Gain on sale of intangible asset ( 1,000 ) — —

Net gain on extinguishment of debt ( 10,267 ) ( 12,767 ) ( 40,205 )

9 unchanged sentences

Deposits for construction in progress — — ( 18,674 )

Refund of deposits for construction in progress 2,707 — —

Capitalized software development costs ( 11,394 ) ( 10,642 ) ( 3,755 )

Purchase of land — — ( 30,017 )

Proceeds from sale of land — — 17,462

Purchase of marketable securities ( 34,050 ) ( 80,625 ) ( 179,598 )

Proceeds from sales and maturities of marketable securities 53,502 130,120 108,681

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

Proceeds from sale of business 779 1,253 1,558

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

Proceeds from sale of intangible assets 1,000 — —

Net cash (used in) provided by investing activities ( 1,442 ) 30,849 ( 133,449 )

Cash flows from financing activities

Borrowings on line of credit 206,500 — —

Repayments on line of credit ( 206,500 ) — —

Payments on finance leases ( 87 ) ( 157 ) ( 190 )

Proceeds from issuance of convertible senior notes — — 250,000

Net cash paid for debt extinguishment ( 128,534 ) ( 51,259 ) ( 117,286 )

Purchase of Capped Call — — ( 25,500 )

Payment of Acquisition holdback — — ( 6,689 )

Payment of debt issuance costs ( 524 ) ( 710 ) ( 553 )

1 unchanged sentence

Value of equity awards withheld for tax liabilities ( 2,295 ) ( 1,062 ) ( 2,139 )

Net cash (used in) provided by financing activities ( 52,775 ) ( 120,005 ) 207,027

Net cash used in financing activities ( 131,273 ) ( 52,775 ) ( 120,005 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1,241 ) 610 881

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

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 50,073 ) 17,685 ( 217,667 )

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

10 unchanged sentences

Supplemental disclosure of cash flow information

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

Cash paid for (received from) interest $ 691 $ ( 1,500 ) $ 18

Cash paid for taxes $ 3,815 $ 7,203 $ 3,932

15 unchanged sentences

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

Reclassification

The Company reclassified certain prior year amounts to conform to the current year presentation.

These reclassifications had no impact on the previously reported total assets, liabilities, stockholder’s deficit or net income.

Principles of Consolidation

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• 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)

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

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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

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

For the years ended December 31, 2024, 2023 and 2022, revenue from reoccurring cloud communications fees represented $ 401.4 million, $ 346.9 million, and $ 354.0 million of total revenue, respectively.

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.

For the years ended December 31, 2024, 2023 and 2022, revenue from recurring cloud communications fees represented $ 138.4 million, $ 132.0 million and $ 120.6 million of total revenue, respectively.

Messaging surcharges

40 unchanged sentences

Marketable Securities

The Company’s marketable securities consist of time deposits, U.S.

treasury debt securities, commercial paper, and corporate debt securities.

The Company’s marketable securities consist of time deposits and commercial paper.

The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date.

1 unchanged sentence

As a result, the Company classifies investments with maturities greater than 90 days as marketable securities in the accompanying consolidated balance sheets.

Available-for-sale securities are recorded at fair value at the end of each reporting period.

Available-for-sale securities are recorded at their estimated fair value at the end of each reporting period.

Unrealized gains and losses are excluded from earnings and recorded as a separate component within accumulated other comprehensive loss on the consolidated balance sheets until realized.

Interest income is reported within other income (expense), net on the consolidated statements of operations.

Interest income is reported within other income, net on the consolidated statements of operations.

The Company evaluates its investments to assess whether the amortized cost basis is in excess of estimated fair value and determines what amount of that difference, if any, is caused by expected credit losses.

Allowance for credit losses are recognized as a charge in other income (expense), net on the consolidated statements of operations, and any remaining unrealized losses are included in accumulated other comprehensive loss on the consolidated balance sheets.

Allowance for credit losses are recognized as a charge in other income, net on the consolidated statements of operations, and any remaining unrealized losses are included in accumulated other comprehensive loss on the consolidated balance sheets.

Due to the nature and investment grade of the Company’s marketable securities, there were no credit losses recorded for the year ended December 31, 2024.

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

The Company determines realized gains and losses on the sale of

Notes to Consolidated Financial Statements (continued)

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

marketable securities using the specific identification method and records such gains and losses in other income, net on the consolidated statements of operations.

Accounts Receivable and Current Expected Credit Losses

4 unchanged sentences

Management has evaluated the expected credit losses related to trade accounts receivable and determined that allowances of approximately $ 2.2 million and $ 1.1 million for uncollectible accounts and customer balances that are disputed were required as of December 31, 2024 and 2023, respectively.

Refer to Note 4, “Financial Statement Components” to these consolidated financial statements, for a rollforward of the components of the allowances as of December 31, 2023 and 2022.

Refer to Note 4, “Financial Statement Components” to these consolidated financial statements, for a rollforward of the components of the allowances for the years ended December 31, 2024, 2023 and 2022.

The Company includes unbilled receivables in its accounts receivable balance.

10 unchanged sentences

For the years ended December 31, 2024, 2023 and 2022, no individual customer represented more than 10% of the Company’s revenue.

Notes to Consolidated Financial Statements (continued)

The Company determines if an arrangement is or contains a lease at inception and reassesses that conclusion if the contract is modified.

All leases are assessed for classification as an operating lease or a finance lease.

For facility leases, the Company does not account for lease and non-lease components as a single lease component.

Operating lease 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.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The Company does not include options to extend or terminate the lease unless it is reasonably certain that it will exercise any such options.

Variable lease payments, such as common areas maintenance costs, are not included in the measurement of ROU assets and lease liabilities, and instead are expensed as incurred.

The Company generally uses its incremental borrowing rate (“IBR”) based on the information available at commencement to determine the present value of lease payments, except when an implicit interest rate is readily determinable.

Operating lease expense attributable to lease payments is recognized on a straight-line basis over the lease term and is part of allocated facilities costs based on employee headcount within the cost of revenue, research and development, sales and marketing, and general and administrative expense categories on the Company’s consolidated statements of operations.

The Company presents the operating leases in long-term assets and current and long-term liabilities in the accompanying consolidated balance sheets.

Finance leases result in the recognition of depreciation expense, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method.

Depreciation expense attributable to finance leases is included in operating expenses on the Company’s consolidated statements of operations.

Finance leases are reported in property, plant and equipment, net, accrued expenses and other current liabilities, and other liabilities on the Company’s consolidated balance sheets.

The Company did not have significant finance leases as of December 31, 2024 and 2023.

The Company does not recognize ROU assets or lease liabilities for leases with a term of twelve months or less.

Lease cost for short-term leases is recognized on a straight-line basis over the lease term.

Property, Plant and Equipment, net

9 unchanged sentences

The Company capitalizes qualifying internal-use software development costs that are incurred during the application development stage.

Capitalization of costs begins when two criteria are

Notes to Consolidated Financial Statements (continued)

Capitalization of costs begins when two criteria are met:

(i) the preliminary project stage is completed, and (ii) it is probable that the software will be completed and used for its intended function.

2 unchanged sentences

Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.

Notes to Consolidated Financial Statements (continued)

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

11 unchanged sentences

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.

The useful lives of the Company’s intangible assets as of December 31, 2024 and 2023 are as follows:

Customer relationships 15 - 20 years

Developed technology 10 years

Other, definite lived 2 - 7 years

Licenses, indefinite lived Indefinite

In accordance with Accounting Standards Codification 350, “Intangibles - Goodwill and Other” (“ASC 350”), goodwill is not amortized, but rather is reviewed for impairment at the reporting unit level on the last day of the Company’s fourth quarter of each fiscal year, or when there is evidence that events or changes in circumstances indicate that the fair value of the reporting unit is less than the carrying amount of the reporting unit, including goodwill.

3 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, 2023, the Company completed a quantitative assessment under ASC 350 and determined that there was not an impairment of goodwill.

As of December 31, 2024, the Company completed a 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 relevant events

Notes to Consolidated Financial Statements (continued)

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.

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.

No goodwill impairment charges were recorded for the years ended December 31, 2024, 2023 and 2022.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, including property, plant and equipment and definite lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company evaluates long-lived assets, including property, plant and equipment, operating right-of-use assets and definite lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group.

15 unchanged sentences

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.

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

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.

11 unchanged sentences

The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position.

The Company recognizes potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.

Operating Segments

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker in deciding how to make operating decisions, allocate resources and in assessing performance.

The Company’s chief operating decision maker is its Chief Executive Officer, who evaluates the Company’s financial information on a consolidated basis.

Accordingly, the Company has determined that it operates in one operating segment.

Earnings per Share

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 (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.

The Company recognizes potential accrued interest and penalties associated with unrecognized tax positions in income tax benefit in the accompanying consolidated statements of operations.

Basic and Diluted (Loss) Income per Common Share

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

Diluted net (loss) income per share is calculated by giving effect to all potentially dilutive shares of common stock, including stock options, and stock related to unvested restricted stock awards and convertible debt.

In periods of net loss, all potentially issuable shares of common stock are excluded from the diluted net loss per share computation because they are anti-dilutive.

The Company is in a net loss position for the years ended December 31, 2024 and 2023, and therefore diluted shares equals basic shares.

Foreign currency translation

7 unchanged sentences

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

When realized, foreign currency transaction gains and losses are recognized in current period earnings as incurred, and included in other income, 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, net in the Company’s consolidated statements of operations.

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

11 unchanged sentences

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

Comprehensive loss refers to net (loss) 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

4 unchanged sentences

Notes to Consolidated Financial Statements (continued)

Recent Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Standards

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.

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities, including public entities with a single reporting segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker (“CODM”) to allocate resources and assess performance.

Additionally, the standard requires disclosures of significant segment expenses as well as incremental qualitative disclosures.

The Company adopted ASU 2023-07 effective December 31, 2024, on a retrospective basis.

The adoption of ASU 2023-07 did not change the way that the Company identifies its reportable segments and, as a result, did not have a material impact on the Company's segment-related disclosures.

See Note 13 , “Segment Reporting,” to the consolidated financial statements, for additional details on the Company ’ s reportable segment.

Recent Accounting Pronouncements Not Yet Adopted

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

2 unchanged sentences

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.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with the option to apply the guidance prospectively or retrospectively.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting ASU 2023-09 on its financial statements and expects to adopt the guidance upon its effective date.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to disclose disaggregated information about certain costs and expenses on an interim and annual basis.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with the option to apply the guidance prospectively or retrospectively.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting ASU 2024-03 on its financial statements.

In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”), which provides additional guidance to stakeholders about how to determine whether a settlement of convertible debt (particularly, cash convertible instruments) at terms that differ from the original conversion terms should be accounted for under the induced conversion or extinguishment guidance.

ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods.

Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06.

The Company, which has adopted ASU 2020-06, is currently evaluating the impact of adopting ASU 2024-03 on its financial statements and expects to adopt the guidance upon its effective date.

Notes to Consolidated Financial Statements (continued)

Fair Value Measurements

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value as of December 31, 2024 and 2023 because of the relatively short duration of these instruments.

Marketable securities consist of time deposits, corporate debt securities, U.S.

treasury securities, and commercial paper not otherwise classified as cash equivalents.

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

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.

7 unchanged sentences

Money market account $ 57,759 $ — $ — $ 57,759 $ — $ — $ 57,759

Commercial paper 18,489 — — 18,489 — — 18,489

Total included in cash and cash equivalents 76,248 — — 76,248 — — 76,248

Marketable securities:

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

Commercial paper 1,970 5 — 1,975 — — 1,975

8 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

9 unchanged sentences

Total $ 1,970 $ 1,975

As of December 31, 2023, the marketable securities were in an unrealized gain position.

As of December 31, 2024, marketable securities were in an unrealized gain position.

The Company has determined that (i) it does not have the intent to sell any of these investments and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis.

As of December 31, 2024, the Company anticipates that it will recover the entire amortized cost basis of its marketable securities before maturity.

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.

During the years ended December 31, 2024, 2023 and 2022, there were $ 53.5 million, $ 91.8 million, and $ 74.3 million , respectively, in maturities of marketable securities.

There were no proceeds from sales of marketable securities for the year ended December 31, 2024.

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

Interest earned on marketable securities was $ 1.0 million, $ 2.0 million, and $ 1.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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

As of December 31, 2024 and 2023, the accrued interest receivable, net of allowance for credit losses, was less than $ 0.1 million.

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

22 unchanged sentences

Year ended December 31,

2024 2023 2022

(In thousands)

2 unchanged sentences

Deductions (1)

1,896 807 983

Impact of foreign currency translation 44 ( 11 ) 30

8 unchanged sentences

Accrued sales, use, VAT and telecommunications related taxes 7,898 8,467

Income tax payable — 2,235

Other accrued expenses 566 674

1 unchanged sentence

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.

The Company determines if an arrangement is a lease at inception.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Depreciation expense attributable to finance leases is included in operating expenses on the Company’s consolidated statements of operations.

The Company presents the operating leases in long-term assets and current and long-term liabilities in the accompanying consolidated balance sheets.

Finance leases are reported in property, plant and equipment, net, accrued expenses and other current liabilities, and other liabilities on the Company’s consolidated balance sheets.

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

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

(f/k/a Republic Wireless, Inc.) (“Relay”).

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

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

1 unchanged sentence

As of December 31, 2024, non-cancelable leases expire on various dates between 2025 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,

2023 2022 2021

(In thousands)

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

Sublease income — ( 206 ) ( 384 )

Total net lease cost $ 15,655 $ 7,544 $ 6,434

For the years ended December 31, 2024, 2023 and 2022, operating lease cost recorded in the consolidated statements of operations was $ 23.1 million, $ 15.7 million and $ 7.8 million, respectively.

During the years ended December 31, 2024, 2023 and 2022, short-term operating lease expense was $ 0.7 million, $ 0.6 million, and $ 0.6 million, respectively.

Notes to Consolidated Financial Statements (continued)

Operating lease assets are recorded net of accumulated amortization of $ 7.3 million and $ 20.3 million as of December 31, 2024 and 2023, respectively.

11 unchanged sentences

imputed interest ( 246,150 )

accrued lease incentive ( 1,875 )

Total lease obligations 222,302

1 unchanged sentence

Long-term lease obligations $ 219,191

New Corporate Headquarters

Corporate Headquarters

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

2 unchanged sentences

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.

Notes to Consolidated Financial Statements (continued)

The Company evaluated the stated yield explicitly set forth in the lease, and determined it was not calculated in a manner as required by ASC 842.

Therefore, the Company determined it appropriate to use its IBR as the discount rate for the lease.

The IBR was estimated by determining the risk-free rate for a similar length security and applying a risk premium based on the Company’s estimated credit rating.

Because the Company’s estimated credit rating was based on presumed unsecured credit, the rating was increased one level to estimate the yield on secured debt, consistent with ASC 842’s requirements.

The estimated rate was 8.78 %.

Upon commencement of the lease, the Company recognized ROU assets of $ 156.0 million and operating lease liabilities of $ 223.1 million, both of which do not include the two ten-year renewal options.

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.

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

As of December 31, 2024, there is no balance remaining on the 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

6 unchanged sentences

Leasehold improvements 76,054 75,437 5 to 15

Software 12,552 7,051 3

Software 24,916 12,552 1 to 5

Internal-use software development 35,499 25,909 4

12 unchanged sentences

The Company capitalized $ 11.7 million, $ 10.6 million, and $ 3.8 million of software development costs for the years ended December 31, 2024, 2023 and 2022, respectively.

Notes to Consolidated Financial Statements (continued)

Amortization expense related to capitalized software development costs was $ 4.2 million, $ 3.2 million, and $ 2.2 million for the years ended December 31, 2024, 2023 and 2022, 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.

As of December 31, 2024, unamortized implementation costs related to cloud computing arrangements were less than $ 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 2025 and 2026.

1 unchanged sentence

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.

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 an impairment of $ 0.3 million during the year ended December 31, 2024, and $ 0.5 million in each of the years ended December 31, 2023 and 2022, related to capitalized software development costs that provided no future benefit.

This expense is reflected within other income, net in the accompanying consolidated statements of operations.

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

7 unchanged sentences

Total depreciation expense $ 31,739 $ 24,443 $ 18,419

Notes to Consolidated Financial Statements (continued)

Goodwill and Intangible Assets

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

The changes in carrying amount of goodwill were as follows:

(In thousands)

4 unchanged sentences

Balance as of December 31, 2024 $ 317,243

Notes to Consolidated Financial Statements (continued)

Intangible Assets

Intangible assets, net consisted of the following as of December 31, 2023:

Intangible assets, net consisted of the following:

As of December 31,

Amount Accumulated

Amortization Net Carrying

Value Amortization

(In thousands) (In years)

Customer relationships $ 147,426 $ ( 35,599 ) $ 111,827 15 - 20

Developed technology 79,702 ( 25,239 ) 54,463 10

Other, definite lived 2,828 ( 2,828 ) — 2 - 7

Licenses, indefinite lived 624 — 624 Indefinite

Total intangible assets, net $ 230,580 $ ( 63,666 ) $ 166,914

Intangible assets, net consisted of the following as of December 31, 2022:

Amount Accumulated

Amortization Net Carrying

Value Amortization

(In thousands) (In years)

(In thousands)

Customer relationships $ 145,625 $ ( 44,754 ) $ 100,871 $ 147,426 $ ( 35,599 ) $ 111,827

1 unchanged sentence

Other, definite lived 2,828 ( 2,828 ) — 2,828 ( 2,828 ) —

Licenses, indefinite lived 624 — 624 Indefinite

Licenses, indefinite lived 624 — 624 624 — 624

Total intangible assets, net $ 224,266 $ ( 78,911 ) $ 145,355 $ 230,580 $ ( 63,666 ) $ 166,914

7 unchanged sentences

The remaining weighted average amortization period for definite lived intangible assets is 9.0 years.

Notes to Consolidated Financial Statements (continued)

Future estimated amortization expense for definite lived intangible assets is as follows:

3 unchanged sentences

Thereafter 59,461

Notes to Consolidated Financial Statements (continued)

Revolving Credit Facility

3 unchanged sentences

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.

The Credit Agreement requires that the Company maintain consolidated EBITDA, tested on a quarterly basis.

The Company is also required to maintain minimum liquidity of $ 75.0 million, which includes the amount of undrawn borrowing commitments available under the Credit Agreement.

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.

1 unchanged sentence

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.

On May 1, 2024, the Company entered into an amendment (the “Amendment”) to the Credit Agreement.

The Amendment increased the aggregate revolving credit commitments to $ 100.0 million;

increased the swingline sublimit to $ 10.0 million;

increased the minimum liquidity to $ 82.5 million;

and extended the maturity date to the earlier of (a) May 1, 2029 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.

Notes to Consolidated Financial Statements (continued)

On October 28, 2024, the Company entered into a second amendment (the “Second Amendment”) to the Credit Agreement, which increased the aggregate revolving credit commitments to $ 150.0 million and modified the maturity date to the earlier of (a) May 1, 2029 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 senior notes due 2028.

The Second Amendment also modified the applicable margin for loans based on SOFR to between 2.00 % and 2.50 %, and modified the applicable margin for loans based on the base rate to between 1.00 % and 1.50 %, in each case depending upon the Company’s consolidated total leverage ratio for the most recent fiscal quarter for which financial statements have been delivered under the Credit Agreement.

The Company is now required to pay a quarterly commitment fee equal to between 0.20 % and 0.25 %, depending upon the Company’s consolidated total leverage ratio for the most recent fiscal quarter for which financial statements have been delivered under the Credit Agreement.

The Second Amendment replaced existing financial covenants with the following new financial covenants:

(a) (1) for each fiscal quarter ending on or prior to June 30, 2025, a consolidated senior secured leverage ratio not to exceed 2.75 to 1.00, and (2) for each fiscal quarter thereafter, a consolidated senior secured leverage ratio not to exceed 2.50 to 1.00;

and (b) a consolidated fixed charge coverage ratio not less than 2.00 to 1.00, in each case tested as of the end of any fiscal quarter.

The amendments modified exceptions to certain customary negative covenants to require a pro forma consolidated senior secured leverage ratio at least 0.50 to 1.00 inside the maximum then-applicable consolidated senior secured leverage ratio, and modified the exception to the restriction on additional convertible indebtedness to require a pro forma consolidated total leverage ratio over the most recent four fiscal quarters not to exceed 4.50 to 1.00.

The obligations under the Credit Agreement are secured by a lien on substantially all of the Company’s tangible and intangible property and by a pledge of all of the equity interests of the Company’s direct domestic subsidiaries and 65 % of the voting capital stock and 100 % of the non-voting capital stock of any first-tier foreign subsidiaries, subject to limited exceptions.

In addition, the Company’s direct domestic subsidiaries guarantee the obligations under the Credit Agreement and grant a lien and pledge, as applicable, on substantially all of their tangible and intangible property to secure the obligations under the Credit Agreement.

As of December 31, 2024, unamortized debt issuance costs were $ 1.0 million, of which $ 0.2 million were included in prepaid expenses and other current assets and $ 0.8 million were included in other long-term assets.

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, 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.

As of December 31, 2024, the Company had no outstanding borrowings under the Credit Facility and was in compliance with all financial and non-financial covenants for all periods presented.

As of December 31, 2024, the available borrowing capacity under the Credit Facility was $ 150.0 million.

Convertible Senior Notes and Capped Call Transactions

8 unchanged sentences

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.

During May 2024, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of the 2026 Convertible Notes (the “2024 Repurchases”) to repurchase approximately $ 140.0 million aggregate principal amount of the 2026 Convertible Notes for an aggregate cash price of approximately $ 128.5 million.

The 2024 Repurchases closed on May 9, 2024.

Following the 2024 Repurchases and previous repurchases, approximately $ 35.0 million principal amount of the 2026 Convertible Notes remain outstanding.

The difference between the consideration used for the 2024 Repurchases and the carrying value of the 2026 Convertible Notes resulted in a gain of $ 10.3 million recorded within net gain on extinguishment of debt on the Company’s condensed consolidated statements of operations for the year ended December 31, 2024.

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.

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

38 unchanged sentences

Year ended December 31,

2024 2023 2022

2026 Convertible Notes:

8 unchanged sentences

Total interest expense $ 2,983 $ 3,719 $ 5,224

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.

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 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 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, 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”).

5 unchanged sentences

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

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

The following table sets forth key terms and costs incurred for the Capped Calls related to the Convertible Notes as of December 31, 2024:

6 unchanged sentences

All of the Capped Calls were outstanding as of December 31, 2024.

Notes to Consolidated Financial Statements (continued)

Geographic Information

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:

The following table summarizes revenue by geographic region, which is apportioned based on the destination of the service:

Year ended December 31,

1 unchanged sentence

(In thousands)

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

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

United States $ 658,735 $ 514,048 $ 484,105

International 89,752 87,069 89,047

Total $ 748,487 $ 601,117 $ 573,152

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.

For the years ended December 31, 2024, 2023 and 2022, no country outside of the United States represented 10% or more of total revenues.

The following table summarizes long-lived assets by geographic region:

As of December 31,

(In thousands)

United States $ 326,634 $ 329,002

International 3,790 6,369

Total $ 330,424 $ 335,371

Stockholders’ Equity

3 unchanged sentences

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

3 unchanged sentences

Dividend payments are not subject to restriction.

Notes to Consolidated Financial Statements (continued)

Reserved Shares

23 unchanged sentences

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.

Depending on the nature of the 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, 2024, awards granted under the 2010 Plan consisted of stock options and awards granted under the 2017 Plan consisted of stock options and RSUs.

Notes to Consolidated Financial Statements (continued)

Stock Options

18 unchanged sentences

As of December 31, 2024, the Company had no unrecognized compensation cost related to non-vested stock options.

Notes to Consolidated Financial Statements (continued)

Restricted Stock Units

11 unchanged sentences

As of December 31, 2024, total unrecognized compensation cost related to non-vested RSUs was $ 72.6 million, which will be amortized over a weighted-average period of 2.14 years.

Notes to Consolidated Financial Statements (continued)

Stock-Based Compensation Expense

15 unchanged sentences

As of December 31, 2024, the Company has $ 14.6 million in non-cancellable purchase obligations, consisting of primarily network equipment maintenance and software license contracts, of which $ 6.6 million will be fulfilled within one year.

Notes to Consolidated Financial Statements (continued)

Legal Matters

2 unchanged sentences

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.

Segment Reporting

The Company manages its business activities on a consolidated basis and operates in one operating segment.

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the CODM in deciding how to make operating decisions, allocate resources and in assessing performance.

The Company’s CODM is its Chief Executive Officer.

The CODM utilizes the Company’s budgeted and forecasted expense information, as a key input to resource allocation.

The CODM makes decisions on resource allocation, assesses performance of the business and monitors budget versus actual results using net (loss) income, as reported in the accompanying consolidated statements of operations.

Significant expenses within net (loss) income include cost of revenue, research and development, sales and marketing, and general and administrative expenses, which are each separately presented on the Company’s consolidated statements of operations.

Other segment items within net (loss) income include net gain on

Notes to Consolidated Financial Statements (continued)

extinguishment of debt, gain on business interruption insurance recoveries, interest expense, net, other income, net, and income tax benefit.

Employee Benefit Plans

14 unchanged sentences

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:

5 unchanged sentences

Interest cost 123 146

Actuarial loss (gain) 13 ( 418 )

Actuarial (gain) loss ( 138 ) 13

Benefits paid ( 8 ) ( 41 )

5 unchanged sentences

Return on plan assets 64 41

Actuarial gain — 72

Actuarial loss ( 6 ) —

Employer contribution 349 393

4 unchanged sentences

Funded status, net liability $ 190 $ 320

Notes to Consolidated Financial Statements (continued)

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.

defined benefit pension plans was $ 0.2 million and $ 0.3 million as of December 31, 2024 and 2023, respectively, 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:

4 unchanged sentences

Fair value of plan assets 3,749 3,607

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 .

Pretax amounts for net periodic benefit cost and other amounts for the defined benefit pension plans consisted of the following components:

8 unchanged sentences

Changes in plan assets and benefit obligations included in other comprehensive loss:

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

Unrecognized net actuarial gain beginning of year ( 783 ) ( 705 ) ( 227 )

Actuarial gain recognized during year 22 27 —

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

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

Actuarial (gain) loss on benefit obligation ( 138 ) 13 ( 418 )

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

Impact of foreign currency translation 44 ( 118 ) 12

7 unchanged sentences

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

actuarial gains and losses which exceed 10% of the higher of the plan assets and the projected benefit obligation are amortized on a straight line basis over the average remaining service period of the active plan participants.

actuarial gains and losses which exceed 10% of the higher of the plan assets and the projected

Notes to Consolidated Financial Statements (continued)

benefit obligation are amortized on a straight line basis over the average remaining service period of the active plan participants.

Any prior service costs are amortized on a straight line basis over the average remaining service period of the active plan participants.

3 unchanged sentences

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:

16 unchanged sentences

The fair value of the contract is determined by the insurer based on the premiums paid by the Company plus interest credits plus the profit-sharing adjustment less benefit payments.

The major categories of plan assets are as follows:

As of December 31,

(In thousands)

Assets held by:

Insurance companies (collective and individual) $ 3,607 $ 3,181

The major category of plan assets are assets held by insurance companies (collective and individual) of $ 3.7 million and $ 3.6 million as of December 31, 2024 and 2023, respectively.

Expected Cash Flows

30 unchanged sentences

Non-deductible expenses ( 4.6 ) ( 4.1 ) 4.0

Non-deductible executive compensation ( 12.4 ) — —

Research tax benefits 49.4 24.4 ( 31.6 )

2 unchanged sentences

Deferred tax rate change 0.1 0.6 0.5

Voxbone US 338(g) gain — — ( 8.9 )

Intangibles and deferred adjustments ( 7.3 ) — ( 4.7 )

3 unchanged sentences

For the year ended December 31, 2024, the Company recognized an income tax benefit of $ 2.4 million on pre-tax book loss of $ 9.0 million, resulting in an effective income tax rate of 27.1 %.

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 )%.

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 )%.

In 2024, the Company’s valuation allowance in the U.S.

21 unchanged sentences

Capitalized research and development expenses 44,716 40,306

Accrued lease incentive — 2,645

Tax credits 15,694 12,994

24 unchanged sentences

Notes to Consolidated Financial Statements (continued)

At December 31, 2023, the amount of unremitted earnings generated by the Company’s foreign subsidiaries was not significant.

At December 31, 2024, the amount of unremitted earnings generated by the Company’s foreign subsidiaries is not significant.

The Company does not assert indefinite reinvestment on a portion of its unremitted earnings of certain foreign subsidiaries as of December 31, 2024.

12 unchanged sentences

deferred tax assets.

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.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 0.1 million, $ 0.3 million and $ 0.3 million, respectively, in interest and penalties related to income taxes within income tax benefit in the accompanying consolidated statements of operations.

The Company expects no material changes in the twelve months following December 31, 2024 in its uncertain tax positions.

5 unchanged sentences

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 (loss) income per share are as follows:

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

Year ended December 31,

10 unchanged sentences

Interest expense on convertible notes, net of taxes — — 5,147

$ ( 16,343 ) $ ( 14,897 ) $ ( 27,362 )

Diluted $ ( 6,524 ) $ ( 16,343 ) $ ( 14,897 )

Weighted average number of common shares outstanding:

2 unchanged sentences

Diluted 27,209,698 25,612,724 30,907,869

________________________

(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 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 (loss) income 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 diluted net (loss) income per common share because their effects would have been anti-dilutive:

As of December 31,

3 unchanged sentences

Convertible senior notes 2,321,106 3,442,229 —

3,442,229 — 987,149

Total 7,596,289 9,451,503 2,766,847

________________________

(1) As of December 31, 2022, subsequent to adopting ASU 2020-06 as of January 1, 2022, the Company used the if-converted method to calculate the dilutive impact of the 2026 Convertible Notes and 2028 Convertible Notes on diluted income per share, if applicable.

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.

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 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.

As of December 31, 2021, the conversion spread, calculated using the average market price of Class A common stock during the period consistent with the treasury stock method, had a dilutive impact for the 2026 Convertible Notes on diluted net income per share of Class A common stock when the average market price of the Company’s Class A common stock for a given period exceeded the conversion price of $ 91.03 per share.

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.

Subsequent Events

Repurchase of 2026 Convertible Notes

On February 19, 2025, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of its 0.250 % Convertible Senior Notes due 2026 (the “Repurchases”) to repurchase approximately $ 27.4 million aggregate principal amount of the Notes for approximately $ 26.1 million, excluding customary transaction fees.

The repurchase price payable by Bandwidth will be paid in cash.

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

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

Notes to Consolidated Financial Statements (continued)

The Repurchases are expected to close on February 24, 2025, subject to the satisfaction of customary closing conditions.

Following such closings, approximately $ 7.6 million principal amount of the Notes will remain outstanding.

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