What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-09 · 137 added, 86 removed, 277 unchanged (45% of the section changed)

13 unchanged sentences

Our strategy is to provide the world’s best combination of freedom of choice and flexibility in a multi-tenant SaaS platform.

We describe this strategy as “Open SaaS.” As of March 31, 2024 we served 5,970 accounts with at least one unique enterprise plan subscription or an enterprise-level feed management subscription (collectively "enterprise accounts").

We describe this strategy as “Open SaaS.” As of June 30, 2024 we served 5,961 accounts with at least one unique enterprise plan subscription or an enterprise-level feed management subscription (collectively “enterprise accounts”).

These accounts may have more than one Enterprise plan or a combination of Enterprise plans and Essentials plans.

32 unchanged sentences

This advancement includes a greater focus on portfolio cross-sell of Feedonomics and partner solutions.

We made a commitment to drive revenue growth and we are beginning to see progress in the first quarter since initiating many of the advancements discussed above.

First quarter of fiscal 2024 net retention rates improved versus the prior quarter, and we continue to focus on customer success and growth.

We are well-positioned to reaccelerate revenue growth, and we are continuing to see progress in the six months since initiating many of the advancements discussed above.

We delivered our largest sequential growth in enterprise ARR in the last twelve months.

For the first half of the year, our net retention rates continue to improve versus the prior year, and we continue to focus on customer success and growth while improving go-to market spending efficiency.

Macroeconomic environment and customer spend

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We calculate Subscription ARR at the end of each month as the sum of contractual monthly recurring revenue at the end of the period, which includes platform subscription fees, invoiced growth adjustments, product feed management subscription fees, recurring professional services revenue, and other recurring revenue, multiplied by twelve to prospectively annualize recurring revenue.

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Average revenue per account

We calculate average revenue per account (“ARPA”) at the end of a period by including customer-billed revenue and an allocation of partner and services revenue, where applicable.

We bill customers for subscription solutions and professional services, and we

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include both in ARPA for the reported period.

For example, ARPA as of March 31, 2024, includes all subscription solutions and professional services billed between January 1, 2024, and March 31, 2024.

We bill customers for subscription solutions and professional services, and we include both in ARPA for the reported period.

For example, ARPA as of June 30, 2024, includes all subscription solutions and professional services billed between January 1, 2024, and June 30, 2024.

We allocate partner revenue, where applicable, primarily based on each customer’s share of GMV processed through that partner’s solution.

11 unchanged sentences

ARR attributable to Enterprise Accounts as a percentage of ARR

Average Revenue Per Account

Lifetime value to customer acquisition costs

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Our retail plans are generally month-to-month contracts.

Monthly subscription fees for Enterprise plans are adjusted if a customer’s GMV or orders processed are outside of specified plan thresholds on a trailing twelve-month basis.

Fixed monthly fees and any transaction charges related to subscription solutions are recognized as revenue in the month they are earned.

Monthly subscription fees for Enterprise plans are adjusted if a customer’s GMV or

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orders processed are outside of specified plan thresholds on a trailing twelve-month basis.

Fixed monthly fees and any transaction charges related to subscription solutions are recognized as revenue in the month they are earned.

Through Feedonomics, we provide feed management solutions under service contracts which are generally one year or less and, in many cases, month-to-month.

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Incremental sales commissions for new customer contracts are deferred and amortized ratably over the estimated period of our relationship with such customers.

We expect our sales and marketing expenses will increase in absolute dollars, but will decrease as a percentage of total revenue over time.

We have seen lower sales and marketing efficiency results in recent quarters as platform investment spending has tightened across our industry.

Research and development

11 unchanged sentences

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Restructuring charges

Restructuring charges consist primarily of employee notice period expenses and severance payments, lease or contract termination costs, and considerations of various capital alternatives which include asset impairments, professional services, and other costs relating to significant items that are nonrecurring or unusual.

Amortization of intangible assets

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Interest expense consists primarily of the interest expense from the amortization of the debt issuance costs and coupon interest attributable to our convertible note issued in 2021, as well as interest associated with a financing agreement entered into in the first half of 2023.

Other income (expense)

Other income (expense) primarily consists of loss from share issuance related to the Bundle acquisition and foreign currency translation adjustments.

Other expense

Other expense primarily consists of loss from share issuance related to the Bundle acquisition and foreign currency translation adjustments.

Provision for income taxes

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Accordingly, our effective tax rate will vary depending on the relative proportion of foreign to domestic income, use of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities, applicability of any valuation allowances, and changes in tax laws in jurisdictions in which we operate.

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Results of operations

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The period-to-period comparison of operating results is not necessarily indicative of results for future periods.

For the three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands)

Cost of revenue (1)

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General and administrative

Acquisition related expenses

Restructuring charges

Amortization of intangible assets

Acquisition related costs

Restructuring charges

Total operating expenses

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Interest expense

Other income (expense)

Other expense

Loss before provision for income taxes

Provision for income taxes

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(1) Amounts include stock-based compensation expense and associated payroll tax costs, as follows:

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands)

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Revenue by geographic region

The composition of our revenue by geographic region during the three months ended March 31, 2024 and March 31, 2023 were as follows:

Three months ended March 31,

The composition of our revenue by geographic region during the three and six months ended June 30, 2024 and June 30, 2023 were as follows:

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

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Total Revenue

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(1) Americas-other revenue includes revenue from North and South America, other than the U.S.

Comparison of the three months ended March 31, 2024 and March 31, 2023

Comparison of the three and six months ended June 30, 2024 and June 30, 2023

The following table presents the components of our revenue for each of the periods indicated:

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

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Total revenue

Total revenue increased $8.6 million, or 12.0 percent, to $80.4 million for the three months ended March 31, 2024, from $71.8 million for the three months ended March 31, 2023, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $7.2 million, or 13.3 percent, to $61.0 million for the three months ended March 31, 2024, from $53.8 million for the three months ended March 31, 2023, primarily due to increases in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $1.5 million, or 8.1 percent, to $19.4 million for the three months ended March 31, 2024, from $17.9 million for the three months ended March 31, 2023, primarily as a result of increases in revenue share activity offset by decreases in stand ready and integration activity.

Total revenue increased $6.4 million, or 8.5 percent, to $81.8 million for the three months ended June 30, 2024, from $75.4 million for the three months ended June 30, 2023, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $5.7 million, or 10.1 percent, to $61.8 million for the three months ended June 30, 2024, from $56.1 million for the three months ended June 30, 2023, primarily due to increases in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $0.7 million, or 3.8 percent, to $20.0 million for the three months ended June 30, 2024, from $19.3 million for the three months ended June 30, 2023, primarily as a result of increases in revenue share activity offset by decreases in stand ready and integration activity.

Total revenue increased $15.0 million, or 10.2 percent, to $162.2 million for the six months ended June 30, 2024 from $147.2 million for the six months ended June 30, 2023, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $12.8 million or 11.7 percent, to $122.8 million for the six months ended June 30, 2024, from $109.9 million for the six months ended June 30, 2023, primarily due to growth in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $2.2 million, or 5.8 percent, to $39.4 million for the six months ended June 30, 2024 , from $37.3 million for the six months ended June 30, 2023, primarily as a result of increases in in revenue share activity offset by decreases in stand ready and integration activity.

Cost of revenue, gross profit, and gross margin

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

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Gross margin percentage

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Cost of revenue increased $1.0 million, or 5.7 percent, to $18.4 million for the three months ended March 31, 2024, from $17.4 million for the three months ended March 31, 2023, primarily as a result of higher software costs and processing fees of $1.1 million and decreased spend of $0.3 million in salaries and shared-based compensation driven by decreases in headcount from the 2023 Restructure.

Cost of revenue increased $1.0 million, or 5.6 percent, to $19.8 million for the three months ended June 30, 2024, from $18.8 million for the three months ended June 30, 2023, primarily as a result of higher software costs and credit card processing fees of $1.2 million driven by associated increased in revenue.

Gross margin increased to 75.8 percent from 75.1 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

Cost of revenue increased $2.1 million, or 5.7 percent, to $38.3 million for the six months ended June 30, 2024, from $36.2 million for the six months ended June 30, 2023 primarily as a result of higher software costs and credit card processing fees of $2.7 million, and lower salaries and stock-based compensation costs of $0.3 million.

Gross margin increased to 76.4 percent from 75.4 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

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Operating income (expenses)

Sales and marketing

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

1 unchanged sentence

Percentage of revenue

Sales and marketing expenses decreased $1.6 million, or (4.8) percent, to $32.4 million for the three months ended March 31, 2024 from $34.1 million for the three months ended March 31, 2023, primarily due to decreased salaries of $1.8 million and share-based compensation driven by cost cutting measures from the 2023 Restructure.

Sales and marketing expenses decreased $1.2 million, or (3.3) percent, to $34.4 million for the three months ended June 30, 2024 from $35.6 million for the three months ended June 30, 2023, primarily due to decreased variable marketing costs of $1.0 million and decreased salaries and share-based compensation expense of $0.4 million driven by cost cutting measures from the 2023 Restructure.

As a percentage of total revenue, sales and marketing expenses decreased to 42.1 percent from 47.2 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

Sales and marketing expenses decreased $2.8 million or (4.0) percent, to $66.9 million for the six months ended June 30, 2024 from $69.6 million for the six months ended June 30, 2023, primarily due to lower variable marketing costs of $1.5 million, and decreased salaries and share-based compensation expense of $2.2 million driven by cost cutting measures from the 2023 Restructure.

These decreases were partially offset by a $1.5 million increase in other expenses, such as software costs, contract services, and professional fees.

As a percentage of total revenue, sales and marketing expenses decreased to 41.2 percent from 47.3 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

Research and development

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

1 unchanged sentence

Percentage of revenue

Research and development decreased $0.9 million, or (4.1) percent, to $20.0 million for the three months ended March 31, 2024 from $20.8 million for the three months ended March 31, 2023, due to the cost cutting measures from the 2023 Restructure.

Research and development decreased $1.1 million, or (5.2) percent, to $20.3 million for the three months ended June 30, 2024 from $21.4 million for the three months ended June 30, 2023, due to the cost cutting measures from the 2023 Restructure.

As a percentage of total revenue, research and development expenses decreased to 24.8 percent from 28.4 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

Research and development decreased $2.0 million, or (4.7) percent, to $40.3 million for the six months ended June 30, 2024 from $42.2 million for the six months ended June 30, 2023, due to the cost cutting measures from the 2023 Restructure.

As a percentage of total revenue, research and development expenses decreased to 24.8 percent from 28.7 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

General and administrative

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(dollars in thousands)

1 unchanged sentence

Percentage of revenue

General and administrative expenses decreased $1.6 million, or (9.5)% percent , to $14.9 million for the three months ended March 31, 2024 from $16.5 million for the three months ended March 31, 2023, primarily due to decreased bad debt expense of $0.3 million due to focus on collection efforts, decreased spend of $0.7 million in salaries and share-based compensation driven by cost cutting measures from the 2023 Restructure, and decreased insurance expense of $0.4 million as a result of improved renewal rates.

General and administrative expenses increased $1.0 million, or 7.0 percent, to $15.4 million for the three months ended June 30, 2024 from $14.4 million for the three months ended June 30, 2023, primarily due to increased spend of $0.7 million in salaries and share-based compensation driven by increased headcount and increased professional service expenses of $0.4 million.

As a percentage of total revenue, general and administrative expenses decreased to 18.9 percent from 19.1 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

Acquisition related expenses

Acquisition related expense decreased $3.8 million, or (91.9) percent, to $0.3 million for the three months ended March 31, 2024, from $4.1 million for the three months ended March 31, 2023.

Acquisition costs related to Feedonomics were recognized through Q3 2023, which was the second anniversary date of the acquisition.

The remaining acquisition expenses are recognized on other transactions that occurred, while the prior years balance included costs related to the Feedonomics acquisition.

General and administrative expenses decreased $0.5 million, or (1.8) percent, to $30.4 million for the six months ended June 30, 2024 from $30.9 million for the six months ended June 30, 2023, primarily due to a $0.8 million decrease in insurance expense due to

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lower renewal rates.

As a percentage of total revenue, general and administrative expenses decreased to 18.7 percent from 21.0 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

Acquisition related expenses

Acquisition related expense decreased $3.8 million, or (91.9) percent, to $0.3 million for the three months ended June 30, 2024, from $4.1 million for the three months ended June 30, 2023, and decreased $7.6 million, or 91.9 percent, to $0.7 million for the six months ended June 30, 2024, from $8.3 million for the six months ended June 30, 2023.

Acquisition costs recognized for the three and six months ended June 30, 2024 represent the amortization of deferred compensation for the Makeswift acquisition.

Acquisition costs in prior years related to other transactions and acquisition costs for Feedonomics were recognized during the three and six months ended June 30, 2023.

Restructuring charges

Restructuring charges were $0.0 million for the three months ended March 31, 2024, and $0.4 million for the three months ended March 31, 2023.

Restructuring charges were $2.6 million and $0.0 million for the three months ended June 30, 2024 and 2023, respectively, and were $2.6 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

The $2.6 million is primarily a result of professional services related to our capital structure and various alternatives associated with inbound inquiries and interest in the Company.

Interest income

Interest income increased $0.8 million, or 31.0 percent, to $3.2 million for the three months ended March 31, 2024, from $2.4 million for the three months ended March 31, 2023.

This increase was primarily a result of investment income reinvested at higher interest rates for our cash, cash equivalents and marketable securities.

Interest income increased $0.4 million, or 13.1 percent, to $3.2 million for the three months ended June 30, 2024, from $2.8 million for the three months ended June 30, 2023, and increased $1.1 million, or 21.4 percent to $6.4 million for the six months ended June 30, 2024 from $5.3 million for the six months ended June 30, 2023.

This increase was primarily a result of higher cash, cash equivalents and marketable securities balances.

Interest expense

Interest expense was $0.7 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively, and was related to our outstanding debt.

Interest expense was $0.7 million and $0.7 million for the three months ended June 30, 2024 and 2023, respectively, and was $1.4 million and $1.4 million for the six months ended June 30, 2024 and 2023 related to our outstanding debt.

Liquidity and capital resources

We are committed to healthy cash flow generation and cash management, and continue to evaluate all of our spending to look for opportunities to drive improvements in cash flow.

Our improvements in internal systems and controls, together with discipline around accounts receivable and collections has led to improvements in working capital and accounts receivable.

We are committed to cash flow generation and cash management by focusing on operational discipline, and we continue to evaluate all of our spending to look for opportunities to drive improvements in cash flow.

Our success in transitioning our customer base from legacy month-to-month contracts to more favorable payment terms has continued to result in better cash flow as these efforts have increased the timing of our cash receipts and reduced our overall subscription churn rate.

Our operational short-term liquidity needs primarily include working capital for sales and marketing, research and development, and continued innovation.

Our future capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives, the timing of new product introductions, the continued impact of the inflation on the global economy, our business, financial condition, and results of operations.

Our future capital requirements will depend on many factors, including our growth rate, levels of revenue, the expansion of sales and marketing activities, market acceptance of our platform, the results of business initiatives including our efforts in transitioning our customers to annual billings, continued reduction in churn, the timing of new product introductions, the continued impact of the inflation on the global economy, market risk due to elevated interest rates, our business, financial condition, and results of operations.

We believe that our existing cash and cash equivalents and our cash flows from operating activities will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

In the future, we may attempt to raise additional capital through the sale of additional equity or debt financing.

In the future, we will continue to work with our customer base to move billings from monthly to annually in efforts to better manage cash flow and reduce churn.

Additionally, we may attempt to restructure our debt financing.

Additionally, with our recently announced anticipated convertible notes restructuring, there will be an inherent reduction in liquidity.

However, we believe as a result of the renegotiation and extension of the remaining obligation, we will decrease our overall debt leverage and better optimize our maturities.

The restructuring of the convertible notes will require semi-annual interest payments to significantly increase over the new extended period.

From time to time, we may seek to repurchase, redeem or otherwise retire our convertible notes through cash repurchases and/or exchanges for equity securities, in open market repurchases, privately negotiated transactions, tender offers or otherwise.

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We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources .

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The following table sets forth a summary of our cash flows for the periods indicated.

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

As of March 31, 2024, we had $62.0 million in cash, cash equivalents, and restricted cash, an increase of $0.2 million compared to $62.2 million as of March 31, 2023.

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

As of June 30, 2024, we had $134.2 million in cash, cash equivalents, and restricted cash, an increase of $58.6 million compared to $75.6 million as of June 30, 2023.

Cash and cash equivalents consist of highly-liquid investments with original maturities of less than three months.

Our restricted cash balance of $1.1 million and $1.1 million at March 31, 2024 and 2023 respectively, consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions.

Our marketable securities balance of $204.3 million and $221.3 million at March 31, 2024 and 2023 respectively, consists of investments in corporate and US treasury securities .

Our restricted cash balances of $1.1 million at June 30, 2024 and 2023, consists of security deposits for future chargebacks and amounts on deposit with certain financial institutions.

Our marketable securities balance of $142.7 million and $222.9 million at June 30, 2024 and 2023 respectively, consists of investments in corporate and US treasury securities.

We maintain cash account balances in excess of Federal Deposit Insurance Corporation (FDIC) insured limits.

Operating activities

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Net cash used in operating activities for the three months ended March 31, 2024 and 2023 was $3.4 million and $20.8 million, respectively.

Net cash provided by operating activities for the three months ended June 30, 2024 and 2023 was $11.7 million and $14.7 million, respectively.

This consisted primarily of our net losses adjusted for certain non-cash items including depreciation, stock-based compensation, debt discount amortization, amortization of intangible assets, bad debt expense, and the effect of changes in working capital.

Net cash provided by (used in) operating activities for the six months ended June 30, 2024 and 2023 was $8.3 million and ($6.1) million respectively.

Investing activities

Net cash used in investing activities during the three months ended March 31, 2024 and 2023 was $6.9 million and ($9.7) million, respectively.

In the three months ended March 31, 2024, this consists primarily of the sale and maturity of marketable securities of $29.4 million offset by the purchase of property and equipment of $0.8 million and the purchase of marketable securities of $35.5 million.

In the three months ended March 31, 2023, this consists primarily of the purchases of marketable securities of $48.0 million and the purchases of property and equipment of $1.1 million offset by the maturity of marketable securities of $39.4 million.

Net cash provided by (used in) investing activities during the three months ended June 30, 2024 and 2023 was $60.3 million and ($2.7) million, respectively.

For the three months ended June 30, 2024, this consisted primarily of the sale and maturity of marketable securities of $62.5 million offset by the purchase of property and equipment of $1.1 million and the purchase of marketable securities of $1.0 million.

In the three months ended June 30, 2023, this consists primarily of the purchases of marketable securities of $83.6 million and the purchases of property and equipment of $1.0 million offset by the maturity of marketable securities of $85.3 million.

Net cash provided by (used in) investing activities during the six months ended June 30, 2024 and 2023 was $53.4 million and ($12.4) million, respectively.

In the six months ended June 30, 2024, this consists primarily of the sale and maturity of marketable securities of $92.0 million offset by the purchase of property and equipment of $1.9 million and the purchase of marketable securities of $36.6 million.

In the six months ended June 30, 2023, this consists primarily of the purchase of marketable securities of $133.4 million and the purchase of property and equipment of $2.1 million offset by the sale and maturity of marketable securities of $123.1 million.

Financing activities

Net cash used in financing activities during the three months ended March 31, 2024 and 2023 was $0.5 million and $0.3 million, respectively.

In the three months ended March 31, 2024, this was attributable to proceeds from exercise of stock options of $0.1 million offset by withholdings from the issuance of shares of common stock pursuant to the exercise of stock options and vesting of restricted stock units of $1.3 million and repayments of debt of $0.1 million.

In the three months ended March 31, 2023, this was attributable to withholdings from the issuance of shares of common stock pursuant to the exercise of stock options of $0.3 million

Net cash provided by financing activities during the three months ended June 30, 2024 and 2023 was $0.1 million and $1.4 million, respectively.

In the three months ended June 30, 2024, this was attributable to proceeds from exercise of stock options of $0.2 million offset by repayments of debt of $0.1 million.

In the three months ended June 30, 2023, this was attributable to withholdings from the issuance of shares of common stock pursuant to the exercise of stock options of $1.0 million and proceeds from debt of $1.1 million, offset by withholdings from the issuance of shares of common stock pursuant to the exercise of stock options and vesting of restricted stock units of $0.8 million.

Net cash provided by (used in) financing activities during the six months ended June 30, 2024 and 2023 was ($0.4) million and $1.1 million, respectively.

In the six months ended June 30, 2024, this was attributable to proceeds from exercise of stock options of $1.2 million offset by withholdings from the issuance of shares of common stock pursuant to the exercise of stock options and vesting of restricted stock units of $1.3 million and repayment of debt of $0.3 million.

In the six months ended June 30, 2023, this was attributable to proceeds from the exercise of stock options of $2.2 million and proceeds from debt of $1.1 million offset by

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withholdings from the issuance of shares of common stock pursuant to the exercise of stock options and vesting of restricted stock units of $2.2 million.

2026 Convertible senior notes

In September 2021, we issued $345.0 million principal amount of 0.25 percent Convertible Senior Notes due 2026 (the “Notes”).

The Notes were issued pursuant to, and are governed by, an indenture (the “Convertible Notes Indenture”), dated as of September 14, 2021, between us and U.S.

In September 2021, we issued $345.0 million principal amount of 0.25 percent Convertible Senior Notes due 2026 (the “2026 2026 Convertible Notes”).

The 2026 Convertible Notes were issued pursuant to, and are governed by, an indenture (the “2026 Convertible Notes Indenture”), dated as of September 14, 2021, between us and U.S.

Bank National Association, as trustee.

The Notes are our senior, unsecured obligations and are (i) equal in right of payment with our future senior, unsecured indebtedness;

(ii) senior in right of payment to our future indebtedness that is expressly subordinated to the Notes in right of payment;

The 2026 Convertible Notes are our senior, unsecured obligations and are (i) equal in right of payment with our future senior, unsecured indebtedness;

(ii) senior in right of payment to our future indebtedness that is expressly subordinated to the 2026 Convertible Notes in right of payment;

(iii) effectively subordinated to our future secured indebtedness, to the extent of the value of the collateral securing that indebtedness;

and (iv) structurally subordinated to all future indebtedness and other liabilities, including trade payables, and (to the extent we are not a holder thereof) preferred equity, if any, of our subsidiaries.

The Notes accrue interest at a rate of 0.25 percent per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.

The Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted.

The 2026 Convertible Notes accrue interest at a rate of 0.25 percent per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.

The 2026 Convertible Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted.

Before July 1, 2026, noteholders have the right to convert their Notes only upon the occurrence of certain events.

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In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the 2026 Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

We may not redeem the Notes at our option at any time before October 7, 2024.

The Notes will be redeemable, in whole or in part (subject to the “Partial Redemption Limitation” (as defined in the Convertible Notes Indenture)), at our option at any time, and from time to time, on or after October 7, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of our common stock exceeds 130 percent of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice;

We may not redeem the 2026 Convertible Notes at our option at any time before October 7, 2024.

The 2026 Convertible Notes will be redeemable, in whole or in part (subject to the “Partial Redemption Limitation” (as defined in the 2026 Convertible Notes Indenture)), at our option at any time, and from time to time, on or after October 7, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of our common stock exceeds 130 percent of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice;

and (ii) the trading day immediately before the date we send such notice.

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

The redemption price will be a cash amount equal to the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

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

Pursuant to the Partial Redemption Limitation, we may not elect to redeem less than all of the outstanding Notes unless at least $150.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time we send the related redemption notice.

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

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fundamental change repurchase date.

If certain corporate events that constitute a “Fundamental Change” (as defined in the 2026 Convertible Notes Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require us to repurchase their Notes at a cash repurchase price equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving us and certain de-listing events with respect to our common stock.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Convertible Notes Indenture), which include the following:

(i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period);

(ii) our failure to send certain notices under the Notes Indenture within specified periods of time;

(iii) our failure to comply with certain covenants in the Notes Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of us and our subsidiaries, taken as a whole, to another person;

(iv) a default by us in our other obligations or agreements under the Convertible Notes Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Convertible Notes Indenture;

The 2026 Convertible Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Convertible Notes Indenture), which include the following:

(i) certain payment defaults on the 2026 Convertible Notes (which, in the case of a default in the payment of interest on the 2026 Convertible Notes, will be subject to a 30-day cure period);

(ii) our failure to send certain notices under the 2026 Convertible Notes Indenture within specified periods of time;

(iii) our failure to comply with certain covenants in the 2026 Convertible Notes Indenture relating to our ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of us and our subsidiaries, taken as a whole, to another person;

(iv) a default by us in our other obligations or agreements under the 2026 Convertible Notes Indenture or the 2026 Convertible Notes if such default is not cured or waived within 60 days after notice is given in accordance with the 2026 Convertible Notes Indenture;

(v) certain defaults by us or any of our significant subsidiaries with respect to indebtedness for borrowed money of at least $65.0 million;

and (vi) certain events of bankruptcy, insolvency and reorganization involving us or any of our significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of us) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person.

If any other Event of Default occurs and is continuing, then, the trustee, by notice to us, or noteholders of at least 25 percent of the aggregate principal amount of Notes then outstanding, by notice to us and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the Notes Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 0.50 percent on the principal amount of the Notes.

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If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to us (and not solely with respect to a significant subsidiary of us) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2026 Convertible Notes then outstanding will immediately become due and payable without any further action or notice by any person.

If any other Event of Default occurs and is continuing, then, the trustee, by notice to us, or noteholders of at least 25 percent of the aggregate principal amount of 2026 Convertible Notes then outstanding, by notice to us and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2026 Convertible Notes then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, we may elect, at our option, that the sole remedy for an Event of Default relating to certain failures by us to comply with certain reporting covenants in the 2026 Convertible Notes Indenture consists exclusively of the right of the noteholders to receive special interest on the 2026 Convertible Notes for up to 180 days at a specified rate per annum not exceeding 0.50 percent on the principal amount of the 2026 Notes.

Off-balance sheet arrangements

We did not have any off-balance sheet arrangements as of March 31, 2024 or as of December 31, 2023.

We did not have any off-balance sheet arrangements as of June 30, 2024 or as of December 31, 2023.

Critical accounting policies and estimates

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A discussion of recent accounting pronouncements is included in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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Quantitative and Qualitati ve Disclosures About Market Risk.

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Because of the short-term maturities of our cash, cash equivalents, restricted cash, and marketable securities, we do not believe that an increase in market rates would have any significant negative impact on the realized value of our investments.

An immediate increase or decrease in interest rates of 100 basis points at March 31, 2024 could result in a $2 million market value reduction or increase of the same amount.

An immediate increase or decrease in interest rates of 100 basis points at June 30, 2024 could result in a $2 million market value reduction or increase of the same amount.

The 2028 Convertible Notes will bear interest at a rate of 7.5 percent per annum, which is expected to increase our annual interest expense after giving effect to the 2028 Notes Restructuring Transactions.

The fair value of our 2026 Convertible Notes is subject to interest rate risk, market risk and other factors due to the conversion feature.

The Capped Call Transactions that were entered into concurrently with the issuance of our 2026 Convertible Notes were completed to reduce the potential dilution from the conversion of the 2026 Convertible Notes.

The fair value of the 2026 Convertible Notes will generally increase as interest rates fall and decrease as interest rates rise.

In addition, the fair value of the 2026 Convertible Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines.

The interest and market value changes affect the fair value of the 2026 Convertible Notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation.

When issued, the fair value of our 2028 Convertible Notes will be subject to interest rate risk, market risk and other factors due to the conversion feature.

When issued, the fair value of the 2028 Convertible Notes will generally increase as interest rates fall and decrease as interest rates rise.

In addition, when issued, the fair value of the 2028 Convertible Notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines.

The interest and market value changes affect the fair value of the 2028 Convertible Notes when issued, but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation.

Foreign currency exchange risk

All of our revenue and a majority of our expense and capital purchasing activities for the three months ended March 31, 2024 were transacted in U.S.

All of our revenue and a majority of our expense and capital purchasing activities for the three months ended June 30, 2024 were transacted in U.S.

As we expand our sales and operations internationally, we will be more exposed to changes in foreign exchange rates.

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We are exposed to credit risk in the event of default by the financial institutions holding our cash and cash equivalents or an event of default by the issuers of the corporate debt securities we hold.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis