What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-01 · 181 added, 133 removed, 281 unchanged (53% of the section changed)

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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 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”).

We describe this strategy as “Open SaaS.” As of September 30, 2024 we served 5,892 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.

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For our larger customers, our Enterprise plan offers our full feature set at a subscription price tailored to each business.

For SMBs, we offer three retail plans:

For small and medium business ("SMBs"), we offer three retail plans:

Standard, Plus, and Pro, priced at $29, $79, and $299 per month (our “Essentials” plans) when pre-paid annually, or $39, $105, and $399 per month (our “Essentials plans”), when paid monthly, respectively.

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Key factors affecting our performance

Our operational and financial results have been, and will continue to be, affected by a number of factors that present significant opportunities as well as risks and challenges, including those discussed below and elsewhere in this quarterly report and in our Annual Report on Form 10-K, particularly in Part I, Item 1A, “Risk Factors” The key factors discussed below impacted our 2023 results or are anticipated to impact our future results .

Our operational and financial results have been, and will continue to be, affected by a number of factors that present significant opportunities as well as risks and challenges, including those discussed below and elsewhere in this quarterly report and in our Annual Report, particularly in Part I, Item 1A, “Risk Factors” The key factors discussed below impacted our 2023 results or are anticipated to impact our future results .

“Go-to-Market” Strategy

BigCommerce was originally founded to serve the needs of small business customers.

We have radically improved our product and service capabilities on behalf of the complex needs of midmarket and enterprise businesses, and we have successfully moved our customer base up-market as a result.

We plan to continue our focus on enterprise businesses and we describe examples of advancements taken by us below.

We reorganized our business teams and leadership structure to introduce clear and unified end to end ownership of the customer.

Sales, customer success, marketing, and our business development teams have congruent and clear targets that unify their efforts around customer success and growth.

In the fourth quarter of 2023 we centralized end to end customer success ownership under our Company President.

Our Company President now oversees all go-to-market efforts across the business, including the platform product, Feedonomics, and partner and services revenue.

New customer acquisition remains a priority, but it is now balanced with a strong focus on customer retention, satisfaction, and growth.

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

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.

We centralized end to end customer success ownership under our Company's Chief Executive Officer, Travis Hess.

Hess oversees all go-to-market efforts across the business, including the platform product, Feedonomics, and partner and services revenue.

Additionally, we appointed Ms.

Siminoff as Executive Chair of the Board to work with Mr.

Hess and other members of the Company's executive team to provide, among other things, strategic expertise, leadership, and direction to the Board and senior management.

We continue to advance efficient revenue growth by ensuring investments spent in our go-to-market strategy yield greater returns for our customers and for us.

We are focusing on brand architecture and integration and product strategy to shape our strategy moving forward:

• Brand architecture and integration - We are streamlining our brand architecture to focus on integrating the capabilities of our platform with Feedonomics and Makeswift to offer a more comprehensive solution for our customers.

• Product strategy - We remain committed to driving value and business growth serving our core customers:

mid-market and enterprise B2C and B2B customers, and sophisticated small business customers.

We will focus our investments and innovation to serve these customers, including through the continued rollout of Catalyst for our B2C customers, continuing integration of our B2B features into our platform, and the launching of a hosted Catalyst solution that offers our small business customers a more cost-effective, easy-to-use platform.

We have made strategic organizational changes that will allow us to scale efficiently to support these initiatives as described below in our results of operations.

Macroeconomic environment and customer spend

Consumer spending remains resilient across our major markets, though aggregate ecommerce is growing at lower rates than during the pandemic.

Consumer spending remains resilient across our major markets.

We are encouraged overall by the underlying consumption signals that we are seeing in our business.

As described above, we are making progress in our go to market transformation.

We continue to see longer sales cycle times relative to the pandemic and elevated scrutiny on platform investment spending.

We believe sales cycle times and platform investment spending will improve, and we are transforming our go-to-market capabilities to capitalize on that improvement.

2024 Restructure

As discussed in Note 7 to our condensed consolidated financial statements, on September 30, 2024, we committed to a restructuring plan (the "2024 Restructure") intended to reinvest in product delivery and increase sales capacity, reduce operating costs, improve operating margins and continue to advance our commitment to profitable growth.

The 2024 Restructure includes a reduction of our workforce, exits of certain office leases, impairment of certain software development projects and contract amendments and terminations to better align operating expenses with existing economic conditions and the Company’s strategic priorities.

Affected employees were notified on November 7, 2024, and are being provided severance arrangements.

We anticipate to incur additional expense related to the 2024 Restructure of approximately $3.5 million to $5.7 million through fiscal 2025 relating to severance benefits, contract terminations, accelerated depreciation, right-of-use asset impairments, software impairments, and professional services costs.

The additional expenses we expect to incur are subject to assumptions, and actual expenses may differ from the estimates disclosed above.

Business metrics

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As an example, some of our business metrics include annual revenue run-rate (“ARR”), subscription annual revenue run-rate (“Subscription ARR”), average revenue per account, lifetime value (“LTV”) to customer acquisition costs (“CAC”) and others are calculated as of the end of the last month of the reporting period.

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Annual revenue run-rate

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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

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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.

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

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

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ARR (in thousands)

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We update our reported NRR at the end of each fiscal year and do not report quarterly changes in NRR.

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Components of results of operations

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Our Enterprise plan contracts are generally for a fixed term of 12 to 36 months and are non-cancelable.

In the first half of 2023, we implemented a new pricing strategy that provided enterprise merchants a discount for a period of time from their contractual monthly fee.

Prior to this new strategy, certain enterprise agreements contain promotional periods.

Under both models, merchants have full access to the functionality of our platform upon contract execution, and revenue is recognized ratably over the contract life.

Our pricing strategy provides enterprise merchants a discount for a period of time from their contractual monthly.

Merchants have full access to the functionality of our platform upon contract execution, and revenue is recognized ratably over the contract life.

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

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.

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.

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(1) personnel-related costs (including stock-based compensation expense and associated payroll costs) for our customer success teams, (2) costs that are directly related to hosting and maintaining our platform, (3) fees for processing customer payments such as credit card processing charges, (4) personnel and other costs related to feed management, and (5) allocated costs, such as, depreciation, technology and facility costs.

We expect that cost of revenue will increase in absolute dollars, but may fluctuate as a percentage of total revenue from period to period.

As a result of our growth plans and integration of our previously acquired businesses, we have incurred expenses for equity and amortization of purchased intangibles.

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

Research and development

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We expect to continue to make investments in research and development.

We expect our research and development expenses to increase in absolute dollars, but decrease as a percentage of total revenue over time, as we continue to leverage engineers in other low-cost international locations.

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General and administrative

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(1) personnel-related expenses (including stock-based compensation expense and associated payroll costs) for finance, legal and compliance, and human resources, (2) external professional services, and (3) allocated overhead costs, such as technology and facility costs.

We expect our general and administrative expenses to increase in absolute dollars but will decrease as a percent of revenue.

Acquisition related expenses

Acquisition related expenses consists of cash payments for third-party acquisition costs and other acquisition related expenses, including contingent compensation arrangements entered into in connection with acquisitions.

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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.

Restructuring charges consist primarily of severance payments, right-of-use asset impairments, lease termination gain, software impairments, and professional services costs.

Amortization of intangible assets

Amortization of intangible assets consist of amortization of acquired intangible assets which were recognized as a result of business combinations and are being amortized over their expected useful life.

Gain on convertible notes extinguishment

Gains recorded net of proportionate share of unamortized debt issuance costs and certain third party transaction costs relate to the repurchase transactions of the 2026 Convertible Notes and exchange transaction of the 2026 Convertible Notes for the 2028 Convertible Notes.

Interest income

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Interest expense

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.

Interest expense consists primarily of the interest expense from the amortization of the debt issuance costs and coupon interest attributable to our 2028 and 2026 Convertible Notes with offsetting amortization of the debt premium related to the 2028 Convertible Notes, as well as interest associated with a financing agreement entered into in the first half of 2023.

Other expense

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

Other expense primarily consists of foreign currency translation adjustments.

Provision for income taxes

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

Three months ended June 30,

Six months ended June 30,

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Nine months ended September 30,

(in thousands)

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Loss from operations

Gain on convertible note extinguishment

Interest income

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands)

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Revenue by geographic region

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,

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

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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

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

Comparison of the three and nine months ended September 30, 2024 and 2023,

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(dollars in thousands)

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Total revenue

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.

Total revenue increased $5.7 million, or 7.3 percent, to $83.7 million for the three months ended September 30, 2024, from $78.0 million for the three months ended September 30, 2023, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $4.1 million, or 7.0 percent, to $62.8 million for the three months ended September 30, 2024, from $58.7 million for the three months ended September 30, 2023, primarily due to increases in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $1.5 million, or 8.0 percent, to $20.9 million for the three months ended September 30, 2024, from $19.3 million for the three months ended September 30, 2023, primarily as a result of increases in revenue share offset by decreases in stand ready and integration activity.

Total revenue increased $20.7 million, or 9.2 percent, to $245.9 million for the nine months ended September 30, 2024 from $225.2 million for the nine months ended September 30, 2023, as a result of increases in both subscription solutions and partner and services revenue.

Subscription solutions revenue increased $16.9 million or 10.0 percent, to $185.6 million for the nine months ended September 30, 2024, from $168.7 million for the nine months ended September 30, 2023, primarily due to growth in enterprise, mid-market, and Feedonomics activity.

Partner and services revenue increased $3.7 million, or 6.6 percent, to $60.3 million for the nine months ended September 30, 2024 , from $56.6 million for the nine months ended September 30, 2023, primarily as a result of increases in in revenue share offset by decreases in stand ready and integration activity.

Cost of revenue, gross profit, and gross margin

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Six months ended June 30,

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Gross margin percentage

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.

Cost of revenue increased $0.8 million, or 4.2 percent, to $19.9 million for the three months ended September 30, 2024, from $19.1 million for the three months ended September 30, 2023, primarily as a result of higher software costs and credit card processing fees of $0.9 million driven by associated increased in revenue.

Gross margin increased to 76.3 percent from 75.6 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.

Cost of revenue increased $2.9 million, or 5.2 percent, to $58.1 million for the nine months ended September 30, 2024, from $55.3 million for the nine months ended September 30, 2023 primarily as a result of higher software costs and credit card processing fees of $3.0 million.

Gross margin increased to 76.4 percent from 75.5 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

We expect that cost of revenue will likely decrease in the near term as a percentage of revenue due to reductions in headcount related costs as a result of the 2024 Restructure, leading to improved gross margins.

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Sales and marketing

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(dollars in thousands)

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Percentage of revenue

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.

Sales and marketing expenses decreased $3.1 million, or (8.6) percent, to $33.1 million for the three months ended September 30, 2024 from $36.3 million for the three months ended September 30, 2023, primarily due to decreased variable marketing costs of $1.9 million, decreased salaries and share-based compensation expense of $0.8 million driven by cost cutting measures from the 2023 Restructure, and decreased professional services fees of $0.3 million.

As a percentage of total revenue, sales and marketing expenses decreased to 39.6 percent from 46.5 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.

Sales and marketing expenses decreased $5.9 million or (5.6) percent, to $100.0 million for the nine months ended September 30, 2024 from $105.9 million for the nine months ended September 30, 2023, primarily due to lower variable marketing costs of $3.6 million, and decreased salaries and share-based compensation expense of $3.0 million driven by cost cutting measures from the 2023 Restructure.

These decreases were partially offset by a $0.7 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 40.7 percent from 47.0 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

We expect that sales and marketing expenses will slightly increase near term as we reinvest in sales resources as part of the 2024 Restructure, which we expect to be offset with anticipated future revenue growth.

Research and development

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Percentage of revenue

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.

Research and development decreased $0.9 million, or (4.0) percent, to $20.8 million for the three months ended September 30, 2024 from $21.7 million for the three months ended September 30, 2023, due to the cost cutting measures from the 2023 Restructure.

As a percentage of total revenue, research and development expenses decreased to 24.9 percent from 27.8 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.

Research and development decreased $2.8 million, or (4.4) percent, to $61.1 million for the nine months ended September 30, 2024 from $64.0 million for the nine months ended September 30, 2023, due to the cost cutting measures from the 2023 Restructure.

As a percentage of total revenue, research and development expenses decreased to 24.9 percent from 28.4 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

We expect that research and development expenses will likely decrease as a percentage of revenue in the near term primarily due to reductions in headcount related costs relating to the 2024 Restructure.

General and administrative

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(dollars in thousands)

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Percentage of revenue

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.

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

General and administrative expenses increased $2.1 million, or 14.6 percent, to $16.4 million for the three months ended September 30, 2024, from $14.3 million for the three months ended September 30, 2023, primarily due to an increase of $1.2 million

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lower renewal rates.

in bad debt expense and an increase in professional service expenses of $0.9 million.

As a percentage of total revenue, general and administrative expenses increased to 19.6 percent from 18.4 percent, primarily as a result of the increase in bad debt expense due to focused collections efforts for the three months ended September 30, 2023.

General and administrative expenses increased $1.5 million, or 3.4 percent, to $46.8 million for the nine months ended September 30, 2024 from $45.3 million for the nine months ended September 30, 2023, primarily due to a $1.8 million increase in bad debt expense, $0.9 million increase in professional services, and a $0.4 million increase in variable spend partially offset by $1.2 million decrease in insurance expense due to lower renewal rates.

As a percentage of total revenue, general and administrative expenses decreased to 19.0 percent from 20.1 percent, primarily as a result of cost cutting measures from the 2023 Restructure.

We expect that general and administrative expenses will likely decrease as a percentage of revenue in the near term due to reductions in headcount related costs relating to the 2024 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.

Acquisition related expense decreased $0.7 million, or (68.7) percent, to $0.3 million for the three months ended September 30, 2024, from $1.1 million for the three months ended September 30, 2023, and decreased $8.3 million, or 89.3 percent, to $1.0 million for the nine months ended September 30, 2024, from $9.3 million for the nine months ended September 30, 2023.

Acquisition costs recognized for the three and nine months ended September 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 nine months ended September 30, 2023.

Restructuring charges

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.

Restructuring charges were $9.9 million and $5.8 million for the three months ended September 30, 2024 and 2023, respectively, and were $12.5 million and $6.2 million for the nine months ended September 30, 2024 and 2023, respectively.

The $9.9 million is a result of $6.9 million of severance and related charges, $2.1 million of capitalized software related charges due to impairment of software due to change in market strategy, $1.1 million of real estate related charges, $0.6 million of professional services related to our change in market strategy as described above in relation to the 2024 Restructure, and $0.2 million of professional services related to our capital structure and various alternatives associated with inbound inquiries partially offset by a $1.0 million gain on real estate modification.

The charges for the three months and nine months ended September 30, 2023 were primarily related to charges from the 2023 Restructure which included a one time charge of $5.5 million resulting from severance and other related charges.

Gain on convertible note extinguishment

Gain on convertible note extinguishment was $12.1 million for the three months ended September 30, 2024.

The $12.1 million consisted of a $10.4 million gain on the repurchase of 2026 Convertible Notes and $1.7 million gain on the exchange of 2028 Convertible Notes.

Interest income

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 income decreased $0.7 million, or 20.5 percent, to $2.4 million for the three months ended September 30, 2024, from $3.1 million for the three months ended September 30, 2023.

This decrease was primarily a result of lower cash, cash equivalents and marketable securities balance during the three months ended September 30, 2024 due to cash outflows for financing activities.

Interest income increased $0.5 million, or 6.0 percent to $8.8 million for the nine months ended September 30, 2024 from $8.3 million for the nine months ended September 30, 2023.

This increase was primarily a result of higher cash, cash equivalents and marketable securities balances for the nine months ended September 30, 2024

Interest expense

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.

Interest expense was $1.9 million and $0.7 million for the three months ended September 30, 2024 and 2023, respectively, and was $3.3 million and $2.2 million for the nine months ended September 30, 2024 and 2023.

The increase in interest expense for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was primarily a result of the issuance of the 2028 Convertible Notes that have a higher effective interest rate than the 2026 Convertible Notes.

Liquidity and capital resources

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 success in transitioning our customer base from legacy month-to-month contracts to annual contracts 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.

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

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

Additionally, with our convertible notes restructuring, there was a reduction in liquidity.

However, we believe as a result of the renegotiation and extension of the remaining obligation, we have decreased our overall debt leverage and better optimized our maturities.

The restructuring of the convertible notes requires semi-annual interest payments and increases our contractual interest rate to 7.50 percent.

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.

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(in thousands)

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by 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.

Net decrease in cash, cash equivalents and restricted cash

As of September 30, 2024, we had approximately $37.0 million in cash, cash equivalents, and restricted cash, a decrease of $33.9 million compared to $70.9 million as of September 30, 2023.

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

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.

Our restricted cash balance of $1.5 million and $1.1 million at September 30, 2024 and 2023, respectively, consisted of security deposits for future chargebacks and amounts on deposit with certain financial institutions.

Our marketable securities balance of $133.0 million and $195.6 million at September 30, 2024 and 2023 respectively, consisted 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

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.

Net cash provided by (used in) operating activities for the three months ended September 30, 2024 and 2023 was $5.6 million and ($31.4) million, respectively.

This consisted primarily of our net losses adjusted for certain non-cash items including depreciation, amortization of intangible assets, convertible note premium and convertible note issuance costs amortization, stock-based compensation, bad debt expense, impairment losses, gains on settlement of lease liabilities, gain on extinguishment of convertible notes, and the effect of changes in working capital.

The increase in cash flows provided by operating activities for the three months ended September 30, 2024 was driven by cost reductions associated with the 2023 Restructure and focus on reduction of variable spend.

Net cash provided by (used in) operating activities for the nine months ended September 30, 2024 and 2023 was $13.9 million and ($37.5) million respectively.

The increase in cash flows provided by operating activities for the nine months ended September 30, 2024 was driven by cost reductions associated with the 2023 Restructure and focus on reduction of variable spend.

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Investing activities

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.

Net cash provided by investing activities during the three months ended September 30, 2024 and 2023 was $9.3 million and $26.4 million, respectively.

For the three months ended September 30, 2024, this consisted primarily of the sale and maturity of marketable securities of $59.7 million offset by the purchase of property and equipment of $1.1 million and the purchase of marketable securities of $49.4 million.

In the three months ended September 30, 2023, this consists primarily of the sale and maturity of marketable securities of $83.1 million and the purchases of property and equipment of $1.1 million and the purchase of marketable securities of $55.7 million.

Net cash provided by investing activities during the nine months ended September 30, 2024 and 2023 was $62.6 million and $14.0 million, respectively.

In the nine months ended September 30, 2024, this consists primarily of the sale and maturity of marketable securities of $151.6 million offset by the purchase of property and equipment of $2.9 million and the purchase of marketable securities of $86.0 million.

In the nine months ended September 30, 2023, this consists primarily of the sale and maturity of marketable securities of $206.2 million and the purchase of property and equipment of $3.1 million and the purchase of marketable securities of $189.1 million.

Financing activities

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

Net cash provided by (used in) financing activities during the three months ended September 30, 2024 and 2023 was ($112.1) million and $0.3 million, respectively.

In the three months ended September 30, 2024, this was attributable to repayment of convertible notes and financing obligations of $108.7 million, payments of convertible note issuance and related third party costs of $2.5 million, and taxes paid related to the settlement of stock options and restricted stock units of $1.1 million, partially offset by proceeds from exercise of stock options of $0.2 million.

In the three months ended September 30, 2023, this was attributable to proceeds from exercise of stock options of $1.5 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 $1.0 million and repayments of financing obligations of $0.1 million.

Net cash provided by (used in) financing activities during the nine months ended September 30, 2024 and 2023 was ($112.4) million and $1.4 million, respectively.

In the nine months ended September 30, 2024, this was attributable to $109.0 million of payments related to the repurchase and repayment of convertible notes and refinancing obligations, $2.5 million of payments for convertible note issuance and related third-party costs, and $1.5 million of taxes paid related to the settlement of stock options and restricted stock units, partially offset by proceeds from exercise of stock options of $1.5 million.

In the nine months ended September 30, 2023, this was attributable to proceeds from the exercise of stock options of $3.7 million and proceeds from the issuance of convertible note 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 $3.3 million and repayment of financing obligations of $0.1 million.

2028 Convertible Notes

In August 2024, we issued $150.0 million in aggregate principal amount of the Company’s new 7.50 percent convertible senior notes due 2028 (the “2028 Convertible Notes”).

The 2028 Convertible Notes were issued pursuant to, and are governed by, an indenture (the “2028 Convertible Notes Indenture”), dated as of August 7, 2024, between the Company and U.S.

Bank Trust Company, National Association, as trustee.

The 2028 Convertible Notes are the Company’s senior, initially unsecured obligations and will accrue interest at a rate of 7.50 percent per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2024.

The 2028 Convertible Notes will mature on October 1, 2028, unless earlier converted, redeemed or repurchased.

Before July 3, 2028, noteholders will have the right to convert their 2028 Convertible Notes only upon the occurrence of certain events.

From and after July 3, 2028, noteholders may convert their 2028 Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The initial conversion rate is 62.5000 shares of common stock per $1,000 principal amount of 2028 Convertible Notes, which represents an initial conversion price of $16.00 per share of common stock.

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the 2028 Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Company may not redeem the 2028 Convertible Notes at its option at any time before October 7, 2026.

The 2028 Convertible Notes will be redeemable, in whole or in part (subject to the “Partial Redemption Limitation” (as defined in the 2028 Convertible Notes Indenture)), at the Company’s option at any time, and from time to time, on or after October 7, 2026 and on or before the 25th

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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 “2026 2026 Convertible Notes”).

scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130 percent of the conversion price for a specified period of time and certain other conditions are satisfied.

The redemption price will be equal to the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

In addition, calling any 2028 Convertible Note for redemption will constitute a Make-Whole Fundamental Change with respect to that 2028 Convertible Note, in which case the conversion rate applicable to the conversion of that 2028 Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption.

Pursuant to the Partial Redemption Limitation, the Company may not elect to redeem less than all of the outstanding 2028 Convertible Notes unless at least $100.0 million aggregate principal amount of 2028 Convertible Notes are outstanding and not subject to redemption as of the time the Company sends the related redemption notice.

If certain corporate events that constitute a “Fundamental Change” (as defined in the 2028 Convertible Notes Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their 2028 Convertible Notes at a cash repurchase price equal to the principal amount of the 2028 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 the Company and certain de-listing events with respect to the Company’s common stock.

The 2028 Convertible Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the 2028 Convertible Notes Indenture), which include the following:

(i) certain payment defaults on the 2028 Convertible Notes (which, in the case of a default in the payment of interest on the 2028 Convertible Notes, will be subject to a 30-day cure period);

(ii) the Company’s failure to send certain notices under the 2028 Convertible Notes Indenture within specified periods of time;

(iii) the Company’s failure to comply with certain covenants in the 2028 Convertible Notes Indenture relating to the Company’s 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 the Company and its subsidiaries, taken as a whole, to another person;

(iv) a default by the Company in its other obligations or agreements under the 2028 Convertible Notes Indenture or the 2028 Convertible Notes if such default is not cured or waived within 60 days after notice is given in accordance with the 2028 Convertible Notes Indenture;

(v) certain payment defaults on the Company’s credit facility if the Company has entered into the Security Documents (as defined in the 2028 Convertible Notes Indenture), (vi) certain defaults by the Company or any of its significant subsidiaries with respect to indebtedness for borrowed money of at least $20,000,000;

and (vii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2028 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 the Company, or noteholders of at least 25 percent of the aggregate principal amount of 2028 Convertible Notes then outstanding, by notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2028 Convertible Notes then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the 2028 Convertible Notes for up to 180 days at a specified rate per annum not exceeding 0.50 percent on the principal amount of the 2028 Convertible Notes.

The 2028 Convertible Notes Indenture contains a number of restrictive covenants and limitations, including restrictions on the Company’s ability to incur certain indebtedness, as further described in the Indenture.

In addition, to the extent the Company incurs subordinated indebtedness pursuant to the terms of the Indenture, it will be required to secure the 2028 Convertible Notes, subject only to prior security interests in favor of lenders under any senior secured revolving credit facility, if then outstanding.

2026 Convertible Notes

In September 2021, we issued $345.0 million principal amount of 0.25 percent convertible notes due 2026 (the “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 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.

In August 2024, in addition to the Exchange Agreement, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of its outstanding 2026 Convertible Notes to repurchase (the "Repurchase Transactions") approximately $120.6 million aggregate principal amount of the 2026 Convertible Notes for aggregate cash consideration of approximately $108.7 million, including accrued but unpaid interest of approximately $0.2 million on such 2026 Convertible Notes.

The Repurchase Transactions settled in August 2024.

Following the Repurchase Transactions, approximately $63.1 million principal amount of 2026 Convertible Notes remain outstanding.

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

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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 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.

From and after July 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The remaining outstanding 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 the remaining outstanding 2026 Convertible Notes only upon the occurrence of certain events.

From and after July 1, 2026, noteholders may convert their 2026 Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

We will settle conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

The initial conversion rate was 13.6783 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $73.11 per share of common stock.

The initial conversion rate of the remaining outstanding 2026 Convertible Notes was 13.6783 shares of common stock per $1,000 principal amount of 2026 Convertible Notes, which represents an initial conversion price of approximately $73.11 per share of common stock.

The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events.

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 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;

The remaining outstanding 2026 Convertible Notes are 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 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 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.

In addition, calling any 2026 Convertible Note for redemption will constitute a Make-Whole Fundamental Change with respect to that 2026 Convertible Note, in which case the conversion rate applicable to the conversion of that 2026 Convertible 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 2026 Convertible Notes unless at least $150.0 million aggregate principal amount of 2026 Convertible 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 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 remaining outstanding 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.

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

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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.

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Off-balance sheet arrangements

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

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

Critical accounting policies and estimates

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Actual results may differ from these estimates.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the year ended December 31, 2023.

Recent accounting pronouncements

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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 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.

An immediate increase or decrease in interest rates of 100 basis points at September 30, 2024 could result in a $1.3 million market value reduction or increase of the same amount.

In September 2021, we issued the 2026 Convertible Notes with an aggregate principal amount of $345.0 million, of which $63.1 million remains outstanding as of September 30, 2024.

The 2026 Convertible Notes have a fixed interest rate of 0.25 percent;

we do not face variable interest rate risk with respect to the 2026 Convertible Notes.

The fair value of the 2026 Convertible Notes changes when the market price of our stock fluctuates or market interest rates change.

In August 2024, we issued the 2028 Convertible Notes with an aggregate principal amount of $150.0 million, the full amount of which is outstanding as of September 30, 2024.

The 2028 Convertible Notes have a fixed interest rate of 7.50 percent;

we do not face variable interest rate risk with respect to the 2028 Convertible Notes.

The fair value of the 2028 Convertible Notes changes when the market price of our stock fluctuates or market interest rates change.

Foreign currency exchange risk

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.

All of our revenue and a majority of our expense and capital purchasing activities for the three months ended September 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