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Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-28 · 225 added, 280 removed, 1067 unchanged (32% of the section changed)

39 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

13 unchanged sentences

We placed test calls and observed that call attributes such as duration and type of service were captured in the relevant IT systems.

For each billing sample tested, we also compared the agent seats, service types and rates for consistency with underlying documentation, including client contracts.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence over revenue for subscription services and related usage.

We assessed the recorded revenue by comparing total cash received during the year, adjusted for reconciling items, to the revenue recognized.

Such assessment also evaluated the relevance and reliability of reconciling items to underlying documentation, including the changes in accounts receivable and deferred revenue.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

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

25 unchanged sentences

Sales tax liabilities 2,973 2,660

Finance lease liabilities — 612

Deferred revenue 57,816 43,720

Total current liabilities 157,575 103,561

Convertible senior notes 169 —

Total current liabilities 150,776 157,575

Convertible senior notes - less current portion 738,376 768,599

Sales tax liabilities — less current portion 899 877

9 unchanged sentences

Additional paid-in capital 635,668 439,787

Accumulated other comprehensive (loss) income ( 287 ) 335

Accumulated other comprehensive loss ( 2,688 ) ( 287 )

Accumulated deficit ( 323,086 ) ( 228,436 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 1,244,485 $ 1,192,942

See accompanying notes to consolidated financial statements.

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

10 unchanged sentences

Total operating expenses 498,927 394,742 266,929

(Loss) income from operations ( 56,250 ) ( 12,305 ) 3,267

Loss from operations ( 87,582 ) ( 56,250 ) ( 12,305 )

Other (expense) income, net:

4 unchanged sentences

Loss before income taxes ( 90,262 ) ( 64,285 ) ( 44,583 )

(Benefit from) provision for income taxes ( 11,285 ) ( 2,453 ) 104

Provision for (benefit from) income taxes 4,388 ( 11,285 ) ( 2,453 )

Net loss $ ( 94,650 ) $ ( 53,000 ) $ ( 42,130 )

5 unchanged sentences

Net Loss $ ( 94,650 ) $ ( 53,000 ) $ ( 42,130 )

Other comprehensive (loss) income ( 622 ) ( 241 ) 669

Other comprehensive loss ( 2,401 ) ( 622 ) ( 241 )

Comprehensive loss $ ( 97,051 ) $ ( 53,622 ) $ ( 42,371 )

See accompanying notes to consolidated financial statements.

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

5 unchanged sentences

Balance as of December 31, 2019 61,544 $ 61 $ 351,870 $ 576 $ ( 156,049 ) $ 196,458

Issuance of common stock upon exercise of stock options 932 1 7,704 — — 7,705

Issuance of common stock upon vesting of restricted stock units 1,204 1 ( 1 ) — — —

Issuance of common stock under ESPP 198 — 7,823 — — 7,823

Stock-based compensation — — 42,065 — — 42,065

Other comprehensive income — — — 669 — 669

Net loss — — — — ( 4,552 ) ( 4,552 )

Balance as of December 31, 2019 61,544 61 351,870 576 ( 156,049 ) 196,458

Equity component of issuance of the 2025 convertible senior notes, net of issuance costs — — 154,363 — — 154,363

21 unchanged sentences

Balance as of December 31, 2021 68,488 68 439,787 ( 287 ) ( 228,436 ) 211,132

Issuance of common stock upon partial conversion of the 2023 convertible senior notes 574 1 ( 281 ) — — ( 280 )

Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes ( 119 ) — 10 — — 10

Issuance of common stock upon exercise of stock options 531 1 8,521 — — 8,522

Issuance of common stock upon vesting of restricted stock units 1,383 1 — — — 1

Issuance of common stock under ESPP 190 — 13,413 — — 13,413

Stock-based compensation — — 174,218 — — 174,218

Other comprehensive loss — — — ( 2,401 ) — ( 2,401 )

Net loss — — — — ( 94,650 ) ( 94,650 )

Balance as of December 31, 2022 71,047 $ 71 $ 635,668 $ ( 2,688 ) $ ( 323,086 ) $ 309,965

(1) Effective January 1, 2021, the Company adopted ASU 2020-06.

Accordingly, the Company recorded a net reduction to opening accumulated deficit of $ 22.7 million and a net reduction to opening additional paid-in capital of $ 168.4 million as of January 1, 2021 due to the cumulative impact of adopting this new standard.

See Note 1 for more information.

See accompanying notes to consolidated financial statements.

See accompanying notes to the consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

11 unchanged sentences

Amortization of discount and issuance costs on convertible senior notes 3,743 3,957 25,738

Gain on sale of convertible note held for investment — — ( 217 )

Loss on early extinguishment of debt — — 6,964

1 unchanged sentence

Change in fair value of contingent consideration 260 5,640 —

Payment of contingent consideration liability in excess of acquisition-date fair value ( 5,900 ) — —

Tax benefit of valuation allowance associated with an acquisition — — ( 2,910 )

7 unchanged sentences

Accrued and other current liabilities ( 8,379 ) 20,562 9,374

Accrued federal fees and sales tax liability ( 497 ) 1,302 1,010

Accrued federal fees and sales tax liabilities 524 ( 497 ) 1,302

Deferred revenue 13,176 10,462 7,971

6 unchanged sentences

Purchases of property and equipment ( 52,272 ) ( 42,216 ) ( 30,422 )

Capitalization of software development costs ( 3,899 ) — —

Payments of initial direct costs ( 266 ) — —

Cash paid for an equity investment in a privately-held company ( 2,000 ) — —

Cash paid to acquire Inference and Virtual Observer — — ( 165,338 )

Cash paid to acquire substantially all of the assets of Whendu — — ( 100 )

Proceeds from sale of convertible note held for investment — — 217

Net cash used in investing activities ( 150,478 ) ( 382,330 ) ( 63,631 )

Net cash provided by (used in) investing activities 30,963 ( 150,478 ) ( 382,330 )

Cash flows from financing activities:

4 unchanged sentences

Proceeds from sale of common stock under ESPP 13,413 15,397 11,469

Payment of contingent consideration liability up to acquisition-date fair value ( 18,100 ) — —

Payment of holdbacks related to acquisitions — ( 5,000 ) —

1 unchanged sentence

Net cash (used in) provided by financing activities ( 30,232 ) ( 7,501 ) 457,424

Net (decrease) increase in cash and cash equivalents ( 129,494 ) 142,396 ( 3,936 )

Net increase (decrease) in cash and cash equivalents 89,596 ( 128,981 ) 142,396

Cash and cash equivalents:

8 unchanged sentences

Acquisition and related transaction costs accrued at period-end — — 586

Stock-based compensation included in capitalized software development costs 1,711 — —

Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Consolidated Balance Sheets - Beginning of Period:

Cash and cash equivalents $ 90,878 $ 220,372 $ 77,976

Restricted cash in other assets 513 — —

Total cash, cash equivalents and restricted cash $ 91,391 $ 220,372 $ 77,976

Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Consolidated Balance Sheets - End of Period:

Cash and cash equivalents $ 180,520 $ 90,878 $ 220,372

Restricted cash in other assets 467 513 —

Total cash, cash equivalents and restricted cash $ 180,987 $ 91,391 $ 220,372

See accompanying notes to the consolidated financial statements.

6 unchanged sentences

On July 16, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Zoom Video Communications, Inc., a Delaware corporation (“Zoom”), and Summer Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Zoom (“Merger Sub”).

The Merger Agreement provided for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger and continuing as a wholly owned subsidiary of Zoom.

On September 30, 2021, at a special meeting of the Company’s stockholders, a vote to approve the Merger was unsuccessful.

As a result, immediately following the special meeting, on September 30, 2021, the Company and Zoom mutually agreed to terminate the Merger Agreement, effective immediately.

Except as otherwise set forth in the Merger Agreement, none of the Company, Zoom or Merger Sub shall have any further liability thereunder.

On September 30, 2021, at a special meeting of the Company’s stockholders, a vote to approve the Merger was unsuccessful and immediately following the special meeting the Company and Zoom mutually agreed to terminate the Merger Agreement.

The Company incurred approximately $ 7.6 million in transaction costs related to the Merger recorded in general and administrative expense in its consolidated statements of operations and comprehensive loss.

2 unchanged sentences

All intercompany transactions and balances have been eliminated in consolidation.

Certain prior period amounts within operating and investing activities in the consolidated statements of cash flows have been reclassified to conform to the current period presentation.

The consolidated balance sheet and the consolidated statement of stockholders' equity included in this Annual Report as of December 31, 2021 differ from the Form 10-K for the year ended December 31, 2020 as it reflects an immaterial error correction due to the reclassification of $ 2.3 million from treasury stock to additional paid-in-capital.

This reclassification was from the shares received for the partial unwind of capped calls related to the 2023 convertible senior notes.

The consolidated statement of cash flows for the year ended December 31, 2021 included in this Annual Report differs from the consolidated statement of cash flows for the year ended December 31, 2021 included in the Form 10-K for the year ended December 31, 2021 due to the changes in restricted cash, which was previously presented within operating activities and is now included within the beginning and ending cash, cash equivalents and restricted cash balances.

Use of Estimates

5 unchanged sentences

The functional currency of the Company’s foreign subsidiaries is the U.S.

For these subsidiaries, the monetary assets and liabilities are re-measured into U.S.

dollars at the current exchange rate as of the balance sheet date, and all non-monetary assets and liabilities are re-measured into U.S.

dollars at historical exchange rates.

Revenues are primarily denominated in U.S.

Expenses are converted using average rates in effect on a monthly basis.

Exchange gains and losses resulting from foreign currency transactions were not significant in any period and are reported in “Other (expense) income, net” in the consolidated statements of operations and comprehensive loss.

For these subsidiaries, the monetary assets and liabilities resulting from foreign currency transactions are adjusted to reflect the exchange rate as of the balance sheet date.

Foreign currency transaction gains and losses were not significant in any period and are reported in “Other (expense) income, net” in the consolidated statements of operations and comprehensive loss.

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase.

The Company’s cash equivalents consist of investments in money market funds, U.S.

treasury securities, U.S.

agency securities and commercial paper.

The Company’s cash equivalents consist of investments in money market funds and U.S.

treasury securities.

Marketable Investments

25 unchanged sentences

Computer software 3 years

Development costs 1 to 5 years

Internal-use software and development costs 1 to 5 years

Furniture and fixtures 7 years

Leasehold improvements Shorter of useful life or lease term

The Company capitalizes certain qualifying costs incurred during the development stage of internal-use software.

Costs related to preliminary project activities and post-implementation activities are expensed in research and development as incurred.

Preliminary project activities include conceptual formulation, evaluation and final selection of alternatives, planning, proof of concept and requirement analysis of the selected alternative.

The post-implementation stage begins when the internal-use software is ready for its intended use, and includes all internal and external training and application maintenance activities.

Capitalized internal-use software costs are included within property and equipment, net on the consolidated balance sheets, and are amortized over the estimated useful life of the software, which is three years .

The related amortization expense is recognized in cost of revenue.

Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized.

6 unchanged sentences

The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed as of the acquisition date.

The Company’s estimates are inherently uncertain and subject to refinement.

During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value to these tangible and intangible assets and liabilities assumed, with the corresponding offset to goodwill.

The Company’s estimates are inherently uncertain and subject to change.

During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets and liabilities assumed, with the corresponding offset to goodwill.

In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.

27 unchanged sentences

The Company’s revenue consists of subscription services and related usage as well as professional services.

The Company charges clients subscription fees, usually billed on a monthly basis, for access to the Company’s VCC solution.

The Company charges clients subscription fees, usually billed on a monthly basis, for access to the Company’s VCC

The subscription fees are primarily based on the number of agent seats, as well as the specific VCC functionalities and applications deployed by the client.

Agent seats are defined as the maximum number of named

agents allowed to concurrently access the VCC cloud platform.

Agent seats are defined as the maximum number of named agents allowed to concurrently access the VCC cloud platform.

Clients typically have more named agents than agent seats.

23 unchanged sentences

When services are included in the contract with the customer and are not sold at their stand-alone selling price, the Company is required to estimate the number of seats the customer will use, especially during the initial ramp period of the contract, during which the Company bills under an ‘actual usage’ model for subscription-related services.

To date, variable consideration has not had a material impact on the allocation of transaction fees to multiple performance obligations.

The Company recognizes revenue on fixed fee professional services performance obligations based on the proportion of labor hours expended compared to the total hours expected to complete the related performance obligation.

4 unchanged sentences

Deferred Revenue

Deferred revenue consists of billings or payments received from clients for subscription service, usage and professional services in advance of revenue recognition and is recognized in accordance with the Company’s revenue recognition policy discussed above.

The Company generally invoices its clients monthly in advance for subscription services.

Deferred revenue consists of billings or payments received from clients for subscription services, usage and professional services in advance of revenue recognition and is recognized in accordance with the Company’s revenue recognition policy discussed above.

The Company generally invoices its clients monthly in advance for

subscription services.

Accordingly, the deferred revenue balance does not represent the total contract value of sales arrangements.

Cost of Revenue

Cost of revenue consists primarily of personnel costs, including stock-based compensation, fees that the Company pays to telecommunications providers for usage, USF contributions and other regulatory costs, depreciation and related expenses of the servers and equipment, costs to build out and maintain co-location data centers, costs of public cloud-based data centers, allocated office and facility costs and amortization of acquired technology.

Cost of revenue consists primarily of personnel costs, including stock-based compensation, fees that the Company pays to telecommunications providers for usage, USF contributions and other regulatory costs, depreciation and related expenses of servers and equipment, costs to build out and maintain co-location data centers, costs of public cloud-based data centers, allocated office and facility costs, amortization of acquired technology and amortization of internal-use software costs.

Personnel costs include those associated with support of the Company’s solution, clients and data center operations, as well as with providing professional services.

Data center costs include costs to build out and setup, as well as co-location fees for the right to place the Company’s servers in data centers owned by third parties.

Data center costs include costs for servers and equipment to build out and setup, as well as co-location fees for the right to place the Company’s servers in data centers owned by third parties.

Research and Development

Research and development expenses consist primarily of salary and related expenses, including stock-based compensation, for personnel related to the development of improvements and expanded features for the Company’s services, as well as quality assurance, testing, product management and allocated overhead.

Research and development expenses consist primarily of salary and related expenses, including stock-based compensation, for personnel related to the development of improvements and expanded features for the Company’s solution, as well as quality assurance, testing, product management and allocated overhead.

Research and development costs are expensed as incurred except for internal use software development costs that qualify for capitalization.

8 unchanged sentences

All stock-based compensation granted to employees and non-employee directors is measured at the grant date fair value of the award.

The Company estimates the fair value of stock options and purchase rights under the Company’s Equity Incentive Plans and the 2014 Employee Stock Purchase Plan (“2014 ESPP Plan” or “ESPP”), respectively, using the Black-Scholes option-pricing model.

The fair value of restricted stock awards is equal to the fair value of the Company’s common stock on the date of grant.

The Company estimates the fair value of stock options under the Company’s Equity Incentive Plans and purchase rights under the Company’s 2014 Employee Stock Purchase Plan (“2014 ESPP Plan” or “ESPP”) using the Black-Scholes option-pricing model.

The fair value of restricted stock units (“RSUs”), including performance-based restricted stock units (“PRSUs”) subject to performance conditions, is equal to the fair value of the Company’s common stock on the date of grant.

The fair value of PRSUs subject to market conditions are determined using a Monte Carlo Simulation model.

Compensation expense is recognized net of actual forfeitures using the straight-line method over the service period, which is generally the vesting period.

6 unchanged sentences

net deferred tax assets because of its history of operating losses in the United States.

As of December 31, 2021 and 2020, the Company recognized a net deferred tax asset balance of $ 6.9 million and deferred tax liabilities of $ 4.4 million, respectively, related to its operations in the UK and Australia.

As of December 31, 2022 and 2021, the Company recognized a net deferred tax asset balance of $ 3.8 million and $ 6.9 million, respectively, related to its

operations in the UK and Australia.

The Company classifies interest and penalties on unrecognized tax benefits as income tax expense.

Comprehensive loss

Comprehensive loss consists of net loss, unrealized gains or losses on available-for-sale marketable investments, and the effects of foreign currency translation adjustments.

The Company presents comprehensive loss

as part of the consolidated statements of operations.

Comprehensive loss consists of net loss, and unrealized gains or losses on available-for-sale marketable investments.

The Company presents comprehensive loss as part of the consolidated statements of operations.

The changes in the accumulated balances of the components of other comprehensive loss were not material for the periods presented.

1 unchanged sentence

Basic net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the period, and excludes any dilutive effects of employee stock-based awards and potential shares issuable upon conversion of the convertible senior notes.

Diluted net loss per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options, vesting of restricted stock units and shares of common stock issuable upon conversion of convertible senior notes.

Diluted net loss per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options, vesting of RSUs and PRSUs, and shares of common stock issuable upon conversion of convertible senior notes.

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

7 unchanged sentences

Accordingly, the Company has determined that it operates in a single reportable segment.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"), which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature.

The Company elected to early adopt ASU 2020-06 as of January 1, 2021 using a modified retrospective transition method.

Applying the transition guidance, the Company was required to apply the guidance to all impacted financial instruments that were outstanding as of January 1, 2021 with the cumulative effect recognized as an adjustment to the opening balance of accumulated deficit.

As a result of early adopting ASU 2020-06, the Company made certain adjustments to its accounting for the outstanding 0.125 % convertible senior notes due 2023 (the "2023 convertible senior notes") and the outstanding 0.500 % convertible senior notes due 2025 (the "2025 convertible senior notes", and, together with the 2023 convertible senior notes, the "convertible senior notes").

The adoption of ASU 2020-06 resulted in the re-combination of the liability and equity components of the convertible senior notes into a single liability instrument, which required the Company to record a $ 168.4 million decrease in additional paid in capital from the derecognition of the separated equity components of these convertible senior notes, a $ 145.7 million increase in debt from the derecognition of the discount associated with the separated equity components of the convertible senior notes, and a $ 22.7 million cumulative effect decrease to the opening balance of its accumulated deficit as of January 1, 2021 upon transition.

Interest expense recognized in future periods will be reduced as a result of accounting for the convertible senior notes as a single liability instrument.

Since the Company had a net loss for the year ended December 31, 2021, the convertible senior notes were determined to be anti-dilutive and therefore had no impact to basic or diluted net loss per share for fiscal 2021 as a result of adopting ASU 2020-06.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which amends its guidance to simplify the accounting for income taxes by, among other things, removing exceptions to certain general principles in Topic 740, Income Taxes.

standard was effective for the Company beginning in the first quarter of 2021.

The Company adopted ASU 2019-12 and concluded that the impact on its consolidated financial statements was immaterial.

Recent Accounting Pronouncements Not Yet Effective

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The Company expects to recognize revenue on approximately three-fourths of the remaining performance obligations over the next 24 months, with the balance recognized thereafter.

The Company has elected the optional exemption, which allows for the exclusion of the amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less.

Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations pursuant to ASC 606.

The Company excludes amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less.

Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations.

Investments and Fair Value Measurements

5 unchanged sentences

Certificates of deposit $ 747 $ — $ ( 13 ) $ 734

treasury 83,237 — ( 24 ) 83,213

agency securities 159,070 — ( 65 ) 159,005

treasury securities 186,776 8 ( 1,382 ) 185,402

agency and government-sponsored securities 197,597 29 ( 1,660 ) 195,966

Commercial paper 25,386 — — 25,386

4 unchanged sentences

Long-Term Marketable Investments Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Certificates of deposit $ 746 $ — $ ( 2 ) $ 744

treasury 63,566 — ( 251 ) 63,315

agency securities $ 885 $ — $ — $ 885

Municipal bonds 18,655 — ( 64 ) 18,591

Corporate bonds 1,026 — ( 5 ) 1,021

Total $ 885 $ — $ — $ 885

2 unchanged sentences

Certificates of deposit $ 1,615 $ — $ — $ 1,615

treasury 287,315 41 ( 4 ) 287,352

treasury securities 83,237 — ( 24 ) 83,213

agency securities 159,070 — ( 65 ) 159,005

5 unchanged sentences

Long-Term Marketable Investments Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

treasury $ 10,189 $ — $ — $ 10,189

Certificates of deposit $ 746 $ — $ ( 2 ) $ 744

treasury securities 63,566 — ( 251 ) 63,315

agency securities 63,960 — ( 254 ) 63,706

Municipal bonds 18,655 — ( 64 ) 18,591

Corporate bonds 1,026 — ( 5 ) 1,021

Total $ 147,953 $ — $ ( 576 ) $ 147,377

3 unchanged sentences

Certificates of deposit $ ( 13 ) $ 734 $ ( 2 ) $ 2,010

treasury ( 275 ) 140,527 ( 4 ) 78,549

treasury securities ( 1,382 ) 126,534 ( 275 ) 140,527

agency securities ( 1,660 ) 172,458 ( 320 ) 222,710

3 unchanged sentences

Although the Company had certain available-for-sale debt securities in an unrealized loss position as of December 31, 2022, no impairment loss was recorded since it did not intend to sell them, did not anticipate a need to sell them, and the decline in fair value was not due to any credit-related factors.

The amortized cost and fair values of the Company’s marketable investments by contractual maturity as of December 31, 2021 and 2020 were as follows (in thousands):

December 31, 2021 December 31, 2020

Cost Fair Value Cost Fair Value

Due within one year $ 379,169 $ 378,980 $ 383,121 $ 383,171

Due after one year 147,953 147,377 42,119 42,127

Total $ 527,122 $ 526,357 $ 425,240 $ 425,298

Fair Value Measurements

16 unchanged sentences

Money market funds $ 37,560 $ — $ — $ 37,560

Certificates of deposit — 747 — 747

treasury securities 19,700 — — 19,700

Total cash equivalents $ 57,260 $ — $ — $ 57,260

1 unchanged sentence

Certificates of deposit $ — $ 734 $ — $ 734

Treasury 146,528 — — 146,528

treasury securities 185,402 — — 185,402

agency and government sponsored securities — 196,851 — 196,851

3 unchanged sentences

Total marketable investments $ 185,402 $ 249,226 $ — $ 434,628

Contingent consideration $ — $ — $ 23,740 $ 23,740

December 31, 2021

2 unchanged sentences

Money market funds $ 31,380 $ — $ — $ 31,380

Treasury 39,997 — — 39,997

Certificates of deposit — 747 — 747

Total cash equivalents $ 31,380 $ 747 $ — $ 32,127

2 unchanged sentences

Treasury 146,528 — — 146,528

agency securities — 98,711 — 98,711

agency and government sponsored securities — 222,711 — 222,711

Commercial paper — 47,555 — 47,555

8 unchanged sentences

As part of the agreement to acquire Inference Solutions Inc.

(“Inference”) in November 2020, the Company may be obligated to pay contingent earn out consideration of up to $ 24.0 million based upon achievement of certain milestones and relative thresholds during the earn out measurement period which ended on December 31, 2021.

The fair value of the contingent consideration arrangement, estimated to be $ 23.7 million as of December 31, 2021, is classified within Level 3 and is determined using a probability-based scenario analysis approach.

The resulting probability-weighted contingent consideration amounts were discounted based on the Company’s estimated cost of debt.

During the year ended December 31, 2021, the Company recognized $ 5.6 million of contingent consideration expense due to an increase in fair value of the contingent consideration as a result of the estimated achievement of the forecast the shorter time to payment.

As of December 31, 2021, the Company does not expect any material change to the fair value of the contingent consideration other than due to the time value of money.

(“Inference”) in November 2020, the Company was obligated to pay contingent earn out consideration of up to $ 24.0 million based upon achievement of certain milestones and relative thresholds during the earn out measurement period which ended on December 31, 2021.

The fair value of the contingent consideration arrangement was classified within Level 3 and was determined using a probability-based scenario analysis approach.

The resulting probability-weighted contingent consideration amounts

were discounted based on the Company’s estimated cost of debt.

During 2022, the Company concluded and paid the final contingent consideration amount of $ 24.0 million.

A reconciliation of the beginning and ending balance for contingent consideration consisted of the following (in thousands):

Year Ended December 31, 2021

Contingent Consideration

Balance, December 31.

2 unchanged sentences

Balance, December 31, 2021 23,740

There were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2021 and 2020.

Change in fair value of contingent consideration 260

Payment ( 24,000 )

Balance, December 31, 2022 $ —

In February 2022, the Company made a $ 2.0 million equity investment in a privately-held company that it does not have the ability to exercise significant influence over.

The Company elected the measurement alternative for an equity security without a readily determinable fair value.

Accordingly, this investment will be accounted for at its cost minus impairment, if any, and is classified within Level 3.

If the Company identifies observable price changes in orderly transactions for such investment or a similar investment, it will measure the investment at fair value as of the date that the observable transaction or events occurred.

The Company concluded that there was no indicator of impairment of this investment as of December 31, 2022.

Except for the $ 2.0 million equity investment and contingent consideration described above, there were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2022 and 2021.

The fair value of the Company’s other financial instruments’, including accounts receivable, accounts payable and other current liabilities, approximate their carrying value due to the relatively short maturity of those instruments.

The carrying amounts of the Company’s operating and finance leases approximate their fair value, which is the present value of expected future cash payments based on assumptions about current interest rates and the creditworthiness of the Company.

The carrying amounts of the Company’s operating leases approximate their fair value, which is the present value of expected future cash payments based on assumptions about current interest rates and the creditworthiness of the Company.

Financial Statement Components

31 unchanged sentences

Other assets $ 5,081 $ 4,964

Equity investment in a privately-held company 2,000 —

Deferred tax assets 3,976 6,907

Total $ 11,871 $ 3,236

Other assets $ 11,057 $ 11,871

Accrued and other current liabilities consisted of the following (in thousands):

7 unchanged sentences

Other long-term liabilities 1,745 5,574

Contingent consideration — 18,100

Other long-term liabilities $ 3,080 $ 7,671

Goodwill and Intangible Assets

Goodwill was recorded as a result of the Company’s acquisitions of Face It, Corp., which the Company also refers to as SoCoCare, in October 2013, Virtual Observer in April 2020, and Inference in November 2020.

See Note 14 for further details of the Virtual Observer and Inference acquisitions.

The following table summarizes the activity in the Company's goodwill balances during the years ended December 31, 2021 and 2020 (in thousands):

Beginning of the period, January 1, 2020 $ 11,798

Addition (Inference) 130,976

Addition (Virtual Observer) 22,646

End of the period, December 31, 2020 165,420

End of the period, December 31, 2021 $ 165,420

There was no activity in the Company's goodwill balance during the years ended December 31, 2022 and 2021.

During the fourth quarter of 2022, the Company completed its annual goodwill impairment test.

4 unchanged sentences

Intangible Assets

Intangible assets were acquired in connection with the Company’s acquisitions of SoCoCare in October 2013, Whendu in November 2019, Virtual Observer in April 2020, and Inference in November 2020.

See Note 14 for further details of the Virtual Observer and Inference acquisitions.

The following table summarizes the activity in the Company's intangible asset balances during the years ended December 31, 2022 and 2021 (in thousands):

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Beginning of the period, January 1, 2021 $ 51,684

Addition (Inference) 30,100

Addition (Virtual Observer) 12,800

Addition (Whendu) 100

Amortization ( 11,787 )

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Amortization expense related to intangible assets was $ 11.7 million, $ 11.8 million and $ 6.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The increase in amortization expense from 2019 to 2020 and 2020 to 2021 was due to the acquisition of intangible assets from Whendu in November 2019, Virtual Observer in April 2020, and Inference in November 2020.

As of December 31, 2022, the expected future amortization expense for intangible assets was as follows (in thousands):

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Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable.

The Company concluded that there was no impairment to the carrying value of its intangible assets as of December 31, 2021 and 2020.

The Company concluded that there was no indicators of impairment of its intangible assets as of December 31, 2022 and 2021.

2025 Convertible Senior Notes and Related Capped Call Transactions

In May and June 2020, the Company issued $ 747.5 million aggregate principal amount of 2025 convertible senior notes in a private offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $ 97.5 million principal amount of the 2025 convertible senior notes.

The 2025 convertible senior notes mature on June 1, 2025 and bear interest at a fixed rate of 0.500 % per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020.

In addition, under the terms of the 2025 convertible senior notes, the Company was obligated to pay additional interest on the 2025 convertible senior notes at a rate equal to 0.500 % per annum for the period from June 13, 2021 through July 8, 2021, after which such additional interest is no longer payable.

The total net proceeds from the issuance of the 2025 convertible senior notes, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, were approximately $ 728.8 million.

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The initial conversion price represents a premium of approximately 30 % to the $ 103.34 per share closing price of the Company’s common stock on The Nasdaq Global Market on May 21, 2020.

The 2025 convertible senior notes

are convertible, in multiples of $ 1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding March 1, 2025, only under the following circumstances:

The 2025 convertible senior notes are convertible, in multiples of $ 1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding March 1, 2025, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

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The 2025 convertible senior notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2025 convertible senior notes;

equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated (including the 2023 convertible senior notes);

equal in right of payment to any of the Company’s unsecured indebtedness that is not so

subordinated (including the 2023 convertible senior notes);

effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

Prior to the adoption of ASU 2020-06 on January 1, 2021 and in accounting for the issuance of the 2025 convertible senior notes, the 2025 convertible senior notes were separated into liability and equity components.

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

The carrying amount of the equity component representing the 2025 Conversion Option was $ 158.3 million and was determined by deducting the fair value of the liability component from the par value of the 2025 convertible senior notes.

The equity component was recorded in

additional paid-in-capital and was not re-measured as long as it continued to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) was amortized to interest expense over the contractual term of the 2025 convertible senior notes at an effective interest rate of 5.76 %.

Prior to the adoption of ASU 2020-06 on January 1, 2021 and in accounting for the debt issuance costs of $ 18.7 million related to the 2025 convertible senior notes, the Company allocated the total amount incurred to the liability and equity components of the 2025 convertible senior notes based on their relative values.

Issuance costs attributable to the liability component were $ 14.7 million and were amortized to interest expense using the effective interest method over the contractual term of the 2025 convertible senior notes.

Issuance costs attributable to the equity component were netted with the equity component in additional paid-in-capital.

On January 1, 2021, the Company elected to early adopt ASU 2020-06 based on a modified retrospective transition method.

Under such transition, prior-period information has not been retrospectively adjusted.

In accounting for the 2025 convertible senior notes after adoption of ASU 2020-06, the 2025 convertible senior notes are accounted for as a single liability, and the carrying amount of the 2025 convertible senior notes is $ 734.7 million as of December 31, 2021, with principal of $ 747.5 million, net of issuance cost of $ 12.8 million.

The 2025 senior convertible notes were classified as long term liabilities as of December 31, 2021.

The issuance cost related to the 2025 convertible senior notes is being amortized to interest expense over the contractual term of the 2025 convertible senior notes at an effective interest rate of 1.0 %.

The net carrying amount of the 2025 convertible senior notes as of December 31, 2021 (post-ASU 2020-06 adoption) and as of December 31, 2020 (pre-ASU 2020-06 adoption) was as follows (in thousands):

The net carrying amount of the 2025 convertible senior notes as of December 31, 2022 and 2021 was as follows (in thousands):

December 31, 2022 December 31, 2021

Principal $ 747,500 $ 747,500

Unamortized debt discount — ( 141,792 )

Unamortized issuance costs ( 9,124 ) ( 12,835 )

Net carrying amount $ 738,376 $ 734,665

The net carrying amount of the equity component of the 2025 convertible senior notes as of December 31, 2021 (post-ASU 2020-06 adoption) and as of December 31, 2020 (pre-ASU 2020-06 adoption) was as follows (in thousands):

December 31, 2021 December 31, 2020

Equity component $ — $ 158,321

Issuance costs — ( 3,958 )

Net carrying amount $ — $ 154,363

Interest expense related to the 2025 convertible senior notes was as follows (in thousands):

December 31, 2021 December 31, 2020

December 31, 2022 December 31, 2021 December 31, 2020

Contractual interest expense $ 3,737 $ 4,007 $ 2,230

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In connection with the issuance of the 2025 convertible senior notes, the Company entered into privately negotiated capped call transactions (the “2025 Capped Call Transactions”) with certain financial institutions.

The 2025 Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock in connection with any conversion of the 2025 convertible senior notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2025 convertible senior notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price.

The initial cap price of the 2025 Capped Call Transactions was $ 206.68 per share and is subject to certain adjustments under the terms of the 2025 Capped Call Transactions.

The 2025 Capped Call Transactions cover, subject to anti-dilution adjustments,

approximately 5.6 million shares of the Company’s common stock.

For accounting purposes, the 2025 Capped Call Transactions are separate transactions, and not integrated with the issuance of the 2025 convertible senior notes.

As these transactions meet certain accounting criteria, the 2025 Capped Call Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.

The cost to the Company of the 2025 Capped Call Transactions was $ 90.5 million during the year ended December 31, 2020, which was recorded as a reduction to additional paid-in capital.

Maturity of the Company’s 2025 convertible senior notes as of December 31, 2021 was as follows (in thousands):

Period Amount to Mature

2025 (Maturity date of June 1, 2025) $ 747,500

Total $ 747,500

The 2025 Capped Call Transactions cover, subject to anti-dilution adjustments, approximately 5.6 million shares of the Company’s common stock.

2023 Convertible Senior Notes and Related Capped Call Transactions

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This interest rate was based on the income and market-based approaches used to determine the effective interest rate of the 2023 convertible senior notes, adjusted for the remaining term of the 2023 convertible senior notes.

As of the settlement of the 2023 Note Repurchase Transactions, the carrying value of the 2023 convertible senior notes subject to the 2023 Note Repurchase Transactions, net of unamortized debt discount and issuance costs, was $ 150.4 million.

As of the settlement

of the 2023 Note Repurchase Transactions, the carrying value of the 2023 convertible senior notes subject to the 2023 Note Repurchase Transactions, net of unamortized debt discount and issuance costs, was $ 150.4 million.

The Company also incurred approximately $ 0.5 million in third party transaction costs related to the 2023 Note Repurchase Transactions.

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Each $ 1,000 principal amount of the 2023 convertible senior notes was initially convertible into 24.4978 shares of the Company’s common stock (the “2023 Conversion Option”), which is equivalent to an initial conversion price of approximately $ 40.82 per share of common stock, subject to adjustment upon the occurrence of specified events.

The 2023 convertible senior notes are convertible, in multiples of $ 1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding November 1, 2022, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ended on September 30, 2018 (and only during such calendar quarter), if the last reported

sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

The 2023 convertible senior notes were convertible, in multiples of $ 1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding November 1, 2022, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ended on September 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) during the five business day period after any five consecutive trading day period (the “2023 Measurement Period”) in which the trading price (as defined in the indenture governing the 2023 convertible senior notes) per $ 1,000 principal amount of the 2023 convertible senior notes for each trading day of the 2023 Measurement Period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate in effect on each such trading day;

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There have been no changes to the initial conversion price of the 2023 convertible senior notes since issuance.

During each of the quarters from the third quarter of 2019 through the fourth quarter of 2021, one of the triggers for convertibility of the 2023 convertible senior notes was triggered as the last reported sale price of the Company’s common stock was greater than $ 53.07 per share, which represents 130 % of the initial conversion price of $ 40.82 per share, for at least 20 trading days in the period of 30 consecutive trading days ended on, and including, the last trading day of the quarter for each quarter of 2020 and 2021.

As a result, the 2023 convertible senior notes were convertible, in multiples of $ 1,000 principal amount, at the option of the 2023 convertible senior note holders between October 1, 2019 to December 31, 2021, and are also currently convertible between January 1, 2022 and March 31, 2022.

Whether the 2023 convertible senior notes will be convertible after March 31, 2022 will depend on the continued satisfaction of this condition or other conversion conditions in the future.

During each of the quarters from the third quarter of 2019 through the third quarter of 2022, one of the triggers for convertibility of the 2023 convertible senior notes was triggered as the last reported sale price of the Company’s common stock was greater than $ 53.07 per share, which represents 130 % of the initial conversion price of $ 40.82 per share, for at least 20 trading days in the period of 30 consecutive trading days ended on, and including, the last trading day of the quarter for each quarter of 2020, 2021 and for the first three quarters of 2022.

The 2023 convertible senior notes continue to be convertible from November 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date.

During 2021, the Company paid $ 24.7 million in cash and issued 453,943 shares of its common stock to settle aggregate principal amount of $ 24.6 million of its 2023 convertible senior notes.

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The conversions that occurred prior to January 1, 2021 resulted in a $ 1.2 million loss on early debt extinguishment.

The conversions that occurred during 2021 were subject to ASU 2020-06 and such conversions were accounted for as contractual conversions, which did not result in any gain or loss upon their settlement.

The conversions that occurred during 2021 and 2022 were subject to ASU 2020-06 and such conversions were accounted for as contractual conversions, which did not result in any gain or loss upon their settlement.

During 2021, the Company received 68,905 shares from the partial unwind of capped calls resulting from the settlement of its 2023 convertible senior notes.

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The receipt of the 68,905 and 119,492 shares reduced the number of shares of common stock outstanding.

In addition, on or prior to December 31, 2021, the Company received elections to convert aggregate principal amount of $ 34.0 million of its 2023 convertible senior notes that remain unsettled as of the end of the fourth quarter of 2021.

The Company expects to settle these conversions in cash or a combination of cash and shares during the first quarter of 2022.

The Company has the option to settle any future election conversion notices in cash, shares, or a combination of cash and shares.

The 2023 convertible senior notes became redeemable at the Company's option on May 5, 2021.

The Company may redeem for cash all or any portion of the 2023 convertible senior notes, at its option, if the last reported sale price of its common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading

day of such period) ending not more than two trading days immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2023 convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

No sinking fund is provided for the 2023 convertible senior notes.

The 2023 convertible senior notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2023 convertible senior notes;

2 unchanged sentences

and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

Prior to the adoption of ASU 2020-06 on January 1, 2021 and in accounting for the issuance of the 2023 convertible senior notes, the 2023 convertible senior notes were separated into liability and equity components.

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

The equity component was recorded in additional paid-in-capital and was not re-measured as long as it continued to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the "Debt Discount") was amortized to interest expense over the contractual term of the 2023 convertible senior notes at an effective interest rate of 6.39 %.

Prior to the adoption of ASU 2020-06 on January 1, 2021 and in accounting for the debt issuance costs of $ 8.0 million related to the 2023 convertible senior notes, the Company allocated the total amount incurred to the liability and equity components of the 2023 convertible senior notes based on their relative values.

Issuance costs attributable to the liability component were $ 6.0 million and were amortized to interest expense using the effective interest method over the contractual term of the 2023 convertible senior notes.

Issuance costs attributable to the equity component were netted with the equity component in additional paid-in-capital.

After the adoption of ASU 2020-06, the 2023 convertible senior notes are accounted for as a single liability, and the carrying amount of the 2023 convertible senior notes was $ 33.9 million as of December 31, 2021, with principal of $ 34.2 million , net of issuance cost of $ 0.3 million.

The 2023 senior convertible notes were classified as long term liabilities during 2021.

The issuance cost related to the 2023 convertible senior notes is being amortized to interest expense over the contractual term of the 2023 convertible senior notes at an effective interest rate of 0.76 %.

The net carrying amount of the 2023 convertible senior notes as of December 31, 2021 (post-ASU 2020-06 adoption) and as of December 31, 2020 (pre-ASU 2020-06 adoption) was as follows (in thousands):

The net carrying amount of the 2023 convertible senior notes as of December 31, 2022 and 2021 was as follows (in thousands):

December 31, 2022 December 31, 2021

Principal $ 169 $ 34,225

Unamortized debt discount — ( 7,367 )

Unamortized issuance costs — ( 291 )

Net carrying amount $ 169 $ 33,934

The net carrying amount of the equity component of the 2023 convertible senior notes as of December 31, 2021 (post-ASU 2020-06 adoption) and as of December 31, 2020 (pre-ASU 2020-06 adoption) was as follows (in thousands):

December 31, 2021 December 31, 2020

Equity component $ — $ 14,505

Issuance costs — ( 455 )

Net carrying amount $ — $ 14,050

Interest expense related to the 2023 convertible senior notes was as follows (in thousands):

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In connection with the issuance of the 2023 convertible senior notes, the Company entered into privately negotiated capped call transactions (the “2023 Capped Call Transactions”) with certain financial institutions.

The 2023 Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the 2023 convertible senior notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2023 convertible senior notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price.

The initial cap price of the 2023 Capped Call Transactions was $ 62.80 per share, and is subject to certain adjustments under the terms of the 2023 Capped Call Transactions.

The 2023 Capped Call Transactions cover, subject to anti-dilution adjustments, approximately 6.3 million shares of the Company’s common stock.

For accounting purposes, the 2023 Capped Call Transactions are separate transactions, and not integrated with the issuance of the 2023 convertible senior notes.

As these transactions meet certain accounting criteria, the 2023 Capped Call Transactions are recorded in stockholders’ equity and are not accounted for as derivatives.

The cost of $ 31.4 million incurred in connection with the 2023 Capped Call Transactions was recorded as a reduction to additional paid-in capital.

In connection with the 2023 Note Repurchase Transactions, the Company amended the 2023 Capped Call Transactions such that the portion associated with the 2023 convertible senior notes subject to the 2023 Note Repurchase Transactions would remain outstanding notwithstanding the retirement of $ 181.0 million aggregate principal amount of 2023 convertible senior notes.

Following such amendment, the 2023 Capped Call Transactions continue to meet the accounting criteria to be recorded in stockholders’ equity and are not accounted for as derivatives.

Maturity of the Company’s 2023 convertible senior notes as of December 31, 2021 was as follows (in thousands):

Period Amount to Mature

2023 (Maturity date of May 1, 2023) $ 34,225

Total $ 34,225

Adoption of ASU 2020-06

On January 1, 2021, the Company elected to early adopt ASU 2020-06 based on a modified retrospective transition method.

Under such transition, prior-period information was not retrospectively adjusted.

Prior to the adoption of ASU 2020-06, the 2025 and 2023 convertible senior notes were separated into liability and equity components.

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

The equity component was recorded in additional paid-in-capital and was not re-measured as long as it continued to meet the conditions for equity classification.

The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) was amortized to interest expense over the contractual term of the 2025 and 2023 convertible senior notes at an effective interest rate of 5.76 % and 6.39 %, respectively.

Prior to the adoption of ASU 2020-06, the debt issuance costs related to the 2025 and 2023 convertible senior notes were allocated to the liability and equity components based on their relative values.

Issuance costs attributable to the liability component were amortized to interest expense using the effective interest method over the contractual term of the 2025 and 2023 convertible senior notes.

Issuance costs attributable to the equity component were netted with the equity component in additional paid-in-capital.

In accounting for the 2025 and 2023 convertible senior notes after adoption of ASU 2020-06, the 2025 convertible senior notes are accounted for as a single liability, and the issuance costs related to the 2025 and 2023 convertible senior notes are being amortized to interest expense over the contractual term at an effective interest rate of 1.0 % and 0.76 %, respectively.

Stockholders’ Equity

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Stock options outstanding 1,481

Restricted stock units outstanding 2,560

RSUs (including PRSUs) outstanding 3,718

Shares available for future grant under 2014 Plan 14,230

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Additionally, any forfeited or expired shares that would have otherwise returned to the 2004 Plan, instead return to the 2014 Plan.

The 2014 Plan allows the Company to grant stock options, restricted stock units (“RSUs”), restricted stock awards, performance stock awards, stock appreciation rights, performance cash awards, and other stock awards.

The 2014 Plan allows the Company to grant stock options, RSUs, restricted stock awards, performance stock awards, stock appreciation rights, performance cash awards, and other stock awards.

To date, the Company has granted stock options and RSUs under the 2014 Plan.

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(1) Intrinsic value of options exercised is the difference between the fair market value of the Company’s common stock at the time of exercise and the exercise price paid.

Restricted Stock Units

A summary of RSU activity during the year ended December 31, 2021 is as follows (in thousands, except years and per share data):

Restricted Stock Units (including Performance-Based Restricted Stock Units)

A summary of RSU activity (including PRSUs) during the year ended December 31, 2022 is as follows (in thousands, except years and per share data):

Number of Shares Weighted Average Grant Date Fair Value Per Share

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Outstanding as of December 31, 2022 3,718 103.55

During the third quarter of 2021, the Company granted 0.7 million RSU awards conditional upon the close of the Merger.

The Company cancelled these grants on September 30, 2021, the termination date of the Merger.

In October 2021, the Company subsequently granted 0.7 million RSU awards to its employees.

Following is additional information pertaining to the Company’s RSU activity (in thousands, except per share data):

(1) Includes 0.4 million PRSUs granted during 2022.

Performance-Based Restricted Stock Units

In 2022, the Company granted 0.3 million PRSUs subject to market and service conditions (“market-based PRSUs”) and with a weighted average grant date fair value of $ 30.6 million as part of its annual grant of equity incentive awards to certain executives and in connection with the appointment of Michael Burkland as the Company’s new Chief Executive Officer.

The amount that may be earned pursuant to the PRSUs ranges from 0 % to 200 % of the target number based on the Company’s relative total shareholder return (“RTSR”) performance as compared to the companies in the S&P Software and Services Select Index during three one -year performance periods.

One-third of the total PRSUs may be earned and settled in shares following the end of each one -year performance period based on RTSR performance and subject to continued employment through the payment date, but the amount initially paid for the first two one -year performance periods is limited to 100 % of the target amount for such years, and any PRSUs resulting from above-target performance in those first two years will be paid following the end of final one -year performance period, subject to the executive’s continued employment through the payment date.

If the Company’s absolute total shareholder return for any performance period is negative, then no more than 100 % of the target amount of PRSUs for such period may be earned.

If an executive's employment with the Company terminates before the end of the final one -year performance period due to death or disability, 100 % (if due to death) or 50 % (if due to disability) of the unvested PRSUs may be earned subject to ultimate RTSR performance in each remaining performance period.

Upon a qualifying termination of employment in connection with a change in control of the Company, the unvested PRSUs will vest on a double-trigger basis (i) at the target level for approximately 0.1 million of the market-based PRSUs and (ii) for approximately 0.2 million of the market-based PRSUs, (a) at the target level for the uncompleted portions of the performance periods and (b) at the actual level of performance measured through the date of the change in control of the Company, based on the price per share paid in such change in control.

The fair value of the PRSUs are determined on their grant date using a Monte

Carlo Simulation model based upon assumptions presented below.

The Company recognizes the fair value of the PRSUs ratably over their requisite service period.

In 2022, the Company granted 0.1 million shares of PRSUs subject to revenue-based performance and service conditions (“revenue-based PRSUs”), with a grant date fair value of $ 6.6 million.

The amount of revenue-based PRSUs that may be earned will be determined based on achievement of two quarterly revenue goals.

One third of the revenue-based PRSUs may be earned based on achievement of the first revenue target and, if achieved, will vest in four quarterly installments, with the first installment occurring on the date such achievement is certified, subject to the executive's continuous service through the applicable vesting dates.

Two thirds of the revenue-based PRSUs may be earned based on achievement of the second revenue target and, if achieved, will vest in eight quarterly installments, with the first installment occurring on the date such achievement is certified, subject to the executive's continuous service through the applicable vesting dates.

The revenue-based PRSUs are otherwise on the Company's standard award terms from its market-based PRSUs.

The Company concluded that the first revenue target was probable of achievement at December 31, 2022, thus recognized the related stock-based compensation cost through this period.

The Company, however, concluded that, as of December 31, 2022, the second revenue target was not probable of achievement, thus recognized a cumulative catch-up adjustment in the fourth quarter of 2022 to reverse all previously recognized stock-based compensation cost related to this target.

The Company will reassess the probability of the achievement of the performance conditions at each reporting period and a cumulative catch-up adjustment will be recorded to stock-based compensation cost for any change in the probability assessment.

Following is additional information pertaining to the Company’s RSU activity (including PRSUs) (in thousands, except per share data):

Year Ended December 31,

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As of December 31, 2022, unrecognized stock-based compensation expense by award type and their expected weighted-average recognition periods are summarized in the following table (in thousands, except years).

Stock Option RSU ESPP

Stock Option RSU (excluding PRSUs) PRSU ESPP

Unrecognized stock-based compensation expense $ 12,085 $ 324,834 $ 24,841 $ 3,265

Weighted-average amortization period 2.5 years 2.5 years 0.4 years

Weighted-average amortization period 2.2 years 2.4 years 2.5 years 0.4 years

The Company recognizes stock-based compensation expense that is calculated based upon awards that have vested, reduced for actual forfeitures.

All stock-based compensation for equity awards granted to employees and non-employee directors is measured based on the grant date fair value of the award.

The Company values RSUs at the closing market price of its common stock on the date of grant.

The Company estimates the fair value of each stock option and purchase right under the 2014 ESPP granted to employees on the date of grant using the Black-Scholes option-pricing model and using the assumptions disclosed in the table below.

The Company values RSUs, including PRSUs subject to performance conditions, at the closing market price of its common stock on the date of grant.

The Company estimates the fair value of each stock option and purchase right under the 2014 ESPP granted to employees on the date of grant using the Black-Scholes option-pricing model using the assumptions disclosed in the table below.

The Company estimates the fair value of PRSUs subject to market conditions using a Monte Carlo Simulation model using the assumptions disclosed in the table below.

Expected volatility is based upon the weighting of the Company’s historical volatility.

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Accordingly, the expected dividend yield is zero.

The weighted average assumptions used to value stock options and purchase rights under the 2014 ESPP granted during the years ended December 31, 2021, 2020 and 2019 were as follows:

The weighted average assumptions used to value stock options granted during the periods presented were as follows:

Stock Options

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The weighted average assumptions of the assumed stock options were an expected term of 4.3 years, volatility of 47 %, risk-free interest rate of 0.3 % and dividend yield of 0 %.

The weighted average assumptions used to value PRSUs with market conditions granted during the periods presented were as follows:

PRSUs (Market Conditions)

Year Ended December 31,

2022 2021 2020

Expected term (years) 3.0 — —

Volatility 53 % — —

Risk-free interest rate 3.5 % — —

Dividend yield — — —

The weighted average assumptions used to value purchase rights under the 2014 ESPP granted during the periods presented were as follows:

November 2022 May 2022 November 2021 May 2021 November 2020 May 2020

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Diluted net loss per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options, vesting of RSUs and shares of common stock issuable upon conversion of convertible senior notes.

Diluted net loss per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options, vesting of RSUs and PRSUs, and shares of common stock issuable upon conversion of convertible senior notes.

As the Company had net losses for the years ended December 31, 2022, 2021 and 2020, all potentially issuable shares of common stock were determined to be anti-dilutive.

8 unchanged sentences

Stock options 1,481 1,982 2,255

Restricted stock units

RSUs (including PRSUs)

3,718 2,560 2,267

2 unchanged sentences

Total 10,884 11,205 5,432

(1) The convertible senior notes were calculated under the if-converted method for 2021 due to the adoption of ASU 2020-06 and under the treasury stock method for 2020 and 2019.

(1) The Company used the if-converted method for 2022 and 2021 due to the adoption of ASU 2020-06 and under the treasury stock method for 2020.

Prior to the adoption of ASU 2020-06, the Company used the treasury stock method for calculating any potential dilutive effect of the conversion spread of its convertible senior notes.

The conversion spread had a dilutive impact for the 2023 convertible senior notes during the years ended December 31, 2020 and 2019 since the average market price of the Company’s common stock during the period exceeded the initial conversion price of $ 40.82 per share.

The conversion spread had a dilutive impact for the 2023 convertible senior notes during the year ended December 31, 2020 since the average market price of the Company’s common stock during the period exceeded the initial conversion price of $ 40.82 per share.

However, the potential shares of common stock issuable upon the conversion of the 2023 convertible senior notes were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

After the adoption of ASU 2020-06, the Company used the if-converted method for calculating any potential dilutive effect of the convertible senior notes for the year ended December 31, 2021.

After the adoption of ASU 2020-06, the Company used the if-converted method for calculating any potential dilutive effect of the convertible senior notes for the years ended December 31, 2022 and 2021.

Under this method, the Company calculates diluted earnings per share under both the cash and share settlement assumptions to determine which is more dilutive.

If share settlement is more dilutive, the Company calculates diluted earnings per share assuming that all of the convertible senior notes were converted solely into shares of common stock at the beginning of the reporting period.

The potential impact upon the conversion of the convertible senior notes was excluded from the calculation of diluted net loss per share for the year ended December 31, 2021 because the effect would have been anti-dilutive.

The potential impact upon the conversion of the convertible senior notes were excluded from the calculation of diluted net loss per share for the years ended December 31, 2022 and 2021 because the effect would have been anti-dilutive.

The following table presents components of loss before income taxes for the periods presented (in thousands):

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Foreign 3,088 ( 11,345 ) ( 178 )

Total (benefit from) income taxes - Deferred ( 11,345 ) ( 3,087 ) —

Total (benefit from) provision for income taxes $ ( 11,285 ) $ ( 2,453 ) $ 104

The Company recorded a deferred income tax benefit during 2021 principally due to a restructuring of its Australian subsidiary organization which allowed for the step-up in tax basis of certain intangible assets, and net operating loss carryover increases for current year losses, against which no valuation allowance was recorded.

Total provision for (benefit from) income taxes - Deferred 3,088 ( 11,345 ) ( 3,087 )

Total provision for (benefit from) income taxes $ 4,388 $ ( 11,285 ) $ ( 2,453 )

The Company recorded a deferred income tax expense during 2022 principally due to a repatriation of intellectual property from its Australian subsidiary to the U.S., where it is offset by a valuation allowance, and a decrease in available Australian net operating loss carryforwards.

Income tax (benefit) expense differed from the amount computed by applying the U.S.

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Section 162(m) 3,851 7,543 6,472

Global intangible low-taxed income 4,127 — —

Non-deductible expenses 78 1,361 1,944

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Change in valuation allowance 11,288 30,088 25,319

Total (benefit from) provision for income taxes $ ( 11,285 ) $ ( 2,453 ) $ 104

Total provision for (benefit from) income taxes $ 4,388 $ ( 11,285 ) $ ( 2,453 )

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 related to the following (in thousands):

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Net operating loss and credit carryforwards $ 125,698 $ 133,433

Capitalized R&D costs 30,552 —

Accrued liabilities 10,295 12,719

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Property and equipment ( 2,737 ) ( 2,633 )

Amortized intangibles — ( 11,041 )

Other ( 556 ) ( 509 )

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Deferred compensation - Current ( 35,443 ) ( 23,211 )

Convertible senior notes — ( 35,832 )

Gross deferred tax liabilities ( 49,155 ) ( 37,926 )

Net deferred taxes $ 3,819 $ 6,907

The Company has not provided for U.S.

With the exception of Russia, the Company has not provided for U.S.

income taxes on undistributed earnings of its foreign subsidiaries because it intends to permanently re-invest those earnings outside the United States.

The undistributed earnings of the Company’s foreign subsidiaries were immaterial as of December 31, 2021 and 2020.

The Company has plans to liquidate its Russian subsidiary.

As such, the Company can no longer assert an intention to permanently re-invest those earnings.

The undistributed earnings of the Company’s foreign subsidiaries were immaterial as of December 31, 2022 and 2021 and no U.S.

income taxes have been accrued.

A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain.

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However, the Company has recorded net foreign deferred tax assets associated with its U.K.

and Australia operations totaling $ 6.9 million.

The net change in the valuation allowance for the years ended December 31, 2021 and 2020 was an increase of $ 70.7 million and a decrease of $ 8.8 million, respectively.

The increase in the valuation allowance in the current year was primarily attributed to the Company's adoption of ASU 2020-06 resulting in the reversal of previously recognized deferred taxes related to the convertible debt option.

In addition, the net operating loss for the current year contributed to the increase in the valuation allowance.

and Australia operations totaling $ 3.8 million, which cannot increase its U.S.

valuation allowance.

The net change in the valuation allowance for the years ended December 31, 2022 and 2021 was an increase of $ 13.6 million and $ 70.7 million, respectively.

The increase in the valuation allowance in the current year was primarily attributed to the new requirement to capitalize tax research and development costs under Section 174 of the Internal Revenue Code of 1986, as amended (“IRC”), offset by an increase in the Company's deferred contract costs.

The requirement to capitalize under Section 174 was passed with the Tax Cuts and Jobs Act of 2017 but was not effective until tax years beginning after December 31, 2021.

Domestic expenditures will be amortized over five years, while foreign expenditures are amortized over fifteen years.

As of December 31, 2022, the Company had net operating loss carryforwards for federal, state and foreign income tax purposes of $ 456.9 million, $ 310.9 million and $ 13.5 million, respectively, available to reduce future income subject to income taxes.

If not utilized, the federal and state net operating loss carryforwards will begin to expire in 2024 and 2028, respectively, while the foreign net operating loss carryforwards do not expire.

If not utilized, the federal and significant state net operating loss carryforwards will begin to expire in 2024 and 2028, respectively, while the foreign net operating loss carryforwards do not expire.

As of December 31, 2022, the Company also had gross research credit carryforwards for federal and California state tax purposes of $ 10.8 million and $ 7.0 million, available to reduce future income subject to income taxes.

The federal research credit carryforwards will begin to expire in 2022 and the California state research credits can be carried forward indefinitely.

The Internal Revenue Code (“IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses and credits in the event of an “ownership change” of a corporation.

A portion of the federal research credit carryforwards will continue to expire in 2023.

The California state research credits do not expire.

The IRC imposes restrictions on the utilization of net operating losses and credits in the event of an

“ownership change” of a corporation.

Accordingly, a company’s ability to use net operating losses and credits may be subject to substantial limitation as prescribed under the IRC Sections 382 and 383 and similar state provisions.

Events that may cause limitations in the amount of the

net operating losses and credits that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50 % over a three-year period.

Events that may cause limitations in the amount of the net operating losses and credits that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50 % over a three-year period.

In the event the Company has changes in ownership, net operating losses and research and development credit carryforwards, which are fully reserved by the deferred tax asset valuation allowance, could be limited and may expire unutilized.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years pursuant to IRC Section 174.

Although Congress is considering legislation that would defer the amortization requirement to later years, it is not certain that the provision will be repealed or otherwise modified.

If the requirement is not modified, it will reduce the Company’s net operating losses beginning in 2022.

Given the Company’s carryover attributes, this is not expected to have a material impact on the consolidated financial statements.

Subsequent to year end, the Company completed a reorganization of its Australian entities, the ultimate result of which was to repatriate the ownership of certain intellectual property to the United States.

As a result, the Company will increase its deferred tax assets and its valuation allowance during the first quarter of 2022 by approximately $ 2.1 million with no net impact on its earnings.

Unrecognized Tax Benefits

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Unrecognized benefit — end of period $ 9,415 $ 7,643 $ 6,076

As of December 31, 2021 and 2020, the Company had $ 0.0 million and $ 0.3 million, respectively, of total unrecognized tax benefits, if recognized, would have an impact on its effective tax rate.

As of each of December 31, 2022 and 2021, the Company did no t have any unrecognized tax benefits that, if recognized, would have a material impact on its effective tax rate for each such respective year.

The Company recognizes interest and penalties related to uncertain tax positions as income tax expense.

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The Company’s foreign tax returns are open to audit under the statutes of limitation of the respective foreign countries in which its subsidiaries are located.

The Company considers all undistributed earnings of its foreign subsidiaries indefinitely reinvested.

With the exception of Russia, the Company considers all undistributed earnings of its foreign subsidiaries indefinitely reinvested.

Commitments and Contingencies

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2024 238 5,940

2024 226 3,532

Thereafter $ — $ —

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Universal Services Fund Liability

The Company is classified as a telecommunications service provider for regulatory purposes and is required to make contributions to the USF based on the revenue the Company receives from the resale of interstate and international telecommunications services.

In order to comply with the obligation to make direct contributions, the Company is registered with the USAC, which is charged by the FCC with administering the USF, and has been remitting the required contributions to USAC since its registration with the USAC in April 2013.

In June 2015, in connection with the Company’s late registration with the USAC and past failure to make USF contributions prior to 2013, the Company entered into a consent decree with the FCC Enforcement Bureau.

In the consent decree, the Company agreed to pay a civil penalty of $ 2.0 million to the U.S.

Treasury, which was paid in installments ending on December 31, 2018.

The Company also agreed to make USF contributions of $ 3.9 million based on its revenues for the period from 2008 to 2012.

The Company is still in dispute with the FCC regarding whether the Company is liable for USF contributions related to the period from 2003 through 2007.

The Company also made retroactive USF contributions based on its revenues for the period from 2008 to 2012.

The Company, however, has an unresolved and arguably dormant dispute with the FCC regarding whether the Company is liable for USF contributions related to the period from 2003 through 2007.

As of December 31, 2022, the Company had accrued $ 0.1 million in interest related to the disputed assessments for the period of 2003 through 2007.

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In management’s opinion, resolution of these matters is not expected to have a material impact on the Company’s consolidated results of operations, cash flows, or its financial position.

However, due to the uncertain nature of legal

matters, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

However, due to the uncertain nature of legal matters, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period.

The Company expenses legal fees as incurred.

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In the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which it agrees to indemnify clients, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, including breach of security, services to be provided by the Company or from intellectual property infringement claims made by third parties.

In addition, the Company has entered into indemnification agreements with its directors, officers and certain employees that requires it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.

In addition, the Company has entered into indemnification agreements with its directors, officers and certain employees

that requires it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees.

There are no claims that the Company is aware of that could have a material effect on the consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.

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The Company began matching employee contributions in cash in the fourth quarter of 2019.

The contribution expense for the year ended December 31, 2021 and 2020 was $ 1.8 million and $ 1.4 million, respectively.

The contribution expense for the years ended December 31, 2022 and 2021 was $ 2.1 million and $ 1.8 million, respectively.

The Company complies with the requirement of maintaining a retirement plan for employees in the Philippines.

This plan is a non-contributory and defined benefit type that provides retirement to employees equal to approximately one month salary for every year of credited service for employees who attain the normal retirement of age of 60 with at least five years of service.

This plan is a non-contributory and defined benefit plan that provides retirement to employees equal to approximately one month salary for every year of credited service for employees who attain the normal retirement age of 60 with at least five years of service.

The benefits are paid in a lump sum amount upon retirement from the Company.

Total defined benefit liability was $ 0.6 million as of each of December 31, 2021 and 2020.

Total retirement expense for this plan was $ 0.2 million, $ 0.1 million, and $ 0.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Total defined benefit liability under this plan was $ 0.5 million and $ 0.6 million as of each of December 31, 2022 and 2021, respectively.

Total retirement expense for this plan were $ 0.2 million, $ 0.2 million, and $ 0.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The Company has leases for offices, data centers and computer and networking equipment that expire at various dates through 2031.

The Company’s leases have remaining terms of one to ten years , some of the leases include a Company option to extend the leases for up to three to five years , and some of the leases include the option to terminate the leases upon 30 -days notice.

The Company has elected the practical expedient to not separate lease and non-lease components for real estate operating leases.

The Company's Bishop Ranch Lease commenced on February 1, 2021, has a lease term of 10 years, and has a total commitment over its term of $ 46.4 million, which was the primary component of the increase in operating lease costs, operating lease right-of-use assets and operating lease liabilities for the year ended December 31, 2021.

The Company does not separate lease and non-lease components for real estate operating leases.

The components of lease expenses were as follows (in thousands):

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Property and equipment, net $ 79 $ 852

Finance lease liabilities:

Finance leases $ — $ 612

Finance lease liabilities — less current portion — —

Total finance lease liabilities $ — $ 612

Weighted average remaining terms were as follows (in years):

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Maturities of lease liabilities were as follows (in thousands):

Year Ending December 31, Operating Leases Finance Leases

2022 $ 11,383 $ —

Year Ending December 31, Operating Leases

2023 $ 12,246

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Total $ 52,015

As of December 31, 2021, the Company entered into an additional data center operating lease that had not yet commenced, representing a total commitment of $ 0.2 million with a one year term.

This data center lease is expected to commence on March 1, 2022.

The Company also entered into an additional facility operating lease that commenced in January 2022 with a lease term of three years , representing a total commitment over its term of $ 0.3 million.

Inference Solutions

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The total consideration comprised of $ 137.0 million in cash, net of cash acquired, and $ 18.1 million in estimated fair value of contingent earn out consideration.

The contingent earn out consideration is up to $ 24.0 million and is based upon achievement of certain milestones and relative thresholds during the earn out measurement period which ended on December 31, 2021.

The range of amounts that the Company could pay under the contingent consideration arrangement is between $ 0.0 million and $ 24.0 million.

The fair value of the contingent earn out consideration is estimated to be $ 23.7 million as of December 31, 2021.

The contingent earn

out consideration was up to $ 24.0 million and was based upon achievement of certain milestones and relative thresholds during the earn out measurement period which ended on December 31, 2021.

The range of amounts that the Company could pay under the contingent consideration arrangement was between $ 0.0 million and $ 24.0 million.

During 2022, the Company concluded and paid the final contingent consideration amount of $ 24.0 million.

See Note 3 for additional information regarding the contingent consideration arrangement.

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Total consideration (net of cash acquired) $ 155,297

The acquired technology, customer relationships, and trade name will be amortized on a straight-line basis over their assigned useful lives of six years , five years , and two years , respectively.

The acquired technology, customer relationships, and trade name are being amortized on a straight-line basis over their assigned useful lives of six years , five years , and two years , respectively.

The Company used the income approach to estimate the fair value of intangible assets acquired.

In connection with this acquisition, the Company incurred approximately $ 0.3 million and $ 2.9 million of acquisition costs in 2021 and 2020, respectively, which have been expensed as incurred and included in general and administrative expense in the consolidated statements of operations and comprehensive loss.

The results of operations of this acquisition are included in the accompanying consolidated statements of operations and comprehensive loss from the date of acquisition.

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McGrail, dated January 15, 2020.

This acquisition, which was accounted for as a business combination, is intended to expand the Company's portfolio to include a cloud-based Workforce Optimization (“WFO”) offering as a complement to its ongoing strategic partnerships with leading WFO providers.

This acquisition, which was accounted for as a business combination, is intended to expand the Company's portfolio to include a cloud-based WFO offering as a complement to its ongoing strategic partnerships with leading WFO providers.

The excess of the purchase price over identifiable intangible assets and net tangible assets in the amount of $ 22.6 million was allocated to goodwill, which is not deductible for tax purposes.

The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered final.

The following table presents the final allocation of the purchase price at the acquisition date (in thousands):

The following table presents the final allocation of the purchase price at the acquisition date

(in thousands):

Tangible assets acquired 200

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Total $ 32,222

The acquired technology, customer relationships, and trade name and trademarks will be amortized on a straight-line basis over their estimated useful lives of five years , five years , and two years , respectively.

The acquired technology, customer relationships, and trade name and trademarks are being amortized on a straight-line basis over their estimated useful lives of five years , five years , and two years , respectively.

The Company used the income approach to estimate the fair value of intangible assets acquired.

In connection with this acquisition, the Company incurred total acquisition-related transaction costs of $ 0.9 million and $ 0.3 million in 2020 and 2019, respectively, that have been expensed as incurred and included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

The results of operations of this acquisition are included in the accompanying consolidated statements of operations and comprehensive loss from the date of acquisition.

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Total operating expenses 125,302 125,962 122,914 124,749 105,814 106,182 93,581 89,165

(Loss) income from operations ( 11,979 ) ( 18,991 ) ( 14,194 ) ( 11,086 ) 2,665 ( 1,785 ) ( 8,229 ) ( 4,956 )

Loss from operations ( 13,251 ) ( 21,731 ) ( 21,761 ) ( 30,839 ) ( 11,979 ) ( 18,991 ) ( 14,194 ) ( 11,086 )

Other (expense) income, net:

Interest expense ( 1,887 ) ( 1,879 ) ( 1,857 ) ( 1,870 ) ( 2,024 ) ( 1,947 ) ( 2,118 ) ( 1,938 )

Loss on early extinguishment of debt — — — — ( 887 ) ( 282 ) ( 5,794 ) —

Other (expense) and interest income 2,706 982 280 845 ( 43 ) 213 ( 353 ) 175

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Loss before income taxes ( 12,432 ) ( 22,628 ) ( 23,338 ) ( 31,864 ) ( 14,046 ) ( 20,725 ) ( 16,665 ) ( 12,849 )

(Benefit from) provision for income taxes ( 10,445 ) ( 188 ) ( 135 ) ( 517 ) 8 346 ( 2,876 ) 69

Provision for (benefit from) income taxes 1,221 579 332 2,256 ( 10,445 ) ( 188 ) ( 135 ) ( 517 )

Net loss $ ( 13,653 ) $ ( 23,207 ) $ ( 23,670 ) $ ( 34,120 ) $ ( 3,601 ) $ ( 20,537 ) $ ( 16,530 ) $ ( 12,332 )

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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-K

Item 8. Financial Statements and Supplementary Data