What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-24 · 207 added, 296 removed, 996 unchanged (34% of the section changed)

15 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 6 to the consolidated financial statements, the Company has changed its method of accounting for convertible senior notes as of January 1, 2021 due to the adoption of Accounting Standards Update (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.

Basis for Opinions

23 unchanged sentences

Evaluation of the sufficiency of audit evidence over revenues from subscription services and related usage

As discussed in Note 1 to the consolidated financial statements, the Company charges its clients subscription fees, usually billed on a monthly basis, for access to the Company’s Virtual Contract Center (“VCC”) cloud platform.

As discussed in Note 1 to the consolidated financial statements, the Company charges clients subscription fees, usually billed on a monthly basis, for access to the Company’s Virtual Contact Center (VCC) solution.

For the year ended December 31, 2023, the Company recorded $910,488 thousand of revenue.

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 to named agents allowed to concurrently access the VCC cloud platform.

Substantially all of the Company’s clients purchase both subscriptions and related telephony usage.

The related telephony usage fees are generally based on the volume of minutes used for inbound and outbound client interactions.

The related usage fees are generally based on the volume of minutes used for inbound and outbound client interactions.

There are high volumes of subscription and related usage transactions processed across multiple information technology (IT) systems.

1 unchanged sentence

Revenues from subscription services and related usage involve a high volume of automated transactions dependent on the Company’s IT systems.

Therefore, our audit procedures required the involvement of IT professionals and auditor judgement was required to determine the nature and extent of audit evidence obtained and evaluate the results of the procedures.

Therefore, our audit procedures required the involvement of IT professionals and auditor judgment was required to determine the nature and extent of audit evidence obtained and evaluate the results of the procedures.

The following are the primary procedures we performed to address this critical audit matter.

19 unchanged sentences

Operating lease right-of-use assets 38,873 44,120

Finance lease right-of-use assets 4,564 —

Intangible assets, net 38,323 28,192

9 unchanged sentences

Operating lease liabilities 10,731 10,626

Accrued federal fees 2,471 2,282

Sales tax liabilities 2,973 2,660

Finance lease liabilities 1,767 —

Deferred revenue 68,187 57,816

2 unchanged sentences

Convertible senior notes - less current portion 742,125 738,376

Sales tax liabilities — less current portion 899 877

Operating lease liabilities — less current portion 36,378 41,389

Finance lease liabilities — less current portion 2,877 —

Other long-term liabilities 7,888 3,979

7 unchanged sentences

Additional paid-in capital 942,280 635,668

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

Accumulated other comprehensive income (loss) 582 ( 2,688 )

Accumulated deficit ( 404,850 ) ( 323,086 )

15 unchanged sentences

Loss from operations ( 98,576 ) ( 87,582 ) ( 56,250 )

Other (expense) income, net:

Other income (expense), net:

Interest expense ( 7,646 ) ( 7,493 ) ( 8,027 )

Loss on early extinguishment of debt — — ( 6,964 )

Other (expense) and interest income 4,813 ( 8 ) 3,034

Total other (expense) income, net ( 2,680 ) ( 8,035 ) ( 32,278 )

Interest income and other 26,799 4,813 ( 8 )

Total other income (expense), net 19,153 ( 2,680 ) ( 8,035 )

Loss before income taxes ( 79,423 ) ( 90,262 ) ( 64,285 )

7 unchanged sentences

Net loss $ ( 81,764 ) $ ( 94,650 ) $ ( 53,000 )

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

Other comprehensive income (loss) 3,270 ( 2,401 ) ( 622 )

Comprehensive loss $ ( 78,494 ) $ ( 97,051 ) $ ( 53,622 )

7 unchanged sentences

Balance as of December 31, 2020 66,496 $ 67 $ 476,941 $ 335 $ ( 198,179 ) $ 279,164

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

Purchase of capped calls related to the 2025 convertible senior notes — — ( 90,448 ) — — ( 90,448 )

Equity component from conversion of the 2023 convertible senior notes — — ( 336,592 ) — — ( 336,592 )

Cumulative effect adjustment due to adoption of ASU 2020-06 (1)

— — ( 168,412 ) — 22,743 ( 145,669 )

Issuance of common stock upon partial conversion of the 2023 convertible senior notes 454 — ( 353 ) — — ( 353 )

Fair value of Inference assumed unvested stock options for services completed prior to the acquisition — — 192 — — 192

Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes ( 69 ) — 9 — — 9

Issuance of common stock upon exercise of stock options 389 — 7,402 — — 7,402

5 unchanged sentences

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

Cumulative effect adjustment due to adoption of ASU 2020-06 (1)

— — ( 168,412 ) — 22,743 ( 145,669 )

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

8 unchanged sentences

Issuance of common stock upon partial conversion of the 2023 convertible senior notes 2 — — — — —

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

Settlement at maturity of the outstanding capped calls and retirement of common stock related to the 2023 convertible senior notes ( 371 ) — 74,453 — — 74,453

Issuance of common stock upon exercise of stock options 491 — 9,127 — — 9,127

Issuance of common stock upon vesting of restricted stock units 1,844 2 ( 2 ) — — —

Shares held for tax withholdings ( 40 ) — ( 3,270 ) — — ( 3,270 )

Issuance of common stock under ESPP 344 — 15,927 — — 15,927

Stock-based compensation — — 210,377 — — 210,377

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

Other comprehensive income — — — 3,270 — 3,270

Net loss — — — — ( 81,764 ) ( 81,764 )

12 unchanged sentences

Amortization of deferred contract acquisition costs 55,384 41,034 26,050

Amortization of premium on marketable investments ( 90 ) 6,385 3,090

Provision for doubtful accounts 1,105 808 754

(Accretion of discount) amortization of premium on marketable investments ( 11,351 ) ( 90 ) 6,385

Provision for credit losses 989 1,105 808

Stock-based compensation 206,292 172,507 108,805

Amortization of discount and issuance costs on convertible senior notes 3,749 3,743 3,957

Loss on early extinguishment of debt — — 6,964

Deferred taxes 53 3,088 ( 6,907 )

1 unchanged sentence

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 )

Other 807 188 396

6 unchanged sentences

Accrued and other current liabilities ( 9,274 ) ( 7,878 ) 20,045

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

Deferred revenue 4,958 13,176 10,462

Other liabilities ( 3,880 ) ( 22,623 ) 1,913

Other long-term liabilities (including non-current portions of operating and finance lease liabilities) 3,814 ( 3,857 ) ( 22,603 )

Net cash provided by operating activities 128,838 88,865 28,998

4 unchanged sentences

Purchases of property and equipment ( 31,234 ) ( 52,272 ) ( 42,216 )

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

Capitalization of internal-use software development costs ( 9,537 ) ( 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 )

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

Cash paid to acquire Aceyus, Inc.

( 80,588 ) — —

Net cash (used in) provided by investing activities ( 259,562 ) 30,963 ( 150,478 )

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes — — 728,812

Payments for capped call transactions — — ( 90,448 )

Repurchase of a portion of 2023 convertible senior notes, net of costs — ( 34,067 ) ( 24,688 )

Repayment of outstanding 2023 convertible senior notes at maturity ( 169 ) — —

Cash received from the settlement at maturity of the outstanding capped calls associated with the 2023 convertible senior notes 74,453 — —

Proceeds from exercise of common stock options 9,127 8,522 7,402

Proceeds from sale of common stock under ESPP 15,927 13,413 15,397

Payment of employee taxes related to vested RSUs ( 3,270 ) — —

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

1 unchanged sentence

Payments of finance leases ( 989 ) — ( 612 )

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

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

Net cash provided by (used in) financing activities 94,579 ( 30,232 ) ( 7,501 )

Net (decrease) increase in cash and cash equivalents ( 36,145 ) 89,596 ( 128,981 )

Cash and cash equivalents:

7 unchanged sentences

Capitalization of leasehold improvement through non-cash lease incentive — 109 5,121

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

Stock-based compensation included in capitalized software development costs 4,085 1,711 —

13 unchanged sentences

The Company has offices in Europe, Asia and Australia, which primarily provide research, development, sales, marketing, and client support services.

Termination of Proposed Merger with Zoom

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”).

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.

Basis of Presentation

1 unchanged sentence

All intercompany transactions and balances have been eliminated in consolidation.

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

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

The significant estimates made by management affect revenue and related reserves, as well as the fair value of liabilities assumed through business combinations.

The significant estimates made by management affect revenue and related reserves, as well as the fair value of assets acquired and liabilities assumed through business combinations.

Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.

3 unchanged sentences

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.

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

Cash and Cash Equivalents

8 unchanged sentences

The Company’s marketable investments have been classified and accounted for as available-for-sale.

The intent is that all marketable investments are available for use in the Company’s current operations, including marketable investments with maturity dates greater than one year from December 31, 2023.

Marketable investments are carried at fair value.

4 unchanged sentences

The Company has not experienced any losses in such accounts.

As of December 31, 2022 and 2021, no single client represented more than 10% of accounts receivable.

As of December 31, 2023, there was one client which represented 11 % of accounts receivable.

As of December 31, 2022, no single client represented more than 10% of accounts receivable.

For the years ended December 31, 2023, 2022 and 2021, no single client represented more than 10% of revenue.

Allowance for Doubtful Accounts

The Company uses an expected credit loss model, which requires it to consider historical loss rates and expectations of forward-looking losses to estimate its allowance for doubtful accounts on its trade accounts receivables, unbilled accounts receivables and contract assets.

The following table presents the changes in the allowance for doubtful accounts (in thousands):

Provision for Credit Losses

The Company uses an expected credit loss model, which requires it to consider historical loss rates and expectations of forward-looking losses to estimate its provision for credit losses on its trade accounts receivables, unbilled accounts receivables and contract assets.

The following table presents the changes in the provision for credit losses (in thousands):

Year Ended December 31,

8 unchanged sentences

Computer software 3 years

Internal-use software and development costs 1 to 5 years

Internal-use software development costs 3 years

Furniture and fixtures 7 years

4 unchanged sentences

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.

Capitalized internal-use software development 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 in the consolidated statements of operations and comprehensive loss.

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

When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheet and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive loss in the period realized.

21 unchanged sentences

If the carrying value exceeds estimated fair value, an impairment charge is recorded for the excess.

Intangible assets, consisting of acquired developed technology, domain names and customer relationships, are carried at cost less accumulated amortization.

All intangible assets have been determined to have definite lives and are amortized on a straight-line basis over their estimated remaining economic lives, ranging from three to six years .

The Company may elect to bypass the qualitative assessment and proceed to perform the quantitative goodwill impairment test.

Intangible assets, consisting of acquired developed technology, trademarks and customer relationships, are carried at cost less accumulated amortization.

All intangible assets have been determined to have definite lives and are amortized on a straight-line basis over their estimated remaining economic lives, ranging from three to eight years .

Amortization expense related to developed technology is included in cost of revenue.

11 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

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

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.

3 unchanged sentences

Substantially all of the Company’s clients purchase both subscriptions and related telephony usage.

A small percentage of the Company’s clients subscribe to its platform but purchase telephony usage directly from a wholesale telecommunications service provider.

A small percentage of the Company’s clients subscribe to its platform but purchase telephony usage directly from a wholesale telecommunications service

The Company does not sell telephony usage on a stand-alone basis to any client.

27 unchanged sentences

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.

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 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.

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.

15 unchanged sentences

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.

Compensation expense is recognized net of actual forfeitures over the service period, which is generally the vesting period.

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

5 unchanged sentences

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

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.

As of December 31, 2023, the Company recognized a net deferred tax asset balance of $ 3.8 million related to its operations in Australia and Portugal, and placed a valuation allowance against its UK net deferred tax asset balance due to its recent history of losses.

As of December 31, 2022, the Company recognized a net deferred tax asset balance of $ 3.8 million related to its operations in the UK and Australia.

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

16 unchanged sentences

Recent Accounting Pronouncements Not Yet Effective

The Company has reviewed, or is in the process of evaluating, all issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such accounting pronouncements will cause a material impact on its consolidated financial position, operating results or statements of cash flows.

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ ASU”) No.

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others.

This ASU is effective for the Company’s fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted, and the amendments should be applied retrospectively.

The Company is currently evaluating the impact of this ASU on its consolidated financial statement disclosures.

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

Improvements to Income Tax Disclosures .

This ASU requires disclosure of specific categories in the effective tax rate reconciliation and additional information on income taxes paid.

This ASU is effective for the Company’s fiscal years beginning after December 15, 2024.

Early adoption is permitted and may be adopted on a prospective or retrospective basis.

The Company is currently evaluating the impact of this ASU on its consolidated financial statement disclosures.

Contract Balances

14 unchanged sentences

Accounts receivable are recorded when the right to consideration becomes unconditional.

Deferred contract acquisition costs are recorded when incurred and are amortized over an estimated customer benefit period of five years .

The Company’s contract assets consist of unbilled amounts typically resulting from professional services revenue recognition when it exceeds the total amounts billed to the customer.

9 unchanged sentences

The Company’s marketable investments have been classified and accounted for as available-for-sale.

The Company’s intent is that all marketable investments are available for use in its current operations, including marketable investments with maturity dates greater than one year from December 31, 2023.

The Company’s marketable investments as of December 31, 2023 and 2022 were as follows (in thousands):

9 unchanged sentences

December 31, 2022

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

agency securities $ 885 $ — $ — $ 885

Total $ 885 $ — $ — $ 885

December 31, 2021

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

1 unchanged sentence

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

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

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 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

agency and government-sponsored securities $ 885 $ — $ — $ 885

Total $ 885 $ — $ — $ 885

4 unchanged sentences

treasury securities ( 362 ) 79,644 ( 1,382 ) 126,534

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

agency and government-sponsored securities ( 177 ) 165,493 ( 1,660 ) 172,458

Municipal bonds — — ( 145 ) 12,623

2 unchanged sentences

Although the Company had certain available-for-sale debt securities in an unrealized loss position as of December 31, 2023, 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 value of the Company’s marketable investments by contractual maturity as of December 31, 2023 were as follows (in thousands):

Cost Fair Value

Due within one year $ 457,498 $ 457,484

Due after one year through two years 129,870 129,612

Total $ 587,368 $ 587,096

Fair Value Measurements

10 unchanged sentences

To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers.

The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded.

The Company performs routine procedures such as comparing prices obtained from independent sources to ensure that appropriate fair values are recorded.

The following tables set forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands):

3 unchanged sentences

Money market funds $ 66,661 $ — $ — $ 66,661

Certificates of deposit — 493 — 493

treasury securities 4,983 — — 4,983

Commercial paper — 1,498 — 1,498

Total cash equivalents $ 71,644 $ 1,991 $ — $ 73,635

Marketable investments (short and long-term)

Marketable investments

Certificates of deposit $ — $ 1,463 $ — $ 1,463

9 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

As of December 31, 2022 and 2021, the estimated fair value of the Company’s outstanding 2023 convertible senior notes was $ 0.3 million and $ 114.9 million, respectively.

As of December 31, 2022, the estimated fair value of the Company’s outstanding 2023 convertible senior notes was $ 0.3 million.

The 2023 convertible senior notes matured on May 1, 2023.

As of December 31, 2023 and 2022, the estimated fair value of the Company's outstanding 2025 convertible senior notes was $ 718.3 million and $ 687.1 million, respectively.

1 unchanged sentence

See Note 6 for further information on the Company’s convertible senior notes.

As part of the agreement to acquire Inference Solutions Inc.

(“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):

Contingent Consideration

Balance, December 31.

2020 $ 18,100

Change in fair value of contingent consideration 5,640

Balance, December 31, 2021 23,740

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.

Accordingly, this investment is 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 transactions or events occurred.

The Company concluded that there was no indicator of impairment of this investment as of December 31, 2023.

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.

Except for the $ 2.0 million equity investment described above, there were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and 2022.

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 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 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.

Financial Statement Components

1 unchanged sentence

Cash $ 69,566 $ 123,260

Certificates of deposit — 747

Money market funds 66,661 37,560

Certificates of deposit 493 —

Treasury 4,983 19,700

Commercial paper 1,498 —

Total cash and cash equivalents $ 143,201 $ 180,520

2 unchanged sentences

Unbilled trade accounts receivable, net of advance client deposits 10,776 10,135

Allowance for doubtful accounts ( 262 ) ( 220 )

Provision for credit losses ( 264 ) ( 262 )

Accounts receivable, net $ 97,424 $ 87,494

14 unchanged sentences

Depreciation and amortization expense associated with property and equipment was $ 36.5 million, $ 33.0 million and $ 26.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Property and equipment capitalized under finance lease obligations consists primarily of computer and network equipment and was as follows (in thousands):

Gross $ 36,282 $ 42,541

accumulated depreciation and amortization ( 36,203 ) ( 41,689 )

Total $ 79 $ 852

Property and equipment capitalized under finance lease obligations consists primarily of computer and network equipment and was immaterial as of December 31, 2023 and 2022.

Other assets consisted of the following (in thousands):

6 unchanged sentences

Accrued compensation and benefits 35,927 33,749

Contingent consideration — 23,740

Accrued federal fees 4,166 2,471

Sales tax liabilities 3,756 2,973

Accrued and other current liabilities $ 62,131 $ 58,536

2 unchanged sentences

Deferred tax liabilities — 157

Sales tax liabilities 926 899

Other long-term liabilities 5,612 1,745

1 unchanged sentence

Goodwill and Intangible Assets

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.

Based on its assessment of the qualitative factors, the Company’s management concluded that the fair value of the Company’s goodwill was more likely than not greater than its carrying amount as of December 31, 2022.

As such, it was not necessary to perform the quantitative goodwill impairment test.

Subsequent to the 2022 annual impairment test, the Company believes there have been no significant events or circumstances negatively affecting the valuation of goodwill.

As of December 31, 2022 and 2021, there was no impairment to the carrying value of the Company’s goodwill.

Intangible Assets

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

Intangible Assets

Goodwill of $ 62.0 million and intangible assets of $ 22.1 million were recognized as a result of the Company's acquisition of Aceyus, Inc.

("Aceyus") in August 2023.

See Note 14 for further details.

The following table summarizes the activity in the Company's goodwill and intangible asset balances during the years ended December 31, 2023 and 2022 (in thousands):

Goodwill Intangible Assets

Beginning of the period, January 1, 2022 $ 165,420 $ 39,897

Amortization — ( 11,705 )

End of the period, December 31, 2021 39,897

Beginning of the period, December 31, 2022 165,420 28,192

Addition (Aceyus) 61,992 22,150

Amortization — ( 12,019 )

End of the period, December 31, 2023 $ 227,412 $ 38,323

During the fourth quarter of 2023, the Company completed its annual goodwill impairment test.

Based on the Company’s assessment, it concluded that it is more likely than not that the fair values are more than their carrying values.

Accordingly, there was no indication of impairment of goodwill, and further quantitative testing was not required.

Subsequent to the 2023 annual impairment test, the Company believes there have been no significant events or circumstances negatively affecting the valuation of goodwill.

As of December 31, 2023 and 2022, there was no impairment to the carrying value of the Company’s goodwill.

The components of intangible assets were as follows (in thousands):

16 unchanged sentences

2024 $ 10,591

Thereafter 6,267

Total $ 38,323

2 unchanged sentences

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

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.

9 unchanged sentences

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

If the Company undergoes a fundamental change (as defined in the indenture governing the 2025 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2025 convertible senior notes, in principal amounts of $ 1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100 % of the principal amount of the 2025 convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

If the Company undergoes a fundamental change (as defined in the indenture governing the 2025 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2025 convertible senior notes, in principal amounts of $1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100 % of the principal amount of the 2025 convertible senior notes to be repurchased, plus

accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

In addition, following certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.

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As such, during the three months ended December 31, 2023, the conditions allowing holders of the 2025 convertible senior notes to convert were not met.

The 2025 convertible senior notes are therefore not convertible for the three months ending March 31, 2023.

The Company may not redeem the 2025 convertible senior notes prior to June 6, 2023.

The Company may redeem for cash all or any portion of the 2025 convertible senior notes, at its option, on or after June 6, 2023 and prior to March 1, 2025 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 2025 convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The 2025 convertible senior notes are therefore not convertible during the three months ending March 31, 2024.

The 2025 convertible senior notes became redeemable at the Company’s option on June 6, 2023.

The Company may redeem for cash all or any portion of the 2025 convertible senior notes, at its option, prior to March 1, 2025, 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 2025 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 2025 convertible senior notes.

During the three months ended December 31, 2023, the conditions allowing the Company to redeem for cash all or any portion of the 2025 convertible senior notes were not met.

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;

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;

8 unchanged sentences

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

Amortization of debt discount — — 16,528

Amortization of issuance costs 3,749 3,711 3,674

5 unchanged sentences

In May 2018, the Company issued $ 258.8 million aggregate principal amount of the 2023 convertible senior notes in a private offering.

The 2023 convertible senior notes mature on May 1, 2023 and bear interest at a fixed rate of 0.125 % per annum, payable semiannually in arrears on May 1 and November 1 of each year.

The total net proceeds from the offering, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, was approximately $ 250.8 million.

In May 2020, the Company used part of the net proceeds from the issuance of the 2025 convertible senior notes to repurchase, exchange or otherwise retire approximately $ 181.0 million aggregate principal amount of the 2023 convertible senior notes in privately-negotiated transactions for aggregate consideration of $ 449.6 million, consisting of $ 181.0 million in cash and 2,723,581 shares of the Company’s common stock (the "2023 Note Repurchase Transactions").

As of December 31, 2022, after giving effect to the 2023 Note Repurchase Transactions and other settlements upon conversion requests, approximately $ 0.2 million aggregate principal amount of 2023 convertible senior notes remained outstanding.

The 2023 Note Repurchase Transactions were accounted for as a debt extinguishment.

Pursuant to ASC Subtopic 470-20 under existing accounting rules prior to ASU 2020-06 adoption, total consideration for the 2023 Note Repurchase Transactions was separated into liability and equity components by estimating the fair value of a similar liability without a conversion option and assigning the residual value to the equity component.

The gain or loss on extinguishment of the debt was subsequently determined by comparing the repurchase consideration allocated to the liability component to the sum of the carrying value of the liability component, net of the proportionate amounts of unamortized debt discount and the remaining unamortized debt issuance costs.

Of the $ 449.6 million in aggregate consideration paid by the Company in connection with the 2023 Note Repurchase Transactions, $ 155.8 million and $ 293.8 million were allocated to the debt and equity components, respectively, using an effective interest rate of 5.32 % to determine the fair value of the liability component.

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.

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

These costs were allocated to the liability and equity components in proportion to the allocation of consideration transferred at settlement and accounted for as debt extinguishment costs and equity reacquisition costs, respectively.

The 2023 Note Repurchase Transactions resulted in a $ 5.8 million loss on early debt extinguishment in the second quarter of fiscal 2020, of which $ 2.7 million consisted of unamortized debt issuance costs.

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 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;

(3) if the Company calls any or all of the 2023 convertible senior notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date;

or (4) upon the occurrence of specified corporate events.

On or after November 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2023 convertible senior notes, in multiples of $ 1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

If the Company undergoes a fundamental change (as defined in the indenture governing the 2023 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2023 convertible senior notes, in principal amounts of $ 1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100 % of the principal amount of the 2023 convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2023 convertible senior notes in connection with such corporate event or during the relevant redemption period.

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 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.

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 October 31, 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.

During 2022, the Company paid $ 34.1 million in cash and issued 573,633 shares of its common stock to settle aggregate principal amount of $ 34.1 million of its 2023 convertible senior notes.

As of December 31, 2022, approximately $ 0.2 million aggregate principal amount of the 2023 convertible senior notes remained outstanding.

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 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.

During 2022, the Company received an additional 119,492 shares from the partial unwind of capped calls resulting from the settlement of its 2023 convertible senior notes.

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

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;

equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated (including the 2025 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.

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 issuance costs — ( 291 )

Net carrying amount $ 169 $ 33,934

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

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

Contractual interest expense $ 6 $ 42 $ 184

Amortization of debt discount — — 7,006

Amortization of issuance costs 32 283 666

Total interest expense $ 38 $ 325 $ 7,856

The 2023 convertible senior notes matured on May 1, 2023, and were settled in a combination of cash and shares of the Company’s common stock.

Prior to maturity, the 2023 convertible senior notes bore interest at a fixed rate of 0.125 % per annum, payable semiannually in arrears on May 1 and November 1 of each year.

There were no changes to the 2023 convertible senior notes’ initial conversion price of approximately $ 40.82 per share of common stock since issuance.

The net carrying amount of the 2023 convertible senior notes as of December 31, 2022 was $ 0.2 million.

There were no 2023 convertible senior notes outstanding as of December 31, 2023.

Interest expense related to the 2023 convertible senior notes was immaterial for the years ended December 31, 2023, 2022 and 2021.

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 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.

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.

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.

The initial cap price of the 2023 Capped Call Transactions was $ 62.80 per share.

The 2023 Capped Call Transactions covered approximately 6.3 million shares of the Company’s common stock.

Upon maturity, the outstanding capped calls associated with the repurchase, early settlements and settlements at maturity of $ 194.7 million of the 2023 convertible senior notes were settled, which resulted in the Company receiving 370,877 shares of the Company’s common stock and $ 74.5 million.

Stockholders’ Equity

3 unchanged sentences

During 2023 and 2022, the Company issued 1,445 and 573,633 shares, respectively, of common stock in connection with 2023 convertible senior note settlements.

During 2022 and 2021, the Company also received 119,492 and 68,905 shares, respectively, from the partial unwind of capped calls resulting from the settlement of its 2023 convertible senior notes.

During 2023 and 2022, the Company also received 370,877 and 119,492 shares, respectively, from the partial unwind and settlement of capped calls resulting from the settlement of its 2023 convertible senior notes.

The receipt of the 370,877 and 119,492 shares reduced the number of shares of common stock outstanding.

23 unchanged sentences

In March 2014, the Company’s board of directors and stockholders approved the 2014 Equity Incentive Plan (“2014 Plan”) and 5,300,000 shares of common stock were authorized for issuance under the 2014 Plan.

In addition, on the first day of each year beginning in 2015 and ending in 2024, the 2014 Plan provides for an annual automatic increase to the shares reserved for issuance in an amount equal to 5 % of the total number of shares outstanding on December 31st of the preceding calendar year or a lesser number as determined by the Company’s board of

Pursuant to the automatic annual increase, 3,665,848 additional shares were reserved under the 2014 Plan on January 1, 2024.

9 unchanged sentences

Vested options generally expire three months after termination of the optionee’s employment or relationship as a consultant or director, unless otherwise extended by the terms of the stock option agreement.

In connection with the Company’s acquisition of Inference, the Company assumed unvested stock options that had been granted under the Inference Technologies Group Inc.

In connection with the Company’s acquisition of Inference in 2020, the Company assumed unvested stock options that had been granted under the Inference Technologies Group Inc.

2018 Equity Incentive Plan.

19 unchanged sentences

2023 2022 2021

Weighted average grant date fair value per share of options granted, excluding assumed stock options $ 50.44 $ 78.72 $ 38.80

Weighted average grant date fair value per share of assumed stock options — — 125.96

Weighted average grant date fair value per share of options granted $ — $ 50.44 $ 78.72

Intrinsic value of options exercised (1)

11 unchanged sentences

Outstanding as of December 31, 2023 4,076 83.25

(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.

(1) Includes 36 thousand PRSUs granted during 2023.

PRSUs with Market and Service Conditions .

In 2022, the Company granted 284,282 PRSUs subject to market and service conditions (“market-based PRSUs”) with a 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 its new Chief Executive Officer.

In 2023, the Company granted an additional 35,921 market-based PRSUs with a grant date fair value of $ 3.1 million.

The amount that may be earned pursuant to the market-based 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 market-based 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 market-based PRSUs resulting from above-target performance in those first two years will be paid following the end of the 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 market-based 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 market-based 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 market-based PRSUs will vest on a double-trigger basis (i) at the target level for the market-based PRSUs subject to the 2022-2024 performance period, and (ii) for the market-based PRSUs subject to the 2023-2025 performance period, (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 market-based PRSUs is determined on their grant date using a Monte Carlo Simulation model based upon assumptions presented below.

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

During the first quarter of 2023, the Company certified the performance results for the 2022 measurement period for the market-based PRSUs subject to the 2022-2024 performance period.

Under the market-based PRSU agreements, the TSR payout percentage ranges from 0 % to 200 %, with a 50 % payout at the 25th TSR percentile (threshold), 100 % payout at the 55th TSR percentile (target), 200 % payout at the 90th percentile or greater (maximum) and no payout below the threshold performance level.

The Company determined that its actual total shareholder return was - 52.64 % for 2022, and that its relative total shareholder return ranking was in the 30.2 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 58.7 % of target.

During the first quarter of 2024, the Company certified the performance results for the 2023 measurement period for the market-based PRSUs subject to the 2022-2024 performance period.

The Company determined that its actual total shareholder return was 19.95 % for 2023, and that its relative total shareholder return ranking was in the 53.8 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 98.0 % of target.

During the first quarter of 2024, the Company also certified the performance results for the 2023 measurement period for the market-based PRSUs subject to the 2023-2025 performance period.

The Company determined that its actual total shareholder return was 19.95 % for 2023, and that its relative total shareholder return ranking was in the 50.5 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 92.5 % of target.

PRSUs with Revenue and Service Conditions .

In 2022, the Company granted 66,167 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.

1 unchanged sentence

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.

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

During 2023, the Company certified that the first revenue target was achieved, and thus recognized the related stock-based compensation expense for this first revenue target.

However, the Company certified during the first quarter of 2024

that, as of December 31, 2023, the second revenue target was not achieved, and thus did not recognize the related stock-based compensation expense and cancelled the shares associated with this target.

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

35 unchanged sentences

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

Prior to 2020, expected volatility was based upon the weighting of the Company’s historical volatility and the historical volatility of a peer group of publicly traded companies.

The expected term of options granted is estimated using the simplified method by taking the average of the vesting term and the contractual term of the option.

12 unchanged sentences

Dividend yield — — —

(1) The weighted average assumptions for the year ended December 31, 2020 includes assumed stock options.

The weighted average assumptions, excluding the assumed stock options, were an expected term of 6.0 years, volatility of 47 %, risk-free interest rate of 1.0 % and dividend yield of 0 %.

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:

30 unchanged sentences

Total 10,560 10,884 11,205

(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 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 years ended December 31, 2022 and 2021.

The Company used the if-converted method for calculating any potential dilutive effect of the convertible senior notes for the years ended December 31, 2023, 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.

15 unchanged sentences

federal — — —

state — — ( 414 )

Foreign 53 3,088 ( 11,345 )

1 unchanged sentence

Total provision for (benefit from) income taxes $ 2,341 $ 4,388 $ ( 11,285 )

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.

The Company recorded current income tax expense during 2023 principally due to U.S.

taxable income as a result of IRC Section 174 research and experimental capitalization requirements.

The Company offset federal

taxable income through the utilization of available net operating loss carryforward attributes.

However, the Company was subject to net operating loss utilization limitations in some U.S.

state jurisdictions.

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

federal statutory income tax rate of 21% to pre-tax (loss) income for the periods presented as a result of the following (in thousands):

5 unchanged sentences

Global intangible low-taxed income ( 4,002 ) 4,127 —

Effect of waived tax deductions - Base Erosion and Anti-Abuse Tax 7,751 — —

Non-deductible expenses 894 78 1,361

3 unchanged sentences

Foreign taxes ( 383 ) 6,749 ( 4,760 )

Other — 20 533

Change in valuation allowance ( 4,077 ) 11,288 30,088

5 unchanged sentences

Accrued liabilities 9,807 10,295

Allowance for doubtful accounts 1,143 712

Provision for credit losses 1,236 1,143

Amortized intangibles 29 3,041

9 unchanged sentences

Right of use assets ( 9,092 ) ( 10,419 )

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

Deferred contract acquisition costs ( 44,217 ) ( 35,443 )

Gross deferred tax liabilities ( 60,551 ) ( 49,155 )

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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.

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, 2023 and 2022 and no U.S.

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net deferred tax assets.

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

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

The Company has recorded net foreign deferred tax assets associated with its Australia and Portugal operations totaling $ 3.8 million since management has assessed it is more likely than not that the results of future operations within these jurisdictions will generate sufficient taxable income to realize the deferred tax assets.

The Australia and Portugal deferred tax assets 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.

The net change in the valuation allowance for the years ended December 31, 2023 and 2022 was a decrease of $ 0.6 million and an increase of $ 13.6 million, respectively.

The decrease of the valuation allowance in the current year was primarily attributed to the utilization of net operating losses, an increase in deductible deferred contract acquisition costs, federal bonus tax depreciation, and Aceyus purchased intangibles, offset by the requirement to capitalize research and development costs under IRC Section 174.

As of December 31, 2023, the Company had net operating loss carryforwards for federal, state and foreign income tax purposes of $ 403.4 million, $ 298.6 million and $ 14.0 million, respectively, available to reduce future income subject to income taxes.

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.

If not utilized, $ 69.5 million of federal and various amounts of significant state net operating loss carryforwards will begin to expire in 2027 and 2028, respectively, while $ 333.9 million of federal net operating losses, as well as the foreign net operating losses, do not expire.

As of December 31, 2023, the Company also had gross research credit carryforwards for federal and California state tax purposes of $ 12.9 million and $ 7.5 million, available to reduce future income subject to income taxes.

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

The federal research credit carryforwards will expire between 2024 and 2043.

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.

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.

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.

The Company completed a study covering through December 31, 2022, discovering we experienced certain ownership changes prior to 2015, and adjusted the disclosed amounts of our net operating losses and research credit carryforwards for the resulting effect of the IRC Section 382 limitations, as necessary.

In the event the Company has further 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.

Unrecognized Tax Benefits

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Gross increases — current year tax positions 1,413 1,773 1,851

Gross increases — prior year tax positions 299 — —

Gross decreases — prior year tax positions ( 3 ) ( 1 ) —

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Unrecognized benefit — end of period $ 11,124 $ 9,415 $ 7,643

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.

The Company does not anticipate its total unrecognized tax benefits as of December 31, 2022 will significantly change due to settlement of examination or the expiration of statutes of limitation during the next 12 months.

As of each of December 31, 2023 and 2022, the Company had unrecognized tax benefits that, if recognized, would impact its effective tax rate by $ 0.5 million and $ 0.1 million, respectively.

The Company recognizes interest and penalties related to uncertain tax positions as income tax expense, which has cumulatively been immaterial to its financial statements.

The Company does not anticipate its total unrecognized tax benefits as of December 31, 2023 will significantly change due to settlement of examination or the expiration of statutes of limitation during the next

The Company is currently unaware of any uncertain tax positions that could result in significant additional payments, accruals or other material deviation in this estimate over the next 12 months.

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Commitments and Contingencies

As of December 31, 2022, $ 747.7 million of aggregate principal of the convertible senior notes were outstanding.

The 2023 convertible senior notes and the 2025 convertible senior notes are due on May 1, 2023 and June 1, 2025, respectively.

As of December 31, 2023, $ 747.5 million of aggregate principal of the 2025 convertible senior notes were outstanding and are due on June 1, 2025.

As of December 31, 2023, no 2023 convertible senior notes were outstanding.

See Note 6 for more information concerning the convertible senior notes.

The Company had outstanding operating lease obligations of $ 57.9 million as of December 31, 2022.

The Company had outstanding operating lease and finance lease obligations of $ 52.0 million and $ 5.0 million, respectively, as of December 31, 2023.

See Note 13 for further details.

As of December 31, 2022, the Company also had outstanding cloud service agreement commitments totaling $ 41.1 million, of which $ 29.0 million is expected to be paid in 2023 and the remaining $ 12.1 million in 2024.

As of December 31, 2023, the Company also had outstanding cloud services and software and maintenance agreement commitments totaling $ 104.4 million, of which $ 33.0 million is expected to be purchased in 2024, $ 45.6 million is expected to be purchased in 2025 and the remaining $ 25.8 million is expected to be purchased in 2026.

Hosting and Telecommunication Usage Services

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2024 $ 246 $ 7,619

2024 238 5,940

Thereafter — 685

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The Company continues to analyze its activities to determine if it is subject to these taxes in additional jurisdictions and based on the Company’s ongoing assessment of its U.S.

state and local tax collection and remittance obligations, the Company registers for tax and regulatory purposes in such jurisdictions and commences collecting and remitting applicable state and local taxes and surcharges to these jurisdictions.

As of December 31, 2022 and 2021, the Company had total accrued liabilities of $ 1.2 million and $ 1.0 million, respectively, for such contingent sales taxes and surcharges that were not being collected from its clients but may be imposed by various taxing authorities, of which $ 0.3 million and $ 0.2 million, respectively, were included in current “Sales tax liabilities” on the consolidated balance sheets, and the remaining were included in non-current “Sales tax liabilities” on the consolidated balance sheets.

and local tax collection and remittance obligations, the Company registers for tax and regulatory purposes in such jurisdictions and commences collecting and remitting applicable state and local taxes and surcharges to these jurisdictions.

As of December 31, 2023 and 2022, the Company had total accrued liabilities of $ 1.7 million and $ 1.2 million, respectively, for such contingent sales taxes and surcharges that were not being collected from its clients but may be imposed by various taxing authorities, of which $ 0.8 million and $ 0.3 million, respectively, were included in “Accrued and other current liabilities” on the consolidated balance sheet, and the remaining were included in “Other long-term liabilities” on the consolidated balance sheet.

The Company’s estimate of the probable loss incurred under this contingency is based on its analysis of the source location of its usage-based fees and the regulations and rules in each tax jurisdiction.

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

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

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Finance leases

Finance lease right-of-use assets $ 4,564 $ —

Property and equipment, gross $ 29,503 $ 36,282

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Property and equipment, net $ — $ 79

Finance lease liabilities $ 1,767 $ —

Finance lease liabilities — less current portion 2,877 —

Total finance lease liabilities $ 4,644 $ —

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

Year Ending December 31, Operating Leases Finance Leases

2024 $ 12,283 $ 1,991

2025 9,329 1,991

2026 7,109 1,013

Thereafter 11,709 —

2 unchanged sentences

Total $ 47,109 $ 4,644

Inference Solutions

On November 18, 2020, the Company acquired all of the issued and outstanding shares of Inference for total consideration of approximately $ 156.7 million.

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 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.

This acquisition, which was accounted for as a business combination, is intended to accelerate the Company’s AI position through the addition of Inference’s widely deployed IVA platform.

The excess of the purchase price over identifiable intangible assets and net tangible assets in the amount of $ 131.0 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):

Property and equipment acquired 124

Other assets acquired 2,238

Acquired technology 28,600

Customer relationships 1,100

Trade name and trademarks 400

Goodwill 130,976

Total assets acquired 164,832

Liabilities assumed ( 3,525 )

Deferred tax liability ( 4,616 )

Total consideration $ 156,691

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

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.

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

Virtual Observer

On April 1, 2020, the Company acquired all of the issued and outstanding shares of common stock of Virtual Observer, formerly Coordinated Systems, Inc., for cash consideration of approximately $ 32.2 million, subject to adjustment, pursuant to a stock purchase agreement by and among the Company and Robert H.

Hutcheon, David R.

Brower and Daniel J.

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 WFO offering as a complement to its ongoing strategic partnerships with leading WFO providers.

On August 14, 2023, the Company acquired all of the issued and outstanding shares of capital stock of Aceyus for total cash consideration of approximately $ 82.0 million.

This acquisition, which was accounted for as a business combination, is intended to accelerate the Company's ability to capitalize on two business opportunities, namely facilitating the migration of large enterprise customers from on-premise to cloud and leveraging contextual data to deliver personalized experiences throughout the customer journey, including using this contextual data in the Company's AI & Automation solutions.

The excess of the purchase price over identifiable intangible assets and net tangible assets in the amount of $ 62.0 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 fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the acquisition date and are considered preliminary pending finalization of valuation analyses pertaining to intangible assets acquired, liabilities assumed and tax liabilities assumed.

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 acquired and liabilities assumed, with the corresponding offset to goodwill.

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

Tangible assets acquired 383

Other assets acquired 3,002

Acquired technology 19,100

Customer relationships 2,550

Trade name and trademarks 100

Trademarks 500

Goodwill 61,992

Total assets acquired 88,951

Deferred tax liability ( 2,910 )

Liabilities assumed ( 6,939 )

Total $ 82,012

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

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

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

In connection with this acquisition, the Company incurred total acquisition-related transaction costs of $ 2.2 million during the year ended December 31, 2023 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 and are not material to the Company's consolidated financial statements.

Selected Quarterly Financial Data (Unaudited)

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Interest expense ( 1,963 ) ( 1,972 ) ( 1,866 ) ( 1,845 ) ( 1,887 ) ( 1,879 ) ( 1,857 ) ( 1,870 )

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

Total other (expense) income, net 819 ( 897 ) ( 1,577 ) ( 1,025 ) ( 2,067 ) ( 1,734 ) ( 2,471 ) ( 1,763 )

Interest income and other 8,322 8,233 6,123 4,121 2,706 982 280 845

Total other income (expense), net 6,359 6,261 4,257 2,276 819 ( 897 ) ( 1,577 ) ( 1,025 )

Loss before income taxes ( 12,239 ) ( 19,477 ) ( 20,986 ) ( 26,721 ) ( 12,432 ) ( 22,628 ) ( 23,338 ) ( 31,864 )

39 unchanged sentences

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