What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-21 compared with 2024-02-22 · 373 added, 192 removed, 1011 unchanged (36% of the section changed)

35 unchanged sentences

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

Critical Audit Matter

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

Critical Audit Matters

The critical audit matter communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

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

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

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

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

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 customers subscription fees, usually billed on a monthly basis, for access to the Company’s Intelligent CX Platform.

For the year ended December 31, 2024, the Company recorded $1,041.9 million of revenue.

The subscription fees are primarily based on the number of licenses, as on a consumption or capacity basis for the Company’s Artificial Intelligence solutions.

Licenses are defined as the maximum number to named agents allowed to concurrently access the Intelligent CX Platform.

The majority of the Company’s customers purchase both subscriptions and related telephony usage.

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

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

We identified the evaluation of the sufficiency of audit evidence over subscription services and related usage as a critical audit matter.

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

We identified the evaluation of the sufficiency of audit evidence over revenue from subscription services and related usage as a critical audit matter.

Revenues from subscription services and related usage involved 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 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.

We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the design and testing the operating effectiveness of certain internal controls over the Company’s revenue process.

This included controls over the capture and flow of subscription and related usage transactional information through the Company’s IT systems.

This included controls related to the capture and flow of subscription and related usage transactional information through the Company’s IT systems.

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

2 unchanged sentences

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

Accounting for the repurchase of 2025 convertible senior notes

As discussed in Note 6 to the consolidated financial statements, on March 1, 2024, the Company used part of the net proceeds from the issuance of the 2029 convertible senior notes to repurchase approximately $313.1 million aggregate principal amount of the outstanding 2025 convertible senior notes (the Repurchase Transaction).

The Repurchase Transaction was accounted for as a debt extinguishment.

As a result, the Company recorded an extinguishment gain of approximately $6.6 million in Other income (expense), net in the Company’s consolidated statements of operations and comprehensive loss.

We identified the evaluation of the accounting for the Repurchase Transaction as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the appropriate accounting guidance for the Repurchase Transaction, specifically the technical assessment of the accounting for the debt extinguishment.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s debt process, including a control related to the Company’s evaluation of the appropriate accounting guidance and technical accounting assessment.

We evaluated the technical accounting assessment of the debt extinguishment by (1) obtaining and inspecting the underlying agreements, (2) evaluating the settlement price of the 2025 convertible senior notes on the date of the Repurchase Transaction by comparing the settlement price to the conversion price of the 2025 convertible senior notes, the conversion price to the trading price of the 2025 convertible senior notes, and the conversion price to the Company’s stock price, and (3) assessing whether there were any changes to conversion privileges.

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

15 unchanged sentences

Goodwill 365,436 227,412

Marketable investments — 885

Other assets 13,384 16,199

22 unchanged sentences

Additional paid-in capital 1,039,125 942,280

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

Accumulated other comprehensive income 636 582

Accumulated deficit ( 417,645 ) ( 404,850 )

17 unchanged sentences

Interest expense ( 14,812 ) ( 7,646 ) ( 7,493 )

Gain on early extinguishment of debt 6,615 — —

Interest income and other 46,745 26,799 4,813

1 unchanged sentence

Loss before income taxes ( 12,755 ) ( 79,423 ) ( 90,262 )

Provision for (benefit from) income taxes 2,341 4,388 ( 11,285 )

Provision for income taxes 40 2,341 4,388

Net loss $ ( 12,795 ) $ ( 81,764 ) $ ( 94,650 )

15 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 )

Balance as of December 31, 2023 73,317 73 942,280 582 ( 404,850 ) 538,085

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

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 new capped calls associated with the 2029 convertible senior notes — — ( 93,438 ) — — ( 93,438 )

Partial termination of existing capped calls associated with the 2025 convertible senior notes — — 539 — — 539

Issuance of common stock upon exercise of stock options 26 — 481 — — 481

Issuance of common stock upon vesting of restricted stock units 2,093 2 ( 2 ) — — —

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

Issuance of common stock under ESPP 372 1 14,797 — — 14,798

3 unchanged sentences

Balance as of December 31, 2024 75,808 $ 76 $ 1,039,125 $ 636 $ ( 417,645 ) $ 622,192

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

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

See accompanying notes to the consolidated financial statements.

6 unchanged sentences

Depreciation and amortization 52,905 48,515 44,671

Amortization of operating lease right-of-use assets 12,642 10,377 8,698

Reduction in the carrying amount of right-of-use assets 15,358 12,642 10,377

Amortization of deferred contract acquisition costs 71,483 55,384 41,034

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

Accretion of discount on marketable investments ( 20,818 ) ( 11,351 ) ( 90 )

Provision for credit losses 1,150 989 1,105

1 unchanged sentence

Amortization of discount and issuance costs on convertible senior notes 5,478 3,749 3,743

Deferred taxes 53 3,088 ( 6,907 )

Gain on early extinguishment of debt ( 6,615 ) — —

Impairment charge of an equity investment 1,250 — —

Impairment charge related to closure of operating lease facilities 2,202 — —

Interest on finance lease obligations 264 150 —

Deferred taxes - excluding tax benefit from acquisition 647 53 3,088

Deferred taxes - tax benefit from acquisition ( 5,482 ) — —

Change in fair value of contingent consideration — — 260

19 unchanged sentences

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

Cash paid to acquire Aceyus, Inc.

Cash paid to acquire Acqueon Inc.

( 167,151 ) — —

Cash settlement to acquire Aceyus, Inc.

99 ( 80,588 ) —

Net cash (used in) provided by investing activities ( 266,550 ) ( 259,562 ) 30,963

Cash flows from financing activities:

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

Proceeds from issuance of 2029 convertible senior notes 731,055 — —

Payment of debt issuance costs ( 2,212 ) — —

Payments for capped call transactions associated with the 2029 convertible senior notes ( 93,438 ) — —

Repurchase of a portion of 2025 convertible senior notes ( 304,485 ) — —

Repurchase of a portion of 2023 convertible senior notes — — ( 34,067 )

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 —

Cash received from partial termination of capped calls associated with the 2025 convertible senior notes 539 — —

Proceeds from exercise of common stock options 481 9,127 8,522

5 unchanged sentences

Net cash provided by (used in) financing activities 342,725 94,579 ( 30,232 )

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

Cash and cash equivalents:

Net increase (decrease) in cash, cash equivalents and restricted cash 219,343 ( 36,145 ) 89,596

Cash, cash equivalents and restricted cash:

Beginning of year 144,842 180,987 91,391

6 unchanged sentences

Capitalization of leasehold improvement through non-cash lease incentive 37 — 109

Acquisition and related transaction costs accrued at period-end 594 — —

Stock-based compensation included in capitalized software development costs 8,153 4,085 1,711

12 unchanged sentences

The Company was incorporated in Delaware in 2001 and is headquartered in San Ramon, California.

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

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

Basis of Presentation

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The Company’s marketable investments consist of U.S.

agency securities and government sponsored securities, U.S.

treasury securities, certificates of deposit, municipal bonds, corporate bonds and commercial paper.

The Company determines the appropriate classification of its investments in marketable investments at the time of purchase and re-evaluates such designation at each balance sheet date.

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

treasury securities, U.S.

agency securities and government sponsored securities, certificates of deposit, corporate bonds, and commercial paper.

The Company’s marketable investments are classified as available-for-sale and carried at fair value.

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, 2024.

Marketable investments are carried at fair value.

The Company monitors its available-for-sale debt securities for potential impairment on a quarterly basis.

If the Company intends to sell a debt security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in interest income and other in the consolidated statements of operations.

In other cases, the Company further assesses whether the decline in fair value below cost is due to credit or non-credit related factors.

Any credit-related unrealized losses are recognized as an allowance on the consolidated balance sheets with a corresponding charge in interest income and other in the consolidated statements of operations and comprehensive loss.

Non-credit related unrealized losses and unrealized gains on available-for-sale debt securities are included in accumulated other comprehensive income.

Concentration Risks

3 unchanged sentences

The Company has not experienced any losses in such accounts.

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.

As of December 31, 2024, there was no customer that represented more than 10% of accounts receivable.

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

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

Provision for Credit Losses

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

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

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 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 .

5 unchanged sentences

If such evaluation indicates that the carrying amount of the assets or asset groups is not recoverable, the carrying amount of such assets or asset groups is reduced to fair value.

No impairment losses have been recognized in any of the periods presented.

During 2024, the Company recognized impairment losses recorded in general and administrative expenses of $ 1.9 million as a result of its commitment to close two operating lease facilities and $ 0.3 million related to the associated leasehold improvements and property and equipment.

Business Combinations

3 unchanged sentences

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

Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to its consolidated statements of operations and comprehensive loss.

Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations and comprehensive loss.

Goodwill and Intangible Assets

26 unchanged sentences

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

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

The 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.

Clients typically have more named agents than agent seats.

Multiple named agents may use an agent seat, though not simultaneously.

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

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

The Company charges customers monthly subscription fees for access to its Intelligent CX Platform, primarily based on the number of licenses, as well as on a consumption or capacity basis for its AI solutions.

Licenses are defined as the maximum number of named agents allowed to concurrently access the Intelligent CX Platform.

Customers typically have more named agents than licenses.

Multiple named agents may use a license, though not simultaneously.

The majority of the Company’s customers purchase both subscriptions and related telephony usage.

A growing number of the Company’s customers subscribe to its platform but purchase telephony usage directly from a wholesale telecommunications service provider.

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

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

Revenue generated from telephony usage is presented in revenue and cost of sales on a gross basis, as the Company is the party that controls the service and is responsible for fulfilling the promise to provide the call service by diverting the calls to selected carriers.

The Company also offers bundled plans, generally for smaller deployments, whereby the client is charged a single monthly fixed fee per agent seat that includes both subscription and unlimited usage in the contiguous 48 states and, in some cases, Canada.

Professional services revenue is derived primarily from VCC implementations, including application configuration, system integration, optimization, education and training services.

Clients are not permitted to take possession of the Company’s software.

The Company offers monthly, annual and multiple-year contracts to its clients, generally with 30 days’ notice required for reductions in the number of agent seats.

Increases in the number of agent seats can be provisioned almost immediately.

The Company’s clients, therefore, are able to adjust the number of agent seats used to meet their changing contact center needs.

The Company’s larger clients typically choose annual contracts, which generally include an implementation and ramp period of several months.

Fixed subscription fees, including bundled plans, are generally billed monthly in advance, while related usage fees are billed in arrears.

Support activities include technical assistance for the Company’s solution and upgrades and enhancements to the VCC cloud platform on a when-and-if-available basis, which are not billed separately.

The Company generally requires advance deposits from its clients based on estimated usage when such usage is not billed as part of a bundled plan.

Any unused portion of the deposit is refundable to the client upon termination of the arrangement, provided all amounts due have been paid.

The Company also offers bundled plans, generally for smaller deployments, whereby the customer is charged a single monthly fixed fee per agent seat that includes both subscription and unlimited usage in the contiguous 48 states and, in some cases, Canada.

Professional services revenue is derived primarily from Intelligent CX implementations, including application configuration, system integration, optimization, education and training services.

Customers are not permitted to take possession of the Company’s software.

The Company offers monthly, annual and multiple-year contracts to its customers, generally with 30 days’ notice required for limited reductions in the number of licenses or the level of consumption or capacity.

Increases in the number of licenses or the level of consumption or capacity can be provisioned almost immediately.

The Company’s customers, therefore, are able to adjust the number of licenses used to meet their changing contact center needs.

The Company’s larger customers typically choose annual contracts, which generally include an implementation and ramp period of several months.

Subscription fees, including bundled plans, are generally billed monthly in advance, while related usage fees are billed in arrears.

Support activities include technical assistance for the Company’s solution and upgrades and enhancements to the Intelligent CX Platform on a when-and-if-available basis, which are not billed separately.

The Company generally requires advance deposits from its customers based on estimated usage when such usage is not billed as part of a bundled plan.

Any unused portion of the deposit is refundable to the customer upon termination of the arrangement, provided all amounts due have been paid.

All fees, except usage deposits, are non-refundable.

Professional services are primarily billed on a fixed-fee basis.

Professional services are primarily billed on a fixed-fee basis and are performed by us directly.

However, our customers can choose to perform these services themselves, use one of the Company’s certified professional service providers, or engage their own third-party service providers.

Revenue for professional services is recognized over time, as services are performed.

2 unchanged sentences

The Company estimates the variable consideration in order to allocate the overall transaction fee on a relative stand-alone selling price basis to its multiple performance obligations.

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

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

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

5 unchanged sentences

Deferred Revenue

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.

Deferred revenue consists of billings or payments received from customers 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 customers monthly in advance for subscription services.

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

Cost of Revenue

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.

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, cost of third party software that the Company resells, 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, customers and data center operations, as well as with providing professional services.

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

13 unchanged sentences

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

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

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 over the service period, which is generally the vesting period.

6 unchanged sentences

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

As of December 31, 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.

As of December 31, 2024, the Company recognized a net deferred tax asset balance of $ 3.5 million related to its operations in Australia, Germany, India, Portugal and the U.K.

net deferred tax asset balance.

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

1 unchanged sentence

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

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

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

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

5 unchanged sentences

Indemnification

The Company, in the ordinary course of business, 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.

The Company, in the ordinary course of business, enters into agreements of varying scope and terms pursuant to which it agrees to indemnify customers, 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.

To date, the Company has not incurred any material costs as a result of such indemnification provisions and the Company has not accrued any liabilities related to such obligations in the consolidated financial statements as of December 31, 2024 and 2023.

Segment Information

The Company has determined that its Chief Executive Officer is its chief operating decision maker.

The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources.

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

Recent Accounting Pronouncements Not Yet Effective

Recently Adopted Accounting Pronouncements

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

2 unchanged sentences

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.

The Company’s adoption of ASU 2023-07 did not have a material impact on its financial

position and results of operations but did result in incremental disclosures.

See Note 11 for further information on the impact of this adoption.

Recent Accounting Pronouncements Not Yet Effective

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

4 unchanged sentences

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

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

This ASU is intended to improve the decision-usefulness of expense information on public companies’ income statements through disaggregation of relevant expense captions in the notes to the financial statements.

The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently assessing the impact of this ASU on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20) , which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

The ASU is effective for annual and interim reporting periods beginning after December 15, 2025.

Early adoption is permitted for entities that have implemented ASU 2020-06, with the option to apply the guidance prospectively or retrospectively.

The Company is currently assessing the impact of this ASU on its consolidated financial statements.

Contract Balances

14 unchanged sentences

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

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.

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 where revenue is recognized in excess of total amounts billed to the customer.

The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized.

16 unchanged sentences

Commercial paper 9,600 8 — 9,608

Municipal bonds 927 1 — 928

Corporate bonds 43,550 124 ( 6 ) 43,668

9 unchanged sentences

Total $ 587,368 $ 283 $ ( 555 ) $ 587,096

December 31, 2022

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

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

Total $ 885 $ — $ — $ 885

The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than 12 months as of December 31, 2024 and 2023 (in thousands):

December 31, 2024 December 31, 2023

Less than 12 months Less than 12 months

Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value

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

treasury securities $ ( 223 ) $ 104,716 $ ( 362 ) $ 79,644

agency and government-sponsored securities ( 18 ) 76,484 ( 177 ) 165,493

Municipal bonds — — ( 145 ) 12,623

Corporate bonds ( 6 ) 4,219 ( 16 ) 7,550

26 unchanged sentences

treasury securities 42,946 — — 42,946

agency and government-sponsored securities — 41,832 — 41,832

Commercial paper — — — —

5 unchanged sentences

Commercial paper — 9,608 — 9,608

Municipal bonds — 928 — 928

Corporate bonds — 43,668 — 43,668

4 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

5 unchanged sentences

Total marketable investments $ 315,437 $ 271,659 $ — $ 587,096

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.

In March 2024, the Company issued $ 747.5 million aggregate principal amount of 1.00 % convertible senior notes due 2029 (the "2029 convertible senior notes") in a private offering.

In connection with the issuance of the 2029 convertible senior notes, the Company used part of the net proceeds from the issuance to repurchase approximately $ 313.1 million aggregate principal amount of its 0.50 % convertible senior notes due 2025 (the "2025 convertible senior notes").

As of December 31, 2024 and December 31, 2023, the estimated fair value of the outstanding 2025 convertible senior notes was $ 423.2 million and $ 718.3 million, respectively.

As of December 31, 2024, the estimated fair value of the outstanding 2029 convertible senior notes was $ 674.8 million.

The fair values were determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 in the fair value hierarchy.

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

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.

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

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

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 described above, there were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2023 and 2022.

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.

During 2024, the Company noted an indicator of impairment of this investment and recorded a $ 1.3 million impairment charge.

Except for the equity investment described above, there were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2024 and 2023.

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.

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Certificates of deposit 496 493

Treasury 4,983 19,700

treasury securities 42,946 4,983

agency and government-sponsored securities 41,832 —

Commercial paper — 1,498

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Trade accounts receivable $ 99,551 $ 86,912

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

Unbilled trade accounts receivable, net of advance customer deposits 15,962 10,776

Provision for credit losses ( 341 ) ( 264 )

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Depreciation and amortization expense associated with property and equipment was $ 40.3 million, $ 36.5 million and $ 33.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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):

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Goodwill and 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.

In 2024, goodwill of $ 138.2 million and intangible assets of $ 39.9 million were recorded as a result of the Company's acquisition of Acqueon, Inc.

In 2023, goodwill of $ 62.0 million and intangible assets of $ 22.1 million were recorded as a result of the Company’s acquisition of Aceyus, Inc.

See Note 14 for further details.

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Beginning of the period, January 1, 2023 $ 165,420 $ 28,192

Amortization — ( 11,705 )

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

Addition (Aceyus) 61,992 22,150

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

Addition (Acqueon) 138,181 39,900

Measurement period adjustment (Acqueon) ( 14 ) —

Measurement period adjustment (Aceyus) ( 143 ) —

Amortization — ( 12,591 )

End of the period, December 31, 2024 $ 365,436 $ 65,632

During the fourth quarter of 2024, 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.

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

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

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

The Company concluded that there was no indicators of impairment of its intangible assets as of December 31, 2023 and 2022.

The Company concluded that there were no indicators of impairment of its intangible assets as of December 31, 2024 and 2023.

Repurchase Transaction

In connection with the issuance of the 2029 convertible senior notes on March 1, 2024, the Company used part of the net proceeds from the issuance to repurchase approximately $ 313.1 million aggregate principal amount of the outstanding 2025 convertible senior notes in privately-negotiated transactions for aggregate cash consideration of approximately $ 304.9 million (the “Repurchase Transaction”).

The Repurchase Transaction was accounted for as a debt extinguishment.

The difference between the consideration used to extinguish the 2025 convertible senior notes and the carrying value of the 2025 convertible senior notes (including unamortized debt discount and issuance costs) resulted in an extinguishment gain of approximately $ 6.6 million recorded in Other income (expense), net on the Company’s consolidated statements of operations and comprehensive loss.

In connection with the Repurchase Transaction, the Company also entered into a partial termination agreement with each bank counterparty and unwound a corresponding portion of the previously purchased capped call instruments entered into in connection with the issuance of the 2025 convertible senior notes (the “2025 Capped Calls”).

The Company received approximately $ 0.5 million in cash in connection with these partial terminations, representing the fair value at the date of settlement of the unwound 2025 Capped Calls.

2029 Convertible Senior Notes and Related Capped Call Transactions

In March 2024, the Company issued $ 747.5 million aggregate principal amount of 2029 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 2029 convertible senior notes.

The 2029 convertible senior notes mature on March 15, 2029 and bear interest at a fixed rate of 1.00 % per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024.

The total net proceeds from the issuance of the 2029 convertible senior notes, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, were approximately $ 728.8 million.

Each $1,000 principal amount of the 2029 convertible senior notes is initially convertible into 12.5918 shares of the Company’s common stock (the “2029 Conversion Option”), which is equivalent to an initial conversion price of approximately $ 79.42 per share of common stock, subject to adjustment upon the occurrence of specified events.

The initial conversion price represents a premium of approximately 30 % to the $ 61.09 per share closing price of the Company’s common stock on The Nasdaq Global Market on February 27, 2024.

There have been no changes to the initial conversion price of the 2029 convertible senior notes since issuance.

The 2029 convertible senior notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding December 15, 2028, only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2024 (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

(2) during the five business day period after any five consecutive trading day period (the “2029 Measurement Period”) in which the trading price (as defined in the 2029 Indenture governing the 2029 convertible senior notes) per $1,000 principal amount of the 2029 convertible senior notes for each trading day of the 2029 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 2029 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 December 15, 2028 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 2029 convertible senior notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

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 2029 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2029 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 2029 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.

The closing market price of the Company's common stock of $ 40.64 per share on December 31, 2024, the last trading day during the three months ended December 31, 2024, was below $ 103.24 per share, which represents 130 % of the initial conversion price of $ 79.42 per share.

Additionally, 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, December 31, 2024, was not greater than or equal to 130 % of the initial conversion price.

As such, during the three months ended December 31, 2024, the conditions allowing holders of the 2029 convertible senior notes to convert were not met.

The 2029 convertible senior notes are therefore not convertible during the three months ending March 31, 2025.

The Company may not redeem the 2029 convertible senior notes prior to March 22, 2027.

The Company may redeem for cash all or any portion of the 2029 convertible senior notes, at its option, on or after March 22, 2027 and prior to December 15, 2028, 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 on, and including, the trading day 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 2029 convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

However, the Company may not redeem less than all of the outstanding 2029 convertible senior notes unless at least $ 100.0 million aggregate principal amount of 2029 convertible senior notes are outstanding and not called for redemption at the time the redemption notice is sent.

No sinking fund is provided for the 2029 convertible senior notes.

The 2029 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 2029 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.

The net carrying amount of the 2029 convertible senior notes as of December 31, 2024 was as follows (in thousands):

December 31, 2024

Principal $ 747,500

Unamortized issuance costs ( 15,645 )

Net carrying amount $ 731,855

Interest expense related to the 2029 convertible senior notes was as follows (in thousands):

December 31, 2024

Contractual interest expense $ 6,229

Amortization of issuance costs 3,013

Total interest expense $ 9,242

The debt issuance costs are amortized into interest expense over the term of the 2029 convertible senior notes at an effective interest rate of 1.49 %.

In connection with the issuance of the 2029 convertible senior notes, the Company entered into privately negotiated capped call transactions (each a “2029 Capped Call,” and collectively the "2029 Capped Calls") with certain financial institutions.

The 2029 Capped Call has an initial strike price of approximately $ 79.42 , subject to certain adjustments, which corresponds to the initial conversion price of the 2029 convertible senior notes.

The 2029 Capped Calls have an initial cap price of $ 122.18 per share, subject to certain adjustments.

The 2029 Capped Calls are expected to partially offset the potential dilution to the Company’s common stock upon any conversion of the 2029 convertible senior notes, with such offset subject to a cap based on the cap price.

Each 2029 Capped Call covers, subject to anti-dilution adjustments, approximately 9.4 million shares of the Company’s common stock.

The 2029 Capped Call is subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers, and announcement events.

In addition, each 2029 Capped Call is subject to certain specified additional disruption events that may give rise to a termination of the 2029 Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings, and hedging disruptions.

For accounting purposes, each 2029 Capped Call is treated as a separate transaction from, and not part of the terms of the 2029 convertible senior notes.

As these transactions meet certain accounting criteria, the 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

The 2029 Capped Calls will not be remeasured as long as they continue to meet the conditions for equity classification.

2025 Convertible Senior Notes and Related Capped Call Transactions

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

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

In March 2024, the Company used part of the net proceeds from the issuance of the 2029 convertible senior notes to repurchase $ 313.1 million aggregate principal amount of the 2025 convertible senior notes in privately-negotiated transactions.

As of December 31, 2024, after giving effect to the Repurchase Transaction, approximately $ 434.4 million aggregate principal amount of 2025 convertible senior notes remained outstanding.

Each $1,000 principal amount of the 2025 convertible senior notes is initially convertible into 7.4437 shares of the Company’s common stock (the “2025 Conversion Option”), which is equivalent to an initial conversion price of approximately $ 134.34 per share of common stock, subject to adjustment upon the occurrence of specified events.

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

There have been no changes to the initial conversion price of the 2025 convertible senior notes since issuance.

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

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(2) during the five business day period after any five consecutive trading day period (the “2025 Measurement Period”) in which the trading price (as defined in the 2025 Indenture governing the 2025 convertible senior notes) per $1,000 principal amount of the 2025 convertible senior notes for each trading day of the 2025 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 2025 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;

(3) if the Company calls any or all of the 2025 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.

1 unchanged sentence

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.

There have been no changes to the initial conversion price of the 2025 convertible senior notes since issuance.

The closing market price of the Company's common stock of $ 40.64 per share as of December 31, 2024, the last trading day during the three months ended December 31, 2024, was below $ 174.64 per share, which represents 130 % of the initial conversion price of $ 134.34 per share.

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As such, during the three months ended December 31, 2024, the conditions allowing holders of the 2025 convertible senior notes to convert were not met.

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

The 2025 convertible senior notes are therefore not convertible during the three months ending March 31, 2025 under this conditional conversion feature.

However, on or after March 1, 2025 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 2025 convertible senior notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

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

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Unamortized issuance costs ( 915 ) ( 5,375 )

Principal repaid ( 313,095 ) —

Net carrying amount $ 433,490 $ 742,125

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Total interest expense $ 4,898 $ 7,486 $ 7,448

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

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

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

2023 Convertible Senior Notes and Related Capped Call Transactions

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

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 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.

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.

The debt issuance costs are amortized into interest expense over the term of the 2025 convertible senior notes at an effective interest rate of 1.00 %.

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

The 2025 Capped Calls each have an initial strike price of approximately $ 134.34 , which corresponds to the initial conversion price of the 2025 convertible senior notes.

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

In connection with the Repurchase Transaction, the Company unwound a portion of the 2025 Capped Calls.

Refer to the Repurchase Transaction section above for further information.

There are no changes or amendments made to the remaining 2025 Capped Calls.

The remaining 2025 Capped Calls cover, subject to anti-dilution adjustments, approximately 3.2 million shares of the Company’s common stock.

Each 2025 Capped Call is subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers, and announcement events.

In addition, each 2025 Capped Call is subject to certain specified additional disruption events that may give rise to a termination of each 2025 Capped Call, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings, and hedging disruptions.

For accounting purposes, each 2025 Capped Call is a separate transaction from, and not part of the terms of the 2025 convertible senior notes.

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

The 2025 Capped Calls will not be remeasured as long as they continue to meet the conditions for equity classification.

Stockholders’ Equity

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As of December 31, 2024 and 2023, the Company had 75,807,505 and 73,316,968 shares of common stock issued and outstanding, respectively.

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 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.

See Note 6 for further details.

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

During 2023, the Company also received 370,877 shares 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 shares reduced the number of shares of common stock outstanding.

Holders of the Company’s common stock are entitled to dividends, if and when declared by the board of directors.

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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 directors.

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

No further grants were made under the 2004 Plan once the 2014 Plan became effective on April 3, 2014.

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

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

To date, the Company has granted stock options and RSUs (including PRSUs) under the 2014 Plan.

Stock options granted under the 2014 Plan are in general at a price equal to the fair market value of the common stock on the date of grant and vest over four years .

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

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

A summary of RSU activity (including PRSUs) during the year ended December 31, 2023 is as follows (in thousands, except years and per share data):

Restricted Stock Units (including PRSUs)

A summary of RSU activity (including PRSUs) during the year ended December 31, 2024 is as follows (in thousands, except per share data):

Number of Shares Weighted Average Grant Date Fair Value Per Share

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Outstanding as of December 31, 2024 5,829 57.27

(1) Includes 36 thousand PRSUs granted during 2023.

(1) Includes 159,016 PRSUs granted during 2024.

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.

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

In 2024, the Company granted an additional 159,016 market-based PRSUs with a grant

date fair value of $ 9.6 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 -year performance period based on RTSR performance and subject to 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.

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, (ii) for the market-based PRSUs subject to the 2023-2025 performance period, and (iii) for the market-based PRSUs subject to the 2024-2026 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.

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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.

During the first quarter of 2025, the Company certified the performance results for the 2024 measurement period for the market-based PRSUs subject to the 2022-2024 performance period.

The Company determined that its actual total shareholder return was ( 47.25 )% for 2024, and that its relative total shareholder return ranking was in the 3.7 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.00 % of target.

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

The Company determined that its actual total shareholder return was ( 47.25 )% for 2024, and that its relative total shareholder return ranking was in the 2.9 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0% of target.

During the first quarter of 2025, the Company also certified the performance results for the 2024 measurement period for the market-based PRSUs subject to the 2024-2026 performance period.

The Company determined that its actual total shareholder return was ( 47.25 )% for 2024, and that its relative total shareholder return ranking was in the 1.5 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0 % of target.

PRSUs with Revenue and Service Conditions .

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or (iii) such lesser number as determined by its board of directors.

Pursuant to the automatic annual increase, 733,169 additional shares were reserved under the 2014 ESPP on January 1, 2024.

During 2024 and 2023, 372,046 and 344,309 shares were purchased by employees under the 2014 ESPP at a weighted average price of $ 39.77 and $ 46.26 per share, respectively.

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

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

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

assumptions disclosed in the table below.

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

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Total 18,155 10,560 10,884

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.

The Company used the if-converted method for calculating any potential dilutive effect of its convertible senior notes for the years ended December 31, 2024, 2023 and 2022.

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

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federal ( 4,308 ) — —

state ( 1,174 ) — —

Foreign 647 53 3,088

Total provision for (benefit from) income taxes - Deferred 53 3,088 ( 11,345 )

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

Total (benefit from) provision for income taxes - Deferred ( 4,835 ) 53 3,088

Total provision for income taxes $ 40 $ 2,341 $ 4,388

The Company recorded current income tax expense during 2024 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.

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 and state jurisdictions.

These considerations were partially offset by the Company's acquisition of Acqueon, which carried a U.S.

net deferred tax liability balance and provided the Company with a source of taxable income to release a portion of the consolidated U.S.

valuation allowance.

Income tax expense 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):

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

Non-deductible expenses 894 78 1,361

Miscellaneous permanent tax adjustments 26 230 78

Research and development credit ( 1,383 ) ( 943 ) ( 1,194 )

Stock-based compensation 16,981 10,829 1,722

Transaction costs 862 415 —

Tax benefit from acquisition/reorganizations ( 4,308 ) — ( 3,852 )

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

Foreign tax rate differential 525 ( 383 ) 6,749

Adjustments related to tax positions taken during prior years ( 2,083 ) 249 —

Change in valuation allowance ( 6,177 ) ( 4,077 ) 11,288

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

Total provision for income taxes $ 40 $ 2,341 $ 4,388

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 related to the following (in thousands):

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Provision for credit losses 671 1,236

Amortized intangibles 29 3,041

Property and equipment 35 —

Amortizable intangibles — 29

Deferred revenue 3,687 2,440

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Long-term lease liabilities 15,928 11,171

Stock-based compensation 10,224 9,190

Deferred interest expense 349 —

Gross deferred tax assets 209,105 199,119

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Property and equipment ( 8,647 ) ( 7,037 )

Other ( 205 ) ( 556 )

Amortizable intangibles ( 7,697 ) —

Right of use assets ( 13,493 ) ( 9,092 )

Deferred contract acquisition costs ( 52,663 ) ( 44,217 )

Other — ( 205 )

Gross deferred tax liabilities ( 82,500 ) ( 60,551 )

Net deferred taxes $ 3,464 $ 3,766

To enhance clarity, the Company has revised certain disclosures in its effective tax rate reconciliation and disclosure of its deferred tax assets and liabilities, and has conformed prior year disclosures to ensure comparability with the current year.

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

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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 no longer asserts an intention to permanently re-invest those earnings.

The undistributed earnings of the Company’s foreign subsidiaries were immaterial as of December 31, 2024 and 2023 and no U.S.

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net deferred tax assets.

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.

The Company has recorded net foreign deferred tax assets associated with its Australia, Germany, India, Portugal and the U.K.

operations totaling $ 3.5 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 foreign deferred tax assets cannot increase its U.S.

valuation allowance.

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.

The net change in the valuation allowance for the years ended December 31, 2024 and 2023 were decreases of $ 11.7 million and $ 0.6 million, respectively.

The decrease of the valuation allowance in the current year was primarily attributed to the Company’s acquisition of Acqueon, which provided a source of future U.S.

taxable income to support a reduction in the consolidated U.S.

valuation allowance.

As of December 31, 2024, the Company had net operating loss carryforwards for federal, state and foreign income tax purposes of $ 310.1 million, $ 254.3 million and $ 7.3 million, respectively, available to reduce future income subject to income taxes.

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.

If not utilized, various amounts of significant state net operating loss carryforwards will begin to expire in 2028, while $ 310.1 million of federal net operating losses, as well as the foreign net operating losses, do not expire.

As of December 31, 2024, the Company also had gross research credit carryforwards for federal and California state tax purposes of $ 14.1 million and $ 8.6 million, available to reduce future income subject to income taxes.

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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.

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.

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.

Unrecognized Tax Benefits

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As of each of December 31, 2024 and 2023, the Company had unrecognized tax benefits that, if recognized, would impact its effective tax rate by $ 1.0 million and $ 0.5 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 recognizes interest and penalties related to uncertain tax positions as income tax expense, which has cumulatively been immaterial to the financial statements.

The Company does not anticipate its total unrecognized tax benefits as of December 31, 2024 will significantly change due to settlement of examination or the expiration of statutes of limitation during the next 12 months.

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.

The Company is subject to taxation in the United States, various states and several foreign jurisdictions.

Due to the Company’s net carryover of unused operating losses, all years from 2003 forward remain subject to future examination by the U.S.

Due to the Company’s recently utilized and net carryover of unused operating losses, all years from 2004 forward remain subject to future examination by the U.S.

federal and state tax authorities.

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

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

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

Commitments and Contingencies

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.

As of December 31, 2024, (i) $ 434.4 million of aggregate principal of the 2025 convertible senior notes was outstanding and is due on June 1, 2025, and (ii) $ 747.5 million of aggregate principal of the 2029 convertible senior notes was outstanding and is due on March 15, 2029.

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

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See Note 13 for further details.

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.

As of December 31, 2024, the Company also had outstanding cloud services and software and maintenance agreement commitments totaling $ 38.1 million, of which $ 20.0 million is expected to be purchased in 2025 and $ 18.1 million is expected to be

purchased in 2026.

During 2024, the Company entered into equipment finance lease arrangements that resulted in a $ 8.8 million additional reduction of its outstanding cloud services commitment.

Hosting and Telecommunication Usage Services

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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.

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.

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, 2024 and 2023, the Company had total accrued liabilities of $ 1.1 million and $ 1.7 million, respectively, for such contingent sales taxes and surcharges that were not being collected from its customers but may be imposed by various taxing authorities, of which $ 0.9 million and $ 0.8 million, respectively, were included in Accrued and other current liabilities on the consolidated balance sheets, and the remaining were included in Other long-term liabilities on the consolidated balance sheets.

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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The Company is involved in various legal and regulatory matters arising in the normal course of business.

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

In management’s opinion, resolution of these matters is not expected to have a material impact on the Company’s

consolidated results of operations, cash flows, or its financial position.

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

The Company expenses legal fees as incurred.

The Company is currently party to the following action:

On December 4, 2024, a purported holder of the Company’s securities filed a putative class action complaint against the Company, its Chief Executive Officer, and its Chief Financial Officer in the United States District Court for the Northern District of California alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, based on alleged false and/or misleading statements or omissions regarding the Company and its business and seeking unspecified damages on behalf of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired the Company’s securities, including call options, from June 4, 2024, through the close of trading on August 8, 2024.

On February 3, 2025, Lucid Alternative Fund, LP moved to be appointed lead plaintiff of this action pursuant to the Private Securities Litigation Reform Act of 1995.

The Company cannot predict the duration or outcome of this lawsuit at this time.

As a result, the Company is unable to estimate the reasonably possible loss or range of reasonably possible losses arising from this lawsuit.

The Company intends to vigorously defend this lawsuit.

Indemnification Agreements

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 the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which it agrees to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including 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.

The Company has received indemnification demands, and will likely continue to receive demands, from customers regarding its intellectual property indemnification obligations under these contracts.

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.

Geographical Information

The following table summarizes revenues by geographic region based on client billing address (in thousands):

Segment and Geographical Information

The Company has a single operating and reportable segment and manages its business activities on a consolidated basis.

The Company’s single segment provides its solution through a SaaS business model.

The Company generates subscription revenue from its Intelligent CX Platform, and also generates usage-based telephony revenue.

The Company charges its customers monthly subscription fees for access to its solution, primarily based on the number of licenses.

The Company’s AI solutions are sold to its customers on a consumption or capacity basis.

The Company’s reliable, secure, and scalable Intelligent CX Platform, powered by Five9 Genius AI, delivers a comprehensive suite of easy-to-use applications that enable the breadth of customer service, sales, and marketing related functions.

The Company’s chief operating decision maker (“CODM”) is its chief executive officer.

The Company’s CODM reviews financial information presented on a consolidated basis for purposes of assessing financial performance and making operating decisions on how to allocate resources based on net income (loss) that

is also reported on its consolidated statements of operations and comprehensive loss as consolidated net income (loss).

The measure of segment assets is reported on its consolidated balance sheets as total consolidated assets.

Revenue by Geographic Areas

The following table summarizes revenues by geographic region based on customer billing address (in thousands):

Year Ended December 31,

3 unchanged sentences

Total revenue $ 1,041,938 $ 910,488 $ 778,846

Long-Lived Assets, Net by Geographic Areas

The following table summarizes total property and equipment, net in the respective locations (in thousands):

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Property and equipment, net $ 144,888 $ 108,572

Total purchases of property and equipment for the years ended December 31, 2024, 2023 and 2022 are disclosed in the Company’s Consolidated Statements of Cash Flows.

Segment Information - Consolidated Statement of Operations

Year Ended December 31,

2024 2023 2022

Revenue $ 1,041,938 $ 910,488 $ 778,846

Adjusted cost of revenue (1)

( 399,197 ) ( 354,729 ) ( 301,661 )

Adjusted research and development (2)

( 122,053 ) ( 99,418 ) ( 83,337 )

Adjusted sales and marketing (3)

( 256,193 ) ( 230,419 ) ( 202,617 )

Adjusted general and administrative (4)

( 68,513 ) ( 59,657 ) ( 50,795 )

Other segment items (5)

( 194,380 ) ( 216,326 ) ( 183,347 )

Depreciation and amortization ( 52,905 ) ( 48,515 ) ( 44,671 )

Interest expense ( 14,812 ) ( 7,646 ) ( 7,493 )

Gain on early extinguishment of debt 6,615 — —

Interest income and other 46,745 26,799 4,813

Provision for income taxes ( 40 ) ( 2,341 ) ( 4,388 )

Net loss $ ( 12,795 ) $ ( 81,764 ) $ ( 94,650 )

___________________________

(1) Adjusted cost of revenue includes cost of revenue in accordance with GAAP adjusted for depreciation and amortization, stock-based compensation, exit costs related to the closure and relocation of the Company’s Russian operations, acquisition and related transaction costs and one-time integration costs, lease amortization for finance leases, costs related to a reduction in force plan, and refund for prior year overpayment of USF fees.

(2) Adjusted research and development includes research and development in accordance with GAAP adjusted for depreciation and amortization, stock-based compensation, exit costs related to the closure and relocation of the

Company’s Russian operations, acquisition and related transaction costs and one-time integration costs, and costs related to a reduction in force plan.

(3) Adjusted sales and marketing includes sales and marketing expense in accordance with GAAP adjusted for depreciation and amortization, stock-based compensation, acquisition and related transaction costs and one-time integration costs, and costs related to a reduction in force plan.

(4) Adjusted general and administrative included general and administrative expense in accordance with GAAP adjusted for depreciation and amortization, stock-based compensation, exit costs related to the closure and relocation of the Company’s Russian operations, acquisition and related transaction costs and one-time integration costs, costs related to a reduction in force plan, impairment charge related to closure of operating lease facilities, and contingent consideration expense.

(5) Other segment items included in segment net loss includes stock-based compensation, exit costs related to the closure and relocation of our Russian operations, acquisition and related transaction costs and one-time integration costs, lease amortization for finance leases, costs related to a reduction in force plan, and impairment charge related to closure of operating lease facilities.

Retirement Plans

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

The contribution expense for the years ended December 31, 2023 and 2022 was $ 2.4 million and $ 2.1 million, respectively.

The contribution expense for the years ended December 31, 2024, 2023 and 2022 was $ 2.7 million, $ 2.4 million and $ 2.1 million, respectively.

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

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

As the Company’s leases do not provide an implicit rate, the net present value of future minimum lease payments is determined using the Company’s incremental borrowing rate.

Operating leases with a duration of 12 months or less are excluded from right-of-use assets and operating lease liabilities, and related lease payments are generally recognized on a straight-line basis over the lease term and variable lease payments are recognized as incurred.

The Company entered into three-year equipment finance lease agreements and recognized $ 18.6 million right of use assets during 2024, which were reported within Finance lease right-of-use assets on the consolidated balance sheets and are being depreciated on a straight-line basis over the lease term.

As a result, the Company also recognized short-term lease liabilities of $ 5.9 million within Finance lease liabilities and long-term lease liabilities of $ 12.7 million within Finance lease liabilities - less current portion on the consolidated balance sheets for the year ended December 31, 2024.

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

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Operating lease liabilities $ 11,258 $ 10,731

$ 10,731 $ 10,626

Operating lease liabilities — less current portion 37,071 36,378

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Total finance lease liabilities $ 19,456 $ 4,644

During 2024, the Company recognized a $ 1.9 million impairment loss as a result of its commitment to close two operating lease facilities and a $ 0.3 million impairment loss related to the associated leasehold improvements and property and equipment.

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

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Total $ 48,329 $ 19,456

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.

On August 27, 2024, the Company acquired all of the issued and outstanding shares of capital stock of Acqueon for total consideration of approximately $ 173.8 million.

This acquisition, which was accounted for as a business combination, is intended to build on the pre-existing partnership between the companies, and to extend the Company's AI-powered CX platform by adding omnichannel proactive customer engagement to expand the Company’s outbound capabilities.

The excess of the purchase price over identifiable intangible assets and net tangible assets in the amount of $ 138.2 million was allocated to goodwill, which is not deductible for tax purposes.

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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 Company recorded an adjustment of less than $ 0.1 million during the one year from acquisition date measurement period for the year ended December 31, 2024.

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

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Total assets acquired 196,641

Deferred tax liability ( 4,817 )

Liabilities assumed ( 17,997 )

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

In connection with this acquisition, the Company incurred total acquisition-related transaction costs of $ 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.

In connection with this acquisition, the Company incurred total acquisition-related transaction costs of $ 7.9 million during the year ended December 31, 2024, which were 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.

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-premises 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 $ 61.8 million was allocated to goodwill, which is not deductible for tax purposes.

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

The Company recorded an adjustment of $ 0.1 million during the one year from acquisition date measurement period for the year ended December 31, 2024.

The following table presents the final 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

Trademarks 500

Goodwill 61,849

Total assets acquired 88,907

Liabilities assumed ( 6,895 )

Total $ 82,012

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.

In connection with this acquisition, the Company incurred total acquisition-related transaction costs of $ 2.2 million during the year ended December 31, 2023, and incurred no additional costs during the year ended December 31, 2024, which were expensed as incurred and included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Restructuring

On August 20, 2024, the Company announced a reduction in force plan (the “Plan”) as part of its broader efforts to drive balanced, profitable growth, further supporting its positive, long-term outlook and focus on increasing shareholder value.

The Plan reduced the Company’s global full-time employees by approximately 6 %.

For the year ended December 31, 2024, the Company incurred a total of $ 9.6 million in restructuring costs under the Plan, primarily consisting of notice period payments, severance payments, employee benefits and related costs, all of which are cash expenditures, of which $ 2.1 million was recorded in cost of revenue , $ 1.9 million was recorded in research and development expenses , $ 4.4 million was recorded in sales and marketing expenses , and $ 1.2 million was recorded in general and administrative expenses on the consolidated statements of operations and comprehensive loss.

As of December 31, 2024, $ 9.3 million had been paid and the remaining $ 0.3 million was recorded within Accrued and other current liabilities in the consolidated balance sheets and is mostly expected to be paid by the first quarter of 2025.

Other than as set forth herein, the Company does not expect to incur any additional costs under the Plan.

Selected Quarterly Financial Data (Unaudited)

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Total operating expenses 151,817 157,672 153,037 153,175 145,167 144,763 143,764 142,680

Loss from operations ( 18,598 ) ( 25,738 ) ( 25,243 ) ( 28,997 ) ( 13,251 ) ( 21,731 ) ( 21,761 ) ( 30,839 )

Income (loss) from operations 4,180 ( 15,423 ) ( 19,365 ) ( 20,695 ) ( 18,598 ) ( 25,738 ) ( 25,243 ) ( 28,997 )

Other (expense) income, net:

Interest expense ( 4,271 ) ( 4,068 ) ( 3,906 ) ( 2,567 ) ( 1,963 ) ( 1,972 ) ( 1,866 ) ( 1,845 )

Gain on early extinguishment of debt — — — 6,615 — — — —

Interest income and other 11,242 11,144 13,800 10,559 8,322 8,233 6,123 4,121

Total other income (expense), net 6,971 7,076 9,894 14,607 6,359 6,261 4,257 2,276

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

Income (loss) before income taxes 11,151 ( 8,347 ) ( 9,471 ) ( 6,088 ) ( 12,239 ) ( 19,477 ) ( 20,986 ) ( 26,721 )

Provision for (benefit from) income taxes ( 426 ) ( 3,868 ) 3,345 989 119 942 753 527

Net loss $ ( 12,358 ) $ ( 20,419 ) $ ( 21,739 ) $ ( 27,248 ) $ ( 13,653 ) $ ( 23,207 ) $ ( 23,670 ) $ ( 34,120 )

Net loss per share:

Net income (loss) $ 11,577 $ ( 4,479 ) $ ( 12,816 ) $ ( 7,077 ) $ ( 12,358 ) $ ( 20,419 ) $ ( 21,739 ) $ ( 27,248 )

Net income (loss) per share:

Basic $ 0.15 $ ( 0.06 ) $ ( 0.17 ) $ ( 0.10 ) $ ( 0.17 ) $ ( 0.28 ) $ ( 0.30 ) $ ( 0.38 )

Diluted $ 0.13 $ ( 0.06 ) $ ( 0.17 ) $ ( 0.10 ) $ ( 0.17 ) $ ( 0.28 ) $ ( 0.30 ) $ ( 0.38 )

Shares used in computing net loss per share:

Shares used in computing net income (loss) per share:

Basic 75,430 74,876 74,203 73,488 72,926 72,356 71,627 71,259

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data