What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-03-24 · 304 added, 355 removed, 765 unchanged (46% of the section changed)

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Index to Consolidated Financial Statements

R eport of I nd ependent R egistered P ublic A ccounting F irm

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements of NerdWallet, Inc.

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Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of NerdWallet, Inc.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income (loss), redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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San Jose, California

March 24, 2022

February 23, 2023

We have served as the Company’s auditor since 2015.

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Cash and cash equivalents $ 83.9 $ 167.8

Accounts receivable 57.6 37.3

Accounts receivable—net 87.0 57.6

Prepaid expenses and other current assets 18.3 17.4

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Goodwill 111.2 43.8

Intangibles — net 27.6 35.6

Deferred tax asset — noncurrent — 4.1

Intangible assets—net 64.1 27.6

Right-of-use assets 11.3 13.9

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Total Assets $ 425.7 $ 364.1

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable $ 3.6 $ 3.2

Accrued and other current liabilities 32.1 18.6

Accrued expenses and other current liabilities 37.9 32.1

Contingent consideration—current 30.9 30.5

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Contingent consideration—noncurrent — 24.2

Debt — noncurrent — 30.2

Deferred tax liability — noncurrent 1.8 1.5

Other liabilities—noncurrent 11.6 16.5

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Commitments and contingencies (Note 8)

Series A redeemable convertible preferred stock — $ 0.0001 par value per share — zero and 8,651 shares authorized as of December 31, 2021 and 2020;

zero and 7,687 shares issued and outstanding as of December 31, 2021 and 2020;

liquidation preference of zero and $ 69.0 million as of December 31, 2021 and 2020

Stockholders’ equity:

Preferred stock — $ 0.0001 par value per share — 5,000 and zero shares authorized as of December 31, 2021 and 2020;

zero shares issued and outstanding as of December 31, 2021 and 2020

Common stock — $ 0.0001 par value per share — 296,686 and 127,500 shares authorized as of December 31, 2021 and 2020;

Preferred stock—$ 0.0001 par value per share— 5,000 shares authorized;

zero shares issued and outstanding

Common stock—$ 0.0001 par value per share— 296,686 shares authorized;

75,120 and 66,722 shares issued and outstanding as of December 31, 2022 and 2021

Treasury stock — —

Additional paid-in capital 427.3 331.6

Accumulated other comprehensive income 0.5 0.6

Accumulated other comprehensive income (loss) ( 0.9 ) 0.5

Accumulated deficit ( 84.7 ) ( 74.5 )

Total stockholders’ equity 341.7 257.6

Total Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity $ 364.1 $ 255.2

Total Liabilities and Stockholders’ Equity $ 425.7 $ 364.1

See notes to consolidated financial statements.

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Income (Loss) From Operations ( 19.0 ) ( 39.0 ) 1.9

Other income (expense):

Other income (expense), net:

Interest income 1.5 — 0.2

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Other gains (losses), net — 2.6 ( 0.1 )

Total other income (expense) 1.3 ( 1.0 ) ( 0.5 )

Total other income (expense), net ( 1.0 ) 1.3 ( 1.0 )

Income (loss) before income taxes ( 20.0 ) ( 37.7 ) 0.9

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Redeemable Convertible

Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Stockholders’ Equity (Deficit)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Treasury Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Stockholders’ Equity

(in millions, except share amounts which are in thousands)

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2018 7,687 $ 68.8 42,009 $ — 780 $ ( 1.6 ) $ 22.8 $ — $ ( 41.4 ) $ ( 20.2 )

Impact of ASU 2016-16 adoption ( 0.7 ) ( 0.7 )

Issuance of Class A common stock upon exercise of stock options 625 — 1.7 1.7

Repurchase of stock options ( 0.8 ) ( 0.8 )

Repurchase of Class A common stock ( 326 ) — ( 2.3 ) ( 2.3 )

Stock-based compensation 6.1 6.1

Net income 24.2 24.2

Balance at December 31, 2019 7,687 $ 68.8 42,308 $ — 780 $ ( 1.6 ) $ 29.8 $ — $ ( 20.2 ) $ 8.0

Shares Amount Shares Amount

Balance as of December 31, 2019 42,308 $ — 780 $ ( 1.6 ) $ 29.8 $ — $ ( 20.2 ) $ 8.0

Issuance of Class A common stock in connection with equity offering 3,879 — 54.3 54.3

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Net income 5.3 5.3

Balance at December 31, 2020 7,687 $ 68.8 48,853 $ — — $ — $ 99.8 $ 0.6 $ ( 17.7 ) $ 82.7

NERDWALLET, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Redeemable Convertible

Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income Accumulated Deficit Stockholders’ Equity (Deficit)

(in millions, except share amounts which are in thousands)

Shares Amount Shares Amount

Balance at December 31, 2020 7,687 $ 68.8 48,853 $ — $ 99.8 $ 0.6 $ ( 17.7 ) $ 82.7

Balance as of December 31, 2020 48,853 $ — — $ — $ 99.8 $ 0.6 $ ( 17.7 ) $ 82.7

Issuance of Class A common stock upon initial public offering 8,338 — 134.8 134.8

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Repurchase of early exercised stock options ( 3 ) — —

Repurchase of Series A redeemable convertible preferred stock ( 102 ) ( 2.1 )

Repurchase of Class A common stock ( 41 ) — ( 0.5 ) ( 0.5 )

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Net loss ( 42.5 ) ( 42.5 )

Balance at December 31, 2021 — $ — 66,722 $ — $ 331.6 $ 0.5 $ ( 74.5 ) $ 257.6

Balance as of December 31, 2021 66,722 $ — $ — $ — $ 331.6 $ 0.5 $ ( 74.5 ) $ 257.6

NERDWALLET, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Stockholders’ Equity

(in millions, except share amounts which are in thousands)

Shares Amount

Balance as of December 31, 2021 66,722 $ — $ 331.6 $ 0.5 $ ( 74.5 ) $ 257.6

Issuance of Class A common stock upon exercise of stock options 1,346 — 7.7 7.7

Vesting of early exercised stock options

Issuance of Class A common stock pursuant to settlement of restricted stock units

Class A common stock withheld related to net share settlement of restricted stock units ( 44 ) — ( 0.6 ) ( 0.6 )

Issuance of Class A common stock under Employee Stock Purchase Plan 640 — 4.5 4.5

Issuance of Class A common stock for business combination 4,935 — 43.2 43.2

Stock-based compensation 40.7 40.7

Other comprehensive loss ( 1.4 ) ( 1.4 )

Net loss ( 10.2 ) ( 10.2 )

Balance as of December 31, 2022 75,120 $ — $ 427.3 $ ( 0.9 ) $ ( 84.7 ) $ 341.7

See notes to consolidated financial statements.

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Depreciation and amortization 37.0 27.1 15.1

Loss on disposal of assets — — 0.2

Impairment of capitalized software development costs 0.8 0.2 1.1

Non-cash amortization of debt premium ( 0.3 ) ( 0.4 ) ( 0.4 )

Other (gains) losses, net ( 2.6 ) 0.1 0.5

Stock-based compensation 34.4 17.9 6.4

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Non-cash lease costs 2.6 7.9 6.8

Other, net 1.3 ( 2.1 ) ( 0.1 )

Changes in operating assets and liabilities, net of business combinations:

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Accounts payable ( 5.6 ) ( 2.2 ) 3.6

Accrued and other current liabilities 16.6 ( 5.3 ) 5.1

Accrued expenses and other current liabilities 5.8 16.6 ( 5.3 )

Payment of contingent consideration ( 11.5 ) — —

Operating lease liabilities ( 2.4 ) ( 7.3 ) ( 7.1 )

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Financing Activities:

Payment of contingent consideration ( 19.0 ) — —

Proceeds from line of credit 70.0 — 5.0

Payments on line of credit ( 70.0 ) — ( 10.0 )

Principal repayment of subordinated promissory notes — ( 28.5 ) —

Repurchase of Series A redeemable convertible preferred stock — ( 2.1 ) —

Proceeds from exercise of stock options 7.7 11.0 8.4

Issuance of Class A common stock under Employee Stock Purchase Plan 4.5 — —

Tax payments related to net-share settlements on restricted stock units ( 0.6 ) ( 1.9 ) ( 0.4 )

Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions — 140.0 —

Payment of offering costs related to initial public offering ( 1.0 ) ( 4.0 ) —

Issuance of Class A common stock — — 54.3

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Repurchase of stock options — ( 1.4 ) ( 0.4 )

Repurchase of Series A redeemable convertible preferred stock ( 2.1 ) — —

Tax payments related to net-share settlements on restricted stock units ( 1.9 ) ( 0.4 ) —

Proceeds from exercise of stock options 11.0 8.4 1.7

Principal repayment of subordinated promissory notes ( 28.5 ) — —

Proceeds from line of credit — 5.0 —

Payments on line of credit — ( 10.0 ) —

Payment of offering costs related to initial public offering ( 4.0 ) — —

Net cash provided by (used in) financing activities ( 8.4 ) 100.2 55.7

Effect of exchange rate changes on cash and cash equivalents ( 0.2 ) — 0.1

Net increase in cash and cash equivalents 84.4 15.8 15.2

Net increase (decrease) in cash and cash equivalents ( 83.9 ) 84.4 15.8

Cash and Cash Equivalents:

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Supplemental Disclosures of Non-Cash Investing and Financing Activities:

Purchase of property and equipment recorded in accounts payable and accrued and other current liabilities $ 0.8 $ — $ —

Capitalized software development costs recorded in accounts payable and accrued expenses and other current liabilities $ 0.9 $ 0.5 $ 0.1

Purchase of property and equipment recorded in accounts payable and accrued expenses and other current liabilities 0.1 0.8 —

Offering costs related to initial public offering not yet paid — 1.0 —

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Income tax payments $ 4.0 $ 0.3 $ 1.2

Income tax refunds $ — $ — $ ( 0.1 )

Cash paid for interest 1.9 2.5 1.4

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The Company and its Significant Accounting Policies

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All intercompany transactions and balances have been eliminated in consolidation.

Reverse Stock Split — On October 17, 2021 and October 18, 2021, the Company’s Board of Directors and stockholders, respectively, approved a one-for-two reverse stock split of the Company’s common and preferred stock which was effectuated on October 20, 2021 upon the Company’s filing of an amended and restated certificate of incorporation with the Delaware Secretary of State.

As a result, each stockholder of record on October 20, 2021 received one share of common or preferred stock for every two shares held on the record date.

All share, equity award, and per share amounts presented herein have been retroactively adjusted to reflect this reverse stock split.

Initial Public Offering — The Company’s registration statement on Form S-1 related to its initial public offering (the IPO) was declared effective on November 3, 2021 and the Company’s Class A common stock began trading on the Nasdaq Global Market on November 4, 2021.

On November 8, 2021, the Company completed its IPO, in which the Company sold 8.3 million shares of its Class A common stock, which includes the exercise in full of the underwriters’ option to purchase 1.1 million shares of Class A common stock, at a public offering price of $ 18.00 per share.

The net proceeds to the Company from the IPO were $ 140.0 million after deducting underwriting discounts and commissions of $ 10.1 million.

In connection with the IPO, all 7.5 million shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into an equal number of shares of Class A common stock, and all 31.7 million shares of the Company’s outstanding Class F common stock converted into an equal number of shares of Class B common stock.

Under the Company’s amended and restated certificate of incorporation, which became effective upon completion of the IPO, the Company is authorized to issue 301.7 million shares of capital stock, all with a par value of $ 0.0001 per share, including 265.0 million shares of Class A common stock, 31.7 million shares of Class B common stock, and 5.0 million shares of preferred stock.

Certain comparative amounts for the prior fiscal year have been reclassified to conform to the financial statement presentation as of and for the year ended December 31, 2022.

Segments— Operating segments are defined as components of an enterprise for which discrete financial information is available that is reviewed regularly by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance.

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Significantly all of the Company’s revenue in 2022, 2021 and 2020 was from customers located in the United States.

Significantly all of the Company’s long-lived assets as of December 31, 2022 and 2021 were located in the United States.

Use of Estimates— The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

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Management bases its estimates on historical experience and also on assumptions that it believes are reasonable.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (COVID-19) a pandemic.

The full impact of the COVID-19 pandemic on the global economy and the extent to which the COVID-19 pandemic will continue to impact the Company’s results of operations and cash flows remains uncertain as the COVID-19 pandemic continues and different variants of the coronavirus emerge.

As of the date of issuance of the consolidated financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or the carrying value of its assets or liabilities.

These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known.

Actual results could differ from those estimates, and any such differences may be material to the Company’s consolidated financial statements.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Concentrations of Credit Risk— Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.

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Based on these facts, collectability of bank balances appears to be adequately assured.

The Company generally does not require collateral or other security in support of accounts receivable.

Allowances will be provided for individual accounts receivable when the Company becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy, deterioration in the customer’s operating results, or change in financial position.

If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted.

The Company also considers broader factors in evaluating the sufficiency or necessity of an allowance for doubtful accounts, including the length of time receivables are past due, significant onetime events, and historical experience.

The Company had two customers as of December 31, 2021 which each accounted for 11 % of total accounts receivable, and one customer as of December 31, 2020 which accounted for 12 % of total accounts receivable.

The Company had no customer which accounted for more than 10% of revenue in 2021 or 2020, but had three customers which accounted for 18 %, 11 % and 10 % of revenue, respectively, in 2019.

The Company had two customers which accounted for 15 % and 12 % of total accounts receivable as of December 31, 2022, and two customers which each accounted for 11 % of total accounts receivable as of December 31, 2021.

The Company had one customer which accounted for 12 % of revenue in 2022, and no customer which accounted for more than 10% of revenue in 2021 or 2020.

Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606), the Company’s customers are considered to be financial services providers (e.g., banks, credit card issuers, lenders, investment brokers and other entities) that seek to reach and receive leads, matches and referrals to the Company’s substantial audience of consumers (including SMBs) in exchange for agreed-upon fees.

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Cash and Cash Equivalents— Cash and cash equivalents include on demand deposits and money market funds with banks that have remaining maturities at the date of purchase of less than 90 days.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements— The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market.

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Invoiced amounts do not bear interest.

The Company determines the allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, previous loss history and the specific customer’s current ability to pay its obligation.

Accounts receivable is past due when they are outstanding longer than the contractual payment terms.

The allowance for doubtful accounts was no t material as of December 31, 2021 and 2020.

The Company generally does not require collateral or other security in support of accounts receivable.

Accounts receivable are past due when they are outstanding longer than the contractual payment terms.

The Company determines an allowance for credit losses by considering available information, including the length of time accounts receivable are past due, previous loss history, and reasonable and supportable expectations regarding the specific customer’s ability to pay its financial obligations.

If the Company becomes aware of changes in circumstances that are indicative of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy, deterioration in operating results or changes in financial position, estimates of the allowance for credit losses are further adjusted.

The allowance for doubtful accounts was $ 1.4 million and immaterial as of December 31, 2022 and 2021, respectively.

The Company does no t have any off-balance-sheet credit exposure related to its customers.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Property, Equipment, and Software, Net — Property, equipment, and software are stated at cost, less accumulated depreciation and amortization.

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Upon disposition or retirement, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected as operating expenses in the consolidated statement of operations.

Deferred Offering Costs — The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financing is consummated.

After consummation of the financing, these costs are recorded in stockholders’ equity as a reduction of the proceeds received as a result of the offering.

Should a planned equity financing be abandoned, the deferred offering costs will be expensed immediately as operating expenses in the consolidated statement of operations.

Capitalized Software Development Costs — The costs incurred in the preliminary stages of website and software development are expensed as incurred.

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Amortization expense is included within cost of revenue in the consolidated statement of operations.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Combinations — The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value.

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Contingent Consideration — The fair value measurements of contingent consideration liabilities established in connection with business combinations are determined as of the acquisition date based on significant unobservable inputs, including forecasted revenues and costs of the acquired companies, the probability of meeting certain revenue or earnings targets defined in the merger agreements, and the discount rate.

Contingent consideration liabilities are remeasured to fair value at each subsequent reporting date until the related contingency is resolved.

Contingent consideration liabilities are remeasured to fair value at each subsequent reporting date until the related contingency is resolved, with the remeasurement adjustment reported in the consolidated statement of operations.

Changes to the fair value of the contingent consideration liabilities can result from changes to one or a number of inputs, including discount rates, the probabilities of achieving the milestones, the time required to achieve the milestones and estimated future sales.

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Changes to the inputs described above could have a material impact on the Company’s financial position and results of operations in any given period.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Goodwill — The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.

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Under the quantitative test, the Company first compares the carrying value of each reporting unit to its estimated fair value and if the fair value is determined to be less than the carrying value, we recognize an impairment loss for the difference.

In 2021, 2020 and 2019, the Company did no t recognize any impairment losses against goodwill.

Intangible Assets — Intangible assets include acquired intangible assets identified through business combinations, which are carried at the estimated fair value recorded upon acquisition less accumulated amortization, and purchased intangible assets, which are carried at cost less accumulated amortization.

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Under revenue recognition guidance, revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and promised goods and services have transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For revenue generated from revenue per action or revenue per funded loan arrangements in which fees are earned from customers for approved actions such as when credit cards are issued to consumers or when loans to consumers are funded, the Company’s contractual right to fees is not contemporaneous with the satisfaction of the performance obligation to match the consumer with the customer.

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and third-party data center costs.

NERDWALLET, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Research and Development — Research and development expenses primarily consist of personnel related costs, technology and facility-related expenses and contractor expense for our engineering, product management, data and other personnel engaged in maintaining and enhancing the functionality of our platform.

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Leases — The Company leases real estate facilities and general office equipment under operating leases expiring at various dates through 2029.

In February 2016, the FASB issued Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842), which supersedes previous lease accounting guidance (Topic 840), and requires lessees to recognize certain leases as operating lease right-of-use (ROU) assets with corresponding lease liabilities on the balance sheet.

The Company adopted Topic 842 on January 1, 2019.

For leases that commenced prior to January 1, 2019, the Company elected a package of practical expedients and has carried forward historical lease classification and assessment of whether expired or current contracts contain leases.

The Company also elected the practical expedient to combine lease and nonlease components, and to keep leases with an initial term of 12 months or less off the balance sheet.

The Company’s ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term, which may include options to extend or terminate the lease when it is reasonably certain the Company will exercise such options.

The Company’s right-of-use (ROU) assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term, which may include options to extend or terminate the lease when it is reasonably certain the Company will exercise such options.

At inception of the lease, the Company is not reasonably certain that any available lease extensions or renewal terms will be exercised.

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The Company’s lease agreements generally do not contain any residual guarantees or restrictive covenants.

Operating and finance leases are included in other assets, accrued and other current liabilities, and other liabilities-noncurrent in the consolidated balance sheets.

Operating and finance leases are included in other assets, accrued expenses and other current liabilities, and other liabilities-noncurrent in the consolidated balance sheets.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation — The Company measures compensation expense for all stock-based payment awards granted to employees, directors and nonemployees, including restricted stock units (RSUs), stock options and purchase rights granted under its employee stock purchase plan (ESPP), based on the estimated fair value of the awards on the date of grant.

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The requisite service period of the awards is generally the same as the vesting period.

The Company recognizes forfeitures as they occur for equity awards with only a service condition, rather than estimate expected forfeitures, as permitted by ASU 2016-09.

NERDWALLET, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Embedded Derivative — In January 2017, the Company issued subordinated promissory notes that contained an embedded derivative, see Note 7 – Debt.

At initial recognition, the Company recorded the embedded derivative on the consolidated balance sheet at its estimated fair value resulting in an embedded derivative contra-liability balance with an offsetting recognition of a debt premium.

Both the embedded derivative and debt premium were classified together with the related subordinated promissory notes on the consolidated balance sheet.

Embedded derivatives are subject to remeasurement at each balance sheet date, with changes in fair value recognized as a component of other gains (losses), net on the consolidated statement of operations.

Premium recognized at initial recognition was amortized as a reduction to interest expense over the expected life of the related debt using the effective interest method.

In November 2021, in connection with the Company’s IPO, the Company repaid in full the promissory notes, settled the embedded derivative and recognized the remaining unamortized debt premium as an other gain in its consolidated statement of operations.

The Company recognizes forfeitures as they occur for equity awards with only a service condition.

Income Taxes — The Company accounts for income taxes under an asset and liability approach.

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Other comprehensive income (loss) includes adjustments for foreign currency translation.

Subsequent Events — The Company evaluated subsequent events through March 24, 2022, the date its consolidated financial statements were issued.

Recently Adopted Accounting Pronouncements — In October 2020, the FASB issued ASU 2020-10, Codification Improvements (ASU 2020-10).

ASU 2020-10 was intended to facilitate codification updates for technical corrections, such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance and other minor improvements.

It contains amendments that improve the consistency of the codification by including all disclosure guidance in the appropriate disclosure section and other updates that varies in nature.

The Company adopted the provisions of ASU 2020-10 as of January 1, 2021 and such adoption did not have a material impact on its consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted — The Company qualifies as an “emerging growth company” (EGC) as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, the Company may elect to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

As a result, the Company’s financial position and results of operations within its consolidated financial statements may not be comparable to those of other companies that have adopted the new or revised accounting standards at an earlier date.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), to address diversity and inconsistency related to the recognition and measurement of contract assets and contract liabilities acquired in a business combination.

The guidance in ASU 2021-08 states that an acquirer should recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606.

The guidance in ASU 2021-08 is effective for the Company’s annual periods beginning after December 15, 2023, including interim periods within those fiscal years (one year after the effective date for public business entities due to the Company’s election under its EGC status).

Early adoption is permitted.

The amendments in ASU 2021-08 will be applied prospectively to business combinations occurring during or after the fiscal year of adoption.

The adoption of ASU 2021-08 is not expected to have a material effect on the Company’s financial position or results of operations based on the prospective adoption method and also based on the consistency in the method it currently employs under existing guidance to recognize and measure contract assets and contract liabilities acquired in a business combination.

Subsequent Events —The Company evaluated subsequent events through February 23, 2023, the date its consolidated financial statements were issued.

JOBS Act Accounting Election —The Company qualifies as an “emerging growth company” (EGC) as defined in the JOBS Act, and, as such, the Company may elect to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, the Company’s financial condition and results of operations within its consolidated financial statements may not be comparable to those of other companies that have adopted new or revised accounting standards at an earlier date.

Recently Adopted Accounting Pronouncements — In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments , establishing ASC Topic 326, and amended the guidance thereafter (ASC 326).

ASC 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost;

the Company’s financial assets that are in the scope of ASC 326 includes the Company’s accounts receivable, certain financial instruments and contract assets.

ASC 326 replaces the prior incurred loss impairment model with an expected loss methodology, which results in more timely recognition of credit losses.

The Company adopted the provisions of ASC 326 as of January 1, 2022 (two years after the effective date for public business entities due to the Company’s election under its EGC status), and such adoption did not have an impact on the Company’s financial condition and results of operations within its consolidated financial statements.

NERDWALLET, INC.

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In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) , establishing ASC Topic 848, and amended the guidance thereafter (“ASC 848”).

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, Business Combinations (Topic 805):

The guidance in ASU 2021-08 states that an acquirer should recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers .

The amendments in ASU 2021-08 will be applied prospectively to any business combinations that occur during or after the fiscal year of adoption.

The Company adopted the provisions of ASU 2021-08 as of January 1, 2022, and such adoption did not have an impact on the Company’s financial condition and results of operations within its consolidated financial statements.

Recently Issued Accounting Pronouncement Not Yet Adopted — In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) , establishing ASC Topic 848, and amended the guidance thereafter (ASC 848).

ASC 848 provides optional expedients and exceptions for a limited period of time for accounting for contracts, hedging relationships and other transactions affected by the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued.

Optional expedients can be applied from March 12, 2020 through December 31, 2022.

Optional expedients can be applied through December 31, 2024.

Reference rate reform has not had a material impact with respect to any of the Company’s existing contracts, therefore, the Company has not been required to elect to apply any of the optional practical expedients and exceptions under ASC 848 as of the date of the financial statements.

The Company will assess future changes in its contracts, including modifications, and the potential impact of electing to apply the optional practical expedients and exceptions under ASC 848 as they occur, but does not expect their application will have a material effect on its financial position or results of operations in its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments , establishing ASC Topic 326, and amended the guidance thereafter (ASC 326).

ASC 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost;

the Company’s financial assets that are in the scope of ASC 326 includes the Company’s accounts receivable, certain financial instruments and contract assets.

ASC 326 replaces the prior incurred loss impairment model with an expected loss methodology, which results in more timely recognition of credit losses.

ASC 326 is effective for the Company’s annual periods beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted and the Company expects to adopt the provision of ASC 326 beginning on January 1, 2022 (two years after the effective date for public business entities due to the Company’s election under its EGC status).

Based on the nature and amortized cost basis/carrying values of its financial assets in the scope of ASC 326 (e.g., accounts receivable and contract assets), the adoption of ASC 326 is not expected to have a material impact on the Company’s financial condition and results of operations within its consolidated financial statements.

The following presents a disaggregation of the Company’s revenue based on product category:

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Total revenue $ 538.9 $ 379.6 $ 245.3

The contract asset recorded within prepaid expenses and other current assets on the consolidated balance sheet related to estimated variable consideration was $ 3.0 million and $ 1.2 million at December 31, 2021 and 2020, respectively.

The contract asset recorded within prepaid expenses and other current assets on the consolidated balance sheet related to estimated variable consideration was $ 5.8 million and $ 3.0 million as of December 31, 2022 and 2021, respectively.

Credit cards revenue is primarily generated through revenue per action arrangements, Loans revenue is primarily generated through revenue per funded loan and revenue per lead arrangements, and Other verticals revenue is primarily generated through revenue per action, revenue per click and revenue per funded loan arrangements.

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(in millions) Quoted Prices

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Certificate of deposit — 2.0 — 2.0

Embedded derivative — — 0.1 0.1

$ 164.9 $ 2.0 $ — $ 166.9

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The Company recognizes transfers among Level 1, Level 2 and Level 3 classifications as of the actual date of the events or change in circumstances that caused the transfers.

The change in fair values of Level 3 assets and liabilities are as follows:

Level 3 liabilities consist entirely of contingent consideration, and the changes in fair values are as follows:

(in millions)

Year Ended December 31, Embedded Derivative Contingent Consideration Embedded Derivative Contingent Consideration

Balance at beginning of year $ 0.1 $ 36.5 $ 0.2 $ —

Additions — — — 37.3

Year Ended December 31, 2022 2021

Balance as of beginning of year $ 54.7 $ 36.5

Payment ( 30.5 ) —

Change in fair value, recognized in earnings 6.7 18.1

Other — 0.1 — —

Balance at End of Year $ — $ 54.7 $ 0.1 $ 36.5

The change in fair value of the embedded derivative is recorded in other gains (losses), net within the consolidated statement of operations.

The determination of the fair value of the Level 3 embedded derivative is discussed in Note 7 – Debt.

Balance as of end of year $ 30.9 $ 54.7

Contingent consideration liabilities related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs.

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See Note 5–Business Combinations for additional information on the contingent consideration for each of the acquisitions.

The fair values of the estimated contingent considerations are determined based on the Company’s evaluation of the probability and amount of earnout that will be achieved based on expected future performance by the acquired entity.

As of December 31, 2022, Fundera’s revenue and profitability milestones for 2022 have been achieved and the contingent consideration liability was recorded at the full payout amount.

The fair values of the estimated contingent considerations were previously determined based on the Company’s evaluation of the probability and amount of earnout that will be achieved based on expected future performance by the acquired entity.

The Monte Carlo simulation models simulated the applicable figures over the earnout periods to calculate the estimated earnout payments.

These payments were then discounted to present value based on the expected payment dates of the contingent considerations.

The weighted average volatility was 45.5 % and the weighted average discount rate was estimated to be 9.0 % at December 31, 2021.

The weighted average volatilities fell within the range of 7.4 % to 17.6 % during 2020, and the weighted average discount rate was estimated to be 1.2 %, at December 31, 2020.

The weighted average volatility was 45.5 % and the weighted average discount rate was estimated to be 9.0 % as of December 31, 2021.

Significant Consolidated Balance Sheet Components

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Prepaid expenses $ 10.4 $ 12.0

Certificate of deposit 2.0 2.0

Contract assets 5.8 3.0

Tax receivable 0.3 0.2

Certificate of deposit 2.0 2.0

Other current assets 0.1 0.4

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Property, equipment and software, net consisted of the following:

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The Company capitalized $ 34.1 million, $ 24.2 million and $ 19.2 million of software development costs, and recorded amortization expense of $ 22.1 million, $ 16.7 million and $ 12.5 million, during 2022, 2021 and 2020, respectively.

The Company recorded $ 0.8 million, $ 0.2 million and $ 1.1 million of impairment charges related to software development costs for 2021, 2020 and 2019.

Losses on disposal related to software development costs were $ 0.8 million and $ 0.2 million for 2021 and 2020, with no losses in 2022.

Depreciation and amortization expense, exclusive of amortization of capitalized software development costs and intangible assets, was $ 1.9 million, $ 2.4 million and $ 1.0 million in 2022, 2021 and 2020, respectively.

Accrued and other current liabilities consisted of the following:

Accrued expenses and other current liabilities consisted of the following:

(in millions)

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Unbilled accounts payable $ 26.1 $ 22.1

Operating lease liabilities 2.4 7.4

Accrued compensation 5.6 1.8

Accrued payroll related taxes 1.6 1.4

Operating lease liabilities 3.1 2.4

Deferred compensation liability related to earnouts 1.7 2.1

ESPP liability 1.0 —

Accrued interest — 1.1

Other accrued expenses 1.4 3.7

Total accrued and other current liabilities $ 32.1 $ 18.6

The Company sponsors an ESPP which became effective in connection with the Company’s IPO completed on November 8, 2021.

See Note 11 – Stockholders’ Equity for additional information on the ESPP.

Total accrued expenses and other current liabilities $ 37.9 $ 32.1

Other liabilities—noncurrent consisted of the following:

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Operating lease liabilities $ 9.6 $ 12.7

Unrecognized tax benefit liability 1.7 1.3

Accrued payroll related taxes — 2.8

Deferred tax liability, net 1.2 1.8

Other noncurrent liabilities 0.8 2.0

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Business Combinations

On the Barrelhead, Inc.

—On July 11, 2022, the Company completed the acquisition of On the Barrelhead, Inc.

(OTB), a data-driven platform that provides consumers and SMBs with credit-driven product recommendations.

The Company completed the acquisition of OTB under an Agreement and Plan of Merger and Reorganization.

Purchase Consideration

The purchase consideration consisted of the following:

(in millions) Total

Cash consideration 1

Stock consideration 2

Total consideration 118.9

amounts considered separate from the business combination and attributable to post-combination expense 3

Purchase Consideration $ 118.2

(1) Includes $ 12.2 million of cash which is held in escrow for the settlement of breaches, if any, of certain representations, warranties, agreements and covenants.

(2) Represents the aggregate fair value of 4.9 million shares issued of the Company’s Class A common stock based on the closing price of the stock on the acquisition date of July 11, 2022, which was $ 8.75 per share.

(3) Primarily comprised of the additional fair value of unvested OTB option awards discretionally accelerated by the Company and attributable to post-combination expense.

Half of the stock consideration is subject to a lockup arrangement whereby such shares may not be sold or otherwise transferred prior to expiration of the 24 -month period following the acquisition date.

Retention Agreements and Inducement Awards

Concurrently with the closing of the acquisition, the Company provided employment offer letters to OTB’s employees, including compensatory retention agreements with the co-founders of OTB which could result in up to $ 15.0 million of cash awards.

Cash awards under these retention agreements are payable in equal installments on the first, second and third anniversary dates of the closing of the acquisition.

Also concurrently with the closing of the acquisition, the Compensation Committee of the Company’s Board of Directors granted restricted stock unit (RSU) awards under the NerdWallet, Inc.

2022 Inducement Equity Incentive Plan (the Inducement Plan) to employees of OTB who were offered employment with the Company, which RSU awards had an aggregate grant date fair value on the acquisition date of $ 17.5 million, including $ 12.8 million of RSU awards to the co-founders of OTB, $ 2.3 million of RSU awards to six non-management employees of OTB and $ 2.4 million of RSU awards to all fourteen employees of OTB.

The $ 12.8 million of RSU awards to the co-founders of OTB will generally vest in full upon the third anniversary of the closing of the acquisition.

The $ 2.3 million of RSU awards to non-management employees of OTB will vest annually over four years , with 20 % of the RSUs subject to vest on each of the first, second and third annual vesting dates and the remaining 40 % of the RSUs subject to vest on the fourth annual vesting date.

The $ 2.4 million of RSU awards granted to all employees of OTB will generally vest over four years subject to a one-year cliff and quarterly vesting thereafter.

RSU awards under the Inducement Plan are subject to the conditions of the Inducement Plan and the terms and conditions of the grant agreements covering such awards.

Compensation expenses under these employment offer letters and vesting of awards under these retention agreements and Inducement Plan are generally subject to the employees’ continued employment with the Company, and the fair value of such compensation and awards are excluded from the Purchase Price and accounted for separately from the business combination.

The value of cash awards under these retention agreements are recognized as compensation expense ratably over the three-year period following the close of the acquisition.

The value of RSU awards under the Inducement Plan are recognized as stock-based compensation ratably over the respective vesting terms of the awards.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Purchase Accounting

The acquisition has been accounted for as a business combination.

The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows:

(in millions) Fair Value

Purchase Consideration $ 118.2

Fair Value of Assets Acquired

Cash and cash equivalents 6.9

Accounts receivable 12.2

Intangible assets 50.1

Total assets 69.2

Fair Value of Liabilities Assumed

Accounts payable 6.4

Accrued expenses and other current liabilities 0.6

Deferred tax liability 12.1

Total liabilities 19.1

Net Assets Acquired 50.1

Goodwill $ 68.1

The acquired intangible assets consist of definite-lived assets with estimated fair values and useful lives as follows:

(dollars in millions) Fair Value Weighted-Average

Developed technology $ 48.9 5.0

Customer relationships 1.2 1.0

Total intangible assets $ 50.1 4.9

The estimated fair value of acquired intangible assets was determined using the multi-period excess earnings method of the income approach for developed technology, and the replacement cost method for customer relationships.

The deferred tax liability of $ 12.1 million primarily relates to identified intangible assets.

The Company recorded goodwill of $ 68.1 million, which represents the excess of the purchase consideration over the estimated fair value of the assets acquired, net of the liabilities assumed.

The goodwill is primarily attributable to synergies from combining the operations of the Company and OTB, as well as the value ascribed to the knowledge and experience of the OTB co-founders and employees.

For income tax purposes, the acquisition is a stock purchase and goodwill is not tax deductible.

Acquisition-related costs of $ 3.5 million were incurred during 2022, and are included in general and administrative expense on the consolidated statements of operations.

Due to the extensive level of integration of OTB’s technology and operations into the Company’s operations following the closing of the acquisition, the Company is not able to quantify the acquisition’s contribution following the closing of the acquisition to the Company’s revenue and operating loss for 2022, as the ability to objectively quantify such amounts would require a significant level of estimation.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information is presented as if the OTB acquisition, including the related debt financing, was completed on January 1, 2021.

The pro forma financial information includes the historical operating results of the Company and OTB prior to the acquisition, with adjustments directly attributable to the acquisition.

Pro forma adjustments have been made to reflect the incremental intangible asset amortization to be incurred based on the preliminary fair values and useful lives of each identifiable intangible asset, incremental stock-based compensation related to inducement equity awards, incremental compensation related to cash retention agreements, incremental interest expense related to debt drawn to finance the cash portion of the purchase price, the adjustment of acquisition-related expenses, and the related tax effects of pro forma adjustments for the respective periods.

The unaudited pro forma financial information is as follows:

(in millions)

Year Ended December 31, 2022 2021

Revenue $ 583.9 $ 417.7

Net loss ( 21.9 ) ( 51.7 )

The unaudited pro forma financial information is not intended to present, or be indicative of, what the results of operations would have been for the combined company for the periods presented had the acquisition actually occurred on January 1, 2021, nor is it meant to be indicative of results of operations that may be achieved by the combined company in the future.

The unaudited pro forma financial information does not include any cost savings or other synergies that resulted, or may result, from the OTB acquisition or any estimated costs that will be incurred to integrate OTB.

Future results may vary significantly from the results reflected in this unaudited pro forma financial information because of future events and transactions, as well as other factors.

Fundera —In October 2020, the Company executed a merger agreement to acquire all outstanding shares of Fundera.

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Fundera was founded in 2013 and maintains an office in New York, NY.

The acquisition date aggregate purchase price was approximately $ 65.1 million, which consisted of the following:

The acquisition date aggregate purchase price was $ 65.1 million, which consisted of the following:

(in millions) Fair Value

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These additional payments, to the extent earned, will be payable in cash.

See Note 3–Fair Value Measurements for further information on contingent consideration and additional payments made.

The fair value of earnouts, which are subject to the recipients continued employment services was $ 2.7 million and was excluded from the aggregate purchase price and accounted for separately from the business combination.

The amounts are recognized as compensation expense as earned through 2022, classified as research and development and sales and marketing expenses based on the recipients’ job functions, in the consolidated statement of operations.

The Company has recorded a deferred compensation liability related to earnouts of $ 2.1 million as of December 31, 2021, which is included within accrued and other current liabilities on the consolidated balance sheet.

The estimated fair value of the contingent consideration related to Fundera was $ 54.7 million as of December 31, 2021, which is included in contingent consideration in the consolidated balance sheet.

The estimated fair value of the contingent consideration is determined using a Monte Carlo simulation model.

The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time the estimate was made, which management believes are reasonable.

Contingent consideration is subject to remeasurement at each reporting date until the payments are made, with the remeasurement adjustment reported in the consolidated statement of operations.

The amounts were recognized as compensation expense as earned through 2022, classified as research and development and sales and marketing expenses based on the recipients’ job functions, in the consolidated statement of operations.

The Company has recorded a deferred compensation liability related to earnouts of $ 1.7 million as of December 31, 2022, which is included within accrued expenses and other current liabilities on the consolidated balance sheet.

As of December 31, 2022, Fundera’s revenue and profitability milestones for 2022 have been achieved and the contingent consideration liability was recorded at the full payout amount of $ 30.9 million.

The estimated fair value of the contingent consideration was previously determined using a Monte Carlo simulation model, based upon available information and certain assumptions, known at the time the estimate was made, which management believes were reasonable.

At the time of acquisition, certain stock options held by Fundera employees were replaced with RSUs by the Company with a total fair value of $ 1.9 million.

The vesting of these RSUs is contingent on continued employment, and was excluded from the aggregate purchase price.

These awards are recognized as stock-based compensation expense ratably over the remaining vesting term through 2024.

These awards are recognized as stock-based compensation ratably over the remaining vesting term through 2024.

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquisition has been accounted for as a business combination.

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Total purchase price $ 65.1

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The acquired intangible assets are definite-lived assets consisting of user base, customer relationships, developed technology and trade name.

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The Company’s historical financial information was adjusted based on currently available information and certain assumptions that the Company believes are reasonable under the circumstances.

The unaudited supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets and property and equipment, adjustments to share-based compensation expense, the purchase accounting effect on interest expense, and transaction costs:

The unaudited supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets and property and equipment, adjustments to stock-based compensation, the purchase accounting effect on interest expense, and transaction costs:

(in millions)

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Net income $ 3.6

NERDWALLET, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Know Your Money —On September 30, 2020, the Company acquired all the outstanding shares of Notice Media Ltd., doing business as Know Your Money, an online provider of financial guidance and tools based in the United Kingdom.

The aggregate purchase price transferred for KYM was approximately $ 13.7 million, which consisted of the following:

The aggregate purchase price transferred for KYM was $ 13.7 million, which consisted of the following:

(in millions) Fair Value

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Total purchase price $ 13.7

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The Company paid $ 12.3 million in initial cash consideration and could make up to two additional earnout payments based on certain defined operating metrics during the earnout periods January 1, 2021 through December 31, 2021 and January 1, 2022 through December 31, 2022.

These additional payments, to the extent earned, will be payable in cash.

As part of the transaction, the Company entered into additional earnouts which are subject to the recipients’ continued service.

The Company paid $ 12.3 million in initial cash consideration and could have made up to two additional earnout payments based on certain defined operating metrics during the earnout periods January 1, 2021 through December 31, 2021 and January 1, 2022 through December 31, 2022.

These additional payments, to the extent earned, would be payable in cash.

As part of the transaction, the Company entered into additional earnouts which were subject to the recipients’ continued service.

The fair value of such earnouts was $ 5.9 million, which was excluded from the aggregate purchase price and accounted for separately from the business combination.

The amounts are recognized as compensation expense as earned over the earnout periods.

The amounts were recognized as compensation expense as earned over the earnout periods.

The estimated fair value of the contingent consideration related to KYM was immaterial as of December 31, 2022, and is included in contingent consideration in the consolidated balance sheet.

The estimated fair value of the contingent consideration payments is determined using a Monte Carlo simulation model.

The estimated value of the contingent consideration is based upon available information and certain assumptions, known at the time of this report, which management believes are reasonable.

Contingent consideration is subject to remeasurement at each reporting date until the payments are made, with the remeasurement adjustment reported in the consolidated statement of operations.

The acquisition has been accounted for as a business combination.

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Total intangible assets $ 7.4 4.6

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AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded goodwill of $ 6.0 million, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed.

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Pro forma results of operations have not been provided to reflect the KYM acquisition as such results would not have been materially different from the Company’s reported results.

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Goodwill and Intangible Assets

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Year Ended December 31, 2022 2021

Balance at beginning of year $ 43.8 $ 0.3

Acquisition of Fundera — 37.3

Acquisition of KYM — 6.0

Balance as of beginning of year $ 43.8 $ 43.8

Acquisition of OTB 68.1 —

Foreign currency translation adjustment ( 0.7 ) —

Balance at End of Year $ 43.8 $ 43.8

Balance as of end of year $ 111.2 $ 43.8

No impairment charges have been recorded for goodwill in 2022, 2021 or 2020.

Intangible assets with definite lives related to the following:

(dollars in millions) Weighted Average Useful Life (Years) Gross

Carrying Amount Accumulated Amortization Net

(dollars in millions) Weighted-Average

(Years) Gross

Carrying Amount Accumulated

Amortization Net

Carrying Amount

As of December 31, 2022

Technology 4.4 $ 55.3 $ ( 9.7 ) $ 45.6

User base 4.8 19.4 ( 6.0 ) 13.4

Customer relationships 2.0 12.2 ( 6.9 ) 5.3

Technology 1.8 6.4 ( 2.8 ) 3.6

Trade names 0.4 ( 0.4 ) —

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Total $ 87.3 $ ( 23.0 ) $ 64.1

(dollars in millions) Weighted Average Useful Life (Years) Gross

Carrying Amount Accumulated Amortization Net

(dollars in millions) Weighted-Average

(Years) Gross

Carrying Amount Accumulated

Amortization Net

Carrying Amount

As of December 31, 2021

Technology 1.8 $ 6.4 $ ( 2.8 ) $ 3.6

User base 5.8 19.4 ( 3.2 ) 16.2

Customer relationships 2.8 11.0 ( 3.5 ) 7.5

Technology 2.8 6.4 ( 0.7 ) 5.7

Trade names 0.4 ( 0.4 ) —

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Total $ 37.2 $ ( 9.9 ) $ 27.6

Amortization expense related to definite-lived intangible assets was $ 8.0 million, $ 1.6 million and zero in 2021, 2020 and 2019, respectively.

Amortization expense related to definite-lived intangible assets was $ 13.0 million, $ 8.0 million and $ 1.6 million in 2022, 2021 and 2020, respectively.

NERDWALLET, INC.

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Estimated future amortization expense as of December 31, 2022 is as follows:

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Years Ending December 31, Amortization

Thereafter 2.2

Foreign currency translation adjustment ( 0.2 )

No impairment charges have been recorded for intangible assets for 2022, 2021 or 2020.

Lines of Credit — The Company maintains a line of credit with Silicon Valley Bank, which over time has been amended and restated.

Credit Facility —The Company maintains a Senior Secured Credit Facilities Credit Agreement with Silicon Valley Bank, which over time has been amended and restated (as amended and restated from time to time, the Credit Agreement).

It is secured by certain qualifying accounts receivable of the Company.

In June 2017, the Company entered into a second amended and restated Loan and Security Agreement, and in September 2019, the Company extended the maturity of the line of credit to expire in September 2020.

In September 2020, the Company entered into a Senior Secured Credit Facilities Credit Agreement (Credit Agreement) with Silicon Valley Bank and also terminated the second amended and restated Loan and Security Agreement from June 2017.

In February 2021, the Company amended and restated the Credit Agreement to increase the revolving line of credit to $ 100.0 million from $ 50.0 million, increase the margin on Alternative Base Rate (ABR) Loans, and extend the termination date.

The Credit Agreement, as amended and restated, provides for a revolving line of credit of up to $ 100.0 million with the option to increase up to an additional $ 25.0 million, including a letter of credit sub-facility in the aggregate amount of $ 10.0 million, and a swingline sub-facility in the aggregate amount of $ 10.0 million.

Under the terms of the Credit Agreement, as amended and restated, revolving loans may be either Eurodollar Loans or ABR Loans.

Outstanding Eurodollar Loans will incur interest at the Eurodollar Rate, which is defined in the Credit Agreement as LIBOR (or any successor thereto), plus a margin of either 3.00 % or 2.75 % depending on usage, equating to 3.75 % as of December 31, 2021.

Outstanding ABR Loans will incur interest at the highest of the Prime Rate, as published by the Wall Street Journal, the federal funds rate in effect for such day plus 0.50 %, and 3.25 %, in each case a margin of either 1.75 % or 2.00 % will be applicable, depending on usage, equating to 5.00 % as of December 31, 2021.

The Company will be charged a commitment fee of 0.30 % per year for committed but unused amounts.

The Credit Agreement terminates on September 2, 2023.

The Credit Agreement provides for a revolving line of credit of up to $ 100.0 million with the option to increase up to an additional $ 25.0 million, including a letter of credit sub-facility in the aggregate amount of $ 10.0 million, and a swingline sub-facility in the aggregate amount of $ 10.0 million.

In September 2022, the Company amended and restated the Credit Agreement to extend the termination date from September 2, 2023 to December 2, 2023, and to replace the Eurodollar Loan option (which was LIBOR based) with a Secured Overnight Financing Rate (SOFR) Loan option, with any outstanding Eurodollar Loans to convert to SOFR Loans at the next interest period.

Under the terms of the Credit Agreement, revolving loans may be either SOFR Loans or ABR Loans.

Outstanding SOFR Loans incur interest at the Adjusted SOFR Rate (which is defined in the Credit Agreement as Term SOFR plus a Term SOFR Adjustment equal to 0.10 % for 1-month interest periods, 0.15 % for 3-month interest periods, and 0.25 % for 6-month interest periods, and, in each case, subject to a 1.00 % floor), plus a margin of either 3.00 % or 2.75 % depending on usage.

The Company is charged a commitment fee of 0.30 % per year for committed but unused amounts.

On July 7, 2022, the Company borrowed $ 70.0 million as a Eurodollar Loan under the Credit Agreement to finance the cash portion of the purchase consideration for the acquisition of OTB.

This borrowing was fully repaid by the Company in December 2022.

There were no outstanding balances under the Credit Agreement at December 31, 2022 or 2021.

The available amount to borrow under the Credit Agreement was $ 94.7 million and $ 45.9 million at December 31, 2021 and 2020, respectively, which is equal to the available amount under the Credit Agreement of $ 100.0 million and $ 50.0 million, respectively, net of letters of credit with Silicon Valley Bank of $ 5.3 million and $ 4.1 million, respectively.

The Credit Agreement contains covenants limiting the ability to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock, and make investments, in each case subject to certain exceptions.

The available amount to borrow under the Credit Agreement was $ 98.3 million and $ 94.7 million as of December 31, 2022 and 2021, respectively, which is equal to the available amount under the Credit Agreement of $ 100.0 million net of letters of credit with Silicon Valley Bank of $ 1.7 million and $ 5.3 million, respectively.

The Credit Agreement contains covenants limiting the Company’s ability to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock, and make investments, in each case subject to certain exceptions.

The Credit Agreement also contains financial covenants requiring the Company to maintain a minimum adjusted quick ratio and a minimum consolidated adjusted EBITDA if the adjusted quick ratio falls below a specified level, measured in each case at the end of each fiscal quarter.

The Company is required to furnish audited financial statements within 150 days after the fiscal year end, and after the occurrence of a qualified IPO of the Company’s common stock, 90 days after the end of the fiscal year.

The Company is required to furnish audited financial statements within 90 days after the end of the fiscal year.

The Company was in compliance with all financial covenants as of December 31, 2022 and 2021.

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Subordinated Promissory Notes —During 2017, the Company entered into a stock repurchase agreement to repurchase a specific number of shares of Class G common stock from one of the Company’s co-founders.

In connection with the stock repurchase agreement, the Company issued subordinated promissory notes (the Notes) with a principal amount totaling $ 28.5 million to the co-founder.

The Notes bore interest on the outstanding principal amount at the rate of 4.2922 % per year and the Company made annual interest payments.

The Notes were scheduled to mature in January 2026.

The Company could prepay the Notes in whole or in part at any time prior to the maturity date.

The Notes were subordinated in right of payment to the prior payment in full of (i) any indebtedness to banks or other financial institutions and any indebtedness arising from the satisfaction of such indebtedness by a guarantor in existence on the date of the Notes or incurred after the agreement was entered into, and (ii) the liquidation preferences, or other rights or entitlements to proceeds in the event of a deemed liquidation event in respect of the Company’s redeemable convertible preferred stock.

In the event of a deemed liquidation event or initial public offering while the Notes remained outstanding, the Company was required to repay the Notes in an amount equal to the outstanding principal and any unpaid accrued interest, to the extent there are proceeds available after payment of senior obligations.

The Notes bore interest on the outstanding principal amount at the rate of 4.2922 % per year and were scheduled to mature in January 2026.

In November 2021, in connection with the Company’s IPO, the Company repaid in full the outstanding principal amount of $ 28.5 million and accrued interest on the Notes.

The Company previously determined that the feature whereby the Notes were subordinate in payment to the liquidation preferences of the Company’s preferred stockholders represented an embedded derivative that was to be separately accounted for.

Accordingly, upon issuance in December 2017 the Company measured the fair value of deemed liquidation event redemption feature and recognized a derivative contra-liability of $ 3.3 million with a corresponding entry to debt premium.

At December 31, 2020, the Company remeasured the derivative contra-liability to an amount of $ 0.1 million.

At the time of repayment of the Notes in November 2021, the derivative contra-liability was immaterial.

As a result of remeasurement of the derivative contra-liability, losses of $ 0.1 million, $ 0.1 million and $ 0.5 million were recorded to other gains (losses), net in the consolidated statement of operations for 2021, 2020 and 2019.

Further, the Company recorded amortization of the related premium as a reduction to interest expense in the amount of $ 0.3 million for 2021 and $ 0.4 million for both 2020 and 2019.

Upon repayment of the Notes in November 2021, the Company recognized the remaining unamortized debt premium of $ 1.5 million as a gain on extinguishment of debt recorded to other gains (losses), net in the consolidated statement of operations.

The Company previously estimated the fair value of the embedded derivative feature at each reporting date based on a with or without valuation approach which leveraged the Black-Scholes-Merton option-pricing model.

The key inputs and assumption in the model included the fair value of the Company’s equity, exercise prices which were based on the participation thresholds of the preferred and common securities, as follows.

As of December 31, 2020

Expected volatility 65.0 %

Expected term (in years) 1.5

Dividend yield 0.0 %

Risk-free interest rate 0.12 %

The Company had no outstanding borrowings at December 31, 2021.

The Company’s outstanding borrowings at December 31, 2020 were as follows:

(in millions)

As of December 31, 2020

Promissory notes — noncurrent $ 28.5

embedded derivative contra-liability ( 0.1 )

unamortized debt premium 1.8

Total debt $ 30.2

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Commitments and Contingencies

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Management is not currently aware of any matters that it expects will have a material effect on the financial position, results of operations, or cash flows of the Company.

The Company has not accrued any potential loss as of December 31, 2021 or 2020.

The Company has not accrued any material potential loss as of December 31, 2022 or 2021.

Components of operating lease costs are as follows:

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Right-of-use assets were $ 11.3 million and $ 13.9 million as of December 31, 2022 and 2021, respectively.

The following is a schedule of payments of lease liabilities as of December 31, 2021:

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The maturities of lease liabilities as of December 31, 2022 are as follows:

(in millions)

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Total lease liabilities, noncurrent $ 9.6

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Redeemable Convertible Preferred Stock

In connection with the Company’s IPO which was completed on November 8, 2021, all 7.5 million shares of the Company’s then-outstanding redeemable convertible preferred stock automatically converted into an equal number of shares of Class A common stock.

As of December 31, 2020, the total number of Series A redeemable convertible preferred stock authorized for issuance was 8.7 million shares and there were 7.7 million shares issued and outstanding.

Significant rights and preferences of the redeemable convertible preferred stock prior to the Company’s IPO were summarized as follows:

Dividend Rights — The Corporation would not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company unless the holders of the Series A redeemable convertible preferred stock then outstanding would first receive, or simultaneously receive, out of funds legally available therefore, a noncumulative dividend on each outstanding share of Series A redeemable convertible preferred stock in an amount equal to eight percent ( 8 %) of the Series A original issue price.

No dividends were declared or paid by the Company as of December 31, 2020.

Conversion Rights — Each share of Series A redeemable convertible preferred stock was convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Class A common stock as determined by dividing the Series A original issue price by the Series A Conversion Price (as defined below) in effect at the time of conversion.

The “Series A Conversion Price” was initially $ 8.97960 , with such initial Series A Conversion Price, along with the rate at which shares of Series A redeemable convertible preferred stock may be converted into shares of Class A common stock, subject to certain adjustments.

Liquidation Rights — In the event of any liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, the holders of Series A redeemable convertible preferred stock were entitled to receive prior and in preference to any distribution from the proceeds of the liquidation event of the Company to the holders of the common stock by reason of their ownership thereof, the greater of (i) an amount equal to the original issue price per share of $ 8.97960 , plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of Series A redeemable convertible preferred stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or deemed liquidation event.

Voting Rights — Each share of Series A convertible redeemable preferred stock had voting rights equal to the number of common shares into which the Series A preferred stock could be converted on the record date for determining stockholders entitled to vote on such matter.

Holders of the Series A convertible redeemable preferred stock would vote together with the holders of common stock as a single class, except as otherwise provided in the Second Amended and Restated Articles of Incorporation.

The holders of shares of Series A redeemable convertible preferred stock, exclusively and as a separate class, were entitled to elect two members of the Board of Directors.

The holders of shares of Class F common stock, exclusively and as a separate class, were entitled to elect one director.

The holders of record of the shares of common stock, voting as a separate class, and the holders of record of the shares of Series A redeemable convertible preferred stock, voting as a separate class and on an as-converted to common stock basis, were entitled to elect two directors.

Redemption — Upon written notice requesting redemption by a majority of the then-outstanding shares of Series A redeemable convertible preferred stock, shares of Series A redeemable convertible preferred stock would be redeemed by the Company at a price equal to the greater of (a) the Series A original issue price per share, plus all declared but unpaid dividends thereon and (b) the fair market value of a single share of Series A redeemable convertible preferred stock as of the date of the Company’s receipt of the redemption request, in three annual installments commencing not more than sixty days after receipt by the corporation at any time on or after March 1, 2024.

Such redemption could have occurred outside of the control of the Company, and accordingly, all shares of redeemable convertible preferred stock have been presented outside of permanent equity in the consolidated balance sheet for all periods presented.

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The Series A redeemable convertible preferred stock was contingently redeemable and as the redemption price was subject to change, changes in the estimate of the redemption price were necessary.

The Company had elected to recognize changes in the redemption value immediately as they occurred and adjust the carrying value of the security to the redemption value at the end of each reporting period so long as it was probable that the instrument would become redeemable.

As of December 31, 2020, such redemption was not deemed probable and therefore the Company had not made any adjustments to the carrying value of the Series A redeemable convertible preferred stock.

Repurchase — In March 2021, the Company repurchased 0.1 million shares of Series A redeemable convertible preferred stock from an affiliated entity of a former member of its Board of Directors for $ 2.1 million.

In connection with the Company’s IPO which was completed on November 8, 2021, all 7.5 million shares of the Company’s then-outstanding Series A redeemable convertible preferred stock automatically converted into an equal number of shares of Class A common stock.

A summary of the Company’s Series A redeemable convertible preferred stock activity is as follows:

(in millions, except share amounts which are in thousands) 2021 2020

Year Ended December 31, Shares Amount Shares Amount

Balance as of beginning of year 7,687 $ 68.8 7,687 $ 68.8

Repurchase of Series A redeemable convertible preferred stock ( 102 ) ( 2.1 ) — —

Conversion of Series A redeemable convertible preferred stock to Class A common stock ( 58 ) ( 0.5 ) — —

Conversion of Series A redeemable convertible preferred stock to Class A common stock upon initial public offering ( 7,527 ) ( 66.2 ) — —

Balance as of end of year — $ — 7,687 $ 68.8

In March 2021, the Company repurchased 0.1 million shares of Series A redeemable convertible preferred stock from an affiliated entity of a former member of its Board of Directors for $ 2.1 million.

Stockholders’ Equity

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These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of the Company’s common stock.

There were no shares of preferred stock outstanding upon the completion of the Company’s IPO or at December 31, 2021.

There were no shares of preferred stock outstanding as of December 31, 2022 or 2021.

Common Stock —Under the Company’s amended and restated certificate of incorporation, which became effective upon completion of the Company’s IPO on November 8, 2021, the Company is authorized to issue 296.7 million shares of common stock with a par value of $ 0.0001 per share, including 265.0 million shares of Class A common stock and 31.7 million shares of Class B common stock.

In connection with the Company’s IPO, all 31.7 million shares of the Company’s outstanding Class F common stock were converted into an equal number of shares of Class B common stock.

As of December 31, 2020, the Company had 127.5 million common shares authorized for issuance, consisting of 77.5 million shares of Class A common stock, 35.0 million shares of Class F common stock and 15.0 million shares of Class G common stock, each with a par value of $ 0.0001 per share.

In connection with the Company’s IPO, all 31.7 million shares of the Company’s then-outstanding Class F common stock were converted into an equal number of shares of Class B common stock.

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Holders of all classes of common stock are entitled to dividends when, as and if, declared by the Company’s Board of Directors, subject to the rights of the holders of all classes of stock outstanding having priority rights to dividends.

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Transfer is defined as any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law.

As of December 31, 2021, there were 35.0 million shares and 31.7 million shares of Class A and Class B common stock issued and outstanding, respectively.

As of December 31, 2020, there were 15.1 million shares and 33.8 million shares of Class A and Class F common stock issued and outstanding, respectively, and no shares of Class G common stock issued and outstanding.

As of December 31, 2022 and 2021, there were 43.4 million and 35.0 million shares of Class A common stock issued and outstanding, respectively.

Shares of Class B common stock issued and outstanding were 31.7 million as of both December 31, 2022 and 2021.

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Additionally, the Company incurred offering costs of $ 5.2 million related to the IPO.

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In November 2020, the Company entered into a Class A Common Stock Purchase Agreement to sell shares of Class A common stock at $ 14.00 per share.

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No compensation expense was recorded on this transaction as management concluded that it was not a mechanism to provide compensation to employees, but rather an arms-length transaction between willing buyers and willing sellers, at a price per share determined by a third party.

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In February 2020, four new investors led an offer to purchase approximately 1.7 million shares of Class A common stock from existing employees and service providers that hold common stock and vested options at a price of $ 14.00 per share for an aggregate purchase price of $ 23.8 million.

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Shares outstanding from stock options and restricted stock units 13,517 10,261

Shares reserved for Series A redeemable convertible preferred stock — 7,687

Shares reserved for Class F common stock — 33,783

Shares available for future equity award grants 7,554 3,679

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Total shares reserved 21,272 14,781

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Equity Incentive Plans —In 2012, the Company’s Board of Directors approved the adoption of the 2012 Equity Incentive Plan (the 2012 Plan).

In October 2021, the Company’s Board of Directors approved the adoption of the 2021 Equity Incentive Plan (the 2021 Plan) and the termination of the 2012 Plan, both of which became effective in connection with the Company’s IPO completed on November 8, 2021.

The 2021 Plan has an initial authorization to grant share-based awards for up to 4.1 million shares of Class A common stock, and additionally provides that any shares subject to outstanding awards under the 2012 Plan that are terminated, expire, are forfeited due to a failure to vest, are reacquired or withheld to satisfy a tax withholding obligation or to satisfy the purchase price or exercise price of a stock award will be added to the 2021 Plan and made available for future issuance.

The 2021 Plan had an initial authorization to grant share-based awards for up to 4.1 million shares of Class A common stock, and additionally provides that any shares subject to outstanding awards under the 2012 Plan that are terminated, expire, are forfeited due to a failure to vest, are reacquired or withheld to satisfy a tax withholding obligation or to satisfy the purchase price or exercise price of a stock award will be added to the 2021 Plan and made available for future issuance.

The termination of the 2012 Plan had no impact on the terms of outstanding awards under that plan.

The number of shares of Class A common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each calendar year, starting January 1, 2023 and ending on and including January 1, 2031, in an amount equal to five percent ( 5 %) of the total number of shares of the Company’s capital stock outstanding on December 31 of the prior calendar year, unless the Company’s Board of Directors determines prior to the date of increase that there will be a lesser increase, or no increase.

The 2021 Plan and the predecessor 2012 Plan (collectively, the Plans) provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock units and restricted stock awards to employees, non-employee directors and consultants of the Company.

At the Company’s 2022 annual meeting of stockholders on May 25, 2022, the stockholders approved an amendment to the 2021 Equity Incentive Plan to increase the aggregate number of shares of Class A common stock reserved for issuance thereunder by 8.0 million shares.

The number of shares of Class A common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each calendar year, starting January 1, 2023 and ending on and including January 1, 2031, in an amount equal to 5 % of the total number of shares of the Company’s capital stock outstanding on December 31 of the prior calendar year, unless the Company’s Board of Directors determines prior to the date of increase that there will be a lesser increase, or no increase.

Additionally, concurrent with the closing of the acquisition of OTB on July 11, 2022, the Compensation Committee of the Company’s Board of Directors granted RSU awards under the Inducement Plan to employees of OTB who were offered employment with the Company.

See Note 5 — Business Combination for further discussion.

The 2021 Plan and the predecessor 2012 Plan, both as amended, along with the Inducement Plan (collectively, the Plans) provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock units and restricted stock awards to employees, non-employee directors and consultants of the Company.

Options to purchase Class A common stock granted under the Plans continue to vest until the last day of employment and generally will vest 25 % in the first year and monthly thereafter (for a total vesting period of 4 years), and expire 10 years from the date of grant.

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The exercise price must not be less than 110 % of the fair market value of the Company’s Class A common stock at the date of grant for incentive stock options granted to an employee that owns greater than 10 % of the Company stock.

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A summary of the Company’s stock option activity for its Plans is as follows:

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The Company estimates the fair values of options awarded on the date of grant using the Black-Scholes-Merton option-pricing model, which requires inputs, including the fair value of common stock, expected term, expected volatility, risk-free interest and dividend yield.

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The Company estimates the expected term of options using the simplified method described in Staff Accounting Bulletin Topic 14, as amended, as it does not have sufficient historical experience for determining the expected term of the awards granted.

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Risk-free interest rate 2.6 % 1.1 % 0.6 %

The Company modified the terms of approximately 0.7 million, 1.0 million and 0.4 million stock options, respectively, in connection with various termination agreements during 2021, 2020 and 2019.

These modifications resulted in additional stock-based compensation expense of $ 0.4 million, $ 0.2 million and $ 0.1 million, respectively, which was fully recognized at the modification date and included within research and development, sales and marketing and general and administrative expense in the consolidated statement of operations.

In March 2021, the Company entered into an Option Cancellation Agreement with a former member of its Board of Directors and his affiliated entity, pursuant to which the Company cancelled options to purchase an aggregate of 0.2 million shares of Class A common stock.

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The total consideration paid to Camelot Financial Capital Management LLC was $ 0.8 million.

Performance-based Options — Under the Plans, the Company granted certain key employees performance-based stock options of 2.0 million shares in June 2018 to incentivize their performance and retention.

Subject to the employees’ continued employment with the Company, the performance-based stock options would fully vest in the first quarter of 2021 if certain performance metrics were achieved in 2020.

Performance metrics included both financial performance and non-financial performance.

For awards that included a performance condition, compensation expense was recognized when the performance condition was probable of being achieved, at which time the cumulative compensation expense from the grant date would be recognized.

As of the grant date, the options were valued using the Black-Scholes-Merton option-pricing model based on the consistent assumption used for the options issued to employees of the Company As of December 31, 2020, the Company had no performance-based stock options outstanding as the Company determined that the performance metrics were unlikely to be met and the stock options were canceled during 2020, with the compensation cost associated with unvested options reversed.

The Company recorded $( 0.6 ) million and $ 0.6 million of stock-based compensation expense (credit) associated with performance-based options in 2020 and 2019, respectively.

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Restricted Stock Units —The Plans also provide for the issuance of RSUs of the Company’s common stock to eligible participants.

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The service-based vesting condition is generally satisfied over four years.

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A summary of the Company’s outstanding nonvested RSUs for its Plans is as follows:

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Nonvested as of December 31, 2021

3,818 $ 18.07

Granted 6,416 $ 10.47

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The ESPP authorizes the issuance of 0.8 million shares of the Company’s Class A common stock under purchase rights granted to eligible employees, with automatic increases in the number of shares reserved for issuance on January 1 of each calendar year, beginning in 2023 and through 2031, subject to terms of the ESPP.

There were no shares of the Company’s Class A common stock purchased under the ESPP through December 31, 2021.

The Company recognized stock-based compensation expense related to the ESPP of $ 0.8 million during 2021.

Unrecognized compensation cost related to the ESPP was $ 11.9 million as of December 31, 2021, with these costs expected to be recognized over a period of 2 years through the end of the initial offering period.

There were 0.6 million shares of the Company’s Class A common stock purchased under the ESPP during 2022.

Prior to capitalizing amounts related to software development costs, the Company recognized stock-based compensation related to the ESPP of $ 6.3 million and $ 0.8 million during 2022 and 2021, respectively.

Unrecognized compensation cost related to the ESPP was $ 4.0 million as of December 31, 2022, with these costs expected to be recognized over a period of 1.0 year through the end of the initial offering period.

The impact of forfeitures under the ESPP are recognized as forfeitures occur.

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Risk-free interest rate 2.8 % 0.4 %

Stock-Based Compensation — The Company recognized stock-based compensation expense under the Plans and ESPP as follows:

Stock-Based Compensation — The Company recognized stock-based compensation under the Plans and ESPP as follows:

(in millions)

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In addition, stock-based compensation of $ 6.3 million, $ 3.3 million and $ 1.6 million was capitalized related to software development costs in 2022, 2021 and 2020, respectively.

The Company did no t recognize any tax benefit for stock-based compensation arrangements in 2021 due to the establishment of a valuation allowance.

The Company recognized tax benefits for stock-based compensation arrangements of $ 4.7 million and $ 0.3 million in 2020 and 2019, including excess tax benefits of $ 3.7 million and an immaterial amount, respectively.

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The Company did no t recognize any tax benefit for stock-based compensation arrangements in 2022 or 2021 due to the establishment of a valuation allowance.

The Company recognized a tax benefit for stock-based compensation arrangements of $ 4.7 million in 2020, including an excess tax benefit of $ 3.7 million.

Income (loss) before the provision for (benefit from) income taxes consisted of the following:

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Tax at effective tax rate $ ( 9.8 ) $ 4.8 $ ( 4.4 )

The valuation allowance increased by $ 15.1 million in 2021, mainly attributable to corresponding changes in deferred tax assets, primarily certain federal and state tax credits and net operating loss carryforwards.

The valuation allowance decreased by $ 3.7 million in 2022, mainly attributable to a corresponding reduction in the valuation allowance for a deferred tax liability related to the acquisition of OTB (see further discussion below), and corresponding changes in deferred tax assets, primarily net operating loss carryforwards and federal and state tax credits, partially offset by capitalization of research and development expenses under new tax regulations effective in 2022.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Stock-based compensation 3.9 3.3

Capitalized research and development expenses 22.2 —

Net operating loss carryforwards 4.1 13.5

Lease liability 3.7 3.8

Lease liabilities 3.1 3.7

Other 0.1 1.2

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Prepaid expense and other ( 0.6 ) ( 1.3 )

Right-of-use asset ( 3.5 ) ( 3.6 )

Right-of-use assets ( 2.8 ) ( 3.4 )

Basis difference for fixed assets and intangibles ( 28.0 ) ( 14.8 )

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Valuation allowance for deferred tax assets ( 19.3 ) ( 22.4 )

Net deferred tax asset (liability) $ ( 1.8 ) $ 2.6

Net deferred tax liability $ ( 1.2 ) $ ( 1.8 )

The net deferred tax liability is recorded in Other Liabilities—Noncurrent on the Company’s consolidated balance sheet.

As part of the acquisition of OTB on July 11, 2022, the Company recorded identified intangible assets of $ 50.1 million.

As these identified intangible assets are not deductible for U.S.

tax purposes, a related deferred tax liability of $ 12.1 million was recognized, which provided an additional source of taxable income to support the realization of a portion of the Company’s pre-existing U.S.

deferred tax assets.

As the Company had previously established a full valuation allowance against its net U.S.

deferred tax assets, the Company reduced its deferred tax asset valuation allowance by a corresponding $ 12.1 million, with the reduction in allowance recognized as an income tax benefit in the consolidated statement of operations for the year ended December 31, 2022.

As of December 31, 2022, the Company has federal net operating loss carryforwards of $ 6.3 million, of which $ 3.4 million, if not utilized, will begin to expire in 2034, and the remaining $ 2.9 million can be carried forward indefinitely.

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The California credits can be carried forward indefinitely.

The federal credits will start to expire in 2037.

The federal credits will begin to expire on various dates beginning in 2040 and continuing through 2042.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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The Company’s judgment regarding the likelihood of realization of these deferred tax assets could change in future periods, which could result in a material impact to the Company’s income tax provision in the period of change.

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A reconciliation of unrecognized tax benefits, excluding accrued interest and penalties, are as follows:

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Year Ended December 31, 2022 2021 2020

Balance at the beginning of the year $ 6.3 $ 4.8 $ 4.4

Balance as of beginning of year $ 8.4 $ 6.3 $ 4.8

Increases related to prior year tax positions — 0.6 0.3

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Current year increases 1.7 1.5 1.4

Balance at the end of the year $ 8.4 $ 6.3 $ 4.8

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Balance as of end of year $ 9.9 $ 8.4 $ 6.3

Interest and penalties were not material for 2022 and 2021.

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federal and various state jurisdictions.

The Company’s tax years for 2013 and forward are subject to examination by the U.S.

tax authorities due to certain acquired attribute carryforwards.

The Company’s tax years for 2013 and forward are subject to examination by various state tax authorities due to certain acquired attribute carryforwards.

The Company’s tax years for 2014 and forward are subject to examination by U.S.

and various state tax authorities due to certain acquired attribute carryforwards.

Net Income (Loss) Per Basic and Diluted Share

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The dilutive effect of outstanding awards and convertible securities is reflected in diluted earnings per share by application of the treasury stock method.

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The following table provides a reconciliation of the numerators and denominators of the basic and diluted per share computations for net income (loss) attributable to common stockholders:

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Weighted-average shares of common stock – diluted 70.6 51.9 56.3

Earnings (loss) per share attributable to common stockholders:

Net income (loss) per share attributable to common stockholders:

Basic $ ( 0.14 ) $ ( 0.82 ) $ 0.12

Diluted $ ( 0.14 ) $ ( 0.82 ) $ 0.09

The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock, as well as of Class F stock prior to the Company’s IPO, are identical, except with respect to voting and conversion.

The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock, as well as of Class F stock prior to the Company’s IPO in November 2021, are identical, except with respect to voting and conversion.

See Note 11–Stockholders’ Equity for further discussion.

As the liquidation and dividend rights are identical for Class A, Class B and predecessor Class F common stock, the undistributed earnings are allocated on a proportional basis and the resulting net income (loss) attributable to common stockholders will be the same for Class A, Class B and the predecessor Class F common stock on an individual or combined basis.

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The following common stock equivalents were excluded from the computation of diluted earnings (loss) per share for the periods presented because including them would have been antidilutive:

The following common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been antidilutive:

(in millions)

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The Notes bore interest on the outstanding principal amount at the rate of 4.2922 % per year and were scheduled to mature in 2026.

In November 2021, in connection with the Company’s IPO, the Company repaid in full the outstanding principal amount of $ 28.5 million and accrued interest on the Notes.

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There were no other material related party transactions during 2022, 2021 or 2020.

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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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