Bandwidth(BAND) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Bandwidth Inc's unaudited condensed consolidated financial statements and related notes Unaudited Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (In thousands) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :------------------ | | Total assets | $1,054,196 | $1,065,539 | | Total liabilities | $802,709 | $652,944 | | Total stockholders' equity | $251,487 | $412,595 | Unaudited Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31, In thousands, except per share amounts) | Metric | 2022 | 2021 | | :-------------------------------------------------- | :------- | :------- | | Revenue | $131,364 | $113,479 | | Cost of revenue | $75,950 | $62,321 | | Gross profit | $55,414 | $51,158 | | Operating loss | $(6,870) | $(37) | | Net loss | $(6,814) | $(5,316) | | Net loss per share, basic and diluted | $(0.27) | $(0.21) | | Weighted average common shares outstanding | 25,220,052 | 25,015,948 | - Revenue increased by 16% year-over-year to $131,364 thousand, while net loss widened to $(6,814) thousand from $(5,316) thousand in Q1 2021[17] Unaudited Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :------------------------------------ | :------- | :------- | | Net loss | $(6,814) | $(5,316) | | Foreign currency translation, net of income taxes | $(10,516) | $(23,185) | | Total comprehensive loss | $(17,330) | $(28,501) | - Total comprehensive loss decreased to $(17,330) thousand from $(28,501) thousand in Q1 2021, primarily due to a smaller foreign currency translation loss[20] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity - Stockholders' equity decreased from $412,595 thousand to $251,487 thousand, significantly impacted by an accounting standard adoption (ASU 2020-06)[14][26] - Foreign currency translation resulted in a $(10,516) thousand loss for the three months ended March 31, 2022[26] Unaudited Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, In thousands) | Cash Flow Activity | 2022 | 2021 | | :---------------------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,695) | $10,009 | | Net cash (used in) provided by investing activities | $(5,925) | $22,116 | | Net cash (used in) provided by financing activities | $(1,624) | $215,294 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(15,300) | $247,821 | | Cash, cash equivalents, and restricted cash, end of period | $316,989 | $329,258 | - The company experienced a net decrease in cash of $(15,300) thousand in Q1 2022, a significant shift from a net increase of $247,821 thousand in Q1 2021[29] Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Organization and Description of Business - Bandwidth Inc is a global cloud-based Communications Platform-as-a-Service (CPaaS) provider[32] - The company consolidated its reporting from two segments to a single segment in Q1 2022 due to strategic alignment[33] Note 2. Summary of Significant Accounting Policies - The company changed its presentation of certain costs in Q1 2022 to align with benchmarked definitions, with no impact on revenue or net income[36][37] - The company adopted ASU 2020-06, which reversed the separation of convertible debt into liability and equity components, now accounting for it entirely as debt[51] - The adoption of ASU 2020-06 decreased non-cash interest expense by $6.6 million for the three months ended March 31, 2022[51] Impact of Cost Alignment on Statement of Operations (Three Months Ended March 31, 2021, In thousands) | Statement of Operations | As previously reported | Conformed to current definitions | | :---------------------- | :--------------------- | :------------------------------- | | Cost of revenue | $61,328 | $62,321 | | Research and development | $13,333 | $16,789 | | Sales and marketing | $11,992 | $19,110 | | General and administrative | $26,863 | $15,296 | Note 3. Fair Value Measurements - The fair value of 2026 and 2028 Convertible Notes was approximately $309.5 million and $164.8 million, respectively, as of March 31, 2022[57] Financial Assets Measured at Fair Value (In thousands) | Financial Assets | March 31, 2022 | December 31, 2021 | | :----------------------- | :------------- | :------------------ | | Money market account | $230,003 | $241,157 | Note 4. Financial Statement Components - Unbilled receivables increased from $31.8 million to $35.5 million at March 31, 2022, representing earned revenue to be billed in the next cycle[45][59] Accounts Receivable, Net of Allowances (In thousands) | Component | March 31, 2022 | December 31, 2021 | | :------------------------------------------------------- | :------------- | :------------------ | | Trade accounts receivable | $32,256 | $31,036 | | Unbilled accounts receivable | $35,515 | $31,786 | | Allowance for doubtful accounts and reserve for expected credit losses | $(1,680) | $(1,661) | | Other accounts receivable | $2,736 | $411 | | Total accounts receivable, net | $68,827 | $61,572 | Allowance for Doubtful Accounts Rollforward (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :--------------------------------- | :------- | :------- | | Balance, beginning of period | $(1,661) | $(1,203) | | Charged to bad debt expense | $(141) | $(48) | | Deductions (write-offs) | $111 | $10 | | Impact of foreign currency translation | $11 | $23 | | Balance, end of period | $(1,680) | $(1,218) | Note 5. Right-of-Use Asset and Lease Liabilities - The company entered into a lease for a new corporate headquarters with total lease payments over the initial 20-year term of approximately $495.7 million[75][76] Lease Expense Components (Three Months Ended March 31, In thousands) | Lease Cost Component | 2022 | 2021 | | :-------------------------- | :------- | :------- | | Operating lease cost | $2,138 | $1,614 | | Finance lease cost: Depreciation | $50 | $47 | | Finance lease cost: Interest | $3 | $0 | | Sublease income | $(96) | $(96) | | Total net lease cost | $2,095 | $1,565 | Lease Assets and Liabilities (In thousands) | Metric | March 31, 2022 | December 31, 2021 | | :------------------------------------------------ | :------------- | :------------------ | | Operating lease assets, net | $15,419 | $14,061 | | Finance lease assets, net | $358 | $373 | | Total leased assets | $15,777 | $14,434 | | Operating lease liability, current | $7,208 | $5,807 | | Finance lease liability, current | $170 | $177 | | Operating lease liability, non-current | $10,711 | $10,958 | | Finance lease liability, non-current | $195 | $202 | | Total lease liabilities | $18,284 | $17,144 | Note 6. Property, Plant and Equipment - Capitalized software development costs were $0.7 million in Q1 2022, down from $1.1 million in Q1 2021[79] Property, Plant and Equipment, Net (In thousands) | Component | March 31, 2022 | December 31, 2021 | | :--------------------------------- | :------------- | :------------------ | | Total cost | $139,336 | $139,336 | | Less—accumulated depreciation | $(69,732) | $(69,732) | | Total property, plant and equipment, net | $69,604 | $69,604 | Total Depreciation Expense (Three Months Ended March 31, In thousands) | Category | 2022 | 2021 | | :----------------------------- | :------- | :------- | | Cost of revenue | $3,376 | $3,146 | | Research and development | $592 | $453 | | Sales and marketing | $334 | $284 | | General and administrative | $302 | $293 | | Total depreciation expense | $4,604 | $4,176 | Note 7. Intangible Assets - Total intangible assets, net, decreased from $211,217 thousand to $202,502 thousand at March 31, 2022[14][85] Intangible Assets, Net (March 31, 2022, In thousands) | Intangible Asset | Gross Amount | Accumulated Amortization | Net Carrying Value | Amortization Period (In years) | | :----------------------- | :----------- | :----------------------- | :----------------- | :----------------------------- | | Customer relationships | $152,005 | $(19,135) | $132,870 | 15 - 20 | | Developed technology | $80,234 | $(11,366) | $68,868 | 10 | | Other, definite lived | $2,828 | $(2,828) | $0 | 2 - 7 | | Licenses, indefinite lived | $764 | $0 | $764 | Indefinite | | Total intangible assets, net | $235,831 | $(33,329) | $202,502 | | Total Amortization Expense (Three Months Ended March 31, In thousands) | Category | 2022 | 2021 | | :----------------------------- | :------- | :------- | | Cost of revenue | $2,032 | $2,176 | | Sales and marketing | $2,534 | $2,692 | | Total amortization expense | $4,566 | $4,868 | Note 8. Debt - The company has $400 million of 0.25% Convertible Notes due 2026 and $250 million of 0.50% Convertible Notes due 2028[91][102] - Upon adoption of ASU 2020-06, the company reversed the separation of debt and equity components for its Convertible Notes, now accounting for them entirely as debt[100][111][119] - The conditional conversion feature for both 2026 and 2028 Convertible Notes was not triggered during Q1 2022[97][108] Convertible Notes Net Carrying Amount (In thousands) | Convertible Notes | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :------------------ | | 2026 Convertible Notes net carrying amount | $392,169 | $301,923 | | 2028 Convertible Notes net carrying amount | $243,558 | $184,517 | | Total net carrying amount | $635,727 | $486,440 | Total Interest Expense Related to Convertible Notes (Three Months Ended March 31, In thousands) | Interest Expense Component | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | 2026 Convertible Notes: Contractual interest expense | $250 | $250 | | 2026 Convertible Notes: Amortization of debt discount | $0 | $4,510 | | 2026 Convertible Notes: Amortization of debt issuance costs | $495 | $296 | | Total interest expense related to 2026 Convertible Notes | $745 | $5,056 | | 2028 Convertible Notes: Contractual interest expense | $313 | $52 | | 2028 Convertible Notes: Amortization of debt discount | $0 | $333 | | 2028 Convertible Notes: Amortization of debt issuance costs | $265 | $28 | | Total interest expense related to 2028 Convertible Notes | $578 | $413 | | Total interest expense | $1,323 | $5,469 | Note 9. Geographic Information - International revenue increased by 22% year-over-year to $15,479 thousand in Q1 2022[123] - Long-lived assets held outside the United States increased from $9.2 million to $11.9 million at March 31, 2022[122] Revenue by Geographic Area (Three Months Ended March 31, In thousands) | Geographic Area | 2022 | 2021 | | :---------------- | :------- | :------- | | United States | $115,885 | $100,798 | | International | $15,479 | $12,681 | | Total | $131,364 | $113,479 | Note 10. Stockholders' Equity - As of March 31, 2022, the company had 23,309,031 shares of Class A and 1,965,170 shares of Class B common stock outstanding[125] Reserved Shares of Class A Common Stock for Stock-Based Awards | Category | March 31, 2022 | December 31, 2021 | | :--------------------------------------------------- | :------------- | :------------------ | | Stock options issued and outstanding | 164,114 | 180,209 | | Nonvested restricted stock units issued and outstanding | 793,848 | 344,486 | | Stock-based awards available for grant under the 2017 Plan | 3,625,235 | 3,060,674 | | Total | 4,583,197 | 3,585,369 | Note 11. Stock-Based Compensation - The 2017 Incentive Award Plan automatically increased shares available for grant by 1,158,900 on January 1, 2022[131] Stock Option Activity (Three Months Ended March 31, 2022) | Metric | Number of options outstanding | | :----------------------------------------------------------- | :---------------------------- | | Outstanding as of December 31, 2021 | 180,209 | | Exercised | (16,095) | | Outstanding as of March 31, 2022 | 164,114 | | Options vested and exercisable at March 31, 2022 | 164,114 | Restricted Stock Unit (RSU) Activity (Three Months Ended March 31, 2022) | Metric | Number of awards outstanding | | :----------------------------------------------------------- | :---------------------------- | | Nonvested RSUs as of December 31, 2021 | 344,486 | | Granted | 627,724 | | Vested | (144,977) | | Forfeited or cancelled | (33,385) | | Nonvested RSUs as of March 31, 2022 | 793,848 | Total Stock-Based Compensation Expense (Three Months Ended March 31, In thousands) | Category | 2022 | 2021 | | :----------------------------- | :------- | :------- | | Cost of revenue | $99 | $101 | | Research and development | $1,868 | $1,080 | | Sales and marketing | $899 | $710 | | General and administrative | $2,480 | $2,499 | | Total | $5,346 | $4,390 | Note 12. Commitments and Contingencies - The company has non-cancellable purchase obligations totaling $13.7 million as of March 31, 2022[145] - The new corporate headquarters lease has total lease payments of approximately $495.7 million over the initial 20-year term[147] Note 13. Employee Benefit Plans - Company matching contributions for defined contribution plans increased from $0.9 million to $1.2 million in Q1 2022[152] Net Periodic Pension Cost (Three Months Ended March 31, In thousands) | Component | 2022 | 2021 | | :-------------------------- | :------- | :------- | | Service cost | $70 | $103 | | Interest cost | $9 | $5 | | Return on plan assets | $(7) | $(4) | | Net periodic pension cost | $72 | $104 | Note 14. Income Taxes - The effective tax rate decreased from 5.9% in Q1 2021 to (2.7)% in Q1 2022 due to a valuation allowance against deferred tax assets[156][157] Note 15. Related Parties - Amounts charged under services arrangements with Relay, Inc totaled $0.4 million in Q1 2022[158] Note 16. Basic and Diluted Loss per Common Share Basic and Diluted Loss per Common Share (Three Months Ended March 31, In thousands, except per share amounts) | Metric | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | Net loss attributable to common stockholders | $(6,814) | $(5,316) | | Net loss per share, basic and diluted | $(0.27) | $(0.21) | | Weighted average number of common shares outstanding, basic and diluted | 25,220,052 | 25,015,948 | Common Share Equivalents Excluded from Diluted EPS (Anti-dilutive) | Category | March 31, 2022 | March 31, 2021 | | :-------------------------------- | :------------- | :------------- | | Stock options issued and outstanding | 164,114 | 196,433 | | Restricted stock units issued and outstanding | 793,848 | 405,875 | | Convertible senior notes | 5,788,805 | 1,812,134 | | Total | 6,746,767 | 2,414,442 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results of operations for Q1 2022 Overview - Bandwidth Inc is a leading global enterprise cloud communications platform-as-a-service (CPaaS) provider[167] - The company owns and operates a nationwide IP voice network in the U.S and has a global platform across over 60 countries[168] Key Financial and Operational Highlights (Three Months Ended March 31) | Metric | 2022 | 2021 | Change (%) | | :-------------------- | :------- | :------- | :--------- | | Total Revenue | $131M | $113M | 16% | | Net Loss | $7M | $5M | 40% | | Active Customer Accounts | 3,372 | 2,999 | 12% | Segment Reporting Update and Cost Alignment - Bandwidth consolidated from two segments to a single segment in Q1 2022 due to strategic alignment[171] - The company also re-aligned cost presentations, which did not impact revenue or net income for any periods presented[172] Impact of Cost Alignment on Statement of Operations (Three Months Ended March 31, 2021, In thousands) | Statement of Operations | As previously reported | Conformed to current definitions | | :---------------------- | :--------------------- | :------------------------------- | | Cost of revenue | $61,328 | $62,321 | | Research and development | $13,333 | $16,789 | | Sales and marketing | $11,992 | $19,110 | | General and administrative | $26,863 | $15,296 | COVID-19 Update - The COVID-19 pandemic continues to create uncertainty, potentially impacting business spending and customer demand[174] - The company anticipates potential curtailed customer demand as the pandemic abates, which could adversely affect future financial performance[174] DDoS Attack - In September 2021, Bandwidth's network was subjected to a distributed denial of service (DDoS) attack, causing service disruptions[175] - Mitigation efforts have largely stabilized the network, though some intermittent disruptions continued[175] Key Performance Indicators - Active customer accounts increased by 12% year-over-year to 3,372, while the dollar-based net retention rate decreased from 131% to 114%[178] - Adjusted EBITDA decreased by 37.5% year-over-year to $8,368 thousand, and free cash flow declined significantly to $(12,620) thousand[178] Key Performance Indicators (Three Months Ended March 31, Dollars in thousands) | Metric | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Number of active customers | 3,372 | 2,999 | | Dollar-based net retention rate | 114% | 131% | | Adjusted EBITDA | $8,368 | $13,397 | | Free cash flow | $(12,620) | $2,125 | Key Components of Statements of Operations - Revenue is primarily derived from reoccurring sources like per-minute usage and monthly recurring charges[183] - Cost of revenue includes fees to network service providers, network operations costs, and personnel costs[185] - Operating expenses are expected to increase in absolute dollars[188] - The effective tax rate for Q1 2022 was (2.7)%, down from 5.9% in Q1 2021, due to a valuation allowance[192] Results of Operations (Consolidated) - Gross margin decreased to 42% in Q1 2022 from 45% in Q1 2021, primarily due to a $14 million increase in messaging usage costs[199] - R&D expenses increased by 34% and Sales & Marketing expenses increased by 21%, driven by higher personnel and facilities costs[201][202] - Interest expense, net, decreased by $4 million in Q1 2022 compared to Q1 2021[203] Consolidated Statements of Operations (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Revenue | $131,364 | $113,479 | $17,885 | 16% | | Cost of revenue | $75,950 | $62,321 | $13,629 | 22% | | Gross profit | $55,414 | $51,158 | $4,256 | 8% | | Operating expenses | $62,284 | $51,195 | $11,089 | 22% | | Operating loss | $(6,870) | $(37) | $(6,833) | >100% | | Net loss | $(6,814) | $(5,316) | $(1,498) | 28% | Liquidity and Capital Resources - Liquidity is provided by free cash flow from operations and financing activities[205] - Principal future commitments include $650.0 million in Convertible Notes and a $496 million lease for a future office headquarters[206] - The company expects its cash and cash equivalents to be sufficient for anticipated cash needs for at least the next 12 months[205] Statement of Cash Flows - Net cash used in operating activities was $7 million in Q1 2022, a decrease from $10 million provided in Q1 2021[210] - Net cash used in investing activities was $6 million in Q1 2022, compared to $22 million provided in Q1 2021[209][211] - Net cash used in financing activities was $2 million in Q1 2022, a significant decrease from $215 million provided in Q1 2021[209][212] Summary of Cash Flows (Three Months Ended March 31, In thousands) | Cash Flow Activity | 2022 | 2021 | | :---------------------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,695) | $10,009 | | Net cash (used in) provided by investing activities | $(5,925) | $22,116 | | Net cash (used in) provided by financing activities | $(1,624) | $215,294 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(15,300) | $247,821 | Off-Balance Sheet Arrangements - The company has off-balance sheet agreements for short-term leases totaling $237 thousand[213] Non-GAAP Financial Measures - The company uses Non-GAAP gross profit, Non-GAAP net income, Adjusted EBITDA, and free cash flow to evaluate performance[215] Non-GAAP Gross Profit and Margin (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :--------------------------------- | :------- | :------- | | Gross Profit | $55,414 | $51,158 | | Depreciation | $3,376 | $3,146 | | Amortization of acquired intangible assets | $2,032 | $2,176 | | Stock-based compensation | $99 | $101 | | Non-GAAP Gross Profit | $60,921 | $56,581 | | Non-GAAP Gross Margin % | 53% | 52% | Non-GAAP Net Income (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | Net loss | $(6,814) | $(5,316) | | Stock-based compensation | $5,346 | $4,390 | | Amortization of acquired intangibles | $4,566 | $4,868 | | Amortization of debt discount and issuance costs for convertible debt | $760 | $5,167 | | Non-GAAP net income | $2,544 | $8,303 | | Non-GAAP diluted net income per share | $0.09 | $0.30 | Adjusted EBITDA (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :--------------------------------- | :------- | :------- | | Net loss | $(6,814) | $(5,316) | | Income tax provision (benefit) | $179 | $(332) | | Interest expense, net | $1,250 | $5,410 | | Depreciation | $4,604 | $4,176 | | Amortization | $4,566 | $4,868 | | Stock-based compensation | $5,346 | $4,390 | | Adjusted EBITDA | $8,368 | $13,397 | Free Cash Flow (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,695) | $10,009 | | Net cash used in investing in capital assets | $(5,925) | $(7,884) | | Free cash flow | $(12,620) | $2,125 | Critical Accounting Policies and Significant Judgments and Estimates - Critical accounting policies include revenue recognition, stock-based compensation, and goodwill valuation[231] - There have been no material changes to critical accounting policies compared to the Annual Report on Form 10-K[231] Recently Issued Accounting Guidance - Refer to Note 2 for a summary of recently adopted and not yet adopted accounting standards[232] Item 3. Quantitative and Qualitative Disclosure About Market Risk This section discusses the company's exposure to market risks, primarily interest rate and foreign currency fluctuations Interest Rate Risk - The company's primary market risk is interest rate changes, with $316.0 million in cash and cash equivalents[235] - The $650.0 million in Convertible Notes have fixed annual interest rates, limiting direct interest rate exposure[236] Foreign Currency Risk - Approximately 12% of total revenue was generated outside the United States for Q1 2022[237] - The majority of revenues and operating expenses are denominated in U.S dollars, limiting significant foreign currency risk[237] Inflation - The company monitors inflation to minimize its effects through pricing strategies and cost reductions[238] Item 4. Controls and Procedures This section details management's evaluation of disclosure controls and procedures, concluding their effectiveness Evaluation of disclosure controls and procedures - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[240] Changes in internal control over financial reporting - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2022[241] Inherent limitation on the effectiveness of internal control - The effectiveness of any internal control system is subject to inherent limitations, providing reasonable, not absolute, assurances[242] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section outlines ongoing legal proceedings, primarily concerning 911 taxes and unsolicited phone calls - Bandwidth Inc is a defendant in multiple lawsuits alleging failure to bill, collect, and remit 911 taxes and surcharges[244][245] - The company is also named in a class action lawsuit regarding alleged failure to block unsolicited phone calls[245] - Management believes the ultimate resolution of these matters will not have a material adverse effect on the company's financial position[151][246] Item 1A. Risk Factors This section details significant risks and uncertainties that could adversely affect the company's business Risk Factors Summary - Key risks include market competition, customer retention, international operations, the Russia-Ukraine conflict, cybersecurity threats, and various litigations[251][252] - Additional risks relate to the Voxbone acquisition, Convertible Notes, and Class A Common Stock ownership[252] Risks Related to Our Business - Future growth depends on factors including competition, pricing, new service offerings, and regulatory conditions[254][255] - The COVID-19 pandemic may harm business through decreased spending, lower renewal rates, and delayed sales cycles[256][258] - The market is highly competitive, with larger competitors having greater resources, potentially leading to price decreases[261][262] - Cyberattacks, including the September 2021 DDoS attack, pose significant risks of service disruption and reputational damage[300][303] - Operating internationally exposes the company to political, regulatory, economic, and staffing risks[294][295][296] - The military conflict between Russia and Ukraine may adversely affect operations in Europe and increase cyberattack threats[298][299] - The company's revenue is concentrated among a limited number of customers[300] - Failure to protect internally developed systems, technology, and intellectual property could lead to costly litigation[346][347] - The company relies heavily on the continued services of senior management and key employees[378][379] Risks Related to the Acquisition of Voxbone - The anticipated synergies from the Voxbone acquisition may not be fully realized due to integration difficulties[418][419] - Significant non-recurring costs have been incurred for the acquisition and integration[420] Risks Related to the Convertible Notes - Servicing the company's debt requires significant cash flow, and there is a risk that future operations may not generate sufficient cash[421][422] - The company may not have the ability to raise necessary funds for cash settlement upon conversion or repurchase of Convertible Notes[423][424] - The accounting method for convertible debt may adversely affect reported financial results and diluted EPS[427][429] - The conditional conversion feature of the Convertible Notes, if triggered, could adversely affect liquidity[430] - Capped call transactions, intended to reduce dilution, may affect the value of the Convertible Notes and Class A common stock[431][433] - The company is exposed to counterparty risk with respect to the Capped Calls[435] Risks Related to Ownership of Our Class A Common Stock - The trading price of Class A common stock may be volatile, potentially leading to investment losses[436][438] - Substantial future sales of Class A common stock by existing stockholders could cause the market price to decline[439][458] - The dual-class capital structure concentrates voting control with pre-IPO stockholders[440][441] - Anti-takeover provisions in organizational documents and Delaware law could impair or delay takeover attempts[447][448][449] - The company does not intend to pay cash dividends in the foreseeable future[456][457] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states there were no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities occurred during the period[460] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q - Exhibits include organizational documents, employment agreements, and certifications from the CEO and CFO[461] Signatures This section contains the duly authorized signatures of the company's CEO and CFO - The report is signed by David A Morken, CEO, and Daryl E Raiford, CFO, on May 6, 2022[463][464][465]