Alkami(ALKT) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial information, including financial statements, management's discussion, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents Alkami Technology, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2022, and December 31, 2021, including balance sheets, statements of operations, changes in equity, and cash flows, along with detailed notes explaining significant accounting policies, business combinations, revenue recognition, debt, and other financial instrument disclosures Unaudited Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Total Assets | $491,110 | $436,510 | | Total Liabilities | $155,565 | $91,899 | | Total Stockholders' Equity | $335,545 | $344,611 | - Cash and cash equivalents decreased significantly from $308,581 thousand at December 31, 2021, to $89,117 thousand at June 30, 2022[11] - Marketable securities increased from $0 at December 31, 2021, to $124,237 thousand at June 30, 2022[11] - Goodwill increased substantially from $48,091 thousand to $147,402 thousand, primarily due to the Segmint acquisition[11] Unaudited Condensed Consolidated Statements of Operations This section details the company's financial performance over specific periods, presenting revenues, expenses, and net loss | Metric (in thousands) | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $50,530 | $36,701 | $95,320 | $69,963 | | Gross profit | $27,273 | $20,521 | $52,083 | $38,286 | | Loss from operations | $(19,384) | $(9,813) | $(32,390) | $(18,752) | | Net loss | $(20,233) | $(11,375) | $(33,639) | $(22,254) | | Basic and diluted net loss per share | $(0.22) | $(0.15) | $(0.37) | $(0.56) | - Revenues increased by 37.7% for the three months ended June 30, 2022, and 36.2% for the six months ended June 30, 2022, compared to the same periods in 2021[14] - Net loss increased significantly, nearly doubling for the three-month period and increasing by over 50% for the six-month period, primarily due to increased operating expenses[14] Unaudited Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) This section outlines changes in the company's equity structure, including common stock, additional paid-in capital, and accumulated deficit | Metric (in thousands) | Balance Dec 31, 2021 | Balance June 30, 2022 | | :------------------------------ | :------------------- | :-------------------- | | Common Stock Amount | $90 | $91 | | Additional Paid-in Capital | $658,374 | $682,946 | | Accumulated Deficit | $(313,853) | $(347,492) | | Total Stockholders' Equity (Deficit) | $344,611 | $335,545 | - Stock-based compensation contributed $21,449 thousand to additional paid-in capital for the six months ended June 30, 2022[20] - The accumulated deficit increased by $33,639 thousand due to the net loss for the six months ended June 30, 2022[20] Unaudited Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity (in thousands) | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(19,369) | $(12,288) | | Net cash used in investing activities | $(259,576) | $(1,446) | | Net cash provided by financing activities | $62,584 | $185,422 | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(216,361) | $171,688 | - A significant increase in cash used in investing activities in 2022 was primarily due to the purchase of marketable securities ($143.6 million) and the acquisition of Segmint ($132.0 million)[24] - Financing activities in 2022 were driven by $85.0 million in proceeds from long-term debt issuance, while 2021 saw substantial proceeds from the IPO ($192.8 million)[24] Notes to the Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1. Organization This note describes Alkami Technology, Inc.'s business as a cloud-based digital banking solutions provider and its revenue generation model - Alkami Technology, Inc. is a cloud-based digital banking solutions provider, empowering financial institutions with its proprietary, true cloud-based, multi-tenant Alkami Platform[27] - The company generates revenue through long-term, subscription-based contractual arrangements[27] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and policies applied in preparing the interim financial statements, including recent accounting pronouncement adoptions - Interim unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information, omitting some disclosures normally included in annual statements[29][30] - The Company reclassified 'Acquisition-related expenses, net' and 'Amortization of acquired intangibles' into separate captions for current year presentation[31] - The Company early adopted ASU 2021-08 (Business Combinations) in Q2 2022, applying it retrospectively to current fiscal year business combinations, with no material impact[41][43] - The Company expects to adopt ASU 2016-02 (Leases) in fiscal year 2022, which will increase total assets and liabilities by recognizing right-of-use assets and operating lease liabilities[39] Note 3. Business Combination This note details the acquisition of Segmint Inc. and the preliminary purchase price allocation, along with revaluation of contingent consideration from a prior acquisition Preliminary Purchase Price Allocation for Segmint Acquisition (as of April 25, 2022) | Asset/Liability | Preliminary Fair Value (in thousands) | | :-------------------------- | :------------------------------------ | | Trade accounts receivables | $1,788 | | Other current assets | $323 | | Property and equipment | $35 | | Goodwill | $99,310 | | Intangible assets | $35,400 | | Total assets acquired | $136,856 | | Accounts payable | $768 | | Accrued liabilities | $188 | | Deferred revenues, current | $145 | | Other non-current liabilities | $625 | | Total liabilities assumed | $1,726 | | Net assets acquired | $135,130 | - The Company acquired Segmint Inc. on April 25, 2022, for approximately $135.1 million, with a portion placed in escrow for indemnification[49] - Goodwill of $99.3 million resulted from the Segmint acquisition, intended to augment and diversify the Company's segment[52] - For the MK Decisioning Systems acquisition (Sept 2021), the fair value of contingent earn-out was remeasured to $12.8 million as of June 30, 2022, down from $15.5 million at Dec 31, 2021, resulting in a $2.7 million gain on revaluation for the six months ended June 30, 2022[47][48] Note 4. Property and Equipment, Net This note provides a breakdown of the company's property and equipment, net of accumulated depreciation and amortization Property and Equipment, Net (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :---------------------- | :------------ | :---------------- | | Software | $5,908 | $3,299 | | Computers and equipment | $5,239 | $4,854 | | Furniture and fixtures | $3,984 | $3,980 | | Leasehold improvements | $11,720 | $11,712 | | Total | $26,851 | $23,845 | | Less: accumulated depreciation and amortization | $(13,348) | $(12,017) | | Net | $13,503 | $11,828 | - Depreciation and amortization expense for property and equipment was $1.2 million for the six months ended June 30, 2022, consistent with $1.2 million for the same period in 2021[54] Note 5. Revenue and Deferred Costs This note details the company's revenue sources, primarily SaaS subscription services, and information on deferred commissions Revenue by Major Source (in thousands) | Revenue Source | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | SaaS subscription services | $47,781 | $34,604 | $90,590 | $66,173 | | Implementation services | $2,004 | $1,636 | $3,581 | $2,936 | | Other services | $745 | $461 | $1,149 | $854 | | Total revenues | $50,530 | $36,701 | $95,320 | $69,963 | - SaaS subscription services constitute the majority of revenue, representing 94.6% and 95.0% of total revenues for the three and six months ended June 30, 2022, respectively[58] - The Company expects to recognize approximately $696.0 million in minimum contracted subscription revenues in future periods, with 47.9% over the next 24 months[58] - Deferred commissions capitalized increased to $1.7 million for the six months ended June 30, 2022, from $0.5 million in the prior year, with amortization of $1.4 million[59] Note 6. Accounts Receivable This note presents a breakdown of the company's accounts receivable, including trade, unbilled, and other receivables, net of allowances Accounts Receivable (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :------------------------ | :------------ | :---------------- | | Trade accounts receivable | $23,355 | $15,991 | | Unbilled receivables | $3,800 | $3,677 | | Other receivables | $457 | $1,355 | | Total receivables | $27,612 | $21,023 | | Allowance for doubtful accounts | $(60) | $(39) | | Reserve for estimated credits | $(185) | $(163) | | Net Accounts Receivable | $27,367 | $20,821 | - Trade accounts receivable increased by $7.36 million from December 31, 2021, to June 30, 2022[62] Note 7. Accrued Liabilities This note provides a detailed breakdown of the company's accrued liabilities at specific reporting dates Accrued Liabilities (in thousands) | Category | June 30, 2022 | December 31, 2021 | | :------------------------------ | :------------ | :---------------- | | Bonus accrual | $4,857 | $3,725 | | Accrued vendor purchases | $642 | $2,276 | | Commissions accrual | $1,463 | $2,302 | | Accrued hosting services | $1,473 | $1,264 | | Client refund liability | $575 | $1,004 | | Deferred compensation payable | $1,875 | $625 | | Accrued consulting and professional fees | $854 | $657 | | Accrued tax liabilities | $3,138 | $3,724 | | MK acquisition holdback provision | $2,000 | $1,000 | | ESPP liability | $303 | $821 | | Other accrued liabilities | $5,444 | $1,685 | | Total accrued liabilities | $22,624 | $19,083 | - Total accrued liabilities increased by $3.54 million from December 31, 2021, to June 30, 2022[64] - Other accrued liabilities saw a significant increase from $1,685 thousand to $5,444 thousand[64] Note 8. Debt This note details the company's debt arrangements, including the Amended Credit Agreement, term loan, and revolving facility, along with maturity schedules - On April 29, 2022, the Company entered into an Amended Credit Agreement, including a $40.0 million secured revolving facility and an $85.0 million term loan[65] - The proceeds from the Amended Term Loan were used to replenish cash for the Segmint Inc. acquisition[65] - The Amended Credit Agreement matures on April 29, 2025, and includes an accordion feature for up to $50.0 million in additional revolving loan commitments[65][66] - Borrowings bear interest at a variable rate (SOFR + 3.00% to 3.50%) and are subject to annual recurring revenue growth and liquidity covenants[67][69] Long-term Debt Maturities (in thousands) | Year | Amount | | :--------- | :----- | | 2022 | — | | 2023 | $3,188 | | 2024 | $7,438 | | 2025 | $74,374 | | Thereafter | — | | Total | $85,000 | Note 9. Stockholders' Equity (Deficit) This note provides details on stock-based compensation expense and its impact on stockholders' equity Stock-based Compensation Expense (in thousands) | Category | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $1,056 | $465 | $2,034 | $698 | | Research and development | $2,580 | $702 | $4,464 | $1,001 | | Sales and marketing | $997 | $240 | $1,747 | $344 | | General and administrative | $6,635 | $1,616 | $12,797 | $2,398 | | Total | $11,268 | $3,023 | $21,042 | $4,441 | - Total stock-based compensation expense increased significantly to $21.0 million for the six months ended June 30, 2022, from $4.4 million in the prior year[73] Note 10. Income Taxes This note outlines the company's income tax expense, effective tax rate, and the valuation allowance against deferred tax assets - The Company recorded $0.2 million in income tax expense for both the three and six months ended June 30, 2022, compared to no expense in 2021[74] - The effective tax rate was (0.8)% and (0.7)% for the three and six months ended June 30, 2022, respectively, primarily due to state income taxes and deferred taxes related to acquired goodwill amortization[74] - A full valuation allowance is maintained against most deferred tax assets, as realization is not reasonably assured[75] Note 11. Fair Value of Financial Instruments This note describes the fair value hierarchy used for financial instruments and presents the fair values of assets and liabilities - The Company uses a three-tier fair value hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs) for financial instruments[78] Fair Value of Financial Assets and Liabilities (in thousands) as of June 30, 2022 | Category | Total Fair Value | Level 1 | Level 2 | Level 3 | | :----------------------------- | :--------------- | :------- | :------- | :--------- | | Cash equivalents | $89,402 | $89,402 | — | — | | Marketable securities | $124,237 | $53,016 | $68,772 | — | | Total Assets | $213,639 | $142,418 | $68,772 | — | | Contingent consideration payable | $(12,800) | — | — | $(12,800) | | Total Liabilities | $(12,800) | — | — | $(12,800) | - Contingent consideration payable decreased from $15.5 million at December 31, 2021, to $12.8 million at June 30, 2022, due to a $2.7 million fair value adjustment reported in earnings[80][81] Note 12. Earnings Per Share This note details the calculation of basic and diluted net loss per share, including anti-dilutive common share equivalents Net Loss Per Share Attributable to Common Stockholders | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders (in thousands) | $(20,233) | $(11,375) | $(33,639) | $(22,531) | | Weighted average shares outstanding (basic and diluted) | 90,707,381 | 74,831,512 | 90,459,503 | 40,399,138 | | Loss per common share - basic and diluted | $(0.22) | $(0.15) | $(0.37) | $(0.56) | - Due to net losses, basic and diluted EPS are the same, as potentially dilutive shares would be anti-dilutive[84] Anti-dilutive Common Share Equivalents (as of June 30) | Category | 2022 | 2021 | | :------------ | :---------- | :----------- | | Stock options | 7,068,202 | 10,934,687 | | RSUs | 6,665,691 | 213,500 | | ESPP | 24,484 | — | | Total | 13,758,377 | 11,360,595 | Note 13. Commitments and Contingencies This note outlines the company's future minimum operating lease payments and its assessment of legal proceedings Future Minimum Operating Lease Payments (in thousands) as of June 30, 2022 | Year | Operating Leases | | :------------------------ | :--------------- | | 2022 (remaining six months) | $1,864 | | 2023 | $3,773 | | 2024 | $3,835 | | 2025 | $3,898 | | 2026 | $3,961 | | Thereafter | $6,736 | | Total | $24,067 | - The Company leases its corporate headquarters under a non-cancelable operating lease expiring August 31, 2028[87] - The Company believes its liability from pending legal proceedings is not reasonably likely to be material to its financial position, results of operations, or cash flows[90] Note 14. Goodwill and Other Intangibles This note details the changes in goodwill due to acquisitions and the carrying value and amortization of other intangible assets - Goodwill increased to $147.4 million at June 30, 2022, from $48.1 million at December 31, 2021, primarily due to the $99.3 million recorded from the Segmint acquisition[91] Total Intangibles, Net (in thousands) | Category | Carrying Value (June 30, 2022) | Accumulated Amortization (June 30, 2022) | Net Carrying Value (June 30, 2022) | | :--------------------- | :----------------------------- | :--------------------------------------- | :--------------------------------- | | Customer Relationships | $19,970 | $(767) | $19,203 | | Developed Technology | $27,100 | $(2,105) | $24,995 | | Tradenames | $750 | $(55) | $695 | | Subtotal amortizable | $47,820 | $(2,927) | $44,893 | | Website domain name | $25 | — | $25 | | Total | $47,845 | $(2,927) | $44,918 | - Amortization expense on intangible assets was $1.6 million for the six months ended June 30, 2022, a significant increase from $0.4 million in the prior year, largely due to recent acquisitions[92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Alkami's financial condition and operational results, highlighting revenue growth driven by client expansion and product adoption, alongside increased operating expenses due to strategic investments, and details key business metrics, liquidity, and capital resources, including the impact of recent acquisitions and debt financing Overview This section provides an overview of Alkami's business model, strategic acquisitions, and key financial highlights for the reporting periods - Alkami is a cloud-based digital banking solutions provider, enabling financial institutions to compete with larger banks through its Alkami Platform[98] - The company's strategy involves long-term, subscription-based contracts, primarily using a per-registered-user pricing model with tiered discounts[98][102] - Recent acquisitions include ACH Alert (2020), MK Decisioning Systems (2021), and Segmint Inc. (April 2022), expanding product offerings in fraud prevention, digital account opening, and marketing analytics[99] Financial Highlights (in millions) | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | | :----------- | :------------------------------- | :------------------------------- | | Total Revenues | $50.5 | $36.7 | | Net Loss | $(20.2) | $(11.4) | | Metric | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :----------- | :----------------------------- | :----------------------------- | | Total Revenues | $95.3 | $69.9 | | Net Loss | $(33.6) | $(22.3) | Factors Affecting our Operating Results This section discusses the primary drivers influencing the company's financial performance, including client growth, customer penetration, product expansion, and innovation investments - Key factors include growing the FI client base (182 FIs, over 320 clients across all products as of June 30, 2022, representing 91.3% annual client growth), deepening client customer penetration, and expanding the product suite[105][106][107] - Client renewals are crucial for revenue stability and gross margin targets; the company had one and five client renewals in the three and six months ended June 30, 2022, respectively[107] - Continued leadership in innovation, supported by significant R&D investment (32.8% and 32.3% of revenues for the three and six months ended June 30, 2022), is vital for maintaining a differentiated platform[108] - The COVID-19 pandemic continues to pose uncertainty, potentially impacting sales and implementation activities[109] Components of Results of Operations This section breaks down the key components of the company's financial results, including revenue recognition, cost of revenues, gross margin, and operating expenses - Revenues are primarily derived from multi-year SaaS subscription services (average contract life of 70 months), with fees based on contractual minimums and registered users[110] - Cost of revenues includes personnel costs for implementation, client support, and development, third-party hosting, direct costs of bill-pay services, and amortization of acquired technology[114] - Gross margin was 54.0% and 54.6% for the three and six months ended June 30, 2022, respectively, compared to 55.9% and 54.7% for the same periods in 2021[116] - Operating expenses (R&D, Sales & Marketing, G&A) are increasing due to investments in platform expansion, sales team growth, and public company costs[119][120][123] - Acquisition-related expenses include deferred compensation and professional fees, offset by gains on revaluation of contingent consideration[123] Results of Operations This section presents a detailed comparison of the company's consolidated statements of operations data for the three and six months ended June 30, 2022, and 2021 Consolidated Statements of Operations Data (in thousands) | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $50,530 | $36,701 | $95,320 | $69,963 | | Cost of revenues | $23,257 | $16,180 | $43,237 | $31,677 | | Gross profit | $27,273 | $20,521 | $52,083 | $38,286 | | Total operating expenses | $46,657 | $30,334 | $84,473 | $57,038 | | Loss from operations | $(19,384) | $(9,813) | $(32,390) | $(18,752) | | Net loss | $(20,233) | $(11,375) | $(33,639) | $(22,254) | Stock-based Compensation Expenses (in thousands) | Category | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues | $1,056 | $465 | $2,034 | $698 | | Research and development | $2,580 | $702 | $4,464 | $1,001 | | Sales and marketing | $997 | $240 | $1,747 | $344 | | General and administrative | $6,635 | $1,616 | $12,797 | $2,398 | | Total | $11,268 | $3,023 | $21,042 | $4,441 | Key Business Metrics This section highlights the company's key performance indicators, including Annual Recurring Revenue (ARR), Registered Users, Revenue per Registered User (RPU), and Adjusted EBITDA Key Business Metrics | Metric | As of June 30, 2022 | As of June 30, 2021 | Change ($) | Change (%) | | :---------------------- | :------------------ | :------------------ | :--------- | :--------- | | Annual Recurring Revenue (ARR) | $204.5 million | $144.7 million | $59.8 million | 41.3% | | Registered Users | 13.3 million | 10.7 million | 2.6 million | 24.3% | | Revenue per Registered User (RPU) | $15.33 | $13.48 | $1.85 | 13.7% | Adjusted EBITDA (in millions) | Period | Adjusted EBITDA | | :---------------------- | :-------------- | | Three months ended June 30, 2022 | $(5.3) | | Six months ended June 30, 2022 | $(8.9) | | Three months ended June 30, 2021 | $(5.4) | | Six months ended June 30, 2021 | $(11.5) | - Adjusted EBITDA improved for the six months ended June 30, 2022, to $(8.9) million from $(11.5) million in the prior year[133] Comparison of Three and Six Months ended June 30, 2022 and 2021 This section provides a detailed comparative analysis of the company's financial performance for the three and six months ended June 30, 2022, versus the same periods in 2021 Revenues This section analyzes the changes in the company's total revenues for the comparative periods Revenue Growth (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :---------------------- | :------- | :------- | :--------- | :--------- | | Three months ended June 30 | $50,530 | $36,701 | $13,829 | 37.7% | | Six months ended June 30 | $95,320 | $69,963 | $25,357 | 36.2% | - Revenue increase for the three months was driven by registered user growth from new and existing clients, RPU growth, and $2.3 million from the Segmint acquisition[139] - For the six months, revenue growth was due to 2.6 million registered user growth (1.4 million existing, 1.2 million new) and 13.7% RPU growth, with Segmint contributing $2.3 million[140] Cost of Revenues This section examines the changes in the cost of revenues and its impact on gross margin for the comparative periods Cost of Revenues and Gross Margin | Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenues (in thousands) | $23,257 | $16,180 | $43,237 | $31,677 | | Percentage of revenues | 46.0% | 44.1% | 45.4% | 45.3% | - Cost of revenues increased by 43.7% for the three months and 36.5% for the six months, primarily due to higher personnel costs, third-party partner costs, hosting costs, and Segmint acquisition-related expenses[142][143][144] - Gross margin slightly decreased to 54.0% for the three months ended June 30, 2022, from 55.9% in the prior year, while remaining stable at 54.6% for the six-month period[142] Research and Development This section analyzes the changes in research and development expenses for the comparative periods Research and Development Expenses (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :---------------------- | :------- | :------- | :--------- | :--------- | | Three months ended June 30 | $16,595 | $12,107 | $4,488 | 37.1% | | Six months ended June 30 | $30,751 | $23,020 | $7,731 | 33.6% | - Increases were driven by higher personnel-related costs (including stock-based compensation) due to headcount growth in engineering and product teams, Segmint acquisition-related costs, and consulting/hosting costs[146][147] Sales and Marketing This section analyzes the changes in sales and marketing expenses for the comparative periods Sales and Marketing Expenses (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :---------------------- | :------- | :------- | :--------- | :--------- | | Three months ended June 30 | $10,204 | $5,326 | $4,878 | 91.6% | | Six months ended June 30 | $18,101 | $10,641 | $7,460 | 70.1% | - Significant increases were primarily due to headcount growth in sales and marketing teams, Segmint acquisition-related costs, higher travel costs, and increased expenses for industry conferences and trade shows (e.g., Co:Lab) as activities return to pre-COVID levels[148][149] General and Administrative This section analyzes the changes in general and administrative expenses for the comparative periods General and Administrative Expenses (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :---------------------- | :------- | :------- | :--------- | :--------- | | Three months ended June 30 | $18,731 | $12,185 | $6,546 | 53.7% | | Six months ended June 30 | $35,777 | $21,932 | $13,845 | 63.1% | - Increases were mainly driven by higher personnel-related and other costs (including stock-based compensation), Segmint acquisition-related costs, increased insurance costs for public company D&O coverage, and higher software costs[150][151] Acquisition-related expenses, net This section analyzes the changes in acquisition-related expenses, net, for the comparative periods Acquisition-related expenses, net (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :---------------------- | :----- | :----- | :--------- | :--------- | | Three months ended June 30 | $796 | $625 | $171 | 27.4% | | Six months ended June 30 | $(582) | $1,263 | $(1,845) | (146.1)% | - The six-month decrease was primarily due to a $2.7 million gain on contingent consideration related to the MK acquisition, partially offset by $0.8 million in Segmint acquisition expenses[152] Amortization of acquired intangibles This section analyzes the changes in amortization of acquired intangibles for the comparative periods Amortization of acquired intangibles (in thousands) | Period | 2022 | 2021 | Change ($) | Change (%) | | :---------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $331 | $91 | $240 | 263.7% | | Six months ended June 30 | $426 | $182 | $244 | 134.1% | - The increase was primarily due to additional amortization from intangible assets acquired in the MK (September 2021) and Segmint (April 2022) acquisitions[153] Non-Operating Income (Expense), Net This section analyzes the changes in non-operating income and expense for the comparative periods - Non-operating expense decreased by $0.9 million for the three months and $2.5 million for the six months ended June 30, 2022[154] - The six-month decrease was primarily due to a $3.0 million non-operating loss related to warrant liabilities in 2021, partially offset by net interest expense, unrealized losses on marketable securities, and loss on extinguishment of debt in 2022[154] Provision for Income Taxes This section analyzes the changes in the provision for income taxes for the comparative periods - The Company recorded $0.2 million in income tax provision for both the three and six months ended June 30, 2022, compared to none in 2021[155] - The effective tax rate was negative, primarily due to state income taxes, deferred taxes from acquired goodwill amortization, and a full valuation allowance against deferred tax assets[155] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, including its cash position, financing activities, and debt arrangements - As of June 30, 2022, the Company had $213.4 million in cash, cash equivalents, and marketable securities, with an accumulated deficit of $347.5 million[156] - Operations are financed through preferred and common stock sales, SaaS revenue, and borrowings under the Amended Credit Agreement[156] - The IPO in April 2021 generated $192.8 million in net proceeds[157] Summary of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(19,369) | $(12,288) | | Net cash used in investing activities | $(259,576) | $(1,446) | | Net cash provided by financing activities | $62,584 | $185,422 | - The Amended Credit Agreement (April 2022) provides a $40.0 million revolving facility and an $85.0 million term loan, with an accordion feature for up to $50.0 million[166] Critical Accounting Policies and Significant Judgments and Estimates This section confirms that there have been no material changes to the company's critical accounting policies and estimates - There have been no material changes to the critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2021[176] Recently Issued Accounting Pronouncements This section directs readers to Note 2 for information on recently issued accounting pronouncements - Refer to Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements for discussion of recent accounting pronouncements[177] Emerging Growth Company Status This section clarifies the company's status as an "emerging growth company" and its election regarding accounting standards - The Company is an 'emerging growth company' and has elected to use the extended transition period for new or revised accounting standards, which may affect comparability with other public companies[178] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section addresses the Company's exposure to market risks, primarily focusing on interest rate risk associated with its variable-rate Amended Credit Agreement Interest Rate Risk This section details the company's exposure to interest rate fluctuations and their potential impact on financial performance - The Company is exposed to interest rate risk due to its Amended Credit Agreement, which bears interest at a variable rate (SOFR plus a margin)[180] - A hypothetical 10% change in interest rates is not expected to have a material impact on the consolidated financial statements, assuming the Amended Credit Agreement is fully drawn[180] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures as evaluated by management - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2022[181] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the period - There were no changes in internal control over financial reporting during the period that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[182] PART II - OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section states that the Company is not currently a party to any litigation that would have a material adverse effect on its business, operating results, cash flows, or financial condition - The Company is not involved in any material legal proceedings that would adversely affect its financial condition or operations[184] Item 1A. Risk Factors This section confirms that there are no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[185] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[185] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities[185] Item 4. Mine Safety Disclosures This section indicates that there are no mine safety disclosures applicable to the Company - No mine safety disclosures[185] Item 5. Other Information This section states that there is no other information to report - No other information to report[185] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the Amended Credit Agreement, Guarantee and Collateral Agreement, and various certifications - Key exhibits include the Senior Secured Credit Facilities Amended and Restated Credit Agreement and the Amended and Restated Guarantee and Collateral Agreement, both dated April 29, 2022[187] - Certifications of the Principal Executive Officer and Principal Financial Officer are included as Exhibits 31.1, 31.2, 32.1, and 32.2[187] SIGNATURES This section provides the official signatures of the company's principal executive and financial officers, certifying the report's accuracy - The report was signed by Alex Shootman, Chief Executive Officer, and W. Bryan Hill, Chief Financial Officer, on August 5, 2022[191]