Quick Summary:
CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)(in thousands) June 30,2024 December 31,2023 Assets Current assets Cash and cash equivalents$59,639 $49,509 Investment securities—current 221,693 162,196 Accounts receivable, net 25,691 20,709 Prepaid expenses and other current assets 41,774 39,943 Total current assets 348,797 272,357 Property and equipment, net 26,700 28,362 Operating lease right-of-use assets 18,232 19,285 Capitalized software development costs, net 17,345 21,562 Goodwill 56,060 56,060 Other long-term assets 12,183 11,263 Total assets$479,317 $408,889 Liabilities and Stockholders’ Equity Current liabilities Accounts payable$1,256 $1,141 Accrued employee expenses 31,962 35,567 Accrued expenses 16,423 21,723 Other current liabilities 13,708 11,335 Total current liabilities 63,349 69,766 Operating lease liabilities 39,447 41,114 Other liabilities 5,109 697 Total liabilities 107,905 111,577 Stockholders’ equity 371,412 297,312 Total liabilities and stockholders’ equity$479,317 $408,889 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)(in thousands, except per share amounts) Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Revenue(1)$197,375 $147,075 $384,805 $283,175 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization)(2) 69,601 57,854 134,247 114,062 Sales and marketing(2) 27,300 27,002 51,755 56,400 Research and product development(2) 39,522 37,263 77,417 74,925 General and administrative(2) 20,254 18,819 41,386 50,510 Depreciation and amortization 4,670 6,816 9,882 14,487 Total costs and operating expenses 161,347 147,754 314,687 310,384 Income (loss) from operations 36,028 (679) 70,118 (27,209) Other income (loss), net — (54) — (34) Interest income, net 3,476 1,478 6,468 2,839 Income (loss) before provision for income taxes 39,504 745 76,586 (24,404) Provision for income taxes 9,839 19,646 8,258 29,607 Net income (loss)$29,665 $(18,901) $68,328 $(54,011) Net income (loss) per common share: Basic$0.82 $(0.53) $1.89 $(1.52) Diluted$0.81 $(0.53) $1.86 $(1.52) Weighted average common shares outstanding Basic 36,241 35,565 36,164 35,505 Diluted 36,742 35,565 36,720 35,505 (1) The following table presents our revenue categories: Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Core solutions$44,024 $38,515 $86,944 $75,684 Value Added Services 151,620 106,085 293,951 202,920 Other 1,731 2,475 3,910 4,571 Total revenue$197,375 $147,075 $384,805 $283,175 (2) Includes stock-based compensation expense as follows: Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Costs and operating expenses: Cost of revenue (exclusive of depreciation and amortization)$1,175 $988 $2,135 $1,756 Sales and marketing 1,703 444 3,213 2,861 Research and product development 6,472 4,348 12,154 9,787 General and administrative 5,444 4,992 10,766 10,271 Total stock-based compensation expense$14,794 $10,772 $28,268 $24,675 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)(in thousands) Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Cash from operating activities Net income (loss)$29,665 $(18,901) $68,328 $(54,011) Adjustments to reconcile net income (loss) to net cash provided by(used in) operating activities: Depreciation and amortization 4,199 6,198 8,892 13,135 Amortization of operating lease right-of-use assets 530 541 1,053 1,109 Gain on lease modification — (1,915) — (4,281) Stock-based compensation, including as amortized 15,266 11,390 29,258 26,027 Other (2,181) (553) (4,005) (708) Changes in operating assets and liabilities: Accounts receivable 488 (2,616) (4,982) (3,530) Prepaid expenses and other assets (3,692) 333 5,157 (2,066) Accounts payable (296) 788 437 (989) Operating lease liabilities (943) (3,867) (1,418) (4,638) Accrued expenses and other liabilities 7,833 (628) (8,897) 22,295 Net cash provided by (used in) operating activities 50,869 (9,230) 93,823 (7,657) Cash from investing activities Purchases of available-for-sale investments (94,377) (72,312) (151,539) (73,597) Proceeds from sales of available-for-sale investments — — — 1,013 Proceeds from maturities of available-for-sale investments 57,785 11,727 94,455 49,617 Purchases of property and equipment (38) (1,377) (1,458) (2,171) Capitalization of software development costs (1,404) (986) (2,529) (2,151) Proceeds from sale of equity-method investment — — — 629 Net cash used in investing activities (38,034) (62,948) (61,071) (26,660) Cash from financing activities Proceeds from stock option exercises 24 668 3,898 1,502 Tax withholding for net share settlement (12,434) (7,717) (26,520) (13,256) Net cash used in financing activities (12,410) (7,049) (22,622) (11,754) Net increase (decrease) in cash, cash equivalents and restricted cash 425 (79,227) 10,130 (46,071) Cash, cash equivalents and restricted cash Beginning of period 59,464 104,175 49,759 71,019 End of period$59,889 $24,948 59,889 24,948 RECONCILIATION FROM GAAP TO NON-GAAP RESULTS(UNAUDITED)(in thousands, except per share data) Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Costs and operating expenses: GAAP cost of revenue (exclusive of depreciation and amortization)$69,601 $57,854 $134,247 $114,062 Stock-based compensation expense (1,175) (988) (2,135) (1,756) Non-GAAP cost of revenue (exclusive of depreciation and amortization)$68,426 $56,866 $132,112 $112,306 GAAP cost of revenue (exclusive of depreciation and amortization)as a percentage of revenue 35% 39% 35% 40% Non-GAAP cost of revenue (exclusive of depreciation and amortization)as a percentage of revenue 35% 39% 34% 40% GAAP sales and marketing$27,300 $27,002 $51,755 $56,400 Stock-based compensation expense (1,703) (444) (3,213) (2,861) Non-GAAP sales and marketing$25,597 $26,558 $48,542 $53,539 GAAP sales and marketing as a percentage of revenue 14% 18% 13% 20% Non-GAAP sales and marketing as a percentage of revenue 13% 18% 13% 19% GAAP research and product development$39,522 $37,263 $77,417 $74,925 Stock-based compensation expense (6,472) (4,348) (12,154) (9,787) Non-GAAP research and product development$33,050 $32,915 $65,263 $65,138 GAAP research and product development as a percentage ofrevenue 20% 25% 20% 26% Non-GAAP research and product development as a percentage ofrevenue 17% 22% 17% 23% GAAP general and administrative$20,254 $18,819 $41,386 $50,510 Stock-based compensation expense (5,444) (4,992) (10,766) (10,271) Gain on lease modification — 1,915 — 4,281 CEO separation costs, net — — — (11,520) Non-GAAP general and administrative$14,810 $15,742 $30,620 $33,000 GAAP general and administrative as a percentage of revenue 10% 13% 11% 18% Non-GAAP general and administrative as a percentage of revenue 8% 11% 8% 12% GAAP depreciation and amortization$4,670 $6,816 $9,882 $14,487 Amortization of stock-based compensation capitalized in software development costs (471) (618) (990) (1,352) Amortization of purchased intangibles (118) (621) (237) (1,240) Non-GAAP depreciation and amortization$4,081 $5,577 $8,655 $11,895 GAAP depreciation and amortization as a percentage of revenue 2% 5% 3% 5% Non-GAAP depreciation and amortization as a percentage of revenue 2% 4% 2% 4% Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Income (loss) from operations: GAAP income (loss) from operations$36,028 $(679) $70,118 $(27,209) Stock-based compensation expense 14,794 10,772 28,268 24,675 Amortization of stock-based compensation capitalized in software development costs 471 618 990 1,352 Amortization of purchased intangibles 118 621 237 1,240 Gain on lease modification — (1,915) — (4,281) CEO separation costs, net — — — 11,520 Non-GAAP income from operations$51,411 $9,417 $99,613 $7,297 Operating margin: GAAP operating margin 18.3 % (0.5)% 18.2 % (9.6)% Stock-based compensation expense as a percentage of revenue 7.4 7.4 7.3 8.7 Amortization of stock-based compensation capitalized in software development costs as a percentage of revenue 0.2 0.4 0.3 0.5 Amortization of purchased intangibles as a percentage of revenue 0.1 0.4 0.1 0.4 Gain on lease modification as a percentage of revenue — (1.3) — (1.5) CEO separation costs, net as a percentage of revenue — — — 4.1 Non-GAAP operating margin 26.0 % 6.4 % 25.9 % 2.6 % Net income (loss): GAAP net income (loss)$29,665 $(18,901) $68,328 $(54,011) Stock-based compensation expense 14,794 10,772 28,268 24,675 Amortization of stock-based compensation capitalized in software development costs 471 618 990 1,352 Amortization of purchased intangibles 118 621 237 1,240 Gain on lease modification — (1,915) — (4,281) CEO separation costs, net — — — 11,520 Income tax effect of adjustments (3,883) 17,292 (18,262) 27,783 Non-GAAP net income$41,165 $8,487 $79,561 $8,278 Net income (loss) per share, basic: GAAP net income (loss) per share, basic$0.82 $(0.53) $1.89 $(1.52) Non-GAAP adjustments to net income (loss) 0.32 0.77 0.31 1.75 Non-GAAP net income per share, basic$1.14 $0.24 $2.20 $0.23 Net income (loss) income per share, diluted: GAAP net income (loss) per share, diluted$0.81 $(0.52) $1.86 $(1.49) Non-GAAP adjustments to net income (loss) 0.31 0.75 0.31 1.72 Non-GAAP net income per share, diluted$1.12 $0.23 $2.17 $0.23 Weighted-average shares used in GAAP per share calculation Basic 36,241 35,565 36,164 35,505 Diluted 36,742 35,565 36,720 35,505 Weighted-average shares used in non-GAAP per share calculation Basic 36,241 35,565 36,164 35,505 Diluted 36,742 36,305 36,720 36,200 Three Months EndedJune 30, Six Months EndedJune 30, 2024 2023 2024 2023 Free cash flow: GAAP net cash provided by (used in) operating activities$50,869 $(9,230) $93,823 $(7,657) Purchases of property and equipment (38) (1,377) (1,458) (2,171) Capitalized software development costs (1,404) (986) (2,529) (2,151) CEO separation costs payment — 14,926 — 14,926 Partial lease termination payment — 2,851 — 2,851 Severance payments for workforce reduction — — 566 — Non-GAAP free cash flow$49,427 $6,184 $90,402 $5,798 Free cash flow margin: GAAP net cash provided by (used in) operating activitiesas a percentage of revenue 25.8 % (6.3)% 24.4 % (2.7)% Purchases of property and equipment as a percentage of revenue — (0.9) (0.4) (0.8) Capitalized software development costs as a percentage of revenue (0.8) (0.7) (0.6) (0.8) CEO separation costs payment — 10.2 — 5.3 Partial lease termination payment — 1.9 — 1.0 Severance payments for workforce reduction — — 0.1 — Non-GAAP free cash flow margin 25.0 % 4.2 % 23.5 % 2.0 % Statement Regarding the Use of Non-GAAP Financial Measures We use the following non-GAAP financial measures in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
In particular, we believe these non-GAAP financial measures are useful to investors and others in assessing our operating performance due to the following factors: Stock-based compensation expense and amortization of stock-based compensation capitalized in software development costs.
These measures exclude certain non-cash or non-recurring items, including stock-based compensation expense, amortization of stock-based compensation capitalized in software development costs, amortization of purchased intangibles, CEO separation costs, net, gain on lease modification, and the related income tax effect of these adjustments, as applicable and described below.
