BigCommerce Holdings Inc

1. Overview

BigCommerce Holdings Inc. (the “Company”) provides software-as-a-service ("SaaS") ecommerce platform for retailers at all stages of ecommerce growth. The Company's platform serves customers across a wide variety of sizes, industries, and product categories seeking to differentiate themselves in-market with more tailored commerce experiences.

The Company empowers businesses to turn digital transformation into a competitive advantage, and allows merchants to build their ecommerce solution their way with the flexibility to fit their unique business and product offerings. The Company provides a comprehensive platform for launching and scaling an ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting. All of the Company’s stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation. The Company’s platform serves stores in a wide variety of sizes, product categories, and purchase types, including business-to-consumer and business-to-business.

On September 30, 2024, the Board of Directors of the Company notified Brent Bellm that his employment as the Company’s Chief Executive Officer was terminated. The Board appointed Travis Hess, previously President of the Company, to succeed Mr. Bellm as the Company’s Chief Executive Officer, effective October 1, 2024. Concurrently, the Board elected Mr. Hess as a director of the Company, to fill the vacancy created by Mr. Bellm’s departure.

Additionally, effective on October 1, 2024, the Board appointed Ellen F. Siminoff as Executive Chair of the Board. Prior to her appointment as Executive Chair, Ms. Siminoff served as a director of the Company since February 2020 and will continue to serve as Director. The Executive Chair is a newly-created role and in this role, Ms. Siminoff will provide leadership and direction to the Board and work with the Company’s Chief Executive Officer.

2. Summary of significant accounting policies

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

Basis of consolidation

The accompanying consolidated financial statements include the Company’s accounts and the accounts of the Company’s wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

The Company’s fiscal year ends on December 31. References to fiscal 2024, for example, refer to the fiscal year ended December 31, 2024.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions in the Company’s consolidated financial statements and notes thereto.

Significant estimates and assumptions made by management in these consolidated financial statements include:

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the allowance for credit losses;

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constrained revenue;

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variable consideration for revenue recognition;

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the period of benefit associated with costs capitalized to obtain revenue contracts;

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fair value of certain stock awards issued;

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valuation of convertible notes;

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the useful lives of intangible assets; and

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the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions

Because of the use of estimates inherent in financial reporting process actual results could differ and the differences could be material to the Company’s consolidated financial statements.

Recent Accounting Pronouncements Adopted

ASU 2023-07, Segment Reporting (Topic 280)

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires all public entities, including those public entities that have a single reportable segment to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the individual or the name of the group or committee identified as the chief operating decision maker (“CODM”). ASU 2023-07 is effective for the Company’s fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 in the fourth quarter offiscal 2024 on a retrospective basis. The adoption of ASU 2023-07 did not have a significant impact to the Company's financial statement disclosures.

Recent Accounting Pronouncements Not Yet Adopted

ASU 2023-09, Income Taxes (Topic 740)

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires all entities to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this Update also eliminate requirements such as (1) the disclosure of the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months, (2) or making a statement that an estimate of the range cannot be made, and (3) the disclosure of the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures. Lastly, the amendments in this Update replace the term ‘public entity’ as currently used in Topic 740 with the term ‘public business entity’. ASU 2023-09 is effective for the Company’s fiscal years beginning after December 15, 2024. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements but does not expect it to have a material impact on the consolidated financial statements.

ASU 2024-03, Disaggregation of Income Statement Expenses (Topic 220)

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The new guidance is intended to provide investors more detailed disclosures around certain types of expenses, including employee compensation, depreciation, intangible asset amortization, and other specific expense categories. This standard also requires disclosure of the total amount of selling expenses to be presented in the notes to the financial statements. ASU 2024-03 is effective for the Company's fiscal years beginning after December 15, 2026, and interim periods within fiscal years after December 15, 2027. The Company is currently assessing the impact this standard will have on the Company's consolidated financial statements but does not expect it to have a material impact on the consolidated financial statements.

ASU 2024-04, Induced Conversions of Convertible Debt Instruments (Subtopic 470)

In November 2024, the FASB issued ASU 2024-04,Debt - Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments Disclosures. The amendments in this Update is intended to improve relevance and consistency in application of the induced conversion guidance in Subtopic 470-20. Additionally, the purpose of the Update is to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. ASU 2024-04 is effective for the Company's fiscal years beginning after December 15, 2025, and interim periods with those annual reporting periods. The Company is currently assessing the impact this standard will have on the Company's consolidated financial statements but does not expect it to have a material impact on the consolidated financial statements.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2024 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Segments

The Company provides professional-grade commerce solutions for all types of customers at all stages of their ecommerce growth. The Company conducts business as a single operating and reportable segment, which is based upon the Company's current organizational and management structure, as well as information used by the chief operating decisions makers (CODMs) to allocate resources and assess company performance.

Effective October 1, 2024, in connection with the appointment of a new Chief Executive Officer, the Company reorganized its executive leadership team accordingly. The Company’s CODM committee is comprised of thechief executive officer (CEO) and the chief financial officer (CFO). The Company's CODM committee reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. The accounting policies of the segment are the same as those described in the summary of significant accounting policies in Note 2.

In accordance with ASC 280, the Company concludes that consolidated net loss, as reported on the consolidated statement of operations, is the key measure of profitability that is required to be reported as it is the measure determined in accordance with measurement principles most consistent with GAAP. The CODMs use net loss to allocate resources and assess performance which enhances the CODMs' ability to compare past financial performance with current financial performance and analyze business performance and trends. This metric is used when monitoring budget versus actual results, and to assess the performance of the Company's strategic priorities of driving efficient revenue growth. The significant expenses within net loss on which the CODM committee relies include those that are reported on the consolidated statements of operations. The measure of segment assets is reported on the consolidated Balance Sheets as Total assets.

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of money market funds and marketable securities and are stated at fair value.

Restricted cash

The Company maintains a portion of amounts collected through its online payment processor with the online payment processor as a security deposit for future chargebacks. Additionally, the Company has amounts on deposit with certain financial institutions that serve as collateral for letters of credit and lease deposits.

Marketable securities

All marketable securities have been classified as available-for-sale and are carried at estimated fair value. The Company determines the appropriate classification of investments in debt securities at the time of purchase. Securities may have stated maturities greater than one year. All marketable securities are considered available to support current operations and are classified as current assets.

For available-for-sale debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value and recognized in other income (expense) in the results of operations. For available-for-sale debt securities that do not meet the aforementioned criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, an allowance is recorded for the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. Impairment losses attributable to credit loss factors are charged against the allowance when management believes an available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Any unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit loss factors is recognized as a component of accumulated other comprehensive loss. Realized gains and losses and declines in fair value, if any, on available-for-sale securities are included in other income (expense) in the results of operations. The cost of securities sold is based on the specific-identification method.

Concentration of credit risks, significant clients, and suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents, restricted cash, and accounts receivable. The Company’s investment policy limits investments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies, and highly rated corporate securities, subject to certain concentration limits and restrictions on maturities. Cash and cash equivalents and restricted cash are held by financial institutions that management believes are of high credit quality. Amounts on deposit may at times exceed federally insured limits. The Company has not experienced any losses on deposits of cash and cash equivalents. The Company is exposed to credit risk in the event of default by the financial institutions holding cash and cash equivalents and bond issuers.

Accounts receivable are derived from sales to customers and strategic technology partners who operate in a variety of sectors. The Company does not require collateral. Estimated credit losses are provided for in the consolidated financial statements and historically have been within management’s expectations.

One of the Company’s strategic partners accou nted for 13 percent, 12 percent, and 12 percent of revenue for the years ended December 31, 2024, 2023 and 2022, respectively. One of the Company's strategic partners accounted for 20 percent of accounts receivable as of December 31, 2024 and December 31, 2023.

Accounts receivable

Accounts receivable are stated at net realizable value and include both billed and unbilled receivables. Accounts receivable are net of an allowance for credit losses, are not collateralized, and do not bear interest. Payment terms range fromdue immediately todue within 90 days. Unbilled receivable balances arise primarily when the Company provides services in advance of billing for those services. Billing for revenues relating to the volume of transactions processed by the customer are generally billed a month in arrears, resulting in an unbilled receivable. The accounts receivable balance at December 31, 2024 and December 31, 2023 included unbilled receivables of $15.5 million, and $11.0 million, respectively.

The Company assesses the collectability of outstanding accounts receivable on an ongoing basis and maintains an allowance for credit losses for accounts receivable deemed uncollectible. The Company analyzes grouped customers by similar risk profiles, along with the invoiced accounts receivable portfolio and unbilled accounts receivable for significant risks, historical collection activity, and an estimate of future collectability to determine the amount that the Company will ultimately collect. This estimate is analyzed annually and adjusted as necessary.

Identified risks pertaining to the Company’s invoiced accounts receivable include the delinquency level and customer type. The estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances, historical customer delinquency, and assessment of the overall portfolio and general economic conditions.

The allowance for credit losses consisted of the following:

Contract Assets

The Company records a contract asset when revenue recognized on a contract exceeds the billings. Contract assets are recorded on the consolidated balance sheets at the end of each reporting period in Prepaid expenses and other assets, net. Typically, contract assets arise from agreements that have tiered billings over the contract life, promotional billing periods, and partner and services revenue agreements that include substantive minimums. Net contract assets were $5.0 million as of December 31, 2024 as compared to $11.9 million as of December 31,2023. The decrease in the contract asset balance was primarily driven by changes in transaction price estimates and invoicing.

The Company is exposed to credit losses primarily through sales of products and services to customers and partners. The Company assesses the collectability of outstanding contract assets on an ongoing basis and maintains a reserve which is included in the allowance for credit losses for contract assets deemed uncollectible. The Company analyzes the contract asset portfolio for significant risks by considering historical collection experience and forecasting future collectability to determine what will ultimately be collected from its customers and partners, delinquency level and customer type have been identified as the primary specific risk affecting the Company’s contract assets, and the estimate for losses is analyzed annually and adjusted as necessary. The Company has provisioned$0.5 million and $1.5 million for credit losses related to contract assets as of December 31, 2024 and 2023, respectively.

Deferred commissions

The Company capitalizes certain sales commissions earned by the Company's go to market teams as these commission payments are considered incremental and recoverable costs of obtaining a contract with a customer. The Company begins amortizing deferred commissions costs for a particular customer agreement once the revenue recognition criteria are met and amortizes those deferred costs over the expected period of customer benefit. The Company amortizes deferred sales commissions ratably over the customer life which is approximately 3 years. The amortization of deferred commission is recorded in sales and marketing expense within the consolidated statement of operations. The Company periodically reviews the carrying amount of deferred commissions to determine whether events or changes in circumstances have occurred that could impact the period of benefit of the deferred costs.

Property and equipment, net

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives or the related lease terms (if shorter).

The estimated useful lives of property and equipment are as follows:

Maintenance and repairs that do not enhance or extend the asset’s useful life are charged to operating expenses as incurred.

The carrying values of property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, the Company compares the projected undiscounted future cash flows associated with groups of assets used in combination over their estimated useful lives against their respective carrying amounts. If projected undiscounted future cash flows are less than the carrying value of the asset group, impairment is recorded for any excess of the carrying amount over the fair value of those assets in the period in which the determination is made.

Operating leases, right-of-use assets and lease liabilities

The Company determines if an arrangement is a lease or contains a lease at inception. At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As the Company's leases typically do not provide an implicit rate, the Company uses its incremental borrowing rate for most leases. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred and excludes lease incentives. The Company assesses leases for impairment on an annual basis or as needed when events or circumstances necessitate.

Lease terms may include options to extend or terminate the lease. The Company records a ROU asset and a lease liability when it is reasonably certain that the Company will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term.

The Company also leases office space under short-term arrangements and has elected not to include these arrangements in the ROU asset or lease liabilities.

Goodwill and intangible assets, net

The Company assesses goodwill for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances would more likely than not reduce the fair value below its carrying value. When the Company elects to perform a qualitative assessment and conclude it is not more likely than not the fair value is less than its carrying value, no further assessment is necessary; otherwise, a quantitative assessment is performed and the fair value is determined. If the carrying value exceeds the estimated fair value, impairment is recorded.

The Company evaluates the recoverability of intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such asset may not be recoverable. If such review determines the carrying amount of the asset is not recoverable, the carrying amount of such asset is reduced to its fair value.

Acquired intangible assets are amortized over their estimated useful lives. The Company evaluates the estimated remaining useful life of these assets when events or changes in circumstances indicate a revision to the remaining period of amortization. If the Company revises the estimated useful life assumption for any assets, the remaining unamortized balance is amortized over the revised estimated useful life on a prospective basis.

Deferred revenue

Deferred revenue primarily consists of amounts that have been received from customers in advance of the performance obligation being satisfied. The Company recognizes revenue from deferred revenue when the services are performed and the corresponding revenue recognition criteria are met. Amounts recognized from deferred revenue represent primarily revenue from the sale of subscription solutions, integration, and marketing services. The Company recognized $26.8 million of previously deferred revenue during the year ended December 31, 2024, and $15.1 million during the year ended December 31, 2023 .

The Company experienced an increase in the deferred revenue balance as of December 31, 2024, compared to December 31, 2023, which was primarily driven by the Company shifting to annual billing cycles. These increases were offset by the impact of amounts included in net contract assets due to timing differences between billings, revenue recognition and cash collections.

Revenue Recognition

Subscription solutions

Subscription solutions revenue consists primarily of platform subscription fees from all plans and recurring professional services. Subscription solutions are typically charged annually for the Company’s customers to sell their products and process transactions on the Company’s platform. Subscription solutions are generally charged per online store and are based on the store’s subscription plan. Subscription fees are adjusted if a customer’s gross merchandise volume (“GMV”) or orders processed are above specified plan thresholds on a trailing twelve-month basis. For most subscription solutions arrangements, the Company utilizes the right to invoice practical expedient and, therefore, recognizes fixed monthly fees or a pro-rata portion of fees and any transaction fees as revenue in the month they are earned. The Company utilizes a pricing structure that provides a discount to the contractual price for customers who have prepayment terms. The total subscription fee is recognized on a straight-line basis over the term of the contract. In determining the amount of revenue to be recognized, the Company determines whether collection of the entire transaction price is probable. Only amounts deemed probable are recognized as revenue. Key factors in this determination are historical contract termination rates, general economic factors, and customer specific factors.

Subscription solutions includes revenue from Feedonomics. Feedonomics provides a technology platform and related services that enables online retailers and other sellers to automate online listings of the sellers’ information across multiple third-party marketplaces and advertisers (such as Amazon, Alphabet, Meta, etc.). The Company provides these services under service contracts which are generally one year or less, and in many cases month-to-month. These service types may be sold stand-alone or as part of a multi-service bundle (e.g. both marketplaces and advertising). Services are performed and fees are determined based on monthly usage and are billed in arrears.

Professional services, which primarily consist of education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services, are generally billed and recognized as revenue when delivered.

Contracts with the Company’s retail customers are generally month-to-month, while contract terms with the Company’s enterprise customers generally range fromone tothree years. Contracts are typically non-cancelable and do not contain refund-type provisions. Revenue is presented net of sales tax and other taxes the Company collects on behalf of governmental authorities.

Partner and services

The Company’s partner and services revenue includes revenue share, partner technology integrations, and marketing services provided to partners. Revenue share relates to fees earned by the Company’s partners from customers using the Company’s platform, where the Company has an arrangement with such partners to share such fees as they occur. Revenue share is recognized at the time the earning activity is complete, which is generally monthly and variable based on customer usage on the platform. Revenue for partner technology integrations is recorded on a straight-line basis over the life of the contract commencing when the integration has been completed. Revenue for marketing services are recognized either at the time the earning activity is complete, or ratably over the length of the contract, depending on the nature of the obligations in the contract. Payments received in advance of services being rendered are recorded as deferred revenue and recognized when the obligation is completed.

The Company also derives revenue from the sales of website themes and applications upon delivery.

The Company recognizes partner revenue share on a net basis as the Company has determined that the Company is the agent in the Company’s arrangements with third-party application providers. All other revenue is recognized on a gross basis, as the Company has determined the Company is the principal in these arrangements.

Contracts with multiple performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

The Company’s subscription contracts are generally comprised of a single performance obligation to provide access to the Company’s platform, but can include additional performance obligations. For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct service, the Company may be required to allocate the contract’s transaction price to each performance obligation using the Company’s best estimate of SSP. Judgment is required to determine the SSP for each distinct performance obligation. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The primary method used to estimate SSP is the observable prices of products or services sold or priced separately in comparable circumstances to similar customers.

Contracts with the Company’s technology solution partners may include multiple performance obligations, which can include integrations and marketing activities. In determining whether integration services are distinct from hosting services the Company considers various factors. These considerations include the level of integration, interdependency, and interrelation between the implementation and hosting services. The Company has concluded that the integration services included in contracts with hosting obligations are not distinct. As a result, the Company defers any arrangement fees for integration services and recognizes such amounts over the life of the hosting obligation commencing when the integration has been completed. To determine if marketing activities are distinct, the Company considers the nature of the promise in the contract, the timing of payment, and the partner expectations. Additional consideration for some partner contracts varies based on the level of customer activity on the platform. Certain agreements contain minimum guarantees of revenue share. These contracts are evaluated to determine if the guaranteed minimum is substantive. If the minimum is deemed substantive, revenue is recognized ratably over the life of the agreement. For most contracts, variable fees are recognized in the period they are earned as the Company utilizes the right to invoice practical expedient.

The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables, contract assets, and deferred revenue.

Remaining performance obligation

As of December 31, 2024, the Company had$187.9 million ofremaining performance obligations, which represents contracted revenue minimums that have not yet been recognized, including amounts that will be invoiced and recognized as revenue in future periods. Remaining performance obligation is subject to future economic risks, including bankruptcies, regulatory changes and other market factors. The Company expects to recognize approxim ately 65 percent of the remaining performance obligations as revenue in the following 12 month period, and the remaining balance in the periods thereafter.

Remaining performance obligation consisted of the following:

Cost of revenue

Cost of revenue consists primarily of personnel-related costs, including: stock-based compensation expenses for customer support and professional services personnel; costs of maintaining and securing infrastructure and platform; allocation of overhead costs and credit card processing fees; and amortization expense associated with capitalized internal-use software.

Research and development and internal use software

Research and development expenses consist primarily of personnel and related expenses for research and development staff, which include: salaries, benefits, bonuses, and stock-based compensation; the cost of certain third-party contractors; and allocated overhead.

Software development costs associated with internal use software, which are incurred during the application development phase and meet other requirements are capitalized. The Company has unamortized capitalized software costs of $6.2 million and $5.6 million as of December 31, 2024 and 2023, respectively, which are recorded as part of property and equipment, net within the consolidated balance sheets. These capitalized software costs are amortized once placed in service over the useful life, which is 36 months. The Company recorded capitalized software cost amortization expense of $1.7 million, $1.1 million, and $0.1 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Of the total unamortized capitalized software costs as of December 31, 2024, $2.9 million relate to capitalized implementation costs of hosting arrangements that are service contracts. Software development costs related to hosting arrangements are recorded within prepaid expenses, net of current portion within the consolidated balance sheets. As part of the 2024 Restructure, the Company determined certain costs related to business transformation initiatives will not be recoverable which resulted in an impairment of capitalized internal use software costs of $2.3 million.

Acquisition related expenses consist primarily of cash payments for third-party acquisition costs and other acquisition related expenses, such as contingent compensation arrangements entered into in connection with acquisitions. Acquisition related costs are expensed in the period in which the costs are incurred and the services are received within the consolidated statement of operations.

Costs to restructure certain internal operations are accounted for as one-time termination and exit costs. A liability for a cost associated with restructuring activities is recognized and measured at its estimated fair value in our consolidated balance sheet in the period the liability is incurred. All costs relating to restructurings are recorded as "Restructuring charges" in the consolidated statement of operations.

The Company recognizes employee severance costs when payments are probable and amounts are estimable or when notification occurs, depending on whether the severance costs paid are part of the Company’s general plan. When estimating the fair value of facility restructuring activities, assumptions are applied regarding estimated sub-lease payments to be received, which can differ materially from actual results. This may require us to revise our initial estimates which may materially affect our consolidated results of operations and financial position in the period the revision is made. Costs related to contracts without future benefit or contract termination are recognized at the earlier of the contract termination or the cease-use dates. Additionally, restructuring charges include considerations of various capital alternatives or changes in business activities which include expenses related to our change in go-to-market strategy, asset abandonment costs, accelerated depreciation, software impairments, professional services, and other costs.

Advertising costs

Advertising is expensed as incurred. Advertising expense was approximately $11.2 million,$14.5 million, and $17.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Stock-based compensation

The Company issues stock options, restricted stock units (“RSUs”) and performance based restricted stock units (“PSUs”) to employees.

The Company values stock options using the Black-Scholes option-pricing model at the date of grant and recognizes the related stock-based compensation expense on a straight-line basis over the service period, net of estimated forfeitures, which is typically four years.

The Company values RSUs at the closing market price on the date of grant. RSUs typically vest in equal installments over afour-year period, subject to continued service, and compensation expense is recognized straight-line over the requisite service period.

The Company grants PSUs to executive officers and other members of senior management which provide for shares of common stock to be earned based on the Company's total stockholder return compared to the Russell 2000 index, and are referred to as market-based awards. The Company values these market-based awards on the grant date using the Monte Carlo simulation model. The determination of fair value is affected by the Company's stock price and a number of assumptions including the expected volatility and the risk-free interest rate. The Company assumes no dividend yield and recognizes stock-based compensation expense on a straight-line basis from grant date over the derived service period of the award. The market-based awards will cliff-vest at the end of thethree-year period ranging from 0 percent to 200 percent of the target number of PSUs granted.

The Company's PSUs provide for shares of common stock to be earned based on its attainment of the Company's adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) and revenue relative to a target specified in the applicable agreement, and are referred to as Company performance-based awards. The Company values these awards at the closing market price onthe date of grant. The vesting of Company performance-based awards is conditioned upon the achievement of certain targets and will vest inthree annual tranches in a percentage of the target number of shares between 0 percent to 200 percent. The Company recognizes stock-based compensation expense on a straight-line basis over the service period, if it is probable that the performance condition will be achieved. Adjustments to stock-based compensation expense are made, as needed, each reporting period based on changes in our estimate of the number of units that are probable of vesting.

Foreign currency

The Company’s functional and reporting currency is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are re-measured to U.S. dollars using the exchange rates at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are measured in U.S. dollars using historical exchange rates. Revenue and expenses are measured using the actual exchange rates prevailing on the dates of the transactions. Gains and losses resulting from re-measurement are recorded within Other expense in the Company’s consolidated statements of operations and were not material for all periods presented.

Income taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period of the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that those assets will be realized. To date, the Company has provided a valuation allowance against all of its deferred tax assets as the Company believes the objective and verifiable evidence of its historical pretax net losses outweighs any positive evidence of its forecasted future results. The Company will continue to monitor the positive and negative evidence, and will adjust the valuation allowance as sufficient objective positive evidence becomes available.

The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not to be sustained based solely upon its technical merits at the balance sheet date. The unrecognized tax benefit is the difference between the tax benefit recognized and the tax benefit claimed on the Company’s income tax return. All of the Company’s gross unrecognized tax benefits, if recognized, would not affect its effective tax rate but would be recorded as an adjustment to equity before consideration of valuation allowances. The Company does not expect unrecognized tax benefits to decrease within the next twelve months. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2024, the Company hasnot accrued any interest or penalties related to unrecognized tax benefits. The Company believes that all material tax positions in the current and prior years have been analyzed and properly accounted for and that the risk of additional material uncertain tax positions that have not been identified is remote.

3. Revenue recognition and deferred costs

Revenue recognition

The Company’s source of revenue consists of subscription solutions fees and partner and services fees. These services allow customers to access the Company’s hosted software over the contract period. The customer is not allowed to take possession of the software or transfer the software. The Company’s revenue arrangements do not contain general rights of refund in the event of cancellations.

Disaggregation of revenue

The following table disaggregates revenue by major source:

Revenue by geographic region was as follows:

(1)Americas-other revenue includes revenue from North and South America, other than the U.S.

Revenue by geographical region is determined based on the region of the Company’s contracting entity, which may be different than the region of the customer. Revenue attributed to the United States was approximately 76 percent, 76 percent and 78 percent during fiscal 2024, 2023 and 2022, respectively. Revenue attributed to EMEA was approximately 11 percent, 11 percent, and 10 percent during fiscal 2024, 2023, and 2022, respectively. No single region, other than Unites States and EMEA, represented more than ten percent of total revenue during fiscal 2024, 2023 and 2022.

Deferred commissions

The Company amortizes certain sales commissions costs that are considered incremental and recoverable costs of obtaining a contract with a customer. The portion of capitalized costs expected to be amortized during the succeeding twelve-month period is recorded in current assets as deferred commissions, and the remainder is recorded in deferred commissions, net of current portion within the consolidated balance sheets. The Company didnot recognize an impairment of deferred commissions during the years ended December 31, 2024 , 2023, and 2022, respectively.

Sales commissions of $9.1 million and $9.6 million were deferred for the years ended December 31, 2024 and 2023, respectively; and deferred commission amortization expense was $9.9 million, $7.3 million and $5.2 million for the years ended December 31,2024, 2023 and 2022, respectively.

4. Fair value measurements

Financial instruments carried at fair value include cash and cash equivalents, restricted cash, and marketable securities.

For assets and liabilities measured at fair value, fair value is the price to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it would transact, and assumptions that market participants would use when pricing asset or liabilities.

The accounting standard for fair value establishes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable. The standard requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value are as follows:

•

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

•

Level 2 – Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•

Level 3 – Inputs are unobservable that are significant to the fair value of the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s data.

The following table presents information about the Company’s cash equivalents, marketable securities that were measured at fair value as of December 31, 2024 and December 31, 2023:

(1) Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets, in addition to $44.3 millionof cash, as of December 31, 2024.

(1) Included in “Cash and cash equivalents” in the accompanying Consolidated Balance Sheets, in addition to $33.1 million of cash, as of December 31, 2023.

The contractual maturities of the investments classified as marketable securities were as follows:

The following tables summarize the gains, losses, and estimated fair value of cash equivalents, marketable securities as of December 31, 2024 and December 31, 2023:

5. Business combinations

Acquisition of Makeswift

In October 2023, the Company acquired all issued and outstanding stock of Makeswift, Inc. (“Makeswift”) pursuant to a merger agreement. Makeswift is a leading visual editor for Next.js websites. The total purchase consideration for Makeswift was approximately $9.2 million which consisted of the following.

(1)Of the total purchase consideration, $1.1 million of cash was held back by the Company for potential breaches of representation and warranties, as well as adjustments to working capital which was paid during fiscal year 2024.

The table below summarizes the fair value of the assets acquired and liabilities assumed in the Makeswift acquisition, at acquisition date:

(1) Measurement period adjustments of $0.2 million recorded is primarily attributable to tax liabilities with a corresponding net decrease to goodwill. The measurement period adjustment was a result ofthe purchase price allocation finalization as the Company filed the Makeswift tax return during fiscal 2024.

The fair value of identifiable intangible assets acquired at the date of the acquisitions is as follows:

The $2.2 million goodwill balance is primarily attributable to synergies and expanded market opportunities that are expected to be achieved from the integration of Makeswift with the Company’s offerings and assembled workforce. The goodwill balance is not deductible for income taxes purposes.

As part of the Makeswift merger agreement, $2.0 million of the purchase consideration is subject to clawback if any of the key Makeswift employees voluntarily terminate their employment within 18 months after the closing date of the transaction. The $2.0 million is accounted for as compensation expense and therefore not included in the purchase consideration. The related compensation is recognized as post-combination expense over the 18 month service period on a straight-line basis. The Company incurred $1.3 million of compensation costs during the year ended December 31, 2024. The Companyhas $0.4 million ofunvested amounts of cash retention payments recorded in prepaid expenses and other current assets on the consolidated balance sheet as of December 31, 2024.

6. Goodwill and intangible assets

Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired. The changes to the carrying amount of goodwill as follows:

Goodwill amounts are not amortized but tested for impairment on an annual basis. There wasno impairment of goodwill as of December 31,2024 and 2023.

Intangible assets are amortized on a straight-line basis over the useful life. Intangible assets amortization was $9.7 million, $8.4 million and $8.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. There wasno impairment of intangible assets as of December 31,2024 and 2023.

Intangible assets consist of the following:

As of December 31,2024, expected amortization expense for intangible assets was as follows:

7. Property and equipment

Property and equipment, which includes computer software that was purchased or developed for internal use, is composed of the following:

Depreciation expense on property and equipment was $4.0 million, $4.1 million and $3.3 million for the years ended December 31,2024, 2023 and 2022, respectively.

The composition of property and equipment by geographic region during the years ended December 31, 2024 and 2023, were as follows:

There wasno impairment recorded for property and equipment for fiscal year 2024, 2023, and 2022.

8. Commitments, contingencies, leases, and legal proceedings

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of its business. In general, the resolution of a legal matter could prevent the Company from offering its service to others, could be material to the Company’s financial condition or cash flows, or both, or could otherwise adversely affect the Company’s reputation and future operating results.

In the ordinary course of business, the Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. The outcomes of legal proceedings and other contingencies are, however, inherently unpredictable and subject to significant uncertainties. The Company is not presently a party to any legal proceedings that, if determined adversely to the Company, would have a material adverse effect on the Company’s consolidated financial statements.

Purchase Obligations

The Company has contractual commitments for services with third-parties related to hosting and internal software systems. These commitments are non-cancellable and expire withinone tofour years. The Company had unconditional purchase obligations as of December 31,2024, as follows:

Leases

The Company leases certain facilities under operating lease agreements that expire at various dates through 2028. Some of these arrangements contain renewal options and require the Company to pay taxes, insurance and maintenance costs. Renewal options were not included in the right-of-use asset and lease liability calculation. As of December 31, 2024, there wereno finance leases. Other than as described in note 9. Restructuring, there wasno impairment recorded for leases during the years ended December 31, 2024, 2023, and 2022.

Operating lease expense was $2.5 million, $2.7 million and $3.9 million for the year ended December 31, 2024, 2023, and 2022, respectively.

Supplemental lease information

The future maturities of operating lease liabilities are as follows:

9. Restructuring charges

During the year ended December 31, 2024, the Company commenced a restructuring plan (the “2024 Restructure”) intended to reinvest in product delivery and increase sales capacity, to reduce operating costs, improve operating margins and continue to advance the Company's ongoing commitment to profitable growth. The 2024 Restructure includes a reduction of the Company's workforce, exits of certain office leases, impairment of certain software development projects and contract amendments and terminations to better align operating expenses with existing economic conditions and the Company's strategic priorities. In connection with the 2024 Restructure, the Company incurred restructuring charges, consisting primarily of severance benefits, right-of-use asset impairments, lease termination gain, software impairments, accelerated depreciation and professional services costs. Within the consolidated balance sheet, the liability for severance benefits of $1.7 million as of December 31, 2024 is recorded to other current liabilities and $0.5 million of professional services costs are recorded in accounts payable and other current liabilities. These charges were recorded within Restructuring Charges on the accompanying consolidated statement of operations.

The Company expects to incur additional costs relating to the 2024 Restructure of approximately $2.4 million to $4.4 million through fiscal 2025 relating to severance benefits, contract terminations, accelerated depreciation, right-of-use asset impairments, software impairments, and professional services costs. The additional expenses the Company expects to incur are subject to assumptions, and actual expenses may differ from the estimates disclosed above.

Additionally, the Company incurred restructuring charges, related to its capital structure and various alternatives associated with inbound inquiries and interest in the Company. These charges included such items as professional services and other related costs. For the year ended December 31, 2024, the Company has incurred approximately $2.7 million of costs related to these activities.

During the fiscal year 2023, the Company commenced a restructuring plan (the “2023 Restructure”) which included a reduction of the Company’s workforce intended to advance the Company’s ongoing commitment to profitable growth. In fiscal 2024, the Company made paymentsof $1.4 million related to previously recognized expenses and has not recorded any additional charges related to the 2023 Restructure. The 2023 Restructure is substantially complete.

The following table summarizes the activities related to the Company's 2024 and 2023 restructuring charges:

(1) Other restru cturing charges of $3.9 million recorded during the year ended December 31, 2024 is comprised of $2.7 million of inbound inquiries and interest in the Company and $1.2 million of professional services costs associated with the new go-to-market approach.

10. Other liabilities

The following table summarizes the components of other current liabilities:

11. Debt

The Company's convertible note obligations, including the level within the fair value hierarchy (see note 4. Fair Value Measurements), are asfollows:

(1) Included in “Convertible Notes” in the accompanying Consolidated Balance Sheets, is $0.1 million of 2023 financing obligation

(*) The fair value was calculated using a binomial lattice model which incorporates the terms and conditions of the convertible notes and market-based risk measurement that are indirectly observable, such as market credit spread, and therefore are Level 3 investments. The lattice model produced an estimated fair value based on changes in the price of the underlying common share price over successive periods of time. An estimated yield based on market data was used to discount straight debt cash flows.

(**) The fair value is influenced by interest rates, the Company's stock price and is determined by prices observed in market trading. Since the market for trading of the 2026 Convertible Notes is not considered to be an active market, the estimated fair value is based on Level 2 inputs.

The following table presents details of the Company's convertible notes as of December 31, 2024 which are further discussed below:

The total interest expense recognized related to the Company’s convertible notes and financing obligation consists of the following:

2028 Convertible Notes

In August 2024, the Company entered into a privately negotiated exchange agreement (the "Exchange Agreement") with a holder of its 0.25 percent unsecured convertible senior notes due 2026 (the "2026 Convertible Notes"). Pursuant to the Exchange Agreement, the Company exchanged (the "Exchange Transaction") approximately $161.2 million in aggregate principal amount of the 2026 Convertible Notes for $150.0 million in aggregate principal amount of new 7.50 percent convertible senior notes due 2028 (the “2028 Convertible Notes”) and approximately $0.1 million in cash, with such payment representing the accrued and unpaid interest on such 2026 Convertible Notes. This transaction resulted in a net gain on extinguishment of the 2026 Convertible Notes of $1.7 million, net of a $2.0 million write-off of unamortized debt issuance costs, which was recorded in Gain on convertible note extinguishment in the consolidated statements of operations.

The 2028 Convertible Notes are senior, initially unsecured obligations of the Company and accrue interest at a rate of 7.50 percent per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2024. The 2028 Convertible Notes will mature on October 1, 2028, unless earlier converted, redeemed or repurchased by the Company. Before July 3, 2028, noteholders will have the right to convert their 2028 Convertible Notes only upon the occurrence of certain events. From and after July 3, 2028, noteholders may convert their 2028 Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivery, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company's election. The 2028 Convertible Notes will be convertible with an initial conversion rate of 62.5000 shares of common stock per $1,000 principal amount of 2028 Convertible Notes, which represents an initial conversion price of $16.00 per share of common stock, when certain conditions are met. The conversion rate and conversion price will be subject to adjustments related to standard anti-dilution provisions upon the occurrence of certain events.

The Company may not redeem the 2028 Convertible Notes prior to October 7, 2026. The 2028 Convertible Notes will be redeemable, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or after October 7, 2026 and on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130 percent of the conversion price for a specified period of time and certain other conditions are satisfied. The redemption price will be equal to the principal amount of the 2028 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date. In addition, calling any 2028 Convertible Note for redemption will constitute a Make-Whole Fundamental Change with respect to that 2028 Convertible Note, in which case the conversion rate applicable to the conversion of that 2028 Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption. Pursuant to the Partial Redemption Limitation, the Company may not elect to redeem less than all of the outstanding 2028 Convertible Notes unless at least $100.0 million aggregate principal amount of 2028 Convertible Notes are outstanding and not subject to redemption as of the time the Company sends the related redemption notice.

If a “fundamental change” (as defined in the indenture for the 2028 Convertible Notes) occurs, then, subject to a limited exception, noteholders may require the Company to repurchase their 2028 Convertible Notes for cash. The repurchase price will be equal to the principal amount of the 2028 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, up to, but excluding, the applicable repurchase date.

Upon entering into the Exchange Agreement, the Company recorded the $150.0 million aggregate principal amount of 2028 Convertible Notes at fair value of $157.5 million and related debt issuance costs as a reduction to the fair value of $3.0 million. Debt issuance costs are recorded as a contra-liability and amortized over the term of the 2028 Convertible Notes utilizing an effective interest rate of 8.03 percent. The $7.5 million premium related to the fair value adjustment of the 2028 Convertible Notes is amortized using an effective interest rate of 6.12 percent. The Company is in compliance with the terms of the indenture, and has not experienced any events that would constitute an event of default.

2026 Convertible Notes

In September 2021, the Company issued $345.0 million aggregate principal amount of its 2026 Convertible Notes. The 2026 Convertible Notes were issued in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the sales of the 2026 Convertible Notes was approximately $335.0 million after deducting offering and issuance costs related to the 2026 Convertible Notes and before the 2021 Capped Call transactions. Interest on the 2026 Convertible Notes accrue at a rate of 0.25 percent per annum, payable on April 1 and October 1 of each year, beginning on April 1, 2022.

In August 2024, in addition to the Exchange Agreement, the Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of its outstanding 2026 Convertible Notes to repurchase (the "Repurchase Transactions") approximately $120.6 million aggregate principal amount of the 2026 Convertible Notes for aggregate cash consideration of approximately $108.7 million, including accrued but unpaid interest of approximately $0.2 million on such 2026 Convertible Notes. This transaction resulted in a net gain on extinguishments of debt of $10.4 million, net of a $1.5 million write-off of unamortized debt issuance costs which was recorded in Gain on debt extinguishment in the Statement of Operations.

Following the Repurchase Transactions, approximately $63.1 million principal amount of 2026 Convertible Notes remain outstanding. The remaining unamortized debt issuance costs are recorded as a contra-liability and are amortized utilizing the effective interest rate of 0.84 percent over the term of the 2026 Convertible Notes.

The remaining outstanding 2026 Convertible Notes will mature on October 1, 2026, unless earlier converted, redeemed or repurchased by the Company. Before July 1, 2026, noteholders will have the right to convert the remaining outstanding 2026 Convertible Notes only under the following circumstances: (1) during any calendar quarter, if the Last Reported Sale Price (as defined in the indenture for the 2026 Convertible Notes) per share of Common Stock (as defined in the indenture for the 2026 Convertible Notes) exceeds one hundred and thirty percent (130 percent) of the Conversion Price (as defined in the indenture for the 2026 Convertible Notes) for each of at least twenty (20) Trading Days (as defined in the indenture for the 2026 Convertible Notes) (whether or not consecutive) during the thirty (30) consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter; (2) during the five (5) consecutive Business Days (as defined in the indenture for the 2026 Convertible Notes) immediately after any ten (10)consecutive Trading Day period (such ten (10) consecutive Trading Day period, the

“Measurement Period”) if the Trading Price per $1,000 principal amount of 2026 Convertible Notes for each Trading Day of the Measurement Period was less than ninety-eight percent (98 percent) of the product of the Last Reported Sale Price per share of Common Stock on such Trading Day and the Conversion Rate (as defined in the indenture for the 2026 Convertible Notes) on such Trading Day; (3) if the Company calls any or all of the 2026 Convertible Notes for redemption, such 2026 Convertible Notes called for redemption may be converted any time prior to the close of business on the second business day immediately before the redemption date; or (4) upon the occurrence of specified corporate events. From and after July 1, 2026, noteholders may convert their 2026 Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. As of September 30, 2024 and December 31, 2023, no conversion for the remaining outstanding 2026 Convertible notes have been called or met. In addition to the above conditions, the Company must not consummate any privately negotiated repurchases or exchanges of the notes if the yield to maturity of the notes is less than 5.23 percent (calculated at the time the definitive documentation is executed).

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate of the remaining outstanding 2026 Convertible Notes is 13.68 shares of common stock per $1,000 principal amount of 2026 Convertible Notes, which represents an initial conversion price of approximately $73.11 per share of common stock. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events, such as distribution of stock dividends or stock splits.

The remaining outstanding 2026 Convertible Notes may be redeemed, in whole or in part (subject to certain limitations), for cash at the Company’s option at any time, and from time to time, on or before the 25th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of the Company’s common stock exceeds 130 percent of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. The redemption price will be a cash amount equal to the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but excluding, the redemption date. In connection with the Exchange Transaction, the Company agreed that it will not consummate any privately negotiated repurchases or exchanges of 2026 Convertible Notes on or before April 7, 2025 if the yield to maturity (as defined in the Exchange Agreement) of 2026 Convertible Notes in such a transaction is greater than 5.23 percent, calculated at the time definitive documentation related to such transaction is executed. Pursuant to the Partial Redemption Limitation (as defined in the indenture for the 2026 Convertible Notes), the Company may not elect to redeem less than all of the outstanding 2026 Convertible Notes unless at least $150.0 million aggregate principal amount of Notes are outstanding and not subject to redemption as of the time the Company sends the related redemption notice.

If a “fundamental change” (as defined in the indenture for the 2026 Convertible Notes) occurs, then, subject to a limited exception, noteholders may require the Company to repurchase their 2026 Convertible Notes for cash. The repurchase price will be equal to the principal amount of the remaining outstanding 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, up to, but excluding, the applicable repurchase date.

The Company is in compliance with the terms of the indenture, and has not experienced any events that would constitute an Event of Default under the 2026 Convertible Notes.

2021 Capped Call Transactions

In connection with the pricing of the Notes, the Company used $35.6 million of the net proceeds from the Notes to enter into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions are generally expected to reduce potential dilution to holders of the Company’s common stock upon any conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the Notes upon conversion of the Notes in the event that the market price per share of the Company’s common stock is greater than the strike price of the Capped Call Transactions with such reduction and/or offset subject to a cap.

The Capped Call Transactions have an initial cap price of approximately $106.34 per share, which represents a premium of 100 percent over the last reported sale prices of the Company’s common stock of $53.17 per share on September 9, 2021, and is subject to certain adjustments under the terms of the Capped Call Transactions. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s common stock underlying the Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Notes.

The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company’s common stock. The premiums paid for the Capped Call Transaction have been included as a net reduction to additional paid-in capital within stockholders’ equity.

The contractual future principal payments for all borrowings as of December 31, 2024 were as follows:

12. Stockholders’ equity

2020 Equity incentive plan

In 2020, the Company adopted the 2020 Equity Incentive Plan, or “2020 Plan”, under which stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based restricted stock units and other cash-based or stock-based awards may be granted to employees, consultants and directors. Shares of common stock that are issued and available for issuance under the 2020 Plan consist of authorized, but unissued or reacquired shares of common stock or any combination thereof. The Company has granted awards of stock options, restricted stock units, and market-based and performance-based restricted stock units under the 2020 Plan.

A total of 3,873,885 shares of common stock were initially authorized and reserved for issuance under the 2020 Plan. This share reserve automatically increased on January 1, 2021, 2022, 2023, and 2024 will increase on each subsequent January 1st through and including January 1, 2031, by an amount equal to the smaller of (a)5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 and (b) an amount determined by the board of directors. On January 1, 2025, 2024, 2023 and January 1, 2022 the share reserve increased by 3,928,833 shares,3,820,681 shares,3,695,569 shares and 3,616,312 shares, respectively. The Company registered an additional 9,548,587 shares on Form S-8 on May 9, 2024. As of December 31, 2024, a total of 8,365,820, registered shares of common stock remain available for future issuance under the 2020 Plan.

Stock options

Stock options generally vest and become exercisable over a service period of 4 years from the date of grant, subject to continued service. The following table summarizes the weighted-average grant date value of options and the assumptions used to develop their fair value.

The Company estimated its future stock price volatility using a combination of its observed option-implied volatilities and its peer historical volatility calculations. Management believes this is the best estimate of the expected volatility over the expected life of its stock options. The estimated life for the stock options is based on the weighted average of the remaining vesting term and the remaining contractual life of each award. The risk-free interest rate is based on the rate for a U.S. government security with the same estimated life at the time of the option grant. The estimated forfeiture rate applied is based on historical forfeiture rates. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option pricing model.

The total intrinsic value of options exercised during the years ended December 31, 2024, 2023, and 2022 was $2.5 million, $6.8 million, and $11.4 million, respectively. The intrinsic value was calculated as the difference between the estimated fair value of the Company's common stock at exercise, and the exercise price of the in-the-money options. The total grant date fair value of options vested for the years ended December 31, 2024, 2023, and 2022 was $4.2 million, $7.6 million, and $7.2 million, respectively.

At December 31, 2024, there was an estimated$3.9 million of total unrecognized compensation expense related to stock options, which reflects outstanding stock options awards that are vested and outstanding stock option awards that are expected to vest. The costs of $3.9 million for the year ended December 31, 2024 will be recognized over a weighted-average period of 2.30 years.

Restricted stock units

The grant date fair value of the market-based awards issued in March and November 2024 were$9.91 and $6.74, respectively. Significant assumptions used in the Monte Carlo simulation model for the market-based awards granted are as follows:

As of December 31, 2024, there have been an immaterial amount of market-based and performance-based restricted stock units that have been canceled andno market-based or performance-based restricted stock have vested.

The aggregated expected stock-based compensation expense remaining to be recognized as of December 31, 2024 is $38.2 million related to RSUs, which reflects outstanding stock awards that are vested and outstanding stock awards that are expected to vest. This expense will be recognized over a weighted-average period of 2.27 years.

13. Income taxes

Pretax loss consists of the following:

The Company’s components of the benefit (provision) for income taxes are as follows:

The Company’s provision for income taxes attributable to continuing operations differs from the expected tax expense (benefit) amount computed by applying the U.S. statutory federal income tax rate of 21 percent to income from continuing operations before income taxes. The variance is primarily a result of the application of a valuation allowance for net deferred assets, including NOL carryforwards and credits generated in Australia, the UK, and the United States. Current state income tax expense for the period is a result of the limitations of utilization of tax attributes in certain states due to legislative updated during the year. Current foreign income tax expense for the period is a result of taxable profits in Ireland, Ukraine and other foreign countries where the Company is profitable along with withholding taxes. Deferred income tax expense is a result of taxable temporary differences related to indefinite-lived assets.

A reconciliation of the U.S. statutory federal income tax rate to the effective tax rate utilized in the accompanying consolidated statements of operations is as follows:

The Company's effective tax rate for the year ended December 31, 2024, was (3.90)%, compared to the U.S. federal statutory rate of 21%. The primary factors driving the difference between the statutory and effective tax rates are as follows:

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Stock-Based Compensation: The recognition of excess tax benefits from stock-based compensation reduced the effective tax rate by 14.55%, reflecting the impact of deductible stock-based compensation expense.

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Changes in Valuation Allowance: The Company released portions of its valuation allowance on deferred tax assets, which reduced the effective tax rate by 43.48%. This release was based on an assessment of the Company’s ability to utilize certain deferred tax assets in future periods.

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Research and Development (R&D) Tax Credits: The Company generated federal and state research and development tax credits, which increased the effective tax rate by 6.31%.

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State Income Taxes, Net of Federal Benefit: State income taxes, net of the federal benefit, decreased the effective tax rate by 0.92%, reflecting the impact of state tax obligations on taxable income.

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Uncertain Tax Positions: The Company recognized a net increase in reserves for uncertain tax positions, which impacted the effective tax rate by 30.62%. This reflects changes in tax positions due to tax law interpretations and management’s assessment of the likelihood of sustaining certain tax benefits.

Other immaterial reconciling items contributed to the remaining difference between the statutory and effective tax rates.

The Tax Cuts and Jobs Act of 2017 (the “TJCA”) subjects a U.S. shareholder to current tax on certain earnings of foreign subsidiaries under a provision commonly known as the global intangible low-taxed income (“GILTI”). Under U.S. GAAP, an accounting policy election can be made to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred.

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

Significant components of the Company’s deferred tax assets and liabilities are as follows:

The Company has determined it is more likely than not that its deferred tax assets will not be realized based on the Company's lack of earnings history. Accordingly, it has provided a valuation allowance for deferred tax assets. During 2024, the valuation allowance decreasedby approximately $11.6 million due to continuing operations as well as reserves that were established against certain R&D tax credits.

At December 31, 2024, the Company had net operating loss (“NOL”) carryforwards for U.S. federal income tax purposes of approximately $249.7 million. Of this total, $241.5 million is related to tax years 2018-2024 that do not have an expiration, as a result of the TCJA. The remaining $8.2 million of U.S. federal NOL carryforwards are available to offset future U.S. federal taxable income and begin to expire in 2036.

At December 31, 2024, the Company had NOL carryforwards for certain state income tax purposes of approximately $147.8 million. These state NOL carryforwards are available to offset future state taxable income and begin to expire in 2036.

At December 31, 2024, the Company had foreign NOL carryforwards in Australia and the U.K., combined, of approximately $42.2 million, which are available to offset future foreign taxable income and that do not have an expiration.

At December 31, 2024, the Company had research and development tax credit carryforwards of approximately $14.9 million, which are available to offset future U.S. federal income tax. These U.S. federal tax credits begin to expire in 2034.

Our ability to utilize previously accumulated NOL and R&D credit carryforwards may be subject to substantial annual limitations due to the changes in ownership provisions of the Internal Revenue Code (IRC) of 1986, as amended, and similar state regulations as defined in IRC Section 382(g). In general, the annual limitation is equal to the value of our stock immediately before the ownership change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurred. Any unused annual limitation may generally be carried over to later years until the NOL carryforwards expire.

At December 31, 2024, the Company did not provide any U.S. income or foreign withholding taxes related to certain foreign subsidiaries’ undistributed earnings, as such earnings have been retained and are intended to be indefinitely reinvested. The majority of the Company’s foreign operations are in excess tax basis over book basis positions. It is not practicable to estimate the amount of taxes that would be payable upon remittance of these earnings, because such tax, if any, is dependent upon circumstances existing if and when remittance occur.

The Company files U.S. federal, state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2021 through 2024 tax years generally remain open and subject to examination by U.S. federal, state and foreign tax authorities. Losses generated in any year since inception remain open to adjustment until the statute of limitations closes for the tax year in which the NOL carryforwards are utilized.

As of December 31, 2024, 2023, and 2022, the Company had $9.8 million, $0.4 million, and $0.4 million unrecognized tax benefits, respectively, none of which may reverse in the next 12 months. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During 2024, 2023, and 2022, the Company didnot recognize any material interest or penalties.

A reconciliation of the Company's liability for unrecognized tax benefits is as follows:

14. Net loss per share

Basic net loss per share is computed by dividing net loss by number of shares of common stock outstanding for the period. Because the Company has reported a net loss for the year ended December 31, 2024, 2023, and 2021, the number of shares used to calculate diluted net loss per share is the same as the number of shares used to calculate basic net loss per share for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The following potentially dilutive securities outstanding have been excluded from the computation of basic weighted-average shares outstanding because such securities have been an antidilutive impact due to losses reported:

15. Subsequent events

Headquarters Sublease

In connection with the restructuring and the execution of the early lease termination clause with respect to the Company’s corporate headquarters previously announced on November 7, 2024, the Company entered into a sublease agreement to relocate its Austin headquarters effective January 3, 2025. The net rent under the sublease is approximately $8.3 million over the 6-year team of the sublease. The Company is responsible for additional expenses, including taxes, and provided a cash security deposit to the sublessor in the amount of approximately $0.3 million. The sublease is expected to commence on October 1, 2025, andexpires on the earlier of January 31, 2031, or two months prior to such earlier date as the Master Lease (as defined in the Sublease) may otherwise expire or terminate. At the Company's discretion, it may take control of a portion or all of the space prior to the commencement of the lease.

Convertible Note Repurchases

The Company entered into separate, privately negotiated repurchase agreements with a limited number of holders of its outstanding 2026 Convertible Notes to repurchase approximately $59.1 million aggregated principal amount of the 2026 Convertible Notes for aggregated cash consideration of approximately $54.4 million, including accrued but unpaid interest on such 2026 Convertible Notes. Following the repurchase transactions, approximately $4.0 million principal amount of 2026 Convertible Notes remain outstanding. This transaction resulted in a net gain on repurchases of debt of approximately $4.1 million, net of a $0.6 million write-off of unamortized debt issuance costs.