LEGALZOOM.COM, INC.

Previous wording

•Our share of business formations. In the three months ended March 31, 2025 and 2024, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction. As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of these formations.

Current wording

•Our share of business formations. In the three and six months ended June 30, 2025 and 2024, business formations represented the largest share of our total transaction orders. Business formations act as an entrance point for many customers to the LegalZoom ecosystem, where they then often purchase a mix of transaction and subscription offerings alongside and after the initial formation transaction. As a result, our operating results depend on the continuation of new business formations in the U.S. and even more so, on our ability to increase our share of these formations.

Previous wording

In addition to the measures presented in our unaudited condensed consolidated financial statements, we regularly monitor the financial and operating metrics below to evaluate the growth of our business, measure the effectiveness of our marketing efforts, identify trends, formulate financial forecasts and make strategic decisions. For the three months ended March 31, 2025, Formation Nation is included in the key business metrics below starting on February 10, 2025, the date we acquired Formation Nation. Prior periods have not been recast.

Current wording

In addition to the measures presented in our unaudited condensed consolidated financial statements, we regularly monitor the financial and operating metrics below to evaluate the growth of our business, measure the effectiveness of our marketing efforts, identify trends, formulate financial forecasts and make strategic decisions. For the three and six months ended June 30, 2025, Formation Nation is included in the key business metrics below starting on February 10, 2025, the date we acquired Formation Nation. Prior periods have not been recast.

Previous wording

The below table sets forth the number of business formations for the three months ended March 31, 2025 and 2024:

Current wording

The below table sets forth the number of business formations for the three and six months ended June 30, 2025 and 2024:

Previous wording

We experienced a 6% decrease in business formation transactions during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, in part due to a continuing challenging macroeconomic environment, partially offset by our Formation Nation acquisition. Formation Nation contributed approximately 6% of total business formations during the three months ended March 31, 2025. Overall U.S. business formations declined by 5% during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, based on a review of U.S. Census data revealing new applications for EINs.

Current wording

We experienced a 2% and 4% decrease in business formation transactions during the three and six months ended June 30, 2025, respectively, compared to thethree and six months ended June 30, 2024. The decrease in business formation transactions during thethree and six months ended June 30, 2025 was primarily due to a reduction in direct channel business formations, partially offset by our Formation Nation acquisition. Overall U.S. business formations grew by 7% and 1%, respectively, during the three and six months ended June 30, 2025, compared to the three and six months ended June 20, 2024 based on a review of U.S. Census data revealing new applications for EINs.

Previous wording

The below table sets forth the number of transactions for the three months ended March 31, 2025 and 2024:

Current wording

The below table sets forth the number of transactions for the three and six months ended June 30, 2025 and 2024:

Previous wording

We experienced a 1% increase in the number of transactions during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to an increase in annual report filings from our compliance subscriber base and the inclusion of transactions from our Formation Nation acquisition. This increase was partially offset by lower beneficial ownership information report filings following a Financial Crimes Enforcement Network (FinCEN) ruling on March 21, 2025 that eliminated this filing requirement for U.S. companies.

Current wording

Network (FinCEN) ruling on March 21, 2025 that eliminated this filing requirement for U.S. companies, partially offset by the inclusion of transactions from our Formation Nation acquisition.

Previous wording

The below table sets forth the average order value for the three months ended March 31, 2025 and 2024:

Current wording

The below table sets forth the average order value for the three and six months ended June 30, 2025 and 2024:

Previous wording

We achieved a 20% increase in subscription units from March 31, 2024 to March 31, 2025, primarily driven by an increase in forms and e-signature and accounting solution subscriptions from the bundling of these products into certain business formation offerings, and the inclusion of subscription units from our Formation Nation acquisition. This growth in subscription units as of March 31, 2025 was partially offset by the discontinuation of new customer acquisition for our tax offering.

Current wording

We achieved a 22% increase in subscription units from June 30, 2024 to June 30, 2025, primarily driven by forms and e-signature and accounting solution subscriptions from the bundling of these products into certain business formation offerings, as well as the inclusion of subscription units from our Formation Nation acquisition. This growth in subscription units as of June 30, 2025 was partially offset by the prior discontinuation of new customer acquisition for our tax offering.

Previous wording

On a sequential basis, the number of subscription units as of March 31, 2025 increased 9% from 1,766 thousand subscription units as of December 31, 2024.

Current wording

On a sequential basis, the number of subscription units as of June 30, 2025 increased 2% from 1,924 thousand subscription units as of March 31, 2025.

Previous wording

ARPU declined 7% as of March 31, 2025 compared to March 31, 2024 primarily due to a shift in mix towards our lower priced subscription offerings, including forms and e-signature and accounting solution subscriptions, from the bundling of these products into certain business formation offerings, as well as a decrease in our higher-priced tax subscription offering due to the discontinuation of new customer acquisition.

Current wording

ARPU decreased 6% as of June 30, 2025 compared to June 30, 2024 driven primarily by a shift in mix towards our lower priced subscription offerings, including forms and e-signature, due to the bundling of these products into certain business formation offerings.

Previous wording

On a sequential basis, ARPU as of March 31, 2025 decreased 4% compared to December 31, 2024.

Current wording

On a sequential basis, ARPU as of June 30, 2025 increased 2% compared to March 31, 2025.

Previous wording

We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later. Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, our tax solution, our virtual mail, forms and eSignature solutions and our small business legal advisory plan, and exclude subscriptions from our enterprise customers, our prior operations in the U.K. and our consumer legal advisory plan. Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of March 31, 2025 was approximately 60%, which was impacted by the anniversarying of non-renewing annual forms and e-signature subscriptions that were bundled into certain business formation offerings.

Current wording

We define annual small business retention rate as the percentage of small business subscription units active as of the last day of the quarter one year ago that were still active subscriptions 12 months later. Small business subscription units represent our subscriptions targeted at our small business customers and include subscriptions for our registered agent and compliance services, our tax solution, our virtual mail, forms and eSignature solutions and our small business legal advisory plan, and exclude subscriptions from our enterprise customers, our prior operations in the U.K. and our consumer legal advisory plan. Annual small business retention rate includes both monthly and annual subscription units and reflects all subscription unit attrition, including as a result of actual business failures of certain of our customers. Our annual small business retention rate as of June 30, 2025 was approximately 59%, which was impacted by the anniversarying of non-renewing annual forms and e-signature subscriptions that were bundled into certain business formation offerings.

Previous wording

For transaction and subscription revenue, we generally collect payments and fees at the time orders are placed and prior to services being rendered. We record amounts collected for services that have not been performed as deferred revenue on our consolidated balance sheet. The transaction price that we record is generally based on the contractual amounts and is reduced for estimated sales allowances for price concessions, charge-backs, sales credits and refunds, which are accounted for as variable consideration when estimating the amount of revenue to recognize.

Current wording

For transaction and subscription revenue, we generally collect payments and fees at the time orders are placed and prior to services being rendered. We record amounts collected for services that have not been performed as deferred revenue on our unaudited condensed consolidated balance sheet. The transaction price that we record is generally based on the contractual amounts and is reduced for estimated sales allowances for price concessions, charge-backs, sales credits and refunds, which are accounted for as variable consideration when estimating the amount of revenue to recognize.

Previous wording

Interest expense consists primarily of amortization of debt issuance costs related to our Amended and Restated Credit and Guaranty Agreement, or 2021 Revolving Facility.

Current wording

Interest expense consists primarily of amortization of debt issuance costs related to our amended and restated credit and guaranty agreement, or Revolving Facility.

Previous wording

We expect interest expense to remain insignificant in the near term as we have no outstanding indebtedness. However, we would incur interest expense in the longer term should we draw down on our 2021 Revolving Facility or incur other indebtedness.

Current wording

We expect interest expense to remain insignificant in the near term as we have no outstanding indebtedness. However, we would incur interest expense in the longer term should we draw down on our Revolving Facility or incur other indebtedness.

Previous wording

Our provision for income taxes consists of current and deferred federal, state and foreign income taxes.

Current wording

Our (benefit from) provision for income taxes consists of current and deferred federal, state and foreign income taxes.

Previous wording

The following table sets forth our consolidated statement of operations data for each of the periods indicated. The period-to-period comparison of financial results should not be considered as a prediction or indicative of our future results:

Current wording

The following table sets forth our unaudited condensed consolidated statement of operations data for each of the periods indicated. The period-to-period comparison of financial results should not be considered as a prediction or indicative of our future results:

Previous wording

Stock-based compensation expense increased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due to time-based restricted stock units, or RSUs, RSUs with performance and market conditions, and RSUs with market conditions granted to eligible employees and members of our senior leadership team in 2024. See Note 14 to our consolidated financial statements included in our 2024 Annual Report on Form 10-K for additional information.

Current wording

Stock-based compensation expense increased for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 due to time-based restricted stock units, or RSUs, RSUs with performance and market conditions, and RSUs with market conditions granted to eligible employees and members of our senior leadership team in 2024 and 2025. See Note 9 to our unaudited condensed consolidated financial statements and Note 14 to our consolidated financial statements included in our 2024 Annual Report on Form 10-K for additional information.

Previous wording

The increase in total revenue for the three months ended March 31, 2025 was primarily driven by an increase in subscription revenue. Subscription revenue was 63% and 62% of total revenue for the three months ended March 31, 2025 and 2024, respectively, and transaction revenue was 37% and 38% of total revenue for the three months ended March 31, 2025 and 2024, respectively.

Current wording

The increase in total revenue for the three months ended June 30, 2025 was primarily driven by an increase in subscription revenue. Subscription revenue was 62% and 61% of total revenue for the three months ended June 30, 2025 and 2024, respectively, and transaction revenue was 38% and 39% of total revenue for the three months ended June 30, 2025 and 2024, respectively.

Previous wording

Transaction revenue increased 1% year-over-year for the three months ended March 31, 2025 primarily due to $5.9 million in revenues from our acquisition of Formation Nation in February 2025 and, to a lesser extent, an increase in revenue from our beneficial ownership information report filings due to a year-over-year increase in pricing. The increase in transaction revenue was partially offset by a 6% year-over-year decline in the number of business formations as well as the recommercialization of certain business formation offerings.

Current wording

Transaction revenue increased 6% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase in transaction revenue for the three months ended June 30, 2025 was primarily due to approximately $8.4 million in revenues from our acquisition of Formation Nation in February 2025, partially offset by a decline in beneficial ownership information report revenue due to the FinCEN ruling on March 21, 2025 that eliminated this filing requirement for U.S. companies and a decrease in the number of business formations.

Previous wording

Cost of revenue for the three months ended March 31, 2025 decreased by $1.8 million primarily due to a $5.3 million decrease in payroll and related benefits, largely due to the reduction in headcount. These decreases were partially offset by a $2.1 million increase in third party fees for customer fulfillment services, a

Current wording

Cost of revenue for the three months ended June 30, 2025 increased by $3.8 million primarily due to a $5.4 million increase in filing fees driven by the acceleration in fulfillment for certain services, a $0.7 million increase in third party fees for customer fulfillment services, and a $0.7 million increase in depreciation and amortization expense. These decreases were partially offset by a $3.4 million decrease in payroll and related benefits, largely due to a decrease in average headcount.

Previous wording

Gross profit for the three months ended March 31, 2025 increased by $10.7 million compared to three months ended March 31, 2024 due to a $8.9 million increase in revenue and a $1.8 million reduction in cost of revenue.

Current wording

Gross profit for the three months ended June 30, 2025 increased by $11.4 million compared to three months ended June 30, 2024 due to a $15.1 million increase in revenue and a $3.8 million increase in cost of revenue.

Previous wording

Sales and marketing expenses for the three months ended March 31, 2025 increased by $7.6 million primarily due to a $4.2 million increase in payroll and related benefits largely due to an increase in sales and marketing headcount, a $3.7 million increase in customer acquisition marketing spend, and a $0.9 million increase in depreciation and amortization. Customer acquisition marketing spend was $44.2 million and $40.6 million for the three months ended March 31, 2025 and 2024, respectively. These increases were partially offset by a$1.8 million decrease in non-customer acquisition marketing spend related to creative marketing costs.

Current wording

Sales and marketing expenses for thethree months ended June 30, 2025 increased by $9.5 million primarily due to an $8.1 million increase in payroll and related benefits largely due to an increase in sales and marketing headcount primarily related to our Formation Nation acquisition, a $1.6 million increase in depreciation and amortization, and a $0.7 million increase in non-customer acquisition marketing spend related to creative marketing costs. These increases were partially offset bya $0.4 million decrease in customer acquisition marketing spend. Customer acquisition marketing spend was $46.7 million and $47.1 million for thethree months ended June 30, 2025 and 2024, respectively.

Previous wording

Technology and development expenses for the three months ended March 31, 2025 decreased primarily due to a decrease in payroll and related benefits largely due to decreased technology and development headcount.

Current wording

Technology and development expenses for the three months ended June 30, 2025 decreased primarily due to a decrease in payroll and related benefits largely due to a decrease in technology and development headcount.

Previous wording

General and administrative expenses for the three months ended March 31, 2025 increased by$16.2 million mainly due to a $14.7 million increase in stock-based compensation expense compared to the three months ended March 31, 2024 and $1.5 million in legal and advisory consulting costs related to our acquisition of Formation Nation. Stock-based compensation expense increased for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 due to time-based RSUs, RSUs with performance and market conditions, and RSUs with market conditions granted to eligible employees and members of our senior leadership team in 2024.

Current wording

General and administrative expenses for the three months ended June 30, 2025 increased by$10.3 million mainly due to an $11.3 million increase in stock-based compensation expense compared to the three months ended June 30, 2024. This increase was due to time-based RSUs, RSUs with performance and market conditions, and RSUs with market conditions granted to eligible employees and members of our senior leadership team in 2024.

Previous wording

There was a $2.3 million increase in the provision for income taxes for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The change was primarily due to an increase in non-deductible stock-based compensation for the three months ended March 31, 2025.

Current wording

There was a $2.3 million decrease in the provision for income taxes for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The change was primarily due to the change in pre-tax income.

Previous wording

Subscription revenue increased 8% year-over-year for the three months ended March 31, 2025 primarily due to a 6% year-over-year increase in revenue from our compliance-related subscriptions, an increase in our virtual mail subscriptions and revenue earned from the 1-800Accountant partnership entered into in December 2024. These increases were partially offset by our discontinuation of new customer acquisition for our tax offering.

Current wording

Subscription revenue increased 9% year-over-year for the six months ended June 30, 2025 primarily due to a 6% increase in revenue from our compliance-related subscriptions and revenue earned from the 1-800 Accountant partnership entered into in December 2024, partially offset by our discontinuation of new customer acquisition for our tax offering in the second quarter of 2024.

Previous wording

Gain on sale of assets held for sale for the three months ended March 31, 2025 was$14.3 million due to the sale of our operational headquarters on March 31, 2025.

Current wording

Gain on sale of assets held for sale for thesix months ended June 30, 2025 was$14.3 million due to the sale of our operational headquarters on March 31, 2025.

Previous wording

We fund our operations and capital expenditures from cash flows from operating activities. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. At March 31, 2025, our principal sources of liquidity were cash and cash equivalents of $210.0 million, which consisted of cash on deposit with banks and money market funds, of which approximately $3.6 million related to our foreign subsidiaries. Our cash and cash equivalents increased by $67.9 million from December 31, 2024 to March 31, 2025, primarily as a result of proceeds from stock option exercises primarily by former executive officers, proceeds from the sale of a property held for sale, and cash provided by operating activities, partially offset by cash paid for the acquisition of Formation Nation.

Current wording

We fund our operations and capital expenditures from cash flows from operating activities. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. At June 30, 2025, our principal sources of liquidity were cash and cash equivalents of $217.0 million, which consisted of cash on deposit with banks and money market funds, of which approximately $4.0 million related to our foreign subsidiaries. Our cash and cash equivalents increased by $75.0 million from December 31, 2024 to June 30, 2025, primarily as a result of proceeds from stock option exercises primarily by former executive officers in the first quarter of 2025, proceeds from the sale of a property held for sale, and cash provided by operating activities, partially offset by cash paid for the acquisition of Formation Nation.

Previous wording

We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs with borrowings under our 2021 Revolving Facility.

Current wording

We currently anticipate that our available cash, cash equivalents and cash provided by operating activities will be sufficient to meet our operational cash needs for at least the next twelve months and in the foreseeable future. We have the ability to supplement our liquidity needs with borrowings under our Revolving Facility.

Previous wording

In October 2023, our board of directors approved a new stock repurchase program, pursuant to which our management is authorized to repurchase up to $100.0 million of shares of our common stock from time to time. In May 2024 and November 2024, our board of directors approved increases of $75.0 million and $40.0 million, respectively, in the stock repurchase program, bringing the aggregate amount authorized to $215.0 million as of March 31, 2025. Approximately $50.0 million remained available for future repurchases under the stock repurchase program as of March 31, 2025. Subsequent to March 31, 2025, in May 2025, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $315.0 million. For additional information regarding our stock repurchase program, refer to Note 8 to our unaudited condensed consolidated financial statements.

Current wording

In October 2023, our board of directors approved a stock repurchase program authorizing repurchases of our common stock with no fixed expiration. In May 2025, our board of directors approved a $100.0 million increase in our stock repurchase program, bringing the aggregate amount authorized to $315.0 million. Approximately$129.6 million remained available for future repurchases under the stock repurchase program as of June 30, 2025. For additional information regarding our stock repurchase program, refer to Note 8 to our unaudited condensed consolidated financial statements.

Previous wording

On July 2, 2021, we entered into our $150.0 million 2021 Revolving Facility with JPMorgan Chase Bank, N.A., as the administrative agent. The 2021 Revolving Facility, as amended, provides for the issuance of up to $20.0 million of letters of credit as well as borrowings on same-day notice, referred to as swingline loans, in an amount of up to $10.0 million. As of March 31, 2025, we had no borrowings outstanding and $150.0 million was available for use under our 2021 Revolving Facility.

Current wording

On July 2, 2021, we entered into a $150.0 million amended and restated credit and guaranty agreement with JPMorgan Chase Bank, N.A., as the administrative agent. On July 14, 2025, we entered into an amendment to the amended and restated credit and guaranty agreement that, among other things, decreased the revolving loan commitments to $100.0 million and extended the maturity date of the revolving loan commitments to July 14, 2030. We refer to the amended and restated credit and guaranty agreement, as amended from time to time, as the Revolving Facility. The Revolving Facility provides for the issuance of up to $20.0 million of letters of credit as well as borrowings on same-day notice, referred to as swingline loans, in an amount of up to $10.0 million. As of June 30, 2025, we had no borrowings outstanding and $150.0 million was available for use under our Revolving Facility.

Previous wording

Subject to the satisfaction of certain criteria, we will be able to increase the 2021 Revolving Facility by an amount equal to the sum of (i) the greater of $90.0 million and 75% of consolidated last twelve months cash earnings before interest expense, tax, depreciation and amortization, or LTM CEBITDA, plus (ii) unused amounts under the general debt basket (i.e., an amount equal to the greater of $50.0 million and an equivalent percentage of consolidated LTM CEBITDA), plus (iii) an unlimited amount so long as we are in pro forma compliance with the Financial Covenant (as defined below), in each case, with the consent of the lenders participating in the increase.

Current wording

Subject to the satisfaction of certain criteria, we will be able to increase the Revolving Facility by an amount equal to the sum of (i) the greater of $90.0 million and 75% of consolidated last twelve months cash earnings before interest expense, tax, depreciation and amortization, or LTM CEBITDA, plus (ii) unused amounts under the general debt basket (i.e., an amount equal to the greater of $50.0 million and an equivalent percentage of consolidated LTM CEBITDA), plus (iii) an unlimited amount so long as we are in pro forma compliance with the Financial Covenant (as defined below), in each case, with the consent of the lenders participating in the increase.

Previous wording

We are required to pay a commitment fee in respect of unutilized commitments under the 2021 Revolving Facility. The commitment fee is, initially, 0.35% per annum. The commitment fee is subject to a reduction of 0.10% if the total net first lien leverage ratio does not exceed 3.50 to 1.00. We are also required to pay customary letter of credit fees and agency fees. As of March 31, 2025, the interest rate applicable to the 2021 Revolving Facility was subject to a 1.0% floor and was at a rate equal tothe greatest of: (i) the administrative agent’s prime rate; (ii) the federal funds effective rate plus 1/2 of 1.0%; and (iii)the secured overnight financing rate, or SOFR, plus a 0.10% credit spread adjustment to the SOFR benchmark, or Adjusted Term SOFR, plus 1.0%; provided that if the Adjusted Term SOFR is less than zero, the Adjusted Term SOFR shall be deemed to be zero. The interest rate margins under the 2021 Revolving Facility are subject to a reduction of 0.25% and a further reduction of 0.25% if the total net first lien leverage ratio does not exceed 3.50 to 1.00 and 2.50 to 1.00, respectively.

Current wording

We are required to pay a commitment fee in respect of unutilized commitments under the Revolving Facility. The commitment fee is, initially, 0.35% per annum. The commitment fee is subject to a reduction of 0.10% if the total net first lien leverage ratio does not exceed 3.50 to 1.00 and an additional reduction of 0.05% if the total first lien leverage ratio does not exceed 1.00 to 1.00. We are also required to pay customary letter of credit fees and agency fees. U.S. dollar borrowings under the Revolving Facility bear interest at a rate per annum equal to, at the borrower’s option, either (a) the Secured Overnight Financing Rate, or Term SOFR, plus a margin ranging from 2.00% to 1.25% or (b) a margin ranging from 1.00% to 0.25% plus the highest of (i) the administrative agent’s prime rate, (ii) the Federal Funds rate plus 0.50% or (iii) one-month Term SOFR plus 1%. The interest rate margins under the Revolving Facility are subject to one reduction of 0.25%, a second reduction of 0.25% and further reduction of 0.25% upon achieving total net first lien leverage ratios of 3.50 to 1.00 and 2.50 to 1.00, respectively. There is also an additional reduction of 0.25% upon achieving a total net first lien leverage ratio of 1.00 to 1.00.

Previous wording

We have the option to voluntarily repay outstanding loans at any time without premium or penalty, other than customary “breakage” costs with respect to SOFR loans. There is no scheduled amortization under the 2021 Revolving Facility. The principal amount outstanding is due and payable in full at maturity on July 1, 2026.

Current wording

We have the option to voluntarily repay outstanding loans at any time without premium or penalty, other than customary “breakage” costs with respect to SOFR loans. There is no scheduled amortization under the Revolving Facility. The principal amount outstanding is due and payable in full at maturity on July 14, 2030.

Previous wording

Obligations under the 2021 Revolving Facility are guaranteed by our existing and future direct and indirect material wholly-owned domestic subsidiaries, subject to certain exceptions. The 2021 Revolving Facility is secured by a first-priority security interest in substantially all of the assets of the borrower and the guarantors, subject to certain exceptions.

Current wording

Obligations under the Revolving Facility are guaranteed by our existing and future direct and indirect material wholly-owned domestic subsidiaries, subject to certain exceptions. The Revolving Facility is secured by a first-priority security interest in substantially all of the assets of the borrower and the guarantors, subject to certain exceptions.

Previous wording

The 2021 Revolving Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our restricted subsidiaries to incur additional indebtedness and guarantee indebtedness; create or incur liens; pay dividends and distributions or repurchase capital stock; merge, liquidate and make asset sales; change lines of business; change our fiscal year; incur restrictions on our subsidiaries’ ability to make distributions and create liens; modify our organizational documents; make investments, loans and advances; and enter into certain transactions with affiliates.

Current wording

The Revolving Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our restricted subsidiaries to incur additional indebtedness and guarantee indebtedness; create or incur liens; pay dividends and distributions or repurchase capital stock; merge, liquidate and make asset sales; change lines of business; change our fiscal year; incur restrictions on our subsidiaries’ ability to make distributions and create liens; modify our organizational documents; make investments, loans and advances; and enter into certain transactions with affiliates.

Previous wording

The 2021 Revolving Facility requires compliance with a total net first lien leverage ratio not to exceed 4.50 to 1.00, or the Financial Covenant. The Financial Covenant will be tested at quarter-end only if the total principal amount of all revolving loans, swingline loans and drawn letters of credit that have not been reimbursed exceeds 35% of the total commitments under the 2021 Revolving Facility on the last day of such fiscal quarter.

Current wording

The Revolving Facility requires compliance with a total net first lien leverage ratio not to exceed 4.50 to 1.00, or the Financial Covenant. The Financial Covenant will be tested at quarter-end only if the total principal amount of all revolving loans, swingline loans and drawn letters of credit that have not been reimbursed exceeds 35% of the total commitments under the Revolving Facility on the last day of such fiscal quarter.

Previous wording

In the three months ended March 31, 2025, cash provided by operating activities was $50.7 million resulting from net income of $5.1 million, adjusted for stock-based compensation and other non-cash expenses of $28.4 million and net cash flows provided by changes in operating assets and liabilities of $17.2 million. The $28.4 million of stock-based compensation and other non-cash expenses resulted primarily from $29.8 million in stock-based compensation expense, $10.4 million in depreciation and amortization expense, and $0.6 million in amortization of right-of-use assets expense, partially offset by a $14.3 million gain on disposal of property and equipment. The $17.2 million of net cash flows provided from changes in our operating assets and liabilities resulted primarily from a $26.8 million increase in deferred revenue largely due to the growth of our subscription units which are predominantly billed in advance of our revenue recognition, partially offset by a $9.1 million increase in accounts receivables, and a $2.2 million increase in prepaid and other current assets.

Current wording

In the six months ended June 30, 2025, cash provided by operating activities was $89.8 million resulting from net income of $4.9 million, adjusted for stock-based compensation and other non-cash expenses of $62.9 million and net cash flows provided by changes in operating assets and liabilities of $22.1 million. The $62.9 million of stock-based compensation and other non-cash expenses resulted primarily from $60.4 million in stock-based compensation expense, $21.7 million in depreciation and amortization expense, and $1.5 million in amortization of right-of-use assets expense, partially offset by a $14.3 million gain on disposal of property and equipment. The $22.1 million of net cash flows provided from changes in our operating assets and liabilities resulted primarily from a $29.6 million increase in deferred revenue largely due to the growth of our subscription units which are predominantly billed in advance of our revenue recognition and a $3.7 million decrease in prepaid and other current assets, partially offset by a $14.3 million increase in accounts receivables.

Previous wording

In the three months ended March 31, 2025, net cash used in investing activities was $20.5 million resulting primarily from $48.1 million used for the acquisition of Formation Nation, net of cash acquired and $9.4 million in purchases of property and equipment, including capitalization of internal-use software, partially offset by $37.1 million in proceeds from the sale of our operational headquarters.

Current wording

In the six months ended June 30, 2025, net cash used in investing activities was $26.8 million resulting primarily from $48.5 million used for the acquisition of Formation Nation, net of cash acquired, and $16.9 million in purchases of property and equipment, including capitalization of internal-use software, partially offset by $37.1 million in proceeds from the sale of our operational headquarters.