Q2 Holdings Inc

Previous wording

Some financial institutions have in the past experienced significant pressure due to economic uncertainty, liquidity concerns and increased regulation. In recent years, many financial institutions have merged or been acquired, and periodically during downturns, a limited number of financial institutions have failed, creating market disruption and uncertainty for the financial services industry, in particular among RCFIs. The actions taken by such institutions to address potential liquidity concerns have resulted in certain institutions incurring substantial costs that have negatively impacted, and may continue to negatively impact, their profitability and could lead to further market instability or bank failures. Additionally, regulatory changes aimed at stabilizing the financial system could impose new burdens, further straining the profitability of these institutions and potentially leading to a contraction in economic activities. The current market conditions, including deteriorating performance of loan portfolios, capital constraints due to more stringent reserve requirements, and elevated levels of direct losses and charge-offs for some financial institutions, have also caused and may continue to cause financial institutions to reduce lending activity as they seek to increase their reserves to maintain better liquidity. Additionally, banking regulators, alongside increasingly cautious investors, have increased scrutiny of commercial real estate lending. This heightened attention may compel financial institutions with substantial commercial real estate loan portfolios to adopt more stringent underwriting standards, enhance internal controls, bolster risk management policies, conduct more rigorous portfolio stress testing, and maintain higher reserve levels. While the U.S. government has taken measures to strengthen public confidence in the banking system and protect depositors, such steps may be insufficient to resolve the volatility in the financial markets and reduce the risk of additional bank failures. The duration and severity of these general economic conditions and their long-term effects on us and our customers remain uncertain and difficult to predict. Refer to "Special Note Regarding Forward Looking Statements" above for further discussion of the impact and possible future impacts of general macroeconomic uncertainty and the current challenges facing the financial services industry on our business.

Current wording

Some financial institutions have in the past experienced significant pressure due to economic uncertainty, liquidity concerns and increased regulatory scrutiny. In recent years, many financial institutions have merged or been acquired, and periodically during downturns, a limited number of financial institutions have failed, creating market disruption and uncertainty for the financial services industry, in particular among RCFIs. The actions taken by such institutions to address potential liquidity concerns have resulted in certain institutions incurring substantial costs that have negatively impacted, and may continue to negatively impact, their profitability and could lead to further market instability or bank failures. Additionally, regulatory changes aimed at stabilizing the financial system could impose new burdens, further straining the profitability of these institutions and potentially leading to a contraction in economic activities. The current market conditions, including deteriorating performance of loan portfolios, capital constraints due to more stringent reserve requirements, and elevated levels of direct losses and charge-offs for some financial institutions, have also caused and may continue to cause financial institutions to reduce lending activity as they seek to increase their reserves to maintain better liquidity. Additionally, banking regulators, alongside increasingly cautious investors, have increased scrutiny of commercial real estate lending. This heightened attention may compel financial institutions with substantial commercial real estate loan portfolios to adopt more stringent underwriting standards, enhance internal controls, bolster risk management policies, conduct more rigorous portfolio stress testing, and maintain higher reserve levels. While the U.S. government has taken measures to strengthen public confidence in the banking system and protect depositors, such steps may be insufficient to resolve the volatility in the financial markets and reduce the risk of additional bank failures. The duration and severity of these general economic conditions and their long-term effects on us and our customers remain uncertain and difficult to predict. Refer to "Special Note Regarding Forward Looking Statements" above for further discussion of the impact and possible future impacts of general macroeconomic uncertainty and the current challenges facing the financial services industry on our business.

Previous wording

We define a Registered User as an individual related to an account holder of an Installed Customer on our consumer digital banking platform who has registered to use one or more of our digital banking solutions and has current access to use those solutions as of the last day of the reporting period presented. Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base. We anticipate that the number of Registered Users will grow at a faster rate than our number of Installed Customers, however this will be partially offset as our commercial digital banking platform represents a greater proportion of our Installed Customers solutions without the associated Registered User impact. We add new Registered Users through both organic and inorganic growth from existing customers and from the addition of End Users from new Installed Customers. Our Installed Customers had approximately 22.0 million, 21.1 million and 19.2 million Registered Users as of December 31, 2023, 2022 and 2021, respectively. Registered Users as of March 31, 2024 were 23.0 million compared to 21.5 million as of March 31, 2023.

Current wording

We define a Registered User as an individual related to an account holder of an Installed Customer on our consumer digital banking platform who has registered to use one or more of our digital banking solutions and has current access to use those solutions as of the last day of the reporting period presented. Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base. We anticipate that the number of Registered Users will grow at a faster rate than our number of Installed Customers, however this will be partially offset as our commercial digital banking platform represents a greater proportion of our Installed Customers solutions without the associated Registered User impact. We add new Registered Users through both organic and inorganic growth from existing customers and from the addition of End Users from new Installed Customers. Our Installed Customers had approximately 22.0 million, 21.1 million and 19.2 million Registered Users as of December 31, 2023, 2022 and 2021, respectively. Registered Users as of June 30, 2024 were 23.6 million compared to 21.7 million as of June 30, 2023.

Previous wording

We believe Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients. We calculate Subscription ARR as the annualized value of all recurring subscription revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Subscription ARR also includes the contracted minimum subscription amounts associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced. Subscription revenues are defined within "Critical Accounting Policies and Significant Judgements and Estimates" in our Form 10-K. We calculate Total ARR as the annualized value of all recurring revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Premier Services. Premier Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature. Total ARR does not include revenue from professional services or other sources of revenue that are not deemed to be recurring in nature. Subscription and Total ARR are not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. Subscription and Total ARR should be viewed independently of revenue and deferred revenue as Subscription and Total ARR are operating metrics and are not intended to be combined with or replace these items. Our use of Subscription and Total ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures.

Current wording

We believe Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients. We calculate Subscription ARR as the annualized value of all recurring subscription revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Subscription ARR also includes the contracted minimum subscription amounts associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced. Subscription revenues are defined within "Critical Accounting Policies and Significant Judgements and Estimates" in our Form 10-K. We calculate Total ARR as the annualized value of all recurring revenue recognized in the last month of the reporting period, with the exception of variable revenue in excess of contracted amounts for which we instead take the average monthly run rate of the trailing three months within that reporting period. Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Integrated Services, which we previously referred to as Premier Services. Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature. Total ARR does not include revenue from professional services or other sources of revenue that are not deemed to be recurring in nature. Subscription and Total ARR are not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates. Subscription and Total ARR should be viewed independently of revenue and deferred revenue as Subscription and Total ARR are operating metrics and are not intended to be combined with or replace these items. Our use of Subscription and Total ARR has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures.

Previous wording

Our Subscription ARR was $593.9 million, $500.9 million and $426.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Subscription ARR as of March 31, 2024 was $615.1 million compared to $521.3 million as of March 31, 2023. Our Total ARR was $734.8 million, $655.2 million and $574.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Total ARR as of March 31, 2024 was $761.0 million compared to $672.7 million as of March 31, 2023.

Current wording

Our Subscription ARR was $593.9 million, $500.9 million and $426.7 million for the years ended December 31, 2023, 2022 and 2021, respectively. Subscription ARR as of June 30, 2024 was $633.9 million compared to $533.2 million as of June 30, 2023. Our Total ARR was $734.8 million, $655.2 million and $574.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Total ARR as of June 30, 2024 was $783.0 million compared to $681.2 million as of June 30, 2023.

Previous wording

We define non-GAAP revenue as total revenue excluding the impact of purchase accounting. We monitor these measures to assess our performance because we believe our revenue growth rates would be understated without these adjustments. We believe presenting non-GAAP revenue aids in the comparability between periods and in assessing our overall operating performance. During the three months ended March 31, 2024, there was no impact of purchase accounting on revenue, and our non-GAAP total revenue is now equivalent to our GAAP total revenue.

Current wording

We define non-GAAP revenue as total revenue excluding the impact of purchase accounting. We monitor these measures to assess our performance because we believe our revenue growth rates would be understated without these adjustments. We believe presenting non-GAAP revenue aids in the comparability between periods and in assessing our overall operating performance. During the three and six months ended June 30, 2024, there was no impact of purchase accounting on revenue, and our non-GAAP total revenue is now equivalent to our GAAP total revenue.

Previous wording

In recent periods we have observed improved subscription bookings and associated revenue primarily from our digital banking solutions as a result of banking conditions placing an importance on attracting and retaining deposits. During the three months ended March 31, 2024, our subscription revenue growth was 13% as compared to the prior year period, and we expect subscription revenue will continue to increase as a percentage of total revenue.We have observed a general decline in transactional and other revenue from our Helix and payment solutions, resulting from decreased usage. In recent periods, we have also observed a decline in customer demand for certain discretionary aspects of our solutions, namely professional serv ices, which we believe may be related to challenging macroeconomic conditions and the associated pressure on costs until the economic climate stabilizes and their respective financial outlooks improve.

Current wording

In recent periods we have observed improved subscription bookings and associated revenue primarily from our digital banking solutions as a result of banking conditions placing an importance on attracting and retaining deposits. During the three and six months ended June 30, 2024, our subscription revenue growth was 17% and 15%, respectively, as compared to the prior year period, and we expect subscription revenue will continue to increase as a percentage of total revenue. We have observed a general decline in transactional and other revenue from our Helix and payment solutions, resulting from decreased usage. In recent periods, we have also observed a general decline in customer demand for certain discretionary aspects of our solutions, namely professional serv ices, which we believe may be related to challenging macroeconomic conditions and the associated pressure on costs until the economic climate stabilizes and their respective financial outlooks improve.

Previous wording

Operating expenses primarily consist of sales and marketing, research and development and general and administrative expenses. They also include costs related to our acquisitions and the resulting amortization of acquired intangible assets from those acquisitions. We have from time-to-time experienced difficulty in hiring and retaining highly skilled employees with appropriate qualifications, resulting in increased personnel costs due to competition for talent and the related pressure to improve employee benefits and compensation to remain competitive. In an effort to reduce certain of our personnel related expenditures and improve the scaling of expenses relative to revenue growth, we increased the efficiency of our global workforce structure beginning in 2023. Over the long term, we intend to continue to hire new employees and make other investments to support our anticipated growth. As a result, we expect our operating expenses to increase in absolute dollars but to decrease as a percentage of revenues over the long term as we grow our business.

Current wording

Operating expenses primarily consist of sales and marketing, research and development and general and administrative expenses. They also include costs related to our acquisitions and the resulting amortization of acquired intangible assets from those acquisitions. We have from time-to-time experienced difficulty in hiring and retaining highly skilled employees with appropriate qualifications, resulting in increased personnel costs due to competition for talent and the related pressure to improve employee benefits and compensation to remain competitive. In an effort to reduce certain of our personnel related expenditures and improve the scaling of expenses relative to revenue growth, we have increased the efficiency of our global workforce structure. Over the long term, we intend to continue to hire new employees and make other investments to support our anticipated growth. As a result, we expect our operating expenses to increase in absolute dollars but to decrease as a percentage of revenues over the long term as we grow our business.

Previous wording

(1)Includes deferred revenue reduction from purchase accounting of zero and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1)Includes deferred revenue reduction from purchase accounting of zero and $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and zero and $0.2 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

(2)Includes amortization of acquired technology of $5.5 million and $5.9 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(2)Includes amortization of acquired technology of $5.5 million and $5.9 million for the three months ended June 30, 2024 and 2023, respectively, and $11.0 million and $11.8 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

(3)Includes a gain of $19.9 million related to the early extinguishment of a portion of our 2026 Notes and 2025 Notes for the three months ended March 31, 2023.

Current wording

(3)Includes a gain of $19.9 million related to the early extinguishment of a portion of our 2026 Notes and 2025 Notes for the six months ended June 30, 2023.

Previous wording

(1) Includes deferred revenue reduction from purchase accounting of 0.0% and 0.1% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(1) Includes deferred revenue reduction from purchase accounting of 0.0% and 0.1% for the three months ended June 30, 2024 and 2023, respectively, and 0.0% and 0.1% for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

(2)Includes amortization of acquired technology of 3.3% and 3.8% for the three months ended March 31, 2024 and 2023, respectively.

Current wording

(2)Includes amortization of acquired technology of 3.2% and 3.8% for the three months ended June 30, 2024 and 2023, respectively, and 3.3% and 3.8% for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

(3)Includes an increase of 13.0% related to the early extinguishment of a portion of our 2026 Notes and 2025 Notes for the three months ended March 31, 2023.

Current wording

(3)Includes an increase of 6.5% related to a gain from the early extinguishment of a portion of our 2026 Notes and 2025 Notes for the six months ended June 30, 2023.

Previous wording

Comparison of the Three Months Ended March 31, 2024 and 2023

Current wording

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Revenues increased by $12.5 million, or 8.2%, from $153.0 million for the three months ended March 31, 2023 to $165.5 million for the three months ended March 31, 2024. This increase in revenue was primarily attributable to a $15.2 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in usage from new and existing customers and a $0.8 million increase in transactional revenue from usage of our solutions, partially offset by a $3.5 million decrease in services and other revenue from declines in professional and discretionary services and pass-through revenue related to our Helix solutions.

Current wording

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023. Revenues increased by $30.9 million, or 10.0%, from $307.5 million for the six months ended June 30, 2023 to $338.4 million for the six months ended June 30, 2024. This increase in revenue was primarily attributable to a $35.2 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in usage from new and existing customers and a $0.8 million increase in transactional revenue from usage of our solutions, partially offset by decreases of $5.2 million in services and other revenue from declines in professional and discretionary services and Helix related pass-through revenue.

Previous wording

Cost of revenues increased by $3.5 million, or 4.4%, from $79.7 million for the three months ended March 31, 2023 to $83.3 million for the three months ended March 31, 2024. This increase was primarily attributable to a $2.0 million increase in co-location facility costs and depreciation for our data center assets resulting from the increased infrastructure necessary to support our growing customer base, a $1.9 million increase from the amortization of capitalized software development and capitalized implementation services, a $0.8 million increase in personnel costs, including an increase in the number of personnel who provide implementation and customer support services and maintain our data centers and other technical infrastructure, a $0.7 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs incurred and a $0.4 million increase in overhead costs and other discretionary expenses, partially offset by a $1.0 million decrease in pass-through fees, a $0.8 million decrease as a result of higher capitalized implementation costs and a $0.4 million decrease in amortization of acquired customer technology resulting from assets that became fully amortized.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. Cost of revenues increased by $5.4 million, or 6.6%, from $80.7 million for the three months ended June 30, 2023 to $86.1 million for the three months ended June 30, 2024. This increase was primarily attributable to a $2.7 million net increase in co-location facility, hardware and software costs, and depreciation of our data center assets resulting from the increased infrastructure necessary to support our growing customer activity, a $1.9 million increase in personnel costs, including an increase in the number of personnel who provide implementation and customer support services and maintain our data centers and other technical infrastructure, a $1.5 million increase from the amortization of capitalized software development and capitalized implementation services, a $0.9 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs and a $0.4 million increase in overhead costs and other discretionary expenses, partially offset by a $1.1 million decrease in pass-through fees, a $0.6 million decrease as a result of higher capitalized implementation costs and a $0.4 million decrease in amortization of acquired customer technology resulting from assets that became fully amortized.

Previous wording

Research and development expenses increased by $0.4 million, or 1.3%, from $34.4 million for the three months ended March 31, 2023 to $34.9 million for the three months ended March 31, 2024. This increase was primarily attributable to a $0.6 million increase in travel-related, overhead costs and other discretionary expenses, partially offset by a $0.3 million decrease in personnel costs as a result of the continuing globalization of our research and development organization to support continued enhancements to our solutions.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. Research and development expenses increased by $1.7 million, or 4.9%, from $34.1 million for the three months ended June 30, 2023 to $35.8 million for the three months ended June 30, 2024. This increase was primarily attributable to a $0.8 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions and a $0.7 million increase from lower capitalization of software development and implementation services costs.

Previous wording

General and administrative expenses increased by $5.5 million, or 22.2%, from $24.7 million for the three months ended March 31, 2023 to $30.2 million for the three months ended March 31, 2024. The increase in general and administrative expenses was primarily attributable to increased personnel costs, including stock-based compensation, to support the growth of our business.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. General and administrative expenses increased by $4.2 million, or 15.3%, from $27.1 million for the three months ended June 30, 2023 to $31.3 million for the three months ended June 30, 2024. The increase in general and administrative expenses was primarily attributable to a $5.6 million increase in personnel costs, including stock-based compensation, to support the growth of our business and a $0.8 million increase in travel-related and other discretionary expenses, partially offset by a $2.4 million decrease in professional services, including third-party legal fees.

Previous wording

Transaction-related costs decreased $12.0 thousand, or 100.0% from $12.0 thousand for the three months ended March 31, 2023 to zero for the three months ended March 31, 2024. Transaction-related costs are related to various legal and professional expenses incurred in connection with merger and acquisition and divestiture activities.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. Transaction-related costs decreased by $9.0 thousand, or 100.0% from $9.0 thousand for the three months ended June 30, 2023 to zero for the three months ended June 30, 2024. Transaction-related costs are related to various legal and professional expenses incurred in connection with merger and acquisition and divestiture activities.

Previous wording

Amortization of acquired intangibles decreased by $0.4 million, or 8.2%, from $5.3 million for the three months ended March 31, 2023 to $4.8 million for the three months ended March 31, 2024. The acquired intangible assets are related to previously disclosed business combinations. The decrease in amortization is related to the intangible assets that became fully amortized.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. Amortization of acquired intangibles decreased by $0.5 million, or 8.8%, from $5.3 million for the three months ended June 30, 2023 to $4.8 million for the three months ended June 30, 2024. The acquired intangible assets are related to previously disclosed business combinations. The decrease in amortization is related to intangible assets that became fully amortized.

Previous wording

Lease and other restructuring charges decreased by $0.8 million, or 42.6%, from $2.0 million for the three months ended March 31, 2023 to $1.1 million for the three months ended March 31, 2024. The decrease in lease and other restructuring charges was primarily attributable to a $1.3 million decrease related to exiting of various facilities, including the associated impairment of the right of use asset during the three months ended March 31, 2023, partially offset by a $0.5 million increase related to updated assessments and ongoing expenses of previously vacated facilities in the current period.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. Lease and other restructuring charges decreased by $1.3 million, or 58.2%, from $2.3 million for the three months ended June 30, 2023 to $1.0 million for the three months ended June 30, 2024. The decrease in lease and other restructuring charges was primarily attributable to a $0.9 million decrease related to severance and other related compensation charges associated with eliminating certain positions in connection with initiatives intended to align our resources to the portions of our business that we believe will drive the most long-term value and a $0.4 million decrease related to the impairment of the right of use asset during the prior year period.

Previous wording

Total other income (expense), net represented a net income of $1.9 million for the three months ended March 31, 2024 compared to a net income of $20.7 million for the three months ended March 31, 2023. The change was primarily due to a $19.9 million gain from the partial repurchase of the 2026 Notes and the 2025 Notes during 2023. This was partially offset by a $0.6 million increase in income from cash and investments in the current period and a $0.3 million realized loss on investments recognized in the prior year period.

Current wording

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023. Total other income (expense), net represented a net income of $4.6 million for the six months ended June 30, 2024 compared to a net income of $21.2 million for the six months ended June 30, 2023. The change was primarily due to a $19.9 million gain from the partial repurchase of the 2026 Notes and the 2025 Notes during the three months ended March 31, 2023, partially offset by a $2.4 million increase in income from cash, cash equivalents and investments in the current period, a $0.3 million loss realized on investments recognized in the prior year period and a $0.2 million realized loss on the sale of fixed assets recognized during the prior year period.

Previous wording

Total provision for income taxes represented an expense of $1.6 million for the three months ended March 31, 2024 compared to an expense of $18.0 thousand for the three months ended March 31, 2023. As a result of our current net operating loss position, income tax expense for the three months ended March 31, 2024 consisted primarily of $1.3 million in state income tax and $0.4 million in foreign income tax, partially offset by $0.1 million in federal income tax benefit. The income tax expense for the three months ended March 31, 2023 consisted primarily of $0.3 million in state income tax, partially offset by $0.2 million in federal income tax benefit and $0.1 million in foreign income tax benefit.

Current wording

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023. Total provision for income taxes represented an expense of $2.1 million for the three months ended June 30, 2024 compared to an expense of $0.5 million for the three months ended June 30, 2023. As a result of our current net operating loss position, income tax expense for the three months ended June 30, 2024 consisted primarily of $0.9 million in federal income tax expense, $0.7 million in foreign income tax and $0.5 million in state income tax. The income tax expense for the three months ended June 30, 2023 consisted primarily of $0.5 million in tax amortization of recently acquired goodwill and $0.3 million in foreign income tax, partially offset by $0.3 million in state income tax benefit.

Previous wording

We have financed our operations primarily through the proceeds from the issuance of common stock from our initial public offering in March 2014, additional registered common stock offerings, convertible note offerings and cash flows from operations. As of March 31, 2024, our principal sources of liquidity were cash, cash equivalents and investments of $338.5 million. Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, which include our ability to access capital markets, are adequate to meet our cash requirements for the next twelve months. However, if we determine the need for additional short-term liquidity, there is no assurance that such financing, if pursued, would be adequate or available on terms acceptable to us.

Current wording

We have financed our operations primarily through the proceeds from the issuance of common stock from our initial public offering in March 2014, additional registered common stock offerings, convertible note offerings and cash flows from operations. As of June 30, 2024, our principal sources of liquidity were cash, cash equivalents and investments of $372.1 million. Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, which include our ability to access capital markets, are adequate to meet our cash requirements for the next twelve months. However, if we determine there is a need for additional short-term liquidity, there is no assurance that such financing, if pursued, would be adequate or available on terms acceptable to us.

Previous wording

For the three months ended March 31, 2024, our net cash and cash equivalents provided by operating activities was $13.4 million, which consisted of a net loss of $13.8 million and non-cash adjustments of $45.1 million, partially offset by cash outflows from changes in operating assets and liabilities of $17.7 million. The primary drivers of cash inflows in operating assets and liabilities were a $23.2 million increase in deferred revenue due to the timing of annual billings and deposits received from customers prior to the recognition of revenue from those related payment. Cash inflows were partially offset by cash outflows resulting from a $13.5 million increase in deferred solution costs primarily from annual commission payments, and deferred implementation costs, from both new customers and existing customer expansions, a $13.3 million decrease in accounts payable and accrued liabilities due to timing of payments in support of our expanding customer base and related growth in our technical infrastructure and payment of annual bonuses during the first quarter, and a $11.3 million increase in accounts receivable primarily due to the timing of annual billings at the end of the current quarter. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs and lease impairments, partially offset by amortization of premiums and discounts on investments.

Current wording

For the six months ended June 30, 2024, our net cash and cash equivalents provided by operating activities was $49.5 million, which consisted of a net loss of $26.9 million and non-cash adjustments of $95.4 million, partially offset by cash outflows from changes in operating assets and liabilities of $19.0 million. The primary drivers of cash outflows in operating assets and liabilities were a $17.6 million increase in deferred solution costs primarily from annual commission payments, and deferred implementation costs from both new customers and existing customer expansions, a $16.4 million increase in accounts receivable primarily due to the timing of annual billings at the end of the current quarter and a $6.9 million decrease in accounts payable and accrued liabilities due to timing of payments in support of our expanding customer base and related growth in our technical infrastructure and payment of annual bonuses during the first quarter. Cash outflows were partially offset by cash inflows resulting from a $22.6 million increase in deferred revenue due to the timing of annual billings and deposits received from customers prior to the recognition of revenue from those related payment. Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs and lease impairments, partially offset by amortization of premiums and discounts on investments.

Previous wording

For the three months ended March 31, 2023, our net cash and cash equivalents provided by operating activities was $3.9 million, which consisted of a net loss of $0.5 million and non-cash adjustments of $23.0 million, partially offset by cash outflows from changes in operating assets and liabilities of $18.5 million. The primary drivers of cash outflows in operating assets and liabilities were a $15.7 million increase in deferred solution and other costs from both new customers and existing customer expansions and a $10.9 million decrease in accounts payable and accrued liabilities due to timing of payments in support of our expanding customer base and related growth in our technical infrastructure and payment of annual bonuses during the first quarter. Cash outflows were partially offset by inflows resulting from a $6.9 million decrease in accounts receivable due to the timing of payments received and a $6.2 million increase in deferred revenue due to payments and deposits received from customers prior to the recognition of revenue from those related payments. Non-cash adjustments primarily consisted of depreciation and amortization, stock-based compensation, deferred solution and other costs and deferred solution and other costs, amortization of debt issuance costs and lease and other restructuring charges, partially offset by a gain on extinguishment of debt.

Current wording

For the six months ended June 30, 2023, our net cash and cash equivalents provided by operating activities was $17.0 million, which consisted of a net loss of $24.1 million and non-cash adjustments of $68.1 million, partially offset by cash outflows from changes in operating assets and liabilities of $27.0 million. The primary drivers of cash outflows in operating assets and liabilities were a $19.4 million increase in deferred solution costs primarily for annual commission payments, and deferred implementation costs, for both new customers and existing customer expansions and an $8.0 million decrease in deferred revenue due to the recognition of revenue from customer billings in prior periods exceeding billings to customers during the period. Non-cash adjustments primarily consisted of depreciation and amortization, stock-based compensation, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs and lease impairments, partially offset by a gain on extinguishment of debt and amortization of premiums on investments.

Previous wording

For the three months ended March 31, 2023, our net cash provided by investing activities was $78.0 million, consisting of $127.9 million received from the maturities of investments, partially offset by $42.8 million for the purchase of investments, $6.0 million in capitalized software development costs and $1.0 million for the purchases of property and equipment.

Current wording

For the six months ended June 30, 2024, our net cash provided by investing activities was $12.1 million, consisting of $60.3 million received from the maturities of investments, partially offset by $33.5 million for purchases of investments, $11.8 million for capitalized software development costs and $2.9 million for the purchase of property and equipment.

Previous wording

For the three months ended March 31, 2024, our net cash provided by investing activities was $23.5 million, consisting of $31.0 million received from the maturities of investments, partially offset by $6.0 million in capitalized software development costs and $1.4 million for the purchase of property and equipment.

Current wording

For the six months ended June 30, 2023, our net cash provided by investing activities was $57.9 million, consisting of $143.7 million from maturities of investments, partially offset by $69.4 million for purchases of investments, $13.1 million for capitalized software development costs and $3.3 million for the purchase of property and equipment.

Previous wording

Our recent financing activities have consisted primarily of activity related to our convertible notes as well as net proceeds from exercises of options and contributions to our ESPP to purchase our common stock.

Current wording

Our recent financing activities have consisted primarily of activity related to our convertible notes as well as net proceeds from exercises of options and contributions to our Employee Stock Purchase Plan, or ESPP, to purchase our common stock.

Previous wording

For the three months ended March 31, 2024, our net cash provided by financing activities was $8.4 million due to cash received from exercises of stock options.

Current wording

For the six months ended June 30, 2024, our net cash provided by financing activities was $11.4 million due to cash received from exercises of stock options and contributions to our ESPP to purchase our common stock.

Previous wording

For the three months ended March 31, 2023 our net cash used in financing activities was $160.3 million, primarily consisting of $149.6 million for the partial repurchase of the 2026 Notes and 2025 Notes and $10.9 million in payment for maturity of convertible notes issued in February 2018 that were due in February 2023.

Current wording

For the six months ended June 30, 2023, our net cash used in financing activities was $156.5 million, primarily consisting of $149.6 million for payments for the partial repurchases of the 2026 Notes and 2025 Notes and $10.9 million for payment of the 2023 Notes which matured in February 2023, partially offset by $3.9 million in cash received from exercises of stock options and contributions to our ESPP to purchase our common stock.

Previous wording

Our principal commitments consist of the 2026 Notes, 2025 Notes, non-cancelable operating leases related to our facilities, minimum purchase commitments for sponsorship obligations, third-party products, co-location fees and other product costs. Our obligations under our convertible senior notes are described in Note 9 to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Information regarding our non-cancellable lease and other purchase commitments as of the three months ended March 31, 2024 can be found in Note 7 and Note 8 to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Current wording

Our principal commitments consist of the 2026 Notes, 2025 Notes, non-cancelable operating leases related to our facilities, minimum purchase commitments for sponsorship obligations, third-party products, co-location fees and other product costs. Our obligations under our convertible senior notes are described in Note 9 to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Information regarding our non-cancellable leases and other purchase commitments as of the six months ended June 30, 2024 can be found in Note 7 and Note 8 to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.