Weave Communications Inc

Previous wording

Weave provides small- and medium-sized healthcare businesses (“SMBs”) with a single, vertically-tailored customer experience and payments software platform, helping them unify, modernize, and personalize every interaction with their patients and clients. Our customers are experts in their fields of care. Weave helps them run their practice more effectively by unifying a patchwork of point solutions into a single platform that helps them attract, engage, and retain their patients. Our platform includes messaging, reviews, payments, online scheduling, appointment reminders, digital forms, email marketing, insurance verification, physical and softphones, and more. Weave enables SMBs to offer flexible payment options including payment via text, email, online bill pay, terminals, and mobile tap-to-pay. Weave empowers healthcare practitioners and their office staff to focus on patient care and minimize time and effort spent on manual and mundane operational tasks.

Current wording

Weave provides small- and medium-sized healthcare businesses (“SMBs”) with a single, vertically-tailored customer experience and payments software platform, helping them unify, modernize, and personalize every interaction with their patients and clients. Weave helps them run their practice more effectively by unifying a patchwork of point solutions into a single platform that helps them attract, engage, and retain their patients. Our platform includes messaging, reviews, payments, online scheduling, appointment reminders, digital forms, email marketing, insurance verification, physical and softphones, and more. Weave enables SMBs to offer flexible payment options including payment via text, email, online bill pay, terminals, and mobile tap-to-pay. Weave empowers healthcare practitioners and their office staff to focus on patient care and minimize time and effort spent on manual and mundane operational tasks.

Previous wording

We generate revenue primarily from recurring subscription fees charged to access our platform, which also include recurring hardware fees. These recurring revenues accounted for 91% and 92% of our revenue for the three months ended June 30, 2024 and 2023, respectively, and 92% for each of the six months ended June 30, 2024 and 2023. In addition, we provide recurring payment processing services through Weave Payments and derive revenue from transactions between our customers that utilize Weave Payments and their end consumers.

Current wording

We generate revenue primarily from recurring subscription fees charged to access our platform, which also include recurring hardware fees. These recurring revenues accounted for 92% of our revenue for each of the three months ended September 30, 2024 and 2023, and 92% for each of the nine months ended September 30, 2024 and 2023. In addition, we provide recurring payment processing services through Weave Payments and derive revenue from transactions between our customers that utilize Weave Payments and their end consumers.

Previous wording

Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and products, the sum total of the features and pricing of the alternative point solution patchwork, the effectiveness of our marketing efforts, the effectiveness of our channel partners in selling and marketing our platform, our ability to integrate our platform with practice management systems, which strengthens our product market fit and increases the value our platform provides to customers, and the growth of the market for a customer experience and payments software platform. Sustaining our growth requires continued adoption of our platform by new customers. We aim to add new customers through a combination of unpaid channels, such as recommendations and word of mouth, and paid channels, such as digital marketing, direct mail, professional events, brand marketing, and our teams of sales representatives. Historically, our go-to-market strategy focused on increasing the number of locations with most of our customers having a single location; however, we now provide multi-office functionality on our platform to allow us to better service organizations with multiple locations. In addition to pursuing continued customer growth among small businesses, we intend to pursue opportunities to expand our customer base among medium-sized businesses with a particular focus on our core specialty healthcare verticals. Our ability to expand among medium-sized businesses will depend upon our ability to successfully sell our platform to multi-location organizations and effectively retain them.

Current wording

Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and products, the sum total of the features and pricing of the alternative point solution patchwork, the effectiveness of our marketing efforts, the effectiveness of our channel partners in selling and marketing our platform, our ability to integrate our platform with practice management systems, which strengthens our product market fit and increases the value our platform provides to customers, and the growth of the market for a customer experience and payments software platform. Sustaining our growth requires continued adoption of our platform by new customers. We aim to add new customers through a combination of unpaid channels, such as recommendations and word of mouth, and paid channels, such as digital marketing, direct mail, professional events, brand marketing, and our teams of sales representatives. Historically, our go-to-market strategy focused on increasing the number of locations with most of our customers having a single location; however, we are increasingly providing multi-office functionality through our platform to allow us to better service organizations with multiple locations. To drive this strategy, we recently introduced Weave Enterprise, our solution designed specifically for organizations with multiple locations, which is powered by our new Weave platform. In addition to pursuing continued customer growth among small businesses, we intend to pursue opportunities to expand our customer base among medium-sized businesses with a particular focus on our core specialty healthcare verticals. Our ability to expand among medium-sized businesses will depend upon our ability to successfully sell our new platform to multi-location organizations and effectively retain them.

Previous wording

Our ability to retain and increase revenue within our existing customer base is dependent upon a number of factors, including customer satisfaction with our platform and support, the sum total of the features and pricing of the alternative point solution patchwork, our ability to effectively enhance our platform by developing new applications and features and addressing additional use cases, and our ability to leverage and scale our core sales efforts and marketing capabilities to increase our penetration into our core specialty healthcare verticals. The deployment of the Weave phone system as part of the platform at each of our customers increases stickiness and customer loyalty. Historically, our subscriptions have provided our new customers with immediate access to the majority of our products and functionality. However, we have added additional add-on products in recent years, such as Weave Payments, which we are increasingly successful at cross-selling to our customer base. We intend to continue to invest in enhancing awareness of our platform, creating additional use cases, and developing more products, features and functionality.

Current wording

Our ability to retain and increase revenue within our existing customer base is dependent upon a number of factors, including customer satisfaction with our platform and support, the sum total of the features and pricing of the alternative point solution patchwork, our ability to effectively enhance our platform by developing new applications and features and addressing additional use cases, and our ability to leverage and scale our core sales efforts and marketing capabilities to increase our penetration into our core specialty healthcare verticals. The deployment of the Weave phone system as part of the platform at each of our customers increases stickiness and customer loyalty. Historically, our subscriptions have provided our new customers with immediate access to the majority of our products and functionality. However, we have released additional add-on products in recent years, such as Weave Payments and Call Intelligence, which we are increasingly successful at cross-selling to our customer base. We intend to continue to invest in enhancing awareness of our platform, creating additional use cases, and developing more products, features and functionality.

Previous wording

Customer retention also impacts our future financial performance given its potential to drive improved gross margin. The initial onboarding costs as well as the cost of hardware, which is depreciated over three years, represent substantial cost of revenue elements during the first few years of a customer’s life. We believe our disaggregated revenue and cost of revenue financial data, particularly our subscription and payment processing gross margin, provide insight into the impact of customer retention on overall gross margin improvement. Our subscription and payment processing gross margin was 78% and 76% for the three months ended June 30, 2024 and 2023, respectively, and 77% and 76% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Customer retention also impacts our future financial performance given its potential to drive improved gross margin. The initial onboarding costs as well as the cost of hardware, which is depreciated over three years, represent substantial cost of revenue elements during the first few years of a customer’s life. We believe our disaggregated revenue and cost of revenue financial data, particularly our subscription and payment processing gross margin, provide insight into the impact of customer retention on overall gross margin improvement. Our subscription and payment processing gross margin was 78% and 77% for the three months ended September 30, 2024 and 2023, respectively, and 78% and 76% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

We continue to add new products and functionality to our platform, broadening our use cases and applicability for different customers. Our ability to cohesively deliver a deep product suite with as little friction as possible to customers is a key determinant of winning new customers. In short, our ability to add new SMB customers is dependent on the features and functionality we add to our platform for small businesses, particularly in our core specialty healthcare verticals. The depth of our platform’s functionality is dependent upon both our internally-developed technology and our platform partnerships and integrations. We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products to SMBs in a timely manner.

Current wording

We continue to add new products and functionality to our platform, broadening our use cases and applicability for different customers. Most notably, we recently announced the new Weave platform and Weave Enterprise, which bring an enhanced interface and experience for both single- and multi-location customers. Our ability to cohesively deliver a deep product suite with as little friction as possible to customers is a key determinant of winning new customers. Our ability to add new SMB customers is dependent on the features and functionality (including those enabled by AI) we add to our platform for small businesses, particularly in our core specialty healthcare verticals. The depth of our platform’s functionality is dependent upon both our internally-developed technology and our platform partnerships and integrations. We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products to SMBs in a timely manner.

Previous wording

We believe we have built a flexible platform that encompasses the majority of the functionality needed for customer experience and engagement across industry verticals, and we have developed a repeatable playbook for assessing new industry verticals. Entering a new industry vertical includes establishing key partnerships as well as identifying, evaluating, developing, and launching a platform solution with vertical-specific functionality that is integrated with the primary systems of record in that vertical. We started in dental and have since successfully expanded to optometry and veterinary, among other areas. While we are focused on continued growth within our core specialty healthcare verticals and adjacent healthcare markets, we continue to evaluate additional expansion opportunities.

Current wording

We believe we have built a flexible platform that encompasses the majority of the functionality needed for customer experience and engagement across industry verticals, and we have developed a repeatable playbook for assessing new industry verticals. Entering a new industry vertical includes evaluating product-market fit and establishing key integration partnerships with the primary systems of record in that vertical. We started in dental and have since successfully expanded to optometry, veterinary and, more recently, to specialty medical verticals. While we are focused on continued growth within our core specialty healthcare verticals and adjacent healthcare markets, we continue to evaluate additional expansion opportunities.

Previous wording

We generate revenue primarily from recurring subscription fees charged to access our software and phone services platform, and recurring embedded lease revenue on hardware provided to customers. The majority of these subscription arrangements have contractual terms of month-to-month, with a small minority portion having contractual terms of 1-3 years. Subscription and hardware fees are prepaid and customers may elect to be billed monthly or annually, with the majority of our revenue coming from those that elect to be billed monthly. To incentivize annual payments, we may offer pricing concessions that apply ratably over the twelve-month subscription plan. Approximately 40% of customer locations elected annual prepayments as of June 30, 2024 and 2023. Subscription revenue is recognized ratably over the term of the subscription agreement. Amounts billed in excess of revenue recognized are deferred.

Current wording

We generate revenue primarily from recurring subscription fees charged to access our software and phone services platform, and recurring embedded lease revenue on hardware provided to customers. The majority of these subscription arrangements have contractual terms of month-to-month, with a small minority portion having contractual terms of 1-3 years. Subscription and hardware fees are prepaid and customers may elect to be billed monthly or annually, with the majority of our revenue coming from those that elect to be billed monthly. To incentivize annual payments, we may offer pricing concessions that apply ratably over the twelve-month subscription plan. Approximately 36% and 40% of customer locations elected annual prepayments as of September 30, 2024 and 2023, respectively. Subscription revenue is recognized ratably over the term of the subscription agreement. Amounts billed in excess of revenue recognized are deferred.

Previous wording

In addition, we provide payment processing services and receive a revenue share from a third-party payment facilitator on transactions between our customers that utilize our payments platform and their end consumers. These payment transactions are generally for services rendered at customers’ business location via credit card terminals or through several card-not-present modalities, including “Text-to-Pay”

Current wording

In addition, we provide payment processing services and receive a revenue share from a third-party payment facilitator on transactions between our customers that utilize our payments platform and their end consumers. These payment transactions are generally for services rendered at customers’ business location via credit card terminals or through several card-not-present modalities, including “Text-to-Pay” functionality. As we act as an agent in these arrangements, revenue from payments services is recorded net of transaction processing fees and is recognized when the payment transactions occur.

Previous wording

Our platform is software-driven, and its research and development teams employ software engineers in the continuous testing, certification and support of our platform and products. Accordingly, the majority of our research and development expenses result from employee-related costs, including salaries, benefits, bonuses, stock-based compensation and costs associated with technology tools used by our engineers.

Current wording

Research and development expenses include software development costs that are not eligible for capitalization and support our efforts to ensure the reliability, availability and scalability of our solutions. Our platform is software-driven, and its research and development teams employ software engineers in the continuous testing, certification and support of our platform and products. Accordingly, the majority of our research and development expenses result from employee-related costs, including salaries, benefits, bonuses, stock-based compensation and costs associated with technology tools used by our engineers.

Previous wording

The increase in cost of revenue was primarily due to a $0.5 million increase in direct costs to support customer usage, particularly with telecommunications connectivity and cloud infrastructure costs, and credit card processing fees. We also experienced a $0.3 million increase in personnel-related costs from our customer support and onboarding functions. Although cost of revenue increased in absolute dollars, it decreased as a percentage of revenue, resulting in overall gross margin improvement. This improvement was driven by successful efforts to reduce third-party costs incurred for specific platform features and overall data usage, as well as a favorable customer mix as a greater portion of our customers had fully depreciated phone hardware. Gross margin improvement was also driven by realized efficiencies within our customer support and onboarding functions.

Current wording

The increase in cost of revenue was primarily due to a $1.0 million increase in direct costs to support customer usage, particularly with telecommunications connectivity, credit card processing fees, and cloud infrastructure costs. Although cost of revenue increased in absolute dollars, it decreased as a percentage of revenue, resulting in overall gross margin improvement. This improvement was driven by successful efforts to reduce third-party costs incurred for specific platform features and overall data usage, as well as a favorable customer mix as a greater portion of our customers had fully depreciated phone hardware. Gross margin improvement was also driven by realized efficiencies within our customer support and onboarding functions.

Previous wording

The increase in sales and marketing expenses was primarily attributable to a $3.5 million increase in personnel-related expenses, including increases in stock-based compensation, and commission/bonus incentives. In addition, demand generation expenses increased by $1.9 million driven by our digital media efforts and partnerships. We also incurred $0.8 million in additional event-related costs due to increased in-person attendance at trade shows, as well as an increase of $0.4 million in related dues and subscription costs.

Current wording

The increase in sales and marketing expenses was primarily attributable to a $2.0 million increase in personnel-related expenses, including increases in stock-based compensation and commission/bonus incentives, largely due to an increase in headcount and salary adjustments. In addition, demand generation expenses increased by $1.3 million, driven by our digital media efforts and partnerships.

Previous wording

The increase in research and development expenses was due to an increase in personnel-related expenses, largely from salary adjustments and stock-based compensation, for employees enhancing our platform infrastructure and developing new product offerings.

Current wording

The increase in research and development expenses was due to an increase in personnel-related expenses, largely from increased headcount, salary adjustments and stock-based compensation, for employees enhancing our platform infrastructure and developing new product offerings.

Previous wording

The increase in general and administrative expenses was primarily due to a $3.2 million increase in personnel-related expenses, particularly from additional bonus incentives, salary adjustments, and stock-based compensation. In addition, bad debt expense increased by $0.2 million.

Current wording

The increase in general and administrative expenses was primarily due to a $1.4 million increase in personnel-related expenses, particularly from stock-based compensation and salary adjustments. In addition, bad debt expense and professional fees both increased by $0.2 million each.

Previous wording

The decrease in interest income and other income was due to lower balances of cash and short-term investments held throughout the majority of the three months ended June 30, 2024, which was the result of the subscription billings deferral discussed under “--Non-GAAP Financial Measures—Free Cash Flow and Free Cash Flow Margin” below.

Current wording

The decrease in interest income and other income was due to lower balances of cash and short-term investments held throughout the majority of the three months ended September 30, 2024.

Previous wording

The increase in revenue for the six months ended June 30, 2024 was largely attributable to new customer locations.

Current wording

The increase in revenue for the nine months ended September 30, 2024 was largely attributable to new customer locations.

Previous wording

The increase in cost of revenue was primarily due to a $1.2 million increase in direct costs to support customer usage, particularly with telecommunications connectivity and cloud infrastructure costs, and credit card processing fees. We also experienced a $0.8 million increase in personnel-related costs from our customer support and onboarding functions. Although cost of revenue increased in absolute dollars, it decreased as a percentage of revenue, resulting in overall gross margin improvement. This improvement was driven by the same factors discussed above under “Comparison of the Three Months Ended June 30, 2024 and 2023—Cost of Revenue and Gross Margin."

Current wording

The increase in cost of revenue was primarily due to a $2.3 million increase in direct costs to support customer usage, particularly with telecommunications connectivity costs, credit card processing fees, and cloud infrastructure costs. We also experienced a $0.8 million increase in personnel-related costs from our customer support and onboarding functions. Although cost of revenue increased in absolute dollars, it decreased as a percentage of revenue, resulting in overall gross margin improvement. This improvement was driven by the same factors discussed above under “Comparison of the Three Months Ended June 30, 2024 and 2023—Cost of Revenue and Gross Margin."

Previous wording

The increase in sales and marketing expenses was primarily attributable to a $2.3 million increase in personnel-related expenses, including increases in stock-based compensation, and commission/bonus incentives, largely due to an increase in headcount and compensation adjustments. In addition, demand generation expenses increased by $1.3 million driven by our digital media efforts and partnerships. We also incurred $0.5 million in additional event-related costs due to increased in-person attendance at trade shows, as well as an increase of $0.2 million in related dues and subscription costs.

Current wording

The increase in sales and marketing expenses was primarily attributable to a $5.5 million increase in personnel-related expenses, including increases in stock-based compensation and commission/bonus incentives, largely due to an increase in headcount and salary adjustments. In addition, demand generation expenses increased by $3.2 million driven by our digital media efforts and partnerships. We also incurred $0.7 million in additional event-related costs due to increased in-person attendance at trade shows, as well as an increase of $0.4 million in related dues and subscription costs.

Previous wording

The increase in research and development expenses was due to an increase personnel-related expenses, largely from salary adjustments and stock-based compensation, for employees enhancing our platform infrastructure and developing new product offerings.

Current wording

The increase in research and development expenses was due to an increase in personnel-related expenses, largely from increased headcount, salary adjustments and stock-based compensation, for employees enhancing our platform infrastructure and developing new product offerings.

Previous wording

The increase in general and administrative expenses was due to a $1.4 million increase in personnel-related expenses, particularly from additional bonus incentives, salary adjustments, and stock-based compensation. In addition, bad debt expense increased by $0.4 million.

Current wording

The increase in general and administrative expenses was primarily due to a $4.6 million increase in personnel-related expenses, particularly from additional bonus incentives, salary adjustments, and stock-based compensation. In addition, bad debt expense, professional fees and software and subscriptions expenses each increased by $0.4 million. These increases were partially offset by a $0.4 million decrease in our director and officer liability insurance premiums.

Previous wording

Interest Expense and Other Income, Net

Current wording

Interest Expense and Other Income (Expense), Net

Previous wording

We define free cash flow as net cash provided by (used in) operating activities, less purchases of property and equipment and capitalized internal-use software costs, and free cash flow margin as free cash flow as a percentage of revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide useful information to management and investors, even if negative, as they provide information about the amount of cash consumed by our combined operating and investing activities. For example, as free cash flow has in the past been negative, we have needed to access cash reserves or other sources of capital for these investments. Comparability of our free cash flow between the three months ended June 30, 2024 and the three months ended June 30, 2023 was affected by the implementation of a new billing system that necessitated deferring March 2024 subscription billings. This resulted in an increase in accounts receivable as of March 31, 2024, and a corresponding decrease in free cash flow for the three months then ended, of approximately $15.0 million. The increase in free cash flow for the three months ended June 30, 2024 is largely due to the collection on [a][the substantial] majority of those deferred billings.

Current wording

We define free cash flow as net cash provided by operating activities, less purchases of property and equipment and capitalized internal-use software costs, and free cash flow margin as free cash flow as a percentage of revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide useful information to management and investors, even if negative, as they provide information about the amount of cash consumed by our combined operating and investing activities. For example, as free cash flow has in the past been negative, we have needed to access cash reserves or other sources of capital for these investments.

Previous wording

We define EBITDA as earnings before interest expense, interest income, other income/expense, provision for income taxes, depreciation, and amortization. Our depreciation adjustment has included depreciation on operating fixed assets and has not included amortization of finance lease right-of-use assets on phone hardware provided to our customers. Our amortization adjustment has included the amortization of capitalized internal-use software costs. We further adjust EBITDA to exclude stock-based compensation expense, a non-cash item. We believe that Adjusted EBITDA provides management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Additionally, management uses Adjusted EBITDA to measure our financial and operational performance and prepare our budgets.

Current wording

We define EBITDA as earnings before interest expense, interest income, other income/expense, provision for income taxes, depreciation, and amortization. Our depreciation adjustment includes depreciation on operating fixed assets and we do not adjust for amortization of finance lease right-of-use assets on phone hardware provided to our customers. Our amortization adjustment includes the amortization of capitalized costs from both internal-use software development and cloud computing arrangements. We further adjust EBITDA to exclude stock-based compensation expense, a non-cash item. We believe that Adjusted EBITDA provides management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations. Additionally, management uses Adjusted EBITDA to measure our financial and operational performance and prepare our budgets.

Previous wording

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under U.S. GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under U.S. GAAP. For example, the non-GAAP financial information presented above may be determined or calculated differently by other companies and may not be directly comparable to that of other companies. In addition, free cash flow does not reflect our future contractual commitments and the total increase or decrease of our cash balance for a given period. Further, Adjusted EBITDA excludes some costs, namely, non-cash stock-based compensation expense. Therefore, Adjusted EBITDA does not reflect the non-cash impact of stock-based compensation expense or working capital needs that will continue for the foreseeable future. All of these limitations could reduce the usefulness of these non-

Current wording

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under U.S. GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under U.S. GAAP. For example, the non-GAAP financial information presented above may be determined or calculated differently by other companies and may not be directly comparable to that of other companies. In addition, free cash flow does not reflect our future contractual commitments and the total increase or decrease of our cash balance for a given period. Further, Adjusted EBITDA excludes some costs, namely, non-cash stock-based compensation expense. Therefore, Adjusted EBITDA does not reflect the non-cash impact of stock-based compensation expense or working capital needs that will continue for the foreseeable future. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related U.S. GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures and to not rely on any single financial measure to evaluate our business.

Previous wording

(2) Represents amortization of capitalized internal-use software costs.

Current wording

(2) Represents amortization of capitalized internal-use software and cloud computing costs.

Previous wording

Since inception, we have financed our operations primarily through cash generated from the sale of subscriptions to our platform, and the net proceeds received from issuances of our equity securities. We have generated losses from our operations as reflected in our accumulated deficit of $278.4 million as of June 30, 2024 and, prior to 2023, have generated negative cash flows from operations. Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer usage and growth in our customer base, and increased research and development expenses to support the growth of our business and related infrastructure. We expect our operating cash flows to further improve as we increase our operational efficiency and experience economies of scale.

Current wording

Since inception, we have financed our operations primarily through cash generated from the sale of subscriptions to our platform, and the net proceeds received from issuances of our equity securities. We have generated losses from our operations as reflected in our accumulated deficit of $284.3 million as of September 30, 2024 and, prior to 2023, have generated negative cash flows from operations. Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer usage and growth in our customer base, and increased research and development expenses to support the growth of our business and related infrastructure. We expect our operating cash flows to further improve as we increase our operational efficiency and experience economies of scale.

Previous wording

As of June 30, 2024, our principal sources of liquidity were cash held as deposits in financial institutions and cash equivalents consisting of highly liquid investments in money market securities of $51.7 million, as well as $47.4 million in other short-term investments comprised primarily of treasury and commercial paper instruments.

Current wording

As of September 30, 2024, our principal sources of liquidity were cash held as deposits in financial institutions and cash equivalents consisting of highly liquid investments in money market securities of

Previous wording

A substantial source of our cash inflow from operating activities is our deferred revenue, which is included on our consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the subscription term. We had $40.6 million of deferred revenue recorded as a current liability as of June 30, 2024. This deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.

Current wording

A substantial source of our cash inflow from operating activities is our deferred revenue, which is included on our consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is recorded as revenue over the subscription term. We had $40.2 million of deferred revenue recorded as a current liability as of September 30, 2024. This deferred revenue will be recognized as revenue when all of the revenue recognition criteria are met.

Previous wording

For the six months ended June 30, 2024, cash provided by operating activities was $3.0 million, primarily due to a net loss of $15.8 million, adjusted for non-cash charges of $29.3 million and net cash outflows of $10.6 million from changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were an $8.0 million increase in deferred contract costs, comprising mainly sales commissions earned on bookings, a $3.0 million decrease in accrued liabilities, a $2.9 million increase in accounts receivable and a $2.0 million decrease in operating lease liabilities. These amounts were partially offset by a $2.4 million increase in accounts payable, a $1.5 million decrease to prepaid expenses and other assets, and a $1.4 million increase to deferred revenue due to our prepay arrangements with our customers.

Current wording

For the nine months ended September 30, 2024, cash provided by operating activities was $7.5 million, primarily due to a net loss of $21.6 million, adjusted for net non-cash charges of $44.3 million and net cash outflows of $15.2 million from changes in our operating assets and liabilities. The drivers of the changes in operating assets and liabilities were an $11.5 million increase in deferred contract costs comprising mainly sales commissions earned on bookings, a $6.1 million increase in accounts receivable, and a $3.0 million decrease in operating lease liabilities. These amounts were partially offset by a $2.5 million increase in accounts payable, a $1.7 million decrease to prepaid expenses and other assets, a $1.1 million increase to deferred revenue due to our prepay arrangements with our customers, and a $0.2 million decrease in accrued liabilities.

Previous wording

For the six months ended June 30, 2023, cash provided by operating activities was $3.1 million, primarily consisting of our net loss of $16.8 million, adjusted for non-cash charges of $23.6 million, and net cash outflows of $3.6 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities were a $6.7 million increase in deferred contract costs and a $1.8 million decrease in operating lease liabilities. These amounts were partially offset by a $0.8 million increase to accrued liabilities, largely from employee compensation accruals, $1.4 million decrease to prepaid expenses and other assets, a $0.5 million increase in accounts payable, and a $2.8 million increase to deferred revenue comprising mainly sales commissions earned on bookings.

Current wording

For the nine months ended September 30, 2023, cash provided by operating activities was $6.5 million, primarily consisting of our net loss of $24.0 million, adjusted for non-cash charges of $36.2 million, and net cash outflows of $5.8 million from changes in our operating assets and liabilities. The drivers of the changes in operating assets and liabilities were a $9.8 million increase in deferred contract costs, consisting mainly of sales commissions earned on bookings, a $2.8 million decrease in operating lease liabilities, and a $1.3 million increase in accounts receivable. These amounts were partially offset by a $3.5 million increase to deferred revenue relating to customers who elect to be billed annually, a $3.2 million increase to accrued liabilities, largely from employee compensation accruals, a $1.0 million increase in accounts payable, and a $0.4 million decrease to prepaid expenses and other assets.

Previous wording

Cash provided by investing activities for the six months ended June 30, 2024 was $9.5 million, primarily due to $32.3 million in short-term investment maturities, partially offset by $20.5 million in purchases of short-term investments. Additional investing cash flow activities included $1.3 million of furniture and equipment additions and $1.0 million in personnel-related costs capitalized as internal-use software development.

Current wording

Cash provided by investing activities for the nine months ended September 30, 2024 was $9.5 million, due to $55.7 million in short-term investment maturities, partially offset by $43.0 million in purchases of short-term investments. Additional investing cash flow activities included $1.8 million of furniture and equipment additions and $1.4 million in personnel-related costs capitalized as internal-use software development.

Previous wording

Cash used in investing activities for the six months ended June 30, 2023 was $7.8 million, primarily due to $35.2 million in purchases of short-term investments, partially offset by $29.0 million in short-term investment maturities. Additional investing cash flow activities included $0.8 million of furniture and equipment additions and $0.8 million in personnel-related costs capitalized as internal-use software development.

Current wording

Cash used in investing activities for the nine months ended September 30, 2023 was $4.7 million, primarily due to $45.7 million in purchases of short-term investments, partially offset by $43.9 million in short-term investment maturities. Additional investing cash flow activities included $1.5 million of furniture and equipment additions and $1.4 million in personnel-related costs capitalized as internal-use software development.

Previous wording

Cash used in financing activities for the six months ended June 30, 2024 was $11.6 million, primarily due to $9.4 million in employee taxes paid related to the net settlement of restricted stock units, and principal payments on finance lease obligations of $3.5 million. These outflows were partially offset by cash proceeds from employee stock option exercises of $0.4 million, and proceeds of $1.0 million from the employee stock purchase plan.

Current wording

Cash used in financing activities for the nine months ended September 30, 2024 was $16.6 million, due to $13.9 million in employee taxes paid related to the net settlement of restricted stock units, and principal payments on finance lease obligations of $5.3 million. These outflows were partially offset by cash proceeds of $2.0 million from the employee stock purchase plan, and proceeds from employee stock option exercises of $0.6 million.

Previous wording

Cash used in financing activities for the six months ended June 30, 2023 was $5.2 million, primarily as a result of principal payments on finance lease obligations of $3.8 million and $2.7 million in employee taxes paid related to the net settlement of restricted stock units. These outflows were partially offset by proceeds of $0.6 million from the employee stock purchase plan and cash proceeds from employee stock option exercises of $0.6 million.

Current wording

Cash used in financing activities for the nine months ended September 30, 2023 was $0.5 million, due to $7.5 million in employee taxes paid related to the net settlement of restricted stock units, and principal payments on finance lease obligations of $5.7 million. These outflows were partially offset by cash proceeds from employee stock option exercises of $11.4 million, and proceeds of $1.3 million from the employee stock purchase plan.

Previous wording

During the six months ended June 30, 2024, we acquired $3.6 million of additional right of use assets through new finance lease obligations.

Current wording

During the nine months ended September 30, 2024, we acquired $5.2 million of additional right of use assets through new finance lease obligations.

Previous wording

In March 2024, we entered into the Sixth Amendment to the Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (“SVB”), which amended certain terms of the August 2021 Agreement, including but not limited to, setting EBITDA financial covenants of the Company for the 2024 fiscal year. There were no other significant modifications of agreement terms with this amendment.

Current wording

In March 2024, we entered into the Sixth Amendment to the Second Amended and Restated Loan and Security Agreement with SVB, which amended certain terms of the August 2021 Agreement, including but not limited to, setting EBITDA financial covenants of the Company for the 2024 fiscal year. There were no other significant modifications of agreement terms with this amendment.

Previous wording

In August 2021, we established a revolving line of credit with SVB with total borrowing capacity up to $50.0 million, subject to reduction should we fail to meet certain metrics for recurring revenue and customer retention (the “August 2021 Agreement”). The line of credit, as amended, matures in August 2025. Amounts outstanding on the line will accrue interest at the greater of prime rate plus 0.25% and 3.50%. We are required to pay an annual fee of $0.1 million beginning on the effective date of the August 2021 Agreement, and continuing on the anniversary of the effective date. We are also required to pay a quarterly unused line fee of 0.15% per annum of the available borrowing amount should the outstanding principal balance drop below $10.0 million (calculated based on the number of days and based on the average available borrowing amount). The line of credit is collateralized by substantially all of our assets. The August 2021 Agreement, as amended in March 2024, includes financial covenants requiring that, at any time, if our total unrestricted cash and cash equivalents held at SVB, plus our short-term investments managed by SVB, is less than $100.0 million, we must at all times thereafter maintain a consolidated minimum $20.0 million in liquidity, meaning unencumbered cash and short-term investments plus available borrowing on the line of credit, and that we meet specified minimum levels of EBITDA, as adjusted for stock-based compensation and changes in our deferred revenue. We did not take any advances on the line of credit in the three months ended June 30, 2024. As of June 30, 2024, there was no outstanding balance on the line of credit, the full $50.0 million was available for borrowing, and we were in compliance with all SVB loan covenants.

Current wording

In August 2021, we established a revolving line of credit with SVB with total borrowing capacity up to $50.0 million, subject to reduction should we fail to meet certain metrics for recurring revenue and customer retention (the “August 2021 Agreement”). The line of credit, as amended, matures in August 2025. Amounts outstanding on the line will accrue interest at the greater of prime rate plus 0.25% and 3.50%. We are required to pay an annual fee of $0.1 million beginning on the effective date of the August 2021 Agreement, and continuing on the anniversary of the effective date. We are also required to pay a quarterly unused line fee of 0.15% per annum of the available borrowing amount should the outstanding principal balance drop below $10.0 million (calculated based on the number of days and based on the average available borrowing amount). The line of credit is collateralized by substantially all of our assets. The August 2021 Agreement, as amended in March 2024, includes financial covenants requiring that, at any time, if our total unrestricted cash and cash equivalents held at SVB, plus our short-term investments managed by SVB, is less than $100 million, we must at all times thereafter maintain a consolidated minimum $20 million in liquidity, meaning unencumbered cash and short-term investments plus available borrowing on the line of credit, and that we are required to meet specified minimum levels of EBITDA, as adjusted for stock-based compensation and changes in our deferred revenue. We did not take any advances on the line of credit in the nine months ended September 30, 2024. As of September 30, 2024, there was no outstanding balance on the line of credit, the full $50.0 million was available for borrowing, and we were in compliance with all SVB loan covenants.