Workiva Inc: Form 10-Q for the period ended Jun 30, 2024

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 20, 2024. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC.

Overview

Workiva’s mission is to power transparent reporting for a better world. We believe that all stakeholders, including consumers, employees, shareholders, and regulators, expect more from business – more action, transparency, and disclosure of financial and non-financial information. We build solutions to meet that demand and streamline processes, connect data and teams, and ensure consistency – all within the Workiva platform, the world’s leading cloud platform for assured integrated reporting. Additionally, we offer the only unified software-as-a-service (“SaaS”) platform that brings customers’ financial reporting, Environmental, Social, and Governance (“ESG”), and Governance, Risk, and Compliance (“GRC”) together in a controlled, secure, audit-ready platform.

From data to disclosure, the Workiva platform empowers customers by connecting and transforming data from hundreds of enterprise resource planning (“ERP”), human capital management (“HCM”), and customer relationship management (“CRM”) systems, as well as other third-party cloud and on-premise applications. Customers use our platform to create, review and publish data-linked documents, presentations, and reports with greater control, consistency, accuracy, and productivity. Our platform is flexible and scalable, so customers can easily adapt it to define, automate, and change their business processes in real time.

Workiva provides more than 6,100 organizations across the globe with SaaS platform solutions to help solve some of the most complex reporting and disclosure challenges. While our customers use our platform for more than 100 different use cases, across dozens of vertical industries, we organize our sales and marketing resources into three purpose-built solution groups (Financial Reporting, ESG, and GRC) focusing primarily on the office of the Chief Financial Officer (“CFO”), Chief Sustainability Officer (“CSO”), and Chief Audit Executive (“CAE”).

We operate our business on a SaaS model. Customers enter into annual and multi-year subscription contracts to gain access to our platform. Our subscription fee includes the use of our software and technical support. Our subscription pricing is based primarily on a solution-based licensing model. Under this model, operating metrics related to a customer’s expected use of each solution determine the price. We charge customers additional fees primarily for document setup and XBRL tagging services.

We generate sales primarily through our direct sales force. In addition, we augment our direct sales channel with partnerships. Our advisory and service partners offer a wider range of domain and functional expertise that broadens the capabilities of our platform, bringing scale and support to customers and prospects. Our technology partners enable more data and process integrations to help customers connect critical transactional systems directly to our platform.

We continue to invest in the development of our solutions, infrastructure and sales and marketing to drive long-term growth. Our full-time employee headcount expanded to 2,680 at June 30, 2024 from 2,508 at June 30, 2023, an increase of 6.9%.

We have achieved significant revenue growth in recent periods. Our revenue grew to $177.5 million and $353.2 million during the three and six months ended June 30, 2024, respectively from $155.0 million and $305.2 million during the three and six months ended June 30, 2023, respectively. We incurred net losses of $17.5 million and $29.2 million during the three and six months ended June 30, 2024, respectively compared to $20.9 million and $67.1 million during the three and six months ended June 30, 2023, respectively.

We continue to invest for future growth and are focused on several key drivers, including focusing on multi-solution adoption by new and existing customers, further developing our partner program, accelerating international expansion and our fit-for-purpose solutions. These growth drivers often require a more sophisticated go-to-market approach and, as a result, we may incur additional costs upfront to obtain new customers and expand our relationships with existing customers, including additional sales and marketing expenses.

Recent Business Developments

On June 17, 2024, we acquired all of the issued and outstanding equity interests in Sustain.Life, a leading provider of carbon accounting solutions to launch Workiva Carbon. Workiva Carbon is an audit-ready carbon accounting solution that helps organizations measure, manage, track, and report carbon emissions, including data from third-party supply chain partners. Coupled with Workiva's ESG reporting solution, companies can now collect key business data, calculate critical metrics, set data-driven ESG strategy, measure progress, and report results all in the Workiva platform. See Note 11 to the condensed consolidated financial statements for more information.

Effects of Volatility in the IPO/SPAC Markets

In the United States, volatility in the public markets has led to a decrease in the number of initial public offerings (“IPOs”) and special-purpose acquisition companies (“SPACs”) since fiscal year 2022. New sales of our SEC and capital markets solutions were adversely affected by this decline in the IPO and SPAC markets. We expect reduced valuation multiples caused by higher interest rates, inflation, and geopolitical instability to continue to negatively impact the number of IPOs and SPACs in fiscal year 2024. Whether and to what extent the IPO and SPAC markets will moderate cannot be accurately predicted.

Key Factors Affecting Our Performance

Generate Growth From Existing Customers. The Workiva platform can exhibit a powerful network effect within an enterprise, meaning that the usefulness of our platform attracts additional users. Since solution-based licensing offers our customers an unlimited number of seats for each solution purchased, we expect customers to add more seats over time. As more employees in an enterprise use our platform, additional opportunities for collaboration and automation drive demand among their colleagues for additional solutions.

Pursue New Customers. We sell to organizations that manage large, complex processes with distributed teams of contributors and disparate sets of business data. We market our platform to professionals and executives in the areas of financial and non-financial reporting, including regulatory, multi-entity and performance reporting. In addition, we market to teams responsible for environmental, social and governance reporting, and governance, risk and compliance programs. We intend to continue to build our sales and marketing organization and leverage our brand equity to attract new customers.

Offer More Solutions. We intend to introduce new solutions to continue to meet growing demand for our platform. Our close and trusted relationships with our customers are a source for new use cases, features and solutions. We have a disciplined process for tracking, developing and releasing new solutions that are designed to have immediate, broad applicability; a strong value proposition; and a high return on investment for both Workiva and our customers. Our advance planning team assesses customer needs, conducts industry-based research and defines new markets. This vetting process involves our sales, product marketing, customer success, professional services, research and development, finance and senior management teams.

Expand Across Enterprises. Our success in delivering multiple solutions has created demand from customers for a broader-based, enterprise-wide Workiva platform. In response, we have been improving our technology and realigning sales and marketing to capitalize on our growing enterprise-wide opportunities. We believe this expansion will add seats and revenue and continue to support our high revenue retention rates. However, we expect that enterprise-wide deals will be larger and more complex, which tend to lengthen the sales cycle.

Add Partners. We continue to expand and deepen our relationships with global and regional partners, including consulting firms, system integrators, large and mid-sized independent software vendors, and implementation partners. Our advisory and service partners offer a wider range of domain and functional expertise that broadens our platform’s capabilities and promotes Workiva as part of the digital transformation projects they drive for their customers. Our technology partners enable powerful data and process integrations to help customers connect critical transactional systems directly to our platform, with powerful linking, auditability and control features. We believe that our partner ecosystem extends our global reach, accelerates the usage and adoption of our platform, and enables more efficient delivery of professional services.

Investment in growth. We plan to continue to invest in the development of our platform, fit-for-purpose solutions and application marketplace to enhance our current offerings and build new features. In addition, we expect to continue to invest in our sales, marketing, professional services and customer success organizations to drive additional revenue and support the needs of our growing customer base and to take advantage of opportunities that we have identified in Europe, the Middle East and Africa ("EMEA") and Asia-Pacific ("APAC") regions.

Seasonality. Our revenue from professional services has some degree of seasonality. Many of our customers employ our professional services just before they file their Form 10-K, often in the first calendar quarter. Our sales and marketing expense also has some degree of seasonality. Sales and marketing expenses have historically been higher in the third quarter due to our annual user conference in September. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow.

Key Performance Indicators

(dollars in thousands)

Total customers. We believe total number of customers is a key indicator of our financial success and future revenue potential. We define a customer as an entity with an active subscription contract as of the measurement date. Our customer is typically a parent company or, in a few cases, a significant subsidiary that works with us directly. Companies with publicly-listed securities account for a substantial majority of our customers. Our customer count as of June 30, 2024 does not include Sustain.Life.

Subscription and support revenue retention rate. We calculate our subscription and support revenue retention rate based on all customers that were active at the end of the same calendar quarter of the prior year (“base customers”). We begin by annualizing the subscription and support revenue recorded in the same calendar quarter of the prior year for those base customers who are still active at the end of the current quarter. We divide the result by the annualized subscription and support revenue in the same quarter of the prior year for all base customers.

Our subscription and support revenue retention rate was 97.6% as of June 30, 2024, which remained flat from June 30, 2023. We believe that our success in maintaining a high rate of revenue retention is attributable primarily to our robust technology platform and strong customer service. Customers whose securities were deregistered due to merger or acquisition or financial distress accounted for just over half of our revenue attrition in the latest quarter.

Subscription and support revenue retention rate including add-ons. Add-on revenue includes the change in both solutions and pricing for existing customers. We calculate our subscription and support revenue retention rate including add-ons by annualizing the subscription and support revenue recorded in the current quarter for our base customers that were active at the end of the current quarter. We divide the result by the annualized subscription and support revenue in the same quarter of the prior year for all base customers.

Our subscription and support revenue retention rate including add-ons was 109.2% as of the quarter ended June 30, 2024, down from 111.1% as of June 30, 2023.

Annual contract value. Our annual contract value (“ACV”) for each customer is calculated by annualizing the subscription and support revenue recognized during each quarter. We believe the increase in the number of larger contracts shows our progress in expanding our customers’ adoption of our platform.

Components of Results of Operations

Revenue

We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. We serve a wide range of customers in many industries, and our revenue is not concentrated with any single customer or small group of customers. For the six months ended June 30, 2024 and 2023, no single customer represented more than 1% of our revenue, and our largest 10 customers accounted for less than 10% of our revenue in the aggregate.

We generate sales directly through our sales force and partners. We also identify some sales opportunities with existing customers through our customer success and professional services teams.

Our customer contracts typically range in length from one year to three years. We typically invoice our customers for subscription fees annually in advance. For contracts with a two or three year term, customers sometimes elect to pay the entire multi-year subscription term in advance. Our arrangements do not contain general rights of return.

Subscription and Support Revenue. We recognize subscription and support revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Amounts that are invoiced are initially recorded as deferred revenue.

Professional Services Revenue. We believe our professional services facilitate the sale of our subscription service to certain customers. To date, most of our professional services have consisted of document set up, XBRL tagging, and consulting to help our customers with business processes and best practices for using our platform. Our professional services are not required for customers to utilize our solution. We recognize revenue for document set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services are recognized as the services are performed.

Cost of Revenue

Cost of revenue consists primarily of personnel and related costs directly associated with our professional services, customer success teams and training personnel, including salaries, benefits, bonuses, travel, and stock-based compensation; the costs of contracted third-party vendors; the costs of third-party hosting fees for server usage by our customers; information technology costs; and facility costs.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, commissions, travel, and stock-based compensation. Other costs included in this expense are marketing and promotional events, our annual user conference, online marketing, product marketing, information technology costs, and facility costs. We pay sales commissions for initial contracts and expansions of existing customer contracts. When the relevant amortization period is one year or less, we expense sales commissions as incurred. All other sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized on a straight-line basis over a period of benefit that we have determined to be three years.

Research and Development Expenses

Research and development expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, travel,and stock-based compensation; costs of third-party hosting fees for server usage by our developers; information technology costs; and facility costs.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel and related costs for our executive, finance and accounting, legal, human resources, and administrative personnel, including salaries, benefits, bonuses, travel, and stock-based compensation; legal, accounting, and other professional service fees; other corporate expenses; information technology costs; and facility costs.

Results of Operations

The following table sets forth selected consolidated statement of operations data for each of the periods indicated:

(in thousands)

(1) Stock-based compensation expense included in these line items was as follows:

(in thousands)

29

The following table sets forth our consolidated statement of operations data as a percentage of revenue for each of the periods indicated:

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

Revenue

(dollars in thousands)

30

Total revenue increased $22.5 million for the three months ended June 30, 2024 compared to the same quarter a year ago due primarily to a $24.0 million increase in subscription and support revenue. Growth in subscription and support revenue in the second quarter was attributable mainly to strong demand and continued solution expansion across our customer base. Revenue from professional services decreased $1.5 million for the three months ended June 30, 2024 compared to the same quarter a year ago. We continue to transition consulting and other services to our partners and expect the revenue growth rate from subscription and support to continue to outpace revenue growth from professional services on an annual basis.

Total revenue increased $48.0 million for the six months ended June 30, 2024 compared to the same period a year ago due primarily to a $49.3 million increase in subscription and support revenue. Growth in subscription and support revenue was attributable mainly to strong demand and continued solution expansion across our customer base. Revenue from professional services decreased $1.3 million for the six months ended June 30, 2024 compared to the same period a year ago. We continue to transition consulting and other services to our partners and expect the revenue growth rate from subscription and support to continue to outpace revenue growth from professional services on an annual basis.

Cost of Revenue

(dollars in thousands)

Cost of revenue increased $1.7 million during the three months ended June 30, 2024 compared to the same quarter a year ago. Subscription and support cost of revenue increased $2.9 million due primarily to $2.4 million in higher cash-based compensation and benefits costs and $0.5 million of additional stock-based compensation. The increase in compensation resulted primarily from our continued investment in and support of our platform and solutions. Professional services cost of revenue decreased $1.2 million due primarily to a $0.8 million decrease in cash-based compensation and benefits costs. The decrease was primarily driven by a decrease in employee headcount as we continue to transition consulting and other services to our partners.

Cost of revenue increased $4.7 million during the six months ended June 30, 2024 compared to the same period a year ago. Subscription and support cost of revenue increased $6.7 million due primarily to $4.9 million in higher cash-based compensation and benefits costs, $1.1 million of additional stock-based compensation, and a $0.4 million increase in software expense. The increases in compensation and software expense resulted primarily from our continued investment in and support of our platform and solutions. Professional services cost of revenue decreased $2.0 million due primarily to a $1.6 million decrease in cash-based compensation and benefits costs. The decrease was primarily driven by a decrease in employee headcount as we continue to transition consulting and other services to our partners.

Operating Expenses

(dollars in thousands)

Research and Development

Research and development expenses increased $5.7 million during the three months ended June 30, 2024 compared to the same quarter a year ago due primarily to $2.0 million in higher cash-based compensation and benefits, $0.3 million of additional stock-based compensation, a $1.9 million increase in travel expense, and a $1.0 million increase in professional service fees. The increases in compensation and professional service fees resulted primarily from our continued investment in and support of our platform and solutions. The increase in travel expense was primarily due to our annual research and development event which was held in the second quarter of 2024. In the prior year the event was held in the first quarter.

Research and development expenses increased $5.4 million during the six months ended June 30, 2024 compared to the same period a year ago due primarily to $4.1 million in higher cash-based compensation and benefits, $0.3 million of additional stock-based compensation, and a $1.0 million increase in professional service fees partially offset by a $0.4 million decrease in software expense. The increases in compensation and professional service fees resulted primarily from our continued investment in and support of our platform and solutions.

Sales and Marketing

Sales and marketing expenses increased $12.8 million during the three months ended June 30, 2024 compared to the same quarter a year ago due primarily to $8.1 million in higher cash-based compensation and benefits, $1.8 million of additional stock-based compensation, a $1.0 million increase in travel expense, a $0.9 million increase in professional service fees, and a $0.8 million increase in marketing and advertising. The increase in compensation was primarily due to an increase in employee headcount as we continue to invest in our go-to-market activities. The increase in travel expense was primarily due to a general increase in travel driven by an increase in employee headcount and our continued investment in our go-to-market activities. The increases in professional service fees and marketing and advertising was the result of our continued investment in and support of our platform and solutions.

Sales and marketing expenses increased $24.7 million during the six months ended June 30, 2024 compared to the same period a year ago due primarily to $16.3 million in higher cash-based compensation and benefits, $2.9 million of additional stock-based compensation, a $2.2 million increase in travel expense, a $1.8 million increase in professional service fees, and a $1.0 million increase in public relations. The increase in compensation was primarily due to an increase in employee headcount and sales commissions as we continue to invest in our go-to-market activities. The increase in travel expense was primarily due to our annual internal sales and marketing event and a general increase in travel driven by an increase in employee headcount and our continued investment in our go-to-market activities. The increases in professional service fees and marketing and advertising was the result of our continued investment in and support of our platform and solutions.

General and Administrative

General and administrative expenses increased $2.7 million during the three months ended June 30, 2024 compared to the same quarter a year ago due primarily to a $0.4 million increase in cash-based compensation and benefits, $2.0 million of additional stock-based compensation, and a $0.9 million increase in professional service fees. In addition, during the second quarter of 2023 we recorded one-time fees of $0.6 million related to the cancellation of certain events which did not recur in the second quarter of 2024. The increase in compensation was primarily due to additional performance-based restricted stock awards issued to executives in the latter part of the first quarter of 2024 and changes in the assumptions associated with the attainment of company-specific performance targets. The remaining increase in compensation was due to a modest increase in employee headcount. The increase in professional service fees was primarily due to costs incurred to acquire Sustain.Life.

General and administrative expenses decreased $15.0 million during the six months ended June 30, 2024 compared to the same period a year ago due primarily to a $1.0 million decrease in cash-based compensation and benefits and a $14.8 million decrease in stock-based compensation partially offset by a $0.6 million increase in professional service fees. In addition, during the six months ended June 30, 2023, we recorded a one-time benefit of $1.0 million related to a goods and services tax refund as well as one-time fees of $0.6 million related to the cancellation of certain events which did not recur in 2024. The decrease in compensation during the first six months of 2024 is primarily due to the recognition of $1.4 million and $18.1 million in cash-based and stock-based compensation, respectively, pursuant to certain transition agreements with former executives during the first quarter of 2023 which did not recur in 2024, partially offset by a modest increase in employee headcount and an increase in performance-based restricted stock expense driven by additional performance-based restricted stock awards issued to executives in the latter part of the first quarter of 2024 and changes in the assumptions associated with the attainment of company-specific performance targets. The increase in professional service fees was primarily due to costs incurred to acquire Sustain.Life.

Non-Operating Income (Expenses)

(dollars in thousands)

(*) Percentage is not meaningful.

Interest Income, Interest Expense and Other (Expense) Income, Net

During the three months ended June 30, 2024, interest income increased $5.8 million compared to the same quarter a year ago due primarily to an increase in our investment balance, facilitated by the issuance of our 2028 convertible notes, coupled with higher interest rates. Interest expense increased $1.7 million compared to the same quarter a year ago due primarily to the issuance of our 2028 convertible notes. Other (expense) income, net decreased $0.4 million compared to the same quarter a year ago due primarily to gains on foreign currency transactions as well as losses on the sale of available-for-sale securities from the second quarter of 2023 which did not recur in the second quarter of 2024.

During the six months ended June 30, 2024, interest income increased $12.5 million compared to the same period a year ago due primarily to an increase in our investment balance, facilitated by the issuance of our 2028 convertible notes, coupled with higher interest rates. Interest expense increased $3.5 million compared to the same period a year ago due primarily to the issuance of our 2028 convertible notes. Other (expense) income, net decreased $1.4 million compared to the same period a year ago due primarily to gains on foreign currency transactions as well as losses on the sale of available-for-sale securities from the first six months of 2023 which did not recur in 2024.

Results of Operations for Fiscal 2023 Compared to 2022

For a comparison of our results of operations for the fiscal years ended December 31, 2023 and 2022, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 20, 2024.

Liquidity and Capital Resources

Overview of Sources and Uses of Cash

As of June 30, 2024, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $740.9 million, which were held for working capital purposes. We have financed our operations primarily through cash generated from operations and issuances of convertible debts. We have generated significant operating losses as reflected in our accumulated deficit on our condensed consolidated balance sheets. While we expect to continue to incur operating losses and may incur negative cash flows from operations in the future, we believe that current cash and cash equivalents and cash flows from operating activities will be sufficient to fund our operations for at least the next twelve months.

Convertible Debt

In August 2023, we issued $702.0 million aggregate principal amount of 1.250% convertible senior notes due 2028 (the "2028 Notes"). Proceeds from the issuance of the 2028 Notes totaled $691.1 million, net of initial purchaser discounts and issuance costs. We used $396.9 million of the net proceeds from the 2028 Notes offering to repurchase $273.8 million principal amount, together with accrued and unpaid interest thereon, of our 1.125% convertible senior notes due 2026 (the "2026 Notes") in separate and individually negotiated transactions with certain holders. As of June 30, 2024, we had outstanding debt relating to our 2026 Notes and 2028 Notes of $70.7 million and $693.0 million, with corresponding maturity dates of August 15, 2026 and August 15, 2028, respectively.

Cash Flows

(in thousands)

Operating Activities

Our largest source of operating cash is cash collections from customers for subscription and support access to our platform. Our primary uses of cash from operating activities are for personnel-related expenditures, marketing activities, and costs of cloud infrastructure services.

Cash used in operating activities was flat for the three months ended June 30, 2024 and consisted of a net loss of $17.5 million adjusted for non-cash charges of $25.4 million and net cash outflows of $7.9 million from changes in operating assets and liabilities. Net cash used in operating activities was primarily due to an increase in accounts receivable driven by an increase in large contracts that were signed toward the end of the period and timing of collections from customers. The increase in large contracts also drove an increase in deferred costs, partially offset by the related increase in deferred revenue. The decreases in accounts payable, prepaid expenses, and other receivables as well as the increases in accrued expenses and other liabilities were attributable primarily to the timing of cash payments and collections.

Cash provided by operating activities of $26.0 million for the three months ended June 30, 2023 consisted of a net loss of $20.9 million adjusted for non-cash charges of $22.3 million and net cash inflows of $24.6 million from changes in operating assets and liabilities. Customer growth and contract renewals for longer terms accounted for most of the increase in deferred revenue. Deferred costs decreased primarily due to the amortization of direct and incremental costs of obtaining a customer contract. The increases in accounts receivable, prepaid expenses, and accrued expenses and other liabilities as well as the decrease in accounts payable were attributable primarily to the timing of our billings, cash collections, and cash payments.

Cash provided by operating activities of $24.8 million for the six months ended June 30, 2024 consisted of a net loss of $29.2 million adjusted for non-cash charges of $47.4 million and net cash inflows of $6.7 million from changes in operating assets and liabilities. The change in operating assets and liabilities was driven by a decrease in deferred revenue which was due in part to a reduction of multi-year prepaid customer contracts and timing of contract negotiations. The increase in deferred costs was primarily due to growth in subscription bookings. The increases in other assets, accounts payable, and accrued expenses and other liabilities as well as the decreases in accounts receivable, prepaid expenses, and other receivables were attributable primarily to the timing of our billings, cash collections, and cash payments.

Cash provided by operating activities of $31.5 million for the six months ended June 30, 2023 consisted of a net loss of $67.1 million adjusted for non-cash charges of $63.1 million and net cash inflows of $35.5 million from changes in operating assets and liabilities. Customer growth accounted for most of the increase in deferred revenue. Deferred costs decreased primarily due to the amortization of direct and incremental costs of obtaining a customer contract. The increases in prepaid expenses and accrued expenses and other liabilities as well as the decreases in accounts receivable and accounts payable were attributable primarily to the timing of our billings, cash collections, and cash payments.

Investing Activities

Cash used in investing activities of $26.3 million for the three months ended June 30, 2024 consisted of $98.3 million for the acquisition of Sustain.Life and $35.0 million in purchases of marketable securities partially offset by $107.1 million from the maturities of marketable securities.

Cash used in investing activities of $22.5 million for the three months ended June 30, 2023 consisted of $51.2 million in purchases of marketable securities and $0.6 million in purchases of fixed assets partially offset by $21.3 million from the sale of marketable securities and $8.0 million from the maturities of marketable securities. Our capital expenditures were associated primarily with computer equipment in support of expanding our infrastructure and work force.

Cash used in investing activities of $8.9 million for the six months ended June 30, 2024 consisted of $98.3 million for the acquisition of Sustain.Life and $151.6 million in purchases of marketable securities partially offset by $236.7 million from the maturities of marketable securities and $4.6 million from the sale of marketable securities.

Cash used in investing activities of $73.0 million for the six months ended June 30, 2023 consisted of $177.0 million in purchases of marketable securities and $0.8 million in purchases of fixed assets partially offset by $65.1 million from the sale of marketable securities and $39.9 million from the maturities of marketable securities. Our capital expenditures were associated primarily with computer equipment in support of expanding our infrastructure and work force.

Financing Activities

Cash used in financing activities of $1.5 million for the three months ended June 30, 2024 consisted of $1.6 million in taxes paid related to net share settlements of stock-based compensation awards partially offset by $0.3 million in proceeds from option exercises.

Cash used in financing activities of $0.6 million for the three months ended June 30, 2023 consisted of $1.2 million in taxes paid related to net share settlements of stock-based compensation awards partially offset by $0.7 million in proceeds from option exercises.

Cash used in financing activities of $2.8 million for the six months ended June 30, 2024 consisted of $10.3 million in taxes paid related to net share settlements of stock-based compensation awards partially offset by $7.1 million in proceeds from shares issued in connection with our employee stock purchase plan and $0.6 million in proceeds from option exercises.

Cash used in financing activities of $0.9 million for the six months ended June 30, 2023 consisted of $8.4 million in taxes paid related to net share settlements of stock-based compensation awards partially offset by $5.5 million in proceeds from shares issued in connection with our employee stock purchase plan and $2.2 million in proceeds from option exercises.

Share Repurchase Plan

On July 30, 2024, our board of directors authorized a share repurchase program for up to $100.0 million of our outstanding Class A common stock (the “2024 Repurchase Plan”). The repurchases may be made in the open market or through privately negotiated transactions, pursuant to Rule 10b5-1 trading plans or other available means, each in compliance with Rule 10b-18 under the Exchange Act. The timing, manner, price, and amount of the repurchase will be subject to the discretion of the Company’s management, and it may be suspended or discontinued at any time.

Contractual Obligations and Commitments

There were no material changes in our contractual obligations and commitments from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 20, 2024.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

During the six months ended June 30, 2024, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 20, 2024.

For quantitative and qualitative disclosures about market risk, see “Item 7A., Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2023. Our exposures to market risk have not changed materially since December 31, 2023.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q.

Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2023 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. There have been no material changes during fiscal year 2024 to the risk factors that were included in the Form 10-K, other than what is set forth immediately below.

Risks Related to Ownership of Our Securities

The amount and frequency of our share repurchases may fluctuate, and we cannot guarantee that we will fully consummate our share repurchase authorization, or that it will enhance long-term shareholder value. Share repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.

The amount, frequency and execution of our share repurchases pursuant to the 2024 Repurchase Plan may fluctuate based on our operating results, cash flows, priorities for the use of cash for other purposes. These other purposes include, but are not limited to, operational spending, capital spending, acquisitions, and repayment of debt. Other factors, including changes in tax laws, could also impact our share repurchases. Although our board of directors has authorized share repurchases of up to $100.0 million of our outstanding Class A common stock, the authorization does not obligate us to repurchase any common stock, and we may not ultimately purchase any common stock.

We cannot guarantee that our share repurchase authorization pursuant to the 2024 Repurchase Plan will be fully consummated or that it will enhance long-term shareholder value. The repurchase authorization could affect the trading price of our stock and increase volatility. Price volatility may cause the average price at which we repurchase our common stock in a given period to exceed the common stock’s price at a given point in time. There can be no assurance that the time frame for repurchases under our 2024 Repurchase Plan or that any repurchases will have a positive impact on our stock price or earnings per share. Important factors that could cause us to discontinue or decrease our stock repurchases include, among others, unfavorable market conditions, the market price of our common stock, the nature of other investment or strategic opportunities presented to us from time to time and the availability of funds necessary to fulfill such repurchases.