# Expensify, Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [Expensify, Inc.](/companies/exfy.md) (CIK 1476840)
- Form: 10-Q
- Filed: 2023-05-09
- Accepted by EDGAR: May 9, 2023, 16:02 ET
- Period: 2023-03-31
- Accession: 0001476840-23-000071
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1476840/000147684023000071/exfy-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1476840/000147684023000071/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $40.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $15.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $24.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $5.4m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$2.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$5.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.07 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.07 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 81,768,429 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $7.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $28.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $111.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $194.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $217.3m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $61.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $114.6m | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $51.3m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $550.0k | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-03-31 | $102.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,789 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 Annual Report"). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A. "Risk Factors" in our 2022 Annual Report and included elsewhere in this Quarterly Report on Form 10-Q. See "Special Note Regarding Forward-Looking Statements."*

### OVERVIEW

Expensify is a cloud-based expense management software platform that helps the smallest to the largest businesses simplify the way they manage money. Every day, people from all walks of life in organizations around the world use Expensify to scan and reimburse receipts from flights, hotels, coffee shops, office supplies and ride shares. Since our founding in 2008, we have added over 12 million members to our community and processed and automated over 1.4 billion expense transactions on our platform as of March 31, 2023, freeing people to spend less time managing expenses and more time doing the things they love. For the quarter ended March 31, 2023, an average of 747,000 paid members across 47,800 companies and over 200 countries and territories used Expensify to make money easy.

### Components of Results of Operations

### Revenue

We generate revenue from subscription fees based on the usage of our cloud-based expense management software platform under arrangements paid monthly in arrears that are either (i) month-to-month and can be terminated by either party without penalty at any time or (ii) annual arrangements based on a minimum number of monthly members. Annual subscription customers who wish to terminate their contracts before the end of the term are required to pay the remaining obligation in full plus any fees or penalties set forth in the agreement. We charge our customers subscription fees for access to our platform based on the number of monthly active members and level of service. The contractual price is based on either negotiated fees or rates published on our website. We generate most of our revenue from customers who have a credit card or debit card on file with us that is automatically charged each month. Virtually all of our customers have a standard terms of service contract, with the few exceptions on bespoke service contracts.

Our contracts with our customers include two performance obligations: access to the hosted software service, inclusive of all features available within the platform, and the related customer support. We account for the platform access and the support as a combined performance obligation because they have the same pattern of transfer over the same period and are therefore delivered concurrently. We satisfy our performance obligation over time each month as we provide platform access and support services to customers and as such recognize revenue over time. We recognize revenue net of applicable taxes imposed on the related transaction.

We offer a cashback rewards program to all customers based on volume of Expensify Card transactions and software as a service ("SaaS") subscription tier. Cashback rewards are earned on a monthly basis and are paid out the following month. We consider our cashback payments to customers as consideration payable to a customer, and the payments are recorded as contra revenue within Revenue on the Condensed Consolidated Statements of Operations. We also record a cashback rewards liability that represents the consideration payable to customers for earned cashback rewards. The cashback rewards fluctuate over time as customers meet eligibility requirements in conjunction with the applicable SaaS subscription tier of each customer and the timing of payments made to customers. Additional details pertaining to the Company's cashback program can be found in Part I, Item 1A. "Risk Factors" in our 2022 Annual Report. Subsequent to the date the 2022 Annual Report was filed with the SEC and effective as of March 2023, the Company removed a $25,000 monthly threshold for companies to qualify for 1% cash back and now offers a minimum of 1% cash back for all purchases.

### Cost of Revenue, Net

Cost of revenue, net primarily consists of expenses related to hosting our service, including the costs of data center capacity, credit card processing fees, third-party software license fees, outsourcing costs to support customer service and outsourcing costs to support and process our patented scanning technology SmartScan, net of consideration from a vendor. Additional costs include amortization expense on capitalized software development costs and personnel-related expenses, including stock-based compensation and employee costs attributable to supporting our customers and maintenance of our platform.

Consideration from a vendor is related to the Expensify Card. We use a third-party vendor to issue Expensify Cards and process the related transactions. When purchases are made with the Expensify Card, a fee is charged by the card network to the merchant (also known as "interchange"). The vendor is contractually entitled to the interchange through its relationships with the card network and card issuing bank. The vendor keeps a portion of the interchange for their services, and our agreement with the vendor results in us receiving the remainder of the interchange less the amount retained by the vendor (our remainder portion, "Expensify interchange amount"). The vendor also charges us fees ("vendor fees") for the services it provides to us. Due to the nature of the vendor agreement, we do not record the Expensify interchange amount as revenue. Instead, the net of the Expensify interchange amount and vendor fees are paid to us, and we record it as "Consideration from a vendor, net," a contra expense in Cost of revenue, net. The following summarizes these various amounts for the periods presented:

*(in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Expensify interchange amount | $2,261 | $1,220 |
| Vendor fees | (189) | (97) |
| Consideration from a vendor, net | $2,072 | $1,123 |

### OPERATING EXPENSES

### Research and Development

Research and development expenses consist primarily of personnel-related expenses, including stock-based compensation, incurred related to the planning and preliminary project stage and post-implementation stage of new products or enhancing existing products or services. We capitalize certain software development costs that are attributable to developing or adding significant functionality to our internal-use software during the application development stage of the projects. All research and development expenses, excluding capitalized software development costs, are expensed as incurred.

We believe delivering new functionality is critical to attract new customers and expand our relationships with existing customers. We expect to continue to make investments in and expand our product and service offerings to enhance our customers’ experience and satisfaction and to attract new customers. We expect research and development expenses will increase as we expand our research and development team to develop new products and product enhancements.

### General and Administrative

General and administrative expenses primarily consist of personnel-related expenses, including stock-based compensation, for any employee time allocated to administrative functions, including finance and accounting, legal and human resources. In addition to personnel-related expenses, general and administrative expenses consist of rent, utilities, depreciation on property and equipment, amortization of operating right-of-use assets and external professional services, including accounting, audit, tax, finance, legal and compliance, human resources and information technology. We expect that general and administrative expenses will continue to increase as we scale our business and as we incur additional costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees.

### Sales and Marketing

Sales and marketing expenses primarily consist of personnel-related expenses, including stock-based compensation, advertising expenses, branding and public relations expenses, referral fees for strategic partners and other benefits that we provide to our referral and affiliate partners, and depreciation expense. We expect sales and marketing expenses will increase as we expand our sales efforts to pursue our market opportunity.

### Interest and Other Expenses, Net

Interest and other expenses, net, consist primarily of interest paid under our credit facilities with Canadian Imperial Bank of Commerce ("CIBC"). It also includes realized gains and losses on foreign currency transactions and foreign currency remeasurement.

### Provision for Income Taxes

Income taxes primarily consist of income taxes in the United States, United Kingdom, Australia, Netherlands and Canada, as well as states in the United States in which we do business.

### Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q.

The following table sets forth our results of operations for the periods presented:

*(in thousands, except per share data)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Revenue | $40,101 | $40,370 |
| Cost of revenue, net(1) | 15,775 | 14,133 |
| Gross margin | 24,326 | 26,237 |
| Operating expenses: |  |  |
| Research and development(1) | 5,418 | 3,701 |
| General and administrative(1) | 12,429 | 14,006 |
| Sales and marketing(1) | 9,183 | 13,372 |
| Total operating expenses | 27,030 | 31,079 |
| Loss from operations | (2,704) | (4,842) |
| Interest and other expenses, net | (1,416) | (902) |
| Loss before income taxes | (4,120) | (5,744) |
| Provision for income taxes | (1,825) | (1,632) |
| Net loss | $(5,945) | $(7,376) |
| Net loss per share: |  |  |
| Basic and diluted | $(0.07) | $(0.09) |
| Weighted average shares of common stock used to compute net loss per share: |  |  |
| Basic and diluted | 81,768,429 | 80,147,208 |
| Net loss margin | (15)% | (18)% |

(1) Includes stock-based compensation expense as follows:

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Cost of revenue, net | $3,306 | $4,908 |
| Research and development | 2,206 | 2,708 |
| General and administrative | 2,644 | 4,975 |
| Sales and marketing | 1,848 | 2,076 |
| Total stock-based compensation expense | $10,004 | $14,667 |

25

### COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

### Revenue

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $40,101 | $40,370 | $(269) | (1)% |

Revenue decreased by $0.3 million, or 1%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to an increase in contra revenue related to cashback payments driven by the increased adoption and spend captured from members using the Expensify Card.

### Cost of Revenue, Net and Gross Margin

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue, net | $15,775 | $14,133 | $1,642 | 12% |
| Gross margin | $24,326 | $26,237 | $(1,911) | (7)% |
| Gross margin % | 61% | 64% |  |  |

Cost of revenue, net increased by $1.6 million, or 12%, for the three months ended March 31, 2023 compared to the same period in 2022. Cost of revenue, net increased primarily due to increased outsourcing activities related to maintaining our platform along with a higher volume of payment processing fees directly related to an increase in reimbursement activity and increased efforts in support and implementation services. These increases were partially offset by an increase in Consideration from a vendor, net, driven primarily by the increased adoption and spend captured from members using the Expensify Card, which reduced Cost of revenue, net by $2.1 million and $1.1 million for the three months ended March 31, 2023 and 2022, respectively.

Gross margin decreased to 61% for the three months ended March 31, 2023 compared to 64% in the same period in 2022 primarily due to the increase in Cost of revenue, net due to the factors described in the preceding paragraph.

### OPERATING EXPENSES

### Research and Development

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $5,418 | $3,701 | $1,717 | 46% |

Research and development expenses increased by $1.7 million, or 46%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to an increase in employee and external contributor time spent on project initiatives and new product features.

### General and Administrative

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $12,429 | $14,006 | $(1,577) | (11)% |

General and administrative expenses decreased by $1.6 million, or 11%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to a decrease in employee time allocated to administrative functions resulting from one-time planning and implementation activities incurred in 2022 for first year compliance with Section 404 of the Sarbanes-Oxley Act and other new public company requirements.

### Sales and Marketing

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing | $9,183 | $13,372 | $(4,189) | (31)% |

Sales and marketing expenses decreased by $4.2 million, or 31%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to a decrease in advertising and marketing event spend partially offset by an increase in outsourcing activities related to sales and product demos.

### Interest and Other Expenses, Net

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest and other expenses, net | $(1,416) | $(902) | $(514) | 57% |

Interest and other expenses, net increased by $0.5 million, or 57%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to increased interest expense incurred under the 2021 Amended Term Loan (as defined below) and revolving line of credit facility due to increases in CIBC's reference rate.

### Provision for Income Taxes

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Provision for income taxes | $(1,825) | $(1,632) | $(193) | 12% |

We recorded a provision for income taxes of $1.8 million during the three months ended March 31, 2023 compared to a provision for income taxes of $1.6 million for the same period in 2022.

During the three months ended March 31, 2023 and 2022, our effective income tax rate was (44.3)% and (28.4)%, respectively. The effective income tax rate differs from the statutory rate in 2023 primarily due to non-deductible stock-based compensation and the change in the valuation allowance. The principal reason for the difference between the statutory rate and the effective rate for 2022 was due to the change in valuation allowance.

### Key Business Metrics and Non-GAAP Financial Measures

We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles ("GAAP") with certain business metrics and non-GAAP financial measures which we regularly review to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Accordingly, we believe that these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for our financial information presented in accordance with GAAP and may be different from similarly titled metrics or measures presented by other companies.

### KEY BUSINESS METRICS

### Paid Members

We believe that our ability to increase the number of paid members on our platform will drive our success as a business. Companies pay for subscriptions on behalf of employees and contractors who use the platform, whom we refer to as paid members. We define paid members as the average number of users (employees, contractors, volunteers, team members, etc.) who are billed on *Collect* or *Control* plans during any particular quarter. For small and medium businesses ("SMBs") or sole proprietors with only one employee, the business owner may also be the only paid member.

The following table sets forth the average number of paid members (in thousands):

| Three months ended | Paid members |
| --- | ---: |
| March 31, 2023 | 747 |
| March 31, 2022 | 706 |

### NON-GAAP FINANCIAL MEASURES

### Limitations of Non-GAAP Financial Measures

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented under GAAP. There are a number of limitations related to the use of non-GAAP financial measures versus comparable financial measures determined under GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and to not rely on any single financial measure to evaluate our business.

### Adjusted EBITDA and Adjusted EBITDA Margin

We define adjusted EBITDA as net loss from operations excluding provision for income taxes, interest and other expenses, net, depreciation and amortization and stock-based compensation. We define adjusted EBITDA margin as adjusted EBITDA divided by total revenue for the same period. We are focused on profitable growth and we consider adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business.

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Adjusted EBITDA | $8,713 | $10,992 |
| Adjusted EBITDA margin | 22% | 27% |

### Non-GAAP Net Income and Non-GAAP Net Income Margin

We define non-GAAP net income as net loss from operations in accordance with GAAP excluding stock-based compensation. Through the fourth quarter of 2021, non-GAAP net income also excluded bonus costs related to our IPO, which we consider to be the discretionary cash bonuses paid to our employees during 2021. These IPO-related bonus costs impacted the second, third and fourth quarters of 2021, but did not impact any subsequent quarters. Refer to Part II, Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources" in our 2022 Annual Report for further detail over the discretionary cash bonuses paid to employees in 2021. We define non-GAAP net income margin as non-GAAP net income divided by total revenue for the same period. We are focused on profitable growth and we consider non-GAAP net income to be an important measure because it helps illustrate underlying trends in our business that could otherwise be masked by the effect of stock-based compensation expense, which is not considered indicative of the core operating performance of our business.

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Non-GAAP net income | $4,059 | $7,291 |
| Non-GAAP net income margin | 10% | 18% |

29

### Reconciliations of Non-GAAP Financial Measures

The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.

#### Adjusted EBITDA and Adjusted EBITDA Margin

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss | $(5,945) | $(7,376) |
| Net loss margin | (15)% | (18)% |
| Add: |  |  |
| Provision for income taxes | 1,825 | 1,632 |
| Interest and other expenses, net | 1,416 | 902 |
| Depreciation and amortization | 1,413 | 1,167 |
| Stock-based compensation | 10,004 | 14,667 |
| Adjusted EBITDA | $8,713 | $10,992 |
| Adjusted EBITDA margin | 22% | 27% |

#### Non-GAAP Net Income and Non-GAAP Net Income Margin

*(in thousands, except percentages)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net loss | $(5,945) | $(7,376) |
| Net loss margin | (15)% | (18)% |
| Add: |  |  |
| Stock-based compensation | 10,004 | 14,667 |
| Non-GAAP net income | $4,059 | $7,291 |
| Non-GAAP net income margin | 10% | 18% |

### Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through our cash flow from operations, sales of our equity securities and borrowings under our credit facilities. In November 2021, upon completion of our IPO, we received aggregate net proceeds of approximately $57.5 million after deducting underwriting discounts and commissions of approximately $4.9 million and offering costs of approximately $8.0 million. As of March 31, 2023, we had $111.2 million in cash and cash equivalents. As of March 31, 2023, we had $67.1 million in outstanding indebtedness.

Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support growth in our business and our need to respond to business opportunities, challenges or unforeseen circumstances. We believe that our existing cash resources will be sufficient to finance our continued operations and growth strategy for the next 12 months and for the foreseeable future.

### CASH FLOWS

The following table summarizes our cash flows for the periods indicated:

*(in thousands)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $7,642 | $11,223 |
| Net cash used in investing activities | (898) | (673) |
| Net cash provided by financing activities | 141 | 218 |
| Net increase in cash and cash equivalents and restricted cash | $6,885 | $10,768 |

### CASH FLOWS FROM OPERATING ACTIVITIES

Net cash provided by operating activities was $7.6 million for the three months ended March 31, 2023 compared to $11.2 million for the same period in 2022. The decrease was primarily due to a decrease in revenue, an increase in employee and external contributor time spent on project initiatives and new product features, increased outsourcing activities related to maintaining our platform, a higher volume of payment processing fees directly related to an increase in reimbursement activity, and increased efforts in support and implementation services offset by the timing of the payments for our operating expenses and a decrease in settlement liabilities due to the increase in reimbursement activity.

### CASH FLOWS FROM INVESTING ACTIVITIES

During the three months ended March 31, 2023, net cash used in investing activities was $0.9 million, primarily consisting of software development costs.

Net cash used in investing activities increased for the three months ended March 31, 2023 compared to the same period in 2022, primarily due to an increase in internally developed software costs offset by a decrease in purchases related to the build-out of offices in Portland and San Francisco.

### CASH FLOWS FROM FINANCING ACTIVITIES

During the three months ended March 31, 2023, net cash provided by financing activities was $0.1 million, primarily consisting of proceeds from common stock purchased under the Matching Plan, offset by payments for employee taxes withheld from stock-based awards.

During the three months ended March 31, 2022, net cash provided by financing activities primarily consisted of proceeds from the issuance of common stock on exercise of stock options, offset by principal payments of the term loan and principal payments of finance leases.

### CREDIT FACILITIES

### Amortizing Term Mortgage

In August 2019, we entered into an $8.3 million amortizing term mortgage agreement with CIBC for our commercial building in Portland, Oregon. The agreement requires interest and principal payments be made each month over a 30-year period. Interest accrues at a fixed rate of 5.00% per year until August 2024, at which point the interest rate changes to the Wall Street Journal Prime Rate less 0.25% for the remaining term of the mortgage. The borrowings are secured by the building. The outstanding balance of the amortizing term mortgage was $7.8 million as of March 31, 2023.

### Loan and Security Agreement

In September 2021, we amended and restated our loan and security agreement with CIBC ("2021 Amended Term Loan") to refinance the existing non-amortizing and amortizing term loans, establish a single term loan of up to $75.0 million, consisting of a $45.0 million initial term loan effective immediately with an option to enter into an additional $30.0 million delayed term loan, and increase the monthly revolving line of credit to $25.0 million. The option for the delayed term loan expired in March 2023. The term loan and revolving line of credit mature in September 2026 and September 2024, respectively. Approximately $23.5 million of the loan proceeds were used to immediately repay the remaining balances under the amortizing and non-amortizing term loans at the time of the amendment, as well as commitment fees and other debt issuance costs associated with the amendment. The remaining proceeds from the initial term loan were utilized to fund our normal business operations.

Under the 2021 Amended Term Loan, the initial term loan of $45.0 million is payable over a 60 month period with principal and accrued interest payments due each quarter thereafter, which commenced with the first payment due on September 30, 2021. Quarterly principal payments are fixed and escalate throughout the term. The amounts borrowed bear interest at the bank’s reference rate plus 2.25% (10.25% as of March 31, 2023) and continue on a quarterly basis through the maturity of the term loan. The borrowings are secured by substantially all our assets. The outstanding balances of the 2021 Amended Term Loan and revolving line of credit were $44.3 million and $15.0 million, respectively, as of March 31, 2023.

See Note 4 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information.

### Certain Covenants

We are subject to customary covenants under the 2021 Amended Term Loan, which unless waived by CIBC, restrict our and our subsidiaries' ability to, among other things incur additional indebtedness, create or incur liens, permit a change of control or merge or consolidate with other companies, sell or transfer assets, pay dividends or make distributions, make acquisitions, investments or loans, or payments and prepayments of subordinated indebtedness, subject to certain exceptions. We must also maintain certain financial covenants: a total EBITDA net leverage ratio, as defined in the loan and security agreement, tested each quarter, of not less than 5.00 to 1.00 from September 30, 2022 through and including June 30, 2023, not less than 4.00 to 1.00 from September 30, 2023 through and including June 30, 2024, and not less than 3.00 to 1.00 from September 30, 2024 and thereafter, and a fixed charge coverage ratio of not less than 1.10 to 1.00, tested on the last day of each calendar quarter.

If we fail to perform our obligations under these and other covenants, CIBC’s credit commitments could be terminated and any outstanding borrowings, together with accrued interest, under the credit or loan agreements could be declared immediately due and payable.

As of March 31, 2023, the Company was not in compliance with all debt covenants, specifically the covenant restricting the amount of repurchases of common stock, which includes RSU net share settlements, and the covenant related to the requirement to maintain all deposit, operating and collateral accounts with CIBC with certain exceptions during the period. A waiver was obtained from CIBC. The Company does not believe non-compliance with this covenant had any material impact on the Company or its operations. The Company expects to be in compliance with all debt covenants, or to have received waivers for any non-compliance, by the end of the fiscal quarter ending June 30, 2023.

### Contractual Obligations and Commitments

As of March 31, 2023, there have been no material changes in our contractual obligations and commitments as disclosed in our 2022 Annual Report.

### Indemnification Agreements

In the ordinary course of business, we enter into agreements of varying scope and terms whereby we agree to indemnify customers, issuing banks, card networks, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with our directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Changes in Stockholders’ Equity, or Condensed Consolidated Statements of Cash Flows.

### Off-Balance Sheet Arrangements

During the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

### Critical Accounting Policies and Estimates

Our condensed consolidated financial statements included elsewhere herein have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compared to those described in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report.

### Recent Accounting Pronouncements

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.

### Emerging Growth Company Status

Upon the completion of our IPO, we elected to be an emerging growth company ("EGC"), as defined in the Jumpstart Our Business Startups Act of 2012, which, among other things, allowed us to take advantage of reduced disclosure requirements and an extended transition period for the implementation of new or revised accounting pronouncements.

Effective December 31, 2022, based on the market value of our common stock held by non-affiliates as of June 30, 2022, we were deemed to be a large accelerated filer and no longer qualified as an EGC. As a result, we must now comply with all financial disclosure and governance requirements applicable to large accelerated filers. The effect of the loss of EGC status and the impact on the adoption of new accounting pronouncements is discussed further in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022.

## Market risk

As filed, 177 characters.

There have been no material changes in our market risk from the disclosure included under “Quantitative and Qualitative Disclosures About Market Risk” in our 2022 Annual Report.

## Controls and procedures

As filed, 1,932 characters.

### EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on such evaluation, our chief executive officer and chief financial officer have concluded that as of March 31, 2023, our disclosure controls and procedures were effective at a reasonable assurance level.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of 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 OF EFFECTIVENESS OF CONTROLS AND PROCEDURES

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

## Risk factors

As filed, 548 characters.

There have been no material changes to the risk factors set forth in "Part I, Item IA. Risk Factors" of our 2022 Annual Report. You should carefully read and consider the risks and uncertainties, together with all of the other information included in the 2022 Annual Report and this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, and other documents that we file with the SEC.

Filed May 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001476840-23-000071. Last ingested by Listed: Nov 5, 2026, 16:32 ET. No prices; not investment advice.