# indie Semiconductor, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [indie Semiconductor, Inc.](/companies/indi.md) (CIK 1841925)
- Form: 10-Q
- Filed: 2024-05-10
- Accepted by EDGAR: May 9, 2024, 17:34 ET
- Period: 2024-03-31
- Accession: 0001628280-24-022356
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1841925/000162828024022356/indi-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1841925/000162828024022356/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $52.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $30.1m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $49.6m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $22.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$49.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $2.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$1.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$31.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.19 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 164,602,608 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$9.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $2.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $138.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $263.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $803.6m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $151.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $342.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $157.0m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $13.2m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2024-03-31 | $432.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,503 characters.

*Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us, or “our” refer to the business of indie and its subsidiaries prior to the consummation of the Transaction. Throughout this section, unless otherwise noted, “indie” refers to indie Semiconductor, Inc. and its consolidated subsidiaries.*

*The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read this discussion and analysis in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Certain amounts may not foot due to rounding. This discussion and analysis contains forward-looking statements. See “Forward Looking Statements.” We urge you to consider the risks and uncertainties discussed in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the Fiscal Year ended December 31, 2023, including, but not limited to, those described under the sections entitled “Risk Factors” and in the other documents we have filed with the SEC in evaluating our forward-looking statements. We assume no obligation to update any of these forward-looking statements except as required by law. Actual results may differ materially from those contained in any forward-looking statements.*

### OUR COMPANY

indie offers highly innovative automotive semiconductors and software solutions for Advanced Driver Assistance Systems (“ADAS”), autonomous vehicle, connected car, user experience and electrification applications. We focus on edge sensors across multiple modalities spanning LiDAR, radar, ultrasound and computer vision. These functions represent the core underpinnings of both electric and autonomous vehicles, while the advanced user interfaces are transforming the in-cabin experience to mirror and seamlessly connect to the mobile platforms we rely on every day. We are an approved vendor to Tier 1 automotive suppliers and our platforms can be found in marquee automotive manufacturers around the world. Headquartered in Aliso Viejo, California, indie has design centers and sales offices in Austin, Texas; Boston, Massachusetts; Detroit, Michigan; San Francisco and San Jose, California; Cordoba, Argentina; Budapest, Hungary; Dresden, Frankfurt an der Oder, Munich and Nuremberg, Germany; Edinburgh, Scotland; Schlieren, Switzerland; Rabat, Morocco; Haifa, Israel; Quebec City and Toronto, Canada; Seoul, South Korea; Tokyo, Japan and several locations throughout China.

We maintain design centers for our semiconductor engineers and designers in the United States, Argentina, Canada, Hungary, Germany, Scotland, Morocco, Israel, Switzerland and China. We engage subcontractors to manufacture our products. These subcontractors, as well as the majority of our customers’ locations, are primarily in Asia. For the three months ended March 31, 2024 and 2023, approximately 66% and 65%, respectively, of our product revenues were recognized for shipments to customer locations in Asia.

### Execution of At-The-Market Agreement

On August 26, 2022, we entered into an At Market Issuance Agreement (“ATM Agreement”) with B. Riley Securities, Inc., Craig-Hallum Capital Group LLC and Roth Capital Partners, LLC (collectively as “Sales Agents”) relating to shares of our Class A common stock, par value $0.0001 per share (the “Class A common stock”). In accordance with the terms of the ATM Agreement, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $150.0 million from time to time through the Sales Agents, acting as our agent or principal. We implemented this program for the flexibility that it provides to the capital markets and to best time our equity capital needs. As of March 31, 2024, we had raised gross proceeds of $70.3 million and issued 7,351,259 shares of Class A common stock at an average per-share sales price of $9.57 through this program. For the three months ended March 31, 2023 we incurred total issuance costs of $0.8 million. There was no activity during the three months ended March 31, 2024.

### Recent Acquisitions

#### Kinetic Technologies

On January 25, 2024 (the “Deal Closing Date”), indie and ADK LLC completed its acquisition of Kinetic Technologies, LLC (“Kinetic”). The acquisition was consummated pursuant to an Asset Purchase Agreement (the “APA”), carving out certain assets, including R&D personnel and intellectual properties (“IP”) from Kinetic Technologies (“Kinetic”), in support of a custom product development for a North American electric vehicle OEM. The closing consideration consisted of (i) $3.2 million in cash as the initial cash consideration, net of an adjustment holdback amount of $0.5 million and an indemnity holdback amount of $0.8 million, (ii) $2.3 million of contingent consideration, payable in cash or Class A common stock, subject to achievement of certain production based milestones 24 months after the Deal Closing Date, and (iii) $2.3 million of contingent consideration, payable in cash or Class A common stock, subject to achievement of a revenue based milestone 12 months after the Deal Closing Date. The purchase price is subject to working capital and other adjustments as provided the APA.

See Note 2 — *Business Combinations* for additional descriptions of our recent acquisitions.

### Impact of Macroeconomic Conditions

Current and continued inflationary conditions have led, and may continue to lead to, rising prices or rising interest rates, which has had a dampening effect on overall economic activity and consumer demand for automotive products. Additionally, the recent conflict in the Middle East and the implications of these events has created global political and economic uncertainty. We are closely monitoring developments, including potential impact to our business, customers, suppliers, our employees and operations in Israel, the Middle East and elsewhere. At this time, the impact to indie is subject to change given the volatile nature of the situation.

Refer to Part I, Item 1A of our 2023 Annual Report on Form 10-K for the fiscal year ended December 31, 2023 under the heading “*Risk Factors”* for more information on our risks and uncertainties.

### OPERATING RESULTS

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

### Revenue

*(in thousands)*

| Revenue: | Three Months Ended March 31, 2024 $% of Revenue |  | 2023 $% of Revenue |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $48,578 | 93% | $33,653 | 83% | $14,925 | 44% |
| Contract revenue | 3,775 | 7% | 6,799 | 17% | (3,024) | (44)% |
| Total revenue | $52,353 | 100% | $40,452 | 100% | $11,901 | 29% |

Revenue for the three months ended March 31, 2024 was $52.4 million, compared to $40.5 million for the three months ended March 31, 2023, an increase of $11.9 million or 29%, which was primarily driven by a $14.9 million increase in product revenue and a $3.0 million decrease in contract revenue. The increase in product revenue was due primarily to change in product mix as well as higher product volume (units sold) given the continued growth in demand from our customers globally as well as the recent acquisitions. The decrease in contract revenue of $3.0 million or 44% was primarily due a large multi-year non-recurring engineering project that commenced in early 2022 and is winding down towards its completion stage.

### Operating Expenses

*(in thousands)*

| Operating expenses: | Three Months Ended March 31, 2024 $% of Revenue |  | 2023 $% of Revenue |  | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of goods sold | $30,089 | 57% | $24,056 | 59% | $6,033 | 25% |
| Research and development | 49,589 | 95% | 36,563 | 90% | 13,026 | 36% |
| Selling, general, and administrative | 22,322 | 43% | 16,814 | 42% | 5,508 | 33% |
| Total operating expenses | $102,000 | 195% | $77,433 | 191% | $24,567 | 32% |

Cost of goods sold for the three months ended March 31, 2024 was $30.1 million, compared to $24.1 million for the three months ended March 31, 2023. The increase of $6.0 million or 25% was primarily due to a $6.5 million increase due to change in product mix, a $2.2 million increase in product shipments in connection with the increase in products sold, as described above, offset by a $2.0 million decrease in product cost.

Research and development expense for the three months ended March 31, 2024 was $49.6 million, compared to $36.6 million for the three months ended March 31, 2023. The increase of $13.0 million or 36% was primarily due to a $3.7 million increase in personnel costs to support our continuous growth in research and development needs and a $10.7 million increase in share-based compensation expense. The increase in share-based compensation expenses reflects an increase in headcount and new equity awards granted since the prior year period. These increases are partially offset by a $2.2 million decrease in product development costs due to timing of our project development timeline. We expect research and development expense to continue to increase as we continue to grow our headcount organically to support expanded product development activities.

Selling, general and administrative expense for the three months ended March 31, 2024 was $22.3 million, compared to $16.8 million for the three months ended March 31, 2023. The increase of $5.5 million or 33% was primarily due to a $2.3 million increase in personnel costs due to an increase in headcount, a $3.2 million increase in share-based compensation expense and a $0.6 million increase in depreciation and amortization expenses. The increase in share-based compensation expense reflects an increase in headcount and new equity awards granted since the prior year period. The increase in depreciation and amortization expense was primarily driven by additional acquired intangible assets as a result of the recent business combinations. We expect selling, general, and administrative expense to continue to increase as we grow our headcount to support our global expansion and to fulfill our obligations as a publicly traded company.

### Other income (expense), net

*(in thousands)*

| Other income (expense), net: | Three Months Ended March 31, 2024 $$ | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Interest income | $1,309 | $2,419 | $(1,110) | (46)% |
| Interest expense | (2,106) | (2,148) | 42 | (2)% |
| Loss from change in fair value of warrants | — | (47,332) | 47,332 | (100)% |
| Gain (loss) from change in fair value of contingent considerations and acquisition-related holdbacks | 15,359 | (1,630) | 16,989 | (1042)% |
| Other expense | (247) | — | (247) | 100% |
| Total other income (expense), net | $14,315 | $(48,691) | $63,006 | (129)% |

Interest income for the three months ended March 31, 2024 was $1.3 million, compared to $2.4 million for the three months ended March 31, 2023. Interest income decreased in the current period primarily as a result of lower cash balances due to multiple acquisitions in 2023 and the first quarter of 2024.

Interest expense for the three months ended March 31, 2024 remained consistent at $2.1 million for both the three months ended March 31, 2024 and 2023.

For the three months ended March 31, 2024 and 2023, we recognized gains (losses) from change in fair value for warrants, contingent considerations and acquisition-related holdbacks. The gains (losses) recorded for the three months ended March 31, 2024 and 2023 represent the following:

i) Warrants: During the three months ended March 31, 2023, we recognized an unrealized loss from change in fair value of our warrants of $47.3 million, which reflected the increase in fair value of our warrant liability, resulting from the increase of the closing price of our Class A common stock listed on the Nasdaq to $10.55 per share on March 31, 2023 from $5.83 per share on December 31, 2022. As of November 9, 2023, we completed our exchange of Warrants. Subsequently there will be no future remeasurement.

ii) Contingent considerations and acquisition-related holdbacks: During the three months ended March 31, 2024, we recognized a net unrealized gain from change in fair value of our contingent considerations and acquisition-related holdbacks of $15.4 million, which is primarily attributed to an unrealized gain of $16.2 million and $3.0 million for the contingent considerations and acquisition-related holdbacks related to the GEO and Exalos acquisitions, respectively, offset by an unrealized loss of $3.7 million for the contingent considerations related to the Silicon Radar acquisition. During the three months ended March 31, 2023, we recognized an net unrealized loss from change in fair value of our contingent considerations and acquisition-related holdbacks of $1.6 million which is primarily attributed to an unrealized loss of $1.7 million and $0.1 million for the contingent considerations related to the Symeo and Silicon Radar acquisitions, respectively, offset by a $0.4 million net unrealized gain for the contingent considerations and acquisition-related holdbacks.

Other expense for the three months ended March 31, 2024 was $0.2 million. Other expense relates primarily to the realized and unrealized foreign currency gains and losses during the period, which was primarily driven by a net loss of $0.6 million related to the change in fair value of our currency forward contracts entered during the period.

### Income Taxes

We utilize the asset and liability method in accounting for income taxes. Deferred tax assets and liabilities reflect the estimated future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax expense or benefit is the result of changes in the deferred tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. We make estimates, assumptions, and judgments to determine our provision for our income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We also assess the likelihood that our deferred tax assets, if any, will be recovered from future taxable income, and to the extent we believe that recovery is not likely, we establish a valuation allowance.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits which, as of the date of this report, have not been material, are recognized within provision for income taxes.

Income tax benefits for the three months ended March 31, 2024 are primarily related to our foreign operations. Income tax benefits for the three months ended March 31, 2023 are primarily related to the tax effects of our acquisition of GEO and subsequent tax reorganizations.

Refer to Note 16, *Income Tax*, in our accompanying unaudited condensed consolidated financial statements for additional detail.

### Liquidity and Capital Resources

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, working capital requirements related to inventory, accounts payable and general and administrative expenditures. In addition, from time to time, we use cash to fund our mergers and acquisitions, purchases of various capital, intellectual property and software assets and scheduled repayments for outstanding debt obligations. Our immediate sources of liquidity are cash, cash equivalents and funds anticipated to be generated from our operations, available borrowings under our revolving credit facility and the issuance of Class A common stock under the ATM Agreement. We believe these sources of liquidity will be sufficient to meet our working capital needs for at least the next 12 months. Our future capital requirements may vary from those currently planned and will depend on many factors, including our rate of sales growth, the timing and extent of spending on various business initiatives, including potential merger and acquisition activities, our international expansion, the timing of new product introductions, market acceptance of our solutions, and overall economic conditions including the potential impact of global supply imbalances, rising interest rates, inflationary pressures, the impact of the ongoing conflicts in Ukraine and the Middle East, and volatility in the global financial markets. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. We have cash deposits with large financial institutions that have stable outlooks and credit ratings as of May 9, 2024. These cash deposits may exceed the insurance provided on such deposits. As part of our cash management strategy going forward, we concentrate cash deposits with large financial institutions that are subject to regulation and maintain deposits across diverse retail banks.

Historically, we derive liquidity primarily from debt and equity financing activities as we have historically had negative cash flows from operations. As of March 31, 2024, our balance of cash and cash equivalents was $138.2 million.

In December 2023, employees in Wuxi exercised options granted to them through the Wuxi Employee Equity Incentive Plan (the “Wuxi EIP”) and contributed total capital of CNY88.0 million (approximately $12.3 million) from option proceeds in preparation for a potential IPO in China. The funds will be used by Wuxi for general corporate purposes. Wuxi does not have an obligation to repay the collected capital to its employees in the case of an unsuccessful IPO.

On March 29, 2024, we entered into a revolving line of credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) with a credit limit of $10 million, bearing interest at the Secured Overnight Financing Rate (“SOFR”) plus 1.75%. The outstanding principal balance is due and payable in full on March 28, 2025. Interest is payable monthly beginning on May 1, 2024 through the maturity date. This line of credit required us to collateralize a cash balance equal to the total outstanding balance in a cash security account with Wells Fargo.

#### Acquisitions

We have completed multiple acquisitions in the last couple of years and we plan to selectively pursue and assess inorganic growth opportunities that are complementary to our existing technologies and portfolio of products and/or accelerate our growth initiatives.

In connection with our acquisitions (See Part I, Item 1, Note 2, *Business Combinations,* of this quarterly report on Form 10-Q), we may from time to time be required to make future payments or issue additional shares of our common stock to satisfy our obligations under the acquisition agreements, including to satisfy certain earn-out requirements. In January 2022 we completed the acquisition of Symeo, for which we made an initial cash payment of approximately $10.0 million and an additional $10.0 million was paid in January 2023. We are still subject to an equity based earn out of Class A common stock based on Symeo’s future revenue growth.

In February 2023, we entered into an agreement to acquire GEO, and completed the transaction on March 3, 2023. The closing consideration consisted of (i) $93.4 million in cash (including accrued cash considerations at closing and net of cash acquired); (ii) the issuance by indie of 6,868,768 shares of Class A common stock at closing, with a fair value of $75.6 million; (iii) 1,907,180 shares of Class A common stock, with a fair value of $21.0 million at closing, payable in the next 24-month period after closing; and (iv) an earn-out with a fair value of $59.3 million at closing payable in cash or in Class A common stock, subject to achieving certain GEO-related revenue targets through September 30, 2024.

Additionally, in February, 2023, we acquired Silicon Radar, for approximately (i) $9.2 million in cash (including debt payable at closing and net of cash acquired), (ii) the issuance by indie of 982,445 shares of Class A common stock at closing, with a fair value of $9.8 million; and (iii) a contingent consideration with fair value of $9.2 million at closing, payable in cash or in Class A common stock subject to Silicon Radar’s achievement of certain revenue-based and design-win milestones through February 21, 2025.

In September 2023, we acquired Exalos. The closing consideration consisted of (i) the issuance by indie of 6,613,786 shares of Class A common stock at closing, with a fair value of $42.8 million; (ii) a contingent consideration with fair value of $13.2 million at closing, payable in cash, subject to Exalos’ achievement of certain revenue-based milestones through September 30, 2025; and (iii) a holdback of $2.5 million subject to final release 12 months from the acquisition date payable in shares of Class A common stock.

On January 25, 2024, we completed the acquisition of certain business properties from Kinetic through an asset purchase agreement. The closing consideration consisted of (i) $3.2 million in cash as the initial cash consideration, net of an adjustment holdback amount of $0.5 million and an indemnity holdback amount of $0.8 million, (ii) $2.3 million of contingent considerations, payable in cash or Class A common stock, subject to achievement of certain production based milestone for the next 24 months, or through January 25, 2026, and (iii) $2.3 million of contingent considerations, payable in cash or Class A common stock, subject to achievement of certain revenue based milestones 12 months after January 25, 2024. The indemnity holdback amount is payable within five business days after the 18-month anniversary of the closing date of January 25, 2024.

We expect to continue to incur net operating losses and negative cash flows from operations. We also expect our research and development expenses, general and administrative expenses and capital expenditures will increase over time as we continue to expand our operations, product offerings and customer base.

The following table summarizes our condensed consolidated cash flows for the three months ended March 31, 2024 and 2023:

|  | Three Months Ended March 31, 2024 | 2023 | Change $% | Change |
| --- | ---: | ---: | ---: | ---: |
| Net cash used in operating activities | $(9,349) | $(32,885) | $23,536 | (72)% |
| Net cash used in investing activities | (5,517) | (101,628) | 96,111 | (95)% |
| Net cash provided by financing activities | 6,880 | 21,066 | (14,186) | (67)% |

### Operating Activities

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, working capital requirements related to inventory, accounts payable and general and administrative expenditures.

For the three months ended March 31, 2024, net cash used in operating activities was $9.3 million, which included net loss of $34.2 million and reflected adjustments for certain non-cash items and changes in operating assets and liabilities. Non-cash increases primarily consisted of $14.8 million of net losses resulting from a change in fair value for contingent considerations, and currency forward contracts, $25.6 million in share-based compensation expense and $9.6 million in depreciation and amortization. Changes in operating assets and liabilities from operations provided $3.2 million of cash, primarily driven by a decrease in accounts receivable, offset by an increase in prepaid and other current assets and inventory, and a decrease in accrued expenses and other current liabilities and prepaid and other current assets.

Cash used in operating activities during the three months ended March 31, 2023 was $32.9 million, which included net loss of $82.0 million and reflected adjustments for certain non-cash items and changes in operating assets and liabilities. Non-cash increases primarily consisted of $49.0 million of net losses resulting from a change in fair value for warrants and contingent considerations, $11.4 million in share-based compensation expense and $6.0 million in depreciation and amortization. Changes in operating assets and liabilities from operations used $16.9 million of cash, primarily driven by an increase in inventory, accounts payable, and prepaid and other current assets, offset by a decrease in accounts receivable.

### Investing Activities

Net cash used in investing activities for the three months ended March 31, 2024 and 2023 was $5.5 million and $101.6 million, respectively. During the period ended March 31, 2024, the decrease in cash was primarily due to the acquisition of Kinetic for $3.2 million, net of cash acquired, as well as an increase in cash used of $2.3 million for the purchase of capital expenditures. During the period ended March 31, 2023, the decrease in cash was primarily due to the acquisitions of GEO and Silicon Radar for $98.4 million, net of cash acquired, as well as an increase in cash used of $3.2 million for the purchase of capital expenditures. We expect that we will make additional capital expenditures in the future, including licenses to various intangible assets, in order to support the future growth of our business.

### Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2024 was $6.9 million, which was primarily attributed to $10.0 million of net proceeds from the issuance of the line of credit through Wells Fargo, partially offset by $1.5 million payments on debt obligations and $2.3 million of payments on financed software.

Net cash provided by financing activities for the three months ended March 31, 2023 was $21.1 million, which was primarily attributed to $34.9 million of net proceeds from the issuance of common stocks through the ATM, partially offset by $11.8 million payments on short-term debt, and $2.1 million of payments on financed software.

### Future Material Cash Obligations

Following is a summary of our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, as of March 31, 2024:

| Contractual Obligations | Future Estimated Cash Payments Due by Period Less than 1 year | 1 - 3 years | 3-5 years | \>5 years | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Debt obligations | $14,279 | $— | $160,000 | $— | $174,279 |
| Interest on debt obligations | 5,425 | 14,400 | 6,293 | — | 26,118 |
| Operating leases | 2,139 | 4,469 | 3,997 | 3,392 | 13,997 |
| Holdbacks payable in cash | 500 | 800 | — | — | 1,300 |
| Total contractual obligations | $22,343 | $19,669 | $170,290 | $3,392 | $215,694 |

### Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments in applying our most critical accounting policies that can have a significant impact on the results we report in our financial statements. The SEC has defined critical accounting estimates as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a registrant’s financial condition or results of operations. Based on this definition, our most critical accounting estimates include revenue recognition, which impacts the recording of net revenue; business combinations, which impacts the fair value of acquired assets and assumed liabilities; and contingent considerations, which impact the fair value of assumed liabilities and the recording of other income (expense). We have other significant accounting policies that do not generally require subjective estimates or judgments or would not have a material impact on our results of operations. Our critical accounting policies and estimates are disclosed under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K filed for the year ended December 31, 2023.

### Recently Issued and Adopted Accounting Standards

We describe the recently issued and adopted accounting pronouncements that apply to us in *Note 1 — Nature of Business and Basis of Presentation* to our condensed consolidated financial statements presented herein.

## Market risk

As filed, 3,451 characters.

### Foreign Currency Risk

We have international operations, giving rise to exposure to market risks from changes in currency exchange rates. Our primary foreign currency exposures are the Canadian dollar, Chinese yuan/renminbi, Euro, British pound sterling and Israeli New Shekel. Foreign exchange gains and losses that resulted from our international operations are included in the determination of *Net income (loss)*. The foreign currency translation exchange loss included in determining loss before income taxes was $(0.2) million for the three months ended March 31, 2024. For the three months ended March 31, 2023 the foreign currency translation exchange loss included in determining loss before income taxes was de minimus. The year-over-year change was primarily related to the change in fair value of our currency forward contracts entered into during 2024. We also have intercompany loans with certain of our foreign subsidiaries that are long-term in nature. Repayments of such principal amounts are neither planned nor anticipated in the foreseeable future and are therefore treated analogous to equity for accounting purposes. As a result, the foreign exchange gains and losses on these borrowings are excluded from the determination of *Net income (loss)* and recorded as a component of *Accumulated other comprehensive income (loss)* in the consolidated balance sheets. A cumulative foreign currency translation loss of $10.8 million and $13.5 million related to our foreign subsidiaries is included in “*Accumulated other comprehensive loss”* within the Stockholders' Equity section of the consolidated balance sheet at March 31, 2024 and 2023, respectively. The year-over-year change was primarily driven by the cumulative foreign currency translation loss recorded in relation to permanently invested intercompany loans as of March 31, 2024 as the exchange rate for U.S. dollar fluctuates against foreign currencies.

As our international operations grow, our risks associated with fluctuation in foreign currency rates will become greater, and we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. dollar could increase the costs of our international expansion and operation. To mitigate the risk, we plan to enter into additional foreign currency forward contracts in the foreseeable future.

### Investment and Interest Rate Risk

Our exposure to interest rate and general market risks relates principally to our investment portfolio, which consists of cash and cash equivalents (money market funds and marketable securities purchased with less than ninety days until maturity) and restricted cash that totals approximately $148.2 million as of March 31, 2024.

The main objectives of our investment activities are liquidity and preservation of capital. Our cash equivalent investments have short-term maturity periods that dampen the impact of market or interest rate risk. Credit risk associated with our investments is not material because our investments are diversified across securities with high credit ratings.

Given the objectives of our investment activities, and the relatively low interest income generated from our cash, cash equivalents, and other investments, we do not believe that investment or interest rate risks currently pose material exposures to our business or results of operations even in the current environment of rising interest rates.

## Controls and procedures

As filed, 5,011 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2024 and based on this evaluation, have concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of March 31, 2024.

Per Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, our management recognizes that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the desired control objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. Accordingly, our disclosure controls and procedures must be designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

### Previously Reported Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

As disclosed in in Part II—Item 9A of the Form 10-K for the year ended December 31, 2023 filed with SEC on February 29, 2024, management determined that the Company did not have effective risk assessment to identify and analyze risks related to non-routine transactions, such as mergers and acquisitions, at a sufficient level of detail to identify all relevant risks of material misstatement across the Company or within each acquired entity. Additionally, the Company did not have effective information control processes, including those related to information technology general controls (“ITGCs”), user access controls and the use of manual spreadsheets, to ensure the reliability of information used in certain computations related to financial reporting. As a consequence of the aforementioned deficiencies, the Company did not have effective control activities related to the design and operation of process-level controls across certain key financial reporting processes.

Management has determined that these material weaknesses persisted as of March 31, 2024.

### Remediation Efforts to Address the Material Weaknesses

Management’s remediation efforts are ongoing and the actions outlined in the Form 10-K for the year ended December 31, 2023, will continue to be pursued. As we continue to evaluate and enhance our internal control over financial reporting, we may determine that additional measures to address the material weaknesses or adjustments to the remediation plan may be required. However, we cannot guarantee when we will remediate material weaknesses, nor can we be certain that additional steps will be necessary. Furthermore, it cannot be guaranteed that no further material weaknesses will emerge in the future.

The remediation efforts are subject to continuous management evaluation and audit committee supervision. Until Management has completed its remediation efforts and evaluated their effectiveness, we will not be able to determine whether the steps taken will completely remedy the material deficiencies in the Company’s internal control over financial reporting.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15d during the quarter ended March 31, 2024, with the exception of the ongoing remediation efforts related to the material weaknesses described above.

## Risk factors

As filed, 959 characters.

The business, financial condition, and operating results of the Company can be affected by many factors, whether currently known or unknown, including but not limited to those described in Part 1, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 under the heading “*Risk Factors,”* any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past or the anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results, and stock price. There have been no material changes to the Company’s risk factors disclosed under the heading “*Risk Factors”* in Part 1, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on February 29, 2024.

Filed May 10, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-022356. Last ingested by Listed: Nov 2, 2026, 18:37 ET. No prices; not investment advice.