UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to ___________.
Commission file number:
AvePoint, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report).
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||
| | | The | ||
| | | The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 7, 2024 there were
FORM 10-Q
For the Fiscal Quarter Ended June 30, 2024
TABLE OF CONTENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) of AvePoint, Inc. (hereinafter referred to as the “Company,” “AvePoint,” “we," “us” and “our”) includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, as well as descriptions of the risks and uncertainties that could cause actual results and events to differ materially, may appear throughout this Quarterly Report, including in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2 of this Quarterly Report), “Quantitative and Qualitative Disclosures about Market Risk” (Part I, Item 3 of this Quarterly Report), and “Risk Factors” (Part II, Item 1A of this Quarterly Report). These risks and uncertainties also include, but are not limited to, those described from time to time in the Company’s reports filed with the Securities and Exchange Commission (“SEC”).
These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events, or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, sales, earnings, and statements expressing general views about future operating results — are forward-looking statements. These forward-looking statements are, by their nature, subject to significant risks and uncertainties, and are based on the beliefs of, as well as assumptions made by and information currently available to, our management. Our management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Readers should evaluate all forward-looking statements made in the context of these risks and uncertainties. The important factors referenced above may not contain all of the factors that are important to investors.
In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications.
Item 1
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net of allowance for credit losses of $ and $, respectively | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Deferred contract costs | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities, mezzanine equity, and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Current portion of deferred revenue | ||||||||
| Total current liabilities | ||||||||
| Long-term operating lease liabilities | ||||||||
| Long-term portion of deferred revenue | ||||||||
| Earn-out shares liabilities | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Mezzanine equity | ||||||||
| Redeemable noncontrolling interest | ||||||||
| Total mezzanine equity | ||||||||
| Stockholders’ equity | ||||||||
| Common stock, $ par value; shares authorized, and shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities, mezzanine equity, and stockholders’ equity | $ | $ | ||||||
See accompanying notes.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue: | ||||||||||||||||
| SaaS | $ | $ | $ | $ | ||||||||||||
| Term license and support | ||||||||||||||||
| Services | ||||||||||||||||
| Maintenance | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of revenue: | ||||||||||||||||
| SaaS | ||||||||||||||||
| Term license and support | ||||||||||||||||
| Services | ||||||||||||||||
| Maintenance | ||||||||||||||||
| Total cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net (loss) income attributable to noncontrolling interest | ( | ) | ( | ) | ||||||||||||
| Net loss available to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted shares used in computing loss per share | ||||||||||||||||
See accompanying notes.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) net of taxes | ||||||||||||||||
| Unrealized loss on available-for-sale securities | ( | ) | ( | ) | ||||||||||||
| Reclassification adjustment for net gains on available-for-sale securities included in net loss | ( | ) | ||||||||||||||
| Foreign currency translation adjustments | ( | ) | ||||||||||||||
| Total other comprehensive income (loss) | ( | ) | ||||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Comprehensive (loss) income attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ||||||||||
| Total comprehensive loss attributable to AvePoint, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying notes.
Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity
(In thousands, except share amounts)
(Unaudited)
| Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||||||
| Common Stock | Paid-In | Accumulated | Comprehensive | Noncontrolling | Stockholders’ | |||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Income | Interest | Equity | ||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Proceeds from exercise of options | ||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | ||||||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Repurchase and retirement of common stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Unrealized loss on available-for-sale securities | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustments | — | ( | ) | |||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Three Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Income | Equity | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Retirement of common stock | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net income attributable to and accretion of redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | — | — | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
See accompanying notes.
AvePoint, Inc.
Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Equity
(In thousands, except share amounts)
(Unaudited)
| Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Accumulated | Comprehensive | Noncontrolling | Stockholders’ | |||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Deficit | Income | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | |||||||||||||||||||||||||||||||||
| Accretion of redeemable noncontrolling interest | ( | ) | ( | ) | — | — | — | — | — | |||||||||||||||||||||||||||
| Redemption of noncontrolling interest | ( | ) | ( | ) | — | ( | ) | |||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||
| Repurchase and retirement of common stock | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive loss: | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Unrealized loss on available-for-sale securities | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Reclassification adjustment for net gains on available-for-sale securities included in net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Redeemable | Total | Accumulated | ||||||||||||||||||||||||||||||||||||||
| noncontrolling | mezzanine | Additional | Other | Total | ||||||||||||||||||||||||||||||||||||
| interest | equity | Common Stock | Paid-In | Treasury Stock | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||||||||||||||||||
| Amount | Amount | Shares | Amount | Capital | Shares | Amount | Deficit | Income | Equity | |||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Proceeds from exercise of options | — | — | ||||||||||||||||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Reclassification of earn-out RSUs to earn-out shares | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Retirement of common stock | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Net income attributable to and accretion of redeemable noncontrolling interest | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | — | — | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||
See accompanying notes.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Operating lease right-of-use assets expense | ||||||||
| Foreign currency remeasurement loss | ||||||||
| Stock-based compensation | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Other | ( | ) | ||||||
| Change in value of earn-out and warrant liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Deferred contract costs and other assets | ( | ) | ||||||
| Accounts payable, accrued expenses, operating lease liabilities and other liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ||||||||
| Net cash provided by operating activities | ||||||||
| Investing activities | ||||||||
| Maturities of investments | ||||||||
| Purchases of investments | ( | ) | ( | ) | ||||
| Capitalization of internal-use software | ( | ) | ( | ) | ||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Investment in notes | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Repurchase of common stock | ( | ) | ( | ) | ||||
| Proceeds from stock option exercises | ||||||||
| Repayments of finance leases | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Effect of exchange rates on cash | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information | ||||||||
| Income taxes paid | $ | $ | ||||||
| Unpaid redemption of noncontrolling interest | $ | $ | ||||||
See accompanying notes.
1. Nature of Business and Organization
AvePoint, Inc. (collectively with its subsidiaries, hereinafter referred to as “AvePoint,” the “Company,” “we,” “us,” or “our”) was incorporated as a New Jersey corporation on July 24, 2001 and redomiciled as a Delaware corporation in 2006.
AvePoint provides a cloud-native software platform that organizations rely on to optimize operations, manage critical data and secure the digital workplace. As companies around the world embrace the new normal of hybrid work, they must build and deliver a new, seamless workplace experience for knowledge workers, centered around an extensive portfolio of SaaS solutions and productivity applications aimed at improving collaboration across the organization.
Our principal corporate headquarters are located in Jersey City, New Jersey, with our principal operating headquarters in Richmond, Virginia and additional offices in North America, Europe, Asia, Australia and the Middle East.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated balance sheet as of December 31, 2023, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and include the accounts of the Company and entities consolidated under the variable interest and voting models. All intercompany transactions and balances have been eliminated. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted.
In the opinion of management, these financial statements contain all material adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Operating results for the six months ended June 30, 2024 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2024.
These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021, and the related notes included in our most recent Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (“Annual Report”).
The Company’s significant accounting policies are discussed in Note 2 to the consolidated financial statements included in the Annual Report. There have been no significant changes to these policies during the six months ended June 30, 2024.
Comparative Data
Certain amounts from prior periods have been reclassed to conform to the current period presentation, including:
| • | The reclassification of changes in earn-out and warrant liabilities to be included in other expense, net on the condensed consolidated statements of operations for the three and six months ended June 30, 2023. | |
| • | The reclassification of interest income, net to be included in other expense, net on the condensed consolidated statements of operations for the three and six months ended June 30, 2023. |
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. We base our estimates and assumptions on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The amounts of assets and liabilities reported in our condensed consolidated balance sheets and the amounts of revenue and expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for the determination of standalone selling price for revenue recognition, allowance for credit losses, deferred contract costs, valuation of goodwill and other intangible assets, income taxes and related reserves, stock-based compensation, purchase price in a business combination, and earn-out liabilities. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.
Foreign Currency
Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other expense, net in the Company’s condensed consolidated statements of operations.
Cash and Cash Equivalents
The Company maintains cash with several high credit-quality financial institutions. The Company considers its investments with original maturities of three months or less to be cash equivalents. These investments are not subject to significant market risk. The Company maintains its cash and cash equivalents in bank accounts which, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts. The Company maintains cash balances used in operations at entities based in countries that impose regulations that limit the ability to transfer cash out of the country. As of June 30, 2024 and December 31, 2023, the Company’s cash balances at these entities were $
Prepaid Expenses and Other Current Assets
The prepaid expenses balances as of June 30, 2024 and December 31, 2023 were $
Goodwill
No events or circumstances changed since the acquisitions that would indicate that the fair value of our reporting unit is below its carrying amount.
Deferred Contract Costs
We defer sales commissions that are considered to be incremental and recoverable costs of obtaining or renewing SaaS, term license and support, services, perpetual license and maintenance contracts. Changes in the anticipated period of asset benefit or the average renewal term are recognized on a prospective basis upon occurrence.
Amortization of deferred contract costs of $
Revenue Recognition
The Company derives revenue from four primary sources: SaaS, term license and support, services, and maintenance. Services include installation services, training and other consulting services.
Term license revenue recognized at a point in time was $
Accounts receivable, net is inclusive of accounts receivable, and current unbilled receivables, net of allowance for credit losses. We record an unbilled receivable when revenue is recognized prior to invoicing. We have a well-established collection history from our direct and indirect sales. We periodically evaluate the collectability of our accounts receivable and provide an allowance for credit losses as necessary, based on the age of the receivable, expected payment ability, and collection experience. As of June 30, 2024 and December 31, 2023, the allowance for credit losses was not material.
We record deferred revenue in the condensed consolidated balance sheets when cash is collected or invoiced before revenue is earned. Deferred revenue as of June 30, 2024 and December 31, 2023 was $
The opening and closing balances of the Company’s accounts receivable, net, deferred revenue and deferred contract costs are as follows:
| Accounts | Deferred | |||||||||||
| receivable, | Deferred | contract | ||||||||||
| net (1) | revenue | costs | ||||||||||
| (in thousands) | ||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | |||||||||
| Balance, June 30, 2024 | ||||||||||||
(1) Includes long-term unbilled receivables.
There were no significant changes to the Company’s contract assets or liabilities during the six months ended June 30, 2024 and the year ended December 31, 2023 outside of its sales activities.
As of June 30, 2024, transaction price allocated to remaining performance obligations, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods, was $
Stock-Based Compensation
Stock-based compensation represents the cost related to stock-based awards granted to employees. To date, we have issued both stock options and restricted stock units. The Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award and recognizes the cost ratably over the requisite service period, net of actual forfeitures in the period.
We estimate the fair value of stock options using the Black-Scholes valuation model. The Black-Scholes model requires highly subjective assumptions in order to derive the inputs necessary to calculate the fair value of stock options. To estimate the expected term of stock options, the Company considers contractual terms of the options, including the vesting and expiration periods, as well as historical option exercise data and current market conditions to determine an estimated expected term. The Company’s historical experience is too limited to be able to reasonably estimate an expected term. Expected volatility is based on the historical volatility of a group of peer entities. Dividend yields are based upon historical dividend yields. Risk-free interest rates are based on the implied yields currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected term.
Recent Accounting Pronouncements
Recently issued accounting pronouncements not yet effective
In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)” (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendment in this ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. We are currently evaluating the impact ASU 2023-07 will have on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures (Topic 740)” (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The amendment in this ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted. We are currently evaluating the impact ASU 2023-09 will have on our consolidated financial statements and related disclosures.
3. Goodwill
The changes in the carrying amounts of goodwill were as follows:
| Goodwill | ||||
| (in thousands) | ||||
| Balance as of December 31, 2023 | $ | |||
| Effect of foreign currency translation | ( | ) | ||
| Balance as of June 30, 2024 | $ | |||
4. Intangible assets, net
Intangible assets consist of acquired intangible assets and self-developed software.
A summary of the balances of the Company’s intangible assets as of June 30, 2024 and December 31, 2023 is presented below:
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Technology and software | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Customer related assets | ( | ) | ( | ) | ||||||||||||||||||||
| Content | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Amortization expense for intangible assets was $
As of June 30, 2024, estimated future amortization expense for intangible assets, net is as follows:
| Year Ending December 31: | ||||
| (in thousands) | ||||
| 2024 (six months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total intangible assets subject to amortization | $ | |||
5. Accounts Receivable, Net
Accounts receivable, net, consists of the following components:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Trade receivables | $ | $ | ||||||
| Current unbilled receivables | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
6. Line of Credit
The Company maintains a loan and security agreement (the “Loan Agreement”) with HSBC Bank USA, National Association, (“HSBC”) as lender, for a revolving line of credit of up to $
7. Income Taxes
The Company had an effective tax rate of (
The change in effective tax rates for the three-month period ended June 30, 2024 as compared to the three-month period ended June 30, 2023 was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, the impact of foreign inclusions, stock-based compensation and changes in valuation allowance in certain jurisdictions.
The change in effective tax rates for the six-month period ended June 30, 2024 as compared to the six-month period ended June 30, 2023 was primarily due to the mix of pre-tax income (loss) results by jurisdictions taxed at different rates, the impact of foreign inclusions, stock-based compensation and changes in valuation allowance in certain jurisdictions.
The Company continues to evaluate the realizability of its deferred tax assets on a quarterly basis and will adjust such amounts in light of changing facts and circumstances. In making such an assessment, management would consider all available supporting data, including the level of historical taxable income, future reversals of existing temporary differences, tax planning strategies, and projected future taxable income.
8. Leases
The Company is obligated under various non-cancelable operating leases primarily for office space. The initial terms of the leases expire on various dates through 2030. We determine if an arrangement is a lease at inception.
The components of the Company’s operating lease expenses are reflected in the condensed consolidated statements of operations as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Lease liability cost | $ | $ | $ | $ | ||||||||||||
| Short-term lease expenses (1) | ||||||||||||||||
| Variable lease cost not included in the lease liability (2) | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
(1) Short-term lease expenses include rent expenses from leases of 12 months or less on the transition date or lease commencement.
(2) Variable lease cost includes common area maintenance, property taxes, and fluctuations in rent due to a change in an index or rate.
Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We elected to combine fixed payments for non-lease components, for all classes of underlying assets, with our lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities.
During the six months ended June 30, 2024 and 2023, right-of-use assets obtained in exchange for new operating lease liabilities amounted to $
Other information related to operating leases is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Cash paid for amounts included in the measurement of the lease liability: | ||||||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | ||||||||||||
As of June 30, 2024, our operating leases had a weighted average remaining lease term of
| Year Ending December 31: | ||||
| (in thousands) | ||||
| 2024 (six months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future lease payments | $ | |||
| Less: Present value adjustment | ( | ) | ||
| Present value of future lease payments (1) | $ | |||
(1) Includes the current portion of operating lease liabilities of $
As of June 30, 2024, letters of credit have been issued in the amount of $
9. Commitments and Contingencies
Legal Proceedings
In the