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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_____________________________________
FORM 10-Q
_____________________________________
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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 001-38947
_________________________
BTRS HOLDINGS INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
83-3780685
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1009 Lenox Drive, Suite 101
Lawrenceville, New Jersey
08648
(Address of Principal Executive Offices)
(Zip Code)
(609) 235-1010
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Class 1 Common Stock, $0.0001 par value BTRS
The Nasdaq Global Select Market
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.   Yes  ☒  No  ☐ 
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).   Yes  ☒  No  ☐ 
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.
Large accelerated filer
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 Act). Yes  ☐  No  
As of May 4, 2022, there were 160,016,876 and 3,395,989 shares of Class 1 and Class 2 common stock outstanding, respectively.




BTRS HOLDINGS INC.
INDEX TO FORM 10-Q
Page Number
PART I
PART II

2


In this Quarterly Report on Form 10-Q, unless otherwise stated or as the context otherwise requires, references to “the Company”, “we”, “us”, "our”, "it", and similar references refer to BTRS Holdings Inc., a Delaware corporation, and its consolidated subsidiaries. It also contains registered marks, trademarks, and trade names of other companies, all of which are the property of their respective holders. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, endorsement, or sponsorship of us by these other companies.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would,” “potentially,” or the negative of these terms or similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends we believe may affect our financial condition, results of operations, business strategy, and financial needs.
These forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions, including those described in the section titled "Part I, Item 1A. Risk Factors" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report on Form 10-K"), as filed with the U.S. Securities and Exchange Commission (the "SEC") on March 9, 2022, including, among other things, risks associated with:
our financial and business performance, including the financial projections, forecasts, business metrics, and any underlying assumptions thereunder;
changes in our strategy, future operations, financial position, estimated revenues or losses, projected costs, prospects, and plans;
the capabilities and benefits to our customers of our technology platforms;
the advantages and expected growth of our Business Payments Network;
our ability to digitally transform the accounts receivable industry;
our ability to scale in a cost-effective manner;
developments and projections relating to our competitors and industry;
the impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;
geopolitical conditions, including the direct or indirect consequences of acts of war, terrorism, or social unrest;
the timing, outcome, and results of integrating our operations with newly acquired companies;
any disruption of management time from ongoing business operations due to recent acquisitions;
creating additional infrastructure to support our operations as a public company, losing emerging growth company status, and becoming a large accelerated filer effective as of December 31, 2021;
our future capital requirements and sources and uses of cash;
our ability to obtain funding for our operations;
our business, expansion plans, and opportunities;
our growth strategy for expanding our operations both within and outside the United States;
our ability to acquire or invest in businesses, products, or technologies that may complement or expand our products or platforms, enhance our technical capabilities, or otherwise offer growth opportunities; and
the outcome of any known and unknown litigation and regulatory proceedings.
3


These risks are not exhaustive. Additional factors could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. We qualify all of the forward-looking statements in this Quarterly Report on Form 10-Q by these cautionary statements.
4


PART 1.
Item 1. Financial Statements
BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
March 31, 2022December 31, 2021
ASSETS(Unaudited)
Current assets:
Cash and cash equivalents$107,839 $187,672 
Marketable securities45,156 45,117 
Customer funds19,385 22,541 
Accounts receivable, net39,226 34,394 
Prepaid expenses7,396 3,715 
Deferred implementation and commission costs, current portion5,011 5,060 
Other current assets1,312 1,164 
Total current assets225,325 299,663 
Property and equipment, net11,813 15,516 
Operating lease right-of-use assets19,852 28,623 
Goodwill127,369 88,148 
Intangible assets, net49,827 24,339 
Deferred implementation and commission costs, net of current portion8,982 9,238 
Other assets4,152 5,122 
Total assets$447,320 $470,649 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Customer funds payable$19,385 $22,541 
Accounts payable3,872 2,968 
Accrued expenses and other current liabilities42,429 46,426 
Deferred revenue, current portion24,556 24,983 
Total current liabilities90,242 96,918 
Operating lease liabilities, net of current portion33,346 32,461 
Customer postage deposits10,064 10,081 
Deferred revenue, net of current portion14,032 14,259 
Deferred taxes10,537 4,338 
Other non-current liabilities3,389 2,958 
Total liabilities161,610 161,015 
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value,10,000 shares authorized; no shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
  
Class 1 common stock, $0.0001 par value, 538,000 shares authorized; 159,954 and 159,413 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
16 15 
Class 2 common stock, $0.0001 par value, 27,000 shares authorized; 3,396 shares issued and outstanding at March 31, 2022 and December 31, 2021
1 1 
Additional paid-in capital523,860 516,987 
Accumulated deficit(235,104)(206,077)
Accumulated other comprehensive loss(3,063)(1,292)
Total stockholders’ equity285,710 309,634 
Total liabilities and stockholders’ equity$447,320 $470,649 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share amounts)
Three Months Ended
March 31,
20222021
Revenues:
Subscription, transaction, and services$37,049 $33,119 
Reimbursable costs8,582 8,817 
Total revenues45,631 41,936 
Cost of revenues:
Cost of subscription, transaction, and services10,325 9,253 
Cost of reimbursable costs8,582 8,817 
Total cost of revenues, excluding depreciation and amortization18,907 18,070 
Operating expenses:
Research and development15,105 10,993 
Sales and marketing10,716 8,936 
General and administrative14,728 12,450 
Depreciation and amortization1,861 1,360 
Impairment and restructuring13,854  
Total operating expenses56,264 33,739 
Loss from operations(29,540)(9,873)
Other income (expense):
Change in fair value of financial instruments22 (9,995)
Interest expense and loss on extinguishment of debt(1)(2,942)
Other non-operating income67 108 
Total other income (expense)88 (12,829)
Loss before income taxes(29,452)(22,702)
Income tax expense (benefit)(425)92 
Net loss$(29,027)$(22,794)
Net loss per common share, basic and diluted$(0.18)$(0.16)
Weighted average common shares outstanding, basic and diluted162,974 144,207 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, amounts in thousands)

Three Months Ended March 31,
20222021
Net loss $(29,027)$(22,794)
Other comprehensive loss from foreign currency translation(1,771) 
Total comprehensive loss$(30,798)$(22,794)
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, amounts in thousands)
Three Months Ended March 31, 2022
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, December 31 2021159,413 $15 3,396 $1 $516,987 $(206,077)$(1,292)$309,634 
Issuance of common stock under stock plans541 1 — — 795 — — 796 
Stock-based compensation expense— — — — 6,078 — — 6,078 
Foreign currency translation— — — — — — (1,771)(1,771)
Net loss— — — — — (29,027)— (29,027)
Balance, March 31, 2022159,954 $16 3,396 $1 $523,860 $(235,104)$(3,063)$285,710 

Three Months Ended March 31, 2021
Class 1 Common StockClass 2 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
SharesAmountSharesAmount
Balance, December 31 202092,760 $9 8,197 $1 $148,677 $(144,877)$ $3,810 
Reverse recapitalization and PIPE financing (Note 3)44,522 5 (1,659)— 329,881 — — 329,886 
Fair value of Earnout Shares (Note 3)— — — — (230,995)— — (230,995)
Issuance and vesting of Earnout Shares (Note 3)10,204 1 713 — 237,008 — — 237,009 
Issuance of common stock under stock plans1,828 — — — 2,032 — — 2,032 
Stock-based compensation expense— — — — 8,826 — — 8,826 
Net loss— — — — — (22,794)— (22,794)
Balance, March 31, 2021149,314 $15 7,251 $1 $495,429 $(167,671)$ $327,774 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

8


BTRS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, amounts in thousands)
Three Months Ended March 31,
20222021
Cash flows from operating activities:
Net loss$(29,027)$(22,794)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,861 1,360 
Provision for bad debts(29)54 
Impairments and reduction in carrying amount of operating lease right-of-use assets10,663  
Impairments of fixed assets3,649  
Loss on extinguishment of debt and amortization of debt discount 2,799 
Stock-based compensation expense6,078 8,826 
Change in fair value of financial instruments and other expenses8 9,995 
Change in fair value of contingent consideration133  
Deferred income taxes(430)92 
Changes in assets and liabilities:
Accounts receivable(2,694)(3,743)
Prepaid expenses(3,680)(3,382)
Deferred implementation and commission costs306 132 
Other assets (current and non-current)1,053 1,512 
Accounts payable(1,413)668 
Accrued expenses and other(4,679)(2,730)
Operating lease liabilities(774) 
Deferred revenue(1,782)(2,604)
Other liabilities (current and non-current)629 (102)
Net cash used in operating activities(20,128)(9,917)
Cash flows from investing activities:
Purchase of business, net of acquired cash(59,456) 
Purchases of marketable securities(39)(25,000)
Purchases of property and equipment(454)(503)
Net cash used in investing activities(59,949)(25,503)
Cash flows from financing activities:
Payments on borrowings (44,663)
Business Combination and PIPE financing 349,638 
Payments of equity issuance costs (19,936)
Debt extinguishment costs (1,565)
Payment of deferred purchase price(557) 
Change in customer funds payable(3,156)261 
Payments on finance leases(23)(65)
Proceeds from common stock issued845 2,032 
Taxes paid on net share issuance of stock-based compensation(49)(4,013)
Net cash provided by (used in) financing activities(2,940)281,689 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash30  
Net increase (decrease) in cash, cash equivalents, and restricted cash(82,987)246,269 
Cash, cash equivalents, and restricted cash, beginning of period
212,809 38,843 
Cash, cash equivalents, and restricted cash, end of period (Note 2)$129,822 $285,112 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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Three Months Ended March 31,
20222021
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest$ $133 
Noncash Investing & Financing Activities:
Equity issuance costs charged to additional paid-in-capital$ $1,624 
Issuance and vesting of Earnout Shares (Note 3)$ $237,008 
Reclassification of stock warrant liability to equity (Note 3)$ $1,433 
Deferred purchase price (Note 3)$586 $ 
Net assets acquired in Business Combination and other$ $255 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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BTRS HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and Nature of Business
BTRS Holdings Inc., formerly known as Factor Systems, Inc. ("Legacy Billtrust"), utilizing the trade name Billtrust (the "Company” or “Billtrust”), was incorporated on September 4, 2001 in the State of Delaware and maintains its headquarters in Lawrenceville, New Jersey, with additional domestic offices or print facilities in Colorado, Illinois, and California, and international offices in Belgium, the Netherlands, Germany, and Poland.
The Company provides a comprehensive suite of order-to-cash software as a service ("SaaS") solutions with integrated payments, including credit decisioning and monitoring, online ordering, invoicing, cash application and collections. In addition, Billtrust founded the Business Payments Network ("BPN") as part of its strategic relationship with VISA, Inc., which combines remittance data with business-to-business ("B2B") payments and facilitates straight-through payment processing. Billtrust primarily serves B2B companies and integrates the key areas of the order-to-cash process: credit decisioning, e-commerce solutions, invoice presentment, invoice payment, cash application, and collections workflow management, helping its clients connect with their customers and cash.
Business Combination Agreement
On October 18, 2020, as amended on December 13, 2020, South Mountain Merger Corp., a Delaware corporation (“South Mountain”), BT Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of South Mountain (“First Merger Sub”), BT Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of South Mountain (“Second Merger Sub”), and the Company ("Billtrust"), entered into a Business Combination Agreement (“BCA”), pursuant to which (i) First Merger Sub was merged with and into Billtrust (the “First Merger”), with Billtrust surviving the First Merger as a wholly owned subsidiary of South Mountain (“Surviving Corporation”), and (ii) the Surviving Corporation merged with and into Second Merger Sub (the “Second Merger”, and together with the First Merger, the “Mergers”), with Second Merger Sub surviving the Second Merger as a wholly owned subsidiary of South Mountain (such Mergers, collectively with the other transactions described in the BCA, the “Business Combination”).
In connection with the execution of the Business Combination, on October 18, 2020, South Mountain entered into separate subscription agreements (“Subscription Agreements”) with a number of investors (“PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, and South Mountain sold to the PIPE Investors, an aggregate of 20.0 million shares of South Mountain Class A common stock, for a purchase price of $10.00 per share and at an aggregate purchase price of $200.0 million, in a private placement (“PIPE Financing”).
As described in Note 3 - Business Combination & Acquisitions, the Business Combination and PIPE Financing closed on January 12, 2021 (the "BCA Closing Date"). The Business Combination was accounted for as a reverse recapitalization in accordance with the generally accepted accounting principles in the United States of America ("U.S. GAAP"). Under this method of accounting, South Mountain was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Billtrust was the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Billtrust (i.e., a capital transaction involving the issuance of stock by South Mountain for the stock of Billtrust). Accordingly, the assets, liabilities, and results of operations of Billtrust became the historical financial statements of "New Billtrust", which was renamed BTRS Holdings Inc., and South Mountain’s assets, liabilities, and results of operations were consolidated with Billtrust beginning on the BCA Closing Date. All amounts of BTRS Holdings Inc. reflect the historical amounts of Billtrust carried over at book value with no step up in basis to fair value. After the Business Combination, the Company’s Class 1 common stock began trading on the Nasdaq stock exchange under the ticker symbol "BTRS".
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting on Form 10-Q. Accordingly, certain information and disclosures required for complete financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These Condensed Consolidated Financial Statements and notes should be read in
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conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (as filed with the SEC on March 9, 2022). Since the date of that filing, there have been no changes or updates to the Company's significant accounting policies, other than those described below.
In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair statement of financial position, results of operations, comprehensive loss, and cash flows as of the dates and for the interim periods presented. The results of operations for the three months ended March 31, 2022 may not be indicative of the results for the full fiscal year ended December 31, 2022 or any other period. The Condensed Consolidated Balance Sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date, but does not include all disclosures required by U.S. GAAP on an annual reporting basis. Certain prior period amounts have been reclassified to conform to the current period presentation.
The Company's fiscal year is the twelve-month period from January 1 through December 31 and all references to "2022", “2021”, and “2020” refer to the fiscal year unless otherwise noted.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of BTRS Holdings Inc. and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported, disclosure about contingent liabilities, and the reported amounts of revenues and expenses in the financial statements and accompanying notes. Such estimates include, but are not limited to, revenue recognition, leases, valuation of goodwill, intangible assets, other long-lived assets, and acquired assets and liabilities from acquisitions, recoverability of deferred tax assets, ongoing impairment reviews of goodwill, intangible assets, and other long-lived assets, contingent consideration, and stock-based compensation. The Company bases its estimates on historical experience, known trends, market specific information, or other relevant factors it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates and changes in estimates are recorded in the period in which they become known. Actual results may differ from these estimates.
Foreign Currency
The functional currency of the Company’s subsidiaries is their respective local currencies. These subsidiary financial statements are translated to U.S. dollars using the period-end exchange rates for assets and liabilities, average exchange rates during the corresponding period for revenues and expenses, and historical rates for equity. The effects of foreign currency translation adjustments are recorded in accumulated other comprehensive income (loss) within stockholders’ equity on the Condensed Consolidated Balance Sheets.
Foreign currency transaction gains (losses) are included in other non-operating income (expense) on the Condensed Consolidated Statements of Operations. Foreign exchange gains and losses were not material during the three months ended March 31, 2022 and 2021.
Liquidity
For the three months ended March 31, 2022, the Company incurred a net loss of $29.0 million and used cash in operations of $20.1 million. As of March 31, 2022, the Company had cash and cash equivalents of $107.8 million, marketable securities of $45.2 million, and an accumulated deficit of $235.1 million. Based on the Company’s business plan, existing cash, cash equivalents, and marketable securities, the Company expects to satisfy its working capital requirements for at least the next 12 months after the date that these Condensed Consolidated Financial Statements are issued.
Impact of COVID-19
During 2021 and the three months ended March 31, 2022, the COVID-19 pandemic did not adversely impact the Company, as evidenced by the continued growth in revenues across its subscription and transactional offerings. The Company's focus remains on investing in its products and supporting its long-term growth, including global expansion. Since the start of the pandemic, the Company has continued to operate despite the disruption to some of its customer's operations. The pandemic has served to increase awareness and urgency around accelerating the digital transformation of accounts receivable through the Company's platform and offerings which has helped avoid significant business, bookings, or revenue disruptions thus far. Additionally, shifts from
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in-person buying and traditional payment methods (such as cash or check) towards e-commerce and digital payments, and the related increase in consumer and B2B demand for safer payment and delivery solutions, have benefited the Company as it has further ingrained its platform in its customers’ critical day-to-day order-to-cash operations. In response to the pandemic, the Company has modified some of its business practices, such as enabling and encouraging its employees to work from anywhere and establishing health and safety protocols in its offices.
In addition, the spread of COVID-19 and its variants has contributed to a global slowdown of economic activity, supply chain disruptions, and inflation, among other macroeconomic events. The Company is unable to predict the impact the COVID-19 pandemic or other macroeconomic events will have on its future results of operations, liquidity, financial condition, ability to access capital markets, and business practices due to numerous uncertainties, including the duration, severity, and spread of the virus and its variants, actions that may be taken by government authorities, the impact to the Company's employees, customers, and partners, prolonged macroeconomic uncertainty, volatility, and disruption, and various other factors beyond the Company's knowledge or control. The Company continues to monitor these situations and may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, and partners.
Retroactive Adjustments Related to Change in Filing Status
Based on the closing share price and the market value of the Company's common stock held by non-affiliates as of June 30, 2021, the Company was deemed to be a large accelerated filer as of December 31, 2021. As a result, on December 31, 2021, the Company no longer qualified as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act (“JOBS Act”). The previous EGC status allowed the Company an extended transition period to adopt new or revised accounting pronouncements until such pronouncements were applicable to private companies. The effect of the loss of ECG status required the Company to adopt the following new accounting pronouncements retroactively to January 1, 2021 in it's 2021 Annual Report on Form 10-K:
Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), including subsequently issued ASUs (collectively, "Topic 842");
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, including subsequently issued ASUs (collectively, "Topic 326");
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes; and
ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.
As a result, in conformity with U.S. GAAP, the Company has retroactively adjusted its quarterly financial statements and related notes thereto, as of, and for the three months ended, March 31, 2021 to reflect the adoption of these new accounting standards as follows:
Within the Condensed Consolidated Statements of Cash Flows, financial statement lines for (1) impairments and reduction in carrying amount of operating lease right-of-use assets and (2) operating lease liabilities were included in the net change in operating activities in accordance with Topic 842.
Within the Notes to Condensed Consolidated Financial Statements, Note 9 - Leases was updated to include the required disclosures under Topic 842.
Except as otherwise noted, the adoption of the accounting pronouncements listed above did not have a material impact on the Company's financial position or results of operations, as of, and for the three months ended, March 31, 2021, and the financial statements and related notes included herein have not been adjusted.
Concentrations of Credit Risk
The financial instruments that potentially subject the Company to concentrations of credit risk are cash, cash equivalents, marketable securities, restricted cash, accounts receivable, and customer funds. The Company maintains its deposits of cash and cash equivalent, restricted cash, and customer funds with high-credit quality financial institutions. The Company’s cash and cash equivalent, restricted cash, and customer funds may exceed federally insured limits.
The Company’s accounts receivable are reported on the Condensed Consolidated Balance Sheets net of allowances for uncollectible accounts. The Company believes that the concentration of credit risk with respect to
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accounts receivable is limited due to the large number of companies and diverse industries comprising its customer base. Ongoing credit evaluations are performed, with a focus on new customers or customers with whom the Company has no prior collections history, and collateral is generally not required. The Company maintains reserves for potential losses based on customer specific situations, historical experience, and expectations of forward-looking loss estimates. Such losses, in the aggregate, have not exceeded management’s expectations. As of March 31, 2022 and December 31, 2021, the allowances for uncollectible accounts were $0.3 million and $0.4 million, respectively.
For the three months ended March 31, 2022 and 2021, no individual customer accounted for 10% or greater of total revenues. As of March 31, 2022 and December 31, 2021, no individual customer had a balance of 10% or greater of accounts receivable.
Presentation of Restricted Cash
The following table summarizes the period ending cash and cash equivalents as presented on the Company's Condensed Consolidated Balance Sheets and the total cash, cash equivalents, and restricted cash as presented on the Condensed Consolidated Statements of Cash Flows (in thousands):
Three Months Ended March 31,
20222021
Cash and cash equivalents$107,839 $261,013 
Customer funds19,385 21,185 
Restricted cash (1)2,598 2,914 
Total cash, cash equivalents, and restricted cash$129,822 $285,112 
(1)Restricted cash consists of collateral for letters of credit required for leased office space. At both March 31, 2022 and December 31, 2021, restricted cash is included in other assets in the Condensed Consolidated Balance Sheets. The short-term or long-term classification is determined in accordance with the expiration of the underlying letters of credit.
Recent Accounting Pronouncements
Accounting Pronouncements Issued and Adopted
On January 1, 2022, the Company adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in this ASU simplify the accounting for convertible instruments by eliminating large sections of the existing guidance and eliminating several triggers for derivative accounting, including a requirement to settle certain contracts by delivering registered shares. The adoption of this standard did not have an impact on the Company's financial position or results of operations.
Accounting Pronouncements Issued but not yet Adopted
In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance. The amendments in this ASU require entities to annually disclose information about certain government assistance they receive. The rule will be effective for public entities for annual periods beginning after December 15, 2021. The adoption of ASU is currently not expected to have a material impact on the Company’s financial statement disclosures.
Note 3 - Business Combination & Acquisitions
2022
Acquisition of Anachron Beheer BV
On February 14, 2022, Billtrust acquired 100% of the outstanding shares of Anachron Beheer BV and subsidiaries, d/b/a Order2Cash ("Order2Cash"), a privately-held company headquartered in Amsterdam, the Netherlands. Order2Cash is a European B2B order-to-cash platform provider. Their enterprise customer base, global interoperability capabilities and established connections to over 70 B2B and business-to-government (“B2G”) e-invoicing networks broaden BPN’s reach to deliver fully compliant and secure e-invoicing across multiple markets. The acquisition is part of Billtrust's strategic plan to continue expanding its physical presence in the European market while also enhancing its global invoicing and payments capabilities. The acquisition of
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Order2Cash was determined to be an acquisition of a business under ASC 805, Business Combinations. Pursuant to the terms of the purchase agreement, the Company paid an initial amount of $59.9 million in cash at closing.
Total Consideration Transferred
The following table summarizes the fair value of the aggregate consideration paid for Order2Cash (in thousands):
Cash paid at close (1)$59,878 
Deferred purchase price (2)586 
Total purchase consideration$60,464 
(1)Cash paid at close represents the gross contractual amounts paid. Net cash paid, which accounts for cash acquired of $0.4 million, was $59.5 million and is reflected as an investing activity on the Condensed Consolidated Statements of Cash Flows.
(2)An additional $0.6 million is payable within four years of the closing date upon achievement of certain conditions. This amount is recognized as purchase price. Refer to Note 13 - Fair Value Measurements for further information on the determination of the fair value.
Additionally, the acquisition included earnout consideration to be paid to the sellers based on the amount and timing of Order2Cash's achievement of certain conditions. These amounts may be earned by the sellers during periods following the closing date based on the financial performance of Order2Cash during 2022, and each of the 12-month periods ending June 30, 2023 and June 30, 2024. Under ASC 805, the Company determined that this arrangement is compensation and are therefore recognized separately from the acquisition transaction.
The preliminary acquisition date fair value of the total earnout liability was $11.5 million. In accordance with ASC 710, Compensation, the amount will be recognized over the arrangement period and will be recorded in general and administrative expenses on the Condensed Consolidated Statements of Operations. The amount expensed for the three months ended March 31, 2022 was $1.0 million, and is included in accrued expenses and other current liabilities and other non-current liabilities on the Company’s Condensed Consolidated Balance Sheets. The determination of the fair value, included the following significant inputs; projected revenue, a risk adjusted discount rate, and estimated volatility. Increases or decreases in the inputs would have resulted in a higher or lower fair value measurement. The range of undiscounted amounts that could be payable under the earnout arrangement is zero to $23.7 million.
Preliminary Allocation of Purchase Price
The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of Order2Cash (in thousands):
Assets:
Cash and cash equivalents$422 
Accounts receivable2,189 
Property and equipment184 
Operating lease right-of-use assets569 
Goodwill (1)40,838 
Intangible assets (2)27,238 
Other assets (current and non current) 
Total Assets$71,440 
Liabilities:
Accounts payable$861 
Accrued expenses and other current liabilities1,510 
Operating lease liabilities569 
Deferred revenue1,226 
Deferred taxes6,810 
Total Liabilities10,976 
Net assets acquired$60,464 
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(1)Goodwill represents the expected revenue synergies from combining Order2Cash with Billtrust, as well as the value of the acquired workforce. The goodwill is not expected to be deductible for income tax purposes.
(2)All of the intangible assets are expected to be finite lived.
The determination of the fair value of the finite-lived intangible assets required management judgment and the consideration of a number of factors. The Company relied on income, market, and replacement cost valuation methodologies, which included estimates related to projected cash flows related to each asset, discount rates, useful lives of each asset, and published industry benchmark data. Based on the preliminary valuation, the intangible assets acquired were (in thousands):
Fair ValueUseful Life
(in Years)
Customer relationships$22,471 20
Developed technology3,405 7
Trade names1,362 10
Total intangible assets$27,238 
The weighted average amortization period of all the acquired intangible assets is 17.9 years.
Due to the timing of the acquisition in the first quarter of 2022, the purchase price allocation is preliminary with respect to the valuation of acquired assets, liabilities assumed (including income taxes), intangible assets and the related useful lives, and goodwill. The Company continues to obtain the information to complete the purchase price allocation and will record adjustments, if any, during the 12 month measurement period.
The operating results of Order2Cash have been included in the Company’s financial statements since the acquisition date. Order2Cash’s operating results and the goodwill resulting from the acquisition are reported in the Company’s Software and Payments segment. The acquisition added approximately $1.4 million of additional revenue and $1.4 million of direct expenses, including intangible amortization for the three months ended March 31, 2022. Had the Company acquired Order2Cash in prior periods, the Company's operating results would have been materially different. As a result the following unaudited pro forma financial information is presented as if Order2Cash had been acquired by the Company on January 1, 2021 (in thousands):
Three Months Ended March 31,
20222021
Pro forma total revenue
$46,983 $44,999 
Pro forma net loss
$(29,194)$(24,965)
The pro forma results have been prepared in accordance with U.S. GAAP and include the following pro forma adjustments: (1) an increase for amortization expense for the three months ended March 31, 2022 and 2021 as a result of the preliminary purchase price allocation for finite-lived intangible assets, (2) an increase in operating costs for the for the three months ended March 31, 2021 to recognize non-recurring acquisition costs incurred to close the transaction, and (3) an increase in the estimated tax benefits as a result of the pro forma adjustments. These pro forma results do not necessarily reflect the combined actual results of operations of the Company and Order2Cash that would have been achieved, nor are they necessarily indicative of future results of operations.
2021
Closing of Business Combination, Accounted for as a Reverse Recapitalization
On January 12, 2021, Billtrust consummated the previously announced Business Combination pursuant to the Agreement dated October 18, 2020, and amended as of December 13, 2020. As a result of the Agreement, Billtrust stockholders received aggregate consideration with a value equal to approximately $1,190.0 million, which consists of:
i.Approximately $90.1 million in cash to certain Billtrust shareholders who elected to receive cash for shares of Billtrust common stock at closing of the Business Combination, accounted for as a reverse recapitalization; and
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ii.Approximately $1,099.0 million in South Mountain Class A and Class C common stock at closing of the Business Combination, accounted for as a reverse recapitalization, or 109.9 million shares (including 15.2 million shares issuable pursuant to outstanding vested and unvested options from the 2003 and 2014 Plans), converted at an exchange ratio of 7.2282662 shares (the "Conversion Rate") per share of Legacy Billtrust common stock based on an assumed share price of $10.00 per share.
As of the completion of the Business Combination, accounted for as a reverse recapitalization, on January 12, 2021, the merged companies, BTRS Holdings Inc. and subsidiaries, had the following outstanding securities:
i.138.7 million shares of Class 1 common stock, including 2.4 million shares to prior South Mountain shareholders that are subject to the vesting and forfeiture provisions based upon the same share price targets described below in the First Earnout and Second Earnout. During the first quarter of 2021, all of these shares vested;
ii.6.5 million shares of Class 2 common stock; and
iii.12.5 million warrants, each exercisable for one share of Class 1 common stock at a price of $11.50 per share (the "Warrants", refer to Note 7 - Stockholders' Equity and Stock-Based Compensation).
In connection with the Merger:
i.Each issued and outstanding South Mountain Class A and Class B share was converted into one share of Class 1 common stock of the Company; and
ii.All 7.0 million private placement warrants of South Mountain were cancelled and were no longer outstanding.
Immediately prior to the closing, each issued and outstanding share of Legacy Billtrust preferred stock converted into equal shares of Legacy Billtrust common stock. At the closing of the Business Combination, each stockholder of Legacy Billtrust received 7.2282662 shares of the Company’s Class 1 common stock, par value $0.0001 per share (“Common Stock”), for each share of Legacy Billtrust common stock, par value $0.001 per share, that such stockholder owned, except for one investor who requested to receive shares of Class 2 common stock, which is the same in all respects as Class 1 common stock except it does not have voting rights.
Upon the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of capital stock to 575.0 million shares, of which 538.0 million shares were designated Class 1 common stock, $0.0001 par value per share; 27.0 million shares were designated Class 2 common stock, $0.0001 par value per share; and 10.0 million shares were designated preferred stock, $0.0001 par value per share.
Concurrently with the completion of the Business Combination, on the BCA Closing Date 20.0 million new shares of Common Stock were issued (such purchases, the “PIPE”) for an aggregate purchase price of $200.0 million.
In connection with the Business Combination, 9.0 million shares of common stock were repurchased for cash from Legacy Billtrust shareholders (after conversion) at a price of $10.00 per share. Additionally, in connection with a previous loan agreement in July 2014, the Company issued a lender a warrant to purchase shares of the Company’s Series C preferred stock. In connection with Business Combination, the warrant was exercised and converted into 0.1 million shares of Common Stock.
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The following table reconciles the elements of the Business Combination, accounted for as a reverse recapitalization, to the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2021 (in thousands):
Reverse Recapitalization
Cash - South Mountain (net of redemptions and non-contingent expenses)$240,670 
Cash - PIPE investors200,000 
Cash electing shares of Legacy Billtrust shareholders(90,061)
Fees to underwriters and other transaction costs(19,936)
Net cash received from reverse recapitalization330,673 
Net assets acquired and other adjustments255 
Net contributions from reverse recapitalization$330,928 
The number of shares of Class 1 and Class 2 common stock of BTRS Holdings Inc. issued immediately following the consummation of the Business Combination, accounted for as a reverse recapitalization, is summarized as follows (in thousands):
Number of Shares
Common Stock outstanding prior to Business Combination25,000 
South Mountain founder shares5,500 
Redemption of South Mountain shares(2)
Common stock of South Mountain30,498 
Shares issued from PIPE20,000 
Legacy Billtrust shareholders' shares purchased for cash(9,006)
Recapitalization shares41,492 
Legacy Billtrust stockholders' shares103,774 
Total shares145,266 
Earnout Consideration
Following the closing of the Merger, holders of Billtrust common stock (including all redeemable preferred shareholders whose shares were converted into common stock at the closing of the Merger) and holders of stock options and restricted stock pursuant to the 2003 Plan and the 2014 Plan (as defined in the Business Combination Agreement) had the contingent right to receive, in the aggregate, up to 12.0 million shares of Class 1 common stock if, from the closing of the Merger until the fifth anniversary thereof, the average closing price of BTRS Holdings Inc. Common Stock exceeds certain thresholds. The first issuance of 6.0 million earnout shares is based on the volume-weighted average price of Common Stock exceeding $12.50 for any 20 trading days within any 30 trading day period (the “First Earnout”). The second issuance of 6.0 million earnout shares is based on the volume weighted average price of Common Stock exceeding $15.00 for any 20 trading days within any 30 trading day period (the “Second Earnout” and together with the First Earnout, the "Earnout Shares").
Subsequent to the closing of the Merger and in the first quarter of 2021, 10.9 million shares of Class 1 and Class 2 common stock were issued associated with attainment of the First Earnout and the Second Earnout thresholds.
The difference in the Earnout Shares issued and the aggregate amounts defined in the Merger Agreement is primarily due to 0.8 million unissued shares reserved for future issuance to holders of unvested options in the form of restricted stock units (the "Earnout RSUs"), which are subject to the same vesting terms and conditions as the underlying unvested stock options, and are not replacement awards. Additionally, 0.2 million shares of Common Stock were withheld from employees to satisfy the mandatory tax withholding requirements, for which the company remitted cash of $4.0 million to the appropriate tax authorities.
As of the BCA Closing Date, the prior holders of South Mountain stock agreed that of their existing issued and outstanding shares of Class 1 common stock, 2.4 million shares would be subject to vesting conditions based upon the same price milestones in the First Earnout (1.2 million shares) and Second Earnout (1.2 million shares) as discussed above ("Sponsor Vesting Shares").
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The Company determined that the Earnout Shares issued to non-employee shareholders and to holders of BTRS Holdings Inc. common stock, vested options from the 2003 Plan and 2014 Plan, and the Sponsor Vesting Shares did not meet the criteria for equity classification under Accounting Standards Codification ("ASC") 815-40. Accordingly, these shares were required to be classified as a liability and recorded at their fair values, with the remeasurement of their fair values at each reporting period recorded in earnings. Upon closing of the Business Combination, the fair value of the shares was determined using a Monte Carlo simulation (using the same assumptions as Earnout RSUs discussed below), resulting in a fair value of $16.80 per share. The shares were remeasured at their fair values through the dates the First Earnout and Second Earnout were achieved in the first quarter of 2021. The liability associated with the Earnout Shares delivered to the equity holders and the Vesting Shares that vested upon achievement of the First Earnout and Second Earnout during the first quarter of 2021 was then reclassified to equity as the shares issued, with the appropriate allocation to common stock at par value and additional paid-in capital.
The following table is a reconciliation of the liability balance at the BCA Closing Date and the changes therein for the three months ended March 31, 2021 (in thousands):
Earnout SharesSponsor Vesting SharesTotal
Fair value on Closing Date$191,095 $39,900 $230,995 
Fair value adjustment (1)8,246 1,780 10,026 
Amount paid for tax withholding(4,013) (4,013)
Amount reclassified to equity(195,328)(41,680)(237,008)
Balance, March 31, 2021$ $ $ 
(1) Included in change in fair value of financial instruments on the Condensed Consolidated Statements of Operations.
Earnout RSUs issued based on the amount of the unvested options are recognized in earnings as stock-based compensation expense under ASC 718. The fair value of the Earnout RSUs was determined using a Monte Carlo simulation, including the stock price on the BCA Closing Date of $16.80, a risk free rate of 0.5%, and a volatility rate of 42%.
Offering Costs
In accordance with ASC 340-10-S99-1, the offering costs, consisting principally of underwriters fees and professional, printing, filing, regulatory, and other costs, were charged to additional paid-in capital upon completion of the Business Combination.
Repayment of Financing Agreement
In connection with the Business Combination, the Company paid all of its outstanding debt facilities in full. In connection therewith, the unamortized debt discount of $1.2 million and a prepayment penalty and associated costs of $1.6 million were recorded in interest expense and loss on extinguishment of debt on the Condensed Consolidated Statements of Operations.
Acquisition of iController BV
On October 7, 2021, Billtrust acquired 100% of the outstanding shares of iController BV ("iController"), a privately-held company based in Ghent, Belgium and Amsterdam, the Netherlands. iController is a business-to-business provider of SaaS intelligent solutions for collections management. Their SaaS offerings enable a wide range of users, from credit and collections managers to chief financial officers, to see payment and collections information and communication in real time, providing visibility into cash flow management. The acquisition is part of Billtrust's strategic plan to expand its physical presence in the European market while enhancing its global collections capabilities. The acquisition of iController was determined to be an acquisition of a business under ASC 805, Business Combinations.
Pursuant to the terms of the purchase agreement, the Company paid an initial amount of $57.0 million in cash at closing, which was subject to a closing working capital adjustment and typical indemnity provisions from the seller.
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Total Consideration Transferred
The following table summarizes the fair value of the aggregate consideration paid for iController (in thousands):
Cash paid at close (1)$57,020 
Contingent consideration (2)5,085 
Deferred purchase price (3)579 
Total purchase consideration$62,684 
(1)The cash paid at close represents the gross contractual amounts paid. Net cash paid, which accounts for cash acquired of $0.2 million, was $56.8 million and is reflected as an investing activity on the Condensed Consolidated Statements of Cash Flows.
(2)The acquisition of iController included contingent cash consideration to be paid to the seller based on the amount and timing of iController’s achievement of certain recurring revenue growth targets over a three year period subsequent to the acquisition date. The fair value of this contingent consideration on the closing date was $5.1 million, which is recognized as purchase price. Refer to Note 13 - Fair Value Measurements for further information.
(3)The deferred purchase price was paid in January 2022 upon the completion of certain conditions.
Preliminary Allocation of Purchase Price
The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of iController (in thousands):
Assets:
Cash and cash equivalents$187 
Accounts receivable1,217 
Property and equipment439 
Operating lease right-of-use assets651 
Goodwill (1)52,386 
Intangible assets (2)17,385 
Other assets (current and non current)76 
Total Assets$72,341 
Liabilities:
Accounts payable$524 
Accrued expenses and other current liabilities641 
Operating lease liabilities, net of current portion917 
Deferred revenue3,775 
Deferred taxes3,800 
Total Liabilities9,657 
Net assets acquired$62,684 
(1)Goodwill represents the expected revenue synergies from combining iController with Billtrust, as well as the value of the acquired workforce. The goodwill is not expected to be deductible for income tax purposes.
(2)All of the intangible assets are finite lived.
The determination of the fair value of the finite-lived intangible assets required management judgment and the consideration of a number of factors. The Company relied on income, market, and replacement cost valuation methodologies, which included estimates related to projected cash flows related to each asset,
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discount rates, useful lives of each asset, and published industry benchmark data. Based on the valuation, the intangible assets acquired were (in thousands):
Fair ValueUseful Life
(in Years)
Customer relationships$14,256 15
Developed technology2,202 6
Trade names927 6
Total intangible assets$17,385 
The weighted average amortization period of all the acquired intangible assets is 13.4 years.
The purchase price allocation is preliminary with respect to the valuation of acquired assets, liabilities assumed (including income taxes), intangible assets, and goodwill. The Company continues to obtain the information to complete the purchase price allocation and will record adjustments, if any, during the 12 month measurement period. No purchase price adjustments were recorded during the three months ended March 31, 2022.
The operating results of iController have been included in the Company’s financial statements since the acquisition date and are not material to the Company’s consolidated financial results. iController’s operating results and the goodwill resulting from the acquisition are reported in the Company’s Software and Payments segment.
Acquisition Costs
The Company recognized $0.7 million and no acquisition costs during the three months ended March 31, 2022 and 2021, respectively related its acquisitions. These costs primarily consisted of legal, accounting, and tax professional fees and are included in general and administrative expenses on the Condensed Consolidated Statements of Operations.
Note 4 - Goodwill and Intangible Assets
Goodwill
Goodwill represents the amount an acquisition’s purchase price exceeds the fair value of the assets acquired, including identifiable intangible assets, and liabilities assumed. Goodwill is not amortized; however it is required to be tested for impairment annually at the reporting unit level. Testing for impairment is also required on an interim basis if an event of circumstance indicates it is more likely than not that an impairment loss has been incurred.
The Company performed its annual impairment test as of October 1, 2021, utilizing a qualitative assessment to determine if it was more likely than not that the fair values of each of its reporting units was less than their respective carrying values, and concluded that no impairment existed. Subsequent to completing the annual test and through March 31, 2022, there were no events or circumstances that required an interim impairment test. Additionally, as of March 31, 2022, the Company had no accumulated goodwill impairment losses.
All of the Company's goodwill is attributable to its Software and Payments segment. A summary of goodwill and the changes in its carrying amount is shown in the following table (in thousands):
Consolidated Goodwill
Balance at December 31, 2021$88,148 
Additions from acquisition (1)40,838 
Foreign translation adjustments(1,617)
Balance at March 31, 2022$127,369 
(1)The entire increase is related to the acquisition of Order2Cash (refer to Note 3 - Business Combination & Acquisitions).
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Finite-Lived Intangible Assets
The gross carrying values, accumulated amortization, and net carrying values (reduced for fully amortized intangibles) of finite-lived intangible assets as of March 31, 2022 and December 31, 2021, are as follows (in thousands):
March 31, 2022
Gross Carrying
Value
Accumulated AmortizationNet Carrying Value
Customer relationships$45,440 $(4,137)$41,303 
Non-compete agreements1,430 (988)442 
Trademarks and trade names2,387 (172)2,215 
Technology6,997 (1,130)5,867 
Total$56,254 $(6,427)$49,827 
December 31, 2021
Gross Carrying
Value
Accumulated AmortizationNet Carrying Value
Customer relationships$23,621 $(3,524)$20,097 
Non-compete agreements1,430 (917)513 
Trademarks and trade names1,066 (111)955 
Technology3,692 (918)2,774 
Total$29,809 $(5,470)$24,339 
Amortization expense was $1.0 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively.
Estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):
2022 (remainder)$3,298 
20234,302 
20244,058 
20253,865 
20263,828 
Thereafter30,476 
Total$49,827 
Note 5 - Revenue and Related Matters
Disaggregated Revenue
The Company disaggregates revenue as set forth in the following table (in thousands):
Three Months Ended
March 31,
Revenues by Type:20222021
Subscription and transaction fees$34,102 $30,183 
Services and other2,947 2,936 
Subscription, transaction, and services$37,049 $33,119 
Contract Assets and Liabilities
There were no contract assets as of March 31, 2022 or December 31, 2021.
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Deferred Revenue
Amounts billed to clients in excess of revenue recognized are contract liabilities (referred to as deferred revenue in the Condensed Consolidated Balance Sheets). Deferred revenue primarily relates to implementation fees for new customers or for new services.
During the three months ended March 31, 2022 and 2021, the Company recognized $5.5 million and $6.7 million of revenue, respectively, related to its deferred revenue balance at the beginning of each such period. To determine revenue recognized in each period, the Company first allocates revenue to the deferred revenue balance outstanding at the beginning of each period, until the revenue equals that balance.
The amount of revenue recognized in the three months ended March 31, 2021 included $2.5 million related to the acceleration of previously paid and deferred revenue from a customer that terminated its contract in the first quarter of 2021.
Remaining Performance Obligations
As of March 31, 2022, the Company had approximately $38.6 million of remaining performance obligations, primarily from multi-year contracts for the Company's services, which includes both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods. The Company expects to recognize revenue for approximately 95% of this amount during the next 36 months, and the remainder thereafter.
Deferred Commissions and Implementation Costs
The current and non-current portions of deferred implementation and commission costs on the Condensed Consolidated Balance Sheets were as follows (in thousands):
March 31,December 31,
20222021
Current portion of deferred costs:
Deferred commissions, current$2,999 $2,997 
Deferred implementation costs, current2,012 2,063 
Deferred implementation and commission costs, current portion$5,011 $5,060 
Non-current portion of deferred costs:
Deferred commissions, net of current portion$6,353 $6,392 
Deferred implementation costs, net of current portion2,629 2,846 
Deferred implementation and commission costs, net of current portion$8,982 $9,238 
Amortization of commissions was $0.8 million and $0.6 million during the three months ended March 31, 2022 and 2021, respectively. Amortization of implementation costs was $0.8 million and $0.9 million during the three months ended March 31, 2022 and 2021, respectively.
The Company evaluates the recoverability of deferred commissions and implementation costs at each balance sheet date and there were no impairments recorded during the three months ended March 31, 2022 or 2021.
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Note 6 - Loss Per Share
The following table sets forth the computation of the basic and diluted net loss per share attributable to the Class 1 and Class 2 common stockholders (in thousands, except per share amounts):
Three Months Ended
March 31,
20222021
Numerator:
Net loss$(29,027)$(22,794)
Denominator:
Weighted-average common shares outstanding162,974 144,207 
Net loss per share attributable to common stockholders, basic and diluted$(0.18)$(0.16)
Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be antidilutive, were as follows as of the dates presented based on the underlying shares and not considering all factors that would be involved in determining the common stock equivalents (in thousands):
Three Months Ended
March 31,
20222021
Stock options19,340 22,383 
Restricted stock units2,534 834 
Warrants 12,500 
21,874 35,717 
Note 7 - Stockholders' Equity and Stock-Based Compensation
Warrants
In connection with the Business Combination (refer to Note 3 - Business Combination & Acquisitions), Billtrust assumed the Warrants that had previously been issued by South Mountain. Following the closing of the Business Combination, the Company filed a registration statement with the SEC that was declared effective in February 2021 covering the issuance of the shares of Common Stock issuable upon exercise of the Warrants and to maintain a current prospectus until the Warrants expired or were redeemed.
The Company determined the Public Warrants met the definition of a derivative as they were indexed to the Company’s Common Stock pursuant to ASC 815-40-15-7 and met all other criteria for equity classification pursuant to ASC 815-40. Therefore as of the BCA Closing Date, the Public Warrants were accounted for within stockholders' equity as a component of additional paid-in-capital on the Condensed Consolidated Balance Sheets. As part of this assessment, it was concluded only events that would constitute a fundamental change of ownership could require the Company to settle the warrants for cash.
Warrant Exchange Offer
On November 18, 2021, the Company commenced a tender offer (the “Warrant Exchange Offer”) to each holder of its outstanding Warrants the opportunity to exchange their warrants for shares of the Company’s Common Stock, par value $0.0001 per share. Each holder was set to receive 0.30 shares of Common Stock in exchange for each outstanding Warrant tendered by the holder and exchanged pursuant to the terms of the Warrant Exchange Offer. Concurrently with the Warrant Exchange Offer, the Company solicited consents from holders of the Warrants to amend the Warrant Agreement (“Warrant Amendment”) dated June 19, 2019, to permit the Company to require that each Warrant outstanding upon the closing of the Warrant Exchange Offer be converted into 0.27 shares of Common Stock, which is a ratio 10% less than the exchange ratio applicable to the Warrant Exchange Offer. Pursuant to the terms of the Warrant Agreement, amendment required the written consent of at least 50% of the holders of the Warrants.
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On December 17, 2021, the Company concluded the Warrant Exchange Offer with approximately 99.2% of the outstanding Warrants validly tendered and not withdrawn in the Warrant Exchange Offer. Additionally, the Company received the approval of approximately 99.2% of the outstanding Warrants for the Warrant Amendment. Accordingly, the Company exchanged all outstanding Warrants and issued 3.7 million shares of its Common Stock. All Warrants were exchanged as of December 31, 2021 and as a result, Nasdaq halted trading in the Warrants and subsequently agreed with the Company to delist them as none remained outstanding.
Equity Incentive Plans
As part of the Business Combination (refer to Note 3 - Business Combination & Acquisitions), the Company adopted the 2020 Equity Incentive Plan (the "2020 Plan") and 2020 Employee Stock Purchase Plan (the "2020 ESPP"). These plans are administered by the Board of Directors, which has the authority to designate participants and determine the number and type of awards to be granted and any other terms or conditions of the awards.
During the three months ended March 31, 2022, the Board of Directors authorized an annual increase of 2.0 million shares for the 2020 Plan and 1.6 million shares for the ESPP, As of March 31, 2022, 6.8 million shares of Common Stock remained to be granted pursuant to the 2020 Plan and 3.0 million shares of Common Stock to be issued pursuant to the 2020 ESPP.
In connection with adopting the 2020 Plan and 2020 ESPP, the 2003 Stock Incentive Plan and the 2014 Incentive Compensation Plan (together, the "Prior Plans") were frozen and no further grants can be made pursuant to the Prior Plans. All outstanding options under the Prior Plans were converted to options of the Company using the Conversion Rate applied to the number of options and original exercise price. The converted options continue to vest based upon their original terms.
Stock Options
Stock option activity for the three months ended March 31, 2022 is presented below (in thousands, except per share and contractual life amounts):
Number of SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Life (in Years)Aggregate Intrinsic Value
Outstanding at December 31, 202120,025 $8.51 7.8$60,223 
Granted  
Exercised(480)1.69 
Forfeited(205)10.87 
Outstanding at March 31, 202219,340 $8.65 7.5$53,286 
Vested and expected to vest at March 31, 202217,278 $8.14 7.4$51,006 
Exercisable at March 31, 20229,529 $5.84 6.6$37,083 
Restricted Stock Units
Restricted stock unit ("RSUs") activity for the three months ended March 31, 2022 is presented below (in thousands, except per share amounts):
Number of SharesWeighted-Average Grant Date Fair Value
Unvested at December 31, 2021613 $15.08 
Granted 1,996 6.28 
Released(60)15.21 
Vested(15)16.80 
Unvested at March 31, 20222,534 $8.27 
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Employee Stock Purchase Plan ("ESPP")
Under the terms of the 2020 ESPP, on May 26, 2021, the Board of Directors approved the Company's ESPP offering program. With certain limitations, all Billtrust employees whose customary employment is more than 20 hours per week are eligible to participate in the ESPP.
The initial offering period, which consisted of one purchase period, commenced on July 1, 2021 and ran through November 30, 2021. Thereafter, each offering period runs for approximately six months, consisting of a single six month purchase period commencing on each successive June 1 and December 1. At the end of each purchase period, employee payroll contributions are used to purchase shares of the Company's Common Stock. The purchase price for each share of Common Stock purchased is the lower of: (1) 85% of the closing price of the Common Stock on the first day of the purchase period, or (2) 85% of the closing price of the Common Stock on the last day of the purchase period.
During the three months ended March 31, 2022, no shares were purchased or issued pursuant to the 2020 ESPP.
Stock-Based Compensation Expense
Stock-based compensation expense was recorded in the following categories in the Condensed Consolidated Statements of Operations (in thousands):
Three Months Ended
March 31,
20222021
Cost of subscription, transaction, and services$438 $443 
Research and development1,225 1,222 
Sales and marketing754 1,332 
General and administrative3,661 5,829 
Total$6,078 $8,826 
The fair value of the Company's stock options granted and purchase rights to the ESPP were estimated using the Black-Scholes valuation model with the following assumptions:
Three Months Ended
March 31,
20222021
Stock Options:
Risk-free interest rate— 
0.6% - 1.1%
Expected dividend yield—  %
Expected volatility—