OneSpan Inc. [OSPN] Filings

10-Q 1 ospn-20220331x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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

☐	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 000-24389

OneSpan Inc.

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE

36-4169320

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

121 West Wacker Drive, Suite 2050

Chicago, Illinois 60601

(Address of Principal Executive Offices) (Zip Code)

(312) 766-4001

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Shares	OSPN	NASDAQ

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 definition 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	◻	Emerging growth company	☐
		Smaller reporting 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 ☒ No

There were 40,020,902 shares of Common Stock, $.001 par value per share, outstanding at April 29, 2022.

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OneSpan Inc.

Form 10-Q

For the Quarter Ended March 31, 2022

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PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2022 and December 31, 2021	3

	Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2022 and 2021	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three months ended March 31, 2022 and 2021	5

	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2022 and 2021	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 6.	Exhibits	32

SIGNATURES		33

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OneSpan Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)


	March 31,		December 31,
	2022		2021
ASSETS
Current assets
Cash and equivalents	$	83,645	$	63,380
Short term investments		36,302		35,108
Accounts receivable, net of allowances of $2,292 in 2022 and $1,419 in 2021		35,704		56,612
Inventories, net		10,388		10,345
Prepaid expenses		7,656		7,594
Contract assets		5,410		4,694
Other current assets		9,591		9,356
Total current assets		188,696		187,089
Property and equipment, net		10,253		10,757
Operating lease right-of-use assets		8,849		9,197
Goodwill		94,586		96,174
Intangible assets, net of accumulated amortization		19,728		21,270
Deferred income taxes		3,679		3,786
Contract assets - non-current		318		195
Other assets		9,802		13,803
Total assets	$	335,911	$	342,271
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	7,231	$	8,204
Deferred revenue		50,988		54,617
Accrued wages and payroll taxes		14,109		16,607
Short-term income taxes payable		735		1,103
Other accrued expenses		7,297		7,668
Deferred compensation		80		877
Total current liabilities		80,440		89,076
Long-term deferred revenue		7,326		9,125
Long-term lease liabilities		9,932		10,180
Other long-term liabilities		7,554		7,770
Long-term income taxes payable		5,054		5,054
Deferred income taxes		2,010		1,286
Total liabilities		112,316		122,491
Stockholders' equity
Preferred stock: 500 shares authorized, none issued and outstanding at March 31, 2022 and December 31, 2021		—		—
Common stock: $.001 par value per share, 75,000 shares authorized; 40,613 and 40,593 shares issued; 40,021 and 40,001 shares outstanding at March 31, 2022 and December 31, 2021, respectively		40		40
Additional paid-in capital		100,975		100,250
Treasury stock, at cost, 592 and 592 shares outstanding at March 31, 2022 and December 31, 2021, respectively		(12,501)		(12,501)
Retained earnings		148,387		143,173
Accumulated other comprehensive loss		(13,306)		(11,182)
Total stockholders' equity		223,595		219,780
Total liabilities and stockholders' equity	$	335,911	$	342,271

See accompanying notes to unaudited condensed consolidated financial statements.

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OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

(unaudited)


	March 31,
	2022		2021
Revenue
Product and license	$	29,485	$	28,445
Services and other		22,962		22,330
Total revenue		52,447		50,775

Cost of goods sold
Product and license		9,079		10,752
Services and other		6,690		5,781
Total cost of goods sold		15,769		16,533

Gross profit		36,678		34,242

Operating costs
Sales and marketing		15,895		17,168
Research and development		13,749		12,244
General and administrative		14,895		12,551
Amortization of intangible assets		1,382		1,573
Total operating costs		45,921		43,536

Operating loss		(9,243)		(9,294)

Interest income (expense), net		(17)		4
Other income (expense), net		15,647		(362)

Income (loss) before income taxes		6,387		(9,652)
Provision (benefit) for income taxes		1,173		(501)

Net income (loss)	$	5,214	$	(9,151)

Net income (loss) per share
Basic	$	0.13	$	(0.23)
Diluted	$	0.13	$	(0.23)

Weighted average common shares outstanding
Basic		39,577		39,996
Diluted		39,687		39,996

See accompanying notes to unaudited condensed consolidated financial statements.

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OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)


	Three months ended March 31,
	2022		2021
Net income (loss)	$	5,214	$	(9,151)
Other comprehensive loss
Cumulative translation adjustment, net of tax		(2,020)		(919)
Pension adjustment, net of tax		(25)		—
Unrealized losses on available-for-sale securities		(79)		(15)
Comprehensive income (loss)	$	3,090	$	(10,085)

See accompanying notes to unaudited condensed consolidated financial statements.

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OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

For the three months ended March 31, 2022:


											Accumulated
							Additional				Other		Total
	Common Stock			Treasury - Common Stock			Paid-In		Retained		Comprehensive		Stockholders'
Description	Shares	Amount		Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balance at December 31, 2021	40,001	$	40	592		(12,501)	$	100,250	$	143,173	$	(11,182)	$	219,780
Net income (loss)	—		—	—		—		—		5,214		—		5,214
Foreign currency translation adjustment, net of tax	—		—	—		—		—		—		(2,020)		(2,020)
Restricted stock awards	34		—	—		—		1,360		—		—		1,360
Tax payments for stock issuances	(14)		—	—		—		(635)		—		—		(635)
Unrealized gain (loss) on available-for-sale securities	—		—	—		—		—		—		(79)		(79)
Pension adjustment, net of tax	—		—	—		—		—		—		(25)		(25)
Balance at March 31, 2022	40,021	$	40	592	$	(12,501)	$	100,975	$	148,387	$	(13,306)	$	223,595

For the three months ended March 31, 2021:


											Accumulated
							Additional				Other		Total
	Common Stock			Treasury - Common Stock			Paid-In		Retained		Comprehensive		Stockholders'
Description	Shares	Amount		Shares	Amount		Capital		Earnings		Income (Loss)		Equity
Balance at December 31, 2020	40,103	$	40	250		(5,030)	$	98,819	$	173,731	$	(10,220)	$	257,340
Net income (loss)	—		—	—		—		—		(9,151)		—		(9,151)
Foreign currency translation adjustment, net of tax	—		—	—		—		—		22		(919)		(897)
Restricted stock awards	248		—	—		—		1,342		—		—		1,342
Tax payments for stock issuances	(86)		—	—		—		(2,139)		—		—		(2,139)
Unrealized gain (loss) on available-for-sale securities	—		—	—		—		—		—		(15)		(15)
Pension adjustment, net of tax	—		—	—		—		—		—		—		—
Balance at March 31, 2021	40,265	$	40	250	$	(5,030)	$	98,022	$	164,602	$	(11,154)	$	246,480

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OneSpan Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three months ended March 31,
	2022		2021
Cash flows from operating activities:
Net income (loss) from operations	$	5,214	$	(9,151)
Adjustments to reconcile net loss from operations to net cash provided by (used in) operations:
Depreciation and amortization of intangible assets		2,097		2,310
Loss on disposal of assets		1		22
Gain on sale of equity-method investment		(14,810)		—
Deferred tax benefit		794		(732)
Stock-based compensation		1,360		1,342
Changes in operating assets and liabilities:
Accounts receivable		19,893		8,554
Allowance for doubtful accounts		666		34
Inventories, net		(260)		1,748
Contract assets		(904)		2,346
Accounts payable		(941)		140
Income taxes payable		(332)		(1,634)
Accrued expenses		(2,723)		3,090
Deferred compensation		(797)		(1,527)
Deferred revenue		(5,156)		322
Other assets and liabilities		(442)		(3,281)
Net cash provided by operating activities		3,660		3,583

Cash flows from investing activities:

Purchase of short term investments		(15,812)		(25,234)
Maturities of short term investments		14,500		7,565
Additions to property and equipment		(272)		(755)
Additions to intangible assets		(7)		(16)
Sale of equity-method investment		18,874		—
Net cash provided by (used in) investing activities		17,283		(18,440)

Cash flows from financing activities:
Tax payments for restricted stock issuances		(635)		(2,139)
Net cash used in financing activities		(635)		(2,139)

Effect of exchange rate changes on cash		(45)		(558)

Net increase (decrease) in cash		20,263		(17,554)
Cash, cash equivalents, and restricted cash, beginning of period		64,228		89,241
Cash, cash equivalents, and restricted cash, end of period (1.)	$	84,491	$	71,687

(1.)	End of period cash, cash equivalents, and restricted cash includes $0.8 million and $0.9 million of restricted cash at March 31, 2022 and March 31, 2021, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

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OneSpan Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Unless otherwise noted, references in this Quarterly Report on Form 10-Q to “OneSpan,” “Company,” “we,” “our,” and “us,” refer to OneSpan Inc. and its subsidiaries.

Note 1 – Description of the Company and Basis of Presentation

Description of the Company

OneSpan Inc. and its wholly owned subsidiaries design, develop, market and support hardware and software security systems that manage and secure access to information assets. OneSpan has operations in Austria, Australia, Belgium, Canada, China, France, Japan, The Netherlands, Singapore, Switzerland, the United Arab Emirates, the United Kingdom (U.K), and the United States (U.S.).

In accordance with ASC 280, Segment Reporting, our operations are reported as a single operating segment. The chief operating decision maker is the Chief Executive Officer who reviews the statement of operations of the Company on a consolidated basis, makes decisions and manages the operations of the Company as a single operating segment.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of OneSpan and its subsidiaries and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles in the United States (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the results of the interim periods presented. All intercompany accounts and transactions have been eliminated. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022, particularly in light of the novel coronavirus (COVID-19) pandemic and its effects on domestic and global economies.

We continue to actively address the effects of the COVID-19 pandemic and its impact globally. During the three months ended March 31, 2022, we experienced lengthened sales cycles and supply chain constraints in connection with the COVID-19 pandemic. In prior periods, we also experienced reduced demand for certain of our hardware products and software solutions. While we hope that the negative consequences on our business associated with the COVID-19 pandemic will subside, we cannot predict the impact with certainty.

Revision of Previously Issued Financial Statements

We have revised amounts reported in previously issued financial statements for the periods presented in this Quarterly Report on Form 10-Q related to immaterial errors. The errors relate to certain costs directly related to the production and distribution of hardware products. The costs were not properly categorized in prior periods, which led to an understatement of product and license cost of goods sold and an overstatement of sales and marketing expense. There was no impact to previously reported revenue or net income.

We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, determined that the errors were not material to the previously issued financial statements and disclosures included in our

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Annual Reports on Form 10-K for the years ended December 31, 2021 and 2020, or for any quarterly periods included therein or through our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021.

The following table presents the effects of the aforementioned revisions on our unaudited condensed consolidated statement of operations for the three months ended March 31, 2022.

Condensed Consolidated Statement of Operations (Unaudited)


	Three Months Ended March 31, 2021
in thousands	As Previously Reported		Adjustments		As Revised
Cost of goods sold
Product and license	$	9,541	$	1,211	$	10,752
Total cost of goods sold		15,322		1,211		16,533

Gross profit		35,453		(1,211)		34,242

Operating costs
Sales and marketing		18,379		(1,211)		17,168
Total operating costs		44,747		(1,211)		43,536

Principles of Consolidation

The consolidated financial statements include the accounts of OneSpan Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation and Transactions

The financial position and results of the operations of the majority of the Company’s foreign subsidiaries are measured using the local currency as the functional currency. Accordingly, assets and liabilities are translated into U.S. Dollars using current exchange rates as of the balance sheet date. Revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments arising from differences in exchange rates are charged or credited to other comprehensive income (loss). Gains and losses resulting from foreign currency transactions are included in the condensed consolidated statements of operations in other income (expense), net. Foreign exchange transaction losses aggregated $0.4 million for the three months ended March 31, 2022. Foreign exchange transaction losses aggregated $0.7 million for the three months ended March 31, 2021.

The financial position and results of our operations in Singapore, Switzerland, and Canada are measured in U.S. Dollars. For these subsidiaries, gains and losses that result from foreign currency transactions are included in the consolidated statements of operations in other income (expense), net.

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Note 2 – Summary of Significant Accounting Policies

There have been no changes to the significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 22, 2022 that have had a material impact on the Company’s condensed consolidated financial statements and related notes.

Cash, Cash Equivalents and Restricted Cash

We are in lease agreements that require letters of credit to secure the obligations. The restricted cash related to these letters of credit is recorded in other non-current assets on the Condensed Consolidated Balance Sheet in the amounts of $0.8 million and $0.8 million at March 31, 2022 and December 31, 2021, respectively.

Sale of Equity Method Investment

On January 31, 2022, we sold our equity interest in Promon AS (Promon) for $18.9 million, and recorded the gain on sale of $14.8 million in other income (expense) on the Condensed Consolidated Statement of Operations during the three months ended March 31, 2022. Promon is a technology company headquartered in Norway that specializes in mobile app security, whose solutions focus largely on Runtime Application Self-Protection (RASP).

Prior to January 31, 2022, we held a 17% interest in Promon and applied the equity method of accounting to our investment in Promon because we exercised significant influence, but not controlling interest, in the investee. Under the equity method of accounting, the Company’s proportionate share of the net earnings (losses) of Promon is reported in other income (expense), net in our condensed consolidated Statements of Operations. The impact of the proportionate share of net earnings (losses) were immaterial for the three months ended March 31, 2022 and 2021 as were the relative size of Promon’s assets and operations in relation to the Company’s.

We intend to continue to purchase and integrate Promon’s RASP technology into our customer software solutions.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, our management believes that the issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

Note 3 – Revenue

We recognize revenue in accordance with ASC 606 “Revenue from Contracts with Customers” (“Topic 606”), as described below.

Disaggregation of Revenues

The following tables present our revenues disaggregated by major products and services, geographical region and timing of revenue recognition.

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Revenue by major products (in thousands)


	Three months ended March 31,
	2022		2021

Hardware products	$	15,352	$	17,668
Software licenses		14,133		10,777
Subscription		10,117		8,405
Professional services		900		1,402
Maintenance, support, and other		11,945		12,523
Total Revenue	$	52,447	$	50,775

Revenue by location of customer for the three months ended March 31, 2022 and 2021 (in thousands)


	EMEA			Americas			APAC			Total
Total Revenue:
2022	$	24,876		$	17,249		$	10,322		$	52,447
2021	$	26,989		$	16,528		$	7,258		$	50,775

Percent of Total:
2022		47	%		33	%		20	%		100	%
2021		53	%		33	%		14	%		100	%

Timing of revenue recognition (in thousands)


	Three Months ended March 31,
	2022		2021
Products and Licenses transferred at a point in time	$	29,485	$	28,445
Services transferred over time		22,962		22,330
Total Revenue	$	52,447	$	50,775

Contract balances (in thousands)

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.


		March 31,		December 31,
in thousands	2022		2021
Receivables, inclusive of trade and unbilled	$	35,704	$	56,612
Contract Assets (current and non-current)	$	5,728	$	4,889
Contract Liabilities (Deferred Revenue current and non-current)	$	58,314	$	63,742

Contract assets relate primarily to multi-year term license arrangements and the remaining contractual billings. These contract assets are transferred to receivables when the right to billing occurs, which is normally over 3-5 years. The contract liabilities primarily relate to the advance consideration received from customers for subscription and maintenance services. Revenue is recognized for these services over time.

As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less. We do not typically include extended payment terms in our contracts with customers.

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Revenue recognized during the three months ended March 31, 2022 included $18.9 million that was included on the December 31, 2021 balance sheet in contract liabilities. Deferred revenue increased in the same period due to timing of annual renewals.

Transaction price allocated to the remaining performance obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period.


in thousands	2022		2023		2024		Beyond 2024		Total
Future revenue related to current unsatisfied performance obligations	$	26,140	$	18,421	$	9,547	$	5,581	$	59,689

The Company applies practical expedients and does not disclose information about remaining performance obligations (a) that have original expected durations of one year or less, or (b) where revenue is recognized as invoiced.

Costs of obtaining a contract

The Company incurs incremental costs related to commissions, which can be directly tied to obtaining a contract. The Company capitalizes commissions associated with certain new contracts and amortizes the costs over a period of benefit based on the transfer of goods or services that we have determined to be up to seven years. The amortization is reflected in Sales and Marketing in the Statements of Operations. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors, including customer attrition. Commissions are earned upon invoicing to the customer. For contracts with multiple year payment terms, as the commissions that are payable after year 1 are payable based on continued employment, they are expensed when incurred. Commissions and amortization expense are included in Sales and Marketing expenses on the condensed consolidated statements of operations.

Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period for the assets that the Company otherwise would have recognized is one year or less. These costs are included in Sales and Marketing expense in the condensed consolidated statements of operations.

The following tables provide information related to the capitalized costs and amortization recognized in the current and prior period:



in thousands		March 31, 2022		December 31, 2021
Capitalized costs to obtain contracts, current	$	2,246	$	2,134
Capitalized costs to obtain contracts, non-current	$	8,781	$	8,675


		Three months ended March 31,
in thousands		2022		2021
Amortization of capitalized costs to obtain contracts	$	541	$	310
Impairments of capitalized costs to obtain contracts	$	-	$	-

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Note 4 – Inventories, net

Inventories, net, consisting principally of hardware and component parts, are stated at the lower of cost or net realizable value. Cost is determined using the FIFO method.

Inventories, net are comprised of the following:


	March 31,		December 31,
	2022		2021

	(in thousands)
Component parts	$	4,263	$	3,841
Work-in-process and finished goods		6,125		6,504
Total	$	10,388	$	10,345

Note 5 – Goodwill

Goodwill activity for the three months ended March 31, 2022 consisted of the following:


in thousands
Net balance at December 31, 2021	$	96,174
Net foreign currency translation		(1,588)
Net balance at March 31, 2022	$	94,586

No impairment of goodwill was recorded during the three months ended March 31, 2022 or March 31, 2021.

Note 6 – Intangible Assets

Intangible asset activity for the three months ended March 31, 2022 is detailed in the following table.



in thousands	Acquired Technology		Customer Relationships		Other		Total Intangible Assets
Net balance at December 31, 2021	$	753	$	19,161	$	1,356	$	21,270
Additions		3		—		6		9
Net foreign currency translation		(11)		(155)		(3)		(169)
Amortization expense		(376)		(988)		(18)		(1,382)
Net balance at March 31, 2022	$	369	$	18,018	$	1,341	$	19,728

March 31, 2022 balance at cost	$	42,903	$	39,455	$	13,542	$	95,900
Accumulated amortization		(42,534)		(21,437)		(12,201)		(76,172)
Net balance at March 31, 2022	$	369	$	18,018	$	1,341	$	19,728

Certain intangible assets are denominated in functional currencies besides the U.S. dollar and are subject to currency fluctuations. No impairment of intangible assets was recorded during the three months ended March 31, 2022 or March 31, 2021.

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Note 7 – Property and Equipment

The major classes of property and equipment are as follows:


in thousands	March 31, 2022		December 31, 2021
Office equipment and software	$	14,502	$	14,327
Leasehold improvements		10,236		10,296
Furniture and fixtures		4,198		4,223
Total		28,936		28,846
Accumulated depreciation		(18,683)		(18,089)
Property and equipment, net	$	10,253	$	10,757

Depreciation expense was $0.7 million and $0.7 million and for the three months ended March 31, 2022 and March 31, 2021, respectively.

Note 8 – Fair Value Measurements

The fair values of cash equivalents, receivables, net, and accounts payable approximate their carrying amounts

due to their short duration. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing base upon its own market assumptions.

The Company classifies its investments in debt securities as available-for-sale. In accordance with ASU 2016-13, Measurement of Credit Losses on Financial Instruments, we review available-for-sale debt securities for impairments related to losses and other factors each quarter. Unrealized gains and losses are recorded to other comprehensive income. The unrealized gains and losses on the available-for-sale debt securities were not material as of March 31, 2022 and December 31, 2021.

The estimated fair value of our financial instruments has been determined by using available market information and appropriate valuation methodologies, as defined in ASC 820, Fair Value Measurements. The fair value hierarchy consists of the following three levels:

●

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

●

Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived primarily from or corroborated by observable market data.

●

Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

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The following tables summarize assets that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021:


			Fair Value Measurement at Reporting Date Using
in thousands		March 31, 2022	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
U.S. Treasury Notes	$	4,010	-	$	4,010	-
Corporate Notes / Bonds	$	9,378	-	$	9,378	-
Commercial Paper	$	9,959	-	$	9,959	-
U.S. Treasury Bills	$	12,955	-	$	12,955	-


			Fair Value Measurement at Reporting Date Using
in thousands		December 31, 2021	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Assets:
U.S. Treasury Notes	$	4,038	-	$	4,038	-
Corporate Notes / Bonds	$	9,585	-	$	9,585	-
Commercial Paper	$	8,996	-	$	8,996	-
U.S. Treasury Bills	$	9,990	-	$	9,990	-
U.S. Government Agencies	$	2,499	-	$	2,499	-

Note 9 – Allowance for credit losses

The changes in the allowance for credit losses during the three months ended March 31, 2022 were as follows:


in thousands
Balance at December 31, 2021	$	1,419
Provision		875
Write-offs		19
Net foreign currency translation		(21)
Balance at March 31, 2022	$	2,292

Note 10 – Leases

Operating lease cost details for the three months ended March 31, 2022 and 2021 are as follows:


		Three months ended
		March 31,
	2022		2021

		(in thousands)
Building rent	$	575	$	570
Automobile rentals		220		333
Total net operating lease costs	$	795	$	903

At March 31, 2022, the weighted average remaining lease term for our operating leases is 6.3 years. The weighted average discount rate for our operating leases is 5%.

During the three months ended March 31, 2022, there were $0.9 million of operating cash payments for lease liabilities, and $0.4 million of right-of use assets obtained in exchange for new lease liabilities.

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Maturities of our operating leases are as follows:


	As of March 31, 2022
		(in $ thousands)
2022	$	2,216
2023		2,627
2024		1,885
2025		1,776
2026		1,714
Later years		4,391
Less imputed interest		(2,333)
Total lease liabilities	$	12,276