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, 2024

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: 001-40429

Paymentus Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	45-3188251
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11605 North Community House Road, Suite 300 Charlotte, NC	28277
(Address of principal executive offices)	(Zip Code)

(888) 440-4826

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	PAY	New York Stock Exchange

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, 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 Exchange Act). Yes ☐ No ☒

As of May 2, 2024, the registrant had 21,905,543 shares of Class A Common Stock, $0.0001 par value per share and 102,266,586 shares of Class B Common Stock, $0.0001 par value per share, outstanding.

Table of Contents

		Page
	Special Note Regarding Forward-Looking Statements	3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Income	6
	Condensed Consolidated Statements of Stockholders' Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
Signatures		27

2

Special Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q for the quarterly period ended March 31, 2024 (“Quarterly Report”) contains forward-looking statements within the meaning of the federal securities laws, such as those under the headings “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations,” which statements involve substantial risks and uncertainties. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this report include statements about:

•our ability to effectively manage our growth and expand our operations;

•our ability to further attract, retain and expand our biller, financial institutions, partner and consumer base;

•our ability to timely implement and recognize revenue from new customers;

•our expectations regarding our revenue, expenses and other operating results;

•the impact of any material cybersecurity incident on our reputation as a trusted brand or on our business, operating results and financial condition;

•our market opportunity and anticipated trends in our business and industry;

•our ability to remain competitive as we continue to scale our business;

•our ability to develop new product features and enhance our platform;

•our ability to hire and retain experienced and talented employees as we grow our business;

•general economic conditions, including inflation, and their impact on us, consumer demand, average bill amounts and interchange fees;

•the impact of disruptions or instability in the financial services industry, or perceived or actual liquidity constraints at financial institutions, on our ability or the ability of our customers and vendors to meet operating expense requirements or to satisfy financial or other obligations;

•our ability to realize the anticipated benefits of past or future acquisitions or strategic investments in complementary companies, products or technologies and our ability to manage the potential business disruption and diversion of management attention caused by such acquisitions;

•our ability to maintain and enhance our brand;

•our plan to expand into new channels and industry verticals across different markets;

•the impact of widespread health issues on our operating results, liquidity and financial condition and on our employees, billers, financial institutions, partners, consumers and other key stakeholders;

•our international expansion plans and ability to expand internationally; and

•those factors described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this report.

You should not place undue reliance on our forward-looking statements as predictions of future events. We have based the forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot

3

assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the ultimate outcome of any of these forward-looking statements. Moreover, the forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

Certain Definitions

In this report, unless the context requires otherwise, all references to “we,” “our,” “us,” “Paymentus,” and the “Company” refer to Paymentus Holdings, Inc., and where appropriate its consolidated subsidiaries.

4

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

	March 31,		December 31,
	2024		2023
Assets
Current assets
Cash and cash equivalents	$	180,138	$	179,361
Restricted cash and cash equivalents		4,014		3,834
Accounts and other receivables, net of allowance for expected credit losses of $399 and $435, respectively		84,178		76,389
Income tax receivable		20		259
Prepaid expenses and other current assets		11,293		10,505
Total current assets		279,643		270,348
Property and equipment, net		1,575		1,558
Capitalized internal-use software development costs, net		61,767		58,787
Intangible assets, net		25,137		27,158
Goodwill		131,850		131,860
Operating lease right-of-use assets		9,477		10,027
Deferred tax asset		91		94
Other long-term assets		4,435		5,031
Total assets	$	513,975	$	504,863
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	41,097	$	35,182
Accrued liabilities		12,334		21,301
Current portion of operating lease liabilities		1,966		1,853
Contract liabilities		4,097		4,089
Income tax payable		3,132		363
Total current liabilities		62,626		62,788
Deferred tax liability		1,159		1,067
Operating lease liabilities, less current portion		8,054		8,661
Contract liabilities, less current portion		2,752		2,731
Total liabilities		74,591		75,247
Stockholders’ equity
Preferred stock, $0.0001 par value per share, 5,000,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; none issued and outstanding as of March 31, 2024 and December 31, 2023		—		—
Class A common stock, $0.0001 par value per share, 883,950,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 21,744,165 and 20,758,603 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		2		2
Class B common stock, $0.0001 par value per share, 111,050,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively; 102,381,811 and 103,062,508 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		10		10
Additional paid-in capital		380,357		377,773
Accumulated other comprehensive income		45		87
Retained earnings		58,970		51,744
Total stockholders’ equity		439,384		429,616
Total liabilities and stockholders' equity	$	513,975	$	504,863

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended March 31,
	2024			2023
Revenue	$	184,875		$	148,328
Cost of revenue		132,150			108,250
Gross profit		52,725			40,078
Operating expenses
Research and development		12,051			11,653
Sales and marketing		23,239			20,264
General and administrative		9,092			9,145
Total operating expenses		44,382			41,062
Income (loss) from operations		8,343			(984	)
Other income (expense)
Interest income, net		2,186			1,440
Other non-recurring income		213			--
Foreign exchange gain (loss)		18			(8	)
Income before income taxes		10,760			448
(Provision for) benefit from income taxes		(3,534	)		256
Net income	$	7,226		$	704
Net income per share
Basic	$	0.06		$	0.01
Diluted	$	0.06		$	0.01
Weighted-average number of shares used to compute net income per share
Basic		123,945,778			123,289,584
Diluted		126,917,654			123,792,741
Comprehensive income
Net income		7,226			704
Foreign currency translation adjustments, net of tax		(42	)		(7	)
Comprehensive income	$	7,184		$	697

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

					Additional				Other			Total
	Common Stock				Paid-In		Retained		Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings		Income (Loss)			Equity
Balances at December 31, 2023		123,821,111	$	12		377,773	$	51,744	$	87		$	429,616
Stock-based compensation		—		—		2,484		—		—			2,484
Issuance of Class A common stock for stock-based awards		304,865		—		100		—		—			100
Other comprehensive income (loss)		—		—		—		—		(42	)		(42	)
Net income		—		—		—		7,226		—			7,226
Balances at March 31, 2024		124,125,976	$	12		380,357	$	58,970	$	45		$	439,384

					Additional				Other			Total
	Common Stock				Paid-In		Retained		Comprehensive			Stockholders’
	Shares		Amount		Capital		Earnings		Income (Loss)			Equity
Balances at December 31, 2022		123,241,173	$	12	$	367,767	$	29,422	$	(22	)	$	397,179
Stock-based compensation		—		—		2,159		—		—			2,159
Issuance of Class A common stock for stock-based awards		104,991		—		5		—		—			5
Other comprehensive income (loss)		—		—		—		—		(7	)		(7	)
Net income		—		—		—		704		—			704
Balances at March 31, 2023		123,346,164	$	12	$	369,931	$	30,126	$	(29	)	$	400,040

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PAYMENTUS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities
Net income	$	7,226		$	704
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		8,537			7,239
Deferred income taxes		92			92
Stock-based compensation		2,933			2,159
Non-cash lease expense		506			462
Amortization of contract asset		451			696
Provision for (benefit from) expected credit losses		48			(239	)
Other non-recurring income		(213	)		—
Change in operating assets and liabilities
Accounts and other receivables		(7,850	)		(8,333	)
Prepaid expenses and other current and long-term assets		(993	)		861
Accounts payable		5,793			3,297
Accrued liabilities		(8,166	)		(2,749	)
Operating lease liabilities		(446	)		(469	)
Contract liabilities		28			2,061
Income taxes receivable, net of payable		3,008			(1,018	)
Net cash provided by operating activities		10,954			4,763
Cash flows from investing activities
Purchases of property and equipment		(116	)		(67	)
Purchase of interest-bearing deposits		(723	)		—
Proceeds from matured interest-bearing deposits		602			—
Capitalized internal-use software development costs		(9,276	)		(8,219	)
Net cash used in investing activities		(9,513	)		(8,286	)
Cash flows from financing activities
Proceeds from exercise of stock-based awards		100			5
Settlement of holdback liability related to prior acquisitions		(506	)		—
Payments on other financing obligations		—			(1,025	)
Payments on finance leases		—			(102	)
Net cash used in financing activities		(406	)		(1,122	)
Effect of exchange rate changes on Cash and cash equivalents and Restricted cash		(78	)		(17	)
Net increase (decrease) in cash, cash equivalents and Restricted cash		957			(4,662	)
Cash and cash equivalents and Restricted cash at the beginning of period		183,195			149,685
Cash and cash equivalents and Restricted cash at the end of period	$	184,152		$	145,023
Reconciliation of Cash and cash equivalents and Restricted Cash:
Cash and cash equivalents at the beginning of period		179,361			147,334
Restricted cash at the beginning of period		3,834			2,351
Cash and cash equivalents and Restricted cash at the beginning of period	$	183,195		$	149,685
Cash and cash equivalents at the end of period		180,138			143,637
Restricted cash at the end of period		4,014			1,386
Cash and cash equivalents and Restricted cash at the end of period	$	184,152		$	145,023
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds	$	434		$	616
Property and equipment purchases in accounts payable	$	87		$	119
Software purchases in accounts payable	$	16			—
Right-of-use assets obtained in exchange of operating lease obligations	$	97		$	1,356

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

PAYMENTUS HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

Description of Business

Paymentus Holdings, Inc. and its wholly owned subsidiaries (“Paymentus” or the “Company”) provides electronic bill presentment and payment services, enterprise customer communication and self-service revenue management to billers through a Software-as-a-Service (“SaaS”), secure, omni-channel technology platform. The platform seamlessly integrates into a biller’s core financial and operating systems to provide flexible and secure access to payment processing of credit cards, debit cards, eChecks and digital wallets across a significant number of channels including online, mobile, IVR, call center, chatbot and voice-based assistants. Paymentus was incorporated in the state of Delaware on September 2, 2011 with office locations in Charlotte, North Carolina, Dallas, Texas, Richmond Hill, Ontario (Canada), and Delhi and Bangalore (India). The Company is headquartered in Charlotte, North Carolina.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the United States Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Therefore, these unaudited condensed consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company's Form 10-K for the year ended December 31, 2023 filed with the SEC on March 5, 2024 (the “2023 Form 10-K”).

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations and comprehensive income, changes in stockholders' equity and cash flows for the periods presented. The results of operations for the three months ended March 31, 2024 and 2023 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates include revenue recognition, cost of revenue recognition, the allowance for credit losses, the lives of tangible and intangible assets, the valuation of acquired intangible assets and the recoverability or impairment of intangible assets, including goodwill, internal-use software development costs, valuation of stock warrants issued, stock-based compensation, and accounting for income taxes. The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates.

Custodial Accounts

The Company has established a relationship with its merchant processors to act as collection and paying agents, whereby a merchant processor receives funds from customers and forwards such funds to the respective Paymentus client, based on the instructions received from the Company. These merchant processors act as custodians of the cash received, and the Company has no legal ownership rights to the funds held in such custodial accounts and does not control the use of these funds. As the Company does not take ownership of the funds, these custodial accounts are not included in the Company’s consolidated balance sheets. The balance of cash in the custodial accounts held by these merchant processors was $427.7 million and $510.8 million as of March 31, 2024 and December 31, 2023, respectively.

9

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk primarily consist of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with high-quality financial institutions with investment-grade ratings. For accounts receivable, the Company is exposed to credit risk in the event of nonpayment by customers and resellers to the extent of the amounts recorded in the consolidated balance sheets. No customer accounted for more than 10% of revenue for either of the three months ended March 31, 2024 and 2023. As of December 31, 2023, one customer accounted for more than 10% of accounts receivable. As of March 31, 2024, no customer accounted for more than 10% of accounts receivable.

Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to make operating decisions, allocate resources and assess performance. The Company has three operating segments based on geography. The United States segment represents the vast majority of the Company’s consolidated net sales and gross profit. The additional two operating segments, Canada and India, do not meet the quantitative thresholds for separate reporting, either individually or in the aggregate. None of the operating segments qualified for aggregation. The Company’s CODM is its chief executive officer. The CODM evaluates the performance of the Company’s operating segments based on revenue and gross profit. The Company does not analyze discrete segment balance sheet information related to long-term assets. All other financial information is presented on a consolidated basis. For information regarding the Company’s long-lived assets and revenue by geographic area, see Note 4 and Note 3, respectively.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021 included in the 2023 Form 10-K. There have been no significant changes to these policies during the three months ended March 31, 2024.

Recently Adopted Accounting Standards

The Company is provided the option to adopt new or revised accounting guidance as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as non-public business entities, including early adoption when permissible. With the exception of standards the Company elected to early adopt, when permissible, the Company has elected to adopt new or revised accounting guidance within the same time period as non-public business entities, as indicated below.

Accounting Standards Updates ("ASU") not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The amendments in ASU 2023-07 are effective for public companies for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Tax Disclosures", which makes changes to annual disclosures of income taxes paid for all entities and requires entities to disclose the amount of income taxes paid, net of refunds received, disaggregated by federal, state and foreign jurisdiction. Additionally, entities are required to disclose income taxes paid, net of refunds received, for individual jurisdictions that comprise 5% or more of total income taxes paid. The 5% threshold is evaluated using the absolute value of the net refund or net payment in each jurisdiction compared to the absolute value of the total income taxes paid (net of refunds received). ASU 2023-09 requires all entities to disclose disaggregated domestic and foreign pre-tax income (or loss) from continuing operations along with disaggregated income tax expense (or benefit) by federal, state and foreign components. Such disaggregation by jurisdiction should classify taxes by jurisdiction based on the jurisdiction imposing the taxes. The amendments in ASU 2023-09 are effective for fiscal years

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beginning after December 15, 2024 for public companies. Early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.

3. Revenue, Performance Obligations and Contract Balances

Disaggregation of Revenue

The following table presents a disaggregation of revenue from contracts with customers (in thousands):

	Three Months Ended March 31,
	2024		2023
Payment transaction processing revenue	$	182,752	$	146,388
Other		2,123	$	1,940
Total revenue	$	184,875	$	148,328

Revenue by geographic area, based on the location of the Company’s users, was as follows (in thousands):

	Three Months Ended March 31,
	2024		2023
United States	$	181,301	$	145,557
Other		3,574		2,771
Total	$	184,875	$	148,328

Remaining Performance Obligations

As of March 31, 2024, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied was $6.8 million, of which the Company expects to recognize over 75% within the next two years, 19% between two to four years and the remainder thereafter. The timing of revenue recognition within the next four years is largely dependent upon the go-live dates of the Company's customers under the Company’s contracts.

As of March 31, 2024, the Company has contractual rights under its commercial agreements with customers and resellers to receive $51.2 million of fixed consideration related to the future minimum guarantees through 2026. As permitted, the Company has elected to exclude from this disclosure any variable consideration that meets specified criteria. Accordingly, the total unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amount disclosed.

Contract Balances

Contract balances consist of the following:

	March 31,		December 31,
	2024		2023
Contract Assets
Costs to fulfill (prepaid expenses and other current assets)	$	2,893	$	2,893
Costs to fulfill (other long-term assets)		4,189		4,783
Total contract assets	$	7,082	$	7,676
Contract Liabilities
Contract liabilities, Current	$	4,097	$	4,089
Contract liabilities, Non-current		2,752		2,731
Total contract liabilities	$	6,849	$	6,820

During the three months ended March 31, 2024 and 2023, the Company reduced revenue as a result of amortization of related contract assets by $0.2 million and $0.7 million, respectively.

Revenue recognized during the three months ended March 31, 2024 and 2023 that was included in the contract liabilities balance at the beginning of each of the periods was $0.9 million and $0.7 million, respectively.

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4. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	March 31,			December 31,
	2024			2023
Computer equipment	$	6,131		$	6,059
Furniture and fixtures		1,793			1,715
Leasehold improvements		390			396
Total property and equipment		8,314			8,170
Less: Accumulated depreciation		(6,739	)		(6,612	)
Property and equipment, net	$	1,575		$	1,558

Depreciation expense recorded for property and equipment was $0.2 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively.

Long-lived assets include property and equipment, net. The geographic locations of the Company’s long-lived assets, net, based on physical location of the assets were as follows (in thousands):

	March 31,		December 31,
	2024		2023
United States	$	626	$	558
Other		949		1,000
Total	$	1,575	$	1,558

5. Goodwill, Internal-use Software Development Costs and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill by reporting unit were as follows (in thousands):

	United States		Other			Total
Balance as of December 31, 2023	$	131,028	$	832		$	131,860
Foreign currency translation adjustments		—		(10	)		(10	)
Balance as of March 31, 2024	$	131,028	$	822		$	131,850

Internal-use Software Development Costs

During the three months ended March 31, 2024 and 2023, the Company capitalized $9.3 million and $8.1 million in software development and implementation costs, respectively.

During the three months ended March 31, 2024 and 2023, the Company recorded $4.0 million and $2.7 million of amortization expense in cost of revenue, respectively, and $2.3 million and $2.0 million of amortization expense in operating expenses, respectively.

Intangible Assets

Intangible assets, net consisted of the following (in thousands):

	March 31, 2024
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	21,832	$	(15,880	)	$	5,952
License		2,509		(2,509	)		—
Customer relationship		31,989		(14,281	)		17,708
Software		449		(417	)		32
Trademark		4,038		(2,593	)		1,445
Total	$	60,817	$	(35,680	)	$	25,137

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	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Technology	$	21,845	$	(14,951	)	$	6,894
License		2,568		(2,568	)		—
Customer relationship		32,006		(13,480	)		18,526
Software		451		(411	)		40
Trademark		4,038		(2,340	)		1,698
Total	$	60,908	$	(33,750	)	$	27,158

Amortization expense of intangible assets was $2.0 million and $2.2 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, future expected amortization expense is as follows (in thousands):

Years Ending December 31,
2024 (remaining 9 months)		6,062
2025		6,620
2026		3,737
2027		3,269
2028		3,269
Thereafter		2,180
Total future amortization expense	$	25,137

There were no impairments of goodwill, internal-use software development costs or intangible assets in the three months ended March 31, 2024 and 2023.

6. Accrued Liabilities

The composition of accrued liabilities is as follows (in thousands):

	March 31,		December 31,
	2024		2023
Payroll and employee-related expenses	$	7,610	$	15,455
Other accrued liabilities		4,724		5,846
Total	$	12,334	$	21,301

7. Commitments and Contingencies

Other Commitments

The Company has entered into certain non-cancellable agreements for software and marketing services that specify all significant terms, including fixed or minimum services to be used, pricing provisions and the approximate timing of the transaction. Obligations under contracts that are cancellable or with remaining terms of 12 months or less are not included. There have been no material changes to the Company's contractual obligations or commitments outside of the ordinary course of business as compared to those described in the 2023 Form 10-K.

Legal Matters

The Company is involved from time to time in various claims and legal proceedings arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that, as of March 31, 2024, no current claims and legal proceedings will have a material adverse effect on its financial position, results of operations, or cash flows.

Indemnification

The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers, and the Company’s officers, directors, and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims due to the Company’s activities or

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non-compliance with obligations or representations made by the Company. The Company seeks to limit, or cap, its indemnification exposure in its commercial and other contracts. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision.

8. Equity

Warrant

On May 13, 2021, the Company entered into a warrant agreement with JPMC Strategic Investments I Corporation (“JPMC”), an affiliate of J.P. Morgan Securities LLC, an underwriter in our 2021 initial public offering ("IPO"), pursuant to which the Company agreed to issue a warrant to JPMC for up to 509,370 shares of Class A common stock upon completion of the IPO at an exercise price of $18.38 per share (the “May 2021 warrant agreement”). Upon completion of the IPO, 382,027 of the warrant shares vested and were exercisable. The vesting of the remaining 127,343 shares of Class A common stock underlying the warrant will be subject to the achievement of certain commercial milestones through December 31, 2025 pursuant to a related commercial agreement with JPMorgan Chase Bank, National Association (“JPM Chase”), an affiliate of JPMC. As discussed below, this commercial agreement was amended in August 2022, and the achievement of certain commercial milestones was extended through December 31, 2026 and minimum revenue commitments were set for each of the calendar years through 2026. As of March 31, 2024, 448,880 warrant shares were vested and exercisable under the May 2021 warrant agreement.

On August 29, 2022, the Company entered into a second warrant agreement with JPMC, in connection with an amendment to the Company's existing commercial agreement with JPM Chase discussed above, pursuant to which the Company issued a warrant to JPMC for up to 684,510 shares of Class A common stock at an exercise price of $10.10 per share (the “August 2022 warrant agreement”). Upon signing the August 2022 warrant agreement, 171,128 of the warrant shares vested and were exercisable. The vesting of the remaining 513,382 shares of Class A common stock underlying the warrant will be subject to the achievement of certain commercial milestones through December 31, 2026 pursuant to the commercial agreement, as amended. As of March 31, 2024 there were no additional warrant shares vested under the August 2022 warrant agreement.

As of March 31, 2024, an aggregate of 620,008 warrants had vested and were exercisable under the outstanding warrant agreements.

The Company accounts for the consideration payable in the form of warrants to its vendor as share based compensation expense. The warrant fair value was determined using the Black-Scholes pricing model in accordance with ASC 718, Compensation-Stock Compensation.

9. Stock-Based Compensation

In May 2021, the Company’s board of directors (the "Board") adopted, and its stockholders approved, the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective in connection with the IPO. The 2021 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code ("IRC"), to the Company’s employees and any of its parent or subsidiary corporations’ employees, and for the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, and performance awards to the Company’s employees, directors and consultants and any of its parent or subsidiary corporations’ employees and consultants. A total of 10,459,000 shares of the Company’s Class A common stock have been reserved for issuance under the 2021 Plan in addition to (i) an annual increase of 4% of the outstanding shares of the Company's common stock, with Class A and Class B common stock taken together, on the first day of each fiscal year, subject to the Compensation Committee of the Board exercising discretion to increase or decrease such amount (the “Evergreen Addition”), and (ii) upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class B common stock underlying outstanding stock awards granted under the 2012 Equity Incentive Plan, an equal number of shares of Class A common stock, such number of shares not to exceed 7,563,990. On January 1, 2024, pursuant to the Evergreen Addition, approximately 5.0 million shares of Class A common stock were added to the 2021 Plan issuance reserve. At March 31, 2024, there were approximately 21.7 million remaining shares available for the Company to grant under the 2021 Plan.

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Stock Options

A summary of the Company’s option activity during the three months ended March 31, 2024 was as follows (in thousands, except share and per share amounts):

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
	Options			Exercise Price		Contractual		Intrinsic
	Outstanding			per Share		Life (years)		Value
Outstanding at December 31, 2023		3,849,350		$	7.87		5.06	$	38,505
Options exercised		(67,746	)		1.44
Options forfeited		(1,333	)		8.66
Outstanding at March 31, 2024		3,780,271		$	7.98		4.85	$	55,817
Exercisable at March 31, 2024		3,732,980		$	7.97		4.83	$	55,161

No options were granted or expired during the three months ended March 31, 2024. Aggregate intrinsic value represents the difference between the exercise price of the options and the fair value of the Company’s common stock.

Restricted Stock Units (“RSUs”)

A summary of the Company’s RSU activity during the three months ended March 31, 2024 was as follows:

				Weighted-
				Average
	Number of			Grant Date
	RSUs Outstanding			Fair Value
Awarded and unvested at December 31, 2023		1,946,006		$	12.74
Awards granted		995,548			19.20
Awards vested		(235,619	)		11.42
Awards forfeited		(25,580	)		9.89
Awarded and unvested at March 31, 2024		2,680,355		$	15.28

The fair value of RSU grants is determined based upon the market closing price of the Company’s Class A common stock on the date of grant. RSUs vest over the requisite service period, which generally ranges between four years and five years from the date of grant for employees and one to three years for directors, subject to continued employment for employees and provision of services for nonemployees.

Stock-based compensation expense included in the condensed consolidated statements of operations was as follows:

	Three Months Ended March 31,
	2024		2023
	(in thousands)
Cost of revenue	$	51	$	45
Research and development		608		546
Sales and marketing		1,310		716
General and administrative		964		852
Total stock-based compensation	$	2,933	$	2,159

At March 31, 2024, there was $0.1 million of total unrecognized compensation cost related to unvested stock options granted under the 2012 Equity Incentive Plan, which is expected to be recognized over a remaining weighted-average period of 1.4 years.

At March 31, 2024, there was $38.5 million of total unrecognized compensation cost related to unvested RSUs granted under the 2021 Plan, which is expected to be recognized over a remaining weighted-average period of 3.8 years.

10. Income Taxes

The Company computes its tax provision for the three months ended March 31, 2024 by applying the estimated annual effective tax rate to year-to-date income from recurring operations and adjusting for discrete items arising in that quarter. The Company continues to record a valuation allowance against its net deferred tax assets (“DTA”) in the U.S. as it is not more likely than not to be realized given the significant tax deductions for stock-based compensation recognized in previous years that have created cumulative losses in recent years.

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The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 32.8% and (57.9)% respectively. The difference between the Company’s effective tax rate and the U.S. federal statutory rate of 21% in 2024 was primarily the result of permanent differences for disallowed stock-based compensation pursuant to IRC Section 162(m), state taxes and the impact of the full valuation allowance. In 2023, it was primarily the result of near break-even pre-tax income from operations, state taxes and the impact of the full valuation allowance and other permanent adjustments in addition to a return to provision benefit recorded in connection with a change in estimate of costs required to be capitalized under IRC Section 174.

11. Net Income per Share Attributable to Common Stock

Basic net income per share attributable to common stock is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period.

Diluted net income per share attributable to common stock is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. The dilutive effect of outstanding options, RSUs and warrants is reflected in diluted net income per share attributable to common stock by application of the treasury stock method. The calculation of diluted net income per share attributable to common stock excludes all anti-dilutive common shares.

The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net income per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both an individual and combined basis.

The following table sets forth the computation of basic and diluted net income per share attributable to common stock (in thousands except share and per share data):

	Three Months Ended March 31,
	2024		2023
Numerator:
Net income	$	7,226	$	704
Denominator:
Weighted-average shares of common stock — basic		123,945,778		123,289,584
Dilutive effect of stock options to purchase common stock		2,141,741		486,286
Dilutive effect of RSUs		754,844		16,871
Dilutive effect of warrants		75,291		—
Weighted-average shares of common stock — diluted		126,917,654		123,792,741
Net income per share
Basic	$	0.06	$	0.01
Diluted	$	0.06	$	0.01

The following table summarizes the weighted average securities that were excluded from the computation of diluted net income per share attributable to common stock as their inclusion would have been antidilutive:

	Three Months Ended March 31,
	2024	2023
Stock options to purchase common stock