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What changed in Q2 Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Q2 Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+537 added−584 removedSource: 10-K (2025-02-12) vs 10-K (2024-02-21)

Top changes in Q2 Holdings, Inc.'s 2024 10-K

537 paragraphs added · 584 removed · 440 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

133 edited+39 added−56 removed74 unchanged
Biggest changeOur solutions include a broad and deep portfolio of digital banking solutions; digital lending and relationship pricing solutions; an open technology platform, the Q2 Innovation Studio, which is a portfolio of technologies and programs which can be leveraged to design, develop, and distribute innovative products, services, features, and integrations by enabling a partnership ecosystem on Q2's digital banking platform; and Helix, a comprehensive banking as a service, or BaaS, solution which also serves as a cloud-native core, both of which enable innovative companies and financial institutions to integrate unique banking products and services into their offerings.
Biggest changeQ2 Innovation Studio leverages Q2's open technology platform to enable a partnership ecosystem, allowing the design, development, and distribution of innovative products, services, features, and integrations on Q2's digital banking platform. Helix serves as a cloud-native core and banking as a service, or BaaS, solution.
We offer some of the solutions included in our digital banking platform on a standalone basis to financial institutions as well as Alt-FIs and FinTechs. • Q2 Innovation Studio: Our application program interface, or API, based and software development kit, or SDK, based open technology platform allows our financial institution customers and other technology partners to develop unique extensions of and integrations to our digital banking platform, allowing financial institutions to quickly and easily deploy customized experiences and the latest financial services expected by End Users. • Lending and Relationship Pricing: Our end-to-end digital lending and relationship pricing portfolio allows our financial institution, FinTech and Alt-FI customers to simplify the End-User experiences of borrowers, accelerate loan decisioning, and reduce operational inefficiencies through digitization and automation of the traditional loan application and underwriting process.
We offer some of the solutions included in our digital banking platform on a standalone basis to financial institutions as well as Alt-FIs and FinTechs. • Q2 Innovation Studio: Our application program interface, or API, and software development kit, or SDK, based open technology platform allows our financial institution customers and other partners to develop unique extensions of and integrations to our digital banking platform, allowing financial institutions to quickly and easily deploy customized experiences and the latest financial services expected by End Users. • Lending and Relationship Pricing: Our end-to-end digital lending and relationship pricing portfolio allows our financial institution, FinTech and Alt-FI customers to simplify the End-User experiences of borrowers, accelerate loan decisioning, and reduce operational inefficiencies through digitization and automation of the traditional loan application and underwriting process.
The ease and availability of communications within digital channels also make it easier for End Users to find information about products and services. Our solutions also enable a simplified End-User experience, which can help improve sales of products and services. • SaaS delivery model: We developed our solutions to be cloud-based.
The ease and availability of communications within digital channels also make it easier for End Users to find information about products and services. Our solutions also enable a simplified End-User experience, which can help improve sales of products and services. • SaaS model: We developed our solutions to be cloud-based.
Our Growth Strategy We believe we are well positioned to connect and serve financial institutions, FinTechs and other financial services providers as they transform the ways in which they engage, either independently or in partnership, with End Users globally and to capitalize on the evolving needs and challenges within the financial services industry.
Our Growth Strategy We believe we are well positioned to connect and serve financial institutions, FinTechs and other financial services providers as they transform the ways in which they engage, either independently or in partnership, with End Users and to capitalize on the evolving needs and challenges within the financial services industry.
We believe our passion, dedication and commitment towards this mission is a significant differentiator for our customers and employees. At Q2, employees experience a culture that is collaborative, inclusive, kind and fun, and which is firmly grounded in our guiding principles. We weave Belonging and Inclusion into our business functions, strategy and engagement efforts.
We believe our passion, dedication and commitment towards this mission is a significant differentiator for our customers and employees. At Q2, employees experience a culture that is collaborative, inclusive, kind and fun, and which is firmly grounded in our guiding principles. We weave inclusion into our business functions, strategy and engagement efforts.
Our culture is demonstrated and shared through our employee traditions and customs and daily engagements among our employees and with our customers. We continue to refine our employee engagement programs to meet the continued and changing needs of our Q2 team members, including to accommodate numerous remote and hybrid employees and hybrid working styles.
Our culture is demonstrated and shared through our employee traditions and daily engagements among our employees and with our customers. We continue to refine our employee engagement programs to meet the continued and changing needs of our Q2 team members, including to accommodate numerous remote and hybrid employees and hybrid working styles.
We also provide global access to an Employee Assistance Program (EAP) connecting our employees and anyone living in their household with access to a variety of resources, including mental health and counseling, work life balance and online legal resources.
We also provide global access to an Employee Assistance Program (EAP) connecting our employees and anyone living in their household with access to a variety of resources, including mental health and counseling, work life balance and online legal services.
Our Q2 Innovation Studio offerings, which we market to financial institutions and FinTechs, allow our financial institution customers and other technology partners to integrate financial services to our digital banking platform, allowing financial institutions to quickly and efficiently incorporate the integrated solutions into their offerings and operations.
Our Q2 Innovation Studio offerings, which we market to financial institutions and FinTechs, allow our financial institution customers and other partners to integrate financial services to our digital banking platform, allowing financial institutions to quickly and efficiently incorporate the integrated solutions into their offerings and operations.
To accomplish this, we have opened our digital banking platform via the Q2 Innovation Studio, which makes it easy for financial institutions and other financial services providers to integrate additional functionality into our platform.
To accomplish this, we have opened our digital banking platform via Q2 Innovation Studio, which makes it easy for financial institutions and other financial services providers to integrate additional functionality into our platform.
With the ubiquity of mobile and tablet devices and resulting proliferation of mobile digital solutions provided through their open developer platforms, End Users are increasingly engaging with financial experiences across a variety of digital channels.
With the ubiquity of mobile and tablet devices and resulting proliferation of mobile digital solutions provided through open developer platforms, End Users are increasingly engaging with financial experiences across a variety of digital channels.
Sales and Marketing Our sales and marketing organization is responsible for growing our customer base and maintaining and expanding relationships with our existing customers. We sell our solutions primarily through our direct sales organization but also through partnerships for select solutions and global regions.
Sales and Marketing Our sales and marketing organization is responsible for growing our customer base and maintaining and expanding relationships with our existing customers. We sell our solutions primarily through our direct sales organization and also through partnerships for select solutions and global regions.
Compliance of digital financial solutions with these regulatory requirements depends on several factors, including functionality and design, the classification of the financial service provider and its services, and the way the financial service provider and its End Users use the solutions.
Compliance of digital financial solutions with these regulatory requirements depends on several factors, including functionality and design, the classification of the financial services provider and its services, and the way the financial services provider and its End Users use the solutions.
Our customers can use transactional-based controls to reduce fraudulent transactions by allowing them to adjust configurations such as transaction values, payment windows or account suspension.
Our customers can use transactional-based controls to seek to reduce fraudulent transactions by allowing them to adjust configurations such as transaction values, payment windows or account suspension.
Financial institutions can deploy their own development resources to supplement or customize their digital offerings and FinTechs and other digital solution providers can integrate their services with the Q2 digital banking platform.
Financial institutions can deploy their own development resources to supplement or customize their digital offerings and other digital solution providers can integrate their services with the Q2 digital banking platform.
By doing so, our customers can mitigate or eliminate the costs associated with building, maintaining and upgrading a compliant environment on their own. • Real-time security: We employ multi-layered controls to help secure o ur customers' and End Users' information. Each layer addresses specific areas of possible fraud or data vulnerability.
By doing so, our customers can mitigate or eliminate the costs associated with building, maintaining and upgrading a compliant environment on their own. • Security controls: We employ multi-layered controls to help secure o ur customers' and End Users' information. Each layer addresses specific areas of possible fraud or data vulnerability.
Our marketing programs primarily target digital transformation, technology, finance, operations and marketing executives as well as senior business leaders. Research and Development Our focus on innovation has fueled our growth and enables us to provide our customers cloud-based digital solutions that transform the ways in which financial institutions, FinTechs and other financial service providers engage with End Users.
Our marketing programs primarily target digital transformation, technology, finance, operations and marketing executives as well as senior business leaders. Research and Development Our focus on innovation has fueled our growth and enables us to provide our customers cloud-based digital solutions that transform the ways in which financial institutions, FinTechs and other financial services providers engage with End Users.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 24 Table of Contents
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 23 Table of Contents
Our investments in digital lending and relationship pricing, BaaS, digital account opening, account switching, open platform solutions, data-driven sales enablement, spending insights and portfolio management, and other innovative solutions will help our customers expand their relationships with us by allowing them to more efficiently sell and market additional services and solutions to their End Users. • Relentlessly innovate to expand our solutions offerings and enhance our platform: We believe our history of innovation distinguishes us in the market, and we intend to continue to invest in our software development efforts and introduce new solutions that are largely informed by and aligned with the business objectives of our existing and new customers.
Our investments in digital lending and relationship pricing, BaaS, account switching, risk and fraud, open platform solutions, data-driven sales enablement, spending insights and portfolio management, and other innovative solutions will help our customers expand their relationships with us by allowing them to more efficiently sell and market additional services and solutions to their End Users. • Relentlessly innovate to expand our solutions offerings and enhance our platform: We believe our history of innovation distinguishes us in the market, and we intend to continue to invest in our software development efforts and introduce new solutions that are largely informed by and aligned with the business objectives of our existing and new customers.
We also compete with core processing vendors that provide systems and services such as Fiserv, Inc., Jack Henry and Associates, Inc. and Fidelity National Information Services, Inc., or FIS.
We also compete with core processing vendors that provide systems and services such as Fiserv, Jack Henry and Associates and Fidelity National Information Services, or FIS.
The FinTech and Alt-FI markets consist of thousands of financial services providers globally seeking to provide End Users with new and innovative financial services, experiences and solutions.
The FinTech and Alt-FI markets consist of thousands of financial services providers seeking to provide End Users with new and innovative financial services, experiences and solutions.
We consider our current relationship with our employees to be good. None of our employees are represented by a labor union nor are a party to a collective bargaining agreement. At Q2, we are as passionate about our people as we are about our mission. For more than 19 years, Q2 has been recognized and defined by our mission-driven culture.
We consider our current relationship with our employees to be good. None of our employees are represented by a labor union nor are a party to a collective bargaining agreement. At Q2, we are as passionate about our people as we are about our mission. For more than 20 years, Q2 has been recognized and defined by our mission-driven culture.
Following an examination, our financial institutions customers may request the open section of the report of examination through their lead examination agency. The Dodd-Frank Act granted the Consumer Financial Protection Bureau, or CFPB, authority to promulgate rules and interpret certain federal consumer financial protection laws, some of which apply to the solutions we offer.
Following an examination, our financial institutions' customers may request the open section of the report of examination through their lead examination agency. The Dodd-Frank Act granted the Consumer Financial Protection Bureau, or CFPB, authority to promulgate rules and interpret certain federal consumer financial protection laws, some of which apply to the solutions we offer.
We believe this further strengthens End-User loyalty by enabling our customers to engage End Users through customized and End-User-friendly digital experiences. • Vast and flexible integrations: Our highly flexible set of integration tools enables the rapid integration of third-party applications and data sources with our digital banking platform.
We believe this further strengthens End-User loyalty by enabling our customers to engage End Users through customized and End User-friendly digital experiences. • Vast and flexible integrations: Our highly flexible set of integration tools enables the rapid integration of a breadth of third-party applications and data sources with our digital banking platform.
Our BaaS Helix solutions allow FinTech and Alt-FI customers to easily and efficiently incorporate highly personalized financial experiences within their digital offerings without having to independently meet the stringent regulatory and technical requirements applicable to financial institutions and their banking services. As a core, Helix allows financial institutions to launch unique and personalized digital banking services.
Our BaaS Helix solutions allow FinTech customers to easily and efficiently incorporate highly personalized financial experiences within their digital offerings without having to independently meet the stringent regulatory and technical requirements applicable to financial institutions and their banking services. As a core, Helix allows financial institutions to launch unique and personalized digital banking services.
We believe the principal competitive factors for why customers choose our solutions in the financial services markets we serve include the following: • alignment with the missions of our customers; • ability to provide a single platform for consumer, SMB and commercial End Users; • ability to provide a comprehensive portfolio of products of integrated end-to-end solutions for both account holders and borrowers; • breadth and depth of product portfolio addressing numerous mission critical applications for our customers; • full-feature functionality across digital channels; • ability to integrate targeted offers for End Users across digital channels; • ability to support financial institutions in acquiring deposits with open API technologies; • SaaS delivery and pricing model; • ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing an SDK; • design of the End-User experience, including modern, intuitive and touch-centric features; • configurability and branding capabilities for customers; • familiarity of workflows and terminology and feature-on-demand functionality; • integrated multi-layered security and compliance of solutions with regulatory requirements; • quality of implementation, integration and support services; • domain expertise and innovation in financial services technology; • ability to innovate and respond to customer needs rapidly; • breadth of integrations to third-party financial services; • rate of development, deployment and enhancement of solutions; and • ability to collect and utilize data generated by our solutions to deliver insights to our customers. 19 Table of Contents We believe that we compete favorably with respect to these factors within the financial institution and other financial services providers markets we serve, but we expect competition to continue and increase as existing competitors continue to evolve their offerings and as new companies enter our market.
We believe the principal competitive factors for our solutions in the financial services markets we serve include the following: • alignment with the missions of our customers; • ability to provide a single digital banking platform for consumer, SMB and commercial End Users; • ability to provide a comprehensive portfolio of products of integrated end-to-end solutions for both account holders and borrowers; • breadth and depth of product portfolio addressing numerous mission critical applications for our customers; • full-feature functionality across digital channels; • ability to integrate targeted offers for End Users across digital channels; • ability to support financial institutions in acquiring deposits with open API technologies; • provided as SaaS with subscription pricing model; • ability to support both internal and external developers to quickly integrate with third-party applications and systems utilizing an SDK; • design of the End-User experience, including modern, intuitive and touch-centric features; • configurability and branding capabilities for customers; • familiarity of workflows and terminology and feature-on-demand functionality; • integrated multi-layered security and compliance of solutions with regulatory requirements; • quality of implementation, integration and support services; • domain expertise and innovation in financial services technology; • ability to innovate and respond to customer needs rapidly; • breadth of integrations to third-party financial services; • rate of development, deployment and enhancement of solutions; and • ability to collect and utilize data generated by our solutions to deliver insights to our customers. 18 Table of Contents We believe that we compete favorably with respect to these factors within the financial institution and other financial services providers markets we serve, but we expect competition to continue and increase as existing competitors continue to evolve their offerings and as new companies enter our market.
In each of the past 13 years, the Austin American-Statesman recognized us as one of Austin's "Top Places to Work." We believe our mission, combined with our focus on delivering leading-edge digital solutions, enables us to attract and retain top talent.
In each of the past 14 years, the Austin American-Statesman recognized us as one of Austin's "Top Places to Work." We believe our mission, combined with our focus on delivering leading-edge digital solutions, enables us to attract and retain top talent.
We believe that the breadth of the comprehensive integrations among our solution offerings and our customers' internal and third-party systems, combined with our deep industry expertise, reputation for consistent, high-quality customer support, pace at which we bring innovation to market, and our unified cloud-based digital banking, digital lending and relationship pricing, Q2 Innovation Studio and Helix solutions distinguish us from the competition. 18 Table of Contents We currently compete with providers of technology and services in the financial services industry, including point system vendors, core processing vendors and systems internally developed by financial services providers.
We believe that the breadth of the comprehensive integrations among our solution offerings and our customers' internal and third-party systems, combined with our deep industry expertise, reputation for consistent, high-quality customer support and the pace at which we bring innovation to market distinguish us from the competition across our cloud-based digital banking, digital lending and relationship pricing, Q2 Innovation Studio and Helix solutions. 17 Table of Contents We currently compete with providers of technology and services in the financial services industry, including point system vendors, core processing vendors and systems internally developed by financial services providers.
With respect to our digital lending and relationship pricing solutions, we compete against several point system competitors, including Abrigo, Baker Hill Solutions, LLC, nCino, Inc., Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv.
With respect to our digital lending and relationship pricing solutions, we compete against several point system competitors, including Abrigo, Baker Hill Solutions, nCino, Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv.
The initial term of our digital banking platform agreements averages over five years. Our digital banking platform revenues generally increase as our customers buy more solutions from us and increase the number of End Users utilizing our solutions and as those users increase their number of transactions on our solutions.
The initial term of our digital banking platform agreements averages over five years. Our digital banking platform revenues generally increase as our customers buy more solutions from us and increase the number of End Users and companies utilizing our solutions and as those retail users and companies increase their number of transactions on our solutions.
To ensure compliance with these laws, technology providers and financial service providers may be required to implement operating policies and procedures to protect the privacy and security of their, the financial service providers' and their End Users' information, and to undergo periodic audits and examinations.
To ensure compliance with these laws, technology providers and financial services providers may be required to implement operating policies and procedures to protect the privacy and security of their, the financial services providers' and their End Users' information, and to undergo periodic audits and examinations.
Our solutions utilize a software-as-a-service, or SaaS, delivery model, designed to scale with our customers as they grow their business, add End Users on our solutions and expand the breadth of digital services and solutions they offer. On average, Q2 digital banking platform customers have historically grown contracted revenue by approximately 42% within 36 months of implementation.
Our solutions utilize a software-as-a-service, or SaaS, model designed to scale with our customers as they grow their business, add End Users and expand the breadth of digital services and solutions they offer. On average, Q2 digital banking platform customers have historically grown contracted revenue by approximately 45% within 36 months of implementation.
RCFIs remain critical to our mission of building stronger and more diverse communities by strengthening their financial institutions. RCFIs have historically sought to differentiate themselves by providing local, personalized banking services that are responsive to the changing needs and circumstances of their communities. Many RCFIs are locally owned and obtain deposits and make digital lending decisions on a local basis.
RCFIs remain critical to our mission of building strong and diverse communities by strengthening their financial institutions. RCFIs have historically sought to differentiate themselves by providing local, personalized banking services that are responsive to the changing needs and circumstances of their communities. Many RCFIs are locally owned and obtain deposits and make digital lending decisions on a local basis.
To date, a substantial majority of our revenues continue to result from sales of our digital banking platform to RCFIs.
To date, a substantial majority of our revenues continue to result from sales of our digital banking platform.
This design process and our broad feature offerings enable our solutions to deliver a modern, unified End-User experience across digital channels. 10 Table of Contents • Delivery of robust digital financial services across multiple channels: Our solutions enable our customers to deliver robust and integrated digital financial services to their End Users who increasingly expect and appreciate the ability to manage their financial experiences anytime, anywhere and on any device.
This design process and our broad feature offerings enable our solutions to deliver a modern, unified End-User experience across digital channels. • Delivery of robust digital financial services across multiple channels: Our solutions enable our customers to deliver robust and integrated digital financial services to their End Users who increasingly expect and appreciate the ability to manage their financial experiences anytime, anywhere and on any device.
We also enable customers to address their market-specific needs via our extension and integration frameworks, which is a key aspect of our technology strategy. 17 Table of Contents Technology and Operations Due to the highly regulated nature of the financial services industry, our digital banking platform combines both multi-tenant and single instance aspects.
We also enable customers to address their market-specific needs via our extension and integration frameworks, which is a key aspect of our technology strategy. Technology and Operations Due to the highly regulated nature of the financial services industry, our digital banking platform combines both multi-tenant and single instance aspects.
Successfully securing the digital financial services of financial institutions, FinTechs and other financial services providers requires experience, constant vigilance, and continuous investment to stay informed and guard against these ever-changing threats. Digital financial services are highly regulated Financial services providers and their solutions are subject to extensive and complex regulations and oversight by federal, state and other regulatory authorities.
Successfully securing the digital financial services of financial institutions, FinTechs and other financial services providers requires experience, constant vigilance, and continuous investment to stay informed and guard against these ever-changing threats. 6 Table of Contents Digital financial services are highly regulated Financial services providers and their solutions are subject to extensive and complex regulations and oversight by federal, state and other regulatory authorities.
We utilize prevailing industry configurations to minimize service interruptions, and regularly consider and implement improvements to enhance the resiliency of our services, including our improvements to actively distribute services across both data centers.
We utilize prevailing industry configurations to minimize service interruptions and regularly consider and implement improvements to enhance the resiliency of our services, including our improvements to actively distribute services across both third-party data centers.
Our mission is to build stronger and more diverse communities by strengthening their financial institutions. Our people are paramount to our success, and we have always operated with a set of principles to help guide us in how we treat one another, run our business and serve our customers, partners and communities.
Our mission is to build strong and diverse communities by strengthening their financial institutions. Our people are paramount to our success, and we have always operated with a set of principles to help guide us in how we treat one another, run our business and serve our customers, partners and communities.
We have significant experience and the technical infrastructure to deliver solutions that are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' and their End Users' data. • Our sales model is tailored to our different markets: The financial institution market is well defined and allows us to effectively focus our go-to-market strategy for our sales and marketing efforts.
We have significant experience and the technical infrastructure to deliver solutions that are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' and their End Users' data. 11 Table of Contents • Our sales model is tailored to our different markets: The financial institution market is well defined and allows us to effectively focus our go-to-market strategy for our sales and marketing efforts.
We emphasize individual and team development planning as part of our annual goal-setting process. In 2023, our team members completed over 110,000 hours of training. We believe leading our employees is one of the greatest acts of trust we can show to our managers, and accordingly all managers go through training to enable them to effectively perform as leaders.
We emphasize individual and team development planning as part of our annual goal-setting process. In 2024, our team members completed over 144,000 hours of training. We believe leading our employees is one of the greatest acts of trust we can show to our managers, and accordingly all managers go through training to enable them to effectively perform as leaders.
Item 1. Business. Overview Q2 is a leading provider of digital banking and lending solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, wanting to incorporate banking into their customer engagement and servicing strategies.
Item 1. Business. Overview Q2 is a leading provider of digital solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies.
These laws and regulations are constantly evolving and affect the conduct of financial service providers' operations and, as a result, the business of their technology providers.
These laws and regulations are constantly evolving and affect the conduct of financial services providers' operations and, as a result, the business of their technology providers.
Our long-term agreements and our high customer retention, as well as the growth over time in the number of End Users using our solutions, drive the recurring nature of our revenues and provide us with significant visibility into future revenues. • Established financial stability: We generated cash flow from operations for our most recent full-year and expect to show continued improvement in cash flows from operations in the normal course of business over the long term.
Our long-term agreements and our high customer retention, as well as the growth over time in the number of End Users using our solutions, drive the recurring nature of our revenues and provide us with significant visibility into future revenues. • Established financial stability: We generated cash flow from operations in recent years and expect to show continued improvement in cash flows from operations in the normal course of business over the long term.
Based on our estimate of the number of target customers of digital lending and relationship pricing services and our internal assumptions as to the number of End Users they serve and the prices for our solutions, we believe that the market for our digital lending and relationship pricing solutions, including the borrower portal, origination, underwriting, servicing, collections, actionable insights, coaching, negotiation, relationship pricing and data-driven sales enablement modules, is greater than $4.0 billion.
Based on our estimate of the number of target customers of digital lending and relationship pricing services and our internal assumptions as to the number of End Users they serve and the prices for our solutions, we believe that the market for our digital lending and relationship pricing solutions, including the borrower portal, origination, underwriting, servicing, collections, actionable insights, coaching, negotiation, relationship pricing and data-driven sales enablement modules, is approximately $4.5 billion.
Aging or increasingly complex solutions can create the following challenges for financial services providers: • integrating applications and systems from multiple vendors may increase costs and time-to-market; • managing relationships with multiple vendors can be time consuming and require a greater investment in business development and support resources; • building, maintaining and upgrading regulatory-compliant solutions and infrastructure can be expensive and time-consuming and require special expertise that can be hard to find and retain; • operating, supporting and upgrading systems from multiple vendors can be difficult, costly and less secure and limit the ability to provide a unified End-User experience or comprehensive view of End-User behavior; • partnering between financial institutions and other financial services providers and innovating and delivering new solutions can be difficult and cost-prohibitive when integration with dated legacy infrastructure is required; and • training End Users and internal personnel on the use of different point systems can be challenging, time-consuming and costly. 7 Table of Contents The use of multiple point solutions for digital financial services can require End Users to maintain different login credentials across digital channels and manage different systems.
Aging or increasingly complex solutions can create the following challenges for financial services providers: • integrating applications and systems from multiple vendors may increase costs and time-to-market; • managing relationships with multiple vendors can be time consuming and require a greater investment in business development and support resources; • building, maintaining and upgrading regulatory-compliant solutions and infrastructure can be expensive and time-consuming and require special expertise that can be hard to find and retain; • operating, supporting and upgrading systems from multiple vendors can be difficult, costly and less secure and limit the ability to provide a unified End-User experience or comprehensive view of End-User behavior; • partnering between financial institutions and other financial services providers and innovating and delivering new solutions can be difficult and cost-prohibitive when integration with dated legacy infrastructure is required; and • training End Users and internal personnel on the use of different point systems can be challenging, time-consuming and costly.
As a result, we leverage our network of technology partners and insights from our experience with financial institution customers to effectively pursue these markets. • We grow our customer relationships over time: Throughout customer relationships, we employ a structured strategy designed to inform, educate and enhance customer confidence and help our customers identify and implement additional solutions to acquire, engage and retain additional End Users. • Our revenues are predictable: To date, a substantial majority of our revenues continue to result from sales of our digital banking platform to RCFIs.
As a result, we leverage our network of technology partners and insights from our experience with financial institution customers to effectively pursue these markets. • We can grow our customer relationships over time: Throughout the lifecycle of our customer relationships, we employ a structured strategy designed to inform, educate and enhance customer confidence and help our customers identify and implement additional solutions to acquire, engage and retain additional End Users. • Our revenues are predictable: To date, a substantial majority of our revenues continues to result from sales of our digital banking platform.
We believe the frequency and ease of these interactions can strengthen the relationships between End Users and our customers and help our customers better serve their End Users through a more 9 Table of Contents comprehensive understanding of their behavior and activities.
We believe the frequency and ease of these interactions can strengthen the relationships between End Users and our customers and help our customers better serve their End Users through a more comprehensive understanding of their behavior and activities.
Our SaaS delivery model is also designed to reduce the cost and complexity of implementing, maintaining and enhancing the digital services and solutions our customers provide to their End Users. The effective delivery and management of advanced digital solutions in the complex and heavily regulated financial services industry requires significant resources, personnel and expertise.
Our SaaS model is also designed to reduce the cost and complexity of implementing, maintaining and enhancing the digital services and solutions our customers provide to their End Users. Delivering advanced digital solutions in the complex and heavily regulated financial services industry requires significant resources, personnel and expertise.
Digital financial services are complex and often have limitations The ubiquity of mobile and tablet devices and continued proliferation of digital solutions offered through open development platforms makes it increasingly difficult to provide a consistent, intuitive and personalized End-User experience and requires digital solutions to support new and rapidly changing mobile operating systems and device types.
Digital financial services are complex and often have limitations The ubiquity of smartphones, tablets and other connected devices and the continued proliferation of digital solutions offered through open development platforms makes it increasingly difficult to provide a consistent, intuitive and personalized End-User experience and requires digital solutions to support new and rapidly changing mobile operating systems and device types.
We have developed a comprehensive suite of solutions to accelerate and optimize this convergence, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs, and Alt-FIs. We believe this creates an expanded market opportunity for our business, which we have been thoughtfully evolving for several years.
We have developed a comprehensive suite of offerings to accelerate and optimize this transformation for our customers, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs, and Alt-FIs. We believe this creates an expanded market opportunity for our business, which we have been thoughtfully evolving for several years.
Based on information provided by our employees who opted to self-identify, representing the vast majority of our employees, our employee population as of December 31, 2023 reflected the following: Female Underrepresented Racial/Ethnic Group Overall 33.8% 29.5% Director-level roles and above 35.4% 18.0% Learning and Development We recognize the importance of employees developing and progressing in their careers, starting on their first day with our robust new-hire employee orientation and thoughtful onboarding plans, which are designed to give employees a successful beginning of their Q2 career and to accelerate their time to productivity, including deep dives into our culture, products, markets as well as our Code of Business Conduct and Ethics, our values and our 10 Guiding Principles.
Based on information provided by our employees who opted to self-identify, representing the vast majority of our employees, our employee population as of December 31, 2024 reflected the following: Female Underrepresented Racial/Ethnic Group Overall 33.5% 29.6% Director-level roles and above 34.6% 19.7% Learning and Development We recognize the importance of employees developing and progressing in their careers, starting on their first day with our robust new-hire employee orientation and thoughtful onboarding plans, which are designed to give employees a successful beginning of their Q2 career and to accelerate their time to productivity, including deep dives into our culture, products and markets, as well as our Code of Business Conduct and Ethics, our values and our 10 Guiding Principles.
We believe we are well positioned to connect and serve financial institutions, FinTechs and other financial services providers as they transform the ways in which they engage, either independently or in partnership, with End Users globally: • Our purpose-built digital banking platform leads the RCFI digital banking market: We built our award winning digital banking platform to address unique challenges that financial institutions face in providing digital banking services.
We believe we are well positioned to connect and serve financial institutions, FinTechs and other financial services providers as they transform the ways in which they engage, either independently or in partnership, with End Users: • Our purpose-built digital banking platform is a leader in the digital banking market: We built our award-winning digital banking platform to address unique challenges that financial institutions face in providing digital banking services.
The flexible nature of our solutions, along with our proprietary, highly flexible set of integration tools, allows us to build rapid integrations with our customers' internal and third-party systems to support End-User activities and customer processes.
The flexible nature of our solutions, along with our proprietary, highly flexible set of integration tools, allows our customers, third parties, and Q2 to build rapid integrations with our customers' internal and third-party systems to support End-User activities and customer processes.
Based on our estimates of the number of target financial institutions and FinTechs for our Helix solutions and our internal assumptions as to the number of End Users they serve, the prices for our solutions and the number of transactions processed, we believe the market for our Helix solutions including open platform solutions and BaaS, is greater than $2.0 billion.
Based on our estimates of the number of target financial institutions and FinTechs for our Helix solutions and our internal assumptions as to the number of End Users they serve, the prices for our solutions and the number of transactions processed, we believe the market for our Helix solutions including open platform solutions and BaaS, is approximately $2.5 billion.
Based on our estimates of the number of target financial institutions for our digital banking solutions and our internal assumptions as to the number and types of digital accounts they serve, the prices for our solutions and the number of transactions processed, we believe that the market for our digital banking platform, including retail, SMB and commercial banking, regulatory and compliance, as well as digital account opening, account switching, risk management, portfolio management solutions and Q2 Innovation Studio is greater than $11.0 billion.
Based on our estimates of the number of target financial institutions for our digital banking solutions and our internal assumptions as to the number and types of digital accounts they serve, the prices for our solutions and the number of transactions processed, we believe that the market for our digital banking platform, including retail, SMB and commercial banking, regulatory and compliance, as well as account switching, risk and fraud, portfolio management solutions and Q2 Innovation Studio is approximately $13.0 billion.
In particular, we believe that engaging with commercial End Users involves unique challenges, and by enabling commercial relationship managers with actionable data-driven insights into commercial End-User relationships, they can better serve their commercial End Users, and increase overall performance. • Drive End-User loyalty: We believe our customers are able to drive End-User loyalty by increasing their level and quality of End-User engagement.
In particular, we believe that engaging with commercial End Users involves unique challenges, and by enabling commercial relationship managers with actionable data-driven insights into commercial End-User relationships, they can better serve their commercial End Users and increase overall performance. 9 Table of Contents • Drive End-User loyalty: We believe our customers can drive End-User loyalty by increasing their level and quality of End-User engagement.
Our digital banking platform customers who leverage our Q2 Sentinel product are able to identify and block suspected fraudulent activity in real-time at the application layer, based on machine-learning and behavioral analytics, and notify operations staff and End Users of suspect transactions prior to consummation of a transaction.
Our digital banking platform customers who leverage our behavioral analytics and fraud management products are able to identify and block suspected fraudulent activity in real-time at the application layer, based on machine-learning and behavioral analytics, and notify operations staff and End Users of suspect transactions prior to consummation of a transaction.
In certain cases, we engage with customers for more tailored, premium professional services, or Premier Services, with select established customers resulting in a deeper and ongoing level of engagement with them. Under certain circumstances for our CL digital lending solutions, we also partner with third-party professional system integrators to support our customers in the installation and configuration process.
We engage with select established customers for more tailored, premium professional services, or Integrated Services, resulting in a deeper and ongoing level of engagement with them. Under certain circumstances for our Symphonix lending solutions, we also partner with third-party professional system integrators to support our customers in the installation and configuration process.
Our sales representatives are supported by our solutions consulting and sales operations teams. Our marketing team complements our sales organization through integrated programs for demand creation, pipeline acceleration, customer expansion and brand advocacy.
Our sales representatives are supported by our lead generation, solutions consulting, digital strategy and sales operations teams. Our marketing team complements our sales organization through integrated programs for demand creation, pipeline acceleration, customer expansion and brand advocacy.
We anticipate that we will continue to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and new markets.
We intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and markets.
With respect to our Helix solution, we primarily compete with Galileo Financial Technologies, LLC, Marqeta, Inc. and Green Dot Corporation in the BaaS and embedded finance markets, and we compete with Finxact, a Fiserv company, Nymbus, Inc. and Thought Machine Group Limited in the cloud-core markets.
With respect to our Helix solution, we primarily compete with Galileo Financial Technologies, Marqeta and Green Dot in the BaaS and embedded finance markets, and we compete with Finxact, a Fiserv company, Nymbus, Mambu and Thought Machine Group in the cloud-core markets.
As of December 31, 2023, we had seven patent applications pending and 13 patents issued in the U.S. and other countries, with expiration dates ranging from October 2027 to October 2040. Despite substantial investment in research and development activities, we have not focused on patents and patent applications historically.
As of December 31, 2024, we had nine patent applications pending and 16 patents issued in the U.S. and other countries, with expiration dates ranging from October 2027 to October 2040. Despite substantial investment in research and development activities, we have not focused on patents and patent applications historically.
These shifts are leading to new roles and interdependencies among financial institutions, FinTechs and Alt-FIs, necessitating new technology, partnerships, and business models. We believe that lasting value creation in financial services will be achieved by those companies that are capable of supporting and enhancing this convergence.
These shifts are leading to new roles and interdependencies among financial institutions, FinTechs and Alt-FIs, necessitating new technology, partnerships, and business models. We believe that lasting value creation in financial services will be achieved by those companies that are capable of supporting and embracing these market dynamics.
Our digital banking platform and lending and relationship pricing solutions provide our financial institution customers with a comprehensive view of operational and End-User activity across channels and devices allowing them to look for opportunities to improve End-User engagement and grow their End-User relationships with targeted offerings based on specific behavior.
Our digital banking platform provides our financial institution customers with a comprehensive view of operational and End-User activity across channels and devices allowing them to look for opportunities to improve End-User engagement and grow their End-User relationships with targeted offerings based on specific behavior.
We believe our deep domain experience as a leading provider of digital banking solutions positions us well to provide new, innovative digital banking and other financial services solutions to address the evolving needs and challenges within the financial services industry. • We have acquired and developed solutions to better serve our financial institution customers and a broader set of global financial service providers including FinTechs and Alt-FIs: Over the past several years, we have expanded our portfolio to include offerings such as digital lending and relationship pricing, Q2 Innovation Studio, Helix, digital account opening, account switching, risk management, data-driven sales enablement, spending insights and portfolio management solutions.
We believe our deep domain experience as a leading provider of digital banking solutions positions us well to provide new, innovative digital banking and other financial services solutions to address the evolving needs and challenges within the financial services industry. • We have acquired and developed solutions to better serve our financial institution customers and a broader set of financial services providers including FinTechs and Alt-FIs: Our portfolio includes offerings such as digital lending and relationship pricing, Q2 Innovation Studio, Helix, account switching, risk and fraud, data-driven sales enablement, spending insights and portfolio management solutions.
Our digital lending and relationship pricing, Helix and some of our digital banking platform solutions are hosted with industry leading public cloud service providers. Our SaaS delivery model can reduce the total cost of ownership of our customers by providing the development, implementation, integration, maintenance, monitoring and support of our cloud-based solutions on a subscription basis.
Our digital lending, relationship pricing and Helix solutions are hosted entirely with industry leading third-party public cloud service providers. Our SaaS model can reduce the total cost of ownership of our customers by providing the development, implementation, integration, maintenance, monitoring and support of our cloud-based solutions on a subscription basis.
Through our sponsorship of Q2 Stadium and our partnership with Austin FC, Austin's major league soccer team, we are able to extend Q2's philanthropic footprint through volunteering and fundraising events, and offer meaningful team-building experiences, including: • support of three central Texas nonprofits dedicated to underserved communities, totaling $150,000 in grants; • $100,000 in an annual entrepreneurial sponsorship, providing funding to a minority-owned startup; • our 2023 Dodgeball tournament for the Juvenile Diabetes Research Foundation, held at Q2 Stadium, that raised more than $125,000; • volunteering over 800 employee hours through Q2 Stadium volunteer opportunities, benefiting regional nonprofits; and • providing more than 1,000 Austin FC game-day experiences for our employees and a variety of customers and non-profit partners.
Through our sponsorship of Q2 Stadium and our partnership with Austin FC, Austin's major league soccer team, we are able to extend Q2's philanthropic footprint through volunteering and fundraising events, and offer meaningful team-building experiences, including: • $150,000 in grants to support three central Texas nonprofits dedicated to underserved communities; • $100,000 in an annual entrepreneurial sponsorship, providing funding to a minority-owned startup; • our 2024 Dodgeball tournament for Breakthrough T1D, held at Q2 Stadium, which raised more than $115,000; • volunteering over 900 employee hours through Q2 Stadium volunteer opportunities, benefiting regional nonprofits; and • providing more than 1,000 Austin FC game-day experiences for our employees and a variety of customers and non-profit partners.
Our solutions must enable our customers to comply with applicable requirements such as the following: • the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act; • the Electronic Funds Transfer Act; • Mobile Banking Guidance; • the Electronic Signatures in Global and National Commerce Act; • federal, state and other usury laws; • the Gramm-Leach-Bliley Act, or GLBA; • the Fair Credit Reporting Act; • the Americans with Disabilities Act, or ADA; • the EU General Data Protection Regulation, or GDPR; • laws against unfair, deceptive, or abusive acts or practices; • the Privacy of Consumer Financial Information regulations; • the Bank Secrecy Act and the USA PATRIOT Act of 2001; • the Guidance on Supervision of Technology Services Providers promulgated by the Federal Financial Institutions Examination Council, or FFIEC; • third-party risk management regulations; 23 Table of Contents • the NCUA's Guidelines for Safekeeping of Member Information; • the Guidance on Outsourcing Technology Services promulgated by the FFIEC; and • other federal, state and international laws and regulations.
Our solutions must enable our customers to comply with applicable requirements such as the following: • the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act; • the Electronic Funds Transfer Act; • Mobile Banking Guidance; • the Electronic Signatures in Global and National Commerce Act; • federal, state and other usury laws; • the Gramm-Leach-Bliley Act, or GLBA; • the Fair Credit Reporting Act; • the Americans with Disabilities Act, or ADA; • the EU General Data Protection Regulation, or GDPR; • laws against unfair, deceptive, or abusive acts or practices; • the Privacy of Consumer Financial Information regulations; • the Bank Secrecy Act and the USA PATRIOT Act of 2001; • the Guidance on Supervision of Technology Services Providers promulgated by the Federal Financial Institutions Examination Council, or FFIEC; • third-party risk management regulations; • the NCUA's Guidelines for Safekeeping of Member Information; • the Guidance on Outsourcing Technology Services promulgated by the FFIEC; and • other federal, state and international laws and regulations. 22 Table of Contents We are subject to periodic examination by regulators under the authority of the FFIEC under its Guidance on the Supervision of Technology Services Providers and the Gramm-Leach-Bliley Act of 1999, and federal, state and other laws that apply to technology service providers as a result of the services we provide to the institutions and entities they regulate.
We intend to further penetrate our large market opportunity and increase our number of financial institution and other financial services provider customers using our broad range of digital solutions through acquiring and developing additional solutions, investments in our sales and marketing organization and related activities. 12 Table of Contents • Grow revenues by expanding our relationships with existing customers: We believe there is significant opportunity to expand our relationships with existing customers by selling them additional solutions.
We intend to further penetrate our large market opportunity and increase our number of financial institutions and other financial services providers using our broad range of digital solutions through acquiring and developing additional solutions, investments in our sales and marketing organization and related activities. 12 Table of Contents • Grow revenues by expanding our relationships with existing customers: We believe there is significant opportunity to expand our relationships with existing customers as they increase the number of End Users on the platform and by selling them additional solutions.
We have rapidly grown since then through a combination of broad market acceptance of our award-winning solutions and relentless innovation, investment and acquisitions.
We have rapidly grown through a combination of broad market acceptance of our solutions and relentless innovation, investment and acquisitions.
Employee Well-Being We are committed to the health, safety and well-being of our employees. In addition to traditional employee benefits, we offer a number of innovative benefits to support the physical, mental and financial health of our employees.
In addition to traditional employee benefits, we offer a number of innovative benefits to support the physical, mental and financial health of our employees.
We market Helix to FinTechs, Alt-FIs and financial institutions wishing to incorporate unique banking products and services into their offerings. We also market our Cloud Lending, or CL, digital lending platform and discrete elements of our digital banking platform to FinTechs and Alt-FIs globally.
We primarily market Helix to FinTechs and financial institutions wishing to incorporate banking products and services into their offerings. We also market our Symphonix lending platform, previously referred to as Cloud Lending, or CL, and discrete elements of our digital banking platform to FinTechs and Alt-FIs.
Financial institutions can then choose to incorporate these integrated services into their offerings, creating a new technology partnership ecosystem where financial institutions, FinTechs and other digital solution providers can cooperate, generating new revenue opportunities and enhancing End User engagement. • We believe Helix serves the rapidly growing market of FinTechs and Alt-FIs incorporating banking into their digital offerings and is well positioned to address the needs of financial institutions looking to drive digital and core transformations: We have been investing in our Helix offerings for several years, and today our Helix platform supports many FinTechs and Alt-FIs, serving more than 15 million End Users.
Financial institutions can then choose to incorporate these integrated services into their offerings, creating a new technology partnership ecosystem where financial institutions, FinTechs and other digital solution providers can cooperate, generating new revenue opportunities and enhancing End-User engagement. • Helix serves the rapidly growing market of FinTechs incorporating banking into their digital offerings, and we believe it is well positioned to address the needs of financial institutions looking to drive digital and core transformations: For several years, we have been investing in our Helix offerings, and our Helix platform now supports numerous FinTech companies, serving over 16 million accounts.
Our customers are able to tailor our solutions by offering individually relevant functionality as well as branded, localized End-User experiences.
Our customers can tailor our solutions by offering individually relevant functionality as well as branded, localized End-User experiences.
We define RCFIs as federally-insured banks and credit unions with less than $100 billion in assets, which according to data compiled by BauerFinancial as of September 30, 2023, consisted of approximately 9,301 financial institutions with combined assets of $8.9 trillion, representing approximately 35% of the aggregate assets held by the 9,334 total federally-insured financial institutions.
We define RCFIs as federally-insured banks and credit unions with less than $100 billion in assets, which according to data compiled by BauerFinancial as of September 30, 2024, consisted of approximately 9,054 financial institutions with combined assets of $9.1 trillion, representing approximately 34% of the aggregate assets held by the 9,088 total federally-insured financial institutions.
To remain competitive, we believe we must continue to invest in research and development, sales and marketing, customer support and our business operations generally. People As of December 31, 2023, we had 2,315 employees, of which 2,312 were full time employees, 1,703 of which were employed in the United States, and 609 were employed outside of the United States.
To remain competitive, we believe we must continue to invest in research and development, sales and marketing, customer support and our business operations generally. People As of December 31, 2024, we had 2,477 employees, of which 2,476 were full time employees, 1,659 of which were employed in the United States, and 817 were employed outside of the United States.
Our culture and commitment to inclusion is visible across our organization and highlighted through a host of initiatives, programs and groups including the following: • our portfolio of company-wide events and forums that foster connections to the organization and one another; • our employee volunteer groups focused on culture, wellness, and charitable causes that help create opportunities for employees to support causes to make a difference in the workplace and local communities; • partnerships with industry leaders to bring networking and learning opportunities for our Q2 team members; • adding new Q2 employee resource groups, or ERGs; • promoting a work environment that encourages employees to express their ideas and perspectives, and one which gives employees easy access to leaders, including executives; • supporting external community-based Belonging and Inclusion-focused causes and organizations; • our workspaces and virtual workspace resources that reinforce our mission and guiding principles and promote a collaborative, high-energy work environment that helps facilitate team-based problem solving and cross-departmental learning; and • our evolving new-hire employee orientations that help new employees learn about our business, culture, mission and values and be positioned for successful performance in their new roles.
Q2 has been recognized by the Austin American-Statesman as a Greater Austin Top Workplace for 14 consecutive years and in 2024, Q2 was also recognized as a Top Workplace USA based on survey responses from employees across the country. 19 Table of Contents Our culture and commitment to inclusion is visible across our organization and highlighted through a host of initiatives, programs and groups including the following: • our portfolio of company-wide events and forums that foster connections to the organization and one another; • our employee volunteer groups focused on culture, wellness, and charitable causes that help create opportunities for employees to support causes to make a difference in the workplace and local communities; • partnerships with industry leaders to bring networking and learning opportunities for our Q2 team members; • adding a new Q2 employee resource group, or ERG, in 2024 - Veterans and Allies; • promoting a work environment that encourages employees to express their ideas and perspectives, and one which gives employees easy access to leaders, including executives; • supporting external organizations committed to underserved communities; • our workspaces and virtual workspace resources that reinforce our mission and guiding principles and promote a collaborative, high-energy work environment that helps facilitate team-based problem solving and cross-departmental learning; and • our new-hire employee orientations that help new employees learn about our business, culture, mission and values and be positioned for successful performance in their new roles.
In the aggregate, we believe that the worldwide market for our solutions is greater than $17.0 billion. 8 Table of Contents Our Solutions We are a leading provider of digital banking and lending solutions that transform the ways in which financial institutions and other financial services providers engage with account holders and End Users.
In the aggregate, we believe that the worldwide market opportunity for our solutions is approximately $20.0 billion. Our Solutions We are a leading provider of digital solutions that transform the ways in which financial institutions and other financial services providers engage with account holders and End Users.
We are headquartered in Austin, Texas, and our principal executive offices are located at 10355 Pecan Park Boulevard, Austin, Texas 78729. Our telephone number is (833) 444-3469.
We changed our name to Q2 Holdings, Inc. in March 2013. We are headquartered in Austin, Texas, and our principal executive offices are located at 10355 Pecan Park Boulevard, Austin, Texas 78729. Our telephone number is (833) 444-3469.
This approach is designed to mitigate and more effectively manage the security risks in financial services and helps protect our customers' reputations. We continue to invest in the resiliency and security of our platform and solutions.
This approach is designed to mitigate and more effectively manage the security risks in financial services and helps protect our customers' reputations.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur principal risks include risks associated with: • the challenging macroeconomic environment and challenges in the financial services industry, including impacts on our customers' purchasing decisions on products and services and the related demand for our solutions relative to our expectations; • focusing on the financial services industry, and particular customer segments therein, and any geographies where we have general customer concentration and the potential for any economic downturn or consolidation in such industry, segments or geographies to adversely affect our business; • our ability to manage our growth; • the length, cost and unpredictability of our sales cycle; • the development of our solutions and changes to the market for our solutions compared to our expectations; • our ability to attract new customers and expand and renew existing customer relationships; • managing challenges and costs associated with the implementation of a higher volume of or more complex configurations of our solutions; • customer acceptance of and satisfaction with our existing and new solutions; • the strength of our brand and reputation; • intense competition in the markets we serve and challenges we face as we enter new markets or new sections of existing markets; • integration of our solutions with and reliance by our solutions on third-party systems or services; • security and privacy breaches involving our solutions; • defects or errors in our solutions, including failures associated with transaction processing or interest, principal or balance calculations; • defects, failures or interruptions in third-party services or solutions, including data centers and third-party hosting services; • customer training and customer support; • evolving technological requirements, enhancements and additions to our solution offerings, including artificial intelligence; • our sales and marketing capabilities, including partner relationships; • dependency on our management team and other key employees and recruiting and retaining talent; • increased costs associated with managing growth and the challenges associated with labor shortages, turnover, labor cost increases and competition for talent; • international operations; • mergers and acquisitions or strategic investments; • our revenue recognition method and the relative impacts of changes in subscription rates on implementation costs; • quarterly fluctuations in our operating results relative to our expectations and guidance and the accuracy of our forecasts and the market data we use; • our history of net operating losses and potential limitations on our ability to utilize our net operating loss carryforwards; 25 Table of Contents • the unpredictability of customer subscription renewals or solution adoption; • our profit margins and the unpredictability of End-User adoption and usage, and customer implementation and support requirements; • the reliability of our forecasting; • sales taxes on our solutions; • changes in financial accounting standards or practices; • maintaining proper and effective internal controls and producing accurate and timely financial statements; • regulations applicable to us, our customers and our solutions, including evolving regulation of AI, machine learning and the receipt, collection, storage, processing and transfer of data, and the impacts of any violation of these regulations; • litigation or threats of litigation; • protecting our intellectual property; • "open-source" software in our solutions; • risks associated with environmental, social and governance, or ESG, disclosures and evolving ESG disclosure requirements; • expenses and administrative burdens as a public company; • the dilutive effects of future sales, or anticipation of future sales, of our common stock and the resulting impact on the price of our common stock; • unfavorable or misleading research by industry analysts; • our stock price volatility and historical policy of no dividends; • anti-takeover provisions in our charter documents and Delaware law; • our convertible debt obligations and our ability to secure sufficient additional financing when desired or needed on favorable terms; • our ability to obtain additional financing and dilution to our stockholders resulting from raising capital or using equity for acquisitions; and • our convertible notes and related capped call transactions and the related accounting treatment.
Biggest changeOur principal risks include risks associated with: • security and privacy threats and breaches involving our solutions; • the current economic environment and challenges in the financial services industry, including impacts on our customers' decisions to purchase our products and services and the related demand for our solutions relative to our expectations; • focusing on the financial services industry, and particular customer segments therein, and any geographies where we have general customer concentration and the potential for any economic downturn or consolidation in such industry, segments or geographies to adversely affect our business; • the integration of our solutions with and reliance by our solutions on third-party systems or services; • defects or errors in our solutions, including failures associated with transaction processing or interest, principal or balance calculations; • defects, failures or interruptions in third-party services or solutions, including third-party data centers and third-party public cloud service providers; • our ability to plan for and manage our growth and scale with our new and existing customers effectively; • the length, cost and unpredictability of our sales cycle; • the development of our solutions and changes to the market for our solutions compared to our expectations; • our ability to attract new customers and expand and renew existing customer relationships; • managing challenges and costs associated with the implementation of a higher volume of or more complex configurations of our solutions; • customer acceptance of and satisfaction with our existing and new solutions; • the strength of our brand and reputation; • intense competition in the markets we serve and challenges we face as we enter new markets or new areas of existing markets; • the migration of a significant portion of the computing, storage and processing of our digital banking platform solutions from our third-party data centers to third-party public cloud service providers; • customer training and customer support; • evolving technological requirements, enhancements and additions to our solution offerings, including AI; • our sales and marketing capabilities, including partner relationships; • our dependency on our management team and other key employees and the increased costs associated with recruiting and retaining talent; • our international operations; • mergers, acquisitions, divestitures or strategic investments; • our revenue recognition method and the relative impacts of changes in subscription rates; • quarterly fluctuations in our operating results relative to our expectations and guidance and the reliability and accuracy of our forecasts and the market data we use; • our history of net operating losses and potential limitations on our ability to utilize our net operating loss carryforwards; 24 Table of Contents • our profit margins and the unpredictability of End-User adoption and usage, and customer implementation and support requirements; • changes in financial accounting standards or practices; • our ability to maintain proper and effective internal controls and produce accurate and timely financial statements; • regulations applicable to us, our customers and our solutions, including evolving regulation of AI, machine learning and the receipt, collection, storage, processing and transfer of data, and the impacts of any violation of these regulations; • litigation or threats of litigation; • our ability to protect our intellectual property; • the use of "open-source" software in our solutions; • environmental, social and governance, or ESG, disclosures and evolving ESG disclosure requirements; • the expenses and administrative burdens as a public company; • the dilutive effects of future sales, or anticipation of future sales, of our common stock and the resulting impact on the price of our common stock; • unfavorable or misleading research by industry analysts; • our stock price volatility and historical policy of no dividends; • anti-takeover provisions in our charter documents and Delaware law; • our convertible debt obligations and related capped call transactions and the related accounting treatment and our ability to secure sufficient additional financing when desired or needed on favorable terms; and • our ability to obtain additional financing and potential dilution to our stockholders resulting from raising capital or using equity for acquisitions. 25 Table of Contents Risks Related to our Operations, Industry and the Markets We Serve Our business faces significant risks from diverse and increasingly frequent security threats.
In addition, we may face increased competition in our existing markets as we enter new markets or sections of a market with larger or different customers and new solutions. Our industry has also experienced recent consolidations which we believe may continue.
In addition, we may face increased competition in our existing markets or as we enter new markets or sections of a market with larger or different customers and new solutions. Our industry has also experienced recent consolidations which we believe may continue.
Additionally, there is an increased risk that we may experience cybersecurity-related events, such as phishing attacks, and other security challenges as a result of some of our employees and our service providers working remotely from non-corporate managed networks.
Additionally, there is an increased risk that we may experience cybersecurity-related events, such as phishing attacks, and other security challenges as a result of some of our employees and employees of our service providers working remotely from non-corporate managed networks.
Our ability to achieve significant future revenue growth may depend on our success in recruiting, training and retaining a sufficient number of direct sales professionals, as well as our ability deploy our existing sales and marketing resources efficiently.
Our ability to achieve significant future revenue growth may depend on our success in recruiting, training and retaining a sufficient number of direct sales professionals, as well as our ability to deploy our existing sales and marketing resources efficiently.
These include, but are not limited to: • fluctuations in currency exchange rates; • the complexity of, or changes in, foreign regulatory requirements; • difficulties in managing the staffing of international operations, including compliance with local labor and employment laws and regulations; • complexities implementing and enforcing cross-border information technology and security controls; 38 Table of Contents • potentially adverse tax consequences, including the complexities of foreign value added tax systems, overlapping tax regimes, restrictions on the repatriation of earnings and changes in tax rates; • the cost and complexity of bringing our solutions into compliance with foreign regulatory requirements, and risks of our solutions not being compliant; • dependence on resellers and distributors to increase customer acquisition or drive localization efforts; • the burdens of complying with a wide variety of foreign laws and different legal standards, certain of which may be significantly more burdensome than those in place in the U.S.; • increased financial accounting and reporting burdens and complexities; • longer payment cycles and difficulties in collecting accounts receivable; • longer sales cycles; • political, social and economic instability abroad; • terrorist attacks and security concerns in general; • failure to recruit, onboard, build and retain a talented and engaged global workforce; • integrating personnel with diverse business backgrounds and organizational cultures; • difficulties entering new non-U.S. markets due to, among other things, consumer acceptance and business knowledge of these new markets; • constraints of remote working by employees; • reduced or varied protection for intellectual property rights in some countries; and • the risk of U.S. regulation of foreign operations.
These include, but are not limited to: 38 Table of Contents • fluctuations in currency exchange rates; • the complexity of, or changes in, foreign regulatory requirements; • difficulties in managing the staffing of international operations, including compliance with local labor and employment laws and regulations; • complexities implementing and enforcing cross-border information technology and security controls; • potentially adverse tax consequences, including the complexities of foreign value added tax systems, overlapping tax regimes, restrictions on the repatriation of earnings and changes in tax rates; • the cost and complexity of bringing our solutions into compliance with foreign regulatory requirements, and risks of our solutions not being compliant; • dependence on resellers and distributors to increase customer acquisition or drive localization efforts; • the burdens of complying with a wide variety of foreign laws and different legal standards, certain of which may be significantly more burdensome than those in place in the U.S.; • increased financial accounting and reporting burdens and complexities; • longer payment cycles and difficulties in collecting accounts receivable; • longer sales cycles; • political, social and economic instability abroad; • terrorist attacks and security concerns in general; • failure to recruit, onboard, build and retain a talented and engaged global workforce; • integrating personnel with diverse business backgrounds and organizational cultures; • difficulties entering new non-U.S. markets due to, among other things, consumer acceptance and business knowledge of these new markets; • constraints of remote working by employees; • reduced or varied protection for intellectual property rights in some countries; and • the risk of U.S. regulation of foreign operations.
Additionally, if governmental agencies or private organizations began to impose taxes, fees or other charges for accessing the Internet or commerce conducted via Internet, characterize the types and quality of services and products, or restrict the exchange of information over the Internet, we may experience reduced growth of our business, a general decline in the use of the Internet by financial services providers, or their End Users, or diminished viability of our solutions and our customers' 46 Table of Contents ability to use our solutions could be significantly restricted.
Additionally, if governmental agencies or private organizations began to impose taxes, fees or other charges for accessing the Internet or commerce conducted via Internet, characterize the types and quality of services and products, or restrict the exchange of information over the Internet, we may experience reduced growth of our business, a general decline in the use of 46 Table of Contents the Internet by financial services providers, or their End Users, or diminished viability of our solutions and our customers' ability to use our solutions could be significantly restricted.
If we are unable for any reason to seek indemnity or otherwise collect from those third parties our direct or indirect liabilities related to any claim, then we may have to bear the liabilities ourselves and our business performance and financial condition could be substantially harmed.
If we are unable for any reason to seek indemnity or otherwise collect from those third parties for our direct or indirect liabilities related to any claim, then we may have to bear the liabilities ourselves and our business performance and financial condition could be substantially harmed.
The capped call transactions entered into in connection with the offering of the 2026 Notes and 2025 Notes may affect the value of our common stock. In connection with the offering of the 2026 Notes and 2025 Notes, we entered into capped call transactions with one or more counterparties, or the Capped Calls.
The capped call transactions entered into in connection with the offering of the 2026 Notes and 2025 Notes may affect the value of our common stock. In connection with the offering of the 2026 Notes and 2025 Notes, we entered into capped call transactions, or the Capped Calls, with one or more counterparties.
In addition, even if holders of the 2026 Notes or 2025 Notes do not elect to convert their 2026 Notes or 2025 Notes, as applicable, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes or 2025 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital, which may negatively impact the trading price of our common stock.
In addition, even if holders of the 2026 Notes or 2025 Notes do not elect to convert their 2026 Notes or 2025 Notes, as applicable, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2026 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital, which may negatively impact the trading price of our common stock.
If our security measures or the security measures of our customers or third-party providers on whom we rely are compromised, unauthorized access to our systems or customer data is otherwise obtained or financial transaction fraud involving our solutions goes undetected, our systems and solutions may not be secure or may be perceived as not being secure or adequate, and customers may curtail or cease their use of our solutions, our reputation may be harmed, and we may incur significant liabilities, regulatory enforcement, fines or other consequences.
If our security measures or the security measures of our customers or third-party providers on whom we rely are compromised, unauthorized access to our systems or customer data is otherwise obtained or financial transaction fraud involving our solutions goes undetected, our systems and solutions may not be secure or may be perceived as not being secure or adequate, and customers may curtail or cease their use of our solutions, our reputation may be harmed, and we or our customers may incur significant liabilities, litigation, regulatory enforcement, fines or other consequences.
Any security and privacy compromise in our industry, whether actual or perceived, could erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.
Any security and privacy compromise in our industry, whether actual or perceived, could erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory investigations or fines or other action or liability, which could materially and adversely affect our business and operating results.
In particular, the impacts of any downturn on Alt-FIs and FinTechs and our arrangements with them are difficult to accurately predict, as Alt-FIs and FinTechs may have particular vulnerabilities to a macroeconomic downturn, and our arrangements with FinTechs represent a more variable revenue model for us which may be more vulnerable to an economic downturn than our arrangements with financial institutions where the majority of recurring revenue is associated with contractual commitments.
In particular, the impacts of any downturn on Alt-FIs and FinTechs and our arrangements with them are difficult to accurately predict, as Alt-FIs and FinTechs may have particular vulnerabilities to an economic downturn, and our arrangements with FinTechs represent a more variable revenue model for us which may be more vulnerable to an economic downturn than our arrangements with financial institutions where the majority of recurring revenue is associated with contractual commitments.
In addition, because we leverage third-party providers, including cloud, software, data center and other critical technology vendors to develop and deliver our solutions to our customers and their End Users, we rely heavily on the data security technology practices and policies adopted by these third-party providers, and we may not be able to identify vulnerabilities in such third-party practices and policies.
In addition, because we increasingly leverage third-party providers, including cloud, software, data center and other critical technology vendors to develop and deliver our solutions to our customers and their End Users, we rely heavily on the data security technology practices and policies adopted by these third-party providers, and we may not be able to identify vulnerabilities in such third-party practices and policies.
The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or terminate our hosting arrangement or other unanticipated problems could result in lengthy interruptions in the delivery of our solutions, cause system interruptions, prevent our customers' End Users from accessing their accounts or services online, reputational harm and loss of critical data, prevent us from supporting our solutions or cause us to incur additional expense in arranging for new facilities, services and support, and may be required to pay refunds to our customers based on service level agreement (SLA) provisions in their contracts. 35 Table of Contents We also depend on third-party Internet service providers and continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business.
The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or terminate our hosting arrangement or other unanticipated problems could result in lengthy interruptions in the delivery of our solutions, cause system interruptions, prevent our customers' End Users from accessing their accounts or services online, cause reputational harm and loss of critical data, prevent us from supporting our solutions or cause us to incur additional expense in arranging for new facilities, services and support, and we may be required to pay refunds to our customers based on service level agreement (SLA) provisions in their contracts. 31 Table of Contents We also depend on third-party Internet service providers and continuous and uninterrupted access to the Internet through third-party bandwidth providers to operate our business.
We also expect to continue to make other investments to develop and expand our solutions and our business, including continuing to increase our marketing, services and sales operations and continuing our significant investment in research and development and our technical infrastructure, while also managing our business in response to continued challenging macroeconomic conditions, challenges in the financial services industry and any anticipated or resulting economic slowdown.
We also expect to continue to make other investments to develop and expand our solutions and our business, including continuing to increase our marketing, services and sales operations and continuing our significant investment in research and development and our technical infrastructure, while also managing our business in response to continued challenging economic conditions, challenges in the financial services industry and any anticipated or resulting economic slowdown.
Our security measures and the security measures of our customers or third-party providers on whom we rely may not be sufficient to prevent our systems from being compromised as a result of third-party action, the error or intentional misconduct of employees, customers or their End Users, malfeasance or stolen or fraudulently obtained login credentials.
Our security measures and the security measures of our customers or third-party providers on whom we rely may not be sufficient to prevent our solutions or systems from being compromised as a result of third-party action, the error or intentional misconduct of employees, customers or their End Users, malfeasance or stolen or fraudulently obtained login credentials.
We have completed, and may in the future evaluate and consider, potential strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products and other assets. We also may enter into relationships with other businesses to expand our solutions, which could involve preferred or exclusive licenses and additional channels of distribution.
We have completed, and may in the future evaluate and consider, potential strategic transactions, including acquisitions or divestitures of, or investments in, businesses, technologies, services, products and other assets. We also may enter into relationships with other businesses to expand our solutions, which could involve preferred or exclusive licenses and additional channels of distribution.
Security incidents can result in unauthorized access to, loss of or unauthorized disclosure of confidential information, litigation, regulatory enforcement, fines, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales, harm our business and result in increased volatility in our stock price.
Security incidents can result in unauthorized access to, loss of or unauthorized disclosure of confidential information, litigation, regulatory investigations and enforcement, fines, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales, harm our business and result in increased volatility in our stock price.
We may become subject, from time to time, to legal proceedings and claims that arise in the ordinary course of business such as claims brought by our customers in connection with commercial or intellectual property disputes, employment claims made by our current or former employees, or commercial or intellectual property claims by our suppliers or service providers.
We may become subject, from time to time, to legal proceedings and claims that arise in the ordinary course of business such as claims brought by our customers in connection with commercial or intellectual property disputes, employment claims made by our current or former employees, whistleblower claims or commercial or intellectual property claims by our suppliers or service providers.
If financial service providers are unwilling to transition from their current systems, the demand for our solutions and related services could decline and adversely affect our business, operating results and financial condition. Our future success also depends on our ability to sell new solutions and enhanced solutions to our current and new customers.
If financial services providers are unwilling to transition from their current systems, the demand for our solutions and related services could decline and adversely affect our business, operating results and financial condition. Our future success also depends on our ability to sell new solutions and enhanced solutions to our current and new customers.
If we have to make changes to our internal processes and solutions as a result of these regulatory changes, we could be required to invest substantial ime and funds and divert time and resources from other corporate purposes to remedy any identified deficiency.
If we have to make changes to our internal processes and solutions as a result of these regulatory changes, we could be required to invest substantial time and funds and divert time and resources from other corporate purposes to remedy any identified deficiency.
Any one of the factors above, or the cumulative effect of some or all of the factors referred to above, may result in significant fluctuations in our quarterly and annual results of operations. This variability and unpredictability could result in our failure to meet or exceed our internal operating plan.
Any one of the factors above, or the cumulative effect of some or all of the factors referred to above, may result in significant fluctuations in our quarterly and annual results of operations. This variability and unpredictability could result in our failure to meet our internal operating plan.
Our corporate reputation is susceptible to damage by actions or statements made by adversaries in legal proceedings, current or former employees or customers, competitors and vendors, technology partners, as well as members of the investment community and the media.
Our corporate reputation is susceptible to damage by actions or statements made by adversaries in legal proceedings, current or former employees or customers, competitors and vendors, partners, as well as members of the investment community and the media.
If our solutions do not function reliably or fail to achieve customer expectations in terms of performance, customers could seek to cancel their agreements with us and assert liability claims against us, which could damage our reputation, impair our ability to attract or maintain customers, harm our results of operations or have an adverse impact on our financial performance. 34 Table of Contents Failures or reduced accessibility of third-party hardware, software or other services on which we rely could impair the delivery of our solutions and adversely affect our business.
If our solutions do not function reliably or fail to achieve customer expectations in terms of performance, customers could seek to cancel their agreements with us and assert liability claims against us, which could damage our reputation, impair our ability to attract or maintain customers, harm our results of operations or have an adverse impact on our financial performance. 30 Table of Contents Failures or reduced accessibility of third-party hardware, software or other services on which we rely could impair the delivery of our solutions and adversely affect our business.
Our failure to repurchase a series of convertible notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of such series of convertible notes as required by the indenture governing such series of convertible notes would constitute a default under such indenture.
Our failure to repurchase a series of convertible notes at a time when the repurchase is required by the applicable indenture, or to pay any cash payable on future conversions of such series of convertible notes as required by the applicable indenture, would constitute a default under such indenture.
A claim brought against us that is uninsured or underinsured could result in unanticipated costs and impact our liquidity, thereby reducing our operating results and impacting our financial condition, leading analysts and investors to reduce their confidence and expectations and reduce the trading price of our stock. 47 Table of Contents Lawsuits by third parties against us or our customers for alleged infringement of the third parties' proprietary rights or for other intellectual property related claims could result in significant expenses and harm our operating results and financial condition.
A claim brought against us that is uninsured or underinsured could result in unanticipated costs and impact our liquidity, thereby reducing our operating results and impacting our financial condition, leading analysts and investors to reduce their confidence and expectations which may reduce the trading price of our stock. 47 Table of Contents Lawsuits by third parties against us or our customers for alleged infringement of the third parties' proprietary rights or for other intellectual property related claims could result in significant expenses and harm our operating results and financial condition.
Our business and operations, as well as those of our customers and third-party providers, are continuously exposed to a broad range of internal and external threats such as cyber-attacks, ransomware attacks, account take-over attacks, hijacking, organized cybercrime, financial transaction fraud, fraudulent representations, malicious code (such as viruses and worms), phishing, employee errors or omissions, employee theft or misuse, denial-of-service attacks and other malicious Internet-based activity.
Our business and operations, as well as those of our customers and third-party providers, are continuously exposed to a broad range of internal and external threats such as cyber-attacks, ransomware attacks, account take-over attacks, hijacking, organized cybercrime, financial transaction fraud, fraudulent representations, malicious code (such as viruses and worms), supply chain attacks, phishing, employee errors or omissions, employee theft or misuse, denial-of-service attacks and other malicious Internet-based activity.
Consequently, a change in the level of new customer agreements or implementations in any quarter may have a small impact on our revenues in that quarter but will affect our revenues in future quarters.
Consequently, a change in the level of new customer agreements or implementations in any quarter may have a small impact on our revenues in that quarter but will primarily affect our revenues in future quarters.
If there is a breach of our systems and we know or suspect that unencrypted personal customer or End-User information has been stolen, we may be required to inform the representative state attorney general or federal or country regulator, media and credit reporting agencies, and any customers whose information was stolen, which could harm our reputation and business.
If there is a breach of our systems and we know or suspect that unencrypted personal customer or End-User information has been stolen, we may be required to inform the representative state attorney general or federal or country regulator, media, credit reporting agencies, applicable banking agencies and any customers whose information was stolen, which could harm our reputation and business.
Each of these factors, among others, could adversely affect your investment in our common stock. Some companies that have had volatile market prices for their securities have had securities class action lawsuits filed against them. If a suit were filed against us, regardless of its merits or outcome, it could result in substantial costs and divert management's attention.
Each of these factors, among others, could adversely affect an investment in our common stock. Some companies that have had volatile market prices for their securities have had securities class action lawsuits filed against them. If a suit were filed against us, regardless of its merits or outcome, it could result in substantial costs and divert management's attention.
We also compete with core processing vendors that provide systems and services such as Fiserv, Inc., Jack Henry and Associates, Inc. and Fidelity National Information Services, Inc., or FIS.
We also compete with core processing vendors that provide systems and services such as Fiserv, Jack Henry and Associates and Fidelity National Information Services, or FIS.
As we create new solutions and enhance our existing solutions to support new customer types, technologies and devices, these solutions and related services may not be attractive to customers.
As we create new solutions and enhance our existing solutions to support new customer types and technologies, these solutions and related services may not be attractive to customers.
Many financial service providers have invested substantial personnel and financial resources in legacy software, and these institutions may be reluctant or unwilling to convert from their existing systems to our solutions. For financial service providers, switching from one provider of solutions (or from an internally developed legacy system) to a new provider is a significant endeavor.
Many financial services providers have invested substantial personnel and financial resources in legacy software, and these institutions may be reluctant or unwilling to convert from their existing systems to our solutions. For financial services providers, switching from one provider of solutions (or from an internally developed legacy system) to a new provider is a significant endeavor.
The option counterparties to our capped call transactions entered into in connection with the convertible notes are financial institutions, and we will be subject to the risk that they might default under these derivative transactions. Our exposure to the credit risk of these counterparties will not be secured by any collateral.
The option counterparties to our Capped Calls entered into in connection with the convertible notes are financial institutions, and we will be subject to the risk that they might default under these derivative transactions. Our exposure to the credit risk of these counterparties will not be secured by any collateral.
Certain elements of our solutions process and store personally identifiable information, or PII, such as banking and personal information of our customers and their End Users, and we also regularly have access to PII during various stages of the implementation process or during the course of providing customer support.
For example, certain elements of our solutions process and store personally identifiable information, or PII, such as banking and personal information of our customers and their End Users, and we also regularly have access to PII during various stages of the implementation process or during the course of providing customer support.
Additional factors affecting the trading price of our common stock include, among others: • variations in our operating results or the operating results of similar companies; • announcements of technological innovations, new solutions or enhancements or strategic partnerships or agreements by us or by our competitors; • changes in the estimates of our operating results, our financial guidance or changes in recommendations by any securities analysts that follow our common stock; • the gain or loss of customers, particularly our larger customers; • adoption or modification of regulations, policies, procedures or programs applicable to our business and our customers' business; • uncertainties in the financial services industries; • public disclosures or marketing and advertising initiatives by us or our competitors; • concerns related to actual or perceived security breaches, outages or other defects related to our solutions; • threatened or actual litigation; • changes in our senior management; • recruitment or departure of key personnel; and • the occurrence of any adverse events or circumstances described in these risk factors.
Additional factors affecting the trading price of our common stock include, among others: • variations in our operating results or the operating results of similar companies; • announcements of technological innovations, new solutions or enhancements or strategic partnerships or agreements by us or by our competitors; • changes in the estimates of our operating results, our financial guidance or changes in recommendations by any of the securities analysts that follow our common stock; • the gain or loss of customers, particularly our larger customers; • adoption or modification of regulations, policies, procedures or programs applicable to our business and our customers' business; • uncertainties in the financial services industries; • public disclosures or marketing and advertising initiatives by us or our competitors; • concerns related to actual or perceived security breaches, outages or other defects related to our solutions; 51 Table of Contents • threatened or actual litigation; • changes in our senior management or key personnel; and • the occurrence of any adverse events or circumstances described in these risk factors.
With respect to our digital lending and relationship pricing solutions, we compete against several point system competitors, including Abrigo, Baker Hill Solutions, LLC, nCino, Inc., Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv.
With respect to our digital lending and relationship pricing solutions, we compete against several point system competitors, including Abrigo, Baker Hill Solutions, nCino, Finastra, Brilliance Financial Technology, Temenos AG, and core processing vendors, including FIS and Fiserv.
A party who is able to compromise the security of our facilities could cause interruptions or malfunctions in our operations. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or sabotage systems because they change frequently and generally are not detected until after an incident has occurred.
A party who is able to compromise the security of our facilities, whether physical or systematic, could cause interruptions or malfunctions in our operations. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or sabotage systems because they change frequently and generally are not detected until after an incident has occurred.
Financial institutions increasingly face competition from non-depository institutions or other innovative products or emerging technologies, such as cryptocurrencies, which may reduce the number of End Users or transactions using their more traditional financial services. Any of these developments could have an adverse effect on our business, results of operations and financial condition.
Financial institutions increasingly face competition from non-depository institutions or other innovative products or emerging technologies, such as cryptocurrencies or stablecoin, which may reduce the number of End Users, or log-ins or transactions using their more traditional financial services. Any of these developments could have an adverse effect on our business, results of operations and financial condition.
We can provide no assurances as to the financial stability or viability of any option counterparty. In addition, the capped call transactions are complex, and they may not operate as planned. For example, the terms of each may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur.
We can provide no assurances as to the financial stability or viability of any option counterparty. In addition, the Capped Calls are complex, and they may not operate as planned. For example, the terms of each may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate events or other transactions occur.
If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the market for our stock, and demand for our stock could decrease, which could cause our stock price or trading volume to decline. 51 Table of Contents Our stock price has been and may continue to be highly volatile.
If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the market for our stock, and demand for our stock could decrease, which could cause our stock price or trading volume to decline. Our stock price has been and may continue to be highly volatile.
If we fail to anticipate and manage our growth or are unable to provide high levels of system performance and customer service, our reputation, as well as our business, results of operations and financial condition, could be harmed. 27 Table of Contents Our sales cycle can be unpredictable, time-consuming and costly, which could harm our business and operating results.
If we fail to anticipate and manage our growth or are unable to provide high levels of system performance and customer service, our reputation, as well as our business, results of operations and financial condition, could be harmed. Our sales cycle can be unpredictable, time-consuming and costly, which could harm our business and operating results.
Damage to our reputation could also reduce the value and effectiveness of our brand name and could reduce investor confidence in us and materially and adversely affect our business, financial condition and results of operations. The markets in which we participate are competitive, and pricing pressure, new technologies or other competitive dynamics could adversely affect our business and operating results.
Damage to our reputation could also reduce the value and effectiveness of our brand name and could reduce investor confidence in us and materially and adversely affect our business, financial condition and results of operations. 34 Table of Contents The markets in which we participate are competitive, and pricing pressure, new technologies or other competitive dynamics could adversely affect our business and operating results.
Additionally, we may not be able to honor commitments we have made to our customers and we may be subject to breach of contract or other claims from our customers. In addition, we do not control the performance of Force.com. If Force.com experiences an outage, our CL digital lending platform will not function properly, and our customers may be dissatisfied.
Additionally, we may not be able to honor commitments we have made to our customers and we may be subject to breach of contract or other claims from our customers. In addition, we do not control the performance of Force.com. If Force.com experiences an outage, our Symphonix lending platform will not function properly, and our customers may be dissatisfied.
Accordingly, potential investors in our common stock are urged not to put undue reliance on such forecasts and market data. 43 Table of Contents We may not be able to utilize a significant portion of our net operating loss carryforwards, which could adversely affect our operating results and cash flows.
Accordingly, investors and potential investors are urged not to put undue reliance on such forecasts and market data. 43 Table of Contents We may not be able to utilize a significant portion of our net operating loss carryforwards, which could adversely affect our operating results and cash flows.
If salesforce.com takes any of these actions, we may suffer lower sales, increased operating costs and loss of revenue from our CL digital lending platform until equivalent technology is either developed by us, or, if available from a third party, is identified, obtained and integrated.
If salesforce.com takes any of these actions, we may suffer lower sales, increased operating costs and loss of revenue from our Symphonix lending platform until equivalent technology is either developed by us, or, if available from a third party, is identified, obtained and integrated.
Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our solutions. In addition to government activity, privacy advocacy groups and the technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us.
Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our solutions. In addition to government activity, privacy advocacy groups and other industry groups are considering various new, additional or different self-regulatory standards that may place additional burdens on us.
We expect to incur losses in the future as we continue to focus on adding new customers and solutions, and we cannot predict whether or when we will achieve or sustain profitability.
We may continue to incur losses in the future as we continue to focus on adding new customers and solutions, and we cannot predict whether or when we will achieve or sustain profitability.
In addition, while much of our operations are not directly subject to the same regulations applicable to financial institutions, we are generally obligated to our customers to provide software solutions and maintain internal systems and processes that comply with federal, state and other regulations applicable to them.
In addition, while much of our operations are not directly subject to the same regulations applicable to financial institutions or our bank partners, we are generally obligated to our customers to provide software solutions and maintain internal systems and processes that comply with federal, state and other regulations applicable to them.
Upon conversion of each series of convertible notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the series of notes being converted.
Upon conversion of each series of convertible notes, unless we elect to settle such conversion solely through delivery of shares of our common stock to (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the series of notes being converted.
Consequently, these transactions, even if undertaken and announced, may not close. 39 Table of Contents We may not achieve the anticipated benefits from our past acquisitions or any additional businesses we acquire due to a number of factors, including: • our inability to integrate, manage or benefit from acquired operations, technologies or services; • our inability to successfully sell and maintain the solutions of the acquired business; • unanticipated costs or liabilities associated with the acquisition, including the assumption of liabilities or commitments of the acquired business that were not disclosed to us or that exceeded our estimates; • difficulty integrating the technology, accounting systems, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy solutions and hosting infrastructure of the acquired business; • uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions; • difficulty converting the customers of the acquired business to our solutions and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company; • diversion of management's attention to other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition or divestiture; • use of resources that are needed in other parts of our business; • the use of a substantial portion of our cash that we may need to operate our business and which may limit our operational flexibility and ability to pursue additional strategic transactions; • the issuance of additional equity securities that would dilute the ownership interests of our stockholders; • incurrence of debt on terms unfavorable to us or that we are unable to repay; • incurrence of large charges or substantial liabilities; • our inability to apply and maintain internal standards, controls, procedures and policies with respect to the acquired businesses; • difficulties retaining key employees of the acquired company or integrating diverse software codes or business culture; and • becoming subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
We may not achieve the anticipated benefits from our past acquisitions or any additional businesses we acquire due to a number of factors, including: • our inability to integrate, manage or benefit from acquired operations, technologies or services; • our inability to successfully sell and maintain the solutions of the acquired business; • unanticipated costs or liabilities associated with the acquisition, including the assumption of liabilities or commitments of the acquired business that were not disclosed to us or that exceeded our estimates; • difficulty integrating the technology, accounting systems, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting and modernizing legacy solutions, security architecture and hosting infrastructure of the acquired business; • uncertainty of entry into markets in which we have limited or no prior experience or in which competitors have stronger market positions; • difficulty converting the customers of the acquired business to our solutions and contract terms, including disparities in the revenues, licensing, support or professional services model of the acquired company; • diversion of management's attention to other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition or divestiture; • use of resources that are needed in other parts of our business; • the use of a substantial portion of our cash that we may need to operate our business and which may limit our operational flexibility and ability to pursue additional strategic transactions; • the issuance of additional equity securities that would dilute the ownership interests of our stockholders; • incurrence of debt on terms unfavorable to us or that we are unable to repay; • incurrence of large charges or substantial liabilities; • our inability to apply and maintain internal standards, controls, procedures and policies with respect to the acquired businesses; • difficulties retaining key employees of the acquired company or integrating diverse software codes or business culture; and • becoming subject to adverse tax consequences, substantial depreciation or deferred compensation charges.
We do not control the operation of these data center facilities and cloud-based service providers, and such facilities and services are vulnerable to damage or interruption from human error, intentional bad acts, power loss, hardware failures, telecommunications failures, fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes, pandemics or similar catastrophic events.
We do not control the operation of these third-party data center facilities and third-party public cloud service providers, and such facilities and services are vulnerable to damage or interruption from human error, intentional bad acts, power loss, hardware failures, telecommunications failures, fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes, pandemics or similar catastrophic events.
Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers and their End Users.
Our operating results may vary based on the impact of changes in our industry, the geopolitical landscape or the global economy on us or our customers and their End Users.
Risks Related to Ownership of Our Common Stock We have incurred and will continue to incur significant expenses and administrative burdens as a public company, which could have a material adverse effect on our operations and financial results. As a public company, we have incurred and will continue to incur significant legal, accounting, administrative and other costs and expenses.
Risks Related to Ownership of Our Common Stock We incur significant expenses and administrative burdens as a public company, which could have a material adverse effect on our operations and financial results. As a public company, we incur significant legal, accounting, administrative and other costs and expenses.
If we accumulate additional funds through debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. We cannot assure you that additional financing will be available on terms favorable to us, or at all.
If we accumulate additional funds through debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities. We cannot give assurance that additional financing will be available on terms favorable to us, or at all.
If we fail to attract, hire and integrate qualified new employees, motivate and retain existing personnel, or maintain a highly skilled and diverse global workforce, our business and future growth prospects could be harmed. Competition for executive officers, software developers and other employees in our industry is intense.
If we fail to attract, hire and integrate qualified new employees, motivate and retain existing personnel, or maintain a highly skilled and diverse global workforce, our business and future growth prospects could be harmed. Competition for executive officers, software developers, domain experts in financial services and other highly skilled personnel in our industry is intense.
A vulnerability in a third-party provider's software or systems, a failure of our third-party providers' safeguards, policies, procedures or overall business operations or a breach of a third-party provider's software or systems could result in the compromise of the confidentiality, integrity or availability of our systems or the data housed in our solutions.
A vulnerability in a third-party provider's software or systems, a failure of our third-party providers' safeguards, policies, procedures or overall business operations or a breach of a third-party provider's software or systems could result in financial loss and the compromise of the confidentiality, integrity or availability of our systems or the data housed in our solutions.
A significant portion of our revenues is derived from financial institutions, and in particular RCFIs, and we have been and may continue to be impacted by challenges in the macroeconomic environment and financial services industry. Some financial institutions have in the past experienced significant pressure due to economic uncertainty, liquidity concerns and increased regulation.
A significant portion of our revenues is derived from financial institutions, and in particular RCFIs, and we have been and may continue to be impacted by challenges in the economic environment and financial services industry. Some financial institutions have in the past experienced significant pressure due to economic uncertainty, liquidity concerns and increased regulatory scrutiny.
Further, if our customers merge with or are acquired by other entities that have in-house developed solutions or that are not our customers or use fewer of our solutions, our customers may discontinue, reduce or change the terms of their use of our solutions.
Further, if our customers merge with or are acquired by other entities that have in-house developed solutions or that are not our customers or use fewer of our solutions, our customers may 28 Table of Contents discontinue, reduce or change the terms of their use of our solutions.
This would involve spending substantial amounts to purchase or lease data center capacity and equipment, subscribe to new or additional third-party hosting services, upgrade our technology and infrastructure or introduce new or enhanced solutions.
This would involve spending substantial amounts to purchase or lease third-party data center capacity and equipment, subscribe to new or additional third-party cloud service services, upgrade our technology and infrastructure or introduce new or enhanced solutions.
Since our inception, our business has experienced high growth, which has resulted in large increases in our number of employees, expansion of the types of solutions we sell and the customers we sell them to, expansion to international locations and international customers, expansion of our infrastructure, enhancement of our internal systems and other significant changes and additional complexities.
Since our inception, our business has experienced high growth, which has resulted in large increases in our number of employees, expansion of the types of solutions we sell and the customers we sell them to, significant increases in the number of End Users accessing and using our solutions, expansion to international locations and international customers, expansion of our infrastructure, enhancement of our internal systems and other significant changes and additional complexities.
In addition, our ability to repurchase each series of convertible notes or to pay cash upon conversions of each series of convertible notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
In addition, our ability to repurchase each series of convertible notes or to pay cash upon the conversions of each series of convertible notes may be limited by law, by regulatory authority or by agreements governing our current and future indebtedness.
The owners and operators of these current and future facilities and cloud-based hosting services do not guarantee that our customers' access to our solutions will be uninterrupted, error-free or secure. We have experienced, and may in the future experience website disruptions, outages and other performance problems with these data centers and third-party hosting providers.
The owners and operators of these current and future facilities and third-party public cloud service providers do not guarantee that our customers' access to our solutions will be uninterrupted, error-free or secure. We have experienced, and may in the future experience, website disruptions, outages and other performance problems with these third-party data centers and third-party public cloud service providers.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the U.S., the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards will have on our business or the businesses of our customers, including, but not limited to, the European Union's GDPR, which came into force in May 2018 and the California Consumer Privacy Act, which came into force in January 2020, each of which creates a range of new compliance obligations, which could require us to change our business practices, and significantly increases financial penalties for noncompliance.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the U.S., the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards will have on our business or the businesses of our customers, including, but not limited to, the European Union's GDPR, which came into force in May 2018, the European Union's Digital Operational Resilience Act, or DORA, which was formally adopted November 2022 and the California Consumer Privacy Act, which came into force in January 2020, each of which creates a range of new compliance obligations, which could require us to change our business practices, and significantly increases financial penalties for noncompliance.
We may encounter implementation challenges, particularly as the number, size, type and complexity of customers that we serve increase and change, and we may have to delay revenue recognition for some complex engagements, which would harm our business and operating results.
We may encounter implementation challenges, particularly as the number, size, type and complexity of customers that we serve increases and changes, and we may have to delay revenue recognition for some complex engagements, which would harm our business and operating results.
Uncertain economic and global conditions may also adversely affect third parties with which we have entered into relationships and upon which we depend in order to grow our business, such as technology vendors and public cloud providers.
Uncertain economic and geopolitical conditions may also adversely affect third parties with which we have entered into relationships and upon which we depend in order to grow our business, such as technology vendors and third-party public cloud service providers.
We cannot assure you that our current customers will renew or expand their use of our solutions. If we are unable to attract new customers or retain or attract new business from current customers or technology partners, our business, financial condition and results of operations may be materially and adversely affected.
We cannot give assurance that our current customers will renew or expand their use of our solutions. If we are unable to attract new customers or retain or attract new business from current customers or partners, our business, financial condition and results of operations may be materially and adversely affected.
With respect to our Helix solution, we primarily compete with Galileo Financial Technologies, LLC, Marqeta, Inc. and Green Dot Corporation in the BaaS and embedded finance markets, and we compete with Finxact, a Fiserv company, Nymbus, Inc. and Thought Machine Group Limited in the cloud-core markets.
With respect to our Helix solution, we primarily compete with Galileo Financial Technologies, Marqeta and Green Dot in the BaaS and embedded finance markets, and we compete with Finxact, a Fiserv company, Nymbus, Mambu and Thought Machine Group in the cloud-core markets.
Security and privacy compromises experienced by our competitors, by our customers or by us may lead to public disclosures and widespread negative publicity.
Security and privacy compromises experienced by our competitors, by our customers, by our third-party providers or by us may lead to public disclosures and widespread negative publicity.
Current or future criminal capabilities, including increased threats from the use of artificial intelligence, discovery of existing or new vulnerabilities, and attempts to exploit those vulnerabilities or other developments, may compromise or breach our systems or solutions, or use them to facilitate financial transaction fraud. 32 Table of Contents In addition, third parties may attempt to fraudulently induce our employees or the employees of our customers or third-party providers into disclosing sensitive information such as usernames, passwords or other information to gain access to our confidential or proprietary information or the data of our customers and their End Users.
Current or future criminal capabilities, including increased threats and speed of exploitation enabled by the use of AI, discovery of existing or new vulnerabilities, and attempts to exploit those vulnerabilities or other developments, may compromise or breach our systems or solutions, or use them to facilitate financial transaction fraud. 26 Table of Contents In addition, third parties may attempt to fraudulently induce our employees or the employees of our customers or third-party providers into disclosing sensitive information such as usernames, passwords or other information to gain access to our confidential or proprietary information or the data of our customers and their End Users.
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. We are subject to counterparty risk with respect to the capped call transactions, and they may not operate as planned.
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. 54 Table of Contents We are subject to counterparty risk with respect to the Capped Calls, and they may not operate as planned.
Additionally, if our stock price trades at a level where the conversion of any series of our convertible notes is not economical for holders of such convertible notes, the conversion of the applicable series of convertible notes is highly unlikely.
Additionally, if our stock trades at a level where the conversion of any series of our convertible notes is not economical for note holders, the conversion of the applicable series of convertible notes is unlikely.
Consequences related to our development and use of AI may result in reputational harm or liability. We currently incorporate AI capabilities into certain of our s olutions and we anticipate further utilization of AI in our solutions in the future.
Consequences related to our development and use of AI may result in reputational harm or liability. We currently incorporate AI capabilities into certain of our solutions, and we are making investments and anticipate further utilization of AI in our solutions in the future.
This will result in us needing to repay the full aggregate principal amount outstanding of the applicable series of our convertible notes, plus accrued and unpaid interest and additional amounts (if any) at maturity in lieu of settling conversions of the convertible notes, and extinguishing our indebtedness under such convertible notes, with shares of our common stock.
This would require us to repay the full aggregate principal amount outstanding of the applicable series of our convertible notes, plus accrued and unpaid interest and additional amounts (if any) at maturity in cash in lieu of settling conversions of the convertible notes, and thus extinguishing our indebtedness under such convertible notes with shares of our common stock.
A default under one of the indentures governing our convertible notes or a fundamental change itself could also lead to a default under agreements governing our future indebtedness.
A default under one of the indentures governing our convertible notes or a fundamental change itself could also lead to a default under our Revolving Credit Agreement and agreements governing our future indebtedness.
Economic uncertainties, whether relating to general macroeconomic and geopolitical conditions or challenges in the financial services industry, including specifically related to discretionary spending, have the ability to limit the growth of our business and negatively affect our operating results.
Economic uncertainties, whether relating to general economic and geopolitical conditions, a changing or uncertain regulatory environment or challenges in the financial services industry, including specifically related to discretionary spending, have the ability to limit the growth of our business and negatively affect our operating results.
Our certificate of incorporation and bylaws: • authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to help defend against a takeover attempt; 52 Table of Contents • require that directors only be removed from office for cause and only upon a supermajority stockholder vote; • provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by stockholders; • prevent stockholders from calling special meetings; • include advance notice procedures for stockholders to nominate candidates for election as directors or bring matters before an annual meeting of stockholders; • prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and • provide that certain litigation against us can only be brought in Delaware.
Our certificate of incorporation and bylaws: • authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to help defend against a takeover attempt; • require that directors only be removed from office for cause and only upon a supermajority stockholder vote; • provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office rather than by stockholders; • prevent stockholders from calling special meetings; • include advance notice procedures for stockholders to nominate candidates for election as directors or bring matters before an annual meeting of stockholders; • prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and • provide that certain litigation against us can only be brought in Delaware. 52 Table of Contents We may not be able to obtain capital when desired on favorable terms, if at all, and we may not be able to obtain capital or complete acquisitions through the use of equity or without dilution to our stockholders.
Further, given the flexibility and complexity of our solutions, including an increasing number of integrations to third party solutions, there is a risk that configurations of, or defects in, the solutions or errors in their development or implementation could create vulnerabilities to security and privacy breaches.
Further, given the flexibility and complexity of our solutions, including an increasing number of integrations to third party solutions and increasing reliance on third-party public cloud service providers, there is a risk that configurations of, or defects in, the solutions or errors in their development or implementation could create vulnerabilities to fraud, security and privacy breaches.
We currently host the majority of our digital banking platform solutions from two third-party data center hosting facilities located in Austin, Texas and Carrollton, Texas, which are both operated by the same third-party provider, and our digital lending and relationship pricing solutions, Helix solutions and some of our digital banking platform solutions are hosted by cloud-based service providers, including Amazon Web Services and Microsoft Azure.
We currently host a significant portion of our digital banking platform solutions from two third-party data center hosting facilities located in Austin, Texas and Carrollton, Texas, which are both operated by the same third-party provider, and our digital lending and relationship pricing solutions, Helix solutions and an increasing portion of our digital banking platform solutions are hosted by third-party public cloud service providers, including Amazon Web Services and Microsoft Azure.
Risks Related to Our Convertible Notes We incurred indebtedness by issuing our 2026 Notes in 2019, and our 2025 Notes in 2020, and our debt repayment obligations may adversely affect our financial condition and cash flows from operations in the future.
Risks Related to Our Debt We incurred indebtedness by issuing our 2026 Notes in 2019, and our 2025 Notes in 2020, we may borrow under our Revolving Credit Agreement, and our debt repayment obligations may adversely affect our financial condition and cash flows from operations in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CRO has over eight years of senior risk management experience at large technology organizations, following a 20-year career in the U.S. Army.
Biggest changeThis program is managed by our Chief Risk Officer, or CRO, appointed by the RACC, and an Enterprise Risk Oversight Committee consisting of a cross-functional representation of senior leaders including our Chief Information Security Officer, or CISO. Our CRO has over nine years of senior risk management experience at large technology organizations, following a 20-year career in the U.S. Army.
Our enterprise risk management team works in partnership with our dedicated security, information technology, compliance, internal audit, and third-party risk management functions, which collectively rely on a variety of internal resources and processes, as well as third-party consultants, auditors and applications, to identify, assess and manage cybersecurity risks, including cybersecurity threats related to third-party providers on which we rely.
Our enterprise risk management team works in partnership with our security, information technology, compliance, internal audit, and third-party risk management functions, which collectively rely on a variety of internal resources and processes, as well as third-party consultants, auditors and applications, to identify, assess and manage cybersecurity risks, including cybersecurity threats related to third-party providers on which we rely.
Our enterprise risk management function also extensively consults with senior management across our organization in identifying, assessing and managing risks. Our information security program is managed by a dedicated CISO, whose team is responsible for leading our enterprise-wide cybersecurity strategy, policy, standards, architecture and processes.
Our enterprise risk management function also extensively consults with senior management across our organization in identifying, assessing and managing risks. Our information security program is managed by a CISO, whose team is responsible for leading our enterprise-wide cybersecurity strategy, policy, standards, architecture and processes.
Our enterprise risk management program includes a formal, enterprise-wide inventory, categorization and assessment of risks, including risks associated with cybersecurity threats, overseen by the Risk and Compliance Committee, or RACC, of our Board of Directors, and managed by our dedicated Chief Risk Officer, or CRO, and an Enterprise Risk Oversight Committee consisting of a cross-functional representation of senior leaders including our Chief Information Security Officer, or CISO.
Our enterprise risk management program includes a formal, enterprise-wide inventory, categorization and assessment of risks, including risks associated with cybersecurity threats, overseen by the Risk and Compliance Committee, or RACC, of our Board of Directors.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures. 56 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. 57 Item 6 . [Reserved] 58 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 59 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 80
Biggest changeItem 4. Mine Safety Disclosures. 56 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. 57 Item 6 . [Reserved] 58 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 59 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 79

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Information and Holders Our common stock has been listed on the New York Stock Exchange under the symbol "QTWO" since March 20, 2014. Prior to that date, there was no public trading market for our common stock.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market Information and Holders Our common stock has been listed on the New York Stock Exchange under the symbol "QTWO" since March 20, 2014. As of December 31, 2024, we had 5 holders of record of our common stock.
This graph assumes the investment of $100 on December 31, 2018 in our common stock, the Russell 2000 Index and the S&P Software & Services Select Index, and assumes the reinvestment of dividends, if any.
This graph assumes the investment of $100 on December 31, 2019 in our common stock, the Russell 2000 Index and the S&P Software & Services Select Index, and the reinvestment of dividends, if any.
We do not anticipate paying cash dividends on our common stock for the foreseeable future. Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2018 and December 31, 2023, with the cumulative total return of (i) the Russell 2000 Index and (ii) the S&P Software & Services Select Index.
We do not anticipate paying cash dividends on our common stock for the foreseeable future. Performance Graph The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2019 and December 31, 2024, with the cumulative total return of (i) the Russell 2000 Index and (ii) the S&P Software & Services Select Index.
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Our common stock was priced at $13.00 per share in our initial public offering on March 20, 2014. As of December 31, 2023, we had 22 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThis increase was primarily attributable to a $7.8 million increase in co-location facility costs and depreciation for our data center assets resulting from the increased infrastructure necessary to support our growing customer base, a $6.6 million increase from the amortization of capitalized software development and capitalized implementation services, a $2.4 million increase in personnel costs, including an increase in the number of personnel who provide implementation and customer support services and maintain our data centers and other technical infrastructure and a $0.7 million increase from amortization of acquired customer technology resulting from the Sensibill business acquired in the fourth quarter of 2022, partially offset by a $2.3 million decrease in pass-through fees, a $2.0 million decrease in third-party costs related to intellectual property included in our solutions and transaction processing costs incurred and a $0.6 million decrease in overhead costs and other discretionary expenses.
Biggest changeThis increase was primarily attributable to a $9.2 million increase in personnel costs, including an increase in the number of personnel who provide implementation and customer support services and maintain our third-party data centers and other technical infrastructure, an $8.8 million net increase in co-location facility, hardware and software costs, third-party public cloud service provider costs and depreciation of our data center assets resulting from the increased infrastructure necessary to support growing customer activity, a $6.1 million increase from the amortization of capitalized software development and capitalized implementation services, a $3.5 million increase in third-party costs related to intellectual property included in our solutions and transaction processing costs and a $2.0 million increase in overhead costs and other discretionary expenses, partially offset by a $4.8 million decrease as a result of higher capitalized implementation costs, a $3.4 million decrease in services, primarily in pass-through fees and a $1.4 million decrease in amortization of acquired customer technology resulting from assets that became fully amortized.
We have continuously invested in expanding and improving our digital banking platform since we introduced it in 2005, and we intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and new markets.
We have continuously invested in expanding and improving our digital banking platform since we introduced it in 2005. We intend to continue investing organically and to selectively pursue acquisitions of and strategic investments in technologies that will strengthen and expand the features and functionality of our solutions and provide access to new customers and markets.
Subscription fees are based on the number of solutions purchased by our customers, the number of End Users using the solutions and other usage fees those users generate using our solutions in excess of the levels included in our standard subscription fee.
Subscription fees are based on the number of solutions purchased by our customers, the number of End Users using the solutions and other usage fees those users generate by using our solutions in excess of the levels included in our standard subscription fee.
The structure and terms of our digital lending and relationship pricing arrangements vary, but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements.
The structure and terms of our digital lending and relationship pricing arrangements vary but generally are also sold on a subscription basis through our direct sales organization, and the related revenues are recognized over the terms of the customer agreements.
Total Other Income (Expense), Net Total other income (expense), net, consists primarily of interest income and expense, other non-operating income and expense, loss on disposal of long-lived assets, foreign currency translation adjustment and gain (loss) on extinguishment of debt. We earn interest income on our cash, cash equivalents and investments.
Total Other Income (Expense), Net Total other income (expense), net, consists primarily of interest income and expense, other non-operating income and expense, loss on disposal of long-lived assets, foreign currency translation adjustment and gain on extinguishment of debt. We earn interest income on our cash, cash equivalents and investments.
Significant Judgments Performance Obligations and Standalone Selling Price A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Significant Judgments Performance Obligations and Standalone Selling Price A performance obligation is a promise in a contract to transfer a good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Cash Flows from Investing Activities Our investing activities have consisted primarily of purchases and maturities of investments, acquisitions of businesses, purchases of property and equipment to support our growth and costs incurred for the development of capitalized software.
Cash Flows from Investing Activities Our investing activities have consisted primarily of purchases and maturities of investments, acquisitions of businesses, costs incurred for the development of capitalized software and purchases of property and equipment to support our growth.
We purpose-build our platforms and solutions to enable success for our customers and technology partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.
We purpose-build our platforms and solutions to enable success for our customers and partners by allowing them to digitize their operations and offerings, differentiate their digital brands, integrate traditional and emerging financial services, and ultimately, enhance their End-User acquisition, engagement and retention and improve their operational efficiencies and profitability.
While we anticipate sales and marketing expenses as a percentage of revenue may fluctuate on a near-term basis, we expect such expenses to decline as a percentage of our revenues over the long-term as our revenues grow and we realize cost efficiencies in the business.
While sales and marketing expenses as a percentage of revenue may fluctuate on a near-term basis, we expect such expenses to decline as a percentage of our revenues over the long-term as our revenues grow and we realize cost efficiencies in the business.
Premier Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services, resulting in a deeper and ongoing level of engagement with them. Professional services revenues also consist of custom services, core conversion services and other general professional services. These revenues are generally billed and recognized when delivered.
Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services, resulting in a deeper and ongoing level of engagement with them. Professional services revenues also consist of custom services, core conversion services and other general professional services. These revenues are generally billed and recognized when delivered.
We value RSUs at the closing market price on the date of grant. RSUs typically vest in equal installments over a four-year period and compensation expense is recognized straight-line over the requisite service period. We value stock options and purchase rights under the ESPP using the Black-Scholes option-pricing model.
We value RSUs at the closing market price on the date of grant. RSUs typically vest in equal installments over a four-year period and compensation expense is recognized straight-line over the requisite service period. We value purchase rights under the ESPP using the Black-Scholes option-pricing model.
Significant resources, personnel and expertise are required to effectively deliver and manage advanced digital banking and lending solutions in the complex and heavily regulated financial services industry. We provide digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of our customers.
Significant resources, personnel and expertise are required to effectively deliver and manage advanced digital solutions in the complex and heavily regulated financial services industry. We provide digital solutions that are designed to be highly configurable, scalable and adaptable to the specific needs of our customers.
Premier Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature.
Integrated Services revenue is generated from select established customer relationships where we have engaged with the customer for more tailored, premium professional services resulting in a deeper and ongoing level of engagement with them, which we deem to be recurring in nature.
We had annual revenue churn of 6.1%, 6.3% and 5.4% for the years ended December 31, 2023, 2022 and 2021, respectively. Our use of revenue churn has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate revenue churn differently, which reduces its usefulness as a comparative measure.
We had annual revenue churn of 4.4%, 6.1% and 6.3% for the years ended December 31, 2024, 2023 and 2022, respectively. Our use of revenue churn has limitations as an analytical tool, and investors should not consider it in isolation. Other companies in our industry may calculate revenue churn differently, which reduces its usefulness as a comparative measure.
Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2023 can be found in Notes 10 and 11 to our consolidated financial statements included in this Annual Report on Form 10-K.
Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2024 can be found in Notes 10 and 11 to our consolidated financial statements included in this Annual Report on Form 10-K.
A discussion regarding year-to-year comparisons between the year ended December 31, 2022 and December 31, 2021 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
A discussion regarding year-to-year comparisons between the year ended December 31, 2023 and December 31, 2022 can be found under Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Items such as the deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets and lease and other restructuring charges can have a material impact on our GAAP financial results. 63 Table of Contents Non-GAAP Revenue We define non-GAAP revenue as total revenue excluding the impact of purchase accounting.
Items such as the deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets and lease and other restructuring charges can have a material impact on our GAAP financial results. Non-GAAP Revenue We define non-GAAP revenue as total revenue excluding the impact of purchase accounting.
For a description and reconciliation of the non-GAAP measures discussed in this section, see "Non-GAAP Financial Measures." Overview We are a leading provider of digital banking and lending solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, wanting to incorporate banking into their customer engagement and servicing strategies.
For a description and reconciliation of the non-GAAP measures discussed in this section, see "Non-GAAP Financial Measures." Overview We are a leading provider of digital solutions to financial institutions, financial technology companies, or FinTechs, and alternative finance companies, or Alt-FIs, seeking to incorporate banking into their customer engagement and servicing strategies.
We believe that the exclusion of stock-based compensation expense provides for a better comparison of our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types.
We believe that the exclusion of stock-based compensation expense provides for a better comparison of 63 Table of Contents our operating results to prior periods and to our peer companies as the calculations of stock-based compensation vary from period to period and company to company due to different valuation methodologies, subjective assumptions and the variety of award types.
General and Administrative General and administrative expenses consist primarily of salaries and other personnel-related costs, including employee benefits, bonuses and stock-based compensation, of our administrative, finance and accounting, information systems, legal, human resources employees and certain members of our executive team. General and administrative expenses also include consulting and professional fees, insurance, travel and other corporate expenses.
General and Administrative General and administrative expenses consist primarily of salaries and other personnel-related costs, including employee benefits, bonuses and stock-based compensation, of our administrative, finance and accounting, information systems, compliance and security, legal, human resources employees and certain members of our executive team. General and administrative expenses also include consulting and professional fees, travel and other corporate expenses.
Known and estimable credits and incentives represent a form of variable consideration, which are estimated at contract inception and generally result in reductions to revenues recognized for a particular contract. These estimates are updated at the end of each reporting period as additional information becomes available.
Known and estimable credits and incentives represent a form of variable consideration, which are estimated at contract inception and generally result in reductions to revenues 69 Table of Contents recognized for a particular contract. These estimates are updated at the end of each reporting period as additional information becomes available.
The most significant drivers of changes in our net revenue retention rate each year have historically been the number of new customers in the prior year and the timing of our implementation of those new customers.
The most significant drivers of changes in our net revenue retention rates each year have historically been the number of new customers in the prior year and the timing of our implementation of those new customers.
Our net revenue retention rate provides insight into the impact on current year revenues of: the number of new customers implemented on any of our solutions during the prior year; the timing of our implementation of those new customers in the prior year; growth in the number of End Users on such solutions and changes in their usage of such solutions; and sales of new products and services to our existing customers during the current year, excluding any products or services resulting from businesses acquired during such year and customer attrition.
Our net revenue retention rates provide insight into the impact on current year revenues of: the number of new customers implemented on any of our solutions during the prior year; the timing of our implementation of those new customers in the prior year; growth in the number of End Users on such solutions and changes in their usage of such solutions; and sales of new products and services to our existing customers during the current year, excluding any products or services resulting from businesses acquired during such year and customer attrition.
Cancellations refer to customers that have either stopped using our services completely or remained a customer but terminated a particular service. Downgrades are a result of customers taking less of a particular service or renewing their contract for identical services at a lower price.
Cancellations refer to customers that have either stopped using our services 62 Table of Contents completely or remained a customer but terminated a particular service. Downgrades are a result of customers taking less of a particular service or renewing their contract for identical services at a lower price.
TSR PSUs and MSUs vest based on TSR relative to the TSR as set forth in the award agreement. The minimum percentage that can vest is 0%, with a maximum percentage of 200%. TSR PSUs and MSUs will vest over two-year and three-year performance periods.
The number of TSR PSUs and MSUs that vest is based on actual TSR relative to the TSR benchmark as set forth in the award agreement. The minimum percentage that can vest is 0%, with a maximum percentage of 200%. TSR PSUs and MSUs will vest over two-year and three-year performance periods.
(2) Includes amortization of acquired technology of $23.4 million, $22.7 million and $22.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) Includes amortization of acquired technology of $22.0 million, $23.4 million and $22.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Cost of revenues also includes the direct costs of bill-pay and other third-party intellectual property included in our solutions, the amortization of deferred solution and services costs, amortization of certain software development costs, co-location facility costs and depreciation of our data center assets, debit card related pass-through fees, cloud-based hosting services, an allocation of general overhead costs, the amortization of acquired technology intangibles and referral fees.
Cost of revenues also includes the direct costs of bill-pay and other third-party intellectual property included in our solutions, the amortization of deferred solution and services costs, amortization of certain software development costs, co-location facility costs and depreciation of our data center assets, debit card related pass-through fees, third-party public cloud service providers, an allocation of general overhead costs, the amortization of acquired technology intangibles and referral fees.
Stock-Based Compensation Stock-based compensation includes grants of stock options, restricted stock units, or RSUs, performance-based restricted stock units, and purchase rights under our employee stock purchase plan, or ESPP, and is used to compensate employees, directors and consultants. All awards are measured at fair value on grant date and forfeitures are recognized as they occur.
Stock-Based Compensation Stock-based compensation consists of restricted stock units, or RSUs, performance-based restricted stock units, and purchase rights under our employee stock purchase plan, or ESPP, and is used to compensate employees, directors and consultants. All awards are measured at fair value on grant date and forfeitures are recognized as they occur.
(3) Includes a gain of $19.9 million, a reduction of zero and a $1.5 million expense related to the early extinguishment of a portion of our convertible notes for the years ended December 31, 2023, 2022 and 2021, respectively. 73 Table of Contents The following table sets forth our results of operations data as a percentage of revenues for each of the periods indicated: Year Ended December 31, 2023 2022 2021 Revenues (1) 100.0 % 100.0 % 100.0 % Cost of revenues (2) 51.5 % 54.7 % 54.9 % Gross margin 48.5 % 45.3 % 45.1 % Operating expenses: Sales and marketing 17.5 % 19.1 % 17.2 % Research and development 22.0 % 23.0 % 23.5 % General and administrative 17.6 % 15.9 % 15.6 % Transaction-related costs — % 0.2 % 0.5 % Amortization of acquired intangibles 3.3 % 3.2 % 3.6 % Lease and other restructuring charges 1.8 % 2.3 % 0.4 % Total operating expenses 62.2 % 63.8 % 60.8 % Loss from operations (13.8) % (18.5) % (15.6) % Total other income (expense), net (3) 3.9 % (0.2) % (6.6) % Loss before income taxes (9.9) % (18.8) % (22.3) % Provision for income taxes (0.6) % (0.5) % (0.3) % Net loss (10.5) % (19.3) % (22.6) % _______________________________________________________________________________ (1) Includes deferred revenue reduction from purchase accounting of 0.1%, 0.1% and 0.4% for the years ended December 31, 2023, 2022 and 2021, respectively.
(3) Includes a gain of $19.9 million related to the early extinguishment of a portion of our convertible notes for the year ended December 31, 2023. 72 Table of Contents The following table sets forth our results of operations data as a percentage of revenues for each of the periods indicated: Year Ended December 31, 2024 2023 2022 Revenues (1) 100.0 % 100.0 % 100.0 % Cost of revenues (2) 49.1 % 51.5 % 54.7 % Gross margin 50.9 % 48.5 % 45.3 % Operating expenses: Sales and marketing 15.2 % 17.5 % 19.1 % Research and development 20.6 % 22.0 % 23.0 % General and administrative 17.7 % 17.6 % 15.9 % Transaction-related costs — % — % 0.2 % Amortization of acquired intangibles 2.4 % 3.3 % 3.2 % Lease and other restructuring charges 1.1 % 1.8 % 2.3 % Total operating expenses 57.0 % 62.2 % 63.8 % Loss from operations (6.1) % (13.8) % (18.5) % Total other income (expense), net (3) 1.6 % 3.9 % (0.2) % Loss before income taxes (4.4) % (9.9) % (18.8) % Provision for income taxes (1.1) % (0.6) % (0.5) % Net loss (5.5) % (10.5) % (19.3) % _______________________________________________________________________________ (1) Includes deferred revenue reduction from purchase accounting of 0.0%, 0.1% and 0.1% for the years ended December 31, 2024, 2023 and 2022, respectively.
Our solutions and our data center infrastructure and resources are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' data and that of their End Users.
Our solutions and our data center and cloud-based hosting infrastructure and resources are designed to comply with the stringent security and technical regulations applicable to financial institutions and financial services providers and to safeguard our customers' data and that of their End Users.
We recognize software license revenue once the customer obtains control of the license, which generally occurs at the start of each license term. We recognize the remaining arrangement consideration for maintenance revenue over time on a ratable basis over the term of the software license.
For these customers, we recognize software license revenue once the customer obtains control of the license, which generally occurs at the start of each license term, and recognize the remaining arrangement consideration for maintenance revenue over time on a ratable basis over the term of the software license.
We have developed a comprehensive suite of solutions to accelerate and optimize this convergence, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs, and Alt-FIs. 59 Table of Contents We deliver our solutions to most of our customers using a software-as-a-service, or SaaS, model under which our customers pay subscription fees for the use of our solutions.
We have developed a comprehensive suite of offerings to accelerate and optimize this transformation for our customers, ranging from digitizing entire banks to facilitating partnerships between financial institutions, FinTechs, and Alt-FIs. 59 Table of Contents We offer our solutions to most of our customers using a software-as-a-service, or SaaS, model under which our customers pay subscription fees for the use of our solutions.
Cost of Revenues Cost of revenues is comprised primarily of salaries and other personnel-related costs, including employee benefits, bonuses and stock-based compensation, for employees providing services to our customers. This includes the costs of our personnel performing implementation, customer support, data center and customer training activities.
Cost of Revenues Cost of revenues is comprised primarily of salaries and other personnel-related costs, including employee benefits, bonuses and stock-based compensation, for employees providing services to our customers. This includes the costs of our personnel performing implementation, customer support, third-party data centers and customer training activities.
We believe Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients.
Annualized Recurring Revenue We believe Subscription Annual Recurring Revenue, or Subscription ARR, and Total Annual Recurring Revenue, or Total ARR, provide important information about our future revenue potential and our ability to maintain and expand our relationship with existing clients.
Our Total ARR was $734.8 million, $655.2 million and $574.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Revenue Churn We utilize revenue churn to monitor the satisfaction of our customers and evaluate the effectiveness of our business solutions and strategies.
Our Total ARR was $824.2 million, $734.8 million and $655.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. Revenue Churn We utilize revenue churn to monitor the satisfaction of our customers and evaluate the effectiveness of our business solutions and strategies.
Due to rounding, totals may not equal the sum of the line items in the tables above. 74 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 A discussion regarding year-to-year comparisons between the year ended December 31, 2023 and December 31, 2022 is presented below.
Due to rounding, totals may not equal the sum of the line items in the tables above. 73 Table of Contents Comparison of the Years Ended December 31, 2024 and 2023 A discussion regarding year-to-year comparisons between the year ended December 31, 2024 and December 31, 2023 is presented below.
Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies contained in the Notes to Consolidated Financial Statements included in this report, regarding the impact of certain recent accounting pronouncements.
Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies contained in the Notes to Consolidated Financial Statements included in this report, regarding the impact of certain recent accounting pronouncements. 78 Table of Contents
We derive the majority of our revenues from subscription fees for the use of our solutions hosted in either our data centers or with cloud-based service providers, transactional revenue from bill-pay solutions, revenues for professional services and implementation services related to our solutions and certain third-party related pass-through fees.
We derive the majority of our revenues from subscription fees for the use of our solutions hosted in either our third-party data centers or with third-party public cloud service providers, transactional revenue from bill-pay solutions and remote deposit products, revenues for professional services and implementation services related to our solutions and certain third-party related pass-through fees.
We derive the majority of our revenues from subscription fees for the use of our solutions hosted in either our data centers or with cloud-based service providers, transactional revenue from bill-pay solutions, revenues for professional services and implementation services related to our solutions and certain third-party related pass-through fees.
We derive the majority of our revenues from subscription fees for the use of our solutions hosted in either our third-party data centers or with third-party public cloud service providers, transactional revenue from bill-pay solutions and remote deposit products, revenues for professional services and implementation services related to our solutions and certain third-party related pass-through fees.
We generally price our digital banking platform solutions based on the number of solutions purchased by our customers and the number of Registered Users (as defined below) or commercial account holders utilizing our solutions.
We generally price our digital banking platform solutions based on the number of solutions purchased by our customers and the number of Registered Users, as defined in "Key Operating Measures" below, or commercial account holders utilizing our solutions.
Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures. Our Subscription ARR was $593.9 million, $500.9 million and $426.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Other companies in our industry may calculate Subscription ARR and Total ARR differently, which reduces their usefulness as comparative measures. Our Subscription ARR was $681.9 million, $593.9 million and $500.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.
These shifts are leading to new roles and interdependencies among financial institutions, FinTechs and Alt-FIs, necessitating new technology, partnerships, and business models. We believe that lasting value creation in financial services will be achieved by those companies that are capable of supporting and enhancing this convergence.
These shifts are leading to new roles and interdependencies among financial institutions, FinTechs and Alt-FIs, necessitating new technology, partnerships, and business models. We believe that lasting value creation in financial services will be achieved by those companies that are capable of supporting and embracing these market dynamics.
(2) Includes amortization of acquired technology of 3.7%, 4.0% and 4.4% for the years ended December 31, 2023, 2022 and 2021, respectively. (3) Includes a gain of 3.2%, a reduction of 0.0% and a 0.3% expense related to the early extinguishment of a portion of our convertible notes for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) Includes amortization of acquired technology of 3.2%, 3.7% and 4.0% for the years ended December 31, 2024, 2023 and 2022, respectively. (3) Includes a gain of 3.2% related to the early extinguishment of a portion of our convertible notes for the year ended December 31, 2023.
We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results for the following reasons: • adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance with and without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; • our management uses adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance; • adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and • our investor and analyst presentations include adjusted EBITDA as a supplemental measure of our overall operating performance.
We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results for the following reasons: • adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance with and without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; • our management uses adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance; • adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and • our investor and analyst presentations include adjusted EBITDA as a supplemental measure of our overall operating performance. 64 Table of Contents Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.
Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Premier Services.
Our Total ARR also includes the contracted minimums associated with all contracts in place at the end of the quarter for which revenue recognition has not yet commenced, and revenue generated from Integrated Services, which we previously referred to as Premier Services.
Year Ended December 31, 2023 2022 2021 Revenue: GAAP revenue $ 624,624 $ 565,673 $ 498,720 Deferred revenue reduction from purchase accounting 344 644 2,129 Total Non-GAAP revenue $ 624,968 $ 566,317 $ 500,849 Non-GAAP Operating Income We provide non-GAAP operating income that excludes such items as deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets and lease and other restructuring charges.
Year Ended December 31, 2024 2023 2022 Revenue: GAAP revenue $ 696,464 $ 624,624 $ 565,673 Deferred revenue reduction from purchase accounting — 344 644 Total Non-GAAP revenue $ 696,464 $ 624,968 $ 566,317 Non-GAAP Operating Income We provide non-GAAP operating income that excludes such items as deferred revenue reduction from purchase accounting, stock-based compensation, transaction-related costs, amortization of acquired technology, amortization of acquired intangible assets and lease and other restructuring charges.
We anticipate that sales and marketing expenses will continue to increase in absolute dollars in the long-term as we continue to support our revenue growth and increase marketing spend to attract new customers, retain and grow existing customers, build brand awareness, and as we continue to hold in-person sales formats and experiences for future user conferences, including our annual client conference typically held during the second quarter.
We anticipate that sales and marketing expenses will increase in absolute dollars over the long-term as we continue to support our revenue growth and increase marketing spend to attract new customers, retain and grow existing customers, build brand awareness, and as we continue to hold various experiences for our current and prospective customers, including our annual client conference typically held during the second quarter.
We had 450, 444 and 448 Installed Customers on our digital banking platform as of December 31, 2023, 2022 and 2021, respectively.
We had 460, 450 and 444 Installed Customers on our digital banking platform as of December 31, 2024, 2023 and 2022, respectively.
General and administrative expenses also include costs to comply with regulations governing public companies and financial institutions, costs of directors' and officers' liability insurance, third-party legal fees, investor 76 Table of Contents relations activities and costs to comply with Section 404 of the Sarbanes-Oxley Act, or SOX.
General and administrative expenses also include costs to comply with regulations governing public companies and financial institutions, third-party legal fees, investor relations activities and costs to comply with Section 404 of the Sarbanes-Oxley Act, or SOX.
The use of adjusted EBITDA as an analytical tool has limitations such as: • depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and adjusted EBITDA does not reflect cash requirements for such replacements; • adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments; • adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation; • adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and • other companies, including companies in our industry, might calculate adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures. 65 Table of Contents Because of these and other limitations, you should consider adjusted EBITDA together with our GAAP financial measures including cash flow from operations and net loss.
The use of adjusted EBITDA as an analytical tool has limitations such as: • depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and adjusted EBITDA does not reflect cash requirements for such replacements; • adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments; • adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation; • adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and • other companies, including companies in our industry, might calculate adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.
The structure and terms of our Helix arrangements with FinTechs vary, but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred. We have achieved high growth since our inception.
The structure and terms of our Helix arrangements with FinTechs vary but typically involve relatively lower contracted minimum revenues and instead emphasize usage-based revenue, with such revenue recognized as it is incurred.
Additionally, over the past several years we have acquired or developed new solutions and additional functionality that serve a broader range of needs of financial institutions as well as the needs of FinTechs and Alt-FIs.
We have also acquired or developed new solutions and additional functionality that serve a broader range of needs of financial institutions as well as the needs of FinTechs and Alt-FIs.
Liquidity and Capital Resources Sources of Liquidity We have financed our operations primarily through the proceeds from the issuance of common stock from our initial public offering in March 2014, additional registered common stock offerings, including our June 2019 and May 2020 common stock offerings, our February 2018 convertible note offering, our June 2019 convertible note offering, our November 2020 convertible note offering, and cash flows from operations.
Liquidity and Capital Resources Sources of Liquidity We have financed our operations primarily through the proceeds from the issuance of common stock from our initial public offering in March 2014, additional registered common stock offerings, convertible note offerings, and cash flows from operations.
This increase in revenue was primarily attributable to a $63.9 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in Registered Users from new and existing customers, partially offset by a $2.0 million decrease in transactional revenue and a $3.0 million decrease in services and other revenue from declines in professional and discretionary services and pass-through revenue related to our Helix solutions.
This increase in revenue was primarily attributable to a $77.7 million increase in subscription revenue from the sale of additional solutions to new and existing customers and growth in usage from new and existing customers and a $3.1 million increase in transactional revenue from usage of our solutions, partially offset by a decrease of $8.9 million in services and other revenue from declines in professional and discretionary services and Helix related pass-through revenue.
As 66 Table of Contents of December 31, 2023, our subscription revenue growth was 16% year over year, and we expect subscription revenue will continue to increase as a percentage of total revenue contribution.
As of December 31, 2024, our subscription revenue growth was 16% year over year, and we expect subscription revenue will continue to increase as a percentage of total revenue.
The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Reconciliation of net loss to adjusted EBITDA: Net loss $ (65,384) $ (108,983) $ (112,746) Depreciation and amortization 71,707 61,659 54,833 Stock-based compensation 79,188 65,157 54,334 Transaction-related costs 24 1,194 3,099 Provision for income taxes 3,562 2,908 1,643 Interest and other (income) expense, net (4,724) 1,087 31,063 Deferred revenue reduction from purchase accounting 344 644 2,129 (Gain) loss on extinguishment of debt (19,869) — 1,513 Lease and other restructuring charges 12,092 13,225 2,008 Adjusted EBITDA $ 76,940 $ 36,891 $ 37,876 Components of Operating Results Revenues Revenue-generating activities directly relate to the sale, implementation and support of our solutions within a single operating segment.
The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Reconciliation of net loss to adjusted EBITDA: Net loss $ (38,536) $ (65,384) $ (108,983) Deferred revenue reduction from purchase accounting — 344 644 Stock-based compensation 89,215 79,188 65,157 Transaction-related costs — 24 1,194 Depreciation and amortization 68,809 71,707 61,659 Lease and other restructuring charges 9,517 12,092 13,225 Provision for income taxes 7,676 3,562 2,908 Gain on extinguishment of debt — (19,869) — Interest and other (income) expense, net (11,343) (4,724) 1,087 Adjusted EBITDA $ 125,338 $ 76,940 $ 36,891 Components of Operating Results Revenues Revenue-generating activities directly relate to the sale, implementation and support of our solutions within a single operating segment.
Implementation services for on-premises agreements are recognized at commencement date. Under certain circumstances, we have determined that these implementation services qualify as a separate performance obligation in certain markets and geographies, and the implementation services for these agreements are recognized over time as services are performed. 69 Table of Contents Professional services revenues consist primarily of Premier Services.
Under certain circumstances, we have determined that these implementation services qualify as a separate performance obligation in certain markets and geographies, and the implementation services for these agreements are recognized over time as services are performed. Professional services revenues consist primarily of Integrated Services.
As we continue to make these investments, we expect they will increase cost of revenues in absolute dollars, and we expect such expenses to decline as a percentage of revenue as our operations continue to scale and revenues grow. 75 Table of Contents Operating Expenses The following tables present our operating expenses for each of the periods indicated (dollars in thousands): Sales and Marketing Year Ended December 31, Change 2023 2022 $ (%) Sales and marketing $ 109,522 $ 108,214 $ 1,308 1.2 % Percentage of revenues 17.5 % 19.1 % Sales and marketing expenses increased by $1.3 million, or 1.2%, from $108.2 million for the year ended December 31, 2022 to $109.5 million for the year ended December 31, 2023.
As we continue to make these investments, we expect they will increase cost of revenues in absolute dollars, and we expect such expenses to decline as a percentage of revenue as our operations continue to scale and revenues grow. 74 Table of Contents Operating Expenses The following tables present our operating expenses for each of the periods indicated (dollars in thousands): Sales and Marketing Year Ended December 31, Change 2024 2023 $ (%) Sales and marketing $ 105,951 $ 109,522 $ (3,571) (3.3) % Percentage of revenues 15.2 % 17.5 % Sales and marketing expenses decreased by $3.6 million, or 3.3%, from $109.5 million for the year ended December 31, 2023 to $106.0 million for the year ended December 31, 2024.
Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs and lease impairments, partially offset by a gain on extinguishment of debt.
Non-cash adjustments primarily consisted of stock-based compensation, depreciation and amortization, amortization of deferred implementation and deferred solution and other costs, amortization of debt issuance costs, deferred income taxes and lease impairments, partially offset by amortization of premiums and discounts on investments.
We recognize revenue for debit card and bill-pay related transaction services generated when End Users utilize debit cards integrated with our Helix products and other payment services in the month incurred based on actual or estimated transactions.
We recognize revenue for debit card and bill-pay related transaction services when End Users utilize debit card services integrated within our Helix and other payment-service solutions 65 Table of Contents in the month incurred based on actual or estimated transactions.
For the year ended December 31, 2021, our net cash provided by operating activities was $31.1 million, which consisted of non-cash adjustments of $168.3 million, partially offset by a net loss of $112.7 million and cash outflows from changes in operating assets and liabilities of $24.5 million.
For the year ended December 31, 2024, our net cash provided by operating activities was $135.8 million, which consisted of non-cash adjustments of $189.1 million, partially offset by a net loss of $38.5 million and cash outflows from changes in operating assets and liabilities of $14.8 million.
Installed Customers We define Installed Customers as the number of customers on live implementations (or installations) of our digital banking platforms.
Installed Customers We define Installed Customers as the number of customers live on our digital banking platform.
Our collection of solutions now spans digital banking, digital lending and relationship pricing, digital account opening, regulatory and compliance, account switching, data-driven sales enablement, spending insights and portfolio management, and we serve account holders and borrowers across retail, SMB, and commercial segments, in addition to our open platform solutions and BaaS offerings.
Our expanded collection of solutions now spans digital banking, digital lending and relationship pricing, regulatory and compliance, risk and fraud, account switching, data-driven sales enablement, spending insights and portfolio management, and also includes our open platform solutions as well as our core and BaaS offerings. We serve account holders and borrowers across retail, SMBs, and commercial segments.
Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base.
Our average number of Registered Users per Installed Customer grows as our existing digital banking platform customers add more Registered Users and as we add larger financial institutions to our Installed Customer base. We anticipate that the number of Registered Users will grow at a faster rate than our number of Installed Customers.
If the carrying value is not recoverable, an impairment is recognized to the extent that the carrying value of the asset group exceeds its fair value. 72 Table of Contents Results of Operations The following table sets forth our results of operations data for each of the periods indicated (in thousands): Year Ended December 31, 2023 2022 2021 Revenues (1) $ 624,624 $ 565,673 $ 498,720 Cost of revenues (2) 321,973 309,328 273,685 Gross profit 302,651 256,345 225,035 Operating expenses: Sales and marketing 109,522 108,214 85,564 Research and development 137,334 130,103 116,952 General and administrative 110,186 90,163 77,915 Transaction-related costs 24 1,176 2,690 Amortization of acquired intangibles 20,667 18,248 17,901 Lease and other restructuring charges 10,975 13,202 2,008 Total operating expenses 388,708 361,106 303,030 Loss from operations (86,057) (104,761) (77,995) Total other income (expense), net (3) 24,235 (1,314) (33,108) Loss before income taxes (61,822) (106,075) (111,103) Provision for income taxes (3,562) (2,908) (1,643) Net loss $ (65,384) $ (108,983) $ (112,746) ______________________________________________________________________________ (1) Includes deferred revenue reduction from purchase accounting of $0.3 million, $0.6 million and $2.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.
If the carrying value is not recoverable, an impairment is recognized to the extent that the carrying value of the asset group exceeds its fair value. 71 Table of Contents Results of Operations The following table sets forth our results of operations data for each of the periods indicated (in thousands): Year Ended December 31, 2024 2023 2022 Revenues (1) $ 696,464 $ 624,624 $ 565,673 Cost of revenues (2) 341,983 321,973 309,328 Gross profit 354,481 302,651 256,345 Operating expenses: Sales and marketing 105,951 109,522 108,214 Research and development 143,244 137,334 130,103 General and administrative 122,942 110,186 90,163 Transaction-related costs — 24 1,176 Amortization of acquired intangibles 16,979 20,667 18,248 Lease and other restructuring charges 7,628 10,975 13,202 Total operating expenses 396,744 388,708 361,106 Loss from operations (42,263) (86,057) (104,761) Total other income (expense), net (3) 11,403 24,235 (1,314) Loss before income taxes (30,860) (61,822) (106,075) Provision for income taxes (7,676) (3,562) (2,908) Net loss $ (38,536) $ (65,384) $ (108,983) ______________________________________________________________________________ (1) Includes deferred revenue reduction from purchase accounting of zero, $0.3 million and $0.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, which include our ability to access capital markets, are adequate to meet our cash requirements for the next twelve months.
Based upon our current levels of operations, we believe that our cash flow from operations along with our other sources of liquidity, including our ability to access capital markets and available borrowings under our $125.0 million Revolving Credit Agreement, are adequate to meet our cash requirements for the next twelve months.
As of December 31, 2023, our principal sources of liquidity were cash, cash equivalents and investments of $324.0 million.
As of December 31, 2024, our principal sources of liquidity were cash, cash equivalents and investments of $446.6 million.
Our integrated, end-to-end collection of solutions includes retail, SMB and commercial banking, regulatory and compliance, digital lending and relationship pricing, open platform solutions, BaaS, digital account opening, account switching and data-driven sales enablement, spending insights and portfolio management solutions among others.
Our portfolio of digital solutions includes a comprehensive suite of offerings for retail, SMB and commercial banking, onboarding, regulatory and compliance, risk and fraud, digital lending and relationship pricing, open platform solutions, BaaS, account switching and data-driven sales enablement, spending insights and portfolio management solutions, among others.
We consider various factors including the degree to which usage is interdependent or interrelated to past services, costs to us per user over the contract, and contractual price per user changes and their relationship to market terms, forecasted data, and our cost to fulfill the obligation.
We consider various factors including the degree to which usage is interdependent or interrelated to past services and contractual price per user and their relationship to market terms.
Cost of Revenues The following table presents our cost of revenues for each of the periods indicated (dollars in thousands): Year Ended December 31, Change 2023 2022 $ (%) Cost of revenues $ 321,973 $ 309,328 $ 12,645 4.1 % Percentage of revenues 51.5 % 54.7 % Cost of revenues increased by $12.6 million, or 4.1%, from $309.3 million for the year ended December 31, 2022 to $322.0 million for the year ended December 31, 2023.
Cost of Revenues The following table presents our cost of revenues for each of the periods indicated (dollars in thousands): Year Ended December 31, Change 2024 2023 $ (%) Cost of revenues $ 341,983 $ 321,973 $ 20,010 6.2 % Percentage of revenues 49.1 % 51.5 % Cost of revenues increased by $20.0 million, or 6.2%, from $322.0 million for the year ended December 31, 2023 to $342.0 million for the year ended December 31, 2024.
Research and Development Year Ended December 31, Change 2023 2022 $ (%) Research and development $ 137,334 $ 130,103 $ 7,231 5.6 % Percentage of revenues 22.0 % 23.0 % Research and development expenses increased by $7.2 million, or 5.6%, from $130.1 million for the year ended December 31, 2022 to $137.3 million for the year ended December 31, 2023.
Research and Development Year Ended December 31, Change 2024 2023 $ (%) Research and development $ 143,244 $ 137,334 $ 5,910 4.3 % Percentage of revenues 20.6 % 22.0 % Research and development expenses increased by $5.9 million, or 4.3%, from $137.3 million for the year ended December 31, 2023 to $143.2 million for the year ended December 31, 2024.
Lease and Other Restructuring Charges Year Ended December 31, Change 2023 2022 $ (%) Lease and other restructuring charges $ 10,975 $ 13,202 $ (2,227) (16.9) % Percentage of revenues 1.8 % 2.3 % Lease and other restructuring charges decreased by $2.2 million, or 16.9%, from $13.2 million for the year ended December 31, 2022 to $11.0 million for the year ended December 31, 2023.
Lease and Other Restructuring Charges Year Ended December 31, Change 2024 2023 $ (%) Lease and other restructuring charges $ 7,628 $ 10,975 $ (3,347) (30.5) % Percentage of revenues 1.1 % 1.8 % Lease and other restructuring charges decreased by $3.3 million, or 30.5%, from $11.0 million for the year ended December 31, 2023 to $7.6 million for the year ended December 31, 2024.
We also generate a portion of our transactional revenues from third-party fees related to End Users utilizing remote deposit products and from fees generated when End Users utilize debit cards integrated with our Helix products. We recognize revenue for transaction services in the month incurred based on actual or estimated transactions.
We also generate a portion of our transactional revenues from third-party fees related to End Users utilizing remote deposit products and from fees generated when End Users utilize debit cards integrated with our Helix products.
We periodically review the estimated useful lives and fair values of our identifiable intangible assets, taking into consideration any events or circumstances which might result in a diminished fair value or revised useful life. 71 Table of Contents The excess purchase price over the fair value of assets acquired is recorded as goodwill.
Amounts allocated to the acquired intangible assets are amortized on a straight-line basis over the estimated useful lives. We periodically review the estimated useful lives and fair 70 Table of Contents values of our identifiable intangible assets, taking into consideration any events or circumstances which might result in a diminished fair value or revised useful life.
As our business grows, we intend to continue to invest in and grow our services and delivery organization to support our customers' needs, help them through their digital transformation, deliver our solutions in a timely and effective manner and maintain our strong reputation.
We intend to continue to make investments in technology innovation and software development to enhance our existing solutions and platforms while expanding our product portfolio. 60 Table of Contents As our business grows, we intend to continue to invest in and grow our services and delivery organization to support our customers' needs, help them through their digital transformation, deliver our solutions in a timely and effective manner and maintain our strong reputation.
For the year ended December 31, 2023, net cash provided by investing activities was $113.3 million, consisting of $220.8 million received from the maturities of investments, partially offset by $76.9 million for the purchase of investments, $25.0 million in capitalized software development costs and $5.7 million for the purchase of property and equipment.
For the year ended December 31, 2024, net cash used in investing activities was $21.1 million, consisting of $95.8 million for the purchase of investments, $22.3 million in capitalized software development costs and $6.7 million for the purchase of property and equipment, partially offset by $103.7 million received from the maturities of investments.
Seasonality and Quarterly Results Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, including the timing of investments to grow our business. The timing of our implementation activities and corresponding revenues from new customers are subject to fluctuations based on the timing of our sales.
Seasonality and Quarterly Results Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, including the timing of investments to grow our business.
Operating Expenses Operating expenses primarily consist of sales and marketing, research and development and general and administrative expenses. They also include costs related to our acquisitions and the resulting amortization of acquired intangible assets from those acquisitions. Over the long term, we intend to continue to hire new employees and make other investments to support our anticipated growth.
Operating Expenses Operating expenses primarily consist of sales and marketing, research and development and general and administrative expenses. They also include costs related to our acquisitions and the resulting amortization of acquired intangible assets from those acquisitions.
Transactional Revenues We generate a majority of our transactional revenues based on the number of bill-pay transactions that End Users initiate on our digital banking platform.
Revenues from term licenses and maintenance agreements were not significant in the periods presented. Transactional Revenues We generate a majority of our transactional revenues based on the number of bill-pay transactions that End Users initiate on our digital banking platform.
This increase was primarily attributable to a $14.3 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions and a $0.7 million increase in travel-related expenses, partially offset by a $7.9 million decrease as a result of increased capitalized software development costs.
This increase was primarily attributable to a $2.4 million increase from lower capitalization of software development costs, a $2.3 million increase in personnel costs as a result of the growth in our research and development organization to support continued enhancements to our solutions and a $1.0 million increase in travel-related and other discretionary expenses.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs inflation has accelerated in the U.S. and globally, we continue to monitor all inflation-driven costs, regardless of where they are incurred. I f our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases.
Biggest changeNonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. Item 8. Financial Statements and Supplementary Data.
We will continue to review this matter and may consider hedging certain foreign exchange risks in future years. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition or results of operations.
We will continue to review this matter and may consider hedging certain foreign exchange risks in future years. Inflation Risk We do not believe that inflation has had a direct material effect on our business, financial condition or results of operations.
Foreign Currency Risk As of December 31, 2023, our most significant currency exposures were the Indian rupee, Canadian dollar, British pound, Australian dollar and Mexican peso. As of December 31, 2023, we had operating subsidiaries in India, Canada, the United Kingdom, Australia and Mexico.
Foreign Currency Risk As of December 31, 2024, our most significant currency exposures were the Indian rupee, Mexican peso, Canadian dollar, Australian dollar and British pound. As of December 31, 2024, we had operating subsidiaries in India, Mexico, Canada, Australia and the United Kingdom.
As of December 31, 2023, we had an outstanding principal amount of $304.0 million of 2026 Notes, with a fixed annual interest rate of 0.75% and an outstanding principal amount of $191.0 million of 2025 Notes with a fixed annual interest rate of 0.125%.
As of December 31, 2024, we had an outstanding principal amount of $304.0 million of 2026 Notes, with a fixed annual interest rate of 0.75% and an outstanding principal amount of $191.0 million of 2025 Notes with a fixed annual interest rate of 0.125%. Borrowings under our Revolving Credit Agreement bear interest at rates that are variable.
Our inability or failure to do so could harm our business, financial condition and results of operations. 80 Table of Contents Item 8. Financial Statements and Supplementary Data. The information required by this item is incorporated by reference to the consolidated financial statements and accompanying notes set forth on pages F-1 through F-38 of this Annual Report on Form 10-K.
The information required by this item is incorporated by reference to the consolidated financial statements and accompanying notes set forth on pages F-1 through F-36 of this Annual Report on Form 10-K.
If overall interest rates fell by 10% in 2023 or 2022, our interest income would not have been materially affected.
If overall interest rates changed by 100-basis points in 2024 or 2023, our interest income and the market value of our marketable securities would not have been materially affected.
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Item 9. Change in and Disagreements With Accountants on Accounting and Financial Disclosure. None.
Added
To the extent that we draw amounts under the Revolving Credit Agreement, we would be exposed to increased market risk from changes in the underlying index rates, which would affect our interest expense. As of December 31, 2024, there were no amounts drawn on the Revolving Credit Agreement.

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