FLYWIRE CORPORATION You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our final prospectus, filed with theSecurities and Exchange Commission , or theSEC , onMay 26, 2021 pursuant to Rule 424(b) under the Securities Act of 1933, as amended. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year end isDecember 31 , and our fiscal quarters end onMarch 31 ,June 30 ,September 30 , andDecember 31 .
Overview
Flywire is a leading global payments enablement and software company. Our next-gen payments platform, proprietary global payment network and vertical-specific software help our clients get paid and help their customers pay with ease-no matter where they are in the world. Our clients rely on us for integrated solutions that are both global and local, and combine tailored invoicing, flexible payment options, and highly personalized omni-channel experiences. We believe we make generational advances for our clients by transforming payments into a source of value and growth for their organizations while delighting their customers with payment experiences that are engaging, secure, fast, and transparent. Our Flywire Advantage is derived from three core elements: (i) our next-gen payments platform; (ii) our proprietary global payment network; and (iii) our vertical-specific software backed by our deep industry expertise. With our Flywire Advantage, we aim to power the transformation of our clients' accounts receivable functions by automating paper and check-based business processes in addition to creating interactive, digital payment experiences for their customers. As a result, clients who implement our payments and software solutions can see increased digital payments and improved accounts receivable, higher enrollment in payment plans, and a reduction in customer support inquiries. We help our clients turn their accounts receivable functions into strategic, value-enhancing areas of their organizations. We reach clients through various channels, with our direct channel being our primary go-to-market strategy. Our industry-experienced sales and relationship management teams bring expertise and local reach, and our solution combines high-tech and high-touch functions backed by 24x7 multilingual customer support, resulting in high client and customer satisfaction. In addition, the value of our Flywire Advantage has been recognized, with global financial institutions and technology providers choosing to form channel partnerships with us. These partnerships promote organic referral and lead generation opportunities and enhance our indirect sales strategy. 29 -------------------------------------------------------------------------------- [[Image Removed: img44781036_0.jpg]]
The combination of our differentiated solution and efficient go-to-market strategy has resulted in strong and consistent client growth.
? Rapid domestic and international payments volume growth. We have grown our Total Payment Volume by approximately 76% period-over-period from approximately$5.7 billion during the nine months endedSeptember 30, 2020 to$10.1 billion during the nine months endedSeptember 30, 2021 .
We have grown our Total Payment Volume by approximately 76.4% period-over-period
from
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Expanded global payments network. Each year we have added to the capabilities of
our payment network by means of new local bank accounts and payment partners,
and have expanded our global reach to 243 countries and territories and 143
currencies.
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Enjoyable and personalized user experience. Our NPS score of 64 in fiscal year
2020 demonstrates a strong affinity among our clients for our platform.
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Strong dollar-based net retention. In 2018 and 2019, our net dollar-based
retention rate was approximately 126% and 128%, respectively. In 2020, despite
the impact of the COVID-19 pandemic on our clients and the industries we serve,
we had annual dollar-based net retention rate of 100%, added over 400 new
clients, and maintained strong client retention of approximately 97%. We
calculate the annual net dollar-based retention rate for a given year based on
the weighted average of the quarterly net dollar-based retention rates for each
quarter in that year. We calculate the quarterly net dollar-based retention rate
for a given quarter by dividing the revenue we earned in that quarter by the
revenue we earned from the same clients in the corresponding quarter of the
previous year. Our calculation of quarterly net dollar-based revenue rate for a
given quarter only
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includes revenue from clients that were clients at the beginning of the corresponding quarter of the previous year.
As ofSeptember 30, 2021 , we serve over 2,500 clients around the world. In education, we serve more than 2,000 institutions and 1.8 million students globally as ofSeptember 30, 2021 . In healthcare, we power more than 80 healthcare systems, including four of the top 10 healthcare systems inthe United States ranked by hospital size as ofDecember 31, 2020 . In the industries we have more recently begun to address, travel and business to business payments, we have a growing portfolio of more than 300 clients as ofSeptember 30, 2021 . Our success in building our client base around the world and expanding utilization by our clients' customers has allowed us to achieve significant scale. We enabled more than$7.5 billion in TPV during the year endedDecember 31, 2020 and$10.1 billion in TPV during the nine months endedSeptember 30, 2021 . We generated revenue of$131.8 million and$94.9 million for the years endedDecember 31, 2020 and 2019, respectively, and incurred net losses of$11.1 million and$20.1 million for those same years. We generated revenue of$149.8 million and$98.6 million for the nine months endedSeptember 30, 2021 and 2020, respectively and incurred net loss of$16.8 million and$7.1 million , respectively, for the same nine month periods. We believe that the growth of our business and our operating results will be dependent upon many factors, including our ability to add new clients, expand the usage of our solutions by our existing clients and their customers, and increase the breadth and depth of our payments and software capabilities by adding new solutions. While these areas present significant opportunities for us, they also pose challenges and risks that we must successfully address in order to sustain the growth of our business and improve our operating results. While we have experienced significant growth and increased demand for our solutions over recent periods, we expect to continue to incur losses in the short term and may not be able to achieve or maintain profitability in the future. Our marketing is focused on generating leads to develop our sales pipeline, building our brand and market awareness, scaling our network of partners and growing our business from our existing client base. We believe that these efforts will result in an increase in our client base, revenues, and improved margins in the long term. To manage any future growth effectively, we must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems and controls, and our ability to manage headcount, capital, and processes in an efficient manner. Additionally, we face intense competition in our market, and to succeed, we need to innovate and offer solutions that are differentiated from legacy payment solutions. We must also effectively hire, retain, train, and motivate qualified personnel and senior management. If we are unable to successfully address these challenges, our business, operating results, and prospects could be adversely affected. Our Revenue Model
We derive revenue from transactions and platform and usage-based fees.
Transaction revenue is earned from payment processing services provided to our clients. The fee earned on each transaction consists of a rate applied to the total payment value of the transaction, which can vary based on the payment method currency pair conversion and the geographic region in which our client and the clients' customer resides. We also earn revenue from marketing fees from credit card service providers for marketing arrangements in which we perform certain marketing activities which we consider to be ancillary to the solutions we provide to our clients. Platform and usage-based fee revenue includes (i) fees earned for the utilization of our payment platform to optimize cash collections, (ii) fees collected on payment plans established by our clients on our payment platform, (iii) subscription fees and (iv) fees related to printing and mailing services which we consider to be ancillary to the solutions we provide to our clients.
Initial Public Offering
OnMay 28, 2021 , we completed our initial public offering, or IPO, in which we issued and sold 12,006,000 shares of common stock at a public offering price of$24.00 per share, which included 1,566,000 shares of common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters. We received$263.8 million in net proceeds from the IPO, after deducting underwriting discounts and commissions of$19.4 million and other offering costs of$4.9 million . 31 --------------------------------------------------------------------------------
Key Operating Metrics and Non-GAAP Financial Measures
The following table sets forth our key operating metrics and non-GAAP measures
for the periods presented:
Three Months Ended Nine Months Ended
September 30, September 30,
In Millions (Except Gross Margin and
Adjusted Gross Margin) 2021 2020 2021 2020
Total Payment Volume $ 5,272.2 $ 2,989.2 $ 10,058.7 $ 5,714.1
Revenue $ 67.8 $ 42.1 $ 149.8 $ 98.6
Revenue Less Ancillary Services $ 62.0 $ 37.2 $ 135.2 $ 85.2
Gross Margin 65.8 % 64.4 % 63.2 % 59.7 %
Adjusted Gross Margin 71.9 % 72.8 % 70.0 % 69.1 %
Net Loss $ 10.0 $ 5.2 $ (16.8 ) $ (7.1 )
Adjusted EBITDA $ 17.6 $ 10.2 $ 24.6 $ 4.4
For the nine months ended September 30, 2021 , transaction revenue and platform
and usage-based fee revenue represented 73.3% and 26.7% of our revenue,
respectively. For the nine months ended September 30, 2020 , transaction revenue
and platform and usage-based fee revenue represented 68.1% and 31.9% of our
revenue, respectively.
For the three months ended September 30, 2021 , transaction revenue and platform
and usage-based fee revenue represented 78.2% and 21.8% of our revenue,
respectively. For the three months ended September 30, 2020 , transaction revenue
and platform and usage-based fee revenue represented 72.9% and 27.1% of our
revenue, respectively.
For nine months ended September 30, 2021 , our total payment volume was
approximately $10.1 billion , consisting of $6.5 billion of total payment volume
from transactions included in transaction revenue and $3.6 billion of total
payment volume from transactions included in platform and usage-based fee
revenue. For the nine months ended September 30, 2020 , our total payment volume
was approximately $5.7 billion , consisting of $3.6 billion of total payment
volume from transactions included in transaction revenue and $2.1 billion of
total payment volume from transactions included in platform and usage-based fee
revenue.
For the three months ended September 30, 2021 , our total payment volume was
approximately $5.3 billion , consisting of $3.5 billion of total payment volume
from transactions included in transaction revenue, and $1.8 billion of total
payment volume from transactions included in platform and usage-based fee
revenue. For the three months ended September 30, 2020 , our total payment volume
was approximately $3.0 billion , consisting of $1.8 billion of total payment
volume from transactions included in transaction revenue, and $1.2 billion of
total payment volume from transactions included in platform and usage-based fee
revenue.
Total Payment Volume
To grow revenue from clients we must facilitate the use of our payment platform
by our clients to process the amounts paid to them by their customers. The more
our clients use our platform and rely upon our features to automate their
payments, the more payment volume is processed on our solution. This metric
provides an important indication of the value of the transactions that our
clients' customers are completing on our payment platform and is an indicator of
our ability to generate revenue from our clients. We define total payment volume
as the total amount paid to our clients on our payments platform in a given
period.
Revenue Less Ancillary Services, Adjusted Gross Margin and Adjusted EBITDA
We use non-GAAP financial measures to supplement financial information presented
on a GAAP basis. We believe that excluding certain items from our GAAP results
allows management to better understand our consolidated financial performance
from period to period and better project our future consolidated financial
performance as forecasts are developed at a level of detail different from that
used to prepare GAAP-based financial measures. Moreover, we believe these
non-GAAP financial measures provide our stakeholders with useful information to
help them evaluate our operating results by facilitating an enhanced
understanding of our operating performance and enabling them to make more
meaningful period to period comparisons. There are limitations to the use of the
non-GAAP financial measures presented here. Our non-GAAP financial measures may
not be comparable to similarly titled measures of other companies. Other
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companies, including companies in our industry, may calculate non-GAAP financial
measures differently than we do, limiting the usefulness of those measures for
comparative purposes.
We use supplemental measures of our performance which are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures include the following:
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Revenue Less Ancillary Services represents our consolidated revenue in
accordance with GAAP after excluding (i) pass-through cost for printing and
mailing services and (ii) marketing fees. We exclude these amounts to arrive at
this supplemental non-GAAP financial measure as we view these services as
ancillary to the primary services we provide to our clients.
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Adjusted Gross Margin. Adjusted gross margin represents adjusted gross profit
divided by Revenue Less Ancillary Services. Adjusted gross profit represents
Revenue Less Ancillary Services less cost of revenue adjusted to (i) exclude
pass-through cost for printing services and (ii) offset marketing fees against
costs incurred. Management believes this presentation supplements the GAAP
presentation of gross margin with a useful measure of the gross margin of our
payment-related services, which are the primary services we provide to our
clients.
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Adjusted EBITDA. Adjusted EBITDA represents EBITDA further adjusted by excluding
(i) stock-based compensation expense, (ii) the impact from the change in fair
value measurement for contingent consideration associated with acquisitions,
(iii) the impact from the change in fair value measurement of our preferred
stock warrants, (iv) other income (expense), net, (v) acquisition related
transaction costs, and (vi) employee retention costs, such as incentive
compensation, associated with acquisition activities. Management believes that
the exclusion of these amounts to calculate Adjusted EBITDA provides useful
measures for period-to-period comparisons of our business.
These non-GAAP financial measures are not meant to be considered as indicators
of performance in isolation from or as a substitute for revenue, gross margin or
net loss prepared in accordance with GAAP and should be read only in conjunction
with financial information presented on a GAAP basis. Reconciliations of Revenue
Less Ancillary Services, Adjusted Gross Margin and Adjusted EBITDA to the most
directly comparable GAAP financial measure are presented below. We encourage you
to review these reconciliations in conjunction with the presentation of the
non-GAAP financial measures for each of the periods presented. In future fiscal
periods, we may exclude such items and may incur income and expenses similar to
these excluded items.
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Reconciliations of Non-GAAP Financial Measures
The tables below provide reconciliations of Revenue Less Ancillary Services, Adjusted Gross Margin and Adjusted EBITDA on a consolidated basis for the periods presented.
Revenue Less Ancillary Services and Adjusted Gross Margin:
Three Months Ended Nine Months Ended
September 30, September 30,
(In Millions, Except for Gross Margin
and Adjusted Gross Margin) 2021 2020 2021 2020
Revenue $ 67.8 $ 42.1 $ 149.8 $ 98.6
Adjusted to exclude gross up for:
Pass-through cost for printing and
mailing $ (5.0 ) $ (4.0 ) $ (13.4 ) $ (12.1 )
Marketing fees $ (0.8 ) $ (0.9 ) $ (1.2 ) $ (1.3 )
Revenue Less Ancillary Services $ 62.0 $ 37.2 $ 135.2 $ 85.2
Payment processing services costs 21.7 13.8 50.9 36.3
Hosting and amortization costs within
technology and
development expenses 1.5 1.2 4.2 3.4
Adjusted to:
Exclude printing and mailing costs (5.0 ) (4.0 ) (13.4 ) (12.1 )
Offset marketing fees against related
costs (0.8 ) (0.9 ) (1.2 ) (1.3 )
Costs of revenue less ancillary
services $ 17.4 $ 10.1 $ 40.5 $ 26.3
Gross Profit $ 44.6 $ 27.1 $ 94.7 $ 58.9
Gross Margin 65.8 % 64.4 % 63.2 % 59.7 %
Adjusted Gross Profit $ 44.6 $ 27.1 $ 94.7 $ 58.9
Adjusted Gross Margin 71.9 % 72.8 % 70.0 % 69.1 %
Three Months Ended Three Months Ended
September 30, 2021 September 30, 2020
Platform Platform
and and
Usage- Usage-
Based Based
(In Millions) Transaction Fee Revenue Transaction Fee Revenue
Revenue $ 53.0 $ 14.8 $ 67.8 $ 30.7 $ 11.4 $ 42.1
Adjusted to exclude gross up
for:
Pass-through cost for printing
and mailing $ - $ (5.0 ) $ (5.0 ) $ - $ (4.0 ) $ (4.0 )
Marketing fees $ (0.8 ) $ - $ (0.8 ) $ (0.9 ) $ - $ (0.9 )
Revenue Less Ancillary Services $ 52.2 $ 9.8 $ 62.0 $ 29.8 $ 7.4 $ 37.2
Percentage of Revenue 78.2 % 21.8 % 100.0 % 72.9 % 27.1 % 100.0 %
Percentage of Revenue less
Ancillary Services 84.2 % 15.8 % 100.0 % 80.1 % 19.9 % 100.0 %
Nine Months Ended Nine Months Ended
September 30, 2021 September 30, 2020
Platform Platform
and and
Usage- Usage-
Based Based
(In Millions) Transaction Fee Revenue Transaction Fee Revenue
Revenue $ 109.7 $ 40.1 $ 149.8 $ 67.1 $ 31.5 $ 98.6
Adjusted to exclude gross up
for:
Pass-through cost for printing
and mailing $ - $ (13.4 ) $ (13.4 ) $ - $ (12.1 ) $ (12.1 )
Marketing fees $ (1.2 ) $ - $ (1.2 ) $ (1.3 ) $ - $ (1.3 )
Revenue Less Ancillary Services $ 108.5 $ 26.7 $ 135.2 $ 65.8 $ 19.4 $ 85.2
Percentage of Revenue 73.2 % 26.8 % 100.0 % 68.1 % 31.9 % 100.0 %
Percentage of Revenue less
Ancillary Services 80.3 % 19.7 % 100.0 % 77.2 % 22.8 % 100.0 %
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EBITDA and Adjusted EBITDA:
Three Months Nine Months
Ended Ended
September 30, September 30,
(In Millions) 2021 2020 2021 2020
Net loss $ 10.0 $ 5.2 $ (16.8 ) $ (7.1 )
Interest expense 0.5 0.6 1.8 1.9
Provision for (benefit from) income
taxes 0.3 (0.4 ) 0.8 (7.8 )
Depreciation and amortization 2.3 1.8 6.6 5.0
EBITDA 13.1 7.2 (7.6 ) (8.0 )
Stock-based compensation expense 2.8 1.0 15.6 2.8
Change in fair value of contingent
consideration 0.5 0.9 2.1 4.6
Change in fair value of preferred
stock warrant liability - - 10.8 0.3
Other (income) expense, net (1) 0.2 - 0.6 (0.1 )
Acquisition related transaction costs
(2) - - - 1.3
Acquisition related employee retention
costs (3) 1.0 1.1 3.1 3.5
Adjusted EBITDA $ 17.6 $ 10.2 $ 24.6 $ 4.4
(1) For the three months ended September 30, 2021 and 2020, other (income)
expense consisted $0.2 million and $0.0 million due to losses from remeasurement
of foreign currency transactions into their functional currency, respectively.
For the nine months ended September 30, 2021 and 2020, other (income) expense
consisted of gains (losses) from the remeasurement of foreign currency
transactions into their functional currency of $0.6 million and ($0.1) million ,
respectively.
(2) Acquisition related costs consisted of legal and advisory fees incurred in
connection with the
(3) Acquisition related employee retention costs consisted of costs incurred to retain and compensateSimplee's employees in connection with integration of the business.
Key Factors Affecting Our Performance
Increased Utilization by Our Clients and Their Customers
Our ability to monetize our payments platform and global payment network is an important part of our business model. Today, we charge a fee based on the total payment volume we process on behalf of our clients. Our revenue and payment volume increases as our clients process more transactions on our payment platform and more money is collected through our global payment network. Increased average size of the payments processed on our payment platform also increases our revenue. Our ability to influence clients to process more transactions on our platform will have a direct impact on our revenue. In addition, sustaining our growth requires continued adoption of our platform by new clients and further adoption of use cases such as payment plans, by our clients' customers. Our ability to influence our clients to expand their customers' usage of our platform also depends on our ability to successfully introduce new solutions, such as our solutions to support payments by international education consultants and our B2B solutions.
Mix of Business on Our Platform
Our revenue is affected by several factors, including the amount of payment volume processed by us on behalf of our clients, the industry in which our clients operate, the currency in which payments are made and received and the number of payment plans initiated by our clients' customers. For example, we recognize more transaction revenue as our clients engage in cross border payment flows which may increase or decrease depending on the industry in which our clients operate. We may experience shifts in the type of revenue we earn (transaction revenue or platform and usage-based fee revenue) depending on the nature of the activity of our clients and our clients' customers on our platform.
Investment in Technology and Development and Sales and Marketing
We make significant investments in both new solutions and existing solution
enhancement. New solution features and functionality are brought to market
through a variety of distribution and promotional activities. We will continue
to adopt emerging technologies, expand our library of software integrations and
invest in the development of more features.
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Additionally, we will continue to expand efforts to market our payment platform and global payment network directly to our clients through comprehensive marketing initiatives. We are focused on the effectiveness of sales and marketing spending and will continue to be strategic in maintaining efficient client acquisition, including adjusting spending levels as needed in response to changes in the economic environment.
Seasonality
Our operating results and operating metrics are subject to seasonality and volatility, which could result in fluctuations in our quarterly revenues and operating results or in perceptions of our business prospects. We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenue, which can vary by geographic corridor. For instance, our revenue has historically been strongest in our first and third quarters and weakest in our second quarter. Some variability results from seasonal events including the timing of when our education clients' customers make their tuition payments on our payment platform and the number of business days in a month or quarter. We also experience volatility in certain other metrics, such as transactions processed and total payment volume.
Economic Conditions and Resulting Consumer Spending Trends
Changes in macro-level consumer spending for education, healthcare and travel trends, including as a result of COVID-19, could affect the amounts of volumes processed on our platform, thus resulting in fluctuations to our revenue streams.
Impact of the COVID-19 Pandemic
The unprecedented and rapid spread of COVID-19 as well as the shelter-in-place orders, promotion of social distancing measures, restrictions to businesses deemed non-essential, and travel restrictions implemented throughoutthe United States and globally have significantly impacted the verticals in which we have been predominantly focused over the last decade, including payment volumes, sales cycles and time to implementation in those verticals. However, we have not experienced any significant client attrition and our net dollar-based retention rate remained strong. In 2018 and 2019, our net dollar-based retention rate was 126% and 128%, respectively. In 2020, despite the impact of the COVID-19 pandemic on our clients and the industries we serve, we had annual dollar-based net retention rate of 100%, added over 400 new clients, and maintained strong client retention of approximately 97%. During the nine months endedSeptember 30, 2021 , we have added an additional 300 clients and have observed a recovery in payment volumes and growth in clients. As a result of the payment volume growth, client growth and public company complexities, we have increased hiring. As variants of COVID-19 emerge we will continue to evaluate the nature and extent of these potential impacts to our business, consolidated financial statements, and liquidity. OnMarch 27, 2020 , the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law. The CARES Act did not have a material impact on our consolidated financial statements for the year endedDecember 31, 2020 or the three or nine months endedSeptember 30, 2021 . We continue to monitor any effects that may result from the CARES Act or other government relief programs that are made available. Diversified Mix of Clients Following the onset of the COVID-19 pandemic, payment volumes and revenue from education clients relying on international enrollments declined significantly, but we saw significant strength in revenue from healthcare clients, particularly as out-of-pocket costs for our clients' customers continued to remain high. There can be no assurance that such trends or that the levels of revenue that we generate from our healthcare clients will continue.
During the nine months ended
Dynamic Changes to Client Communication and Product Solutions
In response to the macroeconomic impact of the COVID-19 pandemic, we initiated a
series of refinements to our technology and personalization engine to optimize
our clients' ability to offer payment plans and communicate effectively and
digitally with their customers. For example, we developed streamlined versions
of our solution that allowed healthcare
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clients to rapidly deploy secure payment capabilities in support of newly
emergent telehealth services that were deployed in the early phases of the
COVID-19 to enable remote healthcare services. Similarly, we configured some of
our education payment plan solutions for a very streamlined implementation in
support of our clients' requests for affordability solutions for their students
that could be deployed with minimal IT involvement. While we continue to invest
in our technology and product capabilities, our ability to continue providing
streamlined and effective products through our technology platform may impact
our ability to retain and win new clients in the future. We believe that our
ability to help increase payment affordability has become more critical to our
clients during the COVID-19 pandemic as the lack of affordability drives the
need for more financial flexibility.
Business Continuity
In response to COVID-19 developments, we implemented measures to focus on the safety of our employees and support of our clients, while at the same time seeking to mitigate the impact on our financial position and operations. We have implemented remote working capabilities for our entire organization and to date, there has been minimal disruption to our operations. As vaccination rates have increased, our offices have reopened in limited capacity. We have also increased our hiring plan to address key roles with the goal of ensuring continuity and growth.
Components of Results of Operations
Revenue
We generate revenue from transactions and platform and usage-based fees as described below.
Transaction Revenue
Transaction revenue consists of a fee based on the total payment volume processed through our payment platform and global payment network. The fee can vary depending on the geographic region in which our client and client's customer resides, the payment method selected by our clients' customer and the currencies in which the transaction is completed on our solution. Fees received are reported as revenue upon the completion of payment processing transaction. We also earn marketing fees from credit card service providers for marketing arrangements in which we perform certain marketing activities to increase the awareness of the credit card provider and promote certain methods of payments on our payment platform. Fees from these marketing services are recognized as revenue when we complete our obligations under the marketing arrangements. We do not expect our marketing services revenue to be material in future periods.
Platform and Usage-Based Fee Revenue
We earn revenue from many of our clients based on the amount of accounts receivable they collect through our platform. For these services, we are paid a platform and usage-based fee based on the total payment volume that our clients collect. We also earn revenue from clients' customers when they enter into a payment plan and make actual payments against a payment plan in satisfying their obligation to our client. Additionally, we earn a subscription fee from some of our clients for their use of our payment platform. Finally, we earn fees from providing other ancillary services to our clients including printing and mailing services.
Payment Processing Services Costs
Payment processing services costs consist of costs incurred to process payment transactions which include banking and credit card processing fees, foreign currency translation costs, partner fees personnel-related expenses for our employees who facilitate these payments and personnel related expenses for our employees who provide implementation services to our clients. We expect that payment processing services costs will increase in absolute dollars but may fluctuate as a percentage of revenue from period to period, as we continue to invest in scaling our processing operations and grow our revenue base.
Technology and Development
Technology and development includes (a) costs incurred in connection with the
development of our solution and the improvement of existing solutions, including
the amortization of software and website development costs incurred in
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developing our solution, which are capitalized, and acquired developed
technology, (b) site operations and other infrastructure costs incurred, (c)
amortization related to capitalized cost to fulfill a contract, (d)
personnel-related expenses, including salaries, stock based compensation and
other expenses, (e) hardware and software engineering, consultant services and
other costs associated with our technology platform and products, (f) research
materials and facilities, and (g) depreciation and maintenance expense.
We believe delivering new functionality is critical to attract new clients and
expand our relationship with existing clients. We expect to continue to make
investments to expand our solutions in order to enhance our clients' experience
and satisfaction, and to attract new clients. We expect our technology and
development expenses to increase in absolute dollars, but they may fluctuate as
a percentage of revenue from period to period as we expand our technology and
development team to develop new solutions and enhancements to existing
solutions.
Selling and Marketing
Selling and marketing expenses consist of personnel-related expenses, including stock-based compensation expense, sales commissions, amortization of acquired client relationship intangible assets, marketing program expenses, travel-related expenses and costs to market and promote our solutions through advertisements, marketing events, partnership arrangements, and direct client acquisition. We focus our sales and marketing efforts on generating awareness of our company, platform, and solutions, creating sales leads, and establishing and promoting our brand. We plan to continue investing in sales and marketing efforts by driving our go-to-market strategies, building our brand awareness, and sponsoring additional marketing events; however, we will adjust our sales and marketing spend level as needed, and this may fluctuate from period to period, in response to changes in the economic environment.
General and Administrative
General and administrative expenses consist of personnel-related expenses, including stock-based compensation expense, for finance, risk management, legal and compliance, human resources and information technology functions, costs incurred for external professional services, as well as rent, and facility and insurance costs. We expect to incur additional general and administrative expenses as we continue to invest in our planned growth of our business. We also expect to increase the size of our general and administrative functions to support the growth in the business, and to operate as a public company. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of revenue from period to period. Interest Expense Interest expense consists of interest previously incurred on our Loan and Security Agreement (LSA) and interest on the new Revolving Credit Facility. During 2018, we borrowed$25.0 million under the LSA to complete the acquisition ofOnPlan Holdings LLC . OnApril 25, 2020 , we entered into a Joinder and Second Amendment to the LSA to refinance the LSA. As part of the refinancing, the lender re-advanced$4.2 million of principal paid on the loan throughMay 1, 2020 . The LSA was interest only untilMay 2023 and carried annual interest at a rate equal to the greater of (i) 5.25% above the prime rate or (ii) 8.50%. InJuly 2021 , we refinanced the LSA by entering into a$50 million Revolving Credit Facility. The Revolving Credit Facility has an adjustable rate of interest, at our option, either at an annual rate based on ABR, which references the prime rate plus an applicable margin or LIBOR plus an applicable margin. Loans based on ABR bear interest at a rate between ABR plus 0.75% and ABR plus 1.25%, and loans based on LIBOR bear interest at a rate between LIBOR plus 1.75% and LIBOR plus 2.25%, depending on our liquidity.
Change in Fair Value of Preferred Stock Warrant Liability
In connection with our financing arrangements, we issued warrants to purchase
convertible preferred stock to a lender. The warrants to purchase preferred
stock provide for net share settlement under which the maximum number of shares
that could be issued represents the total amount of shares under the warrant
agreements. These warrants are classified as liabilities on our consolidated
balance sheets as these are free standing instruments that may require us to
transfer an asset upon exercise. The warrant liability associated with these
warrants was recorded at fair value on the issuance date of the warrants and was
marked to market each reporting period based on changes in the warrants' fair
value calculated using the Black-Scholes model. Following our IPO, we no longer
have to measure the change in fair value of preferred stock warrant liability in
our consolidated statements of operations and comprehensive loss due to the
preferred stock warrants either being fully exercised or converted to warrants
to purchase common stock.
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Other Income (Expense), Net
Other income (expense), net consists of interest income and gains and losses from the remeasurement of foreign currency transactions into its functional currency.
Provision for (Benefit From) Income Tax
Provision for (benefit from) income taxes consists of foreign and state income taxes. We have generated net operating loss (NOL) carryforwards forU.S. Federal tax purposes as we expand the scale of our international business activities. Any changes in theU.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future. We have a valuation allowance for ourU.S. deferred tax assets, including federal and state NOLs. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized through expected future taxable income generated inthe United States . Results of Operations
Comparison of results for the Nine Months Ended
The following table sets forth our consolidated results of operations for
periods presented:
Nine Months Ended
September 30,
(Dollars In Millions) 2021 2020 $ Change % Change
Revenue $ 149.8 $ 98.6 $ 51.2 51.9 %
Payment processing and service costs 50.9 36.3 14.6 40.2
Technology and development 22.2 17.8 4.4 24.7
Selling and marketing 35.4 24.3 11.1 45.7
General and administrative 44.2 33.0 11.2 33.9
Total costs and operating expense 152.7 111.4 41.3 37.1
Loss from operations (2.9 ) (12.8 ) 9.9 (77.3 )
Interest expense (1.8 ) (1.9 ) 0.1 (5.3 )
Change in fair value of preferred
stock warrant liability (10.8 ) (0.2 ) (10.6 ) 5,300.0
Other income (expense), net (0.5 ) 0.1 (0.6 ) (600.0 )
Total other expenses, net (13.1 ) (2.0 ) (11.1 ) 555.0
Loss before income taxes (16.0 ) (14.8 ) (1.2 ) 8.1
Provision for (Benefit from) income
taxes 0.8 (7.8 ) 8.6 (110.3 )
Net income (loss) (16.8 ) (7.0 ) (9.8 ) 140.0
Foreign currency translation
adjustment (0.1 ) (0.1 ) - -
Comprehensive income (loss) $ (16.9 ) $ (7.1 ) $ (9.8 ) 138.0 %
Revenue
Revenue was
Nine Months Ended
September 30,
(Dollars In Millions) 2021 2020 $ Change % Change
Transaction revenue $ 109.7 $ 67.1 $ 42.6 63.5 %
Platform and usage-based fee revenue 40.1 31.5 8.6 27.3
Revenue $ 149.8 $ 98.6 $ 51.2 51.9 %
Transaction revenue was $109.7 million for the nine months ended September 30,
2021 , compared to $67.1 million for the nine months ended September 30, 2020 , an
increase of $42.6 million or 63.5%. The increase in transaction revenue was
primarily driven by growth in transaction payment volumes from both our existing
clients and new clients
39
-------------------------------------------------------------------------------- added during the nine months endedSeptember 30, 2021 . We experienced strong growth in payment volume across all regions during the period. Total payment volume increased 76.0% during the nine months endedSeptember 30, 2021 to$10.1 billion . Our marketing services revenue remained consistent in the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 .
Platform and usage-based fee revenue was
Payment Processing Services Costs
Payment processing services costs were$50.9 million for the nine months endedSeptember 30, 2021 , compared to$36.3 million for the nine months endedSeptember 30, 2020 , an increase of$14.6 million or 40.2%. The increase in payment processing services costs is correlated with the increase in total payment volume of 76.0% over the same period, and was offset by lower processing costs related to bank, credit card and alternative payment transactions.
Technology and Development
Technology and development expenses were$22.2 million for the nine months endedSeptember 30, 2021 , compared to$17.8 million for the nine months endedSeptember 30, 2020 , an increase of$4.4 million or 24.7%. The increase in technology and development cost was primarily driven by an increase in personnel costs, stock-based compensation expense, and an increase in amortization expense. Personnel costs were$12.9 million for the nine months endedSeptember 30, 2021 , compared to$11.6 million for the nine months endedSeptember 30, 2020 an increase of$1.3 million or 11.2%. The increase in personnel costs was primarily driven by an increase in headcount within our technology and development teams partially offset by the capitalization of internally developed software costs during the period of$4.6million . Stock-based compensation expense was$2.0 million for the nine months endedSeptember 30, 2021 , compared to$0.7 million for the nine months endedSeptember 30, 2020 , an increase of$1.3 million . Amortization of intangible assets was$3.6 million for the nine months endedSeptember 30, 2021 , compared to$2.7 million for the nine months endedSeptember 30, 2020 , an increase of$0.9 million or 33.3%. The increase in amortization expense was the result of the acquisition ofSimplee .
Selling and Marketing
Selling and marketing expenses were$35.4 million for the nine months endedSeptember 30, 2021 , compared to$24.3 million for the nine months endedSeptember 30, 2020 , an increase of$11.1 million or 45.7%. The increase in selling and marketing expenses was primarily driven by an increase in personnel costs, stock-based compensation and professional fee expenses, partially offset by a decrease in travel related expenses. Personnel costs increased by$5.3 million . The increase in personnel costs was primarily driven by an increase in headcount within our selling and marketing teams and commissions earned on sales during the period. Stock-based compensation was$4.2 million for the nine months endedSeptember 30, 2021 , compared to$0.9 million for the nine months endedSeptember 30, 2020 , an increase of$3.3 million . Amortization of intangibles was$1.8 million for the nine months endedSeptember 30, 2021 , compared to$1.5 million for the nine months endedSeptember 30, 2020 , an increase of$0.3 million or 20%. The increase in amortization expense was the result of the acquisition ofSimplee which added$48.3 million of acquired client relationships, which have a weighted-average amortization period of 12 years. Professional fees were$2.6 million for the nine months endedSeptember 30, 2021 , compared to$1.0 million for the nine months endedSeptember 30, 2020 , an increase of$1.6 million or 160%. Marketing fees were$2.5 million for the nine months endedSeptember 30, 2021 , compared to$1.4 million for the nine months endedSeptember 30, 2020 , an increase of$1.1 million or 78.6%. Travel related costs during the nine months endedSeptember 30, 2021 decreased by$0.2 million compared to the same period in 2020.
General and Administrative Expenses
General and administrative expenses were$44.2 million for the nine months endedSeptember 30, 2021 , compared to$33.0 million for the nine months endedSeptember 30, 2020 , an increase of$11.2 million or 33.9%. The increase in general and administrative expenses was primarily driven by the increase in stock-based compensation, professional fees and personnel offset by the change in the fair value of contingent consideration and acquisition related expenses. Stock-based compensation was$9.3 million for the nine months endedSeptember 30, 2021 , compared to$1.3 million for the nine months endedSeptember 30, 2020 , an increase of$8.0 million . The increase in compensation is directly attributable 40 -------------------------------------------------------------------------------- to incremental compensation charges taken in relation to a secondary sale during the period that involved stockholders who were also our employees. Professional fees were$4.9 million for the nine months endedSeptember 30, 2021 , compared to$3.1 million for the nine months endedSeptember 30, 2020 , an increase of$1.8 million . Personnel costs were$17.0 million for the nine months endedSeptember 30, 2021 , compared to$14.6 million for the nine months endedSeptember 30, 2020 , an increase of$2.4 million primarily due to increased headcount. The change in the fair value of contingent consideration related to acquisitions was$2.1 million for the nine months endedSeptember 30, 2021 , compared to$4.6 million for the nine months endedSeptember 30, 2020 , a decrease of$2.5 million . Acquisition costs were$0.0 million for the nine months endedSeptember 30, 2021 , compared to$1.4 million for the nine months endedSeptember 30, 2020 .
Interest Expense
Interest expense were
Change in Fair Value of Preferred Stock Warrant Liability
The change in fair value of preferred stock warrant liability was$10.8 million for the nine months endedSeptember 30, 2021 , compared to$0.2 million for the nine months endedSeptember 30, 2020 , an increase of$10.6 million . The increase in the fair value of the preferred stock warrant liability was due to the increase in the value of our preferred stock.
Other Income (Expense), net
Other income (expense), net, was($0.5) million for the nine months endedSeptember 30, 2021 , compared to less than$0.1 million for the nine months endedSeptember 30, 2020 . Losses from the remeasurement of foreign currency transactions into their functional currencies were$0.5 million for the nine months endedSeptember 30, 2021 , compared to less than$0.1 million for the nine months endedSeptember 30, 2020 .
Provision for (Benefit From) Income Taxes
The expense from income taxes was$0.8 million during the nine months endedSeptember 30, 2021 , compared to a tax benefit of$7.8 million for the nine months endedSeptember 30, 2020 , an increase of$8.6 million . During the nine months endedSeptember 30, 2021 , we recorded an income tax expense of$0.8 million , which was primarily attributable to foreign taxes, compared to the nine months endedSeptember 30, 2020 , we recorded an income tax benefit of$7.8 million , which was primarily attributable to a non-recurring benefit of$8.4 million relating to the release of a portion of our valuation allowance. This release was due to taxable temporary differences recorded as part of theSimplee acquisition which are a source of income to realize certain pre-existing federal and state deferred tax assets. Our effective tax rate was 5.1% for the nine months endedSeptember 30, 2021 compared to 52.4% for the nine months endedSeptember 30, 2020 . 41 --------------------------------------------------------------------------------
Comparison of results for the Three Months Ended
The following table sets forth our consolidated results of operations for
periods presented:
Three Months Ended
September 30,
(Dollars In Millions) 2021 2020 $ Change % Change
Revenue $ 67.8 $ 42.1 $ 25.7 61.0 %
Payment processing and service costs 21.7 13.8 7.9 57.2
Technology and development 7.8 6.1 1.7 27.9
Selling and marketing 12.5 7.6 4.9 64.5
General and administrative 14.7 9.2 5.5 59.8
Total costs and operating expense 56.7 36.7 20.0 54.5
Loss from operations 11.1 5.4 5.7 105.6
Interest expense (0.6 ) (0.6 ) - -
Change in fair value of preferred
stock warrant liability - - - NM
Other income (expense), net (0.2 ) - (0.2 ) NM
Total other expenses, net (0.8 ) (0.6 ) (0.2 ) 33.3
Loss before income taxes 10.3 4.8 5.5 114.6
Provision for (Benefit from) income
taxes 0.3 (0.4 ) 0.7 (175.0 )
Net income (loss) 10.0 5.2 4.8 92.3
Foreign currency translation
adjustment (0.3 ) 0.2 (0.5 ) (250.0 )
Comprehensive income (loss) $ 9.7 $ 5.4 $ 4.3 79.6 %
Revenue
Revenue was
Three Months Ended
September 30,
(Dollars In Millions) 2021 2020 $ Change % Change
Transaction revenue $ 53.0 $ 30.7 $ 22.3 72.6 %
Platform and usage-based fee revenue 14.8 11.4 $ 3.4 29.8
Revenue $ 67.8 $ 42.1 $ 25.7 61.0 %
Transaction revenue was $53.0 million for the three months ended September 30,
2021 , compared to $30.7 million for the three months ended September 30, 2020 ,
an increase of $22.3 million or 72.6%. The increase in transaction revenue was
primarily driven by growth in transaction payment volumes from both our existing
and new clients added since September 30, 2020 . We experienced strong growth in
payment volume across all regions during the quarter. Total payment volume
increased 76.4% during the nine months ended September 30, 2021 to $5.3 billion .
This increase was partially offset by a $0.1 million decrease in marketing
services revenue. Our marketing services revenue declined as a result of our
payment partners using fewer of our marketing services in the nine months ended
September 30, 2021 compared to the nine months ended September 30, 2020 .
Platform and usage-based fee revenue was
Payment Processing Services Costs
Payment processing services costs were$21.7 million for the three months endedSeptember 30, 2021 , compared to$13.8 million for the three months endedSeptember 30, 2020 , an increase of$7.9 million or 57.2%. The increase in payment processing services costs is correlated with the increase in total payment volume of 76.4% over the same period, and was partially offset by lower processing costs related to bank, credit card and alternative payment transactions. 42 --------------------------------------------------------------------------------
Technology and Development
Technology and development expenses were$7.8 million for the three months endedSeptember 30, 2021 , compared to$6.1 million for the three months endedSeptember 30, 2020 , an increase of$1.7 million or 27.9%. The increase in technology and development cost was primarily driven by an increase in personnel costs, stock-based compensation expense and an increase in amortization expense. Personnel costs increased by$0.8 million . The increase in personnel costs was driven primarily by an increase in headcount in our technology and development teams. Stock-based compensation expense was$0.5 million for the three months endedSeptember 30, 2021 , compared to$0.3 million for the three months endedSeptember 30, 2020 , an increase of$0.2 million . Amortization of intangible assets was$1.3 million for the three months endedSeptember 30, 2021 , compared to$1.0 million for the three months endedSeptember 30, 2020 , an increase of$0.3 million or 30.0%. The increase in amortization expense was the result of the acquisition ofSimplee . Selling and Marketing Selling and marketing expenses were$12.5 million for the three months endedSeptember 30, 2021 , compared to$7.6 million for the three months endedSeptember 30, 2020 , an increase of$4.9 million or 64.5%. The increase in selling and marketing expenses was primarily driven by an increase in personnel costs, professional fees and marketing. Personnel costs increased by$2.8 million . The increase in personnel costs was primarily driven by an increase in headcount within our selling and marketing teams and commissions earned on sales during the period. Professional fees were$1.0 million for the three months endedSeptember 30, 2021 , compared to$0.3 million for the three months endedSeptember 30, 2020 an increase of$0.7 million due to increase in third party commissions. Marketing costs were$1.0 million for the three months endedSeptember 30, 2021 , compared to$0.5 million for the three months endedSeptember 30, 2020 , an increase of$0.5 million due to increased marketing initiatives and hosted events.
General and Administrative Expenses
General and administrative expenses were$14.7 million for the three months endedSeptember 30, 2021 and$9.2 million for the three months endedSeptember 30, 2020 , an increase of$5.5 million or 59.8%. The increases in general and administrative expenses primarily driven by the increase in stock-based compensation, personnel, professional fees, other costs. Stock-based compensation was$1.5 million for the three months endedSeptember 30, 2021 , compared to$0.5 million for the three months endedSeptember 30, 2020 , an increase of$1.0 million . The increase in stock based compensation is attributable to grants awarded to existing and new employees. Personnel costs were$5.8 million for the three months endedSeptember 30, 2021 , compared to$4.1 million for the three months endedSeptember 30, 2020 , an increase of$1.7 million due to increase in headcount. Professional fees were$1.7 million for the three months endedSeptember 30, 2021 , compared to$0.9 million for the three months endedSeptember 30, 2020 , an increase of$0.8 million due to increased legal and audit fees from the same period. Other costs increased by$1.6 million . The increase in other costs is primarily due to increased insurance costs as a public company and increased hedging fees related to increase in total payment volume.
Interest Expense
Interest expense was
Change in Fair Value of Preferred Stock Warrant Liability
There was no expense due to the change of the fair value of preferred stock
warrant liability for the three months ended
Other Income (Expense), net
Other income (expense), net, was
Provision for (Benefit From) Income Taxes
The expense from income taxes was$0.3 million during the three months endedSeptember 30, 2021 , compared to a benefit from income taxes of$0.4 million for the three months endedSeptember 30, 2020 . The expense and the benefit from income taxes for the three months endedSeptember 30, 2021 and 2020 was primarily attributable to foreign taxes. 43 --------------------------------------------------------------------------------
Our effective tax rate was 3.3% for the three months ended
Liquidity and Capital Resources
Since inception, we have financed operations primarily through proceeds received from sales of equity securities, credit facilities and payments received from our clients as further detailed below. InMay 2021 , we completed our IPO which resulted in aggregate net proceeds of$263.8 million , after underwriting discounts of$19.4 million and issuance costs of$4.9 million . As ofSeptember 30, 2021 , our principal source of liquidity is cash of$453.1 million . We believe that our existing cash will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, the timing and the amount of cash received from clients, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the price at which we are able to purchase public cloud capacity, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform. In the future, we may enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. The following table sets forth summary cash flow information for the periods presented. Nine Months Ended September 30, (In Millions) 2021 2020
Net cash provided by (used in) operating activities
(5,348 ) (81,213 )
Net cash (used in) provided by financing activities 324,676 118,882
Effect of exchange rate changes on cash and cash
equivalents (55 ) (148 )
Net (decrease) increase in cash, cash equivalents
and restricted cash. $ 344,078 $ 9,955
Operating Activities
Net cash used in operating activities consists of net loss adjusted for certain non-cash items and changes in other assets and liabilities.
During the nine months endedSeptember 30, 2021 , cash generated by operating activities of$24.8 million was primarily the result of net loss of$16.8 million adjusted for non-cash expenses of$35.6 million , which primarily include depreciation and amortization of$6.6 million , stock-based compensation expenses of$15.5 million , change in fair value of preferred stock warrant liability of$10.8 million , and$5.9 million of cash generated from our change in operating assets and liabilities. Net cash generated by changes in operating assets and liabilities consisted primarily of a$6.9 million increase in funds payable to clients due to the timing of when we settle the amounts we owe to our clients, a$3.2 million decrease in contingent consideration, a$7.4 million decrease in prepaid expenses and other assets, and a$10.9 million increase in accounts payable, accrued expenses and other current liabilities. During the nine months endedSeptember 30, 2020 , cash used by operating activities of$27.6 million was primarily the result of net loss of$7.1 million adjusted for non-cash expenses of$5.0 million , which primarily include depreciation and amortization of$5.0 million , stock-based compensation expenses of$2.9 million , change in fair value of contingent consideration of$4.6 million , offset by the non-cash tax benefit of$8.5 million and the$25.4 million cash used from our change in operating assets and liabilities. Net cash used by changes in operating assets and liabilities consisted primarily of a$24.8 million decrease in funds payable to clients due to the timing of when we settle the amounts we owe to our 44 -------------------------------------------------------------------------------- clients, a$3.1 million decrease in prepaid expenses and other assets, a$3.9 million decrease in accounts receivable and a$5.0 million increase in funds receivable from payment partners.
Investing Activities
During the nine months endedSeptember 30, 2021 , cash used in investing activities of$5.3 million was primarily the result of the capitalization of internally-developed software costs of$4.6 million , capitalized leasehold improvement costs of$0.2 million , an acquisition of an asset of$0.1 million and$0.3 million of other computer equipment.
During the nine months ended
Financing Activities
During the nine months endedSeptember 30, 2021 , cash provided by financing activities of$324.6 million was primarily driven by the net proceeds received from our IPO of$263.8 million , net proceeds received from our sale of preferred stock for aggregate proceeds of$59.7 million and proceeds from the exercise of stock options and warrants of$4.4 million , net proceeds from draw on our Revolving Credit facility of$25.9 million , offset by the payoff of our previously existing term loan of$25.0 million , partially offset by payments for contingent consideration of$3.8 million related to our acquisition ofSimplee and$0.4 million related to issuance costs associated with our revolving credit facility. During the nine months endedSeptember 30, 2020 , cash provided by financing activities of$118.8 million was the result of our sale of preferred stock for aggregate proceeds of$119.8 million and$0.6 million from the proceeds of the exercise of stock options. The increase was offset by$1.3 million related to contingent consideration paid during the period. As ofSeptember 30, 2021 , we had$25.9 million of outstanding indebtedness under the Revolving Credit Facility. The proceeds of the Revolving Credit Facility were used to pay off the existing loan of$25.0 million . The Revolving Credit Facility consists of Alternate Base Rate (ABR) loans or Eurodollar Borrowings, at our option. ABR loans bear interest at the ABR plus the applicable rate. Eurodollar Borrowings bear interest at the Adjusted LIBO Rate plus the applicable rate. The ABR rate is based on the greatest of (a) the Prime Rate (b) the Federal Funds Effective Rate plus 1/2 of 1% and (c) the Adjusted LIBO Rate for a one-month Interest Period plus 1%. The adjusted LIBO rate is based on (a) the LIBO Rate multiplied by (b) the Statutory Reserve Rate. The applicable rate is based upon our liquidity as of the most recent consolidated financial information and ranges from 0.75% to 2.25%. The Revolving Credit Facility incurs a commitment fee ranging from 0.25% to 0.35% based upon our liquidity as of the most recent consolidated financial information assessed on the average undrawn portion of the available commitment. We have access to an additional$24.1 million of additional funds under the Revolving Credit Facility to draw in the future. Contractual Obligations The following table summarizes our contractual obligations as ofSeptember 30, 2021 : Payments Due by Year Less Than 1 to 3 4 to 5 More Than (In Thousands) Total 1 Year Years Years 5 Years Operating lease obligations$ 4,490 $ 2,020 $ 2,470 - - Debt obligations 25,933 - 25,933 - - Total$ 30,423 $ 2,020 $ 28,403 - - Critical Accounting Policies Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. 45 --------------------------------------------------------------------------------
There have been no material changes to our critical accounting policies and estimates as compared to those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Final Prospectus.
Emerging Growth Company Status
The JOBS Act permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to nonpublic companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies, and our financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies. We will cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of$1.07 billion or more, (ii)December 31, 2026 , (iii) the date on which we have issued more than$1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of theSEC . We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. See "Risk Factors-Risks Related to Ownership of Our Common Stock-We are an emerging growth company," and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Recent Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 1 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our operations.
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