GTY TECHNOLOGY HOLDINGS INC. References to the "Company," "GTY", "our," "us" or "we" refer toGTY Technology Holdings Inc. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled "Risk Factors" and "Forward-Looking Statements" appearing elsewhere in this Annual Report on Form 10-K.
Overview
We are a public-sector company that offers a cloud-based suite of solutions primarily for North American state and local governments. Our six wholly owned subsidiaries are Bonfire,CityBase , eCivis, OpenCounter, Questica and Sherpa. Through our operating subsidiaries, we serve segments in the government technology sector, specifically procurement, payments, grants management, permitting, and budgeting. We were formed onAugust 11, 2016 , for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the "business combination"). Until the business combination, we did not engage in any operations nor generate any revenues. We recognized an opportunity to replace costly legacy on-premises software systems with scalable and efficient SaaS products. Our search led to the acquisition (the "Acquisition") of Bonfire,CityBase , eCivis, OpenCounter, Questica, and Sherpa onFebruary 19, 2019 (the "Closing Date"). Our customers are primarily located inthe United States andCanada , including counties, municipalities, special districts, law enforcement agencies, public-school districts and tribal governments. We plan to further increase our customer base by leveraging our comprehensive product portfolio with our existing customer base, investing in direct sales to new customers, and using relationships with complementary products and services.
Expansion and Further Penetration of Our Customer Base.
We employ a strategy that focuses on acquiring new customers and growing our relationships with existing customers over time. We believe significant opportunity exists for us to acquire new customers as well as expand the use of our platforms by selling additional products and increasing the number of users within our current customers' organizations.
Investment in Growth.
We plan to continue to invest in our business so that we can capitalize on our market opportunity. We intend to continue to grow our sales and marketing team to acquire new customers and to increase sales to existing customers. We intend to continue to grow our research and development team to extend the functionality and range of our applications. We also intend to invest in new and improved information technology solutions to support our business. However, we expect our sales and marketing expenses and research and development expenses as a percentage of revenues to decrease over time as we grow our revenues and gain economies of scale by increasing our customer base and increase sales to our existing customer base. We believe that these investments will contribute to our long-term growth, although they may adversely affect our profitability in the near term. Leveraging Relationships. We plan to continue to strengthen and expand our relationships with technology vendors, professional services firms, and resellers. These relationships enable us to increase the speed of deployment and offer a wider range of integrated services to our customers. We intend to support these existing relationships, seek additional relationships and further expand our channel of resellers to help us increase our presence in existing markets and to expand into new markets. Our business and results of operations will continue to be significantly affected by whether we succeed in leveraging and expanding these relationships.
Market Adoption of Our Platforms.
A key focus of our sales and marketing efforts is creating market awareness about the benefits of our cloud-based SaaS platforms. The market for SaaS solutions remains less mature than the market for on-premises software applications, and
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potential customers may be slow or unwilling to migrate from their legacy solutions. Our business and operating results will be significantly affected by the degree to and speed with which organizations adopt our solutions.
Key Components of our Results of Operations
Revenues
Subscription, support and maintenance
We deliver SaaS that provides customers with access to SaaS-related support and updates during the term of the arrangement. Revenues are recognized ratably over the contract term as the customer simultaneously receives and consumes the benefits of the subscription service. Subscription fees for the first year are typically payable within 30 days after the execution of a contract, and thereafter upon renewal. We initially record subscription fees as contract liabilities and recognize revenues on a straight-line basis over the term of the agreement.
Our contracts may include variable consideration in the form of usage fees, which are included in the transaction price in the period in which the usage occurs and the fee is known.
Subscription, support and maintenance revenues also includes kiosk rentals and on-premises support or maintenance pertaining to license sales. Revenues from kiosk rentals and on-premises support are recognized on a straight-line basis over the support period.
Revenues from subscription, support and maintenance comprised approximately 76%
and 74% of total revenues for the years ended
Professional services
Our professional services contracts generate revenues on a time-and-materials, fixed fee or subscription basis. Revenues are recognized as the services are rendered for time-and-materials contracts. Revenues are recognized when the milestones are achieved and accepted by the customer or on a proportional performance basis for fixed-fee contracts. Revenues are recognized ratably over the contract term for subscription contracts. The milestone method for revenue recognition is used when there is substantive uncertainty at the date the contract is entered into regarding whether the milestone will be achieved. Training revenues are recognized as the services are performed. Revenues from professional services comprised approximately 20% and 23% of total revenues for the years endedDecember 31, 2021 and 2020, respectively.
License
Revenues from distinct licensed software are recognized upfront when that software is made available to the customer, which normally coincides with contract execution, as this is when the customer has the risks and rewards of the right to use the software. Revenues from licensed software comprised approximately 1% and 3% of total revenues for the years endedDecember 31 ,
2021 and 2020, respectively. Asset sales
Revenues from asset sales are recognized when the asset, typically a kiosk, has been received by the customer and is fully operational and ready to accept transactions, which is when the customer obtains control and has the risks and rewards of the asset. Revenues from asset sales comprised approximately 2% and less than 1% of total revenues for the years endedDecember 31, 2021 and 2020, respectively. Cost of Revenues Cost of revenues primarily consists of salaries and benefits of personnel relating to our hosting operations and support, implementation, and grants research. Cost of revenues includes data center costs such as depreciation of the Company's data center assets, third-party licensing costs, and consulting fees. 36 Table of Contents Operating Expenses Sales and marketing Sales and marketing expenses consist primarily of personnel costs of our sales and marketing employees, including salaries, sales commissions and incentives and benefits, travel and related costs, outside consulting fees, marketing programs, including lead generation, and costs of advertising and trade shows. We defer sales commissions and amortize them ratably over the expected customer life. We expect sales and marketing expenses will further increase as we continue to expand our direct sales teams and increase sales through our strategic relationships and resellers.
Research and development
Research and development expenses consist primarily of salaries and benefits associated with our engineering, product and quality assurance personnel. Research and development expenses also include the cost of third-party contractors. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development costs to increase as we develop new solutions and make improvements to our existing platforms.
General and administrative
General and administrative expenses consist primarily of salaries and benefits with our executive, finance, legal, human resources, compliance and other administrative personnel, accounting, auditing and legal professional services fees, recruitment costs, and other corporate-related expenses. We expect that general and administrative expenses will increase as we scale our business,
but at a lower rate over time. Results of Operations
Year Ended
Total revenues
Our total revenues for the year endedDecember 31, 2021 increased on a year-over-year basis. This increase was driven by an increase in the number of customers, an increase in the number of users added by existing customers and an increase in the number of products purchased by existing customers. Our revenues for the year endedDecember 31, 2021 were$60.5 million . Excluding the$0.4 million impact of purchase accounting, our total non-GAAP adjusted revenues for the year endedDecember 31, 2021 would have been$60.9 million compared to$48.8 million for the year endedDecember 31, 2020 , representing a 25% increase. Revenues for each operating segment is comprised of the following (in thousands, except percentages): Generally Accepted Accounting Principles ("GAAP") Non-GAAP Total Total Increase / Increase / Total Total Increase / Increase / Revenues Revenues (Decrease) (Decrease) Revenues Revenues (Decrease) (Decrease) 2021 2020 in Dollars in
% 2021 2020 in Dollars in % Procurement$ 10,559 $ 7,806 $ 2,753 35 %$ 10,559 $ 7,829 $ 2,730 35 % Payments 12,848 8,863 3,985 45 % 13,283 9,384 3,899 42 % Grants Management 7,663 6,693 970 14 % 7,663 6,713 950 14 % Permitting 2,778 2,645 133 5 % 2,778 2,645 133 5 % Budget 26,605 22,121 4,484 20 % 26,605 22,272 4,333 19 % Total$ 60,453 $ 48,128 $ 12,325 26 %$ 60,888 $ 48,843 $ 12,045 25 % Procurement's, Grants Management's, and Permitting's revenues (GAAP and non-GAAP) increased primarily due to an increase in subscription, support and maintenance revenues resulting from an increase in customers from the prior year. Payment's revenues increased primarily due to an increase in transaction volume and asset sales. Budgeting's revenues increased due primarily due to an increase in subscription, support and maintenance revenues as well as an increase in professional services.
Total cost of revenues
Our total cost of revenues for the year endedDecember 31, 2021 has increased on a year-over-year basis. The increase was driven primarily by share-based compensation expense due to the issuance of restricted stock units. Cost of revenues 37 Table of Contents also increased due to increases in headcount, hosting operations and professional services to support our revenue growth. Cost of revenues for each operating segment is comprised of the following (in thousands, except percentages): ` Total Cost Total Cost of of Increase / Increase / Revenues Revenues (Decrease) (Decrease) 2021 2020 in Dollars in % Procurement$ 2,047 $ 1,520 $ 527 35 % Payments 8,258 6,682 1,576 24 % Grants Management 3,157 3,030 127 4 % Permitting 700 563 137 24 % Budget 8,210 6,673 1,537 23 % Total$ 22,372 $ 18,468 $ 3,904 21 % Procurement Procurement's total cost of revenues increased by$0.5 million or 35% primarily due to a$0.3 million or 23% increase in salaries and benefits driven by a 20% increase in average headcount fromDecember 31, 2020 toDecember 31, 2021 , a$0.1 million increase in bonuses, and a$0.1 million increase in the amortization of internal-use software.
Payments
Payments' total cost of revenues increased by$1.6 million or 24% primarily due to a$0.7 million increase in costs associated with kiosk sales, a$0.7 million or 23% increase in bank fees and a$0.2 million or 61% increase in kiosk operations.
Grants Management
Grants Management's total cost of revenues increased by
Permitting
Permitting's total cost of revenues increased by
Budget
Budget's total cost of revenues increased by$1.5 million or 23% primarily due to a$1.1 million or 31% increase in salaries and bonuses mainly driven by a 25% increase in average headcount fromDecember 31, 2020 toDecember 31, 2021 , a$0.5 million increase in share-based compensation related to the issuance of restricted stock units, and partially offset by a$0.1 million decrease in royalty and other third-party costs.
Operating expenses
Our total selling and marketing, general and administrative and research and development components of operating expenses for the year endedDecember 31, 2021 have increased due primarily to an increase in share-based compensation expense resulting from the issuance of restricted stock units, salaries and wages from an increase in headcount, reestablishment of business travel, and expansion of third-party costs to support operations. Operating expenses excluding amortization of 38 Table of Contents
intangible assets, acquisition costs, goodwill impairment, restructuring charges, and change in fair value of contingent consideration for each operating segment is comprised of the following (in thousands, except percentages):
Operating Operating Increase / Increase /
Expenses Expenses (Decrease) (Decrease)
2021 2020 in Dollars in %
Procurement $ 8,824 $ 8,218 $ 606 7 %
Payments 13,150 14,387 (1,237) (9) %
Grants Management 7,647 6,344 1,303 21 %
Permitting 2,621 2,972 (351) (12) %
Budget 12,476 10,515 1,961 19 %
Corporate 7,862 7,615 247 3 %
Total $ 52,580 $ 50,051 $ 2,529 5 %
Procurement
Procurement's total operating expense increased by $0.6 million or 7% due to a
$0.6 million or 35% increase in research and development expenses, a $0.2
million or 11% increase in general and administration expenses, offset by a $0.2
million or 6% decrease in sales and marketing expenses. The increase in research
and development expenses was due to a $0.3 million reduction of capitalization
of internal-use software, a $0.2 million or 10% increase in salaries and wages
and a $0.1 million increase in share-based compensation expense resulting from
the issuance of restricted stock units. The increase in general and
administration expenses was primarily due to a $0.1 million or 13% increase in
salaries and wages driven by a 9% increase in average headcount from December
31, 2020 to December 31, 2021 , and a $0.1 million increase in share-based
compensation expense resulting from the issuance of restricted stock units.The
decrease in sales and marketing costs was primarily due to a
Payments
Payments' total operating expense decreased by$1.2 million or 9% primarily due to a$0.7 million or 13% decrease in research and development expenses, a$0.5 million or 14% decrease in sales and marketing costs, and less than$0.1 million or 1% decrease general and administrative expenses. The decrease in research and development is primarily driven by a$0.5 million or 11% decrease in salaries and wages due to a 9% decrease in average headcount fromDecember 31, 2020 toDecember 31, 2021 and a$0.1 million decrease in share-based compensation expense resulting from the issuance of restricted stock units. The decrease in sales and marketing costs is primarily due to a$0.9 million decrease in share-based compensation expense resulting from the issuance of restricted stock units and partially offset by a$0.4 million increase in commissions and bonuses. The decrease in general and administrative expenses is primarily driven by a$0.4 million decrease in share based compensation resulting from the issuance of restricted stock units and partially offset by a$0.2 million increase in bonuses and a$0.1 million increase in third-party operating expenses.
Grants Management
Grants Management's total operating expense increased by$1.3 million or 21% primarily due to a$1.0 million or 45% increase in sales and marketing costs, a$0.4 million or 21% increase in research and development costs, and partially offset by a$0.1 million or 3% decrease in general and administrative expenses. The increase in sales and marketing costs was primarily due to a$0.4 million or 30% increase in salaries and benefits driven by a 23% increase in average headcount fromDecember 31, 2020 toDecember 31, 2021 , a$0.4 million increase in third-party commissions expense, and a$0.2 million increase in commissions and bonuses. The increase in research and development is primarily driven by a$0.2 million increase in consulting and professional services and a$0.1 million or 6% increase in salaries and wages due to a 4% increase in average headcount fromDecember 31, 2020 toDecember 31, 2021 . The decrease in general and administration expenses is primarily due to a$0.2 million decrease in rent expense, a$0.2 million decrease in recruiting expenses and other third-party costs, and partially offset by a$0.3 million increase in share-based compensation expense resulting from the issuance of restricted stock units.
Permitting
Permitting's total operating expense decreased by$0.4 million or 12% primarily due to a$0.2 million or 20% decrease in sales and marketing costs and a$0.2 million or 22% decrease in general and administrative costs. The decrease
in
sales
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and marketing costs is primarily due to a $0.3 million or 30% decrease in
salaries and wages due to a 25% decrease in average headcount from December 31,
2020 to December 31, 2021 and partially offset by a $0.1 million increase in
share-based compensation expense. The decrease in general and administrative
costs is primarily due to a $0.1 million decrease in travel and a $0.1 million
or 19% decrease in salaries and benefits.
Budget
Budget's total operating expenses increased by$2.0 million or 19% primarily due to a$1.3 million or 35% increase in general and administrative expenses, a$0.5 million or 23% increase in research and development expenses, and a$0.2 million or 3% increase in sales and marketing costs. The increase in general and administrative expenses was due to a$1.4 million increase in share-based compensation expense and partially offset by a$0.1 million decrease in salaries and benefits. The increase in research and development expenses was due to a$0.3 million or 19% increase in salaries and wages and a$0.3 million or 162% increase in share-based compensation expense resulting from the issuance of restricted stock units and partially offset by a$0.1 million decrease in consulting and professional services. The increase in sales and marketing costs was primarily due to a$0.2 million increase in share-based compensation expense.
Corporate
Corporate expenses are primarily comprised of outside services including legal, accounting and consulting fees, payroll and related expenses, corporate insurance, and share-based compensation. Corporate expenses increased by$0.2 million or 3% due primarily to a$0.6 million or 43% increase in salaries and benefits and partially offset by a$0.4 million decrease in legal fees.
Other operating expenses
Amortization of intangible assets consists of the amortization of finite lived intangibles resulting from the Acquisition as described in Note 4 of the notes to our consolidated financial statements included in this Annual Report on Form 10-K. Goodwill impairment expense includes any reduction in the fair value of Goodwill relative to its carrying value. The restructuring charges resulted from the Company'sMarch 2020 restructuring. The change in fair value of contingent consideration consists of any adjustments to the contingent consideration liability since the Acquisition.
Other income (expense)
Other income (expense) consists primarily of interest expense associated with the Company'sFebruary 2020 andNovember 2020 credit facilities, gains (losses) from the issuance of shares, change in fair value of warrant liability, gains (losses) on extinguishment of debt, and gains (losses) resulting from transactions denominated in foreign currencies.
Reconciliation of Non-GAAP Revenues
To supplement our consolidated financial statements, which are prepared in accordance withU.S. generally accepted accounting principles, or GAAP, we have provided certain financial measures that have not been prepared in accordance with GAAP defined as "non-GAAP financial measures," which include (i) non-GAAP revenues, (ii) non-GAAP gross profit and non-GAAP gross margin, (iii) and non-GAAP loss from operations. We use these non-GAAP financial measures internally in analyzing our financial results and believe these metrics are useful to investors, as a supplement to the corresponding GAAP measure, in evaluating our ongoing operational performance and trends. However, it is important to note that particular items we exclude from, or include in, our non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Non-GAAP Revenues
Non-GAAP revenues are defined as GAAP revenues adjusted for the impact of purchase accounting resulting from our business combination which reduced our acquired contract liabilities to fair value. We believe that presenting non-GAAP revenues is useful to investors as it eliminates the impact of the purchase accounting adjustments to revenues to allow for a direct comparison between
current and future periods.
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Non-GAAP Gross Profit and Non-GAAP Gross Margin
Non-GAAP gross profit is defined as GAAP gross profit adjusted for the impact of purchase accounting resulting from the business combination. Non-GAAP gross margin is defined as non-GAAP gross profit divided by non-GAAP revenues. We believe that presenting non-GAAP gross profit and margin is useful to investors as it eliminates the impact of the purchase accounting adjustments to allow for a direct comparison between periods.
Non-GAAP Loss from Operations
Non-GAAP loss from operations is defined as GAAP loss from operations adjusted for the impact of purchase accounting to revenues resulting from our business combination, the amortization of acquired intangible assets, share-based compensation, acquisition related costs, goodwill impairment expense, and the change in fair value of contingent consideration. We believe that presenting non-GAAP loss from operations is useful to investors as it eliminates the impact of certain non-cash and acquisition related expenses to allow a direct comparison of loss from operations between all periods presented.
Below is a reconciliation of non-GAAP revenues, Non-GAAP gross profit and Non-GAAP gross margin and Non-GAAP loss from operations to their most directly comparable GAAP financial measures (in thousands, except percentages):
Year Ended December 31,
2021 2020
Revenues 60,453 48,128Purchase accounting adjustment to revenue 435
715 Non-GAAP Revenues$ 60,888 $ 48,843 Gross Profit 38,081 29,660
Purchase accounting adjustment to revenue 435
715 Share-based compensation 1,459 811 Non-GAAP Gross Profit$ 39,975 $ 31,186 Gross Margin 63 % 62 % Non-GAAP Gross Margin 66 % 64 % Loss from operations$ (45,502) $ (42,718)
Purchase accounting adjustment to revenue 435
715 Amortization of intangibles 14,579 14,681 Share-based compensation 9,969 8,621 Goodwill impairment expense 15,827 2,000 Restructuring charges - 3,666
Change in fair value of contingent consideration 597
1,980 Non-GAAP Loss from Operations$ (4,095) $ (11,055)
Below is a reconciliation of non-GAAP revenues to revenues by operating segment (in thousands, except percentages):
Year Ended December 31,
Grants Total
Procurement Payments Management Permitting Budget Revenues
Revenues 2021 $ 10,559 $ 12,848 $ 7,663 $ 2,778 $ 26,605 $ 60,453
Purchase accounting
adjustment to revenues - 435 - - - 435
Non-GAAP Revenues 2021 $ 10,559 $ 13,283 $ 7,663 $ 2,778 $ 26,605 $ 60,888
Revenues 2020 $ 7,806 $ 8,863 $ 6,693 $ 2,645 $ 22,121 $ 48,128
Purchase accounting
adjustment to revenues 23 521 20 - 151 715
Non-GAAP Revenues 2020 $ 7,829 $ 9,384 $ 6,713 $ 2,645 $ 22,272 $ 48,843
% change 35 % 42 % 14 % 5 % 19 % 25 %
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Liquidity and Capital Resources
As ofDecember 31, 2021 , we had a cash balance of approximately$13.3 million . From the date of the Acquisition throughDecember 31, 2021 , our liquidity needs have been satisfied through proceeds from the January-February 2020 private investment in public equity, or PIPE, transactions, proceeds from our initial public offering that were released inFebruary 2019 from the trust account established in connection with such offering for the benefit of our shareholders, proceeds from ourJune 2019 registered direct offering, proceeds from ourFebruary 2020 andNovember 2020 credit facilities, proceeds from issuances of stock under our at-the-market offering program, and loan proceeds in April-May 2020 from the Paycheck Protection Program. OnNovember 13, 2020 , we entered into a loan and security agreement that provides for term loans in an aggregate principal amount of$25.0 million . The loan and security agreement are supported by a security interest in our assets and related guaranty agreements. On the closing date, we fully drew on the credit facility and the current outstanding balance is$25.0 million . As such, no additional amounts are available from it. The credit facility replaced our prior$12.0 million unsecured credit facility. OnNovember 17, 2020 , we filed a Form S-3 Registration Statement under which the Company may sell a combination of securities up to a total dollar amount of$40.0 million . OnNovember 25, 2020 , the Company entered into an At Market Issuance Sales Agreement withB. Riley Securities, Inc. ("B. Riley") andNeedham & Company ("Needham") with respect to an at-the-market offering program under which the Company may offer and sell shares of its common stock, par value$0.0001 per share having an aggregate offering price of up to$10.0 million throughB. Riley and Needham as its sales agents. During the year endedDecember 31, 2021 , the Company sold 935,633 shares of common stock for$6.8 million in proceeds. Our consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. Our future capital requirements will depend on many factors, including our growth rate, the expansion of our direct sales force, strategic relationships and international operations, the timing and extent of spending to support research and development efforts and the continuing market acceptance of our solutions. We currently anticipate that our cash on hand, together with revenue from operations, will be sufficient to satisfy our anticipated capital requirements during 2021. However, if our projections of revenue or expenditures are inaccurate, we may require additional equity or debt financing during 2021. Sales of additional equity, including under the At Market Sales Agreement, could result in dilution to our stockholders. If we borrow additional funds, the terms of those financing arrangements, if available, may include negative covenants or other restrictions on our business that could impair our operating flexibility. We can provide no assurance that financing will be available at all or, if available, that we would be able to obtain financing on terms favorable to us. If we are unable to raise additional capital when needed, we would be required to curtail our operating activities and capital expenditures, and our business operating results and financial condition would be adversely affected. PIPE Transaction Immediately prior to the closing of the business combination (the "Closing"), pursuant to subscription agreements (the "Subscription Agreements"), dated as of various dates fromJanuary 9, 2019 throughFebruary 12, 2019 , by and among GTY Cayman and certain institutional and accredited investors party thereto (the "Subscribed Investors "), GTY Cayman issued to theSubscribed Investors an aggregate of 12,853,098 Class A ordinary shares of GTY for$10.00 per share, for an aggregate cash purchase price of approximately$126.3 million , including three such Subscription Agreements with certainCityBase holders (includingMichael Duffy , the chief executive officer ofCityBase ) for an aggregate of 380,937 Class A ordinary shares of GTY Cayman at a price of$10.00 per share, for an aggregate cash purchase price of approximately$3.8 million (the "PIPE Transaction"). The Class A ordinary shares of GTY Cayman issued to theSubscribed Investors were cancelled and exchanged on a one-for-one basis for shares of Company common stock at the Closing. 42 Table of Contents Historical Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated (amounts in thousands):
Year Ended Year Ended
December 31 , December 31,
2021 2020Net cash used in operating activities $ (6,382) $
(12,974)
Net cash used in investing activities $ (346) $
(2,993)
Net cash (used in) provided by financing activities $ (2,715) $
30,480
Our net loss and cash flows from operating activities are significantly influenced by the Acquisition and our investments in headcount and infrastructure to support anticipated growth.
For the year endedDecember 31, 2021 , net cash used in operations was$6.4 million resulting from our net loss of$53.8 million and changes in operating assets and liabilities of$1.6 million and offset by net non-cash expenses of$49.1 million . The$49.1 million of non-cash expenses was primarily comprised of$15.8 million of goodwill impairment expense,$14.6 million of amortization of intangible assets acquired as a result of the Acquisition,$10.0 million from share-based compensation expense associated with the issuance of restricted stock units, a$5.3 million loss on issuance of shares, a$1.8 million change in fair value of warrant liability,$1.6 million amortization of right of use assets,$1.0 million of depreciation expense, and$0.7 million of deferred debt issuance costs. These non-cash expenses were partially offset by a$3.2 million gain on extinguishment of debt. The$1.6 million of net cash used as a result of changes in our operating assets and liabilities was due to a$2.7 million increase in accounts receivable, a$1.8 million increase in prepaid expenses, a$1.1 million decrease in operating lease liabilities, a$0.9 million decrease in accounts payable and accrued liabilities and partially offset by a$4.9 million increase in deferred revenue. For the year endedDecember 31, 2020 , net cash used in operations was$13.0 million resulting from our net loss of$41.9 million and offset by net non-cash expenses of$28.2 million and changes in operating assets and liabilities of$0.7 million . The$28.2 million of non-cash expenses was primarily comprised of$14.7 million of amortization of intangible assets acquired as a result of the Acquisition,$8.6 million from share-based compensation expense associated with the issuance of restricted stock units, a$2.1 million loss on issuance of shares,$2.0 million of amortization of right of use assets associated with our operating and finance leases,$2.0 million of goodwill impairment expense, a$2.0 change in fair value of contingent consideration, and$0.9 million of depreciation expense. These non-cash expenses were partially offset by$2.8 million of deferred tax benefits related to the tax and book basis difference on the amortization of intangible assets and a$2.1 million change in fair value of warrant liability. The$0.7 million of net cash flows provided as a result of changes in our operating assets and liabilities was due to a$6.3 million increase in deferred revenue and partially offset by a$2.0 million decrease in accounts payable and accrued liabilities, a$2.1 million decrease in operating lease liabilities, a$0.8 million increase in accounts receivable, and a$0.7 million increase in prepaid expenses.
Our primary investing activities have consisted of capital expenditures.
For the year endedDecember 31, 2021 , cash used in investing activities was$0.3 million due to$0.3 million of capital expenditures resulting largely from the purchases of computer hardware to support our growth in headcount. For the year endedDecember 31, 2020 , cash used in investing activities was$3.0 million due primarily to$2.7 million of capital expenditures resulting largely from the lease improvements and furniture purchases at Questica's new facility.
Net Cash Provided By (Used in) Financing Activities
For the year endedDecember 31, 2021 , cash used in financing activities was$2.7 million due primarily to$8.0 million of stock repurchases associated with the redemption of shares held by former eCivis shareholders,$0.8 million of contingent consideration payments, and$0.6 million of repayments of finance lease liabilities and partially offset by$6.8 million of proceeds from the
issuance of common stock.
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For the year endedDecember 31, 2020 , cash provided by financing activities was$30.5 million due primarily to$37.8 million of proceeds from borrowings, net of issuance costs resulting from ourFebruary 2020 andNovember 2020 Credit Facilities and loans provided under the Paycheck Protection Program and$7.0 million in proceeds received from the issuance of common stock. These proceeds were partially offset by$12.0 million of repayment of borrowings and$1.3 million of contingent consideration payments.
Critical Accounting Policies and Use of Estimates
See Note 3 of the notes to our consolidated financial statements.
Recent Accounting Pronouncements
The impact of recently issued accounting standards is set forth in Note 3, Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet transactions. Other than the guarantees described in Note 9, we have no guarantees or obligations other than those which arise out of normal business operations.
Contractual Obligations
Our principal commitments consist primarily of obligations under operating and financing leases, which include among others, our offices and leased kiosks and term loans. The following table summarizes our commitments to settle contractual obligations in cash as ofDecember 31, 2021 : Payment
Due by Period
Total 2022 2023 2024 2025 2026 Thereafter
Operating lease obligations $ 4,077 $ 800 $ 392 $ 367 $ 416 $ 416 $ 1,686 Finance lease obligations 156 156 - - - - - Term loans 25,000 - 25,000 - - - -
As of
Individuals associated withCityBase may receive, uponCityBase's trailing twelve-month net revenue exceeding$37.0 million , or theCityBase threshold, on or prior toDecember 31, 2048 , an earnout payment equal to a number of shares (or, in the case of certain individuals associated withCityBase who are not accredited investors, the cash value thereof) of our common stock calculated by dividing$54.5 million by the greater of (x)$10.00 or (y) the volume-weighted average closing price for the shares of our common stock for the 30 trading days immediately preceding the payment date. Pursuant to the terms of a 2018 asset purchase agreement by eCivis, shareholders associated with the purchase may receive cash consideration equal to 7.5% of new revenue between$500,000 and 999,999.99, 10% of new revenue above$1,000,000 , 2% of renewal revenue up to 249,999.99 3% of renewal revenue between$250,000.00 to$749,999.99 and 5% above$750,000.00 in each earn-out year beginning in 2018 and ending in 2022. Only revenue derived from the acquired assets is eligible.
The
potential undiscounted amount of all future payments that the Company could be required to make is unlimited.
Off-Balance Sheet Arrangements
As ofDecember 31, 2021 and 2020, the Company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations
JOBS Act
OnApril 5, 2012 , the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting 44
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pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As such, GTY's consolidated financial statements may not be comparable to companies that comply with public company effective dates. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) followingNovember 1, 2021 , the fifth anniversary of the GTY Cayman IPO, (b) in which we have total annual gross revenue of at least$1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds$700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period.
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