10-Q
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
 
FORM
10-Q
 
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File Number:
001-40430
 
 
FLYWIRE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Delaware
 
27-0690799
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
   
141 Tremont St #10
Boston, MA
 
02111
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(617329-4524
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Voting common stock, $0.0001 par value per share
 
FLYW
 
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  
    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding
12
months (or for such shorter period that the registrant was required to submit such files).    Yes  
    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer  
   Accelerated filer  
       
Non-accelerated
filer
 
   Smaller reporting company  
       
         Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
    No  
As of
August
 
11
, 2021, the registrant had 98,829,293 shares of voting common stock, $0.0001 par value per share, outstanding and 5,988,378 shares of
non-voting
common stock $0.0001 par value per share, outstanding.
 
 
 

Table of Contents
Table of Contents
 
 
  
 
  
Page
 
PART I.
  
  
 
3
 
Item 1.
  
  
 
3
 
  
  
 
3
 
  
  
 
4
 
  
  
 
5
 
  
  
 
8
 
  
  
 
10
 
Item 2.
  
  
 
28
 
Item 3.
  
  
 
45
 
Item 4.
  
  
 
45
 
PART II.
  
  
 
46
 
Item 1.
  
  
 
46
 
Item 1A.
  
  
 
46
 
Item 2.
  
  
 
83
 
Item 3.
  
  
 
83
 
Item 4.
  
  
 
83
 
Item 5.
  
  
 
83
 
Item 6.
  
  
 
84
 
  
  
 
85
 
 
i

Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
(Form
10-Q),
as well as information included in oral statements or other written statements made or to be made by us, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
 
   
our future financial performance, including our expectations regarding our revenue, cost and operating expenses, including changes in technology and development, selling and marketing and general and administrative expenses (including any components of the foregoing), gross profit and our ability to achieve, and maintain, future profitability;
 
   
our business plan and our ability to effectively manage our growth;
 
   
our cross-border expansion plans and ability to expand internationally;
 
   
anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
 
   
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
 
   
political, economic, legal, social and health risks, including the
recent COVID-19 pandemic
and subsequent public health measures that may affect our business or the global economy;
 
   
beliefs and objectives for future operations;
 
   
our ability to develop and protect our brand;
 
   
our ability to maintain and grow the payment volume that we process;
 
   
our ability to further attract, retain, and expand our client base;
 
   
our ability to develop new solutions and services and bring them to market in a timely manner;
 
   
our expectations concerning relationships with third parties, including strategic partners;
 
   
the effects of increased competition in our markets and our ability to compete effectively;
 
   
future acquisitions or investments in complementary companies, products, services, or technologies;
 
   
our ability to enter new client verticals, including our relatively new B2B sector;
 
   
our expectations regarding anticipated technology needs and developments and our ability to address those needs and developments with our solutions;
 
   
our expectations regarding litigation and legal and regulatory matters;
 
   
our expectations regarding our ability to meet existing performance obligations and maintain the operability of our solutions;
 
   
our expectations regarding the effects of existing and developing laws and regulations, including with respect to payments and financial services, taxation, privacy and data protection;
 
   
economic and industry trends, projected growth, or trend analysis;
 
   
our ability to attract and retain qualified employees;
 
   
our ability to maintain, protect, and enhance our intellectual property;
 
   
our ability to maintain the security and availability of our solutions;

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the increased expenses associated with being a public company; and
 
   
the future market price of our common stock.
Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Form
10-Q.
Other sections of this Form
10-Q
may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, events, or circumstances. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Form
10-Q
and the documents that we have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
Investors, the media, and others should note that we intend to announce material information to the public through filings with the SEC, the investor relations page on our website, blog posts on our website (www.flywire.com), press releases, public conference calls, webcasts, and our Twitter feed (@flywire). The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website. The contents of our website are not incorporated into this filing. We have included our investor relations website address only as an inactive textual reference and do not intend it to be an active link to our website.
 
2

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PART I—FINANCIAL INFORMATION
 
Item 1.
Financial Statements.
FLYWIRE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
 
    
June 30,

2021
   
December 31,

2020
 
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 412,026     $ 104,052  
Restricted cash
     5,000       5,000  
Accounts receivable, net of allowance for doubtful accounts of $167 and $496, respectively
     11,621       11,573  
Unbilled receivables
     1,006       1,698  
Funds receivable from payment partners
     17,025       22,481  
Prepaid expenses and other current assets
     10,821       3,754  
    
 
 
   
 
 
 
Total current assets
     457,499       148,558  
Property and equipment, net
     7,536       5,101  
Intangible assets, net
     65,033       68,211  
Goodwill
     44,656       44,650  
Other assets
     5,365       4,922  
    
 
 
   
 
 
 
Total assets
   $ 580,089     $ 271,442  
    
 
 
   
 
 
 
Liabilities, Convertible Preferred Stock, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
                
Current liabilities:
                
Accounts payable
   $ 10,454     $ 5,436  
Funds payable to clients
     45,511       59,986  
Accrued expenses and other current liabilities
     14,084       14,991  
Deferred revenue
     836       1,227  
Contingent consideration
     7,079       6,740  
    
 
 
   
 
 
 
Total current liabilities
     77,964       88,380  
Deferred tax liabilities
     663       481  
Contingent consideration, net of current portion
              5,760  
Preferred stock warrant liability
              1,932  
Long-term debt
     24,447       24,352  
Other liabilities
     2,037       2,129  
    
 
 
   
 
 
 
Total liabilities
     105,111       123,034  
    
 
 
   
 
 
 
Commitments and contingencies (Note 14)
            
Convertible preferred stock (Series A, B, B1,
B1-NV,
C and D), $0.0001 par value; 0 and 62,915,394 shares authorized at June 30, 2021 and December 31, 2020, respectively; 0 and 54,208,461 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; liquidation preference of $0 and $110,716 at June 30, 2021 and December 31, 2020, respectively
              110,401  
Redeemable convertible preferred stock (Series
E-1,
E-2,
F-1
and
F-2),
$0.0001 par value; 0 and 16,023,132 shares authorized at June 30, 2021 and December 31, 2020, respectively; 0 and 11,239,920 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; liquidation preference of $0 and $150,000, respectively at June 30, 2021 and December 31, 2020
              119,769  
    
 
 
   
 
 
 
Stockholders’ (deficit) equity:
                
Preferred stock, $0.0001 par value; 10,000,000
and 0
shares authorized as of June 30, 2021 and December 31, 2020, respectively; and none issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
     —         —    
Voting common stock, $0.0001 par value; 2,000,000,000 and 146,898,270 shares authorized as of June 30, 2021 and December 31, 2020, respectively, 100,995,903 shares issued and 98,678,181 shares outstanding as of June 30, 2021; 22,240,872 shares issued and 19,923,150 shares outstanding as of December 31, 2020
     10       2  
Non-voting
common stock, $0.0001 par value;10,000,000 and 0 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 5,988,378 and 0 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
     1           
Treasury Stock, 2,317,722 shares as of June 30, 2021 and December 31, 2020, held at cost
     (748     (748
Additional
paid-in
capital
     600,236       16,970  
Accumulated other comprehensive income (loss)
     49       (214
Accumulated (deficit)
     (124,570     (97,772
    
 
 
   
 
 
 
Total stockholders’ equity (deficit)
     474,978       (81,762
    
 
 
   
 
 
 
Total liabilities, convertible preferred stock, redeemable convertible preferred stock and stockholders’ (deficit) equity
   $ 580,089     $ 271,442  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
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FLYWIRE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
 
    
Three Months Ended June 30,
   
Six Months Ended June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Revenue
   $ 36,976     $ 23,757     $ 81,967     $ 56,466  
Costs and operating expenses:
                                
Payment processing services costs
     13,122       10,868       29,213       22,477  
Technology and development
     6,929       6,378       14,451       11,726  
Selling and marketing
     10,906       8,125       22,837       16,702  
General and administrative
     13,578       13,548       29,491       23,813  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total costs and operating expenses
     44,535       38,919       95,992       74,718  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     (7,559     (15,162     (14,025     (18,252
    
 
 
   
 
 
   
 
 
   
 
 
 
Other income (expense):
                                
Interest expense
     (629     (679     (1,250     (1,276
Change in fair value of preferred stock warrant liability
     (9,803     9       (10,758     (254
Other income (expense), net
     118       107       (294     76  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other expenses, net
     (10,314     (563     (12,302     (1,454
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss before provision for income taxes
     (17,873     (15,725     (26,327     (19,706
(Benefit from) provision for income taxes
     273       272       471       (7,409
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
     (18,146     (15,997     (26,798     (12,297
Foreign currency translation adjustment
     (76     (173     263       (273
    
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
   $ (18,222   $ (16,170   $ (26,535   $ (12,570
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss attributable to common stockholders – basic and diluted
   $ (18,154   $ (16,001   $ (26,811   $ (12,303
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share attributable to common stockholders – basic and diluted
   $ (0.35   $ (0.87   $ (0.73   $ (0.69
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average common shares outstanding – basic and diluted
     52,496,862       18,327,639       36,886,657       17,919,721  
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
4

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FLYWIRE CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited) (Amounts in thousands, except share and per share amounts)
 
   
Three Months Ended June 30, 2021
   
Convertible

Preferred Stock
 
Redeemable

Convertible

Preferred Stock
      
Voting

Common Stock
 
Non-Voting

Common

Stock
 
Treasury Stock
 
Additional
Paid-In
 
Accumu
lated
Other
Compre
hensive
Income
 
Accumu
lated
 
Total
Stock
holders’
   
Shares
 
Amount
 
Shares
 
Amount
      
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
(Loss)
 
Deficit
 
Deficit
Balances at March 31, 2021
      54,208,461     $ 110,401       13,811,856     $ 179,509             25,397,964     $ 3       —         —         (2,317,722 )     $ (748 )     $ 29,734     $ 125     $ (106,424 )     $ (77,310 )
Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions
      —         —         —         —               12,006,000       1       —         —         —         —         268,693       —         —         268,694
Costs incurred in connection with initial public offering
      —         —         —         —               —         —         —         —         —         —         (4,860 )       —         —         (4,860 )
Accretion of redeemable convertible preferred stock
      —         —         —         8             —         —         —         —         —         —         (8 )       —         —         (8 )
Issuance of Series C Convertible Preferred Stock upon net exercise of warrants
      182,467       6,417       —         —               —         —         —         —         —         —         —         —         —         —  
Conversion of convertible preferred stock upon initial public offering
      (54,390,928 )       (116,818 )       —         —               54,390,928       5       —         —         —         —         116,813       —         —         116,818
Conversion of redeemable convertible preferred stock upon initial public offering
      —         —         (13,811,856 )       (179,517 )             7,823,478       1       5,988,378       1       —         —         179,515       —         —         179,517
Issuance of common stock upon exercise of stock options
      —         —             —               1,112,030       —         —         —         —         —         1,387       —         —         1,387
Reclassification of warrant liability to additional
paid-in
capital upon initial public offering
      —         —         —         —               —         —         —         —         —         —         6,272       —         —         6,272
Exercise of common stock warrants
      —         —         —         —               265,503       —         —         —         —         —         294       —         —         294
Foreign currency translation adjustment
      —         —         —         —               —         —         —         —         —         —         —         (76 )       —         (76 )
Stock-based compensation expense
      —         —         —         —               —         —         —         —         —         —         2,396       —         —         2,396
Net loss
      —         —         —         —               —         —         —         —         —         —         —         —         (18,146 )       (18,146 )
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
Balances at June 30, 2021
      —         —         —         —               100,995,903     $ 10       5,988,378     $ 1       (2,317,722 )     $ (748 )     $ 600,236     $ 49     $ (124,570 )     $ 474,978
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
   
Three Months Ended June 30, 2020
   
Convertible

Preferred Stock
 
Redeemable

Convertible

Preferred Stock
      
Voting

Common Stock
 
Non-Voting

Common

Stock
 
Treasury Stock
 
Additional
Paid-In
 
Accumu
lated
Other
Compre
hensive
Income
 
Accumu
lated
 
Total
Stock
holders’
Equity
   
Shares
 
Amount
 
Shares
 
Amount
      
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
(Loss)
 
Deficit
 
(Deficit)
Balances at March 31, 2020
      54,208,461     $ 110,401       11,239,920     $ 119,757             21,832,035     $ 2       —         —         (2,317,722 )     $ (748 )     $ 13,368     $ 2     $ (82,965 )     $ (70,341 )
Issuance of common stock upon exercise of stock options
      —         —         —         —               27,690       —         —         —         —         —         16       —         —         16
Issuance of common stock warrants
      —         —         —         —               —         —         —         —         —         —         336       —         —         336
Accretion of redeemable convertible preferred stock
      —         —         —         4             —         —         —         —         —         —         (4 )       —         —         (4 )
Forfeiture of unvested restricted stock awards
      —         —         —         —               (98,877 )       —         —         —         —         —         —         —         —         —  
Foreign currency translation adjustment
      —         —         —         —               —         —         —         —         —         —         —         (173 )       —         (173 )
Stock-based compensation expense
      —         —         —         —               —         —         —         —         —         —         989       —         —         989
Net income
      —         —         —         —               —         —         —         —         —         —         —         —         (15,997 )       (15,997 )
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
Balances at June 30, 2020
      54,208,461     $ 110,401       11,239,920     $ 119,761             21,760,848     $ 2       —         —         (2,317,722 )     $ (748 )     $ 14,705     $ (171 )     $ (98,962 )     $ (85,174 )
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
 
5

Table of Contents
   
Six Months Ended June 30, 2021
   
Convertible

Preferred Stock
 
Redeemable

Convertible

Preferred Stock
      
Voting

Common Stock
 
Non-Voting

Common

Stock
 
Treasury Stock
 
Additional
Paid-In
 
Accumu
lated
Other
Compre
hensive
Income
 
Accumu
lated
 
Total
Stock
holders’
   
Shares
 
Amount
 
Shares
 
Amount
      
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
(Loss)
 
Deficit
 
Deficit
Balances at December 31, 2020
      54,208,461     $ 110,401       11,239,920     $ 119,769             22,240,872     $ 2       —         —         (2,317,722 )     $ (748 )     $ 16,971     $ (214 )     $ (97,772 )     $ (81,762 )
Issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions
      —         —         —         —               12,006,000       1       —         —         —         —         268,693       —         —         268,694
Costs incurred in connection with initial public offering
      —         —         —         —               —         —         —         —         —         —         (4,860 )       —         —         (4,860 )
Accretion of redeemable convertible preferred stock
      —         —         —         13             —         —         —         —         —         —         (13 )       —         —         (13 )
Issuance of Series
F-1
redeemable convertible preferred stock, net of issuance costs of $256
      —         —         2,571,936       59,735             —         —         —         —         —         —         —         —         —         —  
Issuance of Series C Convertible Preferred Stock upon net exercise of warrants
      182,467       6,417       —         —               —         —         —         —         —         —         —         —         —         —  
Conversion of convertible preferred stock upon initial public offering
      (54,390,928 )       (116,818 )       —         —               54,390,928       5       —         —         —         —         116,813       —         —         116,818
Conversion of redeemable convertible preferred stock upon initial public offering
      —         —         (13,811,856 )       (179,517 )             7,823,478       1       5,988,378       1       —         —         179,515       —         —         179,517
Issuance of common stock upon exercise of stock options
      —         —             —               4,117,604       1       —         —         —         —         3,791       —         —         3,792
Reclassification of warrant liability to additional
paid-in
capital upon initial public offering
      —         —         —         —               —         —         —         —         —         —         6,272       —         —         6,272
Exercise of common stock warrants
      —         —         —         —               417,021       —         —         —         —         —         294       —         —         294
Foreign currency translation adjustment
      —         —         —         —               —         —         —         —         —         —         —         263       —         263
Stock-based compensation expense
      —         —         —         —               —         —         —         —         —         —         12,760       —         —         12,760
Net loss
      —         —         —         —               —         —         —         —         —         —         —         —         (26,798 )       (26,798 )
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
Balances at June 30, 2021
      —         —         —         —               100,995,903     $ 10       5,988,378     $ 1       (2,317,722 )     $ (748 )     $ 600,236     $ 49     $ (124,570 )     $ 474,978
   
 
 
     
 
 
     
 
 
     
 
 
         
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
 
6

Table of Contents
   
Six Months Ended June 30, 2020
   
Convertible

Preferred Stock
 
Redeemable

Convertible

Preferred Stock
      
Voting

Common Stock
 
Non-Voting

Common

Stock
 
Treasury Stock
 
Additional
Paid-In
 
Accumu
lated
Other
Compre
hensive
Income
 
Accumu
lated
 
Total
Stock
holders’
Equity
   
Shares
 
Amount
 
Shares
 
Amount
      
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
(Loss)
 
Deficit
 
(Deficit)
Balances at December 31, 2019
      54,208,461     $     110,401       —         —               20,494,146     $ 2       —         —         (2,317,722 )     $ (748 )     $ 12,031     $ 102     $ (86,665 )     $ (75,278 )
Issuance of common stock upon exercise of stock options
      —         —         —         —               1,372,671       —         —         —         —         —         520       —         —         520
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $245
      —         —           11,239,920         119,755             —         —         —         —         —         —         —         —         —         —  
Accretion of redeemable convertible preferred stock
      —         —         —         6             —         —         —         —         —         —         (6 )       —         —         (6 )
Issuance of common stock warrants
      —         —         —         —               —         —                  —         —         —         —         336       —         —                336
Forfeiture of unvested restricted stock awards
      —         —         —         —               (105,969 )       —         —         —         —         —         —         —         —         —  
Foreign currency translation adjustment
      —         —         —         —               —         —         —         —         —         —         —         (273 )       —         (273 )
Stock-based compensation expense
      —         —         —         —               —         —         —         —         —         —         1,824       —         —         1,824
Net income
      —         —         —         —               —         —         —         —         —         —         —         —         (12,297 )       (12,297 )
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
Balances at June 30, 2020
      54,208,461     $ 110,401       11,239,920     $ 119,761             21,760,848     $   2       —         —         (2,317,722 )     $ (748 )     $ 14,705     $ (171 )     $ (98,962 )     $ (85,174 )
   
 
 
     
 
 
     
 
 
     
 
 
           
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
     
 
 
 
 
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FLYWIRE CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
 
    
Six Months Ended June 30,
 
    
2021
   
2020
 
Cash flows from operating activities:
                
Net loss
   $ (26,798   $ (12,297
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
     4,305       3,263  
Stock-based compensation expense
     12,760       1,824  
Amortization of deferred contract costs
     105       105  
Change in fair value of preferred stock warrant liability
     10,758       254  
Change in fair value of contingent consideration
     1,591       3,702  
Deferred tax provision
     137       (8,538
Bad debt expense
     80       237  
Non-cash
interest expense
     100       145  
Other
     97       —    
Changes in operating assets and liabilities, net of acquisition:
                
Accounts receivable
     (128     (1,971
Unbilled receivables
     692       780  
Funds receivable from payment partners
     5,456       5,648  
Prepaid expenses and other assets
     (7,817     (3,210
Funds payable to clients
     (14,475     (29,990
Accounts payable, accrued expenses and other current liabilities
     3,097       650  
Contingent consideration
     (3,212     (693
Other liabilities
     135       (133
Deferred revenue
     (436     (385
    
 
 
   
 
 
 
Net cash used in operating activities
     (13,553     (40,609
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchases of property and equipment
     (3,463     (1,261
Asset acquisition, net of cash acquired
     (119     —    
Acquisition of businesses, net of cash acquired
     —         (79,401
    
 
 
   
 
 
 
Net cash used in investing activities
     (3,582     (80,662
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Proceeds from initial public offering, net of underwriting discounts and commissions
     268,694       —    
Payment of costs related to initial public offering
     (3,845     —    
Proceeds from issuance of long-term debt
     —         4,167  
Payment of long-term debt issuance costs
     —         (172
Payment of long-term debt
     —         (4,167
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs
     59,735       119,755  
Proceeds from exercise of warrants
     294       —    
Contingent consideration paid for acquisitions
     (3,800     (1,307
Proceeds from exercise of stock options
     3,792       520  
    
 
 
   
 
 
 
Net cash provided by financing activities
     324,870       118,796  
    
 
 
   
 
 
 
Effect of exchange rates changes on cash and cash equivalents
     239       (428
    
 
 
   
 
 
 
Net (decrease) increase in cash, cash equivalents and restricted cash
     307,974       (2,903
Cash, cash equivalents and restricted cash, beginning of period
     109,052       86,027  
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash, end of period
   $ 417,026     $ 83,124  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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FLYWIRE CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (Amounts in thousands)
 
    
Six Months Ended June 30,
 
    
2021
   
2020
 
Supplemental disclosures of cash flow and noncash information
                
Cash paid during the period for interest
     1,074       938  
Accretion of redeemable convertible preferred stock
     (13     (6
Issuance of common stock warrants
     —         336  
Issuance of Series C convertible preferred stock upon net exercise of warrants
     6,417       —    
Conversion of preferred stock warrants to common stock warrants
     6,272       —    
Conversion of convertible preferred stock to common stock upon initial public offering
     116,818       —    
Conversion of redeemable convertible preferred stock to common stock upon initial public offering
     179,986       —    
Offering costs related to initial public offering included in accounts payable, accrued expenses and other current liabilities
     1,015       —    
     
Reconciliation of cash, cash equivalents and restricted cash
                
Cash and cash equivalents
   $ 412,026     $ 83,124  
Restricted cash
     5,000       —    
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash
   $ 417,026     $ 83,124  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
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Table of Contents
FLYWIRE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Business Overview and Summary of Significant Accounting Policies
Flywire Corporation (“Flywire” or the “Company”) was incorporated under the laws of the State of Delaware in July 2009 as peerTransfer Corporation. In 2016, the Company changed its name to Flywire Corporation. The Company is headquartered in Boston, Massachusetts and has a global footprint in 11 countries across 5 continents.
Flywire provides a secure global payments platform, offering its clients an innovative and streamlined process to receive reconciled domestic and international payments in a more cost effective and efficient manner. The Company’s solutions are built on three core elements: (i) a payments platform; (ii) a proprietary global payment network; and (iii) vertical-specific software backed by its deep industry expertise.
Initial Public Offering
On May 28, 2021, in connection with the Company’s initial public offering (“IPO”), the Company filed an amended and restated certificate of incorporation, which became effective on that date. The amended and restated certificate of incorporation authorized the issuance of 2,000,000,000 shares of voting common stock, 10,000,000 shares of
non-voting
common stock and 10,000,000 shares of preferred stock. Each class of stock has a par value of $0.0001 per share.
On May 28, 2021, the Company completed its IPO, in which the Company issued and sold 12,006,000 shares of
voting
common stock at a public offering price of $24.00 per share, which included 1,566,000 shares of
voting
common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters. The Company 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.
Immediately prior to the closing
 
of the IPO, all shares of the Company’s outstanding convertible preferred stock and redeemable convertible preferred stock
, including 182,467 shares of preferred stock issued upon exercise of a warrant immediately prior to the closing of the IPO,
were converted into 68,202,784 shares of common stock.
Prior to the closing
of the
IPO, the Company had
warrants
to purchase
190,500
 
shares of its convertible preferred stock outstanding, such warrants
were converted
immediately prior to the closing of the IPO
into
warrants to purchase 190,500 shares of the Company’s voting
common stock and the associated preferred stock warrant liabilities were
re-measured
to its fair value of $6.3 million and reclassified to additional
paid-in
capital.
Prior to the IPO, deferred offering costs, which consist of legal, accounting, consulting and other direct fees and costs relating to the IPO, were capitalized in other long-term assets. Upon the completion of the IPO, these costs were offset against the proceeds from the IPO and recorded as a reduction to additional
paid-in
capital.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position, results of operations, comprehensive loss, changes in convertible preferred stock, redeemable convertible preferred stock and stockholders’ equity
(
deficit
)
,
 
and its cash flows for the periods presented.
The results of operations for the six months ended June 30, 2021, are not necessarily indicative of results to be expected for the year ended December 31, 2021, any other interim periods or any future year or period. The accompanying consolidated balance sheet as of December 31, 2020 was derived from the Company’s audited consolidated financial statements for the year ended December 31, 2020. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted from the interim unaudited condensed consolidated financial statements.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s prospectus dated May 25, 2021 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended on May 26, 2021 (Prospectus).
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Flywire Corporation and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
 
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Table of Contents
Segment Information
The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. For information regarding the Company’s revenue by geographic area, see Note 2.
Impact of
COVID-19
On March 11, 2020, the World Health Organization (“WHO”) declared the outbreak of a novel coronavirus
(“COVID-19”)
as a global pandemic, which continues to spread throughout the world. The Company’s primary sources of revenue are related to international tuition payments and domestic healthcare payments for elective procedures. These areas have been adversely impacted by the pandemic. Colleges, universities, private primary schools and language schools are still deciding on their
re-opening
plans; international travel has been reduced to stop the
in-flow
of
COVID-19;
and hospitals have cut back on elective procedures to ensure there are available resources to treat waves of
COVID-19
cases.
In response to the
COVID-19
pandemic, the Company executed a reduction in force in May of 2020, cut corporate bonus programs, eliminated corporate travel and reduced professional service and other fees. Further, the Company implemented remote working capabilities and measures focused on the safety of employees. The Company continues to monitor the rapidly evolving conditions and circumstances as well as guidance from international and domestic authorities, including public health authorities. The Company does not currently foresee the need to take additional actions; however, it continues to evaluate the ongoing impact of
COVID-19
as facts and circumstances change.
Stock Split
In May 2021, the Company filed an amendment to its amended and restated certificate of incorporation to effect a
3-for-1
forward stock split of its common stock, convertible preferred stock and redeemable convertible preferred stock. In connection with the forward stock split, each issued and outstanding share of common stock, automatically and without action on the part of the holders, became three shares of common stock, each issued and outstanding share of convertible preferred stock, automatically and without action on the part of the holders, became three shares of convertible preferred stock and each issued and outstanding share of redeemable convertible preferred stock, automatically and without action on the part of the holders, became three shares of redeemable convertible preferred stock. The par value per share of common stock, convertible preferred stock and redeemable convertible preferred stock was not adjusted. All references to the convertible preferred stock, redeemable
 convertible
preferred stock, common stock, treasury stock, options to purchase common stock, restricted stock awards, warrants to purchase convertible preferred stock, warrants to purchase common stock, per share amounts and related information contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the effect of the stock split for all periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and the accompanying notes. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the valuation of common stock prior to the Company’s IPO and stock-based awards, the valuation of the preferred stock warrant liability up until the date of the Company’s IPO, impairment assessment of goodwill, intangibles and other long-lived assets, the valuation of acquired intangible assets and their useful lives, and the valuation of contingent consideration. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.
Concentrations of Credit Risk, Financial Instruments and Significant C
lients
Financial instruments that potentially subject the Company to concentration of credit risk consists principally of cash, cash equivalents, accounts receivable and funds receivable from payment partners. The Company maintains its cash and cash equivalents with financial institutions that management believes are of high credit quality. To manage credit risk related to accounts receivable, the Company evaluates credit worthiness of its clients and maintains allowances, to the extent necessary, for potential credit losses based upon the aging of its accounts receivable balances and known collection issues. The Company has not experienced any material credit losses for the three and six months ended June 30, 202
1
and 202
0
.
 
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Table of Contents
The Company has corporate deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000. As part of the cash management proces
s
, the Company performs periodic reviews of the financial institution credit standing.
Accounts receivable are derived from revenue earned from
Clients
 located in the U.S. and internationally. Significant
Clients
are those that represent 10% or more of accounts receivable, net as set forth in the following table:
 
    
June 30,
   
December 31,
 
    
2021
   
2020
 
Client A
     18     19
Client B
     13     10
Funds receivable from payment partners consist primarily of cash held by the Company’s global payment processing partners that
have
not yet
been
remitted to the Company. Significant partners are those that represent 10% or more of funds receivable from payment partners as set forth in the following table:
 
    
June 30,
   
December 31,
 
    
2021
   
2020
 
Partner A
     12     24
Partner B
     13     12
Partner C
     22     12
Partner D
     10      
 
*
Less than 10% of total balance.
During the three and six months ended June 30, 202
1
and 202
0
, no clients accounted for 10% or more of revenue.
During the three months ended June 30, 2021 and 2020, revenue from clients located outside of the United States in the aggregate accounted for 37.9% and 20.8% of the Company’s revenue, respectively, with the United Kingdom accounting for 12.0% and 10.4%, respectively and Canada accounting for 19.7% and 8.5%, respectively. No other countries accounted for 10% or more of revenue for the three months ended June 30, 2021 and 2020.
During the six months ended June 30, 2021 and 2020, revenue from clients located outside of the United States in the aggregate accounted for 31.0% and 23.0% of the Company’s revenue,
 
respectively, with the United Kingdom accounting for 9.6% and 10.7%, respectively and Canada accounting for 15.6% and 9.3%, respectively. No other countries accounted for 10% or more of revenue for the six months ended June 30, 2021 and 2020.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Index to Consolidated Financial Statements - Note 2. Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements contained in the Prospectus. There have been no changes to these policies as described in the Prospectus.
 
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Table of Contents
Deferred Offering Costs
The Company capitalized certain legal, accounting and other third-party fees that were directly associated with
in-process
equity financings as deferred offering costs until such financings were consummated. After consummation of the IPO, these costs were recorded in stockholder’s equity as a reduction of the additional
paid-in
capital generated as a result of the IPO. As of June 30, 2021, the Company had $1.0 million of deferred offering costs that are unpaid, of which $0.9 million was recorded in accounts payable and $0.1 million was recorded in accrued expenses and other current liabilities.
Software Developed for Internal Use
The Company capitalizes costs related to
internal-use
software during the application development stage including third-party consulting costs and compensation expenses related to employees who devote time to the development of the projects. The Company records software development costs in property and equipment. Costs incurred in the preliminary stages of development activities and post implementation activities are expensed in the period incurred and they are included in technology and development expense in the consolidated statements of operations and comprehensive loss. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Once the additional functionality is available for general use, capitalization ceases and the asset begins being amortized. The Company capitalized $5.0 million and $1.8 million in costs related to internal use software as of June 30, 2021 and December 31, 2020, respectively. The Company capitalized $3.2 
million
and $0.7 million in costs related to internal use software during the six months ended June 30, 2021 and 2020, respectively. Software developed for internal use is amortized on a straight-line basis over its estimated useful life of five years.
Advertising Costs
Advertising costs are expensed as incurred and are included in selling and marketing expenses in the consolidated statements of operations and comprehensive loss. Advertising expenses for the three
 
months ended June 30, 2021 and 2020 were $0.6 million and $0.3 million, respectively. Advertising expenses for the
six
 
months
ended June 30, 2021 and 2020 were $1.1 million and $0.6 million, respectively.
Recent Accounting Pronouncements Not Yet Adopted
The following Accounting Standards Updates (“ASUs”) were issued by the Financial Accounting Standards Board (“FASB”) and not yet adopted by Flywire:
ASU
2016-02,
Leases (Topic 842)
and subsequent related ASUs: The new lease standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In addition, a lessee is required to record (i) a
right-of-use
asset and a lease liability on its balance sheet for all leases with accounting lease terms of more than 12 months regardless of whether it is an operating or financing lease and (ii) lease expense for operating leases and amortization and interest expense for financing leases. Leases with a term of 12 months or less may be accounted for similar to the prior guidance for operating leases. In 2018, the FASB issued
ASU 2018-11,
which added an optional transition method under the new lease standard that allows companies to adopt the standard as of the beginning of the year of adoption as opposed to the earliest comparative period presented. ASU
2016-02
is effective for the Company on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
ASU
2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
: ASU simplifies the accounting for income taxes by removing certain exceptions for intra period tax allocations and deferred tax liabilities for equity method investments and adds guidance on whether a
step-up
in tax basis of goodwill relates to a business combination or a separate transaction. ASU
2019-12
is effective for the Company on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
ASU
2021-04
Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic
470-50),
Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic
815-40):
ASU
2021-04
requires issuers to account for modifications or exchanges of freestanding equity-classified written call options (e.g., warrants) that remain equity classified after the modification or exchange based on the substance of the modification or exchange (e.g., a financing transaction to raise equity versus one to raise debt). ASU
2021-04
is effective for Flywire on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
 
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Table of Contents
ASU 2016-13
Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
and subsequent related ASUs: ASU
2016-13
replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. ASU
2016-13
is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
ASU
2020-06,
Debt - Debt with Conversion and Other
Options (Subtopic
470-20)
and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic
815-40):
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity:
ASU
2020-06
reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity. ASU
2020-06
is effective for the Company on January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
Emerging Growth Company Status
The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected to “opt in” to the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for nonpublic companies.
 
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Table of Contents
Note 2. Revenue and Recognition
The following tables present revenue from
contracts
with clients disaggregated by geographical area and major solutions. The categorization of revenue by geographical location is determined based on where the client resides.
 
    
Three Months Ended

June 30,
    
Six Months Ended

June 30,
 
(in thousands)
  
2021
    
2020
    
2021
    
2020
 
Primary geographical markets
                                   
United States (“U.S.”)
   $ 22,964      $ 18,807      $ 56,538      $ 43,494  
Canada
     7,282        2,031        12,798        5,242  
United Kingdom (“U.K.”)
     4,454        2,461        7,887        6,049  
Other Countries
1
     2,276        458        4,744        1,681  
    
 
 
    
 
 
    
 
 
    
 
 
 
Revenue
   $ 36,976      $ 23,757      $ 81,967      $ 56,466  
    
 
 
    
 
 
    
 
 
    
 
 
 
Major solutions
                                   
Transactions
   $ 24,250      $ 11,224      $ 56,684      $ 36,441  
Platform and usage-based fees
     12,726        12,533        25,283        20,025  
    
 
 
    
 
 
    
 
 
    
 
 
 
Revenue
   $ 36,976      $ 23,757      $ 81,967      $ 56,466  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
(1)
No single country included in the other countries category represented 10% or more of revenue.
Contract Balances from Contracts with Clients
The following table provides information about accounts receivable, unbilled receivables and deferred revenue from contracts with
clients
(in thousands):
 
    
June 30,

2021
    
December 31,

2020
 
Accounts receivable, net of allowances
   $ 11,621      $ 11,573  
Unbilled receivables
     1,006