Talkspace, Inc. (TALK) FY 2024 MD&A

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context otherwise requires, all references in this section as to “Talkspace,” the “Company,” “we,” “us” or “our” refer to the business of Talkspace, Inc. and its consolidated subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes contained in this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those discussed in the “Risk Factors” and “Forward-Looking Statements” sections and elsewhere in this Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

The purpose of this section is to discuss and analyze our consolidated financial condition, liquidity and capital resources and results of operations for the years ended December 31, 2024 and 2023. For a discussion of our results of operations, liquidity and capital resources for the year ended December 31, 2022, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Overview

Talkspace is a healthcare company offering its members convenient and affordable access to a fully-credentialed network of highly qualified providers. We are a leading virtual behavioral healthcare company connecting millions of patients with licensed mental health providers across a wide and growing spectrum of care through virtual psychotherapy and psychiatry. We created a purpose-built platform to address the vast, unmet and growing demand for behavioral health services of our members. Through its platform, Talkspace serves:

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Health insurance plans (commercial and government) and employee assistance programs (“Payor”) who offer their members access to our platform at in-network reimbursement rates,

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Direct-to-Enterprise (“DTE”) comprised of enterprises who offer their enterprise members access to our platform while their enterprise is under an active contract with Talkspace, and

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Individual subscribers (“Consumer”) who subscribe directly to our platform.

For the year ended December 31, 2024 our revenues were $187.6 million compared to $150.0 million for the year ended December 31, 2023. As of December 31, 2024, we had approximately 179.4 million eligible lives through our Payor and DTE customers compared to 131.0 million eligible lives as of December 31, 2023. As of December 31, 2024, we had approximately 7,200 Consumer active members compared to 11,700 Consumer active members as of December 31, 2023. For the year ended December 31, 2024, our clinicians completed 1,229,200 sessions related to members covered under our Payor customers compared to 850,600 completed sessions for the year ended December 31, 2023. Please refer to the “Key Business Metrics” section below for a description of eligible lives and consumer active members.

Quarterly Fluctuations

Our financial results may fluctuate from period-to-period as a result of a variety of factors, many of which are outside of our control, including, without limitation, the factors described in this section. Most of our revenue in any given quarter is derived from contracts entered into with our customers during previous quarters. Consequently, a decline in new or renewed contracts in any one quarter may not be fully reflected in our revenue for that quarter. Such declines, however, would negatively affect our revenue in future periods and the effect of significant downturns in sales of and market demand for our solution, and potential changes in our renewals or renewal terms, may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our total revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable term of the contract. Accordingly, the effect of changes in the industry impacting our business or changes we experience in our new sales may not be reflected in our short-term results of operations. Any fluctuation in our quarterly results may not accurately reflect the underlying performance of our business and could cause a decline in the trading price of our securities.

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Operating Segments

The Company operates as a single segment, which is how the chief operating decision maker (“CODM”), who is the Chief Executive Officer, reviews financial performance and allocates resources.

Key Business Metrics

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions. We believe the following metrics are useful in evaluating our business:

Eligible Lives: We consider eligible lives “eligible” if such persons are eligible to receive treatment on the Talkspace platform, in the case of our Payor customers, at an agreed upon reimbursement rate through insurance under a health insurance plan or an employee assistance program. There may be instances where a person may be covered through multiple solutions. In these instances, the person is counted each time they are covered in the eligible lives calculation, which may cause this amount to reflect a higher number of eligible lives than we actually serve.

Consumer Active Members: We consider consumer members “active” commencing on the date such member initiates contact with a provider on our platform until the term of their monthly, quarterly or bi-annual subscription plan expires, unless terminated early.

Unique Payor Active Members: Represents unique users who had a session completed during the period.

Components of Results of Operations

Revenues

We generate revenues from services provided to individuals who are qualified to receive access to the Company's services through our arrangements with health insurance plans, employee assistance programs and enterprises. We also generate revenues from the sale of monthly, quarterly, bi-annual and annual membership subscriptions to the Company's therapy platform as well as supplementary a la carte offerings directly to the Consumer through a subscription plan. See Note 2, “Summary of Significant Accounting Policies and Estimates” in the notes to the consolidated financial statements for further details.

Revenue growth is generated from a combination of increasing our eligible covered lives through contracting with health insurance plans and employee assistance programs, increasing utilization within eligible covered lives, expanding enterprise customers, and increasing membership subscriptions.

Cost of Revenues

Cost of revenues is comprised primarily of therapist payments. Cost of revenues is largely driven by the number of sessions and the size of our provider network that is required to service the growth of our Payor and DTE customers, in addition to the growth of our customer base.

We designed our business model and our provider network to be scalable and to leverage a hybrid model of both employee providers and independently contracted providers to support multiple growth scenarios. The compensation paid to our

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independently contracted providers is variable, and the amount paid to a provider is generally based on the amount of time committed by such provider to our members. Our employee providers receive a fixed-salary and discretionary bonuses, where applicable, all of which is included in cost of revenues.

While we expect to make increased investments to support accelerated growth and the required investment to scale our provider network, we also expect increased efficiencies and economies of scale. Our cost of revenues as a percentage of revenues is expected to fluctuate from period to period depending on the interplay of these factors as well as pricing fluctuations.

Operating Expenses

Operating expenses consist of research and development, clinical operations, sales and marketing, and general and administrative expenses.

Research and Development Expenses

Research and development expenses include personnel and related expenses for software development and engineering, information technology infrastructure, security and privacy compliance and product development (inclusive of stock-based compensation for our research and development employees), third-party services and contractors related to research and development, information technology and software-related costs. Research and development expenses exclude amounts reflected as capitalized internal-use software development costs.

Clinical Operations Expenses

Clinical operations expenses are associated with the management of our provider network of therapists. This item is comprised of costs related to recruiting, onboarding, credentialing, training and ongoing quality assurance activities (inclusive of stock-based compensation for our clinical operations employees), costs of third-party services and contractors related to recruiting and training, and software-related costs.

Sales and Marketing Expenses

Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, travel and stock-based compensation costs for our employees engaged in sales and account management.

Marketing expenses consist primarily of advertising and marketing expenses for member acquisition and engagement, as well as personnel costs, including salaries, benefits, bonuses, stock-based compensation expense for marketing employees, third-party services and contractors. Marketing expenses also include third-party software subscription services, third-party independent research, participation in trade shows, brand messaging and costs of communications materials that are produced for our customers to generate greater awareness and utilization of our platform among our Payor and DTE customers.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation expense for certain executives, finance, accounting, legal, compliance and human resources functions, as well as professional fees.

Financial income, net

Financial income, net includes the impact from (i) interest earned on cash equivalents invested in money market accounts, U.S. treasury securities and commercial paper, and investments in marketable securities, (ii) non-cash changes in the fair value of our warrant liabilities, and (iii) other financial expenses in connection with bank charges.

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Taxes on income

Taxes on income consists primarily of foreign income taxes related to income generated by our subsidiary organized under the laws of Israel. Taxes on income were immaterial for the years ended December 31, 2024, 2023 and 2022.

We have a full valuation allowance for our U.S. deferred tax assets, including federal and state NOLs. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized through expected future taxable income in the United States.

Results of Operations

The following table presents the results of operations for the years ended December 31, 2024 and 2023 and the dollar and percentage change between the respective years:

Year Ended December 31, 2024 compared to December 31, 2023

Revenues

Revenues increased by $37.5 million, or 25.0%, to $187.6 million for the year ended December 31, 2024 from $150.0 million for the year ended December 31, 2023. The increase was principally due to a 53.8% increase in Payor revenue driven by a higher number of completed Payor sessions, and 14.4% growth in DTE revenue, partially offset by a 30.4% decline in Consumer subscription revenue. Revenue from our Payor customers increased by $43.5 million, or 53.8% to $124.3 million for the year ended December 31, 2024 from $80.8 million for the year ended December 31, 2023. Revenue from our DTE customers increased by $4.9 million, or 14.4% to $38.5 million for the year ended December 31, 2024 from $33.6 million for the year ended December 31, 2023. Consumer member subscriptions revenue decreased by $10.8 million, or 30.4%, to $24.8 million for the year ended December 31, 2024 from $35.6 million for the year ended December 31, 2023, due to the Company's intentional and strategic decision to optimize and focus marketing efforts on attracting Payor members. While we no longer have marketing resources dedicated solely to the Consumer category, it continues to have a positive contribution to our financial results.

Costs of revenues

Cost of revenues increased by $26.1 million or 34.5%, to $101.8 million for the year ended December 31, 2024 from $75.7 million for the year ended December 31, 2023, primarily due to increased hours worked by therapists as a result of increased Payor sessions.

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Gross profit

Gross profit increased by $11.5 million, or 15.4%, to $85.8 million for the year ended December 31, 2024 from $74.4 million for the year ended December 31, 2023. Gross margin was 45.8% for the year ended December 31, 2024, compared to 49.6% during the year ended December 31, 2023. The increase in gross profit was primarily driven by an increase in revenues partially offset by an increase in cost of revenues to service more members and sessions. The decline in gross margin was driven by a shift in revenue mix towards Payor.

Operating Expenses

Overall, our operating expenses for the year ended December 31, 2024 have decreased by $7.3 million or 7.4% to $90.3 million from $97.6 million compared to the year ended December 31, 2023, primarily due to our efforts to achieve greater operational efficiency.

Research and development expenses

Research and development expenses decreased by $7.1 million, or 40.2%, to $10.5 million for the year ended December 31, 2024 from $17.6 million for the year ended December 31, 2023, primarily due to a decrease in employee-related costs, inclusive of non-cash stock compensation expense and the exclusion of amounts reflected as capitalized internal-use software development costs. Capitalized internal-use software development costs were $6.1 million for the year ended December 31, 2024 and were immaterial for the year ended December 31, 2023.

Clinical operations expenses

Clinical operations expenses increased by $0.4 million, or 6.2%, to $6.5 million for the year ended December 31, 2024 from $6.1 million for the year ended December 31, 2023, primarily due to an increase in employee-related costs, inclusive of non-cash stock compensation expense, partially offset by a decrease in third-party subcontractor costs.

Sales and marketing expenses

Sales and marketing expenses decreased by $1.9 million, or 3.6%, to $50.6 million for the year ended December 31, 2024 from $52.5 million for the year ended December 31, 2023. The decrease in sales and marketing expenses was primarily driven by a decrease in subcontractor costs and employee-related costs, inclusive of non-cash stock compensation expense, partially offset by an increase in direct marketing and promotional costs.

General and administrative expenses

General and administrative expenses increased by $1.3 million, or 6.2%, to $22.6 million for the year ended December 31, 2024 from $21.3 million for the year ended December 31, 2023. The increase in general and administrative expenses for the year ended December 31, 2024 was primarily due to an increase in severance costs and professional fees, partially offset by a decrease in third-party subcontractor costs.

Financial income, net

Financial income, net was $5.7 million for the year ended December 31, 2024, compared to financial income, net of $4.2 million for the year ended December 31, 2023. For the year ended December 31, 2024, financial income, net, primarily consisted of $6.0 million of interest income from our money market accounts and marketable securities. For the year ended December 31, 2023, financial income, net, primarily consisted of $5.3 million of interest income from our money market accounts partially offset by $0.9 million in non-cash losses resulting from the remeasurement of warrant liabilities. The increase in financial income, net of $1.5 million or 35.2% for the year ended December 31, 2024, was primarily due to an increase in interest earned from our money market accounts and marketable securities and a decrease in non-cash losses resulting from the remeasurement of warrant liabilities.

Taxes on income

Taxes on income consists primarily of foreign income taxes related to income generated by our subsidiary organized under the laws of Israel. Taxes on income were immaterial for the years ending December 31, 2024 and 2023.

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Year Ended December 31, 2023 compared to December 31, 2022

For a detailed discussion of the results for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to the “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on March 13, 2024.

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance, and our management uses it as a key performance measure to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes and in evaluating acquisition opportunities. We also use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. We believe that the use of adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not necessarily reflect capital commitments to be paid in the future and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these requirements. In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments described herein. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. Adjusted EBITDA should not be considered as an alternative to income (loss) before income taxes, net income (loss), income (loss) per share, or any other performance measures derived in accordance with U.S. GAAP. When evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net income (loss) and other GAAP results.

A reconciliation is provided below for adjusted EBITDA to net income (loss), the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review our financial statements prepared in accordance with GAAP and the reconciliation of our non-GAAP financial measure to its most directly comparable GAAP financial measure, and not to rely on any single financial measure to evaluate our business. We do not provide a forward-looking reconciliation of adjusted EBITDA guidance as the amount and significance of the reconciling items required to develop meaningful comparable GAAP financial measures cannot be estimated at this time without unreasonable efforts. These reconciling items could be meaningful.

We calculate adjusted EBITDA as net income (loss) adjusted to exclude (i) depreciation and amortization, (ii) interest and other expenses (income), net, (iii) tax benefit and expense, (iv) stock-based compensation expense, and (v) certain non-recurring expenses that we believe do not represent our on-going operations, where applicable.

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The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net income (loss), for the years ended December 31, 2024 and 2023:

Liquidity and Capital Resources

As of December 31, 2024, we had $76.7 million of cash and cash equivalents ($123.9 million as of December 31, 2023), and $41.1 million in marketable securities which we use to finance our operations and support a variety of growth initiatives and investments. We had no debt as of December 31, 2024.

Our primary cash needs are to fund operating activities and invest in technology development. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, the timing and extent of investments to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced service offerings and the continuing market acceptance of virtual behavioral healthcare services. Additionally, we may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies.

We currently anticipate to be able to fund our cash needs for at least the next twelve months and thereafter for the foreseeable future using available cash and cash equivalent balances as of December 31, 2024. However, in the future we may require additional capital to respond to technological advancements, competitive dynamics, customer demands, business and investment opportunities, acquisitions or unforeseen circumstances and we may determine to engage in equity or debt financings for other reasons. We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing stockholders could experience significant dilution. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we cannot raise capital when needed we may be forced to undertake asset sales or similar measures to ensure adequate liquidity.

Share Repurchase Program

On February 22, 2024, the Company announced that its Board of Directors approved a share repurchase program to authorize the repurchase of up to $15.0 million of the currently outstanding shares of the Company’s common stock over a period of twenty-four months beginning on March 1, 2024 (the “Share Repurchase Program”). On August 1, 2024, the Company’s Board of Directors amended the Share Repurchase Program to authorize the Company to repurchase up to an additional $25.0 million of its common stock. The Share Repurchase Program will remain in effect until the total authorized dollar amount of shares is repurchased or August 1, 2026.

During the year ended December 31, 2024, the Company repurchased and retired an aggregate of 3,911,259 shares of its common stock for a total consideration of $11.0 million ($2.81 per share). As of December 31, 2024, $29.0 million remained available under the Share Repurchase Program.

Such purchases will be at times and in amounts as the Company deems appropriate, based on factors such as price, market conditions, corporate and regulatory requirements, constraints specified in any Rule 10b5-1 trading plans, alternative investment opportunities and other business considerations. All shares repurchased will be retired. The program does not obligate the Company to repurchase any dollar amount or number of shares, and may be modified, suspended, or discontinued at any time at the Company’s discretion without prior notice.

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Cash Flows from Operating, Investing and Financing Activities

The following table presents the summary consolidated cash flow information for the years ended December 31, 2024 and 2023:

Operating Activities

The increase in net cash provided by operating activities was driven primarily by positive cash flows from operations for the year ended December 31, 2024 primarily due to net income for the year ended December 31, 2024 compared to net loss for the year ended December 31, 2023.

Investing Activities

The increase in net cash used in investing activities was driven primarily by purchases of marketable securities and an increase in capitalized internal-use software development costs during the year ended December 31, 2024 compared to December 31, 2023.

Financing Activities

The increase in net cash used in financing activities was driven primarily by the purchase of $11.0 million of outstanding shares of the Company’s common stock under the Share Repurchase Program and an increase in taxes paid related to vested stock-based awards during the year ended December 31, 2024 compared to December 31, 2023.

Contractual Obligations, Commitments and Contingencies

As of December 31, 2024, we did not have any short-term or long-term debt, or significant long-term liabilities. As of December 31, 2024, we have a non-material long-term operating lease for our office space in New York, NY.

As of December 31, 2024 there were no material legal proceedings, claims or litigation. We may in the future be involved in various legal proceedings, claims and litigation that arise in the normal course of business. We accrue for estimated loss contingencies related to legal matters when available information indicates that it is probable a liability has been incurred and we can reasonably estimate the amount of that loss. In many proceedings, however, it is inherently difficult to determine whether any loss is probable or even possible or to estimate the amount of any loss. In addition, even where a loss is possible or an exposure to loss exists in excess of the liability already accrued with respect to a previously recognized loss contingency, it is often not possible to reasonably estimate the size of the possible loss or range of loss or possible additional losses or range of additional losses. Should any of our estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows.

Our commercial contract arrangements generally include certain provisions requiring us to indemnify customers against liabilities if there is a breach of a customer’s data or if our service infringes a third party’s intellectual property rights. To date, we have not incurred any material costs as a result of such indemnifications.

We have also agreed to indemnify our officers and directors for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request. We maintain director and officer liability insurance coverage that would generally enable us to recover a portion of any future amounts paid. We may also be subject to indemnification obligations by law with respect to the actions of our employees under certain circumstances and in certain jurisdictions.

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Off-Balance Sheet Arrangements

We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our consolidated financial statements.

Critical Accounting Policies and Estimates

The Company's accounting policies are essential to understanding and interpreting the financial results reported on the consolidated financial statements. The significant accounting policies used in the preparation of the Company's consolidated financial statements are summarized in Note 2, “Summary of Significant Accounting Policies and Estimates” in the notes to the consolidated financial statements. Certain of those policies are considered to be particularly important to the presentation of the Company's financial results because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain. The following is a discussion of these estimates:

Revenue Recognition

The Company recognizes revenues in accordance with ASC 606, “Revenue from Contracts with Customers”. Revenues are recognized when the Company satisfies its performance obligation to perform its defined contractual obligations to provide virtual behavioral healthcare services. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for the service rendered. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that is included in the transaction price at contract inception and reassesses this estimate at each reporting date. Variable consideration is included in the transaction price if it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company determines its estimate of variable consideration primarily based on actual historical collection experience.

Internal-use Software Costs

The Company capitalizes costs related to software acquired, developed, or modified solely to meet our internal requirements with no substantive plans to market such software at the time of development. In accordance with ASC 350-40, Internal Use Software, software development activities generally consist of three stages (i) the preliminary project stage, (ii) the application development stage, and (iii) the post-implementation operational stage. Costs incurred during the preliminary project stage and during the post-implementation operational stage are expensed as incurred. Eligible costs incurred during the application development stage of the project are capitalized and are amortized on a straight-line basis over the software’s estimated useful life, generally 3 years. Maintenance costs are expensed as incurred.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation”. Compensation costs for share-based awards are measured at the fair value on the grant date and recognized as expense using the straight-line method for service-based awards over the requisite service period. The fair value of stock options is determined using the Black-Scholes-Merton option pricing model. The option-pricing model requires a number of assumptions, of which the most significant is the expected stock price volatility and the expected option term. Expected volatility is calculated based upon the Company's historical share price movements as well as similar traded companies’ historical share price movements as adequate historical experience is not available to provide a reasonable estimate based only on the Company's share price. Expected term is calculated based on the simplified method as adequate historical experience is not available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term.

Recent Accounting Pronouncements

See Note 2, “Summary of Significant Accounting Policies and Estimates” in the notes to the consolidated financial statements for information regarding recent accounting developments and their impact on our results.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Annual Report on Form 10-K may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements regarding our future results of operations and financial position, industry and business trends, stock-based compensation, revenue recognition, business strategy, plans and market growth.

The forward-looking statements in this Annual Report on Form 10-K and other such statements we publicly make from time to-time are only predictions. We base these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The forward-looking statements in this Annual Report on Form 10-K are based upon information available to us as of the date of this Annual Report on Form 10-K, 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 investors are cautioned not to unduly rely upon these statements.

This Annual Report on Form 10-K and the documents that we reference herein and have filed as exhibits to this Annual Report on Form 10-K should be read 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. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Annual Report on Form 10-K or any forward-looking statements we may publicly make from time-to-time, whether as a result of any new information, future events or otherwise.