APPIAN CORP 10-Q

Item 1. FINANCIAL STATEMENTS APPIAN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) As of March 31, 2021 December 31, 2020 (unaudited) Assets Current assets Cash and cash equivalents $ 114,752 $ 112,462 Short-term investments and marketable securities 118,012 109,826 Accounts receivable, net of allowance of $ 1,400 as of each of March 31, 2021 and December 31, 2020 87,424 97,278 Deferred commissions, current 18,749 17,899 Prepaid expenses and other current assets 28,484 27,955 Total current assets 367,421 365,420 Property and equipment, net 34,682 35,404 Long-term investments 22,317 36,120 Goodwill 4,651 4,862 Intangible assets, net of accumulated amortization of $ 513 and $ 429 as of March 31, 2021 and December 31, 2020, respectively 1,566 1,744 Operating right-of-use assets 30,610 30,659 Deferred commissions, net of current portion 35,991 34,198 Deferred tax assets 482 489 Other assets 2,875 3,625 Total assets $ 500,595 $ 512,521 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 4,194 $ 2,967 Accrued expenses 5,777 5,821 Accrued compensation and related benefits 20,919 22,981 Deferred revenue, current 107,893 116,256 Operating lease liabilities, current 7,664 6,923 Other current liabilities 509 940 Total current liabilities 146,956 155,888 Operating lease liabilities, net of current portion 50,572 51,194 Deferred revenue, net of current portion 2,698 3,886 Deferred tax liabilities 65 70 Other non-current liabilities 4,744 4,878 Total liabilities 205,035 215,916 Stockholders’ equity Class A common stock—par value $ 0.0001 ; 500,000,000 shares authorized and 39,321,079 shares issued and outstanding as of March 31, 2021; 500,000,000 shares authorized and 38,971,324 shares issued and outstanding as of December 31, 2020 4 4 Class B common stock—par value $ 0.0001 ; 100,000,000 shares authorized and 31,503,666 shares issued and outstanding as of March 31, 2021; 100,000,000 shares authorized and 31,707,866 shares issued and outstanding as of December 31, 2020 3 3 Additional paid-in capital 479,017 470,498 Accumulated other comprehensive loss ( 987 ) ( 5,010 ) Accumulated deficit ( 182,477 ) ( 168,890 ) Total stockholders’ equity 295,560 296,605 Total liabilities and stockholders’ equity $ 500,595 $ 512,521 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 APPIAN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except share and per share data) Three Months Ended March 31, 2021 2020 Revenue Subscriptions $ 63,766 $ 50,436 Professional services 25,089 28,428 Total revenue 88,855 78,864 Cost of revenue Subscriptions 5,854 5,383 Professional services 17,675 18,736 Total cost of revenue 23,529 24,119 Gross profit 65,326 54,745 Operating expenses Sales and marketing 35,984 34,172 Research and development 20,690 16,038 General and administrative 19,142 13,141 Total operating expenses 75,816 63,351 Operating loss ( 10,490 ) ( 8,606 ) Other expense Other expense, net 2,893 3,114 Interest expense 81 143 Total other expense 2,974 3,257 Loss before income taxes ( 13,464 ) ( 11,863 ) Income tax expense (benefit) 123 ( 194 ) Net loss $ ( 13,587 ) $ ( 11,669 ) Net loss per share: Basic and diluted $ ( 0.19 ) $ ( 0.17 ) Weighted average common shares outstanding: Basic and diluted 70,730,235 67,528,331 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 APPIAN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited, in thousands) Three Months Ended March 31, 2021 2020 Net loss $ ( 13,587 ) $ ( 11,669 ) Comprehensive income, net of income taxes Foreign currency translation adjustment 4,015 17 Unrealized gains on available-for-sale securities 8 — Total other comprehensive loss, net of income taxes $ ( 9,564 ) $ ( 11,652 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 APPIAN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (unaudited, in thousands, except share data) Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Common Stock Additional Paid-In Capital Accumulated Deficit Shares Amount Balance, January 1, 2021 70,679,190 $ 7 $ 470,498 $ ( 5,010 ) $ ( 168,890 ) $ 296,605 Net loss — — — — ( 13,587 ) ( 13,587 ) Issuance of common stock to directors 960 — — — — — Vesting of restricted stock units 56,326 — — — — — Exercise of stock options 88,269 — 625 — — 625 Stock-based compensation expense — — 7,894 — — 7,894 Other comprehensive income — — — 4,023 — 4,023 Balance, March 31, 2021 70,824,745 $ 7 $ 479,017 $ ( 987 ) $ ( 182,477 ) $ 295,560 Balance, January 1, 2020 67,468,022 $ 6 $ 340,929 $ ( 285 ) $ ( 135,413 ) $ 205,237 Net loss — — — — ( 11,669 ) ( 11,669 ) Issuance of common stock to directors 1,946 — — — — — Vesting of restricted stock units 46,031 — — — — — Exercise of stock options 129,082 — 670 — — 670 Stock-based compensation expense — — 3,476 — — 3,476 Other comprehensive income — — — 17 — 17 Balance, March 31, 2020 67,645,081 $ 6 $ 345,075 $ ( 268 ) $ ( 147,082 ) $ 197,731 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 APPIAN CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Three Months Ended March 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 13,587 ) $ ( 11,669 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,278 1,511 Bad debt expense — 200 Loss on disposal of property and equipment — 7 Change in fair value of available-for-sale securities ( 8 ) — Deferred income taxes ( 448 ) — Stock-based compensation 7,894 3,476 Changes in assets and liabilities: Accounts receivable 12,651 5,751 Prepaid expenses and other assets ( 279 ) 37 Deferred commissions ( 2,642 ) 525 Accounts payable and accrued expenses 1,159 ( 1,800 ) Accrued compensation and related benefits ( 1,955 ) ( 399 ) Other current and non-current liabilities 151 ( 154 ) Deferred revenue ( 7,192 ) ( 2,503 ) Operating lease liabilities 168 1,159 Net cash used in operating activities ( 2,810 ) ( 3,859 ) Cash flows from investing activities: Proceeds from sale of investments 5,625 — Payments for acquisitions, net of cash acquired — ( 6,138 ) Purchases of property and equipment ( 468 ) ( 202 ) Net cash provided by (used in) investing activities 5,157 ( 6,340 ) Cash flows from financing activities: Principal payments on finance leases — ( 357 ) Proceeds from exercise of common stock options 625 670 Net cash provided by financing activities 625 313 Effect of foreign exchange rate changes on cash and cash equivalents ( 682 ) ( 706 ) Net increase (decrease) in cash and cash equivalents 2,290 ( 10,592 ) Cash and cash equivalents, beginning of period 112,462 159,755 Cash and cash equivalents, end of period $ 114,752 $ 149,163 Supplemental disclosure of cash flow information: Cash paid for interest $ 88 $ 49 Cash paid for income taxes $ 148 $ 43 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Description of Business Appian Corporation (together with its subsidiaries, “Appian,” the “Company,” “we,” or “our”) helps organizations build applications and workflows rapidly, with a low-code automation platform. Combining people, technologies, and data in a single workflow, Appian can help companies maximize their resources and improve business results. Many of the world’s largest organizations use Appian applications to improve customer experience, achieve operational excellence, and simplify global risk management and compliance. We were incorporated in the state of Delaware in August 1999. We are headquartered in McLean, Virginia and operate in Canada, Switzerland, the United Kingdom, France, Germany, the Netherlands, Italy, Australia, Spain, Singapore, and Sweden. 2. Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity, and cash flows. The results of operations for the current period are not necessarily indicative of the results for the full year or the results for any future periods. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2021. Use of Estimates The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Although we believe the estimates we use are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ from those estimates. Significant estimates embedded in the condensed consolidated financial statements include revenue recognition, income taxes and the related valuation allowance, the valuation of goodwill and intangible assets, leases, costs to obtain a contract with a customer, the valuation of financial instruments, and stock-based compensation. The ongoing outbreak of the novel coronavirus disease ("COVID-19") has resulted in the declaration of a global pandemic and introduced a level of disruption and uncertainty into the financial markets and global economy. While we continue to monitor the developments surrounding the pandemic, as of the date of issuance of these financial statements, we are not aware of any specific events or circumstances that would require us to update our estimates, assumptions, and judgments or revise the carrying value of our assets or liabilities. We cannot estimate the impacts COVID-19 will have on our business going forward as such impacts will be largely dependent upon a number of factors outside of our control including the extent and duration of the outbreak as well as any mitigating actions which may be undertaken by global governments and the general public. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Appian and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Public Offering In June 2020, we completed an underwritten public offering of 2,500,000 shares of our Class A common stock, of which 1,931,206 shares of Class A common stock were sold by us and 568,794 shares of Class A common stock were sold by existing stockholders. The underwriter purchased the shares from us and the selling stockholders at a price of $ 56.50 per share. Our net 8 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) proceeds from the offering were $ 107.9 million, after deducting underwriting discounts and commissions and offering expenses. We did not receive any of the proceeds from the sale of shares by the selling stockholders. Revenue Recognition Refer to Note 3 for a detailed discussion on specific revenue recognition principles related to our major revenue streams. Cost of Revenue Subscriptions Cost of subscriptions revenue consists primarily of fees paid to our third-party managed hosting providers and other third-party service providers, personnel costs such as payroll and benefits for our technology operations and customer support teams, and allocated facility costs and overhead. Professional Services Cost of professional services revenue includes all direct and indirect costs to deliver our professional services and training, including employee compensation for our global professional services and training personnel, third-party contractor costs, allocated facility costs and overhead, and the costs of billable expenses such as travel and lodging. The unpredictability of the timing of entering into significant professional services agreements sold on a standalone basis may cause significant fluctuations in our quarterly financial results and allocated facility costs and overhead. Concentration of Credit and Customer Risk Our financial instruments exposed to concentration of credit and customer risk consist primarily of cash and cash equivalents, trade accounts receivable, and our short- and long-term investments. Deposits held with banks may exceed the amount of insurance provided on such deposits. We believe the financial institutions holding our cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances. With regard to our customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss. We believe no additional credit risk beyond amounts provided for collection loss are inherent in accounts receivable. Revenue generated from government agencies represented 20.9 % and 14.9 % of our revenue for the three months ended March 31, 2021 and 2020, respectively, of which the top three federal government agencies generated 6.9 % and 6.0 % of our revenue for the three months ended March 31, 2021 and 2020, respectively. Additionally, 32.2 % and 33.5 % of our revenue during the three months ended March 31, 2021 and 2020, respectively, was generated from foreign customers. Cash and Cash Equivalents We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase, as well as overnight repurchase agreements, to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on our assessment of the collectability of accounts and incorporates an estimation of expected lifetime credit losses on our receivables. We regularly review the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, and current economic trends. If the financial condition of our customers were to deteriorate, resulting in their inability to make required payments, additional provisions for doubtful accounts would be required and would increase bad debt expense. There was no increase in the allowance for doubtful accounts from December 31, 2020 to March 31, 2021. 9 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Assets Recognized from the Costs to Obtain a Contract with a Customer We capitalize the incremental costs of obtaining a contract with a customer, including sales commissions paid to our direct sales force, that are incremental costs to obtaining customer contracts. These costs are recorded as deferred commissions in the condensed consolidated balance sheets. Costs to obtain a contract for a new customer or upsell are amortized over an estimated economic life of five years as sales commissions on initial sales are not commensurate with sales commissions on contract renewals. We determine the estimated economic life based on both qualitative and quantitative factors such as expected renewals, product life cycles, contractual terms, and customer attrition. We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the estimated economic life. Commissions paid relating to contract renewals are deferred and amortized over the related renewal period. We also capitalize the incremental fringe benefits associated with commission expenses paid to our direct sales force. Costs to obtain a contract for professional services arrangements are expensed as incurred as the contractual period of our professional services arrangements are one year or less. Amortization associated with commission expense is recorded to sales and marketing costs in our condensed consolidated statements of operations. Commission expense was $ 6.8 million and $ 5.3 million for the three months ended March 31, 2021 and 2020, respectively. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Significant additions or improvements extending the useful life of an asset are capitalized, while repairs and maintenance costs which do not significantly improve the related assets or extend their useful lives are charged to expense as incurred. The following table outlines the useful lives of our major asset categories: Asset Category Useful Life (in years) Computer software 3 Computer hardware 3 Equipment 5 Office furniture and fixtures 10 Leasehold improvements (a) (a) Leasehold improvements have an estimated useful life of the shorter of the useful life of the assets or the lease term. Impairment of Long-Lived Assets Long-lived assets and certain intangible assets are reviewed for impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable through undiscounted cash flows from the use of the assets. If such assets are considered to be impaired, the assets are written down to their estimated fair value. No indicators of impairment were identified for the three months ended March 31, 2021 and 2020. Investments and Fair Value of Financial Instruments Refer to Note 15 for a detailed discussion on our policies specific to investments and determining fair value. Stock-Based Compensation We account for stock-based compensation expense related to stock-based awards based on the estimated fair value of the award on the grant date. We calculate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model. The fair value of restricted stock units ("RSUs") is based on the closing market price of our common stock on the Nasdaq Global Market on the date of grant. For service-based awards such as RSUs, stock-based compensation expense is recognized on a straight-line basis over the requisite service period. For performance-based awards, stock-based compensation expense is recognized using the accelerated attribution method based on the probability of satisfying 10 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) the performance condition. For awards that contain market conditions, compensation expense is measured using a Monte Carlo simulation and recognized using the accelerated attribution method over the derived service period based on the expected market performance as of the grant date. We account for forfeitures as they occur rather than estimating expected forfeitures. Leases Refer to Note 4 for a detailed discussion on our policies specific to leasing arrangements. Recent Accounting Pronouncements Adopted In December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which amends and aims to simplify accounting disclosure requirements regarding a number of topics including, but not limited to, intraperiod tax allocations, accounting for deferred taxes when there are changes in the consolidation of certain investments, tax basis step ups in an acquisition, and the application of effective rate changes during interim periods. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The adoption of the new guidance did not have a material impact on our consolidated financial statements. Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate ("SOFR"). This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. We are currently evaluating the impact and applicability of this new standard. 3. Revenue Revenue Recognition We generate subscriptions revenue primarily through the sale of software as a service ("SaaS") subscriptions bundled with maintenance and support and hosting services as well as term license subscriptions bundled with maintenance and support. We generate professional services revenue from fees for our consulting services, including application development and deployment assistance as well as training related to our platform. The following table summarizes revenue from contracts with customers for the three months ended March 31, 2021 and 2020 (in thousands): Three Months Ended March 31, 2021 2020 SaaS subscriptions $ 39,053 $ 28,390 Term license subscriptions 19,853 17,793 Maintenance and support 4,860 4,253 Professional services 25,089 28,428 Total revenue $ 88,855 $ 78,864 Performance Obligations and Timing of Revenue Recognition We primarily sell products and services that fall into the categories discussed below. Each category contains one or more performance obligations that are either (1) capable of being distinct (i.e., the customer can benefit from the product or service on its own or together with readily available resources, including those purchased separately from us) and distinct within the 11 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) context of the contract (i.e., separately identified from other promises in the contract) or (2) a series of distinct products or services that are substantially the same and have the same pattern of transfer to the customer. Our term license subscriptions are delivered at a point in time while our SaaS subscriptions, maintenance and support, and professional services are delivered over time. Subscriptions Revenue Subscriptions revenue is primarily related to (1) SaaS subscriptions bundled with maintenance and support and hosting services and (2) term license subscriptions bundled with maintenance and support. We generally charge subscription fees on a per-user basis and, to a lesser degree, non-user based single application licenses. We bill customers and collect payment for subscriptions to our platform in advance on an annual, quarterly, or monthly basis. In certain instances, our customers have paid their entire contract up front. SaaS Subscriptions We generate cloud-based subscriptions revenue primarily from the sales of subscriptions to access our cloud offering, together with related support services to our customers. We perform all required maintenance and support for our cloud offering. Revenue is recognized on a ratable basis over the contract term beginning on the date the service is made available to the customer. Our cloud-based subscription contracts generally have a term of one to three years in length. We bill customers and collect payment for subscriptions to our platform in advance, and they are non-cancellable. Term License Subscriptions Our term license subscriptions revenue is derived from customers with on-premises installations of our platform pursuant to contracts that were historically one to three years in length. The majority of recent contracts have been one year in length. Although term license subscriptions are sold with maintenance and support, the software is fully functional at the beginning of the subscription and is considered a distinct performance obligation. On rare occasions, a cloud-based subscription may include the right for the customer to take possession of the license and as such, the revenue is treated as a license. Revenue from term license subscriptions is recognized when control of the software license has transferred to the customer, which is the later of delivery or commencement of the contract term. Maintenance and Support Maintenance and support subscriptions include both technical support and when-and-if-available software upgrades, which are treated as a single performance obligation as they are considered a series of distinct services that are substantially the same and have the same duration and measure of progress. Revenue from maintenance and support is recognized ratably over the contract period, which is the period over which the customer has continuous access to maintenance and support. Professional Services Revenue Our professional services revenue is comprised of fees for consulting services, including application development and deployment assistance as well as training services related to our platform. Our professional services are considered distinct performance obligations when sold standalone or with other products. Consulting Services We sell consulting services to assist customers in planning and executing the deployment of our software. Customers are not required to use consulting services to fully benefit from the software. Consulting services are regularly sold on a standalone basis and either (1) under a fixed-fee arrangement or (2) on a time and materials basis. Consulting contracts are each considered separate performance obligations because they do not integrate with each other or with other products and services to deliver a combined output to the customer, do not modify or customize (or are not modified or customized by) each other or other products and services, and do not affect the customer's ability to use the other consulting offerings or other products and services. Revenue under consulting contracts is recognized over time as services are delivered. For time and materials-based 12 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) consulting contracts, we have elected the practical expedient of recognizing revenue upon invoicing since the invoiced amount corresponds directly to the value of our service to date. Training Services We sell various training services to our customers. Training services are sold in the form of prepaid training credits that are redeemed based on a fixed rate per course. Training revenue is recognized when the associated training services are delivered. Significant Judgments and Estimates Determining the Transaction Price The transaction price includes both fixed and variable consideration. Variable consideration is included in the transaction price to the extent it is probable a significant reversal will not occur. The amount of variable consideration excluded from the transaction price for the three months ended March 31, 2021 and 2020 was insignificant. Our estimates of variable consideration are also subject to subsequent true-up adjustments and may result in changes to transaction prices; however, such true-up adjustments are not expected to be material. Allocating the Transaction Price Based on Standalone Selling Prices ("SSP") We allocate the transaction price to each performance obligation in a contract based on its relative SSP. The SSP is the observable price at which we sell the product or service separately. In the absence of observable pricing, we estimate SSP using the residual approach. We establish SSP as follows: 1. SaaS subscriptions - Given the highly variable selling price of our SaaS subscriptions, we establish the SSP of our SaaS subscriptions using a residual approach after first determining the SSP of consulting and training services. We have concluded the residual approach to estimating SSP of our SaaS subscriptions is an appropriate allocation of the transaction price. 2. Term license subscriptions - Given the highly variable selling price of our term license subscriptions, we have established SSP of term license subscriptions using a residual approach after first determining the SSP of maintenance and support. Maintenance and support is sold on a standalone basis in conjunction with renewals of our legacy perpetual software licenses and within a narrow range of the net license fee. Because an economic relationship exists between the license and maintenance and support, we have concluded the residual approach to estimating SSP of term license subscriptions is an appropriate allocation of the transaction price. 3. Maintenance and support - We establish the SSP of maintenance and support as a percentage of the stated net subscription fee based on observable pricing of maintenance and support renewals from our legacy perpetual software licenses. 4. Consulting services and training services - The SSP of consulting services and training services is established based on the observable pricing of standalone sales within each geographic region where the services are sold. Contract Balances Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. Contract assets primarily relate to unbilled amounts for contracts with customers for which the amount of revenue recognized exceeds the amount billed to the customer. Contract assets are transferred to accounts receivable when the right to invoice becomes unconditional. As of March 31, 2021 and December 31, 2020, contract assets of $ 17.4 million and $ 20.1 million, respectively, are included in the Prepaid expenses and other current assets and Other assets line items in our condensed consolidated balance sheets. Contract liabilities consist of deferred revenue and include payments received in advance of the satisfaction of performance obligations. Deferred revenue is then recognized as the revenue recognition criteria are met. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as 13 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) non-current. For the three months ended March 31, 2021, we recognized $ 48.5 million of revenue that was included in the deferred revenue balance as of December 31, 2020. Transaction Price Allocated to the Remaining Performance Obligations As of March 31, 2021, we had an aggregate transaction price of $ 202.5 million allocated to unsatisfied performance obligations. We expect to recognize $ 184.3 million of this balance as revenue over the next 24 months with the remaining amount recognized thereafter. 4. Leases At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease. Operating leases with a term greater than one year are recognized on the balance sheet as right-of-use ("ROU") assets, lease liabilities, and, if applicable, long-term lease liabilities. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. We have elected not to recognize on the balance sheet leases with a term of one year or less. For contracts with lease and non-lease components, we have elected not to allocate the contract consideration and to account for the lease and non-lease components as a single lease component. Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The implicit rates within most of our leases are generally not determinable; therefore, we use the incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The determination of our incremental borrowing rate requires judgment and is estimated for each lease based on the rate we would have to pay for a collateralized loan with the same term and payments as the lease. We consider various factors, including our level of collateralization, estimated credit rating, and the currency in which the lease is denominated. Operating lease ROU assets also include any lease prepayments, offset by lease incentives. Certain of our leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option while an option to terminate is considered unless it is reasonably certain we will not exercise the option. For certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities. Expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense. We have lease agreements which require payments for lease and non-lease components (i.e., common area maintenance) that are accounted for as a single lease component. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as maintenance costs based on future obligations, are not included in ROU assets or lease liabilities but rather are expensed as incurred and recorded as variable lease expense. As of March 31, 2021, we have operating leases for corporate offices. Our operating leases have remaining lease terms of 1 year to 11 years, some of which include options to extend the leases for up to 10 years. In April 2018, we entered into a lease agreement with respect to 176,222 square feet of office space in McLean, Virginia for a new corporate headquarters. The initial term of the lease was 150 months. We took initial possession of the first phase of the new headquarters in October 2018 and began to recognize rent expense as of that date. In February 2019, we took possession of an additional 28,805 square feet of adjacent office space. In January 2020, we entered into an amendment which adjusts the original terms of the headquarters lease. Under this amendment, we exercised an option to expand occupancy, adding 34,158 square feet of office space. Occupancy of the added space commenced on October 14, 2020. Pursuant to the guidance of ASC 842, Leases , the amendment is considered a modification to the original lease and is accounted for as a separate contract because it represents a new ROU asset and the lease costs on the new space are charged at prevailing market rates. Effective July 1, 2020, we took possession of the space, began to recognize rent expense, and recorded a $ 7.9 million ROU asset and lease liability on our condensed consolidated balance sheets. 14 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) In October 2020, we paid the full $ 2.7 million principal balances outstanding under our finance leases pursuant to an option permitting us to pay such balances in full at any time. As of the date of the paydown, the titles to the assets were transferred to us, the associated lease liabilities were retired, the carrying values of the purchased assets were adjusted, and the assets were reclassified from finance leases to property and equipment, net on the condensed consolidated balance sheets. The following table sets forth the components of lease expense for the three months ended March 31, 2021 and 2020 (in thousands): Three Months Ended March 31, 2021 2020 Operating lease cost $ 1,630 $ 1,868 Finance lease costs: Amortization of right-of-use assets — 373 Interest on lease liabilities — 51 Short-term lease cost 41 185 Variable lease cost 25 183 Total $ 1,696 $ 2,660 Supplemental balance sheet information related to operating leases as of March 31, 2021 and December 31, 2020 was as follows (in thousands, except for lease term and discount rate): As of March 31, 2021 December 31, 2020 Operating right-of-use assets $ 30,610 $ 30,659 Operating lease liabilities, current $ 7,664 $ 6,923 Operating lease liabilities, net of current portion 50,572 51,194 Total operating lease liabilities $ 58,236 $ 58,117 Weighted average remaining lease term (in years) 10.3 10.6 Weighted average discount rate 9.6 % 9.6 % For the three months ended March 31, 2021 and 2020, amortization of operating ROU assets totaled $ 0.3 million and $ 0.7 million, respectively. For both the three months ended March 31, 2021 and 2020, interest expense on operating lease liabilities totaled $ 0.4 million. Supplemental cash flow information related to leases for the three months ended March 31, 2021 and 2020 was as follows (in thousands): Three Months Ended March 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows for operating leases $ 1,749 $ 772 Operating cash outflows for finance leases — 51 Financing cash outflows for finance leases — 357 15 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A summary of our future minimum lease commitments under non-cancellable leases as of March 31, 2021 is as follows (in thousands): Operating Leases 2021 (excluding the three months ended March 31, 2021) $ 5,919 2022 8,177 2023 8,173 2024 8,571 2025 9,267 2026 9,338 Thereafter 48,049 Total lease payments 97,494 Less: imputed interest ( 39,258 ) Total $ 58,236 5. Acquisitions Novayre Solutions SL In January 2020, we acquired 100 % of the outstanding common stock of Novayre Solutions SL ("Novayre"), a developer of a robotic process automation platform, for approximately $ 6.9 million. The acquisition was made due to the attractive nature of the product offerings of Novayre and in furtherance of our objective to enhance our automation platform. The transaction was financed through available cash on hand. The allocation of the purchase price was based upon the estimated fair values of the assets acquired and liabilities assumed. As of the acquisition date, the purchase price was assigned to the acquired assets and assumed liabilities as follows (in thousands): Cash acquired $ 731 Other current assets 213 Property and equipment 22 Developed technology 1,537 Customer relationships 406 Goodwill 4,348 Other noncurrent assets 10 Total assets acquired 7,267 Current liabilities 14 Noncurrent liabilities 344 Total liabilities assumed 358 Net assets acquired $ 6,909 There were no changes to our reportable segments as a result of the acquisition, and revenue and expenses from the date of the acquisition through March 31, 2021 were immaterial. Additionally, acquisition costs incurred in relation to the transaction were immaterial. Acquired property and equipment is depreciated on a straight-line basis over the assets' respective estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify 16 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) for separate recognition, including assembled workforce, non-contractual relationships, and expected future synergies. We do not expect the purchase price allocated to goodwill and intangible assets to be deductible for tax purposes. 6. Property and Equipment, net Property and equipment, net consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands): March 31, 2021 December 31, 2020 Leasehold improvements $ 36,247 $ 36,263 Office furniture and fixtures 2,521 2,521 Computer hardware 4,993 4,535 Computer software 1,352 1,352 Equipment 49 49 Property and equipment, gross 45,162 44,720 Less: accumulated depreciation ( 10,480 ) ( 9,316 ) Property and equipment, net $ 34,682 $ 35,404 Depreciation expense totaled $ 1.2 million for the three months ended March 31, 2021. There were no disposals or retirements recorded during the three months ended March 31, 2021. Depreciation expense totaled $ 1.4 million for the three months ended March 31, 2020. During the three months ended March 31, 2020, we retired $ 1.3 million of leasehold improvements, $ 0.1 million of computer hardware, and $ 0.1 million of office furniture and fixtures and equipment. Nominal losses on disposal were recorded for the three months ended March 31, 2020. 7. Accrued Expenses Accrued expenses consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands): March 31, 2021 December 31, 2020 Accrued hosting costs $ 2,040 $ 1,229 Accrued legal costs 888 760 Accrued contract labor costs 774 908 Accrued audit and tax expenses 549 370 Accrued marketing and tradeshow expenses 286 596 Accrued third party license fees 257 570 Accrued reimbursable employee expenses 138 231 Other accrued expenses 845 1,157 Total $ 5,777 $ 5,821 8. Debt Line of Credit In November 2017, we entered into a $ 20.0 million revolving line of credit with a lender. The facility matures in November 2022. We may elect whether amounts drawn on the revolving line of credit bear interest at a floating rate per annum equal to either LIBOR or the Prime rate plus an additional interest rate margin that is determined by the availability of the borrowings under the revolving line of credit. The additional interest rate margin will range from 2.00 % to 2.50 % in the case of LIBOR advances and from 1.00 % to 1.50 % in the case of Prime rate advances. The revolving line of credit contains an unused facility 17 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) fee in an amount between 0.15 % and 0.25 % of the average unused portion of the revolving line of credit, which is payable quarterly. The agreement contains certain customary affirmative and negative covenants and requires us to maintain (i) an adjusted quick ratio of at least 1.35 to 1.00 and (ii) minimum adjusted EBITDA, in the amounts and for the periods set forth in the agreement. Any amounts borrowed under the credit facility are collateralized by substantially all of our assets. We were in compliance with all covenants as of March 31, 2021. As of March 31, 2021, we had no outstanding borrowings under this revolving line of credit, and we had outstanding letters of credit totaling $ 11.2 million in connection with securing our leased office space. We are monitoring the LIBOR to SOFR transition, which may result in modification or amendment of our existing revolving line of credit. 9. Income Taxes The provision for income taxes is based upon the estimated annual effective tax rates for the year applied to the current period income before tax plus the tax effect of any significant or unusual items, discrete events, or changes in tax law. Our operating subsidiaries are exposed to statutory effective tax rates ranging from zero to approximately 32 %. Fluctuations in the distribution of pre-tax income among our operating subsidiaries can lead to fluctuations of the effective tax rate in the condensed consolidated financial statements. For the three months ended March 31, 2021 and 2020, the actual effective tax rates were ( 0.9 )% and 1.6 %, respectively. We assess uncertain tax positions in accordance with ASC 740-10, Accounting for Uncertainties in Income Taxes . As of March 31, 2021, our net unrecognized tax benefits totaled $ 2.3 million, which if recognized would result in no net effect on the effective tax rate due to a valuation allowance. The amount of reasonably possible unrecognized tax benefits that could decrease over the next 12 months due to the expiration of certain statutes of limitations or settlements of tax audits is not material to our condensed consolidated financial statements. We file income tax returns in the United States federal jurisdiction and in many states and foreign jurisdictions. The tax years 2017 through 2020 remain open to examination by the major taxing jurisdictions to which we are subject. We are not currently under examination by the Internal Revenue Service for any open tax years. In response to the COVID-19 pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act in March 2020. The CARES Act includes various income and payroll tax measures. Pursuant to these measures, we have elected the option to defer the deposit and payment of our share of social security taxes that would otherwise be due between March 27, 2020 and December 31, 2020. Under the CARES Act, half of these deferred payments are due by the end of fiscal year 2021 while the other half are due by the end of fiscal year 2022. At this time, beyond the above deferral, the CARES Act is not expected to materially impact our financial statements, but we continue to evaluate potential impacts. 10. Stock-Based Compensation Equity Incentive Plans In May 2017, our Board of Directors adopted, and our stockholders approved, the 2017 Equity Incentive Plan (the “2017 Plan”), which became effective as of the date of the final prospectus for our initial public offering. The 2017 Plan provides for the grant of incentive stock options to employees and for the grant of nonstatutory stock options, restricted stock awards, RSUs, stock appreciation rights, performance-based stock awards, and other forms of equity compensation to employees, including officers, non-employee directors, and consultants. We initially reserved 6,421,442 shares of Class A common stock for issuance under the 2017 Plan, which included 421,442 shares that remained available for issuance under our 2007 Stock Option Plan (the “2007 Plan”) at the time the 2017 Plan became effective. The number of shares reserved under the 2017 Plan increases for any shares subject to outstanding awards originally granted under the 2007 Plan that expire or are forfeited prior to exercise. As a result of the adoption of the 2017 Plan, no further grants may be made under the 2007 Plan. As of March 31, 2021, there were 7,166,609 shares of Class A common stock reserved for issuance under the 2017 Plan, of which 4,259,664 were available to be issued. Stock Options 18 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) We estimate the fair value of stock options containing only a service condition using the Black-Scholes option pricing model, which requires the use of subjective assumptions, including the expected term of the option, the current price of the underlying stock, the expected stock price volatility, expected dividend yield, and the risk-free interest rate for the expected term of the option. The expected term represents the period of time the stock options are expected to be outstanding. Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options, we use the simplified method to estimate the expected term for our stock options. Under the simplified method, the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected term of the stock options. We assume no dividend yield because dividends are not expected to be paid in the near future, which is consistent with our history of not paying dividends. In May 2019, our Board of Directors granted a stock option to purchase 700,000 shares of our Class A common stock to our Chief Executive Officer (the "2019 CEO Grant") under the 2017 Plan with an exercise price of $ 33.98 per share. The 2019 CEO Grant is eligible to vest based on the achievement of a stock price appreciation target of our Class A common stock. Specifically, the 2019 CEO Grant vests when shares of our Class A common stock close at or above $ 84.63 per share for a period equal to or greater than 90 consecutive calendar days or upon the occurrence of a change in control in which the value of our Class A common stock is equal to or greater than $ 84.63 per share within five years of the grant date. The fair value of the 2019 CEO Grant was determined using a Monte Carlo simulation. The fair value of the award at the grant date was $ 9.5 million and is amortized over the derived service period of 2.6 years. Effective February 2021, the 2019 CEO Grant has satisfied all of the conditions required to be considered fully vested. As a result, we accelerated the recognition of approximately $ 3.3 million in stock-based compensation expense in the three months ended March 31, 2021. The following table summarizes stock option activity for the three months ended March 31, 2021: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in thousands) Outstanding at January 1, 2021 3,399,240 $ 14.06 4.9 $ 503,174 Granted — — — Exercised ( 88,269 ) 6.98 14,330 Expired — — — Canceled ( 1,200 ) 11.02 — Outstanding at March 31, 2021 3,309,771 $ 14.25 4.7 $ 392,855 Exercisable at March 31, 2021 2,882,511 $ 14.68 4.5 $ 340,919 There were no stock options granted during the three months ended March 31, 2021 and 2020. The total fair value of stock options that vested during the three months ended March 31, 2021 and 2020 was $ 9.7 million and $ 0.3 million, respectively. As of March 31, 2021, the total compensation cost related to unvested stock options not yet recognized was $ 0.2 million, which will be recognized over a weighted average period of 1.0 year. 19 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Restricted Stock Units The following table summarizes RSU activity for the three months ended March 31, 2021: Number of Shares Weighted Average Grant Date Fair Value Non-vested and outstanding at January 1, 2021 1,165,003 $ 46.04 Granted 34,535 211.06 Vested ( 56,326 ) 44.07 Canceled ( 17,581 ) 49.01 Non-vested and outstanding at March 31, 2021 1,125,631 51.15 As of March 31, 2021, total unrecognized compensation cost related to unvested RSUs was approximatel y $ 50.4 million, which will be recognized over a weighted average period of 2.2 years. The following table summarizes the components of our stock-based compensation expense by instrument type for the three months ended March 31, 2021 and 2020 (in thousands): Three Months Ended March 31, 2021 2020 RSUs $ 4,005 $ 2,299 Stock options 3,733 1,084 Common stock awards to Board of Directors 156 93 Total stock-based compensation expense $ 7,894 $ 3,476 Stock-based compensation expense for RSUs, stock options, and issuances of common stock to the Board of Directors is included in the following line items in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 (in thousands): Three Months Ended March 31, 2021 2020 Cost of revenue Subscriptions $ 297 $ 213 Professional services 641 212 Operating expenses Sales and marketing 1,108 753 Research and development 1,015 553 General and administrative 4,833 1,745 Total stock-based compensation expense $ 7,894 $ 3,476 20 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11. Stockholders' Equity As of March 31, 2021, we had authorized 500,000,000 shares of Class A common stock and 100,000,000 shares of Class B common stock, each with a par value of $ 0.0001 per share, of which 39,321,079 shares of Class A common stock and 31,503,666 shares of Class B common stock were issued and outstanding. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. The holders of Class A common stock are entitled to one vote per share, and the holders of Class B common stock are entitled to ten votes per share on all matters subject to stockholder vote. The holders of Class B common stock also have approval rights for certain corporate actions. Each share of Class B common stock may be converted into one share of Class A common stock at the option of its holder and will be automatically converted upon transfer thereof, subject to certain exceptions. In addition, upon the date on which the outstanding shares of Class B common stock represent less than 10 % of the aggregate voting power of our capital stock, all outstanding shares of Class B common stock shall convert automatically into Class A common stock. 12. Basic and Diluted Loss per Common Share The following outstanding securities, prior to the use of the treasury stock method or the if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been antidilutive: Three Months Ended March 31, 2021 2020 Stock options 3,309,771 4,308,009 Non-vested restricted stock units 1,125,631 1,069,168 13. Commitments and Contingencies Contractual Warranty and Indemnification Obligations We provide limited product warranties. Historically, any payments made under these provisions have been immaterial. We also agree to standard indemnification provisions in the ordinary course of business. Pursuant to these provisions, we agree to indemnify, hold harmless, and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our customers, in connection with certain intellectual property infringement claims by any third party arising from the use of our products or services in accordance with the agreement. The term of our contractual indemnity provisions often survives termination or expiration of the applicable agreement. We carry insurance that covers certain third-party claims relating to our services and limits our exposure. We have never incurred costs to defend lawsuits or settle claims related to these indemnification provisions. Letters of Credit At each of March 31, 2021 and December 31, 2020, we had outstanding letters of credit totaling $ 11.2 million in connection with securing our leased office space. All letters of credit are secured by our borrowing arrangement as described in Note 8. Legal From time to time, we are subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of business. There are no issues or resolutions of any matters expected to have a material adverse impact on our condensed consolidated financial statements. 21 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 14. Segment and Geographic Information The following table summarizes revenue by geography for the three months ended March 31, 2021 and 2020 (in thousands): Three Months Ended March 31, 2021 2020 Domestic $ 60,282 $ 52,455 International 28,573 26,409 Total $ 88,855 $ 78,864 With respect to geographic information, revenue is attributed to respective geographies based on the contracting address of the customer. There were no individual foreign countries from which more than 10% of our total revenue was attributable for the three months ended March 31, 2021. Revenue from customers attributed to the United Kingdom was 12.5 % of our total revenue for the three months ended March 31, 2020. There were no other individual foreign countries from which more than 10% of our total revenue was attributable for the three months ended March 31, 2020. Substantially all of our long-lived assets were held in the United States as of March 31, 2021 and December 31, 2020. 15. Investments and Fair Value Measurements Fair Value Measurements We use a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires us to use observable inputs when available and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows: • Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities; • Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and • Level 3. Unobservable inputs for which there is little or no market data, which require us to develop our own assumptions. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. There were no instruments measured at fair value on a recurring basis using significant unobservable inputs as of March 31, 2021 and December 31, 2020. The valuation techniques that may be used to measure fair value are as follows: • Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities; • Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts; • Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (i.e., replacement cost). The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value as of March 31, 2021 and December 31, 2020 because of the relatively short duration of these instruments. 22 APPIAN CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Investments Our investment portfolio consists largely of debt investments classified as available-for-sale. Changes in the fair value of available-for-sale securities, excluding other-than-temporary impairments, are recorded in other comprehensive income (loss). The components of our investments as of March 31, 2021 are as follows (in thousands): As of March 31, 2021 Fair Value Measurement Balance Sheet Classification Fair Value Level Cost Basis Unrealized Gains / (Losses) Market Value Cash and Cash Equivalents Short-Term Investments Long-Term Investments Money market fund Level 1 $ 49,930 $ — $ 49,930 $ 49,930 $ — $ — U.S. Treasury bonds Level 1 24,445 4 24,449 — 24,449 — Commercial paper Level 2 60,412 — 60,412 — 60,412 — Corporate bonds Level 2 29,113 ( 15 ) 29,098 — 27,550 1,548 Asset-backed securities Level 2 26,373 ( 3 ) 26,370 — 5,601 20,769 Total investments $ 190,273 $ ( 14 ) $ 190,259 $ 49,930 $ 118,012 $ 22,317 At December 31, 2020, our investments consisted of the following (in thousands): As of December 31, 2020 Fair Value Measurement Balance Sheet Classification Fair Value Level Cost Basis Unrealized Gains / (Losses) Market Value Cash and Cash Equivalents Short-Term Investments Long-Term Investments Money market fund Level 1 $ 27,150 $ — $ 27,150 $ 27,150 $ — $ — U.S. Treasury bonds Level 1 24,445 ( 3 ) 24,442 — 16,273 8,169 Commercial paper Level 2 76,905 — 76,905 16,493 60,412 — Corporate bonds Level 2 34,738 ( 11 ) 34,727 — 27,542 7,185 Asset-backed securities Level 2 26,373 ( 8 ) 26,365 — 5,599 20,766 Total investments $ 189,611 $ ( 22 ) $ 189,589 $ 43,643 $ 109,826 $ 36,120 There were no Level 3 assets held at any point during the three months ended March 31, 2021. Additionally, there were no transfers between Levels 1 and 2 during the three months ended March 31, 2021. The amortized cost basis and fair value of debt securities at March 31, 2021, by contractual maturity, are as follows (in thousands): As of March 31, 2021 Cost Basis Fair Value Due in one year or less $ 167,953 $ 167,942 Due after one year through five years 22,320 22,317 Total investments $ 190,273 $ 190,259 Actual maturities may differ from the contractual maturities in the table above because borrowers have the right to call or prepay certain obligations. 23