What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 157 added, 87 removed, 262 unchanged (48% of the section changed)

27 unchanged sentences

Many of our customer contracts contain termination for convenience provisions.

For the three months ended March 31, 2022, we generated $446.4 million in revenue, reflecting a 31% growth rate from the three months ended March 31, 2021, when we generated $341.2 million in revenue.

Our operating results continued to improve, including when adjusting for stock-based compensation.

In the three months ended March 31, 2022, we incurred losses from operations of $39.4 million, or generated adjusted income from operations of $117.4 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended March 31, 2021, we incurred losses from operations of $114.0 million, or generated adjusted income from operations of $116.6 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended March 31, 2022, our gross profit was $352.0 million, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation.

In the three months ended March 31, 2021, our gross profit was $267.1 million, reflecting a gross margin of 78%, or 83% when excluding stock-based compensation.

For the three months ended June 30, 2022, we generated $473.0 million in revenue, reflecting a 26% growth rate from the three months ended June 30, 2021 when we generated $375.6 million in revenue.

For the six months ended June 30, 2022, we generated $919.4 million in revenue, reflecting a 28% growth rate from the six months ended June 30, 2021 when we generated $716.9 million in revenue.

In the three months ended June 30, 2022, we incurred losses from operations of $41.7 million, or generated adjusted income from operations of $107.8 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended June 30, 2021, we incurred losses from operations of $146.1 million, or generated adjusted income from

operations of $116.7 million when excluding stock-based compensation and related employer payroll taxes.

In the six months ended June 30, 2022, we incurred losses from operations of $81.2 million, or generated adjusted income from operations of $225.2 million when excluding stock-based compensation and related employer payroll taxes.

In the six months ended June 30, 2021, our losses from operations were $260.2 million, or adjusted income from operations of $233.3 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended June 30, 2022, our gross profit was $370.8 million, reflecting a gross margin of 78%, or 81% when excluding stock-based compensation.

In the three months ended June 30, 2021, our gross profit was $284.7 million, reflecting a gross margin of 76%, or 82% when excluding stock-based compensation.

In the six months ended June 30, 2022, our gross profit was $722.7 million, reflecting a gross margin of 79%, or 81% when excluding stock-based compensation.

In the six months ended June 30, 2021, our gross profit was $551.8 million, reflecting a gross margin of 77%, or 83% when excluding stock-based compensation.

For more information about our adjusted income or loss from operations, which excludes stock-based compensation and related employer payroll taxes;

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We define a customer as an organization from which we have recognized revenue during the trailing twelve-month period.

During the period ended March 31, 2022, we had 277 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended March 31, 2021, we had 149 customers.

During the period ended June 30, 2022, we had 304 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended June 30, 2021, we had 169 customers.

For large government agencies, where a single institution has multiple divisions, units, or subsidiary agencies, each such division, unit, or subsidiary agency that enters into a separate contract with us and is invoiced as a separate entity is treated as a separate customer.

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We have built lasting and significant customer relationships with some of the world’s leading government institutions and companies, and are expanding our partnerships with early- and growth-stage companies.

Our average revenue for the top twenty customers during the trailing twelve months ended March 31, 2022 was $44.6 million, which grew 24% from an average of $36.1 million in revenue from the top twenty customers during the trailing twelve months ended March 31, 2021, demonstrating our expanding relationships with existing customers.

Our average revenue for the top twenty customers during the trailing twelve months ended June 30, 2022 was $45.8 million, which grew 17% from an average of $39.0 million in revenue from the top twenty customers during the trailing twelve months ended June 30, 2021, demonstrating our expanding relationships with existing customers.

Organizations in the commercial and government sectors face similar challenges when it comes to managing data, and we intend to expand our reach in both markets moving forward.

In the three months ended March 31, 2022, 54% of our revenue came from government agencies and 46% came from commercial customers.

In the three months ended March 31, 2022, we generated 61% of our revenue from customers in the United States and the remaining 39% from non-U.S.

In the six months ended June 30, 2022, 55% of our revenue came from government agencies and 45% came from commercial customers.

customers have been a meaningful source of revenue growth for our business.

In the six months ended June 30, 2022, we generated 61% of our revenue from customers in the United States and the remaining 39% from non-U.S.

Revenue from our U.S.

customers during the trailing twelve months ended June 30, 2022 was $1.04 billion, which grew 42% from the prior twelve-month period.

We expect that U.S customers will continue to be a source of significant revenue growth for us.

We continue to believe that our government customers remain a meaningful and resilient source of revenue for our business, particularly during periods of economic uncertainty.

However, large government customers in particular are generally subject to a number of uncertainties regarding budgets and spending levels, changes in timing and spending priorities, and regulatory and policy changes, which can make it difficult to predict when, or if, we will make sales to such customers or the size and scope of any contract awards.

See also the discussion of “Risks Related to Relationships and Business with the Public Sector” within Item 1A.

Risk Factors included in this Quarterly Report on Form 10-Q.

Expansion of Access to Platforms

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The speed with which our platforms can be deployed has significantly expanded the range of potential customers with which we plan on partnering over the long term.

We anticipate that our reach among an increasingly broad set of customers, in both the commercial and government sectors, will accelerate moving forward.

We anticipate that our reach among an increasingly broad set of customers, in both

the commercial and government sectors, will accelerate moving forward.

We believe that, as these new partners grow, we will grow with them.

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Our proximity to these businesses and the industries in which they are operating has enhanced, and is expected to continue enhancing, our own product and business development efforts, as we continue expanding access to our platforms to the broadest possible set of customers.

Macroeconomic Trends

As a corporation with an international presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, the ongoing COVID-19 pandemic, the Russian invasion of Ukraine, and inflationary pressures.

We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape.

COVID-19 Impact

1 unchanged sentence

Although the majority of our workforce worked remotely, there was minimal disruption in our ability to ensure the effective operation of our software platforms.

As local conditions and public health guidance permits, we are reopening our offices and allowing business travel to resume, while continuing to closely monitor developments around the evolving nature of the pandemic.

We have reopened our offices and are allowing business travel to resume, while continuing to closely monitor developments around the evolving nature of the pandemic, and some of our employees continue to work remotely.

The economic consequences of the COVID-19 pandemic have been challenging for certain of our customers and prospective customers.

4 unchanged sentences

We saw decreases in our travel and office-related expenditures, including during the temporary closures of our offices globally and reductions in related operating expenses, related to the ongoing COVID-19 pandemic.

However, improvement of our contribution metric has also been driven by the expansion of existing customer accounts, improved sales efficiency, and the increasing deployment of centralized hosting and other software deployment infrastructure.

While we expect our travel and office-related expenditures to increase moving forward, we do not expect such expenditures to return to their pre-pandemic levels, given that we have made significant investments in enabling employees to work with customers remotely.

While our travel and office-related expenditures have increased, and may continue to increase moving forward, we do not expect such expenditures to return to their pre-pandemic levels, given that we have made significant investments in enabling employees to work with customers remotely.

See the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q, and in the Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 24, 2022, for further discussion of the impact of the COVID-19 pandemic on our business.

Russian Invasion of Ukraine

We are closely monitoring the impact of the Russian invasion of Ukraine and its global impacts on our business.

While the conflict is still evolving and the outcome remains highly uncertain, we do not believe the Russian invasion will have a material impact on our business and results of operations.

We do not currently have office locations in Russia and none of our revenues came from sales to entities headquartered in Russia.

In June 2022, our Chief Executive Officer, Alexander Karp, met with the President of Ukraine and other senior officials to discuss opening an office in Ukraine and providing ongoing support.

However, if the conflict continues or worsens, leading to greater disruptions and uncertainty within the technology industry or global economy, our business and results of operations could be negatively impacted.

Key Business Measure

21 unchanged sentences

In addition, other companies may not publish these or similar metrics.

Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our condensed consolidated statement of operations.

Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations.

Thus, our non-GAAP contribution margin;

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We compensate for these limitations by providing reconciliations of these non-GAAP measures to the most comparable GAAP measures.

We encourage investors and others to review our business, results of operations, and financial information in its entirety,

not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.

Contribution Margin

The following table provides a reconciliation of contribution margin for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

Three Months Ended March 31,

The following table provides a reconciliation of contribution margin for the three and six months ended June 30, 2022 and 2021 (in thousands, except percentages):

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Loss from operations $ (41,745) $ (146,148) $ (81,184) $ (260,162)

8 unchanged sentences

Gross Profit and Gross Margin, Excluding Stock-Based Compensation

The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the three months ended March 31, 2022 and 2021 (in thousands, except percentages):

Three Months Ended March 31,

The following table provides a reconciliation of gross profit and gross margin, excluding stock-based compensation for the three and six months ended June 30, 2022 and 2021 (in thousands, except percentages):

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Gross profit $ 370,786 $ 284,716 $ 722,740 $ 551,839

3 unchanged sentences

Adjusted Income from Operations

The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

The following table provides a reconciliation of adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Loss from operations $ (41,745) $ (146,148) $ (81,184) $ (260,162)

7 unchanged sentences

We promise to provide continuous access to the hosted software throughout the contract term.

Revenue associated with Palantir Cloud subscriptions is generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir services to the customer.

Revenue associated with Palantir Cloud subscriptions is

generally recognized over the contract term on a ratable basis, which is consistent with the transfer of control of the Palantir services to the customer.

On-Premises Software

33 unchanged sentences

Other income (expense), net consists primarily of foreign currency exchange gains and losses, realized and unrealized losses from Investments, and our share of income and losses from our equity method investments.

Provision for Income Taxes

Provision for income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists of income taxes related to foreign and state jurisdictions in which we conduct business and withholding taxes.

We have two operating segments, commercial and government, which were determined based on the manner in which the chief operating decision maker (“CODM”), who is our chief executive officer, manages our operations for purposes of allocating resources and evaluating performance.

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The following table summarizes our condensed consolidated statements of operations data (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Revenue $ 473,010 $ 375,642 $ 919,367 $ 716,876

15 unchanged sentences

Loss before provision for income taxes (176,741) (144,241) (276,097) (264,613)

Provision for income taxes 2,023 3,102

Provision for (benefit from) income taxes 2,588 (5,661) 4,611 (2,559)

Net loss $ (179,329) $ (138,580) $ (280,708) $ (262,054)

1 unchanged sentence

The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Revenue 100 % 100 % 100 % 100 %

10 unchanged sentences

Other income (expense), net (28) 1 (21) —

Loss before provision for income taxes (22) (35)

Provision for income taxes 1 1

Loss before provision for (benefit from) income taxes (37) (38) (30) (37)

Provision for (benefit from) income taxes 1 (1) 1 —

Net loss (38) % (37) % (31) % (37) %

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31, Change

2022 2021 Amount %

Comparison of the Three and Six Months Ended June 30, 2022 and 2021

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount % 2022 2021 Amount %

Government $ 262,998 $ 232,119 $ 30,879 13 % $ 504,788 $ 440,539 $ 64,249 15 %

1 unchanged sentence

Total revenue $ 473,010 $ 375,642 $ 97,368 26 % $ 919,367 $ 716,876 $ 202,491 28 %

Revenue increased by $105.1 million, or 31%, for the three months ended March 31, 2022 compared to the same period in 2021.

Revenue from government customers increased by $33.4 million, or 16%, for the three months ended March 31, 2022 compared to the same period in 2021, primarily from customers in the United States.

Revenue increased by $97.4 million, or 26%, for the three months ended June 30, 2022 compared to the same period in 2021.

Revenue from government customers increased by $30.9 million, or 13%, for the three months ended June 30, 2022 compared to the same period in 2021, primarily from customers in the United States.

Of the increase, $25.3 million was from government customers existing as of December 31, 2021.

Revenue from commercial customers increased by $66.5 million, or 46%, for the three months ended June 30, 2022 compared to the same period in 2021.

Of the increase, $46.2 million was from existing customers as of December 31, 2021, of which $22.3 million was revenue from customers with which we have entered into concurrent Investment Agreements.

For additional information, see Note 4.

Investments and Fair Value Measurements and Note 7.

Commitments and Contingencies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Generally, increases in revenue from our existing customers are related to increased adoption of our products and services within their organizations.

Revenue from commercial customers increased by $71.8 million, or 54%, for the three months ended March 31, 2022 compared to the same period in 2021.

Revenue increased by $202.5 million, or 28%, for the six months ended June 30, 2022 compared to the same period in 2021.

Revenue from government customers increased by $64.2 million, or 15%, for the six months ended June 30, 2022 compared to the same period in 2021, primarily from customers in the United States.

Of the increase, $58.2 million was from government customers existing as of December 31, 2021.

Revenue from commercial customers increased by $138.2 million, or 50%, for the six months ended June 30, 2022 compared to the same period in 2021.

Of the increase, $100.0 million was from existing customers as of December 31, 2021, of which $49.4 million was revenue from customers with which we have entered into concurrent Investment Agreements.

2 unchanged sentences

Commitments and Contingencies in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Generally, increases in revenue from our existing customers are related to increased adoption of our products and services within their organizations.

Cost of Revenue and Gross Profit

Three Months Ended March 31, Change

2022 2021 Amount %

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount % 2022 2021 Amount %

Cost of revenue 102,224 90,926 11,298 12 % 196,627 165,037 31,590 19 %

1 unchanged sentence

Gross margin 78 % 76 % 2 % 79 % 77 % 2 %

Cost of revenue for the three months ended March 31, 2022 increased by $20.3 million, or 27%, compared to the same period in 2021.

The increase was primarily due to increases of $14.3 million in third-party cloud hosting services driven by increased usage by

existing customers and $5.4 million in field service representatives and other direct deployment costs mainly related to new projects.

These increases were partially offset by a decrease of $6.9 million in stock-based compensation expense.

Our gross margin for the three months ended March 31, 2022 increased from 78% for the same period in 2021 to 79% as a result of increased efficiencies in supporting revenue growth at our customer deployments, for example from making investments in our platforms as well as a lower rate of increase in cost of revenue partially driven by a decrease in stock-based compensation expense.

Cost of revenue for the three months ended June 30, 2022 increased by $11.3 million, or 12%, compared to the same period in 2021.

The increase was primarily due to increases of $11.1 million in third-party cloud hosting services driven by increased usage, $7.2 million in field service representatives and other direct deployment costs mainly related to new projects, and $4.5 million in payroll and other payroll-related costs driven by increased headcount attributable to our cost of revenue function.

These increases were partially offset by a decrease of $14.5 million in stock-based compensation expense and related expenses.

Our gross margin for the three months ended June 30, 2022 increased from 76% for the same period in 2021 to 78% as a result of increased efficiencies in supporting revenue growth at our customer deployments, for example from making investments in our platforms as well as a lower rate of increase in cost of revenue partially driven by a decrease in stock-based compensation expense.

Cost of revenue for the six months ended June 30, 2022 increased by $31.6 million, or 19%, compared to the same period in 2021.

The increase was primarily due to increases of $25.4 million in third-party cloud hosting services driven by increased usage, $12.7 million in field service representatives and other direct deployment costs mainly related to new projects, and $8.7

million in payroll and other payroll-related costs.

These increases were partially offset by a decrease of $21.4 million in stock-based compensation expense and related expenses.

Our gross margin for the six months ended June 30, 2022 increased from 77% for the same period in 2021 to 79% as a result of increased efficiencies in supporting revenue growth at our customer deployments, for example from making investments in our platforms as well as a lower rate of increase in cost of revenue partially driven by a decrease in stock-based compensation expense.

Operating Expenses

Three Months Ended March 31, Change

2022 2021 Amount %

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount % 2022 2021 Amount %

Sales and marketing 168,875 162,379 $ 6,496 4 % $ 329,360 $ 298,476 $ 30,884 10 %

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Sales and Marketing

Sales and marketing expenses increased by $24.4 million, or 18%, for the three months ended March 31, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $18.9 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our sales and marketing function, $11.0 million in marketing and advertising expenses, and $7.7 million in office-related expenses and travel costs largely driven by the reduction in COVID-19 restrictions.

These increases were partially offset by a decrease of $17.5 million in stock-based compensation expense.

Sales and marketing expenses increased by $6.5 million, or 4%, for the three months ended June 30, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $18.1 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function, $11.4 million in marketing and advertising expenses, and $7.3 million in travel and office-related costs largely driven by the reduction in COVID-19 restrictions and office re-openings.

These increases were partially offset by a decrease of $34.2 million in stock-based compensation expense and related expenses.

Sales and marketing expenses increased by $30.9 million, or 10%, for the six months ended June 30, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $37.0 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function, $22.4 million in marketing and advertising expenses, and $14.9 million in travel and office-related costs largely driven by the reduction in COVID-19 restrictions and office re-openings.

These increases were partially offset by a decrease of $51.6 million in stock-based compensation expense and related expenses.

Research and Development

Research and development expenses decreased by $9.9 million, or 10%, for the three months ended March 31, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $20.1 million in stock-based compensation expense;

partially offset by an increase of $4.7 million in payroll and other payroll-related costs primarily driven by an increase in headcount attributable to our research and development function.

Research and development expenses decreased by $22.4 million, or 20%, for the three months ended June 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $30.8 million in stock-based compensation expense and related expenses;

partially offset by an increase of $7.9 million in payroll costs and other allocated overhead largely driven by increased headcount attributable to our research and development function.

Research and development expenses decreased by $32.2 million, or 15%, for the six months ended June 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $50.9 million in stock-based compensation expense and related expenses;

partially offset by increases of $9.4 million in payroll and other payroll-related costs primarily driven by increased headcount attributable to our research and development function and $5.6 million in travel and office-related costs largely driven by the reduction in COVID-19 restrictions and office re-openings.

General and Administrative

General and administrative expenses decreased by $4.3 million, or 3%, for the three months ended March 31, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $29.3 million in stock-based compensation expense, partially offset by increases of $9.6 million in professional service fees, $7.0 million in office-related expenses and travel costs largely driven by the reduction in COVID-19 restrictions, and $4.9 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our general and administrative functions.

General and administrative expenses decreased by $2.5 million, or 2%, for the three months ended June 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $33.8 million in stock-based compensation expense and related expenses.

This decrease was partially offset by increases of $12.2 million in travel and office-related costs largely driven by the reduction in COVID-19 restrictions and office re-openings, $10.5 million in professional service fees, and $6.3 million in payroll and other payroll-related costs driven by increased headcount attributable to our general and administrative functions.

General and administrative expenses decreased by $6.7 million, or 2%, for the six months ended June 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $63.0 million in stock-based compensation expense and related expenses and related expenses.

This decrease was partially offset by increases of $20.1 million in professional service fees mainly related to legal and financial services, $19.2 million in travel and office-related costs largely driven by the reduction

in COVID-19 restrictions and office re-openings, and $11.2 million in payroll and other payroll-related costs driven by increased headcount attributable to our general and administrative functions.

Stock-Based Compensation

Three Months Ended March 31, Change

2022 2021 Amount %

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount % 2022 2021 Amount %

Cost of revenue $ 11,211 $ 24,029 $ (12,818) (53) % $ 22,888 $ 40,006 $ (17,118) (43) %

3 unchanged sentences

Total stock-based compensation expense $ 145,769 $ 232,742 $ (86,973) (37) % $ 295,092 $ 426,473 $ (131,381) (31) %

Stock-based compensation expenses decreased by $44.4 million, or 23%, for the three months ended March 31, 2022 compared to the same period in 2021.

The decrease was primarily driven by lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our direct listing, during the three months ended March 31, 2022 compared to the same period in 2021, and lower expense due to options becoming fully vested over time.

Stock-based compensation expenses decreased by $87.0 million, or 37%, for the three months ended June 30, 2022 compared to the same period in 2021.

The decrease was primarily driven by awards granted during the three months ended June 30, 2021, forfeitures, and lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our direct listing, during the three months ended June 30, 2022 compared to the same period in 2021.

The decrease was partially offset by an increase related to awards granted after June 30, 2021.

Stock-based compensation expenses decreased by $131.4 million, or 31%, for the six months ended June 30, 2022 compared to the same period in 2021.

The decrease was primarily driven by awards granted during the six months ended June 30, 2021, forfeitures, and lower expense under the accelerated attribution method for RSUs granted prior to September 30, 2020, the date of our direct listing, during the six months ended June 30, 2022 compared to the same period in 2021.

The decrease was partially offset by an increase related to awards granted after June 30, 2021.

Interest Income

Three Months Ended March 31, Change

2022 2021 Amount

Three Months Ended June 30, Change Six Months Ended

June 30, Change

2022 2021 Amount 2022 2021 Amount

Interest income $ 1,472 $ 372 $ 1,100 $ 2,019 $ 748 $ 1,271

Interest income increased by $0.2 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to an increase in U.S.

Interest income increased by $1.1 million for the three months ended June 30, 2022 compared to the same period in 2021 primarily due to an increase in U.S.

interest rates on interest earned from our cash, cash equivalents, and restricted cash.

Interest income increased by $1.3 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily due to an increase in U.S.

interest rates on interest earned from our cash, cash equivalents, and restricted cash.

Interest Expense

Three Months Ended March 31, Change

2022 2021 Amount

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount 2022 2021 Amount

Interest expense $ (670) $ (590) $ (80) $ (1,264) $ (2,430) $ 1,166

Interest expense decreased by $1.2 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to the full repayment of the outstanding debt balance during the second quarter of 2021.

Interest expense remained relatively flat for the three months ended June 30, 2022 compared to the same period in 2021.

Interest expense decreased by $1.2 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily due to the full repayment of the outstanding debt balance during the second quarter of 2021.

Other Income (Expense), Net

Three Months Ended March 31, Change

2022 2021 Amount

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount 2022 2021 Amount

Other income (expense), net $ (135,798) $ 2,125 $ (137,923) $ (195,668) $ (2,769) $ (192,899)

Other income (expense), net changed by $55.0 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to unrealized losses, net from our investments in marketable securities.

Provision for Income Taxes

Three Months Ended March 31, Change

2022 2021 Amount

Provision for income taxes $ 2,023 $ 3,102 $ (1,079)

Provision for income taxes decreased by $1.1 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to decreases in non-US income tax expense partially offset by an increase in foreign withholding taxes.

Other income (expense), net changed by $137.9 million for the three months ended June 30, 2022 compared to the same period in 2021 primarily due to unrealized and realized losses, net from our investments in marketable securities.

Other income (expense), net changed by $192.9 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily due to unrealized and realized losses, net from our investments in marketable securities.

Provision for (Benefit From) Income Taxes

Three Months Ended June 30, Change Six Months Ended June 30, Change

2022 2021 Amount 2022 2021 Amount

Provision for (benefit from) income taxes $ 2,588 $ (5,661) $ 8,249 $ 4,611 $ (2,559) $ 7,170

Provision for income taxes increased by $8.2 million for the three months ended June 30, 2022 compared to a benefit from income taxes in the same period in 2021 primarily due to the revaluation of our U.K.

deferred tax assets as a result of a change in the U.K.

corporate tax rate enacted in June 2021.

Provision for income taxes increased by $7.2 million for the six months ended June 30, 2022 compared to a benefit from income taxes the same period in 2021 primarily due to the revaluation of our U.K.

deferred tax assets as a result of a change in the U.K.

corporate tax rate enacted in June 2021.

Liquidity and Capital Resources

We generated positive cash flow from operations for the three months ended March 31, 2022 as our customer billing cycles have continued to normalize and our growth in customer collections outpaced our cash operating expenses.

We had $2.3 billion in cash and cash equivalents available as of March 31, 2022.

We generated positive cash flow from operations for the six months ended June 30, 2022.

We had $2.4 billion in cash and cash equivalents available as of June 30, 2022.

We believe that cash flows generated from operations, cash, cash equivalents, available funds, and access to financing sources, including our revolving credit facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months.

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Historically, we generated negative cash flows from operations and financed our operations primarily through the sale of our equity securities, including proceeds from option exercises, and payments received from our customers.

As of March 31, 2022, our accumulated deficit balance was $5.6 billion, and our principal sources of liquidity were $2.3 billion of cash and cash equivalents.

As of March 31, 2022, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500.0 million under our revolving credit facility.

As of June 30, 2022, our accumulated deficit balance was $5.8 billion, and our principal sources of liquidity were $2.4 billion of cash and cash equivalents.

As of June 30, 2022, we had no outstanding debt balances and additional available and undrawn revolving commitments of $500.0 million under our revolving credit facility.

During July 2022, we amended our revolving credit facility, which provided for, among other things, a new incremental delayed draw term loan (“DDTL”) facility in an aggregate principal amount of up to $450.0 million, upon the terms and conditions set forth in the applicable credit agreement.

The DDTL facility is available to draw upon through July 1, 2023 and any drawn amounts will mature on March 31, 2027.

The DDTL facility, together with our existing revolving credit facility with an aggregate principal amount of up to $500.0 million, provides for total revolving and DDTL commitments of up to $950.0 million available to draw to fund working capital and general corporate expenditures.

No amounts were drawn as of the date of this Quarterly Report on Form 10-Q.

For more information, see Note 6.

Debt in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q .

Debt and Note 13.

Subsequent Events in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Our future capital requirements will depend on many factors, including, but not limited to the rate of our growth, our ability to attract and retain customers and their willingness and ability to pay for our products and services, and the timing and extent of spending to support our efforts to market and develop our products.

Further, as of March 31, 2022, our approved investment commitments outstanding totaled $35.0 million, which are in addition to the investments we made during the period, and we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies.

Further, as of June 30, 2022, our approved investment commitments outstanding totaled $35.0 million, and we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies.

As such, we may be required to seek additional equity or debt financing.

In the event that additional financing is required from outside sources, we may

not be able to raise it on terms acceptable to us or at all.

In the event that additional financing is required from outside sources, we may not be able to raise it on terms

acceptable to us or at all.

If additional funds are not available to us on acceptable terms, or at all, our business, financial condition, and results of operations could be adversely affected.

The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by (used in):

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(6,341) (1,496)

Net increase (decrease) in cash, cash equivalents, and restricted cash

Net increase in cash, cash equivalents, and restricted cash

$ 48,251 $ 311,674

Operating Activities

Net cash provided by operating activities was $35.5 million and $116.9 million for the three months ended March 31, 2022 and 2021, respectively.

Net cash provided by operating activities was $97.9 million and $139.6 million for the six months ended June 30, 2022 and 2021, respectively.

The decrease was primarily driven by timing of the receipt of payments from our customers and timing of payments to vendors.

Investing Activities

Net cash used in investing activities was $96.5 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively.

The increase in cash used by investing activities was primarily due to purchases of marketable securities of $89.5 million.

Net cash used in investing activities was $91.2 million and $1.4 million for the six months ended June 30, 2022 and 2021, respectively.

The increase in cash used in investing activities was primarily due to purchases of marketable securities of $89.5 million.

Financing Activities

Net cash provided by financing activities was $27.2 million and $206.4 million for the three months ended March 31, 2022 and 2021, respectively, each of which primarily consisted of proceeds from the exercise of common stock options.

Net cash provided by financing activities was $47.8 million and $174.9 million for the six months ended June 30, 2022 and 2021, respectively, each of which primarily consisted of proceeds from the exercise of common stock options offset by the principal payments on borrowings of $200.0 million made during the six months ended June 30, 2021.

Contractual Obligations and Commitments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis