What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-08 · 125 added, 117 removed, 302 unchanged (44% of the section changed)

19 unchanged sentences

We regularly evaluate partnerships and investment opportunities in complementary businesses, employee teams, technologies, and intellectual property rights in an effort to expand our product and service offerings.

For example, we have approved and entered into strategic investments pursuant to certain approved agreements (“Investment Agreements”) to purchase, or commit to purchase shares of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee,” and such purchases, and commitments to purchase, the “Investments”).

For example, we have approved and entered into strategic investments pursuant to certain approved agreements (“Investment Agreements”) to purchase shares of various entities, including special purpose acquisition companies and/or other privately-held or publicly-traded entities (each, an “Investee,” and such purchases, the “Investments”).

See further discussion in Note 4.

Investments and Fair Value Measurements, and Note 7.

Commitments and Contingencies—Investment Commitments .

Investments and Fair Value Measurements .

Our customers pay us to use the software platforms we have built.

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Many of our customer contracts contain termination for convenience provisions.

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 the three months ended September 30, 2022, we generated $477.9 million in revenue, reflecting a 22% growth rate from the three months ended September 30, 2021, when we generated $392.1 million in revenue.

For the nine months ended September 30, 2022, we generated $1.4 billion in revenue, reflecting a 26% growth rate from the nine months ended September 30, 2021, when we generated $1.1 billion in revenue.

In the three months ended September 30, 2022, we incurred losses from operations of $62.2 million, or generated adjusted income from operations of $81.3 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended September 30, 2021, we incurred losses from operations of $91.9 million, or generated adjusted income from operations of $116.1 million when excluding stock-based compensation and related employer payroll taxes.

months ended September 30, 2022, we incurred losses from operations of $143.4 million, or generated adjusted income from operations of $306.5 million when excluding stock-based compensation and related employer payroll taxes.

In the nine months ended September 30, 2021, our losses from operations were $352.1 million, or generated adjusted income from operations of $349.4 million when excluding stock-based compensation and related employer payroll taxes.

In the three months ended September 30, 2022, our gross profit was $370.3 million, reflecting a gross margin of 77%, or 80% when excluding stock-based compensation.

In the three months ended September 30, 2021, our gross profit was $305.3 million, reflecting a gross margin of 78%, or 82% when excluding stock-based compensation.

In the nine months ended September 30, 2022, our gross profit was $1.1 billion, reflecting a gross margin of 78%, or 81% when excluding stock-based compensation.

In the nine months ended September 30, 2021, our gross profit was $857.2 million, reflecting a gross margin of 77%, or 82% 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 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.

During the period ended September 30, 2022, we had 337 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended September 30, 2021, we had 203 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 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.

Our average revenue for the top twenty customers during the trailing twelve months ended September 30, 2022 was $47.7 million, which grew 15% from an average of $41.3 million in revenue from the top twenty customers during the trailing twelve months ended September 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 six months ended June 30, 2022, 55% of our revenue came from government agencies and 45% came from commercial customers.

In the nine months ended September 30, 2022, 56% of our revenue came from government customers and 44% 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.

In the nine months ended September 30, 2022, we generated 62% of our revenue from customers in the United States and the remaining 38% 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.

customers during the trailing twelve months ended September 30, 2022 was $1.1 billion, which grew 38% from the prior twelve-month period.

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

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Expansion of Access to Platforms

We have recently begun to expand access to our platforms to early- and growth-stage companies, including startups, as we continue our outreach efforts to an increasingly broad swath of the potential market.

We have expanded access to our platforms to early- and growth-stage companies, including startups, as we continue our outreach efforts to an increasingly broad swath of the potential market.

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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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.

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 impact of the Russian invasion of Ukraine, inflationary pressures, and foreign currency fluctuations.

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.

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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.

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.

However, our travel and office-related expenditures have increased, and may continue to increase moving forward.

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 continue to closely monitor 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 expect that 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.

Our current operations related to Ukraine are not material to our financial position or results of operations.

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.

Foreign Currency Exchange Rates

Our contracts with customers are primarily denominated in U.S.

As a result, the general strengthening of the U.S.

dollar relative to other major foreign currencies (primarily the Euro and British Pound Sterling) had an unfavorable impact on our revenues from certain non-U.S.

however, that impact for the three and nine months ended September 30, 2022 was not material to our financial position or results of operations.

Key Business Measure

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Contribution Margin

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,

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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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 and six months ended June 30, 2022 and 2021 (in thousands, except percentages):

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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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 and six months ended June 30, 2022 and 2021 (in thousands):

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

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 nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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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

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Interest Expense

Interest expense consists primarily of interest expense and commitment fees incurred under our credit facilities.

Interest expense consists primarily of interest expense and commitment fees incurred under our credit facility.

Other Income (Expense), Net

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Net loss (26) % (26) % (29) % (33) %

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

Comparison of the Three and Nine Months Ended September 30, 2022 and 2021

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount % 2022 2021 Amount %

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Total revenue $ 477,880 $ 392,146 $ 85,734 22 % $ 1,397,247 $ 1,109,022 $ 288,225 26 %

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.

Revenue increased by $85.7 million, or 22%, for the three months ended September 30, 2022 compared to the same period in 2021.

Revenue from government customers increased by $56.0 million, or 26%, for the three months ended September 30, 2022 compared to the same period in 2021, primarily from customers in the United States.

Revenue from U.S.

government customers was $208.9 million for the three months ended September 30, 2022 compared to $170.1 million for the same period in 2021.

Of the total increase in revenue from government customers, $48.7 million was from government customers existing as of December 31, 2021.

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

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.

Revenue from commercial customers increased by $29.7 million, or 17%, for the three months ended September 30, 2022 compared to the same period in 2021.

Of the increase, $26.1 million was from new customers as of December 31, 2021, of which $5.2 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 in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Revenue increased by $288.2 million, or 26%, for the nine months ended September 30, 2022 compared to the same period in 2021.

Revenue from government customers increased by $120.2 million, or 18%, for the nine months ended September 30, 2022 compared to the same period in 2021, primarily from customers in the United States.

Revenue from U.S.

government customers was $601.6 million for the nine months ended September 30, 2022 compared to $493.6 million for the same period in 2021.

Of the total increase in revenue from government customers, $106.7 million was from government customers existing as of December 31, 2021.

Revenue from commercial customers increased by $168.0 million, or 37%, for the nine months ended September 30, 2022 compared to the same period in 2021.

Of the increase, $103.7 million was from existing customers as of December 31, 2021, of which $53.6 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.

Investments and Fair Value Measurements 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 June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount % 2022 2021 Amount %

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Gross margin 77 % 78 % (1) % 78 % 77 % 1 %

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.

Cost of revenue for the three months ended September 30, 2022 increased by $20.8 million, or 24%, compared to the same period in 2021.

The increase was primarily due to increases of $12.6 million in field service representatives and other direct deployment costs mainly related to new projects, $5.3 million in third-party cloud hosting services driven by increased usage from customer growth and expansion, and $4.5 million in payroll and other payroll-related costs as a result of increased headcount attributable to our cost of revenue function.

These increases were partially offset by a decrease of $5.9 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.

For additional information, see the section titled Stock-Based Compensation below.

Our gross margin for the three months ended September 30, 2022 decreased from 78% for the same period in 2021 to 77% as a result of increased costs to support new deployments and company growth, including field service representatives and payroll costs, growing at a higher rate than revenue.

Cost of revenue for the nine months ended September 30, 2022 increased by $52.4 million, or 21%, compared to the same period in 2021.

The increase was primarily due to increases of $30.7 million in third-party cloud hosting services driven by increased usage from customer growth and expansion, $25.3 million in field service representatives and other direct deployment

costs mainly related to new projects, and $11.6 million in payroll and other payroll-related costs as a result of increased headcount attributable to our cost of revenue function.

These increases were partially offset by a decrease of $25.8 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.

For additional information, see the section titled Stock-Based Compensation below.

Our gross margin for the nine months ended September 30, 2022 increased from 77% 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.

Operating Expenses

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

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount % 2022 2021 Amount %

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Sales and Marketing

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.

Sales and marketing expenses increased by $29.5 million, or 19%, for the three months ended September 30, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $28.2 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function and $12.0 million in travel and office-related costs as employees increasingly return to offices.

These increases were partially offset by a decrease of $17.3 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.

For additional information, see the section titled Stock-Based Compensation below.

Sales and marketing expenses increased by $60.4 million, or 13%, for the nine months ended September 30, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $56.3 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function, $27.0 million in travel and office-related costs as employees increasingly return to offices, and $24.2 million in marketing and advertising expenses.

These increases were partially offset by a decrease of $60.0 million in stock-based compensation expense and related expenses.

For additional information, see the section titled Stock-Based Compensation below.

Research and Development

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.

Research and development expenses increased by $6.5 million, or 7%, for the three months ended September 30, 2022 compared to the same period in 2021.

The increase was primarily due to increases of $10.6 million in payroll and other payroll-related costs driven by increased headcount attributable to our research and development function;

and $6.2 million in third-party cloud hosting services driven by increased usage to support customer growth and expansion, other IT costs to support company growth, and office-related expenses primarily due to the increasing return of employees to offices.

These increases were partially offset by a decrease of $12.3 million in stock-based compensation expense and related expenses.

For additional information, see the section titled Stock-Based Compensation below.

Research and development expenses decreased by $25.7 million, or 8%, for the nine months ended September 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $60.2 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.

For additional information, see the section titled Stock-Based Compensation below.

This decrease was partially offset by increases of $17.0 million in payroll and other payroll-related costs driven by increased headcount attributable to our research and development function, $8.6 million in travel and office-related costs as employees increasingly return to offices, and $8.0 million in third-party cloud hosting services driven by increased usage to support customer growth and expansion, as well as other IT costs to support company growth.

General and Administrative

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.

General and administrative expenses decreased by $0.8 million, or 1%, for the three months ended September 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $29.0 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.

For additional information, see the section titled Stock-Based Compensation below.

This decrease was partially offset by increases of $14.8 million in travel and office-related costs as employees increasingly return to offices and $8.6 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 $7.6 million, or 2%, for the nine months ended September 30, 2022 compared to the same period in 2021.

The decrease was primarily due to a decrease of $85.6 million in stock-based compensation expense and related expenses.

For additional information, see the section titled Stock-Based Compensation below.

This decrease was partially offset by increases of $34.1 million in travel and office-related costs as employees increasingly return to offices, $21.9 million in professional service fees mainly related to legal and financial services, $13.4 million in payroll and other payroll-related costs driven by increased headcount attributable to our general and administrative functions, and $5.3 million in third-party cloud hosting services driven by increased usage and other IT costs to support company growth.

Stock-Based Compensation

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

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount % 2022 2021 Amount %

4 unchanged sentences

Total stock-based compensation expense $ 140,308 $ 184,835 $ (44,527) (24) % $ 435,400 $ 611,308 $ (175,908) (29) %

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.

Stock-based compensation expenses decreased by $44.5 million, or 24%, for the three months ended September 30, 2022 compared to the same period in 2021.

The decrease was primarily driven by 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 September 30, 2022 compared to the same period in 2021, partially offset by an increase related to awards granted after September 30, 2021.

Stock-based compensation expenses decreased by $175.9 million, or 29%, for the nine months ended September 30, 2022 compared to the same period in 2021.

The decrease was primarily driven by 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 nine months ended September 30, 2022 compared to the same period in 2021, partially offset by an increase related to awards granted after September 30, 2021.

Interest Income

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount 2022 2021 Amount

Interest income $ 5,540 $ 379 $ 5,161 $ 7,559 $ 1,127 $ 6,432

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 income increased by $5.2 million for the three months ended September 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 income increased by $6.4 million for the nine months ended September 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 June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount 2022 2021 Amount

Interest expense $ (1,082) $ (609) $ (473) $ (2,346) $ (3,039) $ 693

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.

Interest expense increased by $0.5 million for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to amortization of upfront debt issuance costs.

Interest expense decreased by $0.7 million for the nine months ended September 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 June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount 2022 2021 Amount

Other income (expense), net $ (65,046) $ (8,528) $ (56,518) $ (260,714) $ (11,297) $ (249,417)

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.

Other income (expense), net changed by $56.5 million for the three months ended September 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 $249.4 million for the nine months ended September 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

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2022 2021 Amount 2022 2021 Amount

Provision for (benefit from) income taxes $ 1,096 $ 1,438 $ (342) $ 5,707 $ (1,121) $ 6,828

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.

Provision for income taxes decreased by $0.3 million for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to the absence in the current period of 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.

Provision for income taxes increased by $6.8 million for the nine months ended September 30, 2022 compared to a benefit from income taxes the same period in 2021 primarily due to the absence in the current period of the revaluation of our U.K.

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

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Liquidity and Capital Resources

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.

We generated positive cash flow from operations for the nine months ended September 30, 2022.

We had $2.4 billion in cash and cash equivalents available as of September 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 and delayed draw term loan (“DDTL”) facility, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months.

However, any projections of future cash needs and cash flows are subject to substantial uncertainty.

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 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.

We have generated significant losses from our operations as reflected in our condensed consolidated balance sheets and we expect cash flow from operations may fluctuate between positive and negative for the foreseeable future.

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

As of September 30, 2022, our accumulated deficit balance was $5.9 billion, and our principal sources of liquidity were $2.4 billion of cash and cash equivalents.

As of September 30, 2022, we had no outstanding debt balances and additional available and undrawn revolving and DDTL commitments of $950.0 million under our credit agreement.

During July 2022, we amended our credit agreement, which provided for, among other things, a new incremental DDTL facility in an aggregate principal amount of up to $450.0 million, upon the terms and conditions set forth in the credit agreement.

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

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For more information, see Note 6.

Debt and Note 13.

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

Debt 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 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.

Further, 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):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating Activities

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.

Net cash provided by operating activities was $145.0 million and $240.4 million for the nine months ended September 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 $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.

Net cash used in investing activities was $118.5 million and $216.0 million for the nine months ended September 30, 2022 and 2021, respectively.

The decrease in cash used in investing activities was primarily a result of reducing our purchases of alternative investments and marketable securities, as well as selling or redeeming certain marketable securities.

Financing Activities

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.

Net cash provided by financing activities was $71.8 million and $274.3 million for the nine months ended September 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 nine months ended September 30, 2021.

Contractual Obligations and Commitments

Our contractual obligations and commitments primarily consist of operating lease commitments for our facilities, non-cancelable purchase commitments related to third-party cloud hosting services, and commitments to invest in shares of various entities, certain of which are contingent upon certain business combinations.

Our contractual obligations and commitments primarily consist of operating lease commitments for our facilities and non-cancelable purchase commitments related to third-party cloud hosting services.

For additional information, refer to Note 7.

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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