What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-09 · 138 added, 90 removed, 312 unchanged (42% of the section changed)

25 unchanged sentences

Many of our customer contracts contain termination for convenience provisions.

For the three months ended March 31, 2023, we generated $525.2 million in revenue, reflecting an 18% growth rate from the three months ended March 31, 2022, when we generated $446.4 million in revenue.

In the three months ended March 31, 2023, we generated income from operations of $4.1 million, or adjusted income from operations of $125.1 million when excluding stock-based compensation and related employer payroll taxes.

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, 2023, our gross profit was $417.5 million, reflecting a gross margin of 80%, or 81% when excluding stock-based compensation.

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.

For the three months ended June 30, 2023, we generated $533.3 million in revenue, reflecting a 13% growth rate from the three months ended June 30, 2022 when we generated $473.0 million in revenue.

For the six months ended June 30, 2023, we generated $1.1 billion in revenue, reflecting a 15% growth rate from the six months ended June 30, 2022 when we generated $919.4 million in revenue.

In the three months ended June 30, 2023, we generated income from operations of $10.1 million, or adjusted income from operations of $135.0 million when excluding stock-based compensation and related employer payroll taxes.

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 six months ended June 30,

2023, we generated income from operations of $14.2 million, or adjusted income from operations of $260.1 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 three months ended June 30, 2023, our gross profit was $426.4 million, reflecting a gross margin of 80%, or 81% when excluding stock-based compensation.

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 six months ended June 30, 2023, our gross profit was $844.0 million, reflecting a gross margin of 80%, or 81% 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.

For more information about our adjusted income 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, 2023, we had 391 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended March 31, 2022, we had 277 customers.

During the period ended June 30, 2023, we had 421 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended June 30, 2022, we had 304 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 and partnerships with some of the world’s leading government institutions and companies.

Our average revenue for the top twenty customers during the trailing twelve months ended March 31, 2023 was $50.9 million, which grew 14% from an average of $44.6 million in revenue from the top twenty customers during the trailing twelve months ended March 31, 2022, demonstrating our expanding relationships with existing customers.

Our average revenue for the top twenty customers during the trailing twelve months ended June 30, 2023 was $52.6 million, which grew 15% from an average of $45.8 million in revenue from the top twenty customers during the trailing twelve months ended June 30, 2022, 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.

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We manage customers at the account level, not by industry or sector, so that we can optimize on the specific growth opportunities for each customer.

In the three months ended March 31, 2023, 55% of our revenue came from government customers and 45% came from commercial customers.

In the six months ended June 30, 2023, 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 three months ended March 31, 2023, we generated 64% of our revenue from customers in the United States and the remaining 36% from non-U.S.

In the six months ended June 30, 2023, we generated 63% of our revenue from customers in the United States and the remaining 37% from non-U.S.

Revenue from our U.S.

customers during the trailing twelve months ended March 31, 2023 was $1.2 billion, which grew 28% from the prior twelve-month period.

customers during the trailing twelve months ended June 30, 2023 was $1.3 billion, which grew 21% from the prior twelve-month period.

We expect that U.S.

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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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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 impact of the ongoing Russia-Ukraine conflict, rising inflation and interest rates, monetary policy changes, financial services sector instability, and foreign currency fluctuations.

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 COVID-19 pandemic, the impact of the ongoing Russia-Ukraine conflict, rising inflation and interest rates, monetary policy changes, financial services sector instability, and foreign currency fluctuations.

Additionally, these macroeconomic impacts have generally disrupted the operations of our customers and prospective customers.

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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.

In 2023, we announced partnerships with Ukraine to support its defense and reconstruction efforts and investigations of potential war crimes, among other activities.

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

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dollar relative to other major foreign currencies (primarily the Euro and British pound sterling (“GBP”)) has had and could in the future have an unfavorable impact on our revenues from certain non-U.S.

however, that impact for the three months ended March 31, 2023 was not material to our financial position or results of operations.

however, that impact for the six months ended June 30, 2023 was not material to our financial position or results of operations.

Additionally, certain of our U.S.

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Customer Impacts

Current macroeconomic conditions may also adversely impact our customers’ business, particularly our early- and growth-stage customers.

Current macroeconomic conditions have impacted, and may continue to adversely impact, our customers’ businesses, particularly our early- and growth-stage customers.

Relationships with early- or growth-stage customers carry inherent risks because, among other things, such customers may be unable to generate sufficient revenues or profitability or to access any necessary financing or funding in a timely manner or on favorable terms to them in the current macroeconomic environment, which has impacted, and may continue to impact, our expected revenue and collections.

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Contribution Margin

The following table provides a reconciliation of contribution margin for the three months ended March 31, 2023 and 2022 (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, 2023 and 2022 (in thousands, except percentages):

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

2023 2022 2023 2022

Income (loss) from operations $ 10,074 $ (41,745) $ 14,189 $ (81,184)

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, 2023 and 2022 (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, 2023 and 2022 (in thousands, except percentages):

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

2023 2022 2023 2022

Gross profit $ 426,418 $ 370,786 $ 843,959 $ 722,740

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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 months ended March 31, 2023 and 2022 (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, 2023 and 2022 (in thousands):

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

2023 2022 2023 2022

Income (loss) from operations $ 10,074 $ (41,745) $ 14,189 $ (81,184)

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Sales and marketing costs are generally expensed as incurred.

We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, sales force, and enhancing our brand awareness.

We expect that sales and marketing expenses will increase in absolute dollars as we continue to invest in our potential and current customers, in growing our business, in our sales force, and in enhancing our brand awareness.

Research and Development

Our research and development efforts are aimed at continuing to develop and refine our platforms, including adding new platforms, features, and modules, increasing their functionality, and enhancing the usability of our platforms.

Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms, internal use third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead.

Research and development costs primarily include salaries, stock-based compensation expense, and benefits for personnel involved in performing the activities to develop and refine our platforms, internal use of third-party cloud hosting services and other IT-related costs, travel costs, and allocated overhead.

Research and development costs are expensed as incurred.

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Other Income (Expense), Net

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.

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

Provision for Income Taxes

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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,

2023 2022 2023 2022

Revenue $ 533,317 $ 473,010 $ 1,058,503 $ 919,367

Cost of revenue 106,899 102,224 214,544 196,627

107,645 94,403

Gross profit 426,418 370,786 843,959 722,740

1 unchanged sentence

Sales and marketing 184,163 168,875 371,256 329,360

187,093 160,485

Research and development 99,533 88,171 189,633 176,772

90,100 88,601

General and administrative 132,648 155,485 268,881 297,792

136,233 142,307

Total operating expenses 416,344 412,531 829,770 803,924

6 unchanged sentences

Net income (loss) 27,872 (179,329) 47,023 (280,708)

Net income attributable to noncontrolling interests 2,349 —

Net income (loss) attributable to noncontrolling interests (255) — 2,094 —

Net income (loss) attributable to common stockholders $ 28,127 $ (179,329) $ 44,929 $ (280,708)

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,

2023 2022 2023 2022

Revenue 100 % 100 % 100 % 100 %

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Net income (loss) 5 (38) 4 (31)

Net income attributable to noncontrolling interests 1 —

Net income (loss) attributable to noncontrolling interests — — — —

Net income (loss) attributable to common stockholders 5 % (38) % 4 % (31) %

Comparison of the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31, Change

2023 2022 Amount %

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount % 2023 2022 Amount %

Government $ 301,505 $ 262,998 $ 38,507 15 % $ 590,575 $ 504,788 $ 85,787 17 %

1 unchanged sentence

Total revenue $ 533,317 $ 473,010 $ 60,307 13 % $ 1,058,503 $ 919,367 $ 139,136 15 %

Revenue increased by $78.8 million, or 18%, for the three months ended March 31, 2023 compared to the same period in 2022.

Revenue from government customers increased by $47.3 million, or 20%, for the three months ended March 31, 2023 compared to the same period in 2022, primarily from customers in the United States.

Revenue increased by $60.3 million, or 13%, for the three months ended June 30, 2023 compared to the same period in 2022.

Revenue from government customers increased by $38.5 million, or 15%, for the three months ended June 30, 2023 compared to the same period in 2022.

Of the increase, $31.8 million was from government customers existing as of December 31, 2022.

Revenue from U.S.

government customers was $229.8 million for the three months ended March 31, 2023 compared to $188.1 million for the same period in 2022.

government customers was $225.0 million for the three months ended June 30, 2023 compared to $204.6 million for the same period in 2022.

Revenue from commercial customers increased by $21.8 million, or 10%, for the three months ended June 30, 2023 compared to the same period in 2022.

Of the increase, $8.8 million was from existing customers as of December 31, 2022, which includes an offsetting decrease of $12.0 million of revenue from Strategic Commercial Contracts.

Revenue increased by $139.1 million, or 15%, for the six months ended June 30, 2023 compared to the same period in 2022.

Revenue from government customers increased by $85.8 million, or 17%, for the six months ended June 30, 2023 compared to the same period in 2022, primarily from customers in the United States.

Of the increase, $78.0 million was from government customers existing as of December 31, 2022.

Revenue from commercial customers increased by $31.5 million, or 15%, for the three months ended March 31, 2023 compared to the same period in 2022.

Revenue from U.S.

government customers was $454.8 million for the six months ended June 30, 2023 compared to $392.7 million for the same period in 2022.

Revenue from commercial customers increased by $53.3 million, or 13%, for the six months ended June 30, 2023 compared to the same period in 2022.

Of the increase, $31.1 million was from existing customers as of December 31, 2022, which includes an offsetting decrease of $17.8 million of revenue from Strategic Commercial Contracts.

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.

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

For additional information on Strategic Commercial Contracts, see Note 4.

Investments and Fair Value Measurements in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Cost of Revenue and Gross Profit

Three Months Ended March 31, Change

2023 2022 Amount %

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount % 2023 2022 Amount %

Cost of revenue $ 106,899 $ 102,224 $ 4,675 5 % $ 214,544 $ 196,627 $ 17,917 9 %

1 unchanged sentence

Gross margin 80 % 78 % 2 % 80 % 79 % 1 %

Cost of revenue for the three months ended March 31, 2023 increased by $13.2 million, or 14%, compared to the same period in 2022.

The increase was primarily due to increases of $4.4 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our cost of revenue function, and $4.7 million in hardware and $3.5 million for field service representatives mainly related to new projects.

Cost of revenue for the three months ended June 30, 2023 increased by $4.7 million, or 5%, compared to the same period in 2022.

The increase was primarily due to increases of $4.7 million in field service representatives mainly related to new projects and $2.5 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 $2.7 million in stock-based compensation expense and related expenses.

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

Our gross margin for the three months ended March 31, 2023 increased from 79% for the same period in 2022 to 80% as a result of revenue growth outpacing costs of revenue.

The primary cause of this growth rate variation was the decrease in stock-based compensation expense and related expenses in cost of revenue relative to total expense growth as compared to the prior year.

Our gross margin for the three months ended June 30, 2023 increased from 78% for the same period in 2022 to 80% as a result of revenue growth outpacing costs of revenue.

The primary cause of this growth rate variation was the decrease in stock-based compensation expense in costs of revenue relative to total expense growth as compared to the prior year.

Cost of revenue for the six months ended June 30, 2023 increased by $17.9 million, or 9%, compared to the same period in 2022.

The increase was primarily due to increases of $8.2 million in field service representatives mainly related to new projects, $6.9 million in payroll and other payroll-related costs driven by increased headcount attributable to our cost of revenue function, and $6.7 million in hardware and other direct costs.

These increases were partially offset by a decrease of $5.4 million in stock-based compensation expense and related expenses.

Our gross margin for the six months ended June 30, 2023 increased from 79% for the same period in 2022 to 80% as a result of revenue growth outpacing costs of revenue.

The primary cause of this growth rate variation was the decrease in stock-based compensation expense in costs of revenue relative to total expense growth as compared to the prior year.

For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.

Operating Expenses

Three Months Ended March 31, Change

2023 2022 Amount %

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount % 2023 2022 Amount %

Sales and marketing $ 184,163 $ 168,875 $ 15,288 9 % $ 371,256 $ 329,360 $ 41,896 13 %

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Sales and Marketing

Sales and marketing expenses increased by $26.6 million, or 17%, for the three months ended March 31, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $26.8 million in payroll and other payroll-related costs driven by an increase in headcount attributable to our sales and marketing function and $10.5 million in travel and office-related

Sales and marketing expenses increased by $15.3 million, or 9%, for the three months ended June 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $21.5 million in payroll and other payroll-related costs and $7.0 million in travel and office-related costs driven by increased headcount attributable to our sales and marketing function.

These increases were partially offset by decreases of $7.7 million in stock-based compensation expense and related expenses and $7.0 million in marketing costs.

Sales and marketing expenses increased by $41.9 million, or 13%, for the six months ended June 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $48.6 million in payroll and other payroll-related costs and $17.6 million in travel and office-related costs driven by increased headcount attributable to our sales and marketing function.

These increases were partially offset by decreases of $17.8 million in stock-based compensation expense and related expenses and $10.5 million in marketing costs.

For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.

Research and Development

Research and development expenses increased by $1.5 million, or 2%, for the three months ended March 31, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $4.2 million in third-party cloud hosting services, other IT costs, and office-related expenses and $4.1 million in payroll and other payroll-related costs primarily driven by an increase in headcount attributable to our research and development function.

This increase was partially offset by a decrease of $7.5 million in stock-based compensation expense and related expenses.

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

Research and development expenses increased by $11.4 million, or 13%, for the three months ended June 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $6.9 million in payroll and other payroll-related costs driven by increased headcount attributable to our research and development function and $5.0 million in third-party cloud hosting services, other IT costs, and office-related expenses.

Research and development expenses increased by $12.9 million, or 7%, for the six months ended June 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $9.4 million in payroll and other payroll-related costs and $5.2 million in office-related costs driven by increased headcount attributable to our research and development function, as well as $4.6 million in third-party cloud hosting services and other IT costs.

These increases were partially offset by a decrease of $7.2 million in stock-based compensation expense and related expenses.

For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.

General and Administrative

General and administrative expenses decreased by $6.1 million, or 4%, for the three months ended March 31, 2023 compared to the same period in 2022.

The decrease was primarily due to a decrease of $15.6 million in stock-based compensation expense and related expenses.

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

The decrease was partially offset by an increase of $8.6 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 $22.8 million, or 15%, for the three months ended June 30, 2023 compared to the same period in 2022.

The decrease was primarily due to decreases of $14.4 million in stock-based compensation expense and related expenses and $10.6 million in professional service fees.

These decreases were partially offset by an increase of $5.4 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 $28.9 million, or 10%, for the six months ended June 30, 2023 compared to the same period in 2022.

The decrease was primarily due to decreases of $30.0 million in stock-based compensation expense and related expenses and $16.1 million in professional service fees.

These decreases were partially offset by an increase of $13.9 million in payroll and other payroll-related costs driven by increased headcount attributable to our general and administrative functions.

For additional information related to stock-based compensation expense, see the section titled “Stock-Based Compensation” below.

Stock-Based Compensation

Three Months Ended March 31, Change

2023 2022 Amount %

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount % 2023 2022 Amount %

Cost of revenue $ 8,004 $ 11,211 $ (3,207) (29) % $ 17,181 $ 22,888 $ (5,707) (25) %

3 unchanged sentences

Total stock-based compensation expense $ 114,201 $ 145,769 $ (31,568) (22) % $ 228,915 $ 295,092 $ (66,177) (22) %

Stock-based compensation expenses decreased by $34.6 million, or 23%, for the three months ended March 31, 2023 compared to the same period in 2022.

The decrease was driven by lower expense under the accelerated attribution method for restricted stock units (“RSUs”) granted prior to September 30, 2020, the date of our direct listing, during the three months ended March 31, 2023 compared to the same period in 2022, as well as lower expense due to options becoming fully vested and the cancellation of options and RSUs.

Stock-based compensation expenses decreased by $31.6 million and $66.2 million, or 22%, for the three and six months ended June 30, 2023 compared to the same periods in 2022.

The decreases were 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 and six months ended June 30, 2023 compared to the same periods in 2022, as well as lower expense due to options becoming fully vested and the cancellation of options and RSUs.

Interest Income

Three Months Ended March 31, Change

2023 2022 Amount

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount 2023 2022 Amount

Interest income $ 30,310 $ 1,472 $ 28,838 $ 51,163 $ 2,019 $ 49,144

Interest income increased by $20.3 million for the three months ended March 31, 2023 compared to the same period in 2022 primarily due to an increase in U.S.

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

and new investments in U.S.

Interest income increased by $28.8 million and $49.1 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to higher U.S.

interest rates and an increase in our interest-bearing cash, cash equivalents, and short-term U.S.

treasury securities.

Interest Expense

Three Months Ended March 31, Change

2023 2022 Amount

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount 2023 2022 Amount

Interest expense $ (1,317) $ (670) $ (647) $ (2,592) $ (1,264) $ (1,328)

Interest expense increased by $0.7 million for the three months ended March 31, 2023 compared to the same period in 2022 primarily due to the amortization of upfront debt issuance costs.

Interest expense increased by $0.6 million and $1.3 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to the amortization of upfront debt issuance costs.

Other Income (Expense), Net

Three Months Ended March 31, Change

2023 2022 Amount

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount 2023 2022 Amount

Other income (expense), net $ (9,024) $ (135,798) $ 126,774 $ (11,885) $ (195,668) $ 183,783

Other income (expense), net changed by $57.0 million for the three months ended March 31, 2023 compared to the same period in 2022 primarily due to net decrease in losses from our shares held in publicly-traded equity securities.

Other income (expense), net changed by $126.8 million and $183.8 million for the three and six months ended June 30, 2023, respectively, compared to the same periods in 2022 primarily due to the net decrease in losses from our shares held in equity securities.

Provision for Income Taxes

Three Months Ended March 31, Change

2023 2022 Amount

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

2023 2022 Amount 2023 2022 Amount

Provision for income taxes $ 2,171 $ 2,588 $ (417) $ 3,852 $ 4,611 $ (759)

There was no material change in the provision for income taxes for the three months ended March 31, 2023 compared to the same period in 2022.

There was no material change in the provision for income taxes for the three and six months ended June 30, 2023 compared to the same periods in 2022.

Liquidity and Capital Resources

We generated positive cash flow from operations for the three months ended March 31, 2023.

We generated positive cash flow from operations for the six months ended June 30, 2023.

We had cash and cash equivalents and short-term U.S.

treasury securities totaling $2.9 billion available as of March 31, 2023.

treasury securities totaling $3.1 billion available as of June 30, 2023.

We believe that cash flows generated from operations, cash, cash equivalents, marketable securities, available funds, and access to financing sources, including our credit 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.

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

We have historically generated significant losses from our operations as reflected in our condensed consolidated balance sheets and we expect cash flows from operations may fluctuate 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 March 31, 2023, our accumulated deficit balance was $5.8 billion, and our principal sources of liquidity were cash and cash equivalents and short-term U.S.

As of June 30, 2023, our accumulated deficit balance was $5.8 billion, and our principal sources of liquidity were cash and cash equivalents and short-term U.S.

treasury securities totaling $3.1 billion.

As of March 31, 2023, we had no outstanding debt balances and additional available and undrawn revolving and delayed draw term loan (“DDTL”) commitments of $950.0 million under our credit facility.

As of June 30, 2023, we had no outstanding debt balances and additional available and undrawn revolving and delayed draw term loan (“DDTL”) commitments of $950 million under our credit facility.

The DDTL commitment expired undrawn as of

July 1, 2023.

For more information, see Note 6.

6 unchanged sentences

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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Effect of foreign exchange on cash, cash equivalents, and restricted cash

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

(1,855) (6,341)

Net increase in cash, cash equivalents, and restricted cash

$ (1,553,310) $ 48,251

Operating Activities

Net cash provided by operating activities was $187.4 million and $35.5 million for the three months ended March 31, 2023 and 2022, respectively.

Net cash provided by operating activities was $277.6 million and $97.9 million for the six months ended June 30, 2023 and 2022, respectively.

The increase 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 $1.6 billion and $96.5 million for the three months ended March 31, 2023 and 2022, respectively.

The increase in cash used by investing activities was primarily due to purchases of marketable securities, primarily comprised of U.S.

Net cash used in investing activities was $1.9 billion and $91.2 million for the six months ended June 30, 2023 and 2022, respectively.

The increase in cash used in investing activities was primarily due to purchases of marketable securities, primarily comprised of U.S.

treasury securities, offset by proceeds from sales and redemptions of marketable securities.

Financing Activities

Net cash provided by financing activities was $26.0 million and $27.2 million for the three months ended March 31, 2023 and 2022, respectively, each of which primarily consisted of proceeds from the exercise of common stock options.

Net cash provided by financing activities was $116.7 million and $47.8 million for the six months ended June 30, 2023 and 2022, respectively, each of which primarily consisted of proceeds from the exercise of common stock options.

Contractual Obligations and Commitments

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Actual results could differ significantly from our estimates.

To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

To the extent that

there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates discussed in the Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 21, 2023, except as described in Note 2.

4 unchanged sentences

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