What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-08 · 115 added, 102 removed, 348 unchanged (38% of the section changed)

14 unchanged sentences

Apollo allows our customers to run their software in virtually any environment.

We are in the process of developing and releasing components of our newest offering, the Artificial Intelligence Platform (“AIP”).

We have deployed our newest offering, the Artificial Intelligence Platform (“AIP”), to select customers, and we are continuing to onboard additional customers to AIP while we develop and release new features and components.

AIP is designed for customers across the commercial and government sectors, enabling them to derive value from recent breakthroughs in artificial intelligence via the combination of our existing software platforms with large language models (“LLMs”).

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Many of our customer contracts contain termination for convenience provisions.

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 the three months ended September 30, 2023, we generated $558.2 million in revenue, reflecting a 17% growth rate from the three months ended September 30, 2022, when we generated $477.9 million in revenue.

For the nine months ended September 30, 2023, we generated $1.6 billion in revenue, reflecting a 16% growth rate from the nine months ended September 30, 2022, when we generated $1.4 billion in revenue.

In the three months ended September 30, 2023, we generated income from operations of $40.0 million, or adjusted income from operations of $163.3 million when excluding stock-based compensation and related employer payroll taxes.

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 nine months ended

September 30, 2023, we generated income from operations of $54.2 million, or adjusted income from operations of $423.4 million when excluding stock-based compensation and related employer payroll taxes.

In the nine 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 three months ended September 30, 2023, our gross profit was $450.2 million, reflecting a gross margin of 81%, or 82% when excluding stock-based compensation.

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 nine months ended September 30, 2023, our gross profit was $1.3 billion, reflecting a gross margin of 80%, 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.

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

and gross profit and gross margin, when excluding stock-based compensation;

and gross profit and gross margin, excluding stock-based compensation;

as well as reconciliations from income (loss) from operations and gross profit, see the section titled “Non-GAAP Reconciliations” below .

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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, 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.

During the period ended September 30, 2023, we had 453 customers, including companies in various commercial sectors and government agencies around the world.

During the period ended September 30, 2022, we had 337 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 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.

Our average revenue for the top twenty customers during the trailing twelve months ended September 30, 2023 was $53.7 million, which grew 13% from an average of $47.7 million in revenue from the top twenty customers during the trailing twelve months ended September 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 six months ended June 30, 2023, 56% of our revenue came from government customers and 44% came from commercial customers.

In the nine months ended September 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 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.

In the nine months ended September 30, 2023, 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, 2023 was $1.3 billion, which grew 21% from the prior twelve-month period.

customers during the trailing twelve months ended September 30, 2023 was $1.3 billion, which grew 18% from the prior twelve-month period.

We expect that U.S.

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Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty which may adversely affect our results of operations or financial position.

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 (“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 six months ended June 30, 2023 was not material to our financial position or results of operations.

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

However, the general strengthening of the U.S.

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 and expenses from certain non-U.S.

customers or vendors whose contracts are denominated in currencies other than U.S.

For the nine months ended September 30, 2023, that impact was not material to our financial position or results of operations.

Additionally, certain of our U.S.

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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 their 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 and six months ended June 30, 2023 and 2022 (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, 2023 and 2022 (in thousands, except percentages):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 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 and six months ended June 30, 2023 and 2022 (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, 2023 and 2022 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Our sales and marketing efforts span all stages of our sales cycle, including personnel involved with sales functions, and executing pilots at new or existing customers.

Sales and marketing costs primarily include salaries, stock-based compensation expense, and benefits for our sales force and personnel involved in sales functions, executing on pilots and customer growth activities;

as well as third-party cloud hosting services for our pilots, marketing and sales event-related costs, travel costs, and allocated overhead.

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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,

2023 2022 2023 2022

14 unchanged sentences

Net income (loss) 73,439 (123,875) 120,462 (404,583)

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

Net income attributable to noncontrolling interests 1,934 — 4,028 —

Net income (loss) attributable to common stockholders $ 71,505 $ (123,875) $ 116,434 $ (404,583)

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,

2023 2022 2023 2022

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Net income (loss) 13 (26) 7 (29)

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

Net income attributable to noncontrolling interests — — — —

Net income (loss) attributable to common stockholders 13 % (26) % 7 % (29) %

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

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount % 2023 2022 Amount %

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Total revenue $ 558,159 $ 477,880 $ 80,279 17 % $ 1,616,662 $ 1,397,247 $ 219,415 16 %

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.

Revenue increased by $80.3 million, or 17%, for the three months ended September 30, 2023 compared to the same period in 2022.

Revenue from government customers increased by $33.8 million, or 12%, for the three months ended September 30, 2023 compared to the same period in 2022, primarily from customers in the United States.

Of the increase, $26.9 million was from government customers existing as of December 31, 2022.

Revenue from U.S.

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.

government customers was $229.2 million for the three months ended September 30, 2023 compared to $208.9 million for the same period in 2022.

Revenue from commercial customers increased by $46.5 million, or 23%, for the three months ended September 30, 2023 compared to the same period in 2022.

Of the increase, $16.4 million was from customers existing as of December 31, 2022, which included an offsetting decrease of $13.5 million of revenue from Strategic Commercial Contracts.

Revenue increased by $219.4 million, or 16%, for the nine months ended September 30, 2023 compared to the same period in 2022.

Revenue from government customers increased by $119.6 million, or 15%, for the nine months ended September 30, 2023 compared to the same period in 2022, primarily from customers in the United States.

Of the increase, $107.0 million was from government customers existing as of December 31, 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.

government customers was $684.0 million for the nine months ended September 30, 2023 compared to $601.6 million for the same period in 2022.

Revenue from commercial customers increased by $99.9 million, or 16%, for the nine months ended September 30, 2023 compared to the same period in 2022.

Of the increase, $49.4 million was from customers existing as of December 31, 2022, which included an offsetting decrease of $31.2 million of revenue from Strategic Commercial Contracts.

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

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount % 2023 2022 Amount %

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Gross margin 81 % 77 % 4 % 80 % 78 % 2 %

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.

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.

Cost of revenue for the three months ended September 30, 2023 increased by $0.3 million compared to the same period in 2022.

The increase was primarily due to increases of $4.5 million in third-party cloud hosting services and $3.1 million in payroll and other payroll-related costs.

These increases were partially offset by decreases of $4.3 million in field service representatives, hardware, and other direct costs, as well as $1.8 million in stock-based compensation expense and related expenses.

Our gross margin for the three months ended September 30, 2023 increased from 77% for the same period in 2022 to 81% 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 timing of other direct costs in costs of revenue relative to total expense growth as compared to the prior year.

Cost of revenue for the nine months ended September 30, 2023 increased by $18.2 million, or 6%, 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, $5.6 million in hardware costs, $4.7 million in third-party cloud hosting services costs, and $4.4 million in field service representatives.

These increases were partially offset by a decrease of $7.2 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.

Our gross margin for the nine months ended September 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.

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount % 2023 2022 Amount %

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Sales and Marketing

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.

Sales and marketing expenses decreased by $6.5 million, or 4%, for the three months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily due to decreases of $7.2 million in stock-based compensation expense and related expenses and $4.3 million in marketing costs.

These decreases were partially offset by an increase of $6.5 million in payroll and other payroll-related costs driven by increased headcount attributable to our sales and marketing function.

Sales and marketing expenses increased by $35.4 million, or 7%, for the nine months ended September 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $51.2 million in payroll and other payroll-related costs and $17.2 million in travel and office-related costs driven by increased headcount attributable to our sales and marketing function.

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Research and Development

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.

Research and development expenses increased by $4.8 million, or 5%, for the three months ended September 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $3.5 million in third-party cloud hosting services and other IT costs and $2.5 million in payroll and other payroll-related costs driven by increased headcount attributable to our research and development function.

These increases were partially offset by a decrease of $1.9 million in stock-based compensation expense and related expenses.

Research and development expenses increased by $17.7 million, or 6%, for the nine months ended September 30, 2023 compared to the same period in 2022.

The increase was primarily due to increases of $11.6 million in payroll and other payroll-related costs driven by increased headcount attributable to our research and development function, $8.7 million in third-party cloud hosting services and other IT costs, and $5.3 million in office-related costs.

These increases were partially offset by a decrease of $9.1 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 $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.

General and administrative expenses decreased by $20.5 million, or 14%, for the three months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily due to decreases of $9.3 million in stock-based compensation expense and related expenses and $8.2 million in travel-related costs.

General and administrative expenses decreased by $49.4 million, or 11%, for the nine months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily due to decreases of $39.3 million in stock-based compensation expense and related expenses, $24.6 million in professional service fees, and $7.7 million in travel-related costs.

These decreases were partially offset by an increase of $15.4 million in payroll and other payroll-related costs.

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

1 unchanged sentence

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount % 2023 2022 Amount %

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Total stock-based compensation expense $ 114,380 $ 140,308 $ (25,928) (18) % $ 343,295 $ 435,400 $ (92,105) (21) %

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.

Stock-based compensation expenses decreased by $25.9 million and $92.1 million, or 18% and 21%, for the three and nine months ended September 30, 2023, respectively, 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 nine months ended September 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

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount 2023 2022 Amount

Interest income $ 36,864 $ 5,540 $ 31,324 $ 88,027 $ 7,559 $ 80,468

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 income increased by $31.3 million and $80.5 million for the three and nine months ended September 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.

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Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount 2023 2022 Amount

Interest expense $ (742) $ (1,082) $ 340 $ (3,334) $ (2,346) $ (988)

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.

There was no material change in interest expense for the three and nine months ended September 30, 2023 compared to the same periods in 2022.

Other Income (Expense), Net

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount 2023 2022 Amount

Other income (expense), net $ 3,864 $ (65,046) $ 68,910 $ (8,021) $ (260,714) $ 252,693

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.

Other income (expense), net changed by $68.9 million and $252.7 million for the three and nine months ended September 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

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

2023 2022 Amount 2023 2022 Amount

Provision for income taxes $ 6,530 $ 1,096 $ 5,434 $ 10,382 $ 5,707 $ 4,675

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.

The provision for income taxes increased by $5.4 million and $4.7 million for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022 primarily related to higher foreign income taxes as the result of higher foreign taxable income and higher withholding taxes in the current year.

Liquidity and Capital Resources

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

We generated positive cash flow from operations for the nine months ended September 30, 2023.

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

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

treasury securities totaling $3.3 billion available as of September 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.

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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 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.

As of September 30, 2023, our accumulated deficit balance was $5.7 billion, and our principal sources of liquidity were cash and cash equivalents and short-term U.S.

treasury securities totaling $3.3 billion.

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.

As of September 30, 2023, we had no outstanding debt balances and available and undrawn revolving commitments of $500.0 million under our credit facility.

For more information, see Note 6.

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Further, we may enter into future arrangements to acquire or invest in businesses, products, services, strategic partnerships, and technologies;

additionally, we may repurchase shares of our Class A common stock from time to time under our Share Repurchase Program.

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

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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.

For additional information on our Share

Repurchase Program, see Note 8.

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

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 $277.6 million and $97.9 million for the six months ended June 30, 2023 and 2022, respectively.

Net cash provided by operating activities was $411.0 million and $145.0 million for the nine months ended September 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 $1.9 billion and $91.2 million for the six months ended June 30, 2023 and 2022, respectively.

Net cash used in investing activities was $2.1 billion and $118.5 million for the nine months ended September 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.

1 unchanged sentence

Financing Activities

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.

Net cash provided by financing activities was $167.6 million and $71.8 million for the nine months ended September 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