What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-05 · 266 added, 382 removed, 392 unchanged (62% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

1 unchanged sentence

Short-term investments 101,996 138,839

Accounts receivable, net of allowance for doubtful accounts of $ 3,203 and $ 1,829 at September 30, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 2,869 and $ 3,251 at March 31, 2021 and December 31, 2020, respectively

76,714 111,599

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Total assets $ 1,222,693 $ 913,122

Liabilities and Stockholders’ Equity

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities:

10 unchanged sentences

Total liabilities 1,303,918 841,586

Stockholders’ equity:

Stockholders’ equity (deficit):

Preferred stock, $ 0.01 par value per share;

10,000,000 shares authorized at September 30, 2020 and December 31, 2019;

0 shares issued at September 30, 2020 and December 31, 2019

10,000,000 shares authorized at March 31, 2021 and December 31, 2020;

0 shares issued at March 31, 2021 and December 31, 2020

Common stock, $ 0.01 par value per share;

100,000,000 shares authorized at September 30, 2020 and December 31, 2019;

52,264,083 and 50,397,922 shares issued at September 30, 2020 and December 31, 2019, respectively;

51,777,275 and 49,911,114 shares outstanding at September 30, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 486,808 shares at September 30, 2020 and December 31, 2019

100,000,000 shares authorized at March 31, 2021 and December 31, 2020;

55,578,120 and 52,712,084 shares issued at March 31, 2021 and December 31, 2020, respectively;

55,091,312 and 52,225,276 shares outstanding at March 31, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 486,808 shares at March 31, 2021 and December 31, 2020

( 4,764 ) ( 4,764 )

Additional paid-in-capital 542,415 692,603

Accumulated other comprehensive (loss) income ( 23 ) 213

Accumulated other comprehensive loss 112 454

Accumulated deficit ( 619,539 ) ( 617,279 )

Total stockholders’ equity 85,353 83,168

Total liabilities and stockholders’ equity $ 866,817 $ 664,913

Total stockholders’ equity (deficit) ( 81,225 ) 71,536

Total liabilities and stockholders’ equity (deficit) $ 1,222,693 $ 913,122

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1 unchanged sentence

(in thousands, except share and per share data)

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

2020 2019 2020 2019

Three Months Ended March 31,

Products $ 109,285 $ 87,549

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Loss before income taxes ( 29,482 ) ( 22,681 )

Provision for (benefit from) income taxes 527 207 1,005 ( 87 )

Provision for income taxes 363 243

Net loss $ ( 29,845 ) $ ( 22,924 )

4 unchanged sentences

(in thousands)

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

2020 2019 2020 2019

Three Months Ended March 31,

Net loss $ ( 29,845 ) $ ( 22,924 )

2 unchanged sentences

Adjustments for net gains realized and included in net loss — ( 56 )

Total change in unrealized gains (losses) on investments ( 20 ) ( 47 ) ( 148 ) 335

Total change in unrealized losses on investments ( 9 ) ( 291 )

Change in unrealized losses on cash flow hedges ( 129 ) —

Total other comprehensive income (loss) ( 108 ) ( 47 ) ( 236 ) 335

Adjustments for net gains realized and included in net loss ( 204 ) —

Total change in unrealized losses on cash flow hedges ( 333 ) —

Total other comprehensive loss ( 342 ) ( 291 )

Comprehensive loss $ ( 30,187 ) $ ( 23,215 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

(in thousands)

Three Months Ended September 30, 2020

Common stock Treasury stock Additional paid-in-capital Accumulated other comprehensive gain (loss) Accumulated deficit Total stockholders’ equity

Shares Amount Shares Amount

Balance, June 30, 2020 50,952 $ 509 487 $ ( 4,764 ) $ 657,678 $ 85 $ ( 562,820 ) $ 90,688

Stock-based compensation expense — — — — 16,620 — — 16,620

Issuance of common stock under employee stock purchase plan 132 1 — — 3,735 — — 3,736

Vesting of restricted stock units 369 4 — — ( 4 ) — — —

Shares withheld for employee taxes ( 43 ) — — — ( 2,534 ) — — ( 2,534 )

Issuance of common stock upon exercise of stock options 367 4 — — 2,491 — — 2,495

Other comprehensive loss — — — — — ( 108 ) — ( 108 )

Equity component of convertible senior notes, net — — — — ( 3 ) — — ( 3 )

Net loss — — — — — — ( 25,541 ) ( 25,541 )

Balance, September 30, 2020 51,777 $ 518 487 $ ( 4,764 ) $ 677,983 $ ( 23 ) $ ( 588,361 ) $ 85,353

Three Months Ended September 30, 2019

Common stock Treasury stock Additional paid-in-capital Accumulated other comprehensive gain (loss) Accumulated deficit Total stockholders’ equity

Shares Amount Shares Amount

Balance, June 30, 2019 48,798 $ 488 487 $ ( 4,764 ) $ 581,127 $ 351 $ ( 489,678 ) $ 87,524

Stock-based compensation expense — — — — 10,426 — — 10,426

Issuance of common stock under employee stock purchase plan 74 1 — — 2,886 — — 2,887

Vesting of restricted stock units 319 3 — — ( 3 ) — — —

Shares withheld for employee taxes ( 38 ) — — — ( 2,087 ) — — ( 2,087 )

Issuance of common stock upon exercise of stock options 150 1 — — 1,877 — — 1,878

Other comprehensive loss — — — — — ( 47 ) — ( 47 )

Net loss — — — — — — ( 14,406 ) ( 14,406 )

Balance, September 30, 2019 49,303 $ 493 487 $ ( 4,764 ) $ 594,226 $ 304 $ ( 504,084 ) $ 86,175

Nine Months Ended September 30, 2020

Common stock Treasury stock Additional

4 unchanged sentences

stockholders’

equity (deficit)

Shares Amount Shares Amount

5 unchanged sentences

Issuance of common stock upon exercise of stock options 170 2 — — 1,416 — — 1,418

Other comprehensive loss — — — — — ( 236 ) — ( 236 )

Equity component of convertible senior notes, net — — — — 46,832 — — 46,832

Purchase of capped calls related to convertible senior notes — — — — ( 76,020 ) — — ( 76,020 )

Issuance of common stock in connection with repurchase of convertible senior notes 2,177 22 — — ( 2,720 ) — — ( 2,698 )

Issuance of common stock in connection with inducement of convertible senior notes 35 — — — 2,740 — — 2,740

Cumulative-effect adjustment for the adoption of ASU 2020-06 — — — — ( 99,026 ) — 27,585 ( 71,441 )

Other comprehensive loss — — — — — ( 342 ) — ( 342 )

Net loss — — — — — — ( 29,845 ) ( 29,845 )

Balance, September 30, 2020 51,777 $ 518 487 $ ( 4,764 ) $ 677,983 $ ( 23 ) $ ( 588,361 ) $ 85,353

Nine Months Ended September 30, 2019

Balance, March 31, 2021 55,091 $ 551 487 $ ( 4,764 ) $ 542,415 $ 112 $ ( 619,539 ) $ ( 81,225 )

Common stock Treasury stock Additional

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Issuance of common stock upon exercise of stock options 125 1 — — 1,568 — — 1,569

Other comprehensive income — — — — — 335 — 335

Other comprehensive loss — — — — — ( 291 ) — ( 291 )

Net loss — — — — — — ( 22,924 ) ( 22,924 )

Balance, September 30, 2019 49,303 $ 493 487 $ ( 4,764 ) $ 594,226 $ 304 $ ( 504,084 ) $ 86,175

Balance, March 31, 2020 50,419 $ 504 487 $ ( 4,764 ) $ 621,992 $ ( 78 ) $ ( 541,354 ) $ 76,300

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1 unchanged sentence

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Stock-based compensation expense 20,862 13,347

Provision for doubtful accounts 1,760 1,782

Deferred income taxes — ( 761 )

Foreign currency re-measurement loss 308 570

Other non-cash (income) expense ( 87 ) ( 1,635 )

Induced conversion expense 2,740 —

Other 1,404 836

Changes in operating assets and liabilities:

13 unchanged sentences

Sales/maturities of investments 41,900 113,924

Other ( 1,500 ) —

Net cash (used in) provided by investing activities ( 18,444 ) 85,422

2 unchanged sentences

Purchase of capped calls related to convertible senior notes ( 76,020 ) —

Deferred business acquisition payment ( 150 ) —

Payments of debt issuance costs ( 411 ) —

Payments for repurchase of convertible senior notes ( 182,647 ) —

Payments related to business acquisition ( 2,431 ) —

Taxes paid related to net share settlement of equity awards ( 3,324 ) ( 1,533 )

9 unchanged sentences

Cash paid for income taxes, net of refunds $ 64 $ 33

Non-cash investing activities:

Leasehold improvements acquired through tenant improvement allowance $ — $ 14,016

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents $ 503,804 $ 204,434

Restricted cash in other current assets 300 —

Restricted cash included in prepaid expenses and other current assets 36 $ —

Total cash, cash equivalents and restricted cash $ 503,840 $ 204,434

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All intercompany transactions and balances have been eliminated in consolidation.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Significant items subject to such estimates and assumptions include the determination of the estimated economic life of perpetual licenses for revenue recognition, the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition and fulfillment costs, the useful lives of long-lived assets, the valuation of allowance for doubtful accounts, the valuation of stock-based compensation, the valuation of intangible assets acquired in a business combination, the incremental borrowing rate for operating leases and the valuation for deferred tax assets.

The management estimates include, but are not limited to the determination of the estimated economic life of perpetual licenses for revenue recognition, the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition and fulfillment costs, the useful lives and recoverability of long-lived assets, the valuation of allowance for doubtful accounts, the valuation of stock-based compensation, the fair value of assets acquired and liabilities assumed in business combinations, the incremental borrowing rate for operating leases and the valuation for deferred tax assets.

We base our estimates on historical experience and on various other assumptions that we believe are reasonable.

Actual results could differ from those estimates.

The COVID-19 pandemic is expected to result in a sustained global slowdown of economic activity that is likely to decrease demand for a broad variety of goods and services, including from our customers.

We currently expect our operational and financial performance to be negatively impacted by the slowdown in activity associated with the COVID-19 pandemic for the quarter and the year ending December 31, 2020 and beyond.

The COVID-19 pandemic has resulted in a sustained global slowdown of economic activity that has decreased demand for a broad variety of goods and services, including from our customers.

While we have not experienced significant disruptions from the COVID-19 pandemic during the first quarter of fiscal 2021, we are unable to accurately predict the extent to which the COVID-19 pandemic may impact our business, results of operations and financial condition going forward.

Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment.

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Actual results could differ from those estimates and any such differences may be material to our financial statements.

Reclassification

Prior to the fiscal year beginning January 1, 2020, we have presented revenue on our consolidated statement of operations as products, maintenance and support and professional services revenue.

For the three and nine months ended September 30, 2020, we have combined products and maintenance and support revenue as products revenue on our consolidated statement of operations as our customers continue to migrate from our on-premise products to our SaaS Insight Platform.

Given this continued migration, we believe it is more relevant to categorize maintenance and support revenue together as products revenue.

Prior periods have been adjusted to conform with this presentation.

Significant Accounting Policies

Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies , to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

There have been no

changes to the significant accounting policies during the three and nine-month periods ended September 30, 2020 other than those noted below.

Derivatives and Hedging Activities

As a global business, we are exposed to currency exchange rate risk.

Although the majority of our revenue is denominated in U.S.

dollars, a portion of our operating expenses are denominated in foreign currencies, making them subject to fluctuations in foreign currency exchange rates.

In order to manage certain exposures to currency fluctuations, we initiated a derivative instrument and hedging program during the quarter ended September 30, 2020.

We enter into foreign currency derivative contracts, which we designate as cash flow hedges to manage the foreign currency exchange risk associated with these expenses denominated in certain foreign currencies.

Derivative instruments are measured at fair value and reported as either an asset or liability on our consolidated balance sheets.

Gains or losses related to our cash flow hedges are recorded as a component of accumulated other comprehensive income (loss) in our consolidated balance sheets and are reclassified into the financial statement line item associated with the underlying hedged transaction in our consolidated statement of operations when the underlying hedged transaction is recognized in earnings.

If it becomes probable that the hedged transaction will not occur, the cumulative unrealized gain or loss is reclassified immediately from accumulated other comprehensive income (loss) into the financial statement line item associated with the underlying hedged transaction in our consolidated statement of operations.

Derivatives designated as cash flow hedges are classified in our consolidated statements of cash flow in the same manner as the underlying hedged transaction, primarily within cash flow from operating activities.

There have been no changes to the significant accounting policies during the three-month period ended March 31, 2021.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We adopted this standard on January 1, 2020 using the prospective adoption approach.

The impact to our consolidated financial statements as a result of the adoption was not material.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, modifies and adds disclosure requirements for fair value measurements.

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplified the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

We early adopted this standard on January 1, 2021 under the modified retrospective basis.

Refer to Note 10, Debt , for further details of the impact the adoption of this standard had on our consolidated balance sheet.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

This standard is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities.

We adopted this standard on January 1, 2021 and there was no impact to our consolidated financial statements as a result of the adoption.

Accounting Pronouncements Not Yet Effective

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

The standard eliminates beneficial conversion feature and cash conversion models resulting in more convertible instruments being accounted for as a single unit;

and simplifies classification of debt on the balance sheet and earnings per share calculation.

The standard is effective for us in our first quarter of fiscal 2022 and can be adopted on a full or modified retrospective basis.

Early adoption is permitted from our first quarter of fiscal 2021.

We are currently assessing the timing, method of adoption and overall impact that the adoption of this standard will have on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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The impact to our consolidated financial statements from the adoption of this standard is expected to be immaterial.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

The new standard will be effective for us in the first quarter of 2021, with early adoption permitted.

An entity that elects early adoption must adopt all the amendments in the same period.

Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

We are currently assessing the impact of adopting this standard but do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

Revenue from Contracts with Customers

We generate products revenue from the sale of (1) cloud-based subscriptions for our InsightIDR, InsightVM, InsightAppSec and InsightConnect products, (2) managed services offerings which utilize our products and (3) term or perpetual software licenses for our Nexpose, Metasploit, AppSpider and DivvyCloud products, and associated content subscriptions for our Nexpose and Metasploit products.

We generate maintenance and support revenue that is included in our products revenue and is associated with customers’ purchases of our software licenses for Nexpose, Metasploit and AppSpider products.

We generate professional service revenue from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

Our deployment services educate and assist our customers on the best use and best practices to deploy our solutions.

The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2020 and 2019:

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

2020 2019 2020 2019

We generate revenue primarily from:

(1) subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses, (2) perpetual software licenses, and (3) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

The following table summarizes revenue from contracts with customers for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

Subscription revenue $ 78,721 $ 57,885 $ 220,142 $ 157,163

Term and perpetual software licenses 11,904 9,160 33,456 28,151

Maintenance and support 7,743 9,178 24,315 28,107

Subscriptions $ 107,167 $ 84,548

Perpetual software licenses 2,114 2,770

Professional services 8,166 6,791

Other 191 253 625 1,479

Total revenue $ 117,451 $ 94,340

Subscription Revenue

Subscription revenue consists of revenue from our cloud-based subscription, managed services offerings and content subscriptions associated with our software licenses.

Subscriptions

Subscriptions consists of revenue from our cloud-based subscription, managed services offerings, term software licenses and content subscriptions maintenance and support associated with our software licenses.

• We generate cloud-based subscription revenue primarily from sales of subscriptions to access our cloud platform, together with related support services to our customers.

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• Managed services offerings consist of fees generated when we operate our software and provide our capabilities on behalf of our customers.

Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer.

Revenue is recognized on a ratable basis over the contract term beginning on the date that our

service is made available to the customer.

Our managed services offerings generally have annual or multi-year contractual terms which are billed in advance of the annual subscription period and are non-cancellable.

• For our term software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, we recognize the license revenue over the contractual term of the arrangement as a material right does not exist.

For our term software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

• Content subscriptions and our maintenance and support services are sold with our perpetual and term software licenses.

Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period.

Term and Perpetual Software Licenses

Maintenance and support services are distinct from the perpetual and term software license and revenue attributable to maintenance and support services is recognized ratably over the contractual period.

Perpetual Software Licenses

For our perpetual software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, the content subscription renewal options result in a material right with respect to the perpetual software license.

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We estimated this period of benefit by taking into consideration several factors, including the terms and conditions of our customer contracts and renewals and the expected useful life of our technology.

For our term software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, we recognize the license revenue over the contractual term of the arrangement as a material right does not exist.

For our term and perpetual software licenses, which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

Maintenance and support services are sold with our perpetual and term software licenses.

As maintenance and support services are distinct from the perpetual and term software license, revenue attributable to maintenance and support services is recognized ratably over the contractual period.

For our perpetual software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

Professional Services

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Such amounts are recognized as revenue over the contractual period consistent with the above methodology.

For the three months ended September 30, 2020 and 2019, we recognized revenue of $ 90.4 million and $ 72.7 million, respectively, and for the nine months ended September 30, 2020 and 2019, we recognized $ 197.4 million and $ 158.7 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

For the three months ended March 31, 2021 and 2020, we recognized revenue of $ 101.9 million and $ 83.4 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current.

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If the right to consideration is based on satisfaction of another performance obligation in the contract other than the passage of time, we record a contract asset.

As of September 30, 2020 and December 31, 2019, unbilled receivables of $ 2.0 million and $ 0.8 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of September 30, 2020 and December 31, 2019, we had no contract assets recorded on our consolidated balance sheet.

As of March 31, 2021 and December 31, 2020, unbilled receivables of $ 1.1 million and $ 1.2 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of March 31, 2021 and December 31, 2020, we had no contract assets recorded on our consolidated balance sheet.

Transaction price allocated to the remaining performance obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2020.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2021.

The estimated revenues do not include unexercised contract renewals.

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(in thousands)

Subscription revenue $ 197,007 $ 46,101

Term and perpetual software licenses 30,925 12,985

Maintenance and support 16,859 3,809

Subscriptions $ 290,552 $ 79,335

Perpetual software licenses 6,880 2,917

Professional services 12,488 1,084

The amounts presented in the table above primarily consist of fixed fees, which are typically recognized ratably as the performance obligation is satisfied.

Business Combinations

Divvy Cloud Corporation

On May 1, 2020, we acquired Divvy Cloud Corporation (DivvyCloud), a Cloud Security Posture Management (CSPM) company, for a purchase price with an aggregate fair value of $ 137.8 million.

The purchase consideration consisted of $ 130.8 million in cash paid at closing, $ 7.4 million in deferred cash payments and $ 0.1 million in estimated working capital and other purchase price adjustments.

The deferred cash payments will be held by Rapid7 to satisfy indemnification obligations and certain post-closing purchase price adjustments.

The deferred cash payments for post-closing purchase price adjustments is payable three months from the acquisition date in the amount of $ 0.2 million and the remaining $ 7.2 million is payable on the fifteenth month anniversary of the acquisition date.

We have determined the fair value of the deferred cash payments was $ 7.0 million as of the acquisition date.

During the third quarter of 2020, we made a $ 0.2 million payment for the first deferred cash payment and final working capital and other purchase price adjustments.

In addition, in connection with the acquisition, we will issue an aggregate of 200,596 shares of Rapid7’s common stock to the founders of DivvyCloud in three equal annual installments beginning on the first anniversary of the closing date.

The 200,596 shares of common stock were accounted for as stock-based compensation expense as continued service was required.

The fair value of the 200,596 shares of common stock was $ 8.9 million.

In the nine months ended September 30, 2020, we recorded $ 1.1 million of acquisition-related costs in general and administrative expense.

Business Combination

Alcide.IO Ltd.

On January 28, 2021, we acquired Alcide.IO Ltd.

(Alcide), a leading provider of Kubernetes security, for a purchase consideration of $ 50.5 million, which was funded in cash.

The following table summarizes the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Consideration:

Cash $ 130,810

Deferred cash consideration 6,963

Working capital and other purchase price adjustments 55

Fair value of total consideration transferred $ 137,828

Recognized amounts of identifiable assets and liabilities assumed:

Purchase price $ 50,538

Recognized amount of identifiable assets acquired and liabilities assumed:

Cash and cash equivalents 818

Accounts receivable, net 904

Prepaid expenses and other current assets 810

Property and equipment, net 492

Operating lease right-of-use assets 3,320

Accounts payable ( 288 )

Accrued expenses ( 1,308 )

Operating lease liabilities, current portion ( 313 )

Deferred revenue, current portion ( 3,545 )

Operating lease liabilities, non-current portion ( 2,984 )

Deferred revenue, non-current portion ( 1,360 )

Other current assets 163

Deferred tax asset, long-term 2,714

Other assets 208

Accounts payable and other current liabilities ( 3,488 )

Intangible assets 10,400

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Goodwill 39,723

Net purchase price $ 137,828

The fair value of identifiable intangible assets was based on valuations using the income approach.

The estimated fair value and useful life of identifiable intangible assets are as follows:

Amount Weighted Average Life

(in thousands) (in years)

Developed technology $ 18,600 6

Customer relationships 1,700 6

Trade name 900 5

Total identifiable intangible assets $ 21,200

Total purchase price allocation $ 50,538

We identified developed technology as the sole acquired intangible asset.

The estimated fair value of the developed technology intangible asset was $ 10.4 million which was based on a valuation using the income approach.

The estimated useful life of the developed technology is 6 years.

The excess of the purchase price over the tangible assets acquired, identifiable intangible assets acquired and assumed liabilities was recorded as goodwill.

We believe the goodwill is attributable to expanded product offerings resulting from the integration of the technology acquired with our existing product offerings and increased opportunities to successfully market and sell these new products and features to our customer base.

We believe that the amount of goodwill reflects the expected synergistic benefits of being able to leverage the integration of the technology acquired with our existing product offerings and being able to successfully market and sell these new features to our customer base.

The goodwill was allocated to our one reporting unit.

The acquired goodwill and intangible assets were no t deductible for tax purposes.

These preliminary amounts are subject to subsequent adjustment as we obtain additional information to finalize certain components of working capital.

Following the acquisition, we granted to certain retained employees of DivvyCloud restricted stock units (RSUs) for an aggregate of 153,643 shares of our common stock, which will vest over three years subject to continued service.

In addition, we granted certain retained employees of DivvyCloud performance-based restricted stock units (PSUs) for an aggregate of 109,760 shares of our common stock, which will vest over a maximum of three years based upon achievement of certain performance conditions and continued service.

The RSUs and PSUs are expensed as stock-based compensation expense over the required service periods, assuming the service and performance conditions are achieved.

Our revenue attributable to the DivvyCloud business for the three and nine months ended September 30, 2020 was $ 2.3 million and $ 3.4 , respectively.

Our net loss attributable to the DivvyCloud business for the three and nine months ended September 30, 2020 was $ 6.7 million and $ 11.1 million, respectively.

Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of our operations and DivvyCloud, on a pro forma basis, as though we had acquired DivvyCloud on January 1, 2019.

The unaudited pro forma financial information for all periods presented also includes the effects of business combination accounting resulting from the acquisition, including an adjustment to revenue for the deferred revenue fair value adjustment, amortization expense from acquired intangibles assets, reversal of acquisition-related expenses and the stock-compensation expense recorded to retain certain employees.

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

2020 2019 2020 2019

Revenue $ 105,904 $ 84,628 $ 303,203 $ 238,695

Net loss $ ( 24,712 ) $ ( 19,726 ) $ ( 74,485 ) $ ( 59,954 )

NetFort Technologies Limited

On April 1, 2019, we acquired NetFort Technologies Limited (NetFort), a provider of end-to-end network traffic visibility and analytics across cloud, virtual and physical platforms for a purchase price of $ 16.1 million.

The $ 16.1 million purchase price was funded with cash.

In the nine months ended September 30, 2019, we recorded $ 0.5 million of acquisition-related costs in general and administrative expense.

The acquired goodwill and intangible assets were not deductible for tax purposes.

Following the acquisition, certain retained employees of Alcide received an aggregate of 96,127 restricted stock units (RSUs), which will vest over a maximum of three years .

The vesting of the RSUs are subject to the employee's continued service with

Accordingly, stock-based compensation expense associated with the RSUs will be expensed as incurred in our post-acquisition financial statements.

In the three months ended March 31, 2021, we recorded $ 0.9 million of acquisition-related costs related to the acquisition of Alcide, of which $ 0.8 million was recorded to general and administrative expense and $ 0.1 million was recorded to sales and marketing expense.

Proforma results of operations have not been included, as the acquisition of Alcide was not material to our results of operations for any periods presented.

Divvy Cloud Corporation

On May 1, 2020, we acquired Divvy Cloud Corporation (DivvyCloud), a Cloud Security Posture Management (CSPM) company, for a purchase price with an aggregate fair value of $ 137.8 million.

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.

2 unchanged sentences

The goodwill was allocated to our one reporting unit.

The acquired goodwill and intangible asset will no t be deductible for tax purposes.

Accordingly, a $ 0.8 million deferred tax benefit was recorded resulting from a partial release of our valuation allowance to account for the creation of a deferred tax liability for the developed technology intangible asset acquired.

Following the acquisition, certain retained employees and non-employee contractors of NetFort received an aggregate of 123,623 RSUs, which vest over a maximum of three years .

The vesting of the RSUs is subject to the employee's continued

service with us.

Accordingly, the compensation expense associated with the RSUs is expensed as incurred in our post-acquisition financial statements.

The acquired goodwill and intangible asset were not deductible for tax purposes.

Pro Forma Financial Information

The unaudited pro forma financial information also includes the effects of business combination accounting resulting from the acquisition, including an adjustment to revenue for the deferred revenue fair value adjustment, amortization expense from acquired intangibles assets, reversal of acquisition-related expenses and the stock-compensation expense recorded to retain certain employees.

Three Months Ended March 31, 2020

(in thousands)

Revenue $ 97,221

Net loss $ ( 27,566 )

Our investments, which are all classified as available-for-sale, consisted of the following:

As of March 31, 2021

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

(in thousands)

government agencies 55,388 5 — 55,393

Commercial paper 27,676 — — 27,676

Corporate bonds 27,648 16 ( 7 ) 27,657

Asset-backed securities 2,403 — — 2,403

Total $ 113,115 $ 21 $ ( 7 ) $ 113,129

As of December 31, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

(in thousands)

government agencies $ 83,596 $ 3 $ ( 12 ) $ 83,587

Corporate bonds 24,162 31 ( 1 ) 24,192

Commercial paper 34,766 — — 34,766

Agency bonds 3,998 1 — 3,999

Asset-backed securities 2,419 — — 2,419

Total $ 148,941 $ 35 $ ( 13 ) $ 148,963

As of March 31, 2021, our available-for-sale investments had maturities ranging from 1 to 13 months.

As of December 31, 2020, our available-for-sale investments had maturities ranging from 1 to 19 months.

For all of our investments for which the amortized cost basis was greater than the fair value at March 31, 2021 and December 31, 2020, we have concluded that there is no plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated maturity.

In making the determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity.

Fair Value Measurements

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We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and we consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers.

The following table presents our financial assets measured and recorded at fair value on a recurring basis using the above input categories:

As of September 30, 2020

The following table presents our financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories:

As of March 31, 2021

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Corporate bonds — 27,657 — 27,657

Agency bonds — 3,998 — 3,998

Asset-backed securities — 2,403 — 2,403

Total assets $ 248,436 $ 59,035 $ — $ 307,471

Foreign currency forward contracts designated as cash flow hedges $ — $ 88 $ — $ 88

Total liabilities $ — $ 88 $ — $ 88

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 226 — 226

Total $ 519,569 $ 57,962 $ — $ 577,531

Foreign currency forward contracts designated as cash flow hedges (other current liabilities) $ — $ 128 $ — $ 128

Total $ — $ 128 $ — $ 128

As of December 31, 2020

2 unchanged sentences

Money market funds $ 152,570 $ — $ — $ 152,570

Corporate bonds — 60,878 — 60,878

government agencies 83,587 — — 83,587

Commercial paper — 34,766 — 34,766

Agency bonds — 12,242 — 12,242

Asset-backed securities — 8,980 — 8,980

Total assets $ 143,760 $ 102,066 $ — $ 245,826

As of September 30, 2020, the fair values of our 1.25 % and 2.25 % convertible senior notes due 2023 and 2025, respectively, as further described in Note 9, Debt , were $ 359.5 million and $ 289.2 million, respectively, based upon quoted market prices.

We consider the fair values of the convertible senior notes to be a Level 2 measurement due to the limited trading activity of both notes.

We had no other liabilities measured and recorded at fair value on a recurring basis as of September 30, 2020 or December 31, 2019.

Our investments, which are all classified as available-for-sale, consisted of the following:

As of September 30, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

(in thousands)

government agencies 32,984 3 — 32,987

Commercial paper 32,252 — — 32,252

Corporate bonds — 24,192 — 24,192

1 unchanged sentence

Asset-backed securities — 2,419 — 2,419

Total assets $ 91,957 $ 72 $ ( 7 ) $ 92,022

As of December 31, 2019

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

(in thousands)

government agencies $ 36,880 $ 99 $ — $ 36,979

Corporate bonds 60,803 77 ( 2 ) 60,878

Commercial paper 19,965 1 — 19,966

Agency bonds 12,198 44 — 12,242

Asset-backed securities 8,986 1 ( 7 ) 8,980

Total assets $ 138,832 $ 222 $ ( 9 ) $ 139,045

As of September 30, 2020, our available-for-sale investments had maturities ranging from one to nineteen months .

As of December 31, 2019, our available-for-sale investments had maturities ranging from three months to two years .

For all of our investments for which the amortized cost basis was greater than the fair value at September 30, 2020 and December 31, 2019, we have concluded that there is no plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated maturity.

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 432 — 432

Total $ 236,157 $ 65,808 $ — $ 301,965

As of March 31, 2021, the fair value of our 1.25 % , 2.25 % and 0.25 % convertible senior notes due 2023, 2025 and 2027, as further described in Note 10, Debt , was $ 86.8 million, $ 325.9 million and $ 583.9 million, respectively, based upon quoted market prices.

We consider the fair value of the Notes to be a Level 2 measurement due to limited trading activity of the Notes.

Property and Equipment

Property and equipment are recorded at cost and consist of the following:

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

(in thousands)

5 unchanged sentences

Property and equipment, net $ 51,141 $ 53,114

Depreciation expense was $ 2.7 million and $ 2.5 million for the three months ended September 30, 2020 and 2019, respectively, and $ 8.1 million and $ 6.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Depreciation expense was $ 3.0 million and $ 2.7 million for the three months ended March 31, 2021 and 2020, respectively.

Goodwill and Intangible Assets

Goodwill was $ 213.7 million and $ 97.9 million as of September 30, 2020 and December 31, 2019, respectively.

The following table displays the changes in goodwill:

Goodwill was $ 253.3 million and $ 213.6 million as of March 31, 2021 and December 31, 2020, respectively.

The following table displays the changes in the gross carrying amount of goodwill:

(in thousands)

Balance at December 31, 2020 $ 213,601

DivvyCloud acquisition 115,861

Balance at September 30, 2020 $ 213,727

Alcide acquisition 39,723

Balance at March 31, 2021 $ 253,324

The following table presents details of our intangible assets, which include acquired identifiable intangible assets and capitalized internal-use software costs:

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

Life (years) Gross Carrying

6 unchanged sentences

Developed technology 5.7 $ 64,855 $ ( 27,521 ) $ 37,334 $ 54,455 $ ( 24,780 ) $ 29,675

5.6 $ 54,455 $ ( 22,346 ) $ 32,109 $ 35,855 $ ( 16,080 ) $ 19,775

Customer relationships 6.3 2,700 ( 1,061 ) 1,639 2,700 ( 958 ) 1,742

6.3 2,700 ( 856 ) 1,844 1,000 ( 641 ) 359

5.4 1,419 ( 594 ) 825 519 ( 519 ) —

Non-compete agreements

2.0 40 ( 40 ) — 40 ( 40 ) —

Trade names 5.4 1,419 ( 684 ) 735 1,419 ( 639 ) 780

Total acquired intangible assets 68,974 ( 29,266 ) 39,708 58,574 ( 26,377 ) 32,197

Internal-use software 3.0 17,760 ( 4,760 ) 13,000 16,002 ( 3,903 ) 12,099

3.0 14,280 ( 3,116 ) 11,164 9,873 ( 1,446 ) 8,427

Total intangible assets $ 86,734 $ ( 34,026 ) $ 52,708 $ 74,576 $ ( 30,280 ) $ 44,296

Amortization expense was $ 3.2 million and $ 2.1 million for the three months ended September 30, 2020 and 2019, respectively, and $ 8.2 million and $ 5.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of September 30, 2020 was as follows (in thousands):

2020 (for the remaining three months) $ 3,246

Amortization expense was $ 3.7 million and $ 2.1 million for the three months ended March 31, 2021 and 2020, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of March 31, 2021 was as follows (in thousands):

2021 (for the remaining nine months) $ 10,929

2026 and thereafter 2,987

Total $ 45,680

The table above excludes the impact of $ 6.0 million of capitalized internal-use software costs for projects that have not been completed as of September 30, 2020, and, therefore, we have not determined the useful life of the software, nor have all the costs associated with these projects been incurred.

The table above excludes the impact of $ 7.0 million of capitalized internal-use software costs for projects that have not been completed as of March 31, 2021, and therefore, we have not determined the useful life of the software, nor have all the costs associated with these projects been incurred.

Deferred Contract Acquisition and Fulfillment Costs

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

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To mitigate our exposure to foreign currency fluctuations resulting from certain expenses denominated in certain foreign currencies, we enter into forward contracts that are designated as cash flow hedging instruments.

These forward contracts have contractual maturities of thirteen months or less, and as of September 30, 2020, outstanding forward contracts had a total notional value of $ 8.9 million.

These forward contracts have contractual maturities of thirteen months or less, and as of March 31, 2021 and December 31, 2020, outstanding forward contracts had a total notional value of $ 19.9 million and $ 12.5 million, respectively.

The notional value represents the gross amount of foreign currency that will be bought or sold upon maturity of the forward contract.

During the three months ended September 30, 2020, all cash flow hedges were considered effective.

The fair values of outstanding derivative instruments were as follows (in thousands):

Consolidated Balance Sheet Location As of September 30, 2020

Derivative liabilities:

Foreign currency forward contracts designated as cash flow hedges Other current liabilities $ 84

Foreign currency forward contracts designated as cash flow hedges Other non-current liabilities 4

Total derivative liabilities $ 88

For the three and nine months ended September 30, 2020, there were no amounts reclassified from accumulated other comprehensive income (loss) on our consolidated balance sheet to the financial statement line item associated with the underlying hedged transaction on our consolidated statement of operations for our cash flow hedges.

During the three months ended March 31, 2021, all cash flow hedges were considered effective.

Refer to Note 5, Fair Value Measurements , for the fair values of our outstanding derivative instruments.

For the three months ended March 31, 2021, we reclassified realized gains of $ 0.2 million from accumulated other comprehensive income (loss) on our consolidated balance sheet to the financial statement line item associated with the underlying hedged transaction on our consolidated statement of operations.

Convertible Senior Notes

In August 2018, we issued $ 230.0 million aggregate principal amount of convertible senior notes due August 1, 2023 (the 2023 Notes) and in May 2020, we issued $ 230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the 2025 Notes) (collectively, the Notes).

The 2023 Notes bear interest at a fixed rate of 1.25 % per annum, payable semi-annually in arrears on February 1 and August 1 of each year.

The 2025 Notes bear interest at a fixed rate of 2.25 % per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2020.

The 2023 Notes and the 2025 Notes mature on August 1, 2023 and May 1, 2025, respectively unless earlier converted, redeemed or repurchased.

The 2023 Notes and 2025 Notes are senior unsecured obligations, do not contain any financial covenants and are governed by an indenture between the Company, as issuer, and U.S.

Bank National Association, as trustee (the 2023 Indenture and the 2025 Indenture, respectively).

The total net proceeds from the 2023 Notes and the 2025 Notes offerings, after deducting initial purchase discounts and estimated debt issuance costs, were $ 223.1 million and $ 222.8 million, respectively.

Terms of the 2023 Notes and the 2025 Notes

In August 2018, we issued $ 230.0 million aggregate principal amount of convertible senior notes due August 1, 2023 (the 2023 Notes), in May 2020, we issued $ 230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the 2025 Notes) and in March 2021, we issued $ 600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the 2027 Notes) (collectively, the Notes).

Further details of the Notes are as follows:

Issuance Maturity Date Interest Rate First Interest Payment Date Effective Interest Rate Semi-Annual Interest Payment Dates Initial Conversion Rate per $1,000 Principal Initial Conversion Price Number of Shares (in millions)

2023 Notes August 1, 2023 1.25 % February 1, 2019 1.86 % February 1 and August 1 24.0460 $ 41.59 1.1

2025 Notes May 1, 2025 2.25 % November 1, 2020 2.88 % May 1 and November 1 16.3875 $ 61.02 3.8

2027 Notes March 15, 2027 0.25 % September 15, 2021 0.67 % March 15 and September 15 9.6734 $ 103.38 5.8

The 2023 Notes, the 2025 Notes and the 2027 Notes are senior unsecured obligations, do not contain any financial covenants and are governed by indentures between the Company, as issuer, and U.S.

Bank National Association, as trustee (the Indentures).

The total net proceeds from the 2023 Notes, the 2025 Notes and the 2027 Notes offerings, after deducting initial purchase discounts and estimated debt issuance costs, were $ 223.1 million, $ 222.8 million and $ 585.0 million, respectively.

Terms of the Notes

The holders of the Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on December 31, 2018 for the 2023 Notes and September 30, 2020 for the 2025 Notes (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price of the respective Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period (measurement period) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the applicable series of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate of the respective Notes on each such trading day;

• during any calendar quarter commencing after the calendar quarter ending on December 31, 2018 for the 2023 Notes, September 30, 2020 for the 2025 Notes and March 20, 2024 for the 2027 Notes (and only during such calendar

quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price of the respective Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period for the 2023 Notes and the 2025 Notes and any ten consecutive trading day period for the 2027 Notes (measurement periods) in which the trading price (as defined in the Indentures) per $1,000 principal amount of the applicable series of Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of our common stock and the conversion rate of the respective Notes on each such trading day;

• if we call any or all of the respective Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the respective redemption date;

• upon the occurrence of specified corporate events (as set forth in the Indenture).

During the three months ended September 30, 2020, the conversion feature of the 2023 Notes was triggered as the last reported price of our common stock was more than or equal to 130 % of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, and therefore the 2023 Notes are currently convertible, in whole or in part, at the option of the holders between October 1, 2020 through December 31, 2020.

Whether the 2023 Notes will be convertible following such period will depend on the continued

satisfaction of this condition or another conversion condition in the future.

We had not received any conversion notices through the issuance date of our consolidated financial statements.

Since we may elect to repay the 2023 Notes in cash, shares of our common stock, or a combination of both, we have continued to classify the 2023 Notes as long-term debt on our consolidated balance sheet as of September 30, 2020.

As of September 30, 2020, the 2025 Notes are not convertible at the option of the holder.

The following table presents details of the Notes (number of shares in millions):

Initial Conversion Price per $1,000 Principal Initial Conversion Price Initial Number of Shares

2023 Notes 24.0460 $ 41.59 5.5

2025 Notes 16.3875 $ 61.02 3.8

The holders may convert the 2023 Notes and 2025 Notes at any time on or after February 1, 2023 and November 1, 2024, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the foregoing circumstances.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the Indenture.

• upon the occurrence of specified corporate events (as set forth in the Indentures).

As of March 31, 2021, the conversion feature of the 2023 Notes was triggered as the last reported price of our common stock was greater than or equal to 130 % of the conversion price for at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter, and therefore the 2023 Notes were convertible, in whole or in part, at the option of the holders from April 1, 2021 through June 30, 2021.

Whether the 2023 Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future.

As of March 31, 2021, the 2025 Notes and the 2027 Notes are not convertible at the option of the holder.

As of March 31, 2021, an immaterial principal amount of the 2023 Notes was requested for conversion, which is expected to be settled during the quarter ended June 30, 2021.

No additional conversion requests for the 2023 Notes have been received.

The holders may convert the 2023 Notes, the 2025 Notes and the 2027 Notes at any time on or after February 1, 2023, November 1, 2024 and December 15, 2026, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the circumstances set forth above.

If we undergo a fundamental change (as set forth in the Indentures) at any time prior to the maturity date, holders of the Notes will have the right, at their option, to require us to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

In addition, following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, in each case as described in the Indentures, we will increase the conversion rate for a holder of the Notes who elects to convert its Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

We may not redeem the 2023 Notes or 2025 Notes prior to August 6, 2021 and May 6, 2023 (Redemption Dates), respectively.

On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2023 Notes or 2025 Notes, at our option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding, the date on which we provide the redemption notice at a redemption price equal to 100 % principal amount of the 2023 Notes or 2025 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The foregoing description is qualified in its entirety by reference to the text of the Indenture and the Form of the 2023 Notes, which were incorporated by reference as Exhibits 4.4 and 4.5 to our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020.

In addition, the foregoing description of the 2025 Notes is qualified in its entirety by reference to the text of the Indenture and the Form of the 2025 Notes, which were filed with the SEC as Exhibit 4.1 to our Current Report on Form 8-K on May 4, 2020.

Accounting for the 2023 Notes and the 2025 Notes

In accounting for the transactions, the 2023 Notes and the 2025 Notes have been separated into liability and equity components.

We may not redeem the 2023 Notes, the 2025 Notes or the 2027 Notes prior to August 6, 2021, May 6, 2023 and March 20, 2024 (Redemption Dates), respectively.

On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2023 Notes, the 2025 Notes or the 2027 Notes, at our option, if the last reported sale price of our common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding, the date on which we provide the redemption notice at a redemption price equal to 100 % principal amount of the 2023 Notes, the 2025 Notes or the 2027 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Partial Repurchase of the 2023 Notes

On March 16, 2021, we used a portion of the proceeds from the issuance of the 2027 Notes, together with 2.2 million shares of our common stock, to repurchase and retire $ 182.6 million aggregate principal amount of the 2023 Notes, and paid accrued and unpaid interest thereon (the 2023 Notes Repurchase Transaction).

The 2023 Notes Repurchase Transaction was accounted for as an induced conversion in accordance with Accounting Standards Codification 470-20, Debt with Conversion and Other Options (ASC 470-20).

The total fair value of the additional common stock issued to induce the conversion of $ 2.7 million was recognized as an inducement expense and classified as a component of interest expense in our consolidated statement of operations.

The remaining cash and common stock consideration issued under the original terms of the 2023 Notes was accounted for under the general conversion accounting guidance where the difference between the carrying amount of the 2023

Notes retired, including unamortized debt issuance cost of $ 2.7 million, and the cash consideration paid and the par amount of the common stock issued, was recorded in additional paid-in capital.

Accounting for the Notes

Prior to the Adoption of ASU 2020-06

Prior to our January 1, 2021 adoption of ASU 2020-06, the 2023 Notes and the 2025 Notes were separated into liability and equity components.

The initial carrying amounts of the liability components were calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature.

The initial carrying amounts of the equity components representing the Conversion Option was $ 53.8 million and $ 48.3 million for the 2023 Notes and the 2025 Notes, respectively, and were determined by deducting the fair values of the liability components from the par value of the 2023 Notes and 2025 Notes.

The equity components were recorded as an increase to additional paid-in capital and are not remeasured as long as they continue to meet the conditions for equity classification.

The excess of the principal amount of the 2023 Notes and the 2025 Notes over their respective carrying amount of the liability component, or debt discount, are amortized to interest expense using the effective interest method over the contractual terms of the respective Notes.

In accounting for the debt issuance costs of $ 6.9 million and $ 7.2 million related to the 2023 Notes and the 2025 Notes, respectively, we allocated the total amount incurred to the liability and equity components of the 2023 Notes and 2025 Notes based on their relative values.

Issuance costs attributable to the liability component were $ 5.3 million and $ 5.7 million, for the 2023 Notes and the 2025 Notes, respectively, and will be amortized to interest expense using the effective interest method over the contractual term of the 2023 Notes and 2025 Notes, respectively.

Issuance costs attributable to the equity component of $ 1.6 million and $ 1.5 million for the 2023 Notes and the 2025 Notes, respectively, were netted with the equity component in additional paid-in capital.

The effective interest rates for the 2023 Notes and the 2025 Notes were 7.36 % and 7.85 %, respectively.

The net carrying amounts of the liability components of the 2023 Notes and the 2025 Notes were as follows (in thousands):

As of September 30, 2020 As of December 31, 2019

2023 Notes 2025 Notes Total 2023 Notes

The initial carrying amounts of the equity components representing the option to convert the 2023 Notes and the 2025 Notes was $ 53.8 million and $ 48.3 million, respectively, and were determined by deducting the fair values of the liability components from the par value of the 2023 Notes and 2025 Notes.

The equity components were recorded as an increase to additional paid-in capital and were not remeasured as long as they continued to meet the conditions for equity classification.

The excess of the principal amount of the 2023 Notes and the 2025 Notes over their respective carrying amount of the liability component, or debt discount, was amortized to interest expense using the effective interest method over the contractual terms of the respective convertible senior notes.

In addition, prior to the adoption of ASU 2020-06, the debt issuance costs of $ 6.9 million and $ 7.2 million related to the 2023 Notes and the 2025 Notes, respectively, were allocated to the liability and equity components of the 2023 Notes and 2025 Notes based on their relative values.

Debt issuance costs attributable to the liability component were $ 5.3 million and $ 5.7 million, for the 2023 Notes and the 2025 Notes, respectively, and were amortized to interest expense using the effective interest method over the contractual term of the 2023 Notes and 2025 Notes, respectively.

Debt issuance costs attributable to the equity component of $ 1.6 million and $ 1.5 million for the 2023 Notes and the 2025 Notes, respectively, were netted with the equity component in additional paid-in capital.

Impact of the Adoption of ASU 2020-06

On January 1, 2021, we early adopted ASU 2020-06 on a modified retrospective basis.

Under ASU 2020-06, we no longer separate the convertible senior notes into liability and equity components.

We recognized the cumulative effect of initially applying this new standard as of January 1, 2021.

Comparative prior year periods were not adjusted.

As a result of applying the modified retrospective method to adopt this standard, the following adjustments were made to the consolidated balance sheet as of January 1, 2021 (in thousands):

As Reported Adjustments Adjusted Under ASU 2020-06

December 31, 2020 Transfer Equity Component of the Debt to Liabilities Reverse Equity Component of Debt Issuance Costs Reverse Debt Discount Amortization Record Debt Issuance Costs Amortization Total January 1, 2021

Liabilities and Stockholders' Equity:

Convertible senior notes, net $ 378,586 $ 102,166 $ ( 3,140 ) $ ( 28,811 ) $ 1,226 $ 71,441 $ 450,027

Total liabilities $ 841,586 $ 102,166 $ ( 3,140 ) $ ( 28,811 ) $ 1,226 $ 71,441 $ 913,027

Stockholders' Equity:

Additional paid-in capital $ 692,603 $ ( 102,166 ) $ 3,140 $ — $ — $ ( 99,026 ) $ 593,577

Accumulated deficit $ ( 617,279 ) $ — $ — $ 28,811 $ ( 1,226 ) $ 27,585 $ ( 589,694 )

Total stockholders' equity $ 71,536 $ ( 102,166 ) $ 3,140 $ 28,811 $ ( 1,226 ) $ ( 71,441 ) $ 95

Total liabilities and stockholders' equity $ 913,122 $ — $ — $ — $ — $ — $ 913,122

Post Adoption of ASU 2020-06

In accounting for the issuance of the 2027 Notes, the principal of $ 600.0 million less estimated debt issuance costs of $ 15.0 million was recorded as long-term debt on our consolidated balance sheet.

The debt issuance costs are amortized to interest expense using the effective interest method over the contractual term of the 2027 Notes.

The net carrying amount of the Notes as of March 31, 2021 and December 31, 2020 was as follows (in thousands):

As of March 31, 2021 As of December 31, 2020

2023 Notes 2025 Notes 2027 Notes Total 2023 Notes 2025 Notes Total

Principal $ 47,353 $ 230,000 $ 600,000 $ 877,353 $ 230,000 $ 230,000 $ 460,000

Unamortized debt discount — — — — ( 30,425 ) ( 42,930 ) ( 73,355 )

Unamortized issuance costs ( 3,274 ) ( 5,295 ) ( 8,569 ) ( 4,032 )

Net carrying amount $ 193,625 $ 179,693 $ 373,318 $ 185,200

The net carrying amount of the equity component as of September 30, 2020 and December 31, 2019 (for the 2023 Notes only) was as follows (in thousands):

2023 Notes 2025 Notes Total

Debt discount for conversion option $ 53,820 $ 48,346 $ 102,166

Issuance costs ( 1,626 ) ( 1,514 ) ( 3,140 )

Unamortized debt issuance costs ( 778 ) ( 5,957 ) ( 14,909 ) ( 21,644 ) ( 3,009 ) ( 5,050 ) ( 8,059 )

Net carrying amount $ 46,575 $ 224,043 $ 585,091 $ 855,709 $ 196,566 $ 182,020 $ 378,586

Interest expense related to the 2023 Notes and the 2025 Notes was as follows (in thousands):

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

2020 2019 2020 2019

2023 2025 2023 2025 2023 2025 2023 2025

Notes Notes Total Notes Notes Total Notes Notes Total Notes Notes Total

Interest expense related to the Notes was as follows (in thousands):

Three Months Ended March 31, 2021 Three Months Ended March 31, 2020

2023 Notes 2025 Notes 2027 Notes Total 2023 Notes Total

Contractual interest expense $ 558 $ 1,294 $ 50 $ 1,902 $ 719 $ 719

Amortization of debt discount — — — — 2,496 2,496

Amortization of issuance costs 260 241 501 242 — 242 758 393 1,151 701 — 701

Amortization of debt issuance costs 221 319 80 620 247 247

Induced conversion expense 2,740 — — 2,740 — —

Total interest expense $ 3,519 $ 1,613 $ 130 $ 5,262 $ 3,462 $ 3,462

In connection with the offering of the 2023 Notes and the 2025 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the 2023 Capped Calls and 2025 Capped Calls).

The initial strike prices for the 2023 Capped Calls and the 2025 Capped Calls are $ 41.59 and $ 61.02 per share, respectively, subject to certain adjustments, which correspond to the initial conversion price of the 2023 Notes and the 2025 Notes.

The initial cap prices for the 2023 Capped Calls and the 2025 Capped Calls are $ 63.98 and $ 93.88 per share, respectively, subject to certain adjustments.

The 2023 Capped Calls and the 2025 Capped Calls are expected to offset potential dilution to our common stock upon conversion of the respective 2023 Notes or the 2025 Notes, with such offset subject to a cap based on the cap price.

The 2023 Capped Calls and the 2025 Capped Calls cover, subject to anti-dilution adjustments, approximately 5.5 million and 3.8 million shares of our common stock, respectively.

For accounting purposes, the 2023 Capped Calls and the 2025 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes and the 2025 Notes.

The 2023 Capped Calls and the 2025 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

Accordingly, the cost of $ 26.9 million and $ 27.3 million, respectively, for the 2023 Capped Calls and 2025 Capped Calls was recorded as a reduction to additional paid-in capital.

The net impact to our stockholders' equity, included in additional paid-in capital, of the above components of the 2023 Notes and the 2025 Notes was as follows (in thousands):

2023 Notes 2025 Notes

Conversion option $ 53,820 $ 48,346

Purchase of capped calls ( 26,910 ) ( 27,255 )

Issuance costs ( 1,626 ) ( 1,514 )

Total $ 25,284 $ 19,577

In connection with the offering of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the 2023 Capped Calls, 2025 Capped Calls and 2027 Capped Calls).

The initial strike prices for the 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are $ 41.59 , $ 61.02 and $ 103.38 per share, respectively, subject to certain adjustments, which correspond to the initial conversion price of the 2023 Notes, the 2025 Notes and the 2027 Notes.

The initial cap prices for the 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are $ 63.98 , $ 93.88 and $ 159.04 per share, respectively, subject to certain adjustments.

The 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are expected to offset potential dilution to our common stock upon conversion of the respective 2023 Notes, the 2025 Notes or the 2027 Notes, with such offset subject to a cap based on the cap price.

For accounting purposes, the 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes, the 2025 Notes and the 2027 Notes.

The 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

Accordingly, the cost of $ 26.9 million, $ 27.3 million and $ 76.0 million, respectively, for the 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls was recorded as a reduction to additional paid-in capital at the time of each transaction.

Credit Agreement

On April 23, 2020, we entered into a Credit and Security Agreement (the Credit Agreement), with KeyBank National Association that provides for a $ 30.0 million revolving credit facility, with a letter of credit sublimit of $ 15.0 million and an accordion feature under which we can increase the credit facility to up to $ 70.0 million.

In April 2020, we entered into a Credit and Security Agreement (the Credit Agreement), with KeyBank National Association that provides for a $ 30.0 million revolving credit facility, with a letter of credit sublimit of $ 15.0 million and an accordion feature under which we can increase the credit facility to up to $ 70.0 million.

In May 2020, we utilized the accordion feature to increase the credit facility to $ 50.0 million.

We incurred fees of $ 0.4 million in connection with entering into the Credit Agreement.

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The Credit Agreement matures on April 23, 2023 and contains certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts.

In May 2020, we utilized the accordion feature to increase the credit facility to $ 50.0 million.

The borrowings under the Credit Agreement bear interest, at our option, at a rate equal to either the London Interbank Offered Rate (LIBOR) rate (subject to a 1.00 % floor), plus an applicable margin equal to 2.50 % per annum or the alternate base rate (subject to a floor), plus an applicable margin equal to 0 % per annum.

As of September 30, 2020, we did no t have any outstanding borrowings under the Credit Agreement.

As of March 31, 2021, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of March 31, 2021, we had a total of $ 7.6 million in letters of credit outstanding as collateral for certain office space leases and corporate credit card programs which reduce the amount of borrowing available under our Credit Agreement.

Our leases primarily relate to office facilities that have remaining terms of up to 9.7 years, some of which include one or more options to renew with renewal terms of up to 5 years and some of which include options to terminate the leases within the next 6.5 years.

1 unchanged sentence

The components of lease expense were as follows:

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

2020 2019 2020 2019

Three Months Ended March 31,

(in thousands)

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Supplemental balance sheet information related to the operating leases was as follows:

As of September 30, 2020 As of December 31, 2019

(in thousands, except lease term and discount rate)

Operating lease right-of-use (ROU) assets $ 69,797 $ 60,984

Operating lease liabilities, current portion $ 9,568 $ 7,179

Operating lease liabilities, non-current portion 77,863 72,294

Total operating lease liabilities $ 87,431 $ 79,473

As of March 31, 2021 As of December 31, 2020

Weighted average remaining lease term (in years) - operating leases 7.7 7.9

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Supplemental cash flow information related to leases was as follows:

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

2020 2019 2020 2019

Three Months Ended March 31,

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities $ 4,147 $ 3,836

Operating lease ROU assets obtained in exchange for new lease obligations $ 456 $ 3,682 $ 16,053 $ 64,454

Maturities of operating lease liabilities as of September 30, 2020 were as follows (in thousands):

2020 (for the remaining three months) $ 2,642

ROU assets obtained in exchange for new lease obligations $ 152 $ 3,990

Maturities of operating lease liabilities as of March 31, 2021 were as follows (in thousands):

2021 (for the remaining nine months) $ 11,022

2026 and thereafter 41,983

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Stock-Based Compensation Expense

Stock-based compensation expense for restricted stock units, stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

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

2020 2019 2020 2019

Stock-based compensation expense for restricted stock units (RSUs), performance-based restricted stock units (PSUs), stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

Three Months Ended March 31,

(in thousands)

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We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years .

In the first quarter of 2020, our Compensation Committee adopted and approved the performance goals, targets and payout formulas for 2020 under our bonus plans, including permitting our executive officers and other employees the opportunity to receive payment of their earned bonuses for fiscal year 2020 in the form of common stock (in lieu of cash).

During the three and nine months ended September 30, 2020, we recognized stock-based compensation expense related to such bonuses in the amount of $ 0.5 million and $ 1.5 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of September 30, 2020.

For all employees, including executive officers, who elected to receive their 2020 bonuses in the form of common stock (in lieu of cash), the payouts are expected to be made in the form of fully vested stock awards in the first quarter of 2021 pursuant to our 2015 Equity Incentive Plan, as amended.

The number of shares underlying such awards shall be determined by dividing the dollar value of the actual bonus award payment by the closing price per share of our common stock on the date of grant.

(b) Restricted Stock Units

Restricted stock unit activity during the nine months ended September 30, 2020 was as follows:

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2021 and 2020 bonus plans, including permitting our executive officers and certain other employees the opportunity to receive payment of their earned bonuses in the form of common stock (in lieu of cash).

During the three months ended March 31, 2021 and 2020, we recognized stock-based compensation expense related to such bonuses in the amount of $ 1.0 million and $ 0.4 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of March 31, 2021 and 2020.

For all employees, including executive officers, who elect to receive their bonuses in the form of common stock (in lieu of cash), the payouts are expected to be made in the form of fully vested stock awards in the first quarter of the following year pursuant to our 2015 Equity Incentive Plan, as amended.

The number of shares underlying such awards is determined by dividing the dollar value of the actual bonus award payment by the closing price per share of our common stock on the date of grant.

(b) Restricted Stock Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the three months ended March 31, 2021 was as follows:

Shares Weighted-Average

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Forfeited ( 61,704 ) 52.67

Unvested balance as of September 30, 2020 3,261,623 $ 43.74

As of September 30, 2020, the unrecognized compensation expense related to our unvested restricted stock units expected to vest was $ 131.2 million.

Unvested balance as of March 31, 2021 3,953,263 $ 62.61

As of March 31, 2021, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 228.8 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.8 years.

Stock option activity during the nine months ended September 30, 2020 was as follows:

Stock option activity during the three months ended March 31, 2021 was as follows:

Shares Weighted

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Forfeited/cancelled — —

Outstanding as of September 30, 2020 2,066,748 $ 10.21 4.4 $ 105,458

Vested and exercisable as of September 30, 2020 1,906,500 $ 9.75 4.2 $ 98,167

As of September 30, 2020, the unrecognized compensation expense related to our unvested stock options expected to vest was $ 0.9 million.

Outstanding as of March 31, 2021 1,763,007 $ 10.24 3.9 $ 113,492

Vested and exercisable as of March 31, 2021 1,736,419 $ 10.04 3.8 $ 112,127

As of March 31, 2021, the unrecognized compensation expense related to our unvested stock options was $ 0.3 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 0.8 years.

The total fair value of stock options vested in the nine months ended September 30, 2020 was $ 1.8 million.

The total fair value of stock options vested in the three months ended March 31, 2021 was $ 0.4 million.

(d) Employee Stock Purchase Plan

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(i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date.

On March 15, 2019, we issued 110,822 shares of common stock to employees for aggregate proceeds of $ 2.6 million.

The purchase prices of the shares were $ 30.46 and $ 21.96 per share, which were discounted in accordance with the terms of the ESPP from the closing prices of our common stock on September 17, 2018 of $ 35.84 and on March 16, 2018 of $ 25.84 , respectively.

On September 13, 2019, we issued 74,221 shares of common stock to employees for aggregate proceeds of $ 2.9 million.

The purchase prices of the shares were $ 30.46 and $ 42.22 per share, which were discounted in accordance with the terms of the ESPP from the closing prices of our common stock on September 17, 2018 of $ 35.84 and on September 13, 2019 of $ 49.67 , respectively.

On March 15, 2020, we issued 101,806 shares of common stock to employees for aggregate proceeds of $ 3.3 million.

The purchase price of the shares was $ 32.87 per share, which was discounted in accordance with the terms of the ESPP from the closing price of our common stock on March 13, 2020 of $ 38.67 .

On September 15, 2020, we issued 131,585 shares of common stock to employees for aggregate proceeds of $ 3.7 million.

The purchase price of the shares was $ 28.39 per share, which was discounted in accordance with the terms of the ESPP from the closing price of our common stock on March 16, 2020 of $ 33.40 .

On March 15, 2021, we issued 147,837 shares of common stock to employees, with purchase prices of $ 28.39 or $ 52.60 per share, for aggregate proceeds of $ 4.5 million.

Net Loss per Share

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the three and nine months ended September 30, 2020 and 2019:

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

2020 2019 2020 2019

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands, except share and per share data)

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Weighted-average common shares outstanding, basic and diluted 52,904,881 50,127,310

Net loss per share attributable to common stockholders, basic and diluted $ ( 0.50 ) $ ( 0.29 ) $ ( 1.38 ) $ ( 0.82 )

The shares underlying the conversion options in the 2023 Notes and the 2025 Notes were not considered in the calculation of diluted net loss per share as the effect would have been anti-dilutive.

Based on the initial conversion prices, the entire outstanding principal amount of the 2023 Notes and the 2025 Notes as of September 30, 2020 would have been convertible into approximately 5.5 million and 3.8 million shares, respectively.

We expect to settle the principal amount of the 2023 Notes and the 2025 Notes in cash.

As a result, only the amount by which the conversion value exceeds the aggregate principal amount of the 2023 Notes and the 2025 Notes is considered in the diluted earnings per share computation under the treasury stock method.

The conversion spread has a dilutive impact on diluted net income per share when the average market price of our common stock for a given period of time exceeds the initial conversion prices of $ 41.59 per share for the 2023 Notes and $ 61.02 per share for the 2025 Notes.

In connection with the issuance of the 2023 Notes and the 2025 Notes, we entered into 2023 Capped Calls and 2025 Capped Calls, which were not included for the purpose of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

Whether the 2023 Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future.

We had not received any conversion notices through the issuance date of our consolidated financial statements.

For disclosure purposes, we have calculated the potentially dilutive effect of the conversion spread, which is included in the table below.

The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been anti-dilutive:

As of September 30,

Net loss per share, basic and diluted $ ( 0.56 ) $ ( 0.46 )

We intend to settle any conversion of our 2023 Notes, 2025 Notes and 2027 Notes in cash, shares, or a combination thereof.

As a result of our adoption of ASU 2020-06 on January 1, 2021, the dilutive impact of the Notes for our calculation of diluted net income (loss) per share is considered using the if-converted method.

For periods prior to our January 1, 2021 adoption of ASU 2020-06, we considered the impact of the Notes on our diluted net income (loss) per share calculation based on applying the treasury stock method as we had the ability, and intent, to settle any conversions of the Notes solely in cash at that time.

For the three months ended March 31, 2021 and 2020, the shares underlying the Notes were not considered in the calculation of diluted net loss per share as the effect would have been anti-dilutive under each respective method.

In connection with the issuance of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into 2023 Capped Calls, 2025 Capped Calls and 2027 Capped Calls, which were not included for the purpose of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been anti-dilutive:

Three Months Ended March 31,

Options to purchase common stock 1,763,007 2,568,776

Unvested restricted stock units 3,953,263 3,715,342

Common shares to be issued to DivvyCloud founders 200,596 —

Shares to be issued under ESPP 7,889 11,522

Shares underlying the conversion spread in the 2023 Notes 1,774,460 —

Convertible senior notes 10,711,653 5,530,176

Total 16,435,812 11,825,816

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Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

In addition, from time to time, we are a party to litigation or subject to claims incident to the ordinary course of business.

Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business, financial condition or results of operations.

In addition, from time to time, we may be a party to litigation or subject to claims incident to the ordinary course of business.

Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

10 unchanged sentences

Net revenues by geographic area presented based upon the location of the customer were as follows:

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

2020 2019 2020 2019

Three Months Ended March 31,

(in thousands)

3 unchanged sentences

Property and equipment, net by geographic area was as follows:

As of September 30, 2020 As of December 31, 2019

As of March 31, 2021 As of December 31, 2020

(in thousands)

3 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 1. Financial Statements