What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 139 added, 88 removed, 533 unchanged (30% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current assets:

1 unchanged sentence

Short-term investments 76,244 58,850

Accounts receivable, net of allowance for credit losses of $ 1,879 and $ 1,978 at March 31, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowance for credit losses of $ 2,266 and $ 1,978 at June 30, 2022 and December 31, 2021, respectively

124,701 146,094

25 unchanged sentences

Preferred stock, $ 0.01 par value per share;

10,000,000 shares authorized at March 31, 2022 and December 31, 2021;

0 shares issued at March 31, 2022 and December 31, 2021

10,000,000 shares authorized at June 30, 2022 and December 31, 2021;

0 shares issued at June 30, 2022 and December 31, 2021

Common stock, $ 0.01 par value per share;

100,000,000 shares authorized at March 31, 2022 and December 31, 2021;

58,728,035 and 58,181,816 shares issued at March 31, 2022 and December 31, 2021, respectively;

58,241,227 and 57,695,008 shares outstanding at March 31, 2022 and December 31, 2021, respectively

Treasury stock, at cost, 486,808 shares at March 31, 2022 and December 31, 2021

100,000,000 shares authorized at June 30, 2022 and December 31, 2021;

59,122,773 and 58,181,816 shares issued at June 30, 2022 and December 31, 2021, respectively;

58,635,965 and 57,695,008 shares outstanding at June 30, 2022 and December 31, 2021, respectively

Treasury stock, at cost, 486,808 shares at June 30, 2022 and December 31, 2021

( 4,764 ) ( 4,764 )

7 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended March 31,

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

2022 2021 2022 2021

Products $ 159,122 $ 119,147 $ 308,147 $ 228,432

24 unchanged sentences

(in thousands)

Three Months Ended March 31,

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

2022 2021 2022 2021

Net loss $ ( 39,606 ) $ ( 34,164 ) $ ( 84,605 ) $ ( 64,009 )

1 unchanged sentence

Change in fair value of cash flow hedges ( 3,027 ) ( 72 ) ( 3,925 ) ( 201 )

Adjustments for net gains (losses) realized and included in net loss 316 ( 204 )

Adjustments for net losses (gains) realized and included in net loss 761 ( 174 ) 1,077 ( 378 )

Total change in unrealized losses on cash flow hedges ( 2,266 ) ( 246 ) ( 2,848 ) ( 579 )

Change in unrealized (losses) gains on investments ( 658 ) ( 9 )

Change in unrealized losses on investments ( 220 ) ( 3 ) ( 878 ) ( 12 )

Total other comprehensive loss ( 2,486 ) ( 249 ) ( 3,726 ) ( 591 )

1 unchanged sentence

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

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

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

(in thousands)

6 unchanged sentences

Shares Amount Shares Amount

Balance, March 31, 2022 58,242 $ 582 487 $ ( 4,764 ) $ 650,710 $ ( 2,052 ) $ ( 781,027 ) $ ( 136,551 )

Stock-based compensation expense — — — — 31,890 — — 31,890

Vesting of restricted stock units 364 4 — — ( 4 ) — — —

Shares withheld for employee taxes ( 24 ) — — — ( 1,645 ) — — ( 1,645 )

Issuance of common stock upon exercise of stock options 21 — — — 246 — — 246

Issuance of common stock in connection with conversion of convertible senior notes — — — — ( 3 ) — — ( 3 )

Issuance of common stock related to acquisition 33 — — — — — — —

Other comprehensive loss — — — — — ( 2,486 ) — ( 2,486 )

Net loss — — — — — — ( 39,606 ) ( 39,606 )

Balance, June 30, 2022 58,636 $ 586 487 $ ( 4,764 ) $ 681,194 $ ( 4,538 ) $ ( 820,633 ) $ ( 148,155 )

Common stock Treasury stock Additional

paid-in-capital Accumulated

comprehensive

gain (loss) Accumulated

deficit Total

stockholders’

Shares Amount Shares Amount

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

Stock-based compensation expense — — — — 22,487 — — 22,487

Vesting of restricted stock units 500 5 — — ( 5 ) — — —

Shares withheld for employee taxes ( 42 ) ( 1 ) — — ( 3,346 ) — — ( 3,347 )

Issuance of common stock upon exercise of stock options 109 1 — — 1,102 — — 1,103

Issuance of common stock in connection with conversion of convertible senior notes 23 — — — — — — —

Issuance of common stock related to acquisition 67 1 — — ( 1 ) — — —

Other comprehensive loss — — — — — ( 249 ) — ( 249 )

Net loss — — — — — — ( 34,164 ) ( 34,164 )

Balance, June 30, 2021 55,748 $ 557 487 $ ( 4,764 ) $ 562,652 $ ( 137 ) $ ( 653,703 ) $ ( 95,395 )

Common stock Treasury stock Additional

paid-in-capital Accumulated

comprehensive

gain (loss) Accumulated

deficit Total

stockholders’

Shares Amount Shares Amount

Balance, December 31, 2021 57,695 $ 577 487 $ ( 4,764 ) $ 615,032 $ ( 812 ) $ ( 736,028 ) $ ( 125,995 )

4 unchanged sentences

Issuance of common stock upon exercise of stock options 120 1 — — 1,204 — — 1,205

Issuance of common stock in connection with conversion of convertible senior notes — — — — ( 3 ) — — ( 3 )

Issuance of common stock related to acquisition 33 — — — — — — —

Other comprehensive loss — — — — — ( 3,726 ) — ( 3,726 )

Net loss — — — — — — ( 84,605 ) ( 84,605 )

Balance, March 31, 2022 58,242 $ 582 487 $ ( 4,764 ) $ 650,710 $ ( 2,052 ) $ ( 781,027 ) $ ( 136,551 )

Balance, June 30, 2022 58,636 $ 586 487 $ ( 4,764 ) $ 681,194 $ ( 4,538 ) $ ( 820,633 ) $ ( 148,155 )

Common stock Treasury stock Additional

13 unchanged sentences

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 repurchase and conversion of convertible senior notes 2,200 22 — — ( 2,720 ) — — ( 2,698 )

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

Issuance of common stock related to acquisition 67 1 — — ( 1 ) — — —

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

1 unchanged sentence

Net loss — — — — — — ( 64,009 ) ( 64,009 )

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

Balance, June 30, 2021 55,748 $ 557 487 $ ( 4,764 ) $ 562,652 $ ( 137 ) $ ( 653,703 ) $ ( 95,395 )

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

1 unchanged sentence

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation expense 61,333 44,676

Deferred income taxes — 3,924

Induced conversion expense — 2,740

18 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 12,900 for the three months ended March 31, 2021

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 14,560 for the six months ended June 30, 2021

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

Payments of debt issuance costs ( 71 ) —

Payments for repurchase and conversion of convertible senior notes ( 12 ) ( 184,649 )

5 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3,671 ) ( 293 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 23,100 ) 330,223

Net increase in cash, cash equivalents and restricted cash 1,157 319,988

Cash, cash equivalents and restricted cash, beginning of period 165,017 173,617

19 unchanged sentences

All intercompany transactions and balances have been eliminated in consolidation.

The results of operations for the three months ended March 31, 2022 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 and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Use of Estimates

4 unchanged sentences

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 three months ended March 31, 2022, we are unable to accurately predict the extent to which the ongoing COVID-19 pandemic may impact our business, results of operations and financial condition going forward.

While we have not experienced significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2022, we are unable to accurately predict the extent to which the ongoing 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.

4 unchanged sentences

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, 2021.

There have been no changes to the significant accounting policies during the three-month period ended March 31, 2022.

There have been no changes to the significant accounting policies during the three and six-month periods ended June 30, 2022.

Recent Accounting Pronouncements

15 unchanged sentences

(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, 2022 and 2021:

Three Months Ended March 31,

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2022 and 2021:

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

2022 2021 2022 2021

(in thousands)

2 unchanged sentences

Professional services 8,333 7,274 16,692 15,440

Other 245 97 442 101

Total revenue $ 167,455 $ 126,421 $ 324,839 $ 243,872

38 unchanged sentences

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

For the three months ended March 31, 2022 and 2021, we recognized revenue of $ 137.3 million and $ 101.9 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

For the three months ended June 30, 2022 and 2021, we recognized revenue of $ 143.7 million and $ 108.2 million, respectively, and for the six months ended June 30, 2022 and 2021, we recognized $ 250.4 million and $ 181.3 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.

3 unchanged sentences

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 March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, we had no contract assets recorded on our consolidated balance sheet.

As of June 30, 2022 and December 31, 2021, unbilled receivables of $ 1.0 million and $ 1.2 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of June 30, 2022 and December 31, 2021, 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 March 31, 2022.

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 June 30, 2022.

The estimated revenues do not include unexercised contract renewals.

16 unchanged sentences

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

Our revenue and net loss attributable to the IntSights business for the three months ended March 31, 2022 was $ 6.9 million and $ 10.9 million, respectively.

Our revenue attributable to the IntSights business for the three and six months ended June 30, 2022 was $ 8.1 million and $ 15.0 million, respectively, and our net loss attributable to the IntSights business for the three and six months ended June 30, 2022 was $ 10.4 million and $ 21.3 million, respectively.

Pro Forma Financial Information

1 unchanged sentence

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 March 31, 2021

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

(in thousands)

14 unchanged sentences

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

As of March 31, 2022

As of June 30, 2022

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

1 unchanged sentence

government agencies $ 65,670 $ — $ ( 608 ) $ 65,062

Commercial paper 34,997 — — 34,997

Corporate bonds 16,932 — ( 310 ) 16,622

Commercial paper 8,164 — — 8,164

Agency bonds 750 — ( 24 ) 726

8 unchanged sentences

Total $ 92,982 $ — $ ( 64 ) $ 92,918

As of March 31, 2022, our available-for-sale investments had maturities ranging from 1 to 20 months.

As of June 30, 2022, our available-for-sale investments had maturities ranging from 1 to 17 months.

As of December 31, 2021, our available-for-sale investments had maturities ranging from 2 to 23 months.

For all of our investments for which the amortized cost basis was greater than the fair value at March 31, 2022 and December 31, 2021, 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.

For all of our investments for which the amortized cost basis was greater than the fair value at June 30, 2022 and December 31, 2021, 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.

11 unchanged sentences

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, 2022

As of June 30, 2022

Level 1 Level 2 Level 3 Total

2 unchanged sentences

Government agencies 65,062 — — 65,062

Commercial paper — 34,997 — 34,997

Corporate bonds — 16,622 — 16,622

Commercial paper — 8,164 — 8,164

Agency bonds — 726 — 726

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 13 — 13

Total $ 127,069 $ 25,512 $ — $ 152,581

13 unchanged sentences

Total liabilities $ — $ 823 $ — $ 823

As of March 31, 2022, the fair value of our 2.25 % and 0.25 % convertible senior notes due 2025 and 2027, as further described in Note 10, Debt , was $ 435.1 million and $ 669.7 million, respectively, based upon quoted market prices.

As of June 30, 2022, the fair value of our 2.25 % and 0.25 % convertible senior notes due 2025 and 2027, as further described in Note 10, Debt , was $ 292.9 million and $ 540.6 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.

1 unchanged sentence

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

As of March 31, 2022 As of December 31, 2021

As of June 30, 2022 As of December 31, 2021

(in thousands)

5 unchanged sentences

Property and equipment, net $ 50,533 $ 50,225

Depreciation expense was $ 3.3 million and $ 3.0 million for the three months ended March 31, 2022 and 2021, respectively .

Depreciation expense was $ 3.2 million and $ 3.1 million for the three months ended June 30, 2022 and 2021, respectively, and $ 6.5 million and $ 6.0 million for the six months ended June 30, 2022 and 2021, respectively .

Goodwill and Intangible Assets

Goodwill was $ 515.3 million as of March 31, 2022 and December 31, 2021.

Goodwill was $ 515.6 million and $ 515.3 million as of June 30, 2022 and December 31, 2021, respectively.

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

1 unchanged sentence

Balance at December 31, 2021 $ 515,258

IntSights acquisition purchase receivable adjustment 75

Balance at March 31, 2022 $ 515,333

IntSights acquisition adjustments 373

Balance at June 30, 2022 $ 515,631

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

As of March 31, 2022 As of December 31, 2021

As of June 30, 2022 As of December 31, 2021

Life (years) Gross Carrying

11 unchanged sentences

Total intangible assets $ 171,089 $ ( 65,304 ) $ 105,785 $ 163,031 $ ( 51,440 ) $ 111,591

Amortization expense was $ 6.9 million and $ 3.7 million for the three months ended March 31, 2022 and 2021, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of March 31, 2022 was as follows (in thousands):

2022 (for the remaining nine months) $ 19,395

Amortization expense was $ 7.0 million and $ 4.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 13.9 million and $ 7.7 million for the six months ended June 30, 2022 and 2021, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of June 30, 2022 was as follows (in thousands):

2022 (for the remaining six months) $ 12,738

2027 and thereafter 5,206

Total $ 89,417

The table above excludes the impact of $ 13.4 million of capitalized internal-use software costs for projects that have not been completed as of March 31, 2022, 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 $ 16.4 million of capitalized internal-use software costs for projects that have not been completed as of June 30, 2022, 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 three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(in thousands)

5 unchanged sentences

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 nineteen months or less, and as of March 31, 2022 and December 31, 2021, outstanding forward contracts had a total notional value of $ 48.2 million and $ 34.7 million, respectively.

These forward contracts have contractual maturities of eighteen months or less, and as of June 30, 2022 and December 31, 2021, outstanding forward contracts had a total notional value of $ 47.7 million and $ 34.7 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 March 31, 2022, all cash flow hedges were considered effective.

During the three and six months ended June 30, 2022, all cash flow hedges were considered effective.

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

11 unchanged sentences

• during any calendar quarter commencing after the calendar quarter ending on 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 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;

• during the five business day period after any five consecutive trading day period for the 2025 Notes and any ten consecutive trading day period for the 2027 Notes (the “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 Indentures).

As of March 31, 2022, the conversion features of the 2025 Notes were triggered as the last reported price of our common stock was greater than or equal to 130 % of the conversion prices 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 2025 Notes were convertible, in whole or in part, at the option of the holders from April 1, 2022 through June 30, 2022.

Whether the 2025 Notes will be convertible following such period will depend on the continued satisfaction of this condition or another conversion condition in the future.

Since we may elect to repay the 2025 Notes in cash, shares of our common stock, or a combination of both, we have continued to classify the 2025 Notes as long-term debt on our consolidated balance sheet as of March 31, 2022.

As of March 31, 2022, the 2027 Notes are not convertible at the option of the holder.

As of March 31, 2022, an immaterial principal amount of the 2025 Notes was requested for conversion, which is expected to be settled during the quarter ended June 30, 2022.

No additional conversion requests for the Notes have been received.

During the six months ended June 30, 2022, the 2025 Notes were convertible at the option of the holders.

During this period an immaterial principal amount of the 2025 Notes were requested for conversion, which was settled during the quarter ended June 30, 2022 in cash.

As of June 30, 2022, the 2025 Notes and 2027 Notes were not convertible at the option of the holder.

The holders may convert the 2025 Notes and the 2027 Notes at any time on or after 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.

7 unchanged sentences

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

The net carrying amount of the Notes as of March 31, 2022 and December 31, 2021 was as follows (in thousands):

The net carrying amount of the Notes as of June 30, 2022 and December 31, 2021 was as follows (in thousands):

2025 Notes 2027 Notes

Principal Unamortized debt issuance costs Total Principal Unamortized debt issuance costs Total

Net Carrying Amount at December 31, 2021 $ 230,000 $ ( 4,905 ) $ 225,095 $ 600,000 $ ( 13,032 ) $ 586,968

Balance at December 31, 2021 $ 230,000 $ ( 4,905 ) $ 225,095 $ 600,000 $ ( 13,032 ) $ 586,968

Amortization of debt issuance costs — 681 681 — 1,214 1,214

Net Carrying Amount at March, 31, 2022 $ 230,000 $ ( 4,575 ) $ 225,425 $ 600,000 $ ( 12,430 ) $ 587,570

Conversion of Notes ( 8 ) — ( 8 ) — — —

Balance at June, 30, 2022 $ 229,992 $ ( 4,224 ) $ 225,768 $ 600,000 $ ( 11,818 ) $ 588,182

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

Three Months Ended March 31,

Three Months Ended June 30,

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

1 unchanged sentence

Amortization of debt issuance costs 351 612 963 153 341 602 1,096

Total interest expense $ 1,645 $ 987 $ 2,632 $ 301 $ 1,635 $ 977 $ 2,913

Six Months Ended June 30,

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

Contractual interest expense $ 2,588 $ 750 $ 3,338 $ 706 $ 2,588 $ 425 $ 3,719

Amortization of debt issuance costs 681 1,214 1,895 374 660 682 1,716

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

Total interest expense $ 3,269 $ 1,964 $ 5,233 $ 3,820 $ 3,248 $ 1,107 $ 8,175

During the first quarter of 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.

During the first quarter of 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 convertible senior notes due August 1, 2023 (the “2023 Notes”), and paid accrued and unpaid interest thereon.

In addition, during the first quarter of 2021, holders of the 2023 Notes elected to convert Notes with a principal amount of $ 2.0 million.

15 unchanged sentences

Credit Agreement

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 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 could 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.

In December 2021, we entered into an Amendment Agreement (the “Amendment”) in respect of our Credit and Security Agreement (as amended by the Amendment, the “Credit Agreement”), with KeyBank National Association, to, among other things, increase the credit facility from $ 50.0 million to $ 100.0 million and extend the maturity date to December 22, 2024.

In December 2021, we entered into an amendment (the “Amendment”) in respect of our Credit and Security Agreement (as amended by the Amendment, the “Credit Agreement”), with KeyBank National Association, to, among other things, increase the credit facility from $ 50.0 million to $ 100.0 million and extend the maturity date to December 22, 2024.

The Credit Agreement provides for a $ 100.0 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 $ 150.0 million.

4 unchanged sentences

The borrowings under the Credit Agreement bear interest, at our option, at a rate equal to either (i) term SOFR plus a credit spread adjustment of 0.10 % per annum plus a margin of 2.50 % per annum or (ii) the alternate base rate (subject to a floor), plus an applicable margin equal to 0 % per annum.

As of March 31, 2022, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of March 31, 2022, we had a total of $ 9.3 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.

As of June 30, 2022, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of June 30, 2022, we had a total of $ 9.8 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 9.8 years, some of which include one or more options to renew with renewal terms of up to 7 years and some of which include options to terminate the leases within the next 5.2 years.

1 unchanged sentence

The components of lease expense were as follows:

Three Months Ended March 31,

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

2022 2021 2022 2021

(in thousands)

4 unchanged sentences

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

As of March 31, 2022 As of December 31, 2021

As of June 30, 2022 As of December 31, 2021

Weighted average remaining lease term (in years) - operating leases 6.9 7.2

1 unchanged sentence

Supplemental cash flow information related to leases was as follows:

Three Months Ended March 31,

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

2022 2021 2022 2021

(in thousands)

1 unchanged sentence

ROU assets obtained in exchange for new lease obligations $ — $ 909 $ 8,864 $ 1,061

Maturities of operating lease liabilities as of March 31, 2022 were as follows (in thousands):

2022 (for the remaining nine months) $ 12,812

Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):

2022 (for the remaining six months) $ 8,442

2027 and thereafter 48,258

4 unchanged sentences

Stock-based compensation expense for RSUs, performance-based 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,

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

2022 2021 2022 2021

(in thousands)

7 unchanged sentences

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2022 and 2021 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 each of the three months ended March 31, 2022 and 2021, we recognized stock-based compensation expense related to such bonuses in the amount of $ 1.0 million, based on the probable expected performance against the pre-established corporate financial objectives as of March 31, 2022 and 2021.

During the three months ended June 30, 2022 and 2021, we recognized stock-based compensation expense related to such bonuses in the amount of $ 0.5 million and $ 1.0 million, and during the six months ended June 30, 2022 and 2021 we recognized stock-based compensation expense related to such bonuses in the amount of $ 1.5 million and $ 2.3 million, based on the probable expected performance against the pre-established corporate financial objectives

as of June 30, 2022 and 2021.

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.

1 unchanged sentence

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

RSUs and PSUs activity during the three months ended March 31, 2022 was as follows:

RSUs and PSUs activity during the six months ended June 30, 2022 was as follows:

Shares Weighted-Average

3 unchanged sentences

Forfeited ( 288,670 ) 80.63

Unvested balance as of March 31, 2022 3,947,377 $ 86.65

As of March 31, 2022, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 319.5 million.

Unvested balance as of June 30, 2022 3,685,422 $ 87.47

As of June 30, 2022, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 298.8 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.9 years.

Stock option activity during the three months ended March 31, 2022 was as follows:

Stock option activity during the six months ended June 30, 2022 was as follows:

Shares Weighted

6 unchanged sentences

Forfeited/cancelled — —

Outstanding as of March 31, 2022 1,312,604 $ 10.81 3.2 $ 131,818

Vested and exercisable as of March 31, 2022 1,312,604 $ 10.81 3.2 $ 131,818

The total fair value of stock options vested in the three months ended March 31, 2022 was $ 0.1 million.

Outstanding as of June 30, 2022 1,291,667 $ 10.80 2.9 $ 72,334

Vested and exercisable as of June 30, 2022 1,291,667 $ 10.80 2.9 $ 72,334

The total fair value of stock options vested in the six months ended June 30, 2022 was $ 0.1 million.

(d) Employee Stock Purchase Plan

4 unchanged sentences

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 months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the three and six months ended June 30, 2022 and 2021:

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

2022 2021 2022 2021

(in thousands, except share and per share data)

4 unchanged sentences

The dilutive impact of the Notes for our calculation of diluted net income (loss) per share is considered using the if-converted method.

For the three months ended March 31, 2022 and 2021, 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.

For the three and six months ended June 30, 2022 and 2021, 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.

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.

1 unchanged sentence

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,

Three and Six Months Ended June 30,

Options to purchase common stock 1,291,667 1,653,897

29 unchanged sentences

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

Three Months Ended March 31,

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

2022 2021 2022 2021

(in thousands)

3 unchanged sentences

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

As of March 31, 2022 As of December 31, 2021

As of June 30, 2022 As of December 31, 2021

(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