What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 93 added, 103 removed, 569 unchanged (26% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

1 unchanged sentence

Short-term investments 83,231 58,850

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

Accounts receivable, net of allowance for credit losses of $ 2,241 and $ 1,978 at September 30, 2022 and December 31, 2021, respectively

121,017 146,094

25 unchanged sentences

Preferred stock, $ 0.01 par value per share;

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

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

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

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

Common stock, $ 0.01 par value per share;

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

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

59,690,872 and 58,181,816 shares issued at September 30, 2022 and December 31, 2021, respectively;

59,204,064 and 57,695,008 shares outstanding at September 30, 2022 and December 31, 2021, respectively

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

( 4,764 ) ( 4,764 )

7 unchanged sentences

(in thousands, except share and per share data)

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

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

2022 2021 2022 2021

25 unchanged sentences

(in thousands)

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

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

2022 2021 2022 2021

2 unchanged sentences

Change in fair value of cash flow hedges ( 3,355 ) ( 774 ) ( 7,280 ) ( 975 )

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

Adjustments for net losses (gains) realized on cash flow hedges and included in net loss 1,361 ( 8 ) 2,438 ( 386 )

Total change in unrealized losses on cash flow hedges ( 1,994 ) ( 782 ) ( 4,842 ) ( 1,361 )

3 unchanged sentences

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

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

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

(in thousands)

2 unchanged sentences

comprehensive

gain (loss) Accumulated

loss Accumulated

deficit Total

1 unchanged sentence

Shares Amount Shares Amount

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 )

Stock-based compensation expense — — — — 31,746 — — 31,746

Issuance of common stock under employee stock purchase plan 137 1 — — 6,232 — — 6,233

Vesting of restricted stock units 381 4 — — ( 4 ) — — —

1 unchanged sentence

Issuance of common stock upon exercise of stock options 73 1 — — 415 — — 416

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 — — — — — ( 2,160 ) — ( 2,160 )

Net loss — — — — — — ( 28,727 ) ( 28,727 )

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

Balance, September 30, 2022 59,204 $ 592 487 $ ( 4,764 ) $ 717,946 $ ( 6,698 ) $ ( 849,360 ) $ ( 142,284 )

Common stock Treasury stock Additional

1 unchanged sentence

comprehensive

gain (loss) Accumulated

loss Accumulated

deficit Total

1 unchanged sentence

Shares Amount Shares Amount

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 )

Stock-based compensation expense — — — — 27,929 — — 27,929

Issuance of common stock under employee stock purchase plan 74 1 — — 4,808 — — 4,809

Vesting of restricted stock units 377 4 — — ( 4 ) — — —

1 unchanged sentence

Issuance of common stock upon exercise of stock options 77 1 — — 846 — — 847

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

Issuance of common stock related to acquisition 207 2 — — ( 2 ) — — —

1 unchanged sentence

Net loss — — — — — — ( 37,700 ) ( 37,700 )

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

Balance, September 30, 2021 56,441 $ 564 487 $ ( 4,764 ) $ 591,529 $ ( 929 ) $ ( 691,403 ) $ ( 105,003 )

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

(in thousands)

Common stock Treasury stock Additional

1 unchanged sentence

comprehensive

gain (loss) Accumulated

loss Accumulated

deficit Total

11 unchanged sentences

Net loss — — — — — — ( 113,332 ) ( 113,332 )

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

Balance, September 30, 2022 59,204 $ 592 487 $ ( 4,764 ) $ 717,946 $ ( 6,698 ) $ ( 849,360 ) $ ( 142,284 )

Common stock Treasury stock Additional

19 unchanged sentences

Net loss — — — — — — ( 101,709 ) ( 101,709 )

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

Balance, September 30, 2021 56,441 $ 564 487 $ ( 4,764 ) $ 591,529 $ ( 929 ) $ ( 691,403 ) $ ( 105,003 )

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

1 unchanged sentence

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

25 unchanged sentences

Cash flows from financing activities:

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

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 14,976 for the nine months ended September 30, 2021

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

29 unchanged sentences

All intercompany transactions and balances have been eliminated in consolidation.

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.

The results of operations for the three and nine months ended September 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 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.

While we have not experienced significant disruptions from the COVID-19 pandemic during the three and nine months ended September 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 and six-month periods ended June 30, 2022.

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

Recent Accounting Pronouncements

7 unchanged sentences

This guidance will be applied prospectively to all business combinations that occur on or after January 1, 2022.

Accounting Pronouncements Not Yet Effective

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates.

We may elect to apply the amendments prospectively through December 31, 2022.

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

Revenue from Contracts with Customers

1 unchanged sentence

(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 and six months ended June 30, 2022 and 2021:

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

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

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

2022 2021 2022 2021

16 unchanged sentences

• 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 content subscription.

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.

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.

24 unchanged sentences

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

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.

For the three months ended September 30, 2022 and 2021, we recognized revenue of $ 153.8 million and $ 117.5 million, respectively, and for the nine months ended September 30, 2022 and 2021, we recognized $ 308.3 million and $ 237.5 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 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.

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

As of September 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 June 30, 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 September 30, 2022.

The estimated revenues do not include unexercised contract renewals.

13 unchanged sentences

The fair value of net assets acquired, goodwill and intangible assets were $ 61.1 million, $ 260.9 million and $ 65.2 million, respectively.

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

The goodwill was allocated to our one reporting unit.

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

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

The unaudited pro forma financial information in the table below summarizes the combined results of our operations and IntSights, on a pro forma basis, as though we had acquired IntSights on January 1, 2020.

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 June 30, 2021 Six Months Ended June 30, 2021

(in thousands)

Revenue $ 132,963 $ 256,393

Net loss $ ( 47,222 ) $ ( 84,232 )

Velocidex Enterprises Pty Ltd

1 unchanged sentence

The purchase price consisted of $ 2.7 million paid in cash and $ 0.3 million in deferred cash payments.

The purchase price was allocated to developed technology intangible asset which has an estimated useful life of 6 years.

The purchase price was allocated to a developed technology intangible asset which has an estimated useful life of 6 years.

Alcide.IO Ltd.

5 unchanged sentences

The goodwill was allocated to our one reporting unit.

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

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

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

As of June 30, 2022

As of September 30, 2022

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

13 unchanged sentences

Total $ 92,982 $ — $ ( 64 ) $ 92,918

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

As of September 30, 2022, our available-for-sale investments had maturities ranging from 1 to 22 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 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.

For all of our investments for which the amortized cost basis was greater than the fair value at September 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.

8 unchanged sentences

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability.

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.

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 and liabilities measured and recorded at fair value on a recurring basis using the above input categories:

As of June 30, 2022

As of September 30, 2022

Level 1 Level 2 Level 3 Total

(in thousands)

Money market funds $ 62,007 $ — $ — $ 62,007

Government agencies $ 69,840 $ — $ — $ 69,840

Money market funds 67,749 — — 67,749

Corporate bonds — 16,557 — 16,557

1 unchanged sentence

Agency bonds — 5,911 — 5,911

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 124 — 124

Total $ 137,589 $ 30,222 $ — $ 167,811

13 unchanged sentences

Total liabilities $ — $ 823 $ — $ 823

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.

As of September 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 $ 229.9 million and $ 455.2 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 June 30, 2022 As of December 31, 2021

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

(in thousands)

5 unchanged sentences

Property and equipment, net $ 55,002 $ 50,225

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 .

Depreciation expense was $ 3.5 million and $ 3.2 million for the three months ended September 30, 2022 and 2021, respectively, and $ 10.0 million and $ 9.2 million for the nine months ended September 30, 2022 and 2021, respectively .

Goodwill and Intangible Assets

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

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

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

2 unchanged sentences

IntSights acquisition adjustments 373

Balance at June 30, 2022 $ 515,631

Balance at September 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 June 30, 2022 As of December 31, 2021

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

Life (years) Gross Carrying

11 unchanged sentences

Total intangible assets $ 175,679 $ ( 72,019 ) $ 103,660 $ 163,031 $ ( 51,440 ) $ 111,591

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

Amortization expense was $ 6.7 million and $ 6.6 million for the three months ended September 30, 2022 and 2021, respectively, and $ 20.6 million and $ 14.3 million for the nine months ended September 30, 2022 and 2021, respectively.

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

2022 (for the remaining three months) $ 6,637

2027 and thereafter 5,206

Total $ 86,727

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.

The table above excludes the impact of $ 16.9 million of capitalized internal-use software costs for projects that have not been completed as of September 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 six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

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

Nine Months Ended September 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 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.

These forward contracts have contractual maturities of nineteen months or less, and as of September 30, 2022 and December 31, 2021, outstanding forward contracts had a total notional value of $ 51.8 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 and six months ended June 30, 2022, all cash flow hedges were considered effective.

During the three and nine months ended September 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.

15 unchanged sentences

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.

During this period an immaterial principal amount of the 2025 Notes were requested for conversion and settled in cash.

As of September 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 June 30, 2022 and December 31, 2021 was as follows (in thousands):

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

2025 Notes 2027 Notes

3 unchanged sentences

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

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

Balance at September, 30, 2022 $ 229,992 $ ( 3,853 ) $ 226,139 $ 600,000 $ ( 11,192 ) $ 588,808

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

Three Months Ended June 30,

Three Months Ended September 30,

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

2 unchanged sentences

Total interest expense $ 1,663 $ 1,003 $ 2,666 $ 221 $ 1,654 $ 995 $ 2,870

Six Months Ended June 30,

Nine Months Ended September 30,

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

30 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 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.

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

As of September 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 9.5 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 7 years.

1 unchanged sentence

The components of lease expense were as follows:

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

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

2022 2021 2022 2021

5 unchanged sentences

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

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

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

Weighted average remaining lease term (in years) - operating leases 6.8 7.2

1 unchanged sentence

Supplemental cash flow information related to leases was as follows:

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

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

2022 2021 2022 2021

2 unchanged sentences

ROU assets obtained in exchange for new lease obligations $ 3,811 $ 1,290 $ 12,675 $ 2,351

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

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

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

2022 (for the remaining three months) $ 4,039

2027 and thereafter 50,207

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 June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

8 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 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.

During the three months ended September 30, 2022 and 2021, we recognized stock-based compensation expense related to such bonuses in the amount of $( 0.8 ) million and $ 1.3 million, and during the nine months ended September 30, 2022 and 2021, we recognized stock-based compensation expense related to such bonuses in the amount of $ 0.8 million and $ 3.6 million, based on the probable expected performance against the pre-established corporate

financial objectives as of September 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.

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.

During the three months ended September 30, 2021, we accelerated the vesting of a stock award.

The accelerated vesting was deemed a modification of the original award resulting in $ 6.9 million of incremental stock-based compensation expense.

In the three and nine months ended September 30, 2021, we recorded $ 3.1 million of stock-based compensation expense related to this modification.

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

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

RSUs and PSUs activity during the nine months ended September 30, 2022 was as follows:

Shares Weighted-Average

3 unchanged sentences

Forfeited ( 405,534 ) 84.39

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.

Unvested balance as of September 30, 2022 3,279,901 $ 87.58

As of September 30, 2022, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 266.3 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.7 years.

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

Stock option activity during the nine months ended September 30, 2022 was as follows:

Shares Weighted

6 unchanged sentences

Forfeited/cancelled ( 38 ) 21.15

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.

Outstanding as of September 30, 2022 1,218,790 $ 11.10 2.7 $ 38,753

Vested and exercisable as of September 30, 2022 1,218,790 $ 11.10 2.7 $ 38,753

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

(d) Employee Stock Purchase Plan

3 unchanged sentences

On March 15, 2022, we issued 80,747 shares of common stock to employees, with purchase prices of $ 67.59 or $ 81.37 per share, for aggregate proceeds of $ 5.7 million.

On September 15, 2022, we issued 137,567 shares of common stock to employees, with a purchase prices of $ 45.31 per share, for aggregate proceeds of $ 6.2 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 six months ended June 30, 2022 and 2021:

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

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, 2022 and 2021:

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

2022 2021 2022 2021

5 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 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.

For the three and nine months ended September 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 and Six Months Ended June 30,

Three and Nine Months Ended September 30,

Options to purchase common stock 1,218,790 1,577,125

29 unchanged sentences

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

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

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

2022 2021 2022 2021

4 unchanged sentences

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

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

As of September 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