What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-06 · 178 added, 348 removed, 333 unchanged (61% of the section changed)

Financial Statements .

Consolidated Balance Sheets (Unaudited)

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current assets:

1 unchanged sentence

Short-term investments 213,001 169,544

Accounts receivable, net of allowance for credit losses of $ 789 and $ 2,299 at September 30, 2023 and December 31, 2022, respectively

Accounts receivable, net of allowance for credit losses of $ 970 and $ 951 at March 31, 2024 and December 31, 2023, respectively

124,595 164,862

13 unchanged sentences

Accounts payable $ 11,516 $ 15,812

Accrued expenses 63,388 80,306

Accrued expenses and other current liabilities 60,605 85,025

Operating lease liabilities, current portion 14,257 13,452

Deferred revenue, current portion 437,687 455,503

Other current liabilities 888 1,663

Total current liabilities 524,065 569,792

Convertible senior notes, non-current portion, net 928,892 815,948

Convertible senior notes, net 931,001 929,996

Operating lease liabilities, non-current portion 77,069 81,130

4 unchanged sentences

Preferred stock, $ 0.01 par value per share;

10,000,000 shares authorized at September 30, 2023 and December 31, 2022;

0 shares issued at September 30, 2023 and December 31, 2022

100,000,000 shares authorized at March 31, 2024 and December 31, 2023;

0 shares issued and outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.01 par value per share;

100,000,000 shares authorized at September 30, 2023 and December 31, 2022;

61,991,937 and 60,206,277 shares issued at September 30, 2023 and December 31, 2022, respectively;

61,422,358 and 59,719,469 shares outstanding at September 30.

2023 and December 31, 2022, respectively

Treasury stock, at cost, 569,579 and 486,808 shares at September 30, 2023 and December 31, 2022, respectively

100,000,000 shares authorized at March 31, 2024 and December 31, 2023;

62,838,127 and 62,283,630 shares issued at March 31, 2024 and December 31, 2023, respectively;

62,268,548 and 61,714,051 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Treasury stock, at cost, 569,579 shares at March 31, 2024 and December 31, 2023

( 4,765 ) ( 4,765 )

Additional paid-in-capital 925,661 894,630

Accumulated other comprehensive loss ( 822 ) ( 1,411 )

Accumulated other comprehensive (loss) income ( 221 ) 1,344

Accumulated deficit ( 1,007,747 ) ( 1,010,005 )

1 unchanged sentence

Total liabilities and stockholders’ deficit $ 1,488,473 $ 1,505,348

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

Consolidated Statements of Operations (Unaudited)

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

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

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

2023 2022 2023 2022

Products $ 189,876 $ 166,496 $ 545,349 $ 474,643

Three Months Ended March 31,

Product subscriptions $ 196,918 $ 173,772

Professional services 8,183 9,402

1 unchanged sentence

Cost of revenue:

Products 51,261 45,957 150,597 135,296

Product subscriptions 54,655 48,188

Professional services 6,248 7,811

5 unchanged sentences

General and administrative 19,835 24,207

Impairment of long-lived assets 3,553 — 30,784 —

Restructuring 19,996 — 19,996 —

Total operating expenses 133,630 151,140

Loss from operations ( 16,041 ) ( 23,236 ) ( 91,665 ) ( 98,266 )

Income (loss) from operations 10,568 ( 23,965 )

Other income (expense), net:

2 unchanged sentences

Other income (expense), net ( 1,435 ) ( 307 )

Loss before income taxes ( 74,529 ) ( 27,692 ) ( 165,763 ) ( 110,824 )

Income (loss) before income taxes 11,183 ( 25,321 )

Provision for income taxes 8,925 594

Net loss $ ( 76,611 ) $ ( 28,727 ) $ ( 169,308 ) $ ( 113,332 )

Net loss per share, basic and diluted $ ( 1.25 ) $ ( 0.49 ) $ ( 2.80 ) $ ( 1.95 )

Weighted-average common shares outstanding, basic and diluted 61,065,157 58,730,651 60,506,082 58,229,872

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

Consolidated Statements of Comprehensive Loss (Unaudited)

Net income (loss) $ 2,258 $ ( 25,915 )

Net income (loss) per share, basic $ 0.04 $ ( 0.43 )

Net income (loss) per share, diluted $ 0.03 $ ( 0.43 )

Weighted-average common shares outstanding, basic 61,907,808 59,888,119

Weighted-average common shares outstanding, diluted 74,021,704 59,888,119

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

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(in thousands)

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

2023 2022 2023 2022

Net loss $ ( 76,611 ) $ ( 28,727 ) $ ( 169,308 ) $ ( 113,332 )

Three Months Ended March 31,

Net income (loss) $ 2,258 $ ( 25,915 )

Other comprehensive income (loss):

Change in fair value of cash flow hedges ( 629 ) 192

Adjustments for net (gains) losses realized on cash flow hedges and included in net loss ( 49 ) 1,361 531 2,438

Adjustment for net losses realized on cash flow hedges and included in net income (loss), net of taxes ( 381 ) 641

Total change in unrealized (losses) gains on cash flow hedges ( 1,010 ) 833

Change in unrealized gains (losses) on investments 97 ( 166 ) 539 ( 1,044 )

Change unrealized (losses) gains on investments ( 555 ) 378

Total other comprehensive (loss) income ( 1,565 ) 1,211

Comprehensive loss $ ( 77,683 ) $ ( 30,887 ) $ ( 168,719 ) $ ( 119,218 )

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

Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)

Comprehensive income (loss) $ 693 $ ( 24,704 )

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

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

Three Months Ended March 31, 2024 and 2023

(in thousands)

6 unchanged sentences

Shares Amount Shares Amount

Balance, June 30, 2023 60,940 $ 609 570 $ ( 4,765 ) $ 846,326 $ 250 $ ( 953,442 ) $ ( 111,022 )

Stock-based compensation expense — — — — 23,719 — — 23,719

Issuance of common stock under employee stock purchase plan 152 2 — — 5,147 — — 5,149

Vesting of restricted stock units 338 3 — — ( 3 ) — — —

Shares withheld for employee taxes ( 29 ) — — — ( 1,421 ) — — ( 1,421 )

Issuance of common stock upon exercise of stock options 21 — — — 302 — — 302

Purchase of capped calls related to convertible senior notes — — — — ( 36,570 ) — — ( 36,570 )

Repurchase and inducement of convertible senior notes — — — — 35,881 — — 35,881

Other comprehensive loss — — — — — ( 1,072 ) — ( 1,072 )

Net loss — — — — — — ( 76,611 ) ( 76,611 )

Balance, September 30, 2023 61,422 $ 614 570 $ ( 4,765 ) $ 873,381 $ ( 822 ) $ ( 1,030,053 ) $ ( 161,645 )

Common stock Treasury stock Additional

paid-in-capital Accumulated

comprehensive

loss Accumulated

deficit Total

stockholders’

Shares Amount Shares Amount

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

Balance, December 31, 2023 61,714 $ 617 570 $ ( 4,765 ) $ 894,630 $ 1,344 $ ( 1,010,005 ) $ ( 118,179 )

Stock-based compensation expense — — — — 26,487 — — 26,487

4 unchanged sentences

Other comprehensive loss — — — — — ( 1,565 ) — ( 1,565 )

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

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

Net income — — — — — — 2,258 2,258

Balance, March 31, 2024 62,269 $ 623 570 $ ( 4,765 ) $ 925,661 $ ( 221 ) $ ( 1,007,747 ) $ ( 86,449 )

Common stock Treasury stock Additional

12 unchanged sentences

Issuance of common stock in relation to an acquisition 74 1 — — ( 1 ) — — —

Repurchase of common stock in relation to acquisition — — 83 ( 1 ) 1 — — —

Reclassification of 2023 capped calls from equity to derivative asset — — — — 33,029 — — 33,029

Purchase of capped calls related to convertible senior notes — — — — ( 36,570 ) — — ( 36,570 )

Repurchase and inducement of convertible senior notes — — — — 35,881 — — 35,881

Repurchase of common stock issued in relation to acquisition — — 83 ( 1 ) 1 — — —

Other comprehensive gain — — — — — 1,211 — 1,211

Net loss — — — — — — ( 25,915 ) ( 25,915 )

Balance, September 30, 2023 61,422 $ 614 570 $ ( 4,765 ) $ 873,381 $ ( 822 ) $ ( 1,030,053 ) $ ( 161,645 )

Common stock Treasury stock Additional

paid-in-capital Accumulated

comprehensive

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 )

Stock-based compensation expense — — — — 96,111 — — 96,111

Issuance of common stock under employee stock purchase plan 218 2 — — 11,941 — — 11,943

Vesting of restricted stock units 1,147 11 — — ( 11 ) — — —

Shares withheld for employee taxes ( 82 ) — — — ( 6,743 ) — — ( 6,743 )

Issuance of common stock upon exercise of stock options 193 2 — — 1,619 — — 1,621

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 — — — — — ( 5,886 ) — ( 5,886 )

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

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

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

Consolidated Statements of Cash Flows (Unaudited)

Balance, March 31, 2023 60,322 $ 603 570 $ ( 4,765 ) $ 780,850 $ ( 200 ) $ ( 886,660 ) $ ( 110,172 )

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

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net loss $ ( 169,308 ) $ ( 113,332 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss) $ 2,258 $ ( 25,915 )

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 11,348 11,050

1 unchanged sentence

Stock-based compensation expense 24,893 29,373

Impairment of long-lived assets 30,784 —

Change in fair value of derivative assets 15,511 —

Induced conversion expense 53,889 —

Deferred income taxes 1,840 —

Other ( 203 ) 995

Changes in operating assets and liabilities:

Changes in assets and liabilities:

Accounts receivable 39,529 35,805

7 unchanged sentences

Cash flows from investing activities:

Business acquisition, net of cash acquired ( 34,841 ) —

Business acquisitions, net of cash acquired — ( 34,033 )

Purchases of property and equipment ( 620 ) ( 2,285 )

Capitalization of internal-use software costs ( 13,033 ) ( 12,648 )

Capitalization of internal-use software ( 2,916 ) ( 4,776 )

Purchases of investments ( 93,158 ) ( 4,883 )

Sales/maturities of investments 100,700 86,379

Other investments — ( 1,000 )

Sales and maturities of investments 55,000 35,800

Net cash used in investing activities ( 41,694 ) ( 10,177 )

Cash flows from financing activities:

Proceeds from issuance of convertible senior notes, net of issuance costs paid of $ 7,200

Purchase of capped calls related to convertible senior notes ( 36,570 ) —

Payments of debt issuance costs — ( 71 )

Payments for repurchase of convertible senior notes ( 199,998 ) ( 12 )

Payments related to business acquisitions — ( 2,250 )

Proceeds from capped call settlement 17,518 —

Taxes paid related to net share settlement of equity awards ( 1,764 ) ( 1,267 )

3 unchanged sentences

Effect of exchange rate changes on cash ,cash equivalents and restricted cash ( 1,493 ) ( 33 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 24,589 ) 3,851

Net decrease in cash, cash equivalents and restricted cash ( 7,755 ) ( 1,530 )

Cash, cash equivalents and restricted cash, beginning of period 214,130 207,804

5 unchanged sentences

Cash and cash equivalents $ 198,716 $ 205,757

Restricted cash included in prepaid expenses and other assets 488 $ 515

Restricted cash included in other assets and prepaid expenses and other current assets 7,659 517

Total cash, cash equivalents and restricted cash $ 206,375 $ 206,274

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

Notes to Consolidated Financial Statements (Unaudited)

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies

Description of Business

and subsidiaries (“we,” “us” or “our”) are advancing security with visibility, analytics, and automation delivered through our Insight Platform.

and subsidiaries (“we,” “us” or “our”) are advancing security with visibility, analytics, and automation delivered through our platform solutions.

Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks.

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as well as pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting.

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as well as pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting.

Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 26, 2024.

The consolidated financial statements include our results of operations and those of our wholly-owned subsidiaries and reflect all adjustments (consisting solely of normal, recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented.

All intercompany transactions and balances have been eliminated in consolidation.

The results of operations for the three and nine months ended September 30, 2023 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, 2024 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Use of Estimates

5 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, 2023.

There have been no changes to the significant accounting policies, other than restructuring expense noted below, during the three and nine-month periods ended September 30, 2023.

Restructuring Expense

We record restructuring expense when management commits to and approves a restructuring plan, the restructuring plan identifies all significant actions, the period of time to complete the restructuring plan indicates that significant changes to the restructuring plan are not likely to occur, and employees who are impacted have been notified of the pending involuntary termination.

A restructuring plan generally includes significant actions involving employee-related severance charges, employee-related benefits, and other charges associated with the restructuring (collectively, “restructuring expense”).

Restructuring expense is recorded within restructuring in the condensed consolidated statement of operations.

The restructuring liability accrued but not paid at the end of the reporting period is included within accrued expenses in the condensed consolidated balance sheet.

Restricted Cash

As of March 31, 2024, we had $ 7.7 million of restricted cash recorded on our condensed consolidated balance sheet in prepaid expenses and other current assets and other assets in letters of credit outstanding as collateral for certain office space leases.

Recent Accounting Pronouncements

2 unchanged sentences

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 and (2) 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 nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

(in thousands)

Subscriptions $ 189,596 $ 165,687 $ 544,391 $ 470,925

Professional services 8,967 9,269 27,090 25,961

Other 280 809 958 3,718

Total revenue $ 198,843 $ 175,765 $ 572,439 $ 500,604

Subscriptions

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

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

Product Subscriptions

Product subscriptions consists primarily of revenue from our cloud-based subscription, managed services offerings, term software licenses, content subscriptions and 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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• 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.

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

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

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

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.

Professional Services

All of our professional services are considered distinct performance obligations when sold stand alone or with other products.

These contracts generally have terms of one year or less.

The majority of our professional services contracts have terms of one year or less.

For the majority of these contracts, revenue is recognized over time based upon the proportion of work performed to date.

2 unchanged sentences

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

For the three months ended September 30, 2023 and 2022, we recognized revenu e of $ 174.3 million and $ 153.8 million, respectively, and for the nine months ended September 30, 2023 and 2022, we recognized $ 366.5 million a nd $ 308.3 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.

For the three months ended March 31, 2024 and 2023, we recognized revenue of $ 179.3 million and $ 163.4 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.

We receive payments from customers based upon contractual billing schedules.

2 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 September 30, 2023 and December 31, 2022, unbilled receivables of $ 2.4 million and $ 1.1 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of September 30, 2023 and December 31, 2022, we had no contract assets recorded on our consolidated balance sheet.

As of March 31, 2024 and December 31, 2023, unbilled receivables of $ 2.5 million and $ 1.1 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet.

As of March 31, 2024 and December 31, 2023, we had no contract assets recorded on our condensed 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, 2023.

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, 2024.

The estimated revenues do not include unexercised contract renewals.

1 unchanged sentence

(in thousands)

Subscriptions $ 507,807 $ 234,563

Product subscriptions $ 554,573 $ 271,822

Professional services 16,414 8,302

Other 1,255 428

Total $ 570,987 $ 280,124

Business Combinations

Minerva Labs Ltd.

On March 14, 2023, we acquired Minerva Labs Ltd.

1 unchanged sentence

The purchase consideration consisted of $ 35.0 million paid in cash at closing and a $ 0.4 million receivable for purchase price adjustments.

Additionally, we issued an aggregate of 73,846 shares of our common stock to the founders of Minerva with a fair value of $ 3.6 million.

The 73,846 shares of common stock will be accounted for as stock-based compensation expense over a 24-month period as continued service is required for the founders to receive their full amount of common stock.

In the three and nine months ended September 30, 2023, we recognized stock-based compensation expense related to such shares in the amount of $ 0.4 million and $ 1.0 million, respectively.

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 $ 34,977

Estimated purchase price receivable adjustment ( 365 )

Fair value of total consideration transferred $ 34,612

Recognized amount of identifiable assets acquired and liabilities assumed:

Cash and cash equivalents $ 136

Other current assets 1,792

Other assets 43

Accounts payable and other current liabilities ( 438 )

Other long-term liabilities ( 395 )

Intangible asset 12,800

Total identifiable net assets assumed $ 13,938

Goodwill 20,674

Total purchase price allocation $ 34,612

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

We identified developed technology as the sole acquired intangible asset.

The estimated fair value of the developed technology intangible asset was $ 12.8 million which was based on a valuation using the income approach.

The estimated useful life of the developed technology is 8 years.

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

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

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

The fair value of net assets acquired, goodwill and intangible assets were $ 13.9 million, $ 20.7 million and $ 12.8 million, respectively.

The goodwill was allocated to our one reporting unit.

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

In the nine months ended September 30, 2023, we recorded $ 0.4 million of acquisition-related transaction costs related to the acquisition of Minerva to general and administrative expense.

Our revenue and net loss attributable to the Minerva business for the three and nine months ended September 30, 2023 was not material.

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

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

In the first quarter of 2024, we sold acquired intellectual property through a non-cash intercompany transaction, which resulted in $ 4.6 million of current tax expense and $ 1.8 million of deferred tax expense in Israel.

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

As of September 30, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

As of March 31, 2024

Losses Fair Value

(in thousands)

government agencies $ 185,587 $ — $ ( 265 ) $ 185,322

Corporate bonds 1,501 — ( 10 ) 1,491

Agency bonds 3,250 — ( 26 ) 3,224

U.S government agencies $ 265,617 $ 60 $ ( 222 ) $ 265,455

Total $ 265,617 $ 60 $ ( 222 ) $ 265,455

As of December 31, 2023

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Losses Fair Value

(in thousands)

U.S government agencies $ 222,820 $ 467 $ ( 65 ) $ 223,222

Corporate bonds 14,351 — ( 230 ) 14,121

Commercial paper 7,944 — — 7,944

Agency bonds 2,500 — ( 7 ) 2,493

Total $ 225,320 $ 467 $ ( 72 ) $ 225,715

As of September 30, 2023, our available-for-sale investments had maturities ranging from 1 to 18 months.

As of March 31, 2024, our available-for-sale investments had maturities ranging from 1 to 16 months.

As of December 31, 2023, our available-for-sale investments had maturities ranging from 1 to 18 months.

For all of our investments for which the amortized cost basis was greater than the fair value at September 30, 2023 and December 31, 2022, 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 March 31, 2024 and December 31, 2023, 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.

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

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.

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 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 September 30, 2023

As of March 31, 2024

Level 1 Level 2 Level 3 Total

(in thousands)

Government agencies $ 185,322 $ — $ — $ 185,322

Money market funds $ 116,710 $ — $ — $ 116,710

Agency bonds — 3,224 — 3,224

Corporate bonds — 1,491 — 1,491

Total $ 250,914 $ 4,715 $ — $ 255,629

Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities) $ — $ 817 $ — $ 817

Total $ — $ 817 $ — $ 817

government agencies 265,455 — — 265,455

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets and other assets) — 499 — 499

Total assets $ 382,165 $ 499 $ — $ 382,664

Foreign currency forward contracts designated as cash flow hedges (other current liabilities) — 242 — 242

Total liabilities $ — $ 242 $ — $ 242

As of December 31, 2023

3 unchanged sentences

government agencies 223,222 — — 223,222

Corporate bonds — 14,121 — 14,121

Commercial paper — 7,944 — 7,944

Agency bonds — 2,493 — 2,493

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets) — 988 — 988

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets and other assets) — 1,322 — 1,322

Total assets $ 347,728 $ 3,815 $ — $ 351,543

Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities) $ — $ 1,559 $ — $ 1,559

Foreign currency forward contracts designated as cash flow hedges (other current liabilities) — 55 — 55

Total liabilities $ — $ 55 $ — $ 55

As of September 30, 2023, the fair value of our 2.25 %, 0.25 % and 1.25 % convertible senior notes due 2025, 2027 and 2029, as further described in Note 10, Debt , was $ 47.1 million, $ 511.1 million and $ 290.7 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.

As of March 31, 2024, the fair value of our 2.25 %, 0.25 % and 1.25 % convertible senior notes due 2025, 2027 and 2029, as further described in Note 10, Debt , was $ 47.1 million, $ 525.3 million and $ 304.2 million, respectively, based upon quoted market prices.

We consider the fair value of the Notes (as defined in Note 10, Debt) 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, 2023 As of December 31, 2022

March 31, December 31,

(in thousands)

2 unchanged sentences

Leasehold improvements 56,158 56,151

56,037 66,180

Total 93,965 93,443

1 unchanged sentence

Property and equipment, net $ 37,266 $ 39,642

(1) As of September 30, 2023, leasehold improvements with a net book value of $ 8.6 million were recorded as an impairment of long-lived assets related to certain idle office space at our corporate headquarters in Boston, Massachusetts and idle office space in Los Angeles, California, and Toronto, Canada.

Refer to Note 11, Leases, for further details on the impairment of long-lived assets.

Depreciation expense was $ 3.3 million and $ 3.5 million for the three months ended September 30, 2023 and 2022, respectively, and $ 10.9 million and $ 10.0 million for the nine months ended September 30, 2023 and 2022, respectively.

Goodwill and Intangible Assets

Goodwill was $ 536.3 million and $ 515.6 million as of September 30, 2023 and December 31, 2022, respectively.

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

(in thousands)

Balance at December 31, 2022 $ 515,631

Minerva acquisition 20,674

Balance at September 30, 2023 $ 536,305

We recorded depreciation expense of $ 2.9 million and $ 3.8 million for the three months ended March 31, 2024 and 2023, respectively.

Goodwill and Intangibles

Goodwill was $ 536.4 million as of March 31, 2024 and December 31, 2023.

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, 2023 As of December 31, 2022

Life (years) Gross Carrying

Average Estimated Useful Life (years) As of March 31, 2024 As of December 31, 2023

Gross Carrying

Amount Accumulated

10 unchanged sentences

Total intangible assets $ 208,083 $ ( 119,239 ) $ 88,844 $ 205,345 $ ( 110,799 ) $ 94,546

Amortization expense was $ 8.3 million and $ 6.7 million for the three months ended September 30, 2023 and 2022, respectively and $ 23.6 million and $ 20.6 million for the nine months ended September 30, 2023 and 2022, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of September 30, 2023 was as follows (in thousands):

2023 (for the remaining three months) $ 7,777

Amortization expense was $ 8.4 million and $ 7.2 million and for the three months ended March 31, 2024 and 2023, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of March 31, 2024 was as follows (in thousands):

2024 (for the remaining nine months) $ 23,643

2029 and thereafter 3,531

Total $ 81,644

The table above excludes the impact of $ 10.5 million of capitalized internal-use software costs for projects that have not been completed as of September 30, 2023, and therefore, we have not determined the useful life of the software, nor have all the costs associated with these projects been incurred.

For the nine months ended September 30, 2023, we recorded a $ 3.5 million impairment of capitalized internal-use software costs to research and development expense in our consolidated statement of operations for projects that have been discontinued and will not be placed into service.

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, 2023 and 2022:

Nine Months Ended September 30,

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, 2024, and therefore, all the costs associated with these projects have not been incurred.

Deferred Contract Acquisitions and Fulfillment Costs

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands)

3 unchanged sentences

Ending balance $ 122,289 $ 105,315

Derivatives and Hedging Activities

Derivative and Hedging Activities

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 September 30, 2023 and December 31, 2022, outstanding forward contracts had a total notional value of $ 50.3 million and $ 44.9 million, respectively.

These forward contracts have contractual maturities of seventeen months or less, and as of March 31, 2024 and December 31, 2023, outstanding forward contracts had a total notional value of $ 46.8 million and $ 44.9 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 nine months ended September 30, 2023, all cash flow hedges were considered effective.

During the three months ended March 31, 2024, all cash flow hedges were considered effective.

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

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In May 2020, we issued $ 230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the “2025 Notes”) in March 2021, we issued $ 600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the “2027 Notes”) and in September 2023, we issued $ 300.0 million aggregate principal amount of convertible senior notes due March 15, 2029 (the “2029 Notes”) (collectively, the “Notes”).

In September 2023, we used $ 201.0 million of the proceeds from the issuance of the 2029 Notes to repurchase and retire $ 184.0 million aggregate principal amount of the 2025 Notes and paid accrued and unpaid interest thereon.

Further details of the Notes are as follows:

5 unchanged sentences

Trust Company, Bank National Association, as trustee (the “Indentures”).

The total net proceeds from the 2025 Notes, the 2027 Notes and the 2029 Notes offerings, after deducting initial purchase discounts and estimated debt issuance costs, were $ 222.8 million, $ 585.0 million and $ 292.0 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 September 30, 2020 for the 2025 Notes, March 20, 2024 for the 2027 Notes and September 21, 2026 for the 2029 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 and the 2029 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 September 30, 2023, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder.

The total net proceeds from the 2025 Notes, the 2027 Notes and the 2029 Notes offerings, after deducting initial purchase discounts and debt issuance costs, were $ 222.8 million, $ 585.0 million and $ 292.0 million, respectively.

For additional details on the terms of our Notes, see Note 11, Debt , to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2024, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holders.

The holders may convert the 2025 Notes, the 2027 Notes and the 2029 Notes at any time on or after November 1, 2024, December 15, 2026 and December 15, 2028, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the circumstances set forth above.

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 Indentures.

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.

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.

The 2025 Notes, the 2027 Notes and the 2029 Notes are redeemable after May 6, 2023, March 20, 2024 and September 21, 2026 (the “Redemption Dates”), respectively.

On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2025 Notes, the 2027 Notes or the 2029 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 2025 Notes, the 2027 Notes or the 2029 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Partial Repurchase and Conversion of the 2025 Notes

As a result of the induced conversion, we recorded $ 53.9 million in non-cash induced conversion expense which is included in interest expense in our consolidated statement of operations.

The induced conversion expense represents the fair value of the consideration issued upon conversion in excess of the fair value of the securities issuable under the original terms of the 2025 Notes.

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.

Accounting for the Notes

In accounting for the issuance of the Notes, the principal less debt issuance costs are recorded as debt on our consolidated balance sheet.

In accounting for the issuance of the Notes, the principal less debt issuance costs are recorded as debt on our condensed consolidated balance sheet.

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 September 30, 2023 and December 31, 2022 was as follows (in thousands):

The net carrying amount of the Notes as of March 31, 2024 and December 31, 2023 was as follows (in thousands):

2025 Notes 2027 Notes 2029 Notes

1 unchanged sentence

Balance at December 31, 2023 $ 45,992 $ ( 404 ) $ 45,588 $ 600,000 $ ( 8,077 ) $ 591,923 $ 300,000 $ ( 7,515 ) $ 292,485

Issuance — — — — — — 300,000 ( 7,984 ) $ 292,016

Partial repurchase ( 184,000 ) 2,010 ( 181,990 ) — — — — —

Amortization of debt issuance costs — 75 75 — 620 620 — 310 310

Balance at September 30, 2023 $ 45,992 $ ( 480 ) $ 45,512 $ 600,000 $ ( 8,709 ) $ 591,291 $ 300,000 $ ( 7,911 ) $ 292,089

Balance at March 31, 2024 $ 45,992 $ ( 329 ) $ 45,663 $ 600,000 $ ( 7,457 ) $ 592,543 $ 300,000 $ ( 7,205 ) $ 292,795

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

Three Months Ended September 30,

2025 Notes 2027 Notes 2029 Notes Total 2025 Notes 2027 Notes Total

Contractual interest expense $ 948 $ 375 $ 229 $ 1,552 $ 1,292 $ 377 $ 1,669

Amortization of debt issuance costs 289 631 73 993 371 626 997

Total interest expense $ 1,237 $ 1,006 $ 302 $ 2,545 $ 1,663 $ 1,003 $ 2,666

Nine Months Ended September 30,

Three Months Ended March 31,

2025 Notes 2027 Notes 2029 Notes Total 2025 Notes 2027 Notes Total

2 unchanged sentences

Total interest expense $ 334 $ 995 $ 1,247 $ 2,576 $ 1,634 $ 981 $ 2,615

In connection with the offering of the 1.25 % convertible senior notes due 2023 (the “2023 Notes”), the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2023 Capped Calls, “2025 Capped Calls”, “2027 Capped Calls” and “2029 Capped Calls”) (collectively, the “Capped Calls”).

In connection with the offering of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2025 Capped Calls”, “2027 Capped Calls” and “2029 Capped Calls”) (collectively, the “Capped Calls”).

The Capped Calls are expected to reduce potential dilution to our common stock upon conversion of a given series of notes and/or offset any cash payments that we are required to make in excess of the principal amount of converted notes of such series, as the case may be, with such reduction and/or offset subject to a cap.

2 unchanged sentences

The following table sets forth other key terms and premiums paid for the Capped Calls related to each series of Notes:

Capped Calls Entered into in Connection with the Issuance of the 2023 Notes Capped Calls Entered into in Connection with the Issuance of the 2025 Notes Capped Calls Entered into in Connection with the Issuance of the 2027 Notes Capped Calls Entered into in Connection with the Issuance of the 2029 Notes

Capped Calls Entered into in Connection with the Issuance of the 2025 Notes Capped Calls Entered into in Connection with the Issuance of the 2027 Notes Capped Calls Entered into in Connection with the Issuance of the 2029 Notes

Initial strike price, subject to certain adjustments $ 61.02 $ 103.38 $ 64.85

1 unchanged sentence

Total premium paid (in thousands) $ 27,255 $ 76,020 $ 36,570

Expiration dates June 2, 2023 - August 1, 2023 March 4, 2025 - April 29, 2025 January 1, 2027 - March 11, 2027 February 13, 2029 - March 13, 2029

For accounting purposes, the 2023 Capped Calls, the 2025 Capped Calls, the 2027 Capped Calls and the 2029 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes, the 2025 Notes, the 2027 Notes and the 2029 Notes.

The 2023 Notes, 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

The 2025 Capped Calls were not redeemed with the partial repurchase of the 2025 Notes and remain outstanding.

The 2023 Capped Calls were not redeemed with the repayment of the 2023 Notes in 2021.

In accordance with the terms of the Capped Calls agreements, we elected to cash-settle the 2023 Capped Calls via written notice provided to the counterparties on May 31, 2023 (the “Notice Date”).

The 2023 Capped Calls were settled over a 40 -day trading period from June 2, 2023 to August 1, 2023, with a settlement date of August 3, 2023.

Since cash settlement was elected, pursuant to ASC 815, the 2023 Capped Calls were deemed to meet the definition of a derivative instrument, requiring reclassification from stockholder's equity to a derivative asset at the fair value on the Notice Date, with subsequent changes in fair value to be recorded to earnings through the settlement date.

The fair value on the Notice Date of $ 33.0 million was reclassified from stockholders' equity (additional paid-in capital) to derivative assets.

The change in fair value of the derivative asset from the Notice Date to September 30, 2023 was $ 15.5 million and recorded to other income (expense) on our consolidated statement of operations.

On August 3, 2023, we received $ 17.5 million in cash from the settlement of the 2023 Capped Calls.

Expiration dates March 4, 2025 - April 29, 2025 January 1, 2027 - March 11, 2027 February 13, 2029 - March 13, 2029

For accounting purposes, the 2025 Capped Calls, the 2027 Capped Calls and the 2029 Capped Calls are separate transactions, and not part of the terms of the 2025 Notes, the 2027 Notes and the 2029 Notes.

The 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

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 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 (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.

In April 2020, we entered into a Credit and Security Agreement (the Credit Agreement), with KeyBank National Association (as amended, in December 2021) that 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.

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

The fees are recorded in other current assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement.

The commitment fee of 0.2 % per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the consolidated statement of operations.

The fees are recorded in other current assets on the condensed consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement.

The commitment fee of 0.2 % per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the condensed consolidated statement of operations.

The Credit Agreement contains certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts.

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 September 30, 2023, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of September 30, 2023, we had a total of $ 9.0 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 8.5 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 4 years.

All of our leases are classified as operating leases.

The components of lease expense were as follows:

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

2023 2022 2023 2022

(in thousands)

Operating lease cost $ 3,799 $ 4,997 $ 12,716 $ 15,240

Short-term lease costs 322 461 959 1,315

Variable lease costs 1,681 2,184 6,141 6,716

Total lease costs $ 5,802 $ 7,642 $ 19,816 $ 23,271

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

As of September 30, 2023 As of December 31, 2022

Weighted average remaining lease term (in years) - operating leases 6.0 6.6

Weighted average discount rate - operating leases 6.3 % 6.2 %

Supplemental cash flow information related to leases was as follows:

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

2023 2022 2023 2022

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities $ 4,897 $ 3,057 $ 16,444 $ 11,093

ROU assets obtained in exchange for new lease obligations $ 620 $ 3,811 $ 4,457 $ 12,675

Maturities of operating lease liabilities as of September 30, 2023 were as follows (in thousands):

2023 (for the remaining three months) $ 3,469

2028 and thereafter 36,262

Total lease payments $ 112,770

imputed interest ( 19,233 )

Total $ 93,537

During the nine months ended September 30, 2023, we determined that triggering events occurred which indicated that the carrying value of our right-of-use (“ROU”) and other lease-related assets related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas, Los Angeles, California, and Toronto, Canada may not be fully recoverable.

As a result, we utilized discounted cash flow models to estimate the fair value of the asset groups taking into consideration the time period it will take to obtain sublessees, the applicable discount rate and the anticipated sublease income and calculated the corresponding impairment loss.

We used prices and other relevant information generated by recent market transactions involving similar or comparable assets, as well as our historical experience in real estate transactions.

In the three and nine months ended September 30, 2023, we recorded impairment losses of $ 3.6 million and $ 30.8 million, respectively, related to these idle office spaces.

In the three and nine months ended September 30, 2023, the impairment losses consisted of $ 2.0 million and $ 22.2 million, respectively, related to ROU assets and $ 1.6 million and $ 8.6 million, respectively, related to leasehold improvements associated with these leased office spaces.

As of March 31, 2024, we did not have any outstanding borrowings under the Credit Agreement.

As of March 31, 2024, we had a total of $ 7.4 million in letters of credit outstanding as collateral for certain office space leases which reduce the amount of borrowing available under our Credit Agreement.

Stock-Based Compensation Expense

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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Stock-based compensation expense for restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), stock options and purchase rights issued under our employee stock purchase plan was classified in the accompanying condensed consolidated statements of operations as follows:

Three Months Ended March 31,

(in thousands)

5 unchanged sentences

Total stock-based compensation expense $ 24,893 $ 29,373

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

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

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2024 and 2023 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 September 30, 2023 and 2022, we recognized stock-based compensation expense related to such bonuses in the amount of $ 50 thousand and $( 0.8 ) million, respectively, and during the nine months ended based September 30, 2023 and 2022, we recognized stock-based compensation expense related to such bonuses in the amount of $ 1.1 million and $ 0.8 million, respectively, on the probable expected performance against the pre-established corporate financial objectives as of September 30, 2023 and 2022.

During the three months ended March 31, 2024 and 2023, we recognized stock-based compensation expense related to such bonuses in the amount of

$ 0.1 million, and $ 0.7 million, based on the probable expected performance against the pre-established corporate financial objectives as of March 31, 2024 and 2023.

For 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 nine months ended September 30, 2023 was as follows:

Shares Weighted-Average

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, Restricted Stock Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the three months ended March 31, 2024 was as follows:

Shares Weighted-

Average Grant

Unvested balance as of December 31, 2023 2,714,426 63.02

2 unchanged sentences

Forfeited ( 245,501 ) 66.14

Unvested balance as of September 30, 2023 3,126,817 $ 62.79

As of September 30, 2023, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 265.8 million.

Unvested balance as of March 31, 2024 3,984,134 $ 59.52

As of March 31, 2024, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 214.7 million.

This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.3 years.

In February 2023, our Compensation Committee awarded 173,103 PSUs that require the achievement of an ARR target for the 2023 full-year to earn any payout and include a non-GAAP operating income margin modifier.

In addition, the portion of the PSUs that are earned will be capped at a maximum of 200 % of the target level payout and if certain ARR or non-GAAP operating income margin goals are not met, no PSUs will be earned.

In January 2024, our Com pensation Committee awarded 279,570 PSUs that required the achievement of net annualized recurring revenue (“Net ARR”) and Adjusted EBITDA targets for the 2024 full-year to earn any payout.

Net ARR is defined as the change in the annual value of all recurring revenue related to contracts in place at year end.

In addition, the portion of the PSUs that are earned would be capped at a maximum of 200 % of the target level payout and if certain net ARR or Adjusted EBITDA goals were not met, no PSUs will be earned.

The PSUs have a performance period of one year and the earned PSUs will vest in three equal installments following each of the first, second and third anniversary of the vesting commencement date, subject to the participant’s continuous service as of each such date.

Stock-based compensation expense related to these PSUs will be adjusted over the one-year performance period based on interim estimates of performance against the identified targets.

In the three months ended March 31, 2024, we recorded $ 0.9 million of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

Stock option activity during the nine months ended September 30, 2023 was as follows:

The following tables summarizes information about stock option activity during the reporting periods:

Shares Weighted

6 unchanged sentences

Forfeited/cancelled ( 450 ) 7.73

Outstanding as of September 30, 2023 723,632 $ 12.23 2.4 $ 24,276

Vested and exercisable as of September 30, 2023 723,632 $ 12.23 2.4 $ 24,276

Outstanding as of March 31, 2024 604,786 12.42 1.95 $ 22,146

Vested and exercisable as of March 31, 2024 604,786 12.42 1.95 $ 22,146

(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, 2023, we issued 177,886 shares of common stock to employees, with a purchase price of $ 34.71 per share, for aggregate proceeds of $ 6.2 million.

On September 15, 2023, we issued 152,419 shares of common stock to employees, with a purchase price of $ 33.78 per share, for aggregate proceeds of $ 5.1 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, 2023 and 2022:

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

2023 2022 2023 2022

On March 15, 2024, we issued shares of common stock to employees, with a purchase price of either $ 33.78 or $ 39.78 per share, for aggregate proceeds of $ 5.0 million.

Net Income (Loss) per Share

The following table summarizes the computation of basic and diluted net income (loss) per share of our common stock for the three months March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands, except share and per share data)

Net loss $ ( 76,611 ) $ ( 28,727 ) $ ( 169,308 ) $ ( 113,332 )

Weighted-average common shares outstanding, basic and diluted 61,065,157 58,730,651 60,506,082 58,229,872

Net loss per share, basic and diluted $ ( 1.25 ) $ ( 0.49 ) $ ( 2.80 ) $ ( 1.95 )

Net income (loss) $ 2,258 $ ( 25,915 )

Weighted-average common shares outstanding, basic 61,907,808 59,888,119

Weighted-average common shares outstanding, diluted 74,021,704 59,888,119

Net income (loss) per share, basic $ 0.04 $ ( 0.43 )

Net income (loss) per share, diluted $ 0.03 $ ( 0.43 )

We intend to settle any conversion of our 2025 Notes, 2027 Notes and 2029 Notes in cash, shares, or a combination thereof.

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 nine months ended September 30, 2023 and 2022, 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, the 2027 Notes and the 2029 Notes, we entered into 2023 Capped Calls, 2025 Capped Calls, 2027 Capped Calls and 2029 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.

As further described in Note 10, Debt, the 2023 Capped Calls were not redeemed with the redemption of the 2023 Notes.

The 2025 Capped Calls were not redeemed with the partial repurchase of the 2025 Notes and remain outstanding.

As of September 30, 2023 and 2022, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder.

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

For the three months ended March 31, 2024 and 2023, the shares underlying the Notes were not considered in the calculation of diluted net income (loss) per share as the effect would have been anti-dilutive.

In connection with the issuance of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into 2025 Capped Calls, 2027 Capped Calls and 2029 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.

As further described in Note 10, Debt , the 2025 Capped Calls were not redeemed with the partial repurchase of the 2025 Notes and remain outstanding.

As of March 31, 2024 and 2023, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder.

We had not received any conversion notices through the issuance date of our unaudited condensed 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 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 Nine Months Ended September 30,

Three Months Ended March 31,

Options to purchase common stock 604,786 915,314

Unvested restricted stock units 3,984,134 4,246,259

Common stock issued in conjunction with acquisitions 115,041 240,041

Common stock issued in conjunction to acquisitions 36,923 148,473

Shares to be issued under ESPP 15,902 31,793

7 unchanged sentences

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.

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.

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.

8 unchanged sentences

Our chief operating decision maker is our Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.

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,

2023 2022 2023 2022

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

Three Months Ended March 31,

(in thousands)

United States $ 147,929 $ 131,628 $ 427,629 $ 376,752

Other 50,914 44,137 144,810 123,852

North America $ 157,340 $ 137,111

Rest of world 47,761 46,063

Total $ 205,101 $ 183,174

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

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

(in thousands)

United States $ 29,709 $ 41,570

Other 12,740 16,321

North America $ 25,949 $ 27,609

Rest of world 11,317 12,033

Total $ 37,266 $ 39,642

2 unchanged sentences

The Restructuring Plan included a reduction of the Company’s workforce by approximately 16 %.

During the three months ended September 30, 2023, we incurred $ 20.0 million of restructuring charges which were recorded within restructuring in the condensed consolidated statements of operations.

In addition, we incurred $ 1.2 million of stock-based compensation expense related to acceleration of share-based awards.

As of September 30, 2023, the restructuring liability accrued but not paid totaled $ 4.7 million, which is included within accrued expenses in the condensed consolidated balance sheets.

We expect the remainder of the restructuring charges of approximately $ 3.5 million to be incurred in the fourth quarter of 2023 and the execution of the Restructuring Plan to be substantially complete by the end of the fourth quarter of 2023.

Potential position eliminations in each country are subject to local law and consultation requirements, which may extend this process beyond the fourth quarter of 2023 in certain countries.

The charges that we expect to incur are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual expenses may differ materially from the estimates disclosed above.

We permanently closed certain idle office spaces in Plano, Texas, Los Angeles, California and Toronto, Canada, which resulted in an impairment loss in the three months ended September 30, 2023 of $ 3.6 million.

Refer to Note 11, Leases, for further details on the impairment of long-lived assets.

The following table presents the activity of the restructuring liability for the three months ended September 30, 2023:

In the three months ended March 31, 2024, the execution of the Restructuring Plan was completed and we recorded $( 0.2 ) million of restructuring charges within general and administrative expense in the condensed consolidated statements of operations.

As of March 31, 2024, the restructuring liability accrued but not paid totaled $ 0.1 million, which is included within accrued expenses in the condensed consolidated balance sheets.

The following table presents the activity of the restructuring liability for the year ended March 31, 2024:

Restructuring Liability

3 unchanged sentences

Payments ( 3,441 )

Balance at September 30, 2023 $ 4,678

Balance at March 31, 2024 $ 133

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