What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-10 compared with 2020-08-06 · 172 added, 123 removed, 401 unchanged (42% of the section changed)

17 unchanged sentences

Additional product modules, which offer increased functionality depending on a customer’s needs, can be purchased by the customer on a per user per month basis.

We generated revenue of $31.4 million and $24.8 million during the three months ended June 30, 2020 and 2019 , respectively, representing growth of 27% .

Excluding the impact of the 2017 acquisition of Simply Measured, Inc., or Simply Measured, our organic growth rate during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was 35%.

We generated revenue of $33.7 million and $26.4 million during the three months ended September 30, 2020 and 2019, respectively, representing growth of 27%.

Excluding the impact of the 2017 acquisition of Simply Measured, Inc., or Simply Measured, our organic growth rate during the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was 34%.

This organic growth rate excludes the impact of revenue generated from legacy Simply Measured products as well as revenue from the transition of legacy customers to our platform up to an amount equal to such customers’ prior spend on legacy Simply Measured products.

This organic growth rate includes all incremental revenue generated above such prior spend from the sale of additional or higher-priced products and users and profiles to legacy customers of Simply Measured.

We generated revenue of $61.9 million and $48.1 million during the six months ended June 30, 2020 and 2019 , respectively, representing growth of 29% .

We generated revenue of $95.6 million and $74.6 million during the nine months ended September 30, 2020 and 2019, respectively, representing growth of 28%.

Our organic growth rate was 37% during the same period.

In the three and six months ended June 30, 2020 , software subscriptions contributed 99% of our revenue.

We generated net losses of $8.3 million and $10.8 million during the three months ended June 30, 2020 and 2019 , respectively, which included stock-based compensation expense of $2.5 million and $5.3 million during the three months ended June 30, 2020 and 2019 , respectively.

We generated net losses of $18.8 million and $15.9 million during the six months ended June 30, 2020 and 2019 , respectively, which included stock-based compensation expense of $6.0 million and $5.3 million during the six months ended June 30, 2020 and 2019 , respectively.

In the three and nine months ended September 30, 2020, software subscriptions contributed 99% of our revenue.

We generated net losses of $7.0 million and $5.0 million during the three months ended September 30, 2020 and 2019, respectively, which included stock-based compensation expense of $2.6 million and $0.1 million during the three months ended September 30, 2020 and 2019, respectively.

We generated net losses of $25.8 million and $21.0 million during the nine months ended September 30, 2020 and 2019, respectively, which included stock-based compensation expense of $8.6 million and $5.4 million during the nine months ended September 30, 2020 and 2019, respectively.

We expect to continue investing in the growth of our business and, as a result, generate net losses for the foreseeable future.

2 unchanged sentences

The extent of the impact of COVID-19 on our operational and financial performance and financial position will depend on certain developments, including the duration and spread of the outbreak and the governmental responses to address the pandemic and any re-emergence of COVID-19, impact on our customers and sales cycles and impact on our employees, all of which are uncertain and cannot be predicted.

Given the importance of our technology platform and heightened market awareness of social media as a strategic communications channel, our operational and financial performance were not materially impacted by COVID-19 during the six months ended June 30, 2020 .

Our recent IPO in December 2019 resulted in $134.3 million net proceeds, as well as an additional $10.0 million of net proceeds received in January 2020 as a result of our sale of over-allotment shares to the underwriters of our IPO, all of which strengthened our liquidity position prior to the pandemic.

The $42.1 million in net proceeds from our equity follow-on offering in August 2020 has further strengthened our liquidity position.

We believe that over the long-term, we will continue to see strong demand for our technology platform;

20 unchanged sentences

Revenue generated from non-U.S.

customers during the six months ended June 30, 2020 was approximately 28% of our total revenue.

customers during the nine months ended September 30, 2020 was approximately 28% of our total revenue.

We have built local teams in Ireland, Canada, the United Kingdom, Singapore, India and Australia to support our growth internationally.

7 unchanged sentences

We believe that the number of customers using our platform is an indicator not only of our market penetration, but also of our potential for future growth as our customers often expand their adoption of our platform over time based on an increased awareness of the value of our platform and products.

As of June 30,

As of September 30,

Number of customers 25,556 23,066

4 unchanged sentences

We believe total ARR is an indicator of the scale of our entire platform while mitigating fluctuations due to seasonality and contract term.

As of June 30,

As of September 30,

(in thousands)

$ 141,898 $ 109,486

Organic ARR is ARR excluding the impact of recurring revenue generated from legacy Simply Measured products.

We believe organic ARR is an indicator of the scale and visibility of our core platform while mitigating fluctuations due to seasonality and contract term.

As of June 30,

As of September 30,

(in thousands)

$ 140,615 $ 103,855

Number of customers contributing more than $10,000 in ARR

3 unchanged sentences

We define customers contributing more than $10,000 in ARR as those on a paid subscription plan that had more than $10,000 in ARR as of a period end.

As of June 30,

As of September 30,

Number of customers contributing more than $10,000 in ARR

11 unchanged sentences

Cost of revenue primarily consists of expenses related to hosting our platform and providing support to our customers.

These expenses are comprised of fees paid to data providers, hosted data

center costs and personnel costs directly associated with cloud infrastructure, customer success and customer support, including salaries, benefits, bonuses and allocated overhead.

These expenses are comprised of fees paid to data providers, hosted data center costs and personnel costs directly associated with cloud infrastructure, customer success and

customer support, including salaries, benefits, bonuses and allocated overhead.

These costs also include depreciation expense and amortization expense related to acquired developed technologies.

24 unchanged sentences

We also recognized certain non-recurring professional fees and other expenses as part of our transition to becoming a public company and expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply with rules and regulations applicable to companies listed on a U.S.

securities exchange, costs related to compliance and reporting obligations pursuant to the rules and

regulations of the SEC, investor relations and professional services.

We expect the dollar amount of our general and administrative expenses to increase for the foreseeable future.

securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, investor relations and professional services.

We expect the dollar amount of our

general and administrative expenses to increase for the foreseeable future.

However, we expect our general and administrative expenses to decrease as a percentage of revenue over time.

9 unchanged sentences

The following tables set forth information comparing the components of our results of operations in dollars and as a percentage of total revenue for the periods presented.

Three Months Ended June 30,

Six Months Ended June 30,

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

2020 2019 2020 2019

(in thousands)

Subscription $ 33,370 $ 26,284 $ 94,889 $ 74,285

Professional services and other 296 137 714 278

1 unchanged sentence

Cost of revenue (1)

Subscription 8,588 7,144 24,852 19,113

Professional services and other 186 85 450 175

Total cost of revenue 8,774 7,229 25,302 19,288

Gross profit 24,892 19,192 70,301 55,275

Operating expenses

Research and development (1)

7,693 6,361 22,686 19,137

Sales and marketing (1)

14,774 11,894 42,852 34,074

General and administrative (1)

9,346 6,056 30,970 23,417

Total operating expenses 31,813 24,311 96,508 76,628

2 unchanged sentences

Interest income 50 61 563 256

Other income 19 108 222 388

Loss before income taxes (6,946) (5,020) (25,707) (20,908)

3 unchanged sentences

(1) Includes stock-based compensation expense as follows:

Three Months Ended June 30,

Six Months Ended June 30,

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

2020 2019 2020 2019

(in thousands)

4 unchanged sentences

Total stock-based compensation $ 2,560 $ 65 $ 8,563 $ 5,363

Three Months Ended June 30,

Six Months Ended June 30,

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

2020 2019 2020 2019

(as a percentage of total revenue)

Subscription 99 % 99 % 99 % 100 %

Professional services and other 1 % 1 % 1 % — %

1 unchanged sentence

Cost of revenue

Subscription 26 % 27 % 26 % 26 %

Professional services and other — % — % — % — %

Total cost of revenue 26 % 27 % 26 % 26 %

Gross profit 74 % 73 % 74 % 74 %

Operating expenses

6 unchanged sentences

Interest income — % — % — % — %

Other income — % — % — % 1 %

Loss before income taxes (21) % (19) % (27) % (28) %

1 unchanged sentence

Net loss and comprehensive loss (21) % (19) % (27) % (28) %

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Three Months Ended June 30,

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Subscription $ 33,370 $ 26,284 $ 7,086 27 %

Professional services and other 296 137 159 116 %

1 unchanged sentence

Percentage of Total Revenue

Subscription 99 % 99 %

Professional services and other 1 % 1 %

The increase in subscription revenue was primarily driven by revenue from new customers and expansion within existing customers.

The total number of customers grew from 22,418 as of June 30, 2019 to 24,356 as of June 30, 2020 .

The increase in new customers was primarily driven by our growing sales

force capacity to meet market demand.

The total number of customers grew from 23,066 as of

September 30, 2019 to 25,556 as of September 30, 2020.

The increase in new customers was primarily driven by our growing sales force capacity to meet market demand.

Expansion within existing customers was driven by our ability to increase the number of users, social profiles and products purchased by customers.

1 unchanged sentence

Cost of Revenue and Gross Margin

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Cost of revenue

Subscription $ 8,588 $ 7,144 $ 1,444 20 %

Professional services and other 186 85 101 119 %

Total cost of revenue 8,774 7,229 $ 1,545 21 %

Gross profit $ 24,892 $ 19,192 $ 5,700 30 %

Total gross margin 74 % 73 %

The increase in cost of subscription revenue for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to the following:

The increase in cost of subscription revenue for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due to the following:

( in thousands )

Data provider fees $ 1,131

Personnel costs

Stock-based compensation expense 153

1 unchanged sentence

Fees paid to our data providers increased due to revenue growth.

Personnel costs increased primarily as a result of a 23% increase in headcount as we continue to grow our customer support and customer success teams to support our customer growth.

The increase in stock-based compensation was due to the expense related to employee restricted stock units (“RSUs”) vesting since the completion of our IPO on December 17, 2019.

1 unchanged sentence

Research and Development

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue 23 % 24 %

The increase in research and development expense for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to the following:

The increase in research and development expense for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due to the following:

( in thousands )

Stock-based compensation expense

Personnel costs $ 863

Stock-based compensation expense 509

Research and development $ 1,332

Personnel costs increased primarily as a result of an 8% increase in headcount to grow our research and development teams to drive our technology innovation through the development of new products and features.

The increase in stock-based compensation was due to the expense related to employee RSUs vesting since the completion of our IPO on December 17, 2019.

Personnel costs increased as a result of increased headcount to grow our research and development teams to drive our technology innovation through the development of new products and features.

Sales and Marketing

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue 44 % 45 %

The increase in sales and marketing expense for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to the following:

The increase in sales and marketing expense for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due to the following:

( in thousands )

5 unchanged sentences

General and Administrative

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue 28 % 23 %

The decrease in general and administrative expense for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 was primarily due to the following:

The increase in general and administrative expense for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily due to the following:

( in thousands )

Stock-based compensation expense

Personnel costs $ 1,617

Stock-based compensation expense 1,166

General and administrative $ 3,290

Personnel costs increased primarily as a result of a 29% increase in headcount as we continue to grow our business and operate as a publicly traded company.

The increase in stock-based compensation was due to the expense related to employee RSUs vesting since the completion of our IPO on December 17, 2019.

The increase in other was primarily driven by a $0.2 million increase in legal fees, an increase of $0.1 million in consulting fees, and overhead-related costs.

Interest Income (Expense), Net

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Interest income (expense), net

Interest income (expense), net $ (44) $ (9) $ (35) n/m (1)

Percentage of total revenue — % — %

2 unchanged sentences

The increase in net interest expense was driven by fees associated with our revolving line of credit.

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Other income $ 19 $ 108 $ (89) (82) %

Percentage of total revenue — % — %

The decrease in other income is due to sublease rental income declining as the San Francisco office leased expired in June 2019.

The decrease in other income is due to sublease rental income declining as the San Francisco office lease expired in June 2019.

Income Tax Expense

Three Months Ended June 30,

Three Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Income tax expense

Income tax expense $ 51 $ 19 $ 32 n/m (1)

Percentage of total revenue — % — %

1 unchanged sentence

(1) Calculated metric is not meaningful.

The decrease in income tax expense is due to the provision related to foreign income taxes.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Six Months Ended June 30,

The increase in income tax expense is due to the provision related to foreign income taxes.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Nine Months Ended September 30, Change

2020 2019 Amount

( dollars in thousands )

Subscription $ 94,889 $ 74,285 $ 20,604 28 %

Professional services and other 714 278 436 157 %

1 unchanged sentence

Percentage of Total Revenue

Subscription 99 % 100 %

Professional services and other 1 % — %

The increase in subscription revenue was primarily driven by revenue from new customers and expansion within existing customers.

The total number of customers grew from 22,418 as of June 30, 2019 to 24,356 as of June 30, 2020 .

The total number of customers grew from 23,066 as of September 30, 2019 to 25,556 as of September 30, 2020.

The increase in new customers was primarily driven by our growing sales force capacity to meet market demand.

2 unchanged sentences

Cost of Revenue and Gross Margin

Six Months Ended June 30,

Nine Months Ended September 30, Change

2020 2019 Amount

( dollars in thousands )

Cost of revenue

Subscription $ 24,852 $ 19,113 $ 5,739 30 %

Professional services and other 450 175 275 157 %

Total cost of revenue 25,302 19,288 $ 6,014 31 %

Gross profit $ 70,301 $ 55,275 $ 15,026 27 %

Total gross margin 74 % 74 %

The increase in cost of subscription revenue for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the following:

The increase in cost of subscription revenue for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following:

( in thousands )

8 unchanged sentences

Research and Development

Six Months Ended June 30,

Nine Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue 24 % 26 %

The increase in research and development expense for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the following:

The increase in research and development expense for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following:

( in thousands )

Stock-based compensation expense

Personnel costs $ 2,201

Stock-based compensation expense 1,443

Research and development $ 3,549

The increase in stock-based compensation was due to the expense related to employee RSUs vesting since the completion of our IPO on December 17, 2019.

Personnel costs increased as a result of increased headcount to grow our research and development teams to drive our technology innovation through the development of new products and features.

Sales and Marketing

Six Months Ended June 30,

Nine Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue 45 % 46 %

The increase in sales and marketing expense for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the following:

The increase in sales and marketing expense for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following:

( in thousands )

5 unchanged sentences

General and Administrative

Six Months Ended June 30,

Nine Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue 32 % 31 %

The increase in general and administrative expense for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 was primarily due to the following:

The increase in general and administrative expense for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily due to the following:

( in thousands )

Stock-based compensation expense

Personnel costs $ 5,528

Accounting and legal fees 787

Bad debt expense 707

Stock-based compensation expense (693)

General and administrative $ 7,553

The decrease in stock-based compensation was due to a restricted stock award to our Chief Executive Officer that immediately vested in June 2019, partially offset by the expense in 2020 related to employee RSUs vesting since the completion of our IPO on December 17, 2019, of which the largest component related to the vesting of a RSU award granted to our President and Chief Executive Officer in connection with achievement of a market capitalization threshold that immediately vested in February 2020.

Personnel costs increased primarily as a result of a 29% increase in headcount as we continue to grow our business and operate as a publicly traded company.

Accounting and legal fees increased due to operating as a publicly traded company and costs incurred with the equity follow-on offering.

Bad debt expense increased due to higher accounts receivable balances and our consideration of the potential impact of COVID-19 on our customers’ ability to pay.

The increase in other was primarily driven by an increase of $0.3 million in consulting fees, an increase of $0.3 million in charitable contributions, and other expenses related to overhead and operating as a publicly traded company.

Interest Income (Expense), Net

Six Months Ended June 30,

Nine Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Interest income (expense), net

Interest income (expense), net $ 278 $ 57 $ 221 n/m (1)

Percentage of total revenue — % — %

1 unchanged sentence

(1) Calculated metric is not meaningful.

The increase in net interest income was driven by interest earned on cash deposits related to our IPO Proceeds.

Six Months Ended June 30,

The increase in net interest income was primarily driven by interest earned on cash deposits and marketable securities related to our IPO and equity follow-on proceeds.

Nine Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

Other income $ 222 $ 388 $ (166) (43) %

Percentage of total revenue — % 1 %

The decrease in other income is due to sublease rental income declining as the San Francisco office leased expired in June 2019.

The decrease in other income is due to sublease rental income declining as the San Francisco office lease expired in June 2019.

Income Tax Expense

Six Months Ended June 30,

Nine Months Ended September 30, Change

2020 2019 Amount %

( dollars in thousands )

1 unchanged sentence

Percentage of total revenue — % — %

_________________

Calculated metric is not meaningful.

The decrease in income tax expense is due to the provision related to foreign income taxes.

The increase in income tax expense is due to the provision related to foreign income taxes.

Non-GAAP Financial Measures

6 unchanged sentences

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Three Months Ended June 30,

Six Months Ended June 30,

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

2020 2019 2020 2019

( dollars in thousands, except per share data )

5 unchanged sentences

We define non-GAAP operating loss as GAAP loss from operations, excluding stock-based compensation expense.

We believe non-GAAP operating loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance, particularly given the impact of stock-based compensation expense recognized in the six months ended June 30, 2020 after the completion of our December 2019 IPO.

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation of Non-GAAP operating loss

( dollars in thousands )

stock-based compensation expense recognized in the nine months ended September 30, 2020 after the completion of our December 2019 IPO.

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

2020 2019 2020 2019

Reconciliation of Non-GAAP operating loss ( dollars in thousands )

Loss from operations $ (6,921) $ (5,119) $ (26,207) $ (21,353)

3 unchanged sentences

We define non-GAAP net loss as GAAP net loss and comprehensive loss, excluding stock-based compensation expense.

We believe non-GAAP net loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance, particularly given the impact of stock-based compensation expense recognized in the six months ended June 30, 2020 after the completion of our December 2019 IPO.

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation of Non-GAAP net loss

( dollars in thousands )

We believe non-GAAP net loss provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance, particularly given the impact of stock-based compensation expense recognized in the nine months ended September 30, 2020 after the completion of our December 2019 IPO.

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

2020 2019 2020 2019

Reconciliation of Non-GAAP net loss ( dollars in thousands )

Net loss and comprehensive loss $ (6,997) $ (5,039) $ (25,779) $ (20,957)

3 unchanged sentences

We define non-GAAP net loss per share as GAAP net loss per share attributable to common shareholders, basic and diluted, excluding stock-based compensation expense.

We believe non-GAAP net loss per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance, particularly given the impact of stock-based compensation expense recognized in the six months ended June 30, 2020 after the completion of our December 2019 IPO.

Three Months Ended June 30,

Six Months Ended June 30,

We believe non-GAAP net loss per share provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this non-GAAP financial measure eliminates the effect of stock-based compensation, which is often unrelated to overall operating performance, particularly given the impact of stock-based compensation expense recognized in the nine months ended September 30, 2020 after the completion of our December 2019 IPO.

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

2020 2019 2020 2019

Reconciliation of Non-GAAP net loss per share

1 unchanged sentence

Stock-based compensation expense per share (1)

0.04 — 0.17 0.32

Non-GAAP net loss per share $ (0.09) $ (0.30) $ (0.34) $ (0.93)

_________________

(1) Value for the three months ended September 30, 2020, has been rounded down for presentation purposes to equal the difference between the calculated GAAP net loss per share and calculated Non-GAAP net loss per share.

Free Cash Flow

4 unchanged sentences

Additionally, free cash flow does not represent the total increase or decrease in our cash balance for a given period.

Three Months Ended June 30,

Six Months Ended June 30,

Reconciliation of Free cash flow

( dollars in thousands )

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

2020 2019 2020 2019

Reconciliation of Free cash flow ( dollars in thousands )

Net cash (used in) operating activities $ (2,633) $ (3,272) $ (11,178) $ (9,712)

2 unchanged sentences

Liquidity and Capital Resources

Our liquidity and capital resources were not materially impacted by the COVID-19 pandemic and the governmental responses to address the pandemic and the related economic impact during the six months ended June 30, 2020 .

For further discussion regarding the future potential impacts of COVID-19 and the related economic impacts on our liquidity and capital resources, see “Outlook” and “Part II - Item 1A - Risk Factors”.

As of June 30, 2020 , our principal sources of liquidity were cash and cash equivalents of $79.8 million, marketable securities of $49.7 million and net accounts receivable of $14.1 million.

As of September 30, 2020, our principal sources of liquidity were cash and cash equivalents of $117.8 million, marketable securities of $49.5 million and net accounts receivable of $14.4 million.

We have generated losses from operations and negative cash flows from operations, as evidenced by our accumulated deficit and statement of cash flows.

We expect to continue to incur operating losses and negative operating cash flows for the foreseeable future due to the investments in our business we intend

to make as described above.

We expect to continue to incur operating losses and negative operating cash flows for the foreseeable future due to the investments in our business we intend to make as described above.

We may experience greater than anticipated operating losses in the short- and long-term if the COVID-19 pandemic and the governmental responses to address the pandemic and any re-emergence of COVID-19 persist for a prolonged period of time.

3 unchanged sentences

We subsequently received an additional $10.0 million of net proceeds after deducting underwriting discounts and commissions in January 2020 as a result of the over-allotment option exercise by the underwriters of our IPO.

In August 2020, we received $42.1 million of net proceeds from our equity follow-on offering after deducting underwriting discounts and commissions.

Our principal uses of cash in recent periods have been to fund operations and invest in capital expenditures.

We believe our existing cash and cash equivalents will be sufficient to meet our operating and capital needs for at least the next 12 months.

Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the impact of the COVID-19 pandemic on our customers and our operations, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and the continuing market acceptance of our product.

In the future, we may enter into arrangements to acquire or invest in complementary businesses, products and technologies, including intellectual property rights.

8 unchanged sentences

The minimum adjusted EBITDA and minimum liquidity covenants do not apply during any Streamline Period.

As of June 30, 2020 , we did not have any outstanding principal balance under the SVB Credit Facility.

As of September 30, 2020, we did not have any outstanding principal balance under the SVB Credit Facility.

In connection with the November 2019 amendment, the Revolver now has a floating interest rate equal to the greater of (i) 4.75% and (ii) (x) at any time when the Streamline Period is not in effect, one and one-half of one percent (1.50%) above the prime rate and (y) at any time when the Streamline Period is in effect, the prime rate, which interest is payable monthly.

The SVB Credit Facility matures on January 31, 2022.

The SVB Credit Facility contains customary negative covenants that limit our ability to, or require mandatory prepayment in the event that we, among other things, incur additional indebtedness or liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, add new offices or business locations, make certain investments, pay dividends,

transfer or dispose of certain assets, liquidate or dissolve and enter into various specified transactions.

The SVB Credit Facility also contains affirmative covenants, including certain financial covenants such as minimum adjusted EBITDA and minimum liquidity covenants and financial reporting requirements.

With limited exceptions, our obligations under the SVB Credit Facility are secured by all of our property other than intellectual property (which is subject to a negative pledge).

As of June 30, 2020 , we were in compliance with the covenants in the SVB Credit Facility.

As of September 30, 2020, we were in compliance with the covenants in the SVB Credit Facility.

The following table summarizes our cash flows for the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

2 unchanged sentences

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

45,584 (3,334)

Net (decrease) in cash $ (17,532) $ (13,590)

Operating Activities

2 unchanged sentences

Historically, we have generated negative cash flows from operating activities.

Net cash used in operating activities during the six months ended June 30, 2020 was $8.5 million, which resulted from a net loss of $18.8 million adjusted for non-cash charges of $13.8 million and net cash outflow of $3.5 million from changes in operating assets and liabilities.

Net cash used in operating activities during the nine months ended September 30, 2020 was $11.2 million, which resulted from a net loss of $25.8 million adjusted for non-cash charges of $20.4 million and net cash outflow of $5.8 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $8.6 million of stock-based compensation expense, $3.2 million of depreciation and intangible asset amortization expense, $5.4 million for amortization of deferred contract acquisition costs, which were primarily commissions, $1.9 million for bad debt expense and $0.9 million of amortization of right-of-use, or ROU, operating lease assets.

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These outflows were primarily offset by a $7.7 million increase in deferred revenue and a $0.7 million increase in accounts payable and other accrued liabilities.

Net cash used in operating activities during the six months ended June 30, 2019 was $6.4 million, which resulted from a net loss of $15.9 million adjusted for non-cash charges of $10.9 million and net cash outflow of $1.4 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $5.3 million of stock-based compensation expense, $2.1 million of depreciation and intangible asset amortization expense, $2.1 million for amortization of deferred contract acquisition costs, which were primarily commissions, $0.6 million of amortization of right-of-use, or ROU, operating lease assets and $0.7 million for bad debt expense.

The net cash outflow from changes in operating assets and liabilities was primarily the result of a $2.7 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $0.9 million increase in prepaid expenses, a $0.7 million decrease in accounts payable and other accrued liabilities and a $0.6 million decrease in operating lease liabilities.

These outflows were offset by a $2.8 million increase in deferred revenue and a $0.6 million increase in accounts receivable due to the growth of our business.

Net cash used in operating activities during the nine months ended September 30, 2019 was $9.7 million, which resulted from a net loss of $21.0 million adjusted for non-cash charges of $14.1 million and net cash outflow of $2.8 million from changes in operating assets and liabilities.

Non-cash charges primarily consisted of $5.4 million of stock-based compensation expense, $3.2 million of depreciation and intangible asset amortization expense, $3.4 million for amortization of deferred contract acquisition costs, which were primarily commissions, $1.2 million for bad debt expense and $0.8 million of amortization of right-of-use, or ROU, operating lease assets.

The net cash outflow from changes in operating assets and liabilities was primarily the result of a $4.9 million increase in deferred commissions due to the addition of new customers and expansion of the business, a $0.9 million increase in gross accounts receivable, a $0.8 million increase in prepaid expenses and a $0.9 million decrease in operating lease liabilities.

These outflows were offset by a $5.1 million increase in deferred revenue.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2020 was $50.5 million, which was primarily due to the $49.7 million purchase of marketable securities in June 2020.

Net cash used in investing activities for the six months ended June 30, 2019 was $0.4 million, which was primarily due to purchases of computer equipment and hardware.

Net cash used in investing activities for the nine months ended September 30, 2020 was $51.9 million, which was primarily due to the $49.7 million purchase of marketable securities in June 2020.

Purchases of property and equipment of $2.2 million was driven by leasehold improvements of our Seattle office.

Net cash used in investing activities for the nine months ended September 30, 2019 was $0.5 million, which was primarily due to purchases of computer equipment and hardware.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2020 was $3.6 million, which was primarily the result of $10.0 million of net proceeds from our sale of over-allotment shares to the underwriters of our IPO, offset by $6.3 million in payments related to the employee withholding taxes as a result of the net settlement of stock-based awards.

Net cash used in financing activities for the six months ended June 30, 2019 was $0.5 million, which was primarily driven by payments of deferred costs associated with our IPO.

Net cash provided by financing activities for the nine months ended September 30, 2020 was $45.6 million, which was primarily the result of $42.1 million of net proceeds from our equity follow-on offering, $10.0 million of net proceeds from our sale of over-allotment shares to the underwriters of our IPO, offset by $6.3 million in payments related to the employee withholding taxes as a result of the net settlement of stock-based awards.

Net cash used in financing activities for the nine months ended September 30, 2019 was $3.3 million, which was the result of $1.8 million in payments related to the employee taxes due as a result of the net settlement of stock-based awards and $1.6 million in payments of deferred costs associated with our IPO.

Contractual Obligations

The following table summarizes our non-cancellable contractual obligations as of June 30, 2020 .

The following table summarizes our non-cancellable contractual obligations as of September 30, 2020.

Payments Due by Period

Total Less Than

1-3 Years 3-5 Years More Than

( in thousands )

Operating lease obligations (1)

$ 33,058 $ 3,531 $ 7,905 $ 8,271 $ 13,351

Other purchase obligations (2)

66,597 18,758 47,839 — —

Total $ 99,655 $ 22,289 $ 55,744 $ 8,271 $ 13,351

_________________

(1) Excludes $0.7 million of lease incentives that will be realized in 2020.

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Off-Balance Sheet Arrangements

As of June 30, 2020 , we did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other purposes.

As of September 30, 2020, we did not have any relationships with any entities or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Recent Accounting Pronouncements

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Our significant accounting policies are discussed in Note 1, “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements as of and for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020.

There have been no significant changes to these policies during the six months ended June 30, 2020 , other than those described below and in Note 1.

There have been no significant changes to these policies during the nine months ended September 30, 2020, other than those described below and in Note 1.

Stock-Based Compensation

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Restricted Stock Units

Pursuant to his employment agreement, our President and CEO is eligible to receive awards of fully vested restricted stock units with respect to shares of our Class B common stock under our 2019 Class B Incentive Plan, or the Class B Plan, covering up to 1.0% of our fully diluted common equity determined as of the date of our IPO, or 483,663 shares, following the consummation of our IPO, depending on the valuation of the Company in connection with our IPO and the achievement of market capitalization thresholds thereafter, which we refer to as the Howard IPO Award.

depending on the valuation of the Company in connection with our IPO and the achievement of market capitalization thresholds thereafter, which we refer to as the Howard IPO Award.

The initial grant under the Howard IPO Award was based on the valuation of the Company (calculated based on the closing price of the Company’s Class A common stock on its first trading day on The Nasdaq Capital Market on December 13, 2019) and calculated as follows:

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Howard is eligible to receive RSU awards under our Class B Plan equal to:

(i) 0.25% of our fully diluted common equity as of the date of our IPO, or 120,916 shares, upon the Company’s achievement of a market cap threshold of $1,000,000,000;

and (ii) 0.25% of our fully diluted common equity as of the date of our IPO, or 120,916 shares, upon the Company’s achievement of a market cap threshold of $2,000,000,000, in each case, to the extent the applicable market cap threshold value was not previously achieved in connection with any previous grant made under the Howard IPO Award, and subject to Mr.

(i) 0.25% of our fully diluted common equity as of the date of our IPO, or 120,916 shares, upon the Company’s achievement of a market capitalization threshold of $1,000,000,000;

and (ii) 0.25% of our fully diluted common equity as of the date of our IPO, or 120,916 shares, upon the Company’s achievement of a market capitalization threshold of $2,000,000,000, in each case, to the extent the applicable market capitalization threshold value was not previously achieved in connection with any previous grant made under the Howard IPO Award, and subject to Mr.

Howard’s continued service to the Company through each applicable award date.

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In February 2020, Mr.

Howard received 120,916 RSUs upon the Company’s achievement of a market cap threshold of $1,000,000,000, which settled in June 2020.

Howard received 120,916 RSUs upon the Company’s achievement of a market capitalization threshold of $1,000,000,000, which settled in June 2020.

In connection with RSUs granted to Mr.

Howard pursuant to the Howard IPO Award that immediately vested in February 2020, we recognized $1.4 million of stock-based compensation expense in the first quarter of 2020.

Because the maximum company valuation was not achieved through June 30, 2020, Mr.

Howard will remain eligible to receive an additional grant up to the maximum award contemplated by the Howard IPO Award if a certain market capitalization threshold is achieved during the first twenty-four months following the completion of our IPO (as described above).

We expect that the

remaining compensation expense to be recognized in connection with the Howard IPO Award will be $0.4 million.

Because the maximum company valuation was not achieved through September 30, 2020, Mr.

Howard remained eligible to receive an additional grant up to the maximum award contemplated by the Howard IPO Award if a certain market capitalization threshold is achieved during the first twenty-four months following the completion of our IPO (as described above).

In October 2020, the Company achieved the market capitalization threshold of $2,000,000,000.

As a result, in the fourth quarter, Mr.

Howard will receive the remaining 120,916 shares and the remaining stock-based compensation expense of $0.2 million will be recognized.

JOBS Act Accounting Election

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis