0001118417-20-000085.txt : 20200805 0001118417-20-000085.hdr.sgml : 20200805 20200804180544 ACCESSION NUMBER: 0001118417-20-000085 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 76 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200805 DATE AS OF CHANGE: 20200804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MODEL N, INC. CENTRAL INDEX KEY: 0001118417 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 770528806 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35840 FILM NUMBER: 201074616 BUSINESS ADDRESS: STREET 1: 777 MARINERS ISLAND BOULEVARD STREET 2: SUITE 300 CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: (650) 610-4600 MAIL ADDRESS: STREET 1: 777 MARINERS ISLAND BOULEVARD STREET 2: SUITE 300 CITY: SAN MATEO STATE: CA ZIP: 94404 FORMER COMPANY: FORMER CONFORMED NAME: MODEL T1 INC DATE OF NAME CHANGE: 20001031 FORMER COMPANY: FORMER CONFORMED NAME: MODEL N INC DATE OF NAME CHANGE: 20000707 10-Q 1 modnq32010q.htm 10-Q Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 001-35840
 
Model N, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
77-0528806
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
777 Mariners Island Boulevard,
Suite 300
 
94404
San Mateo,
California
 
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (650) 610-4600
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, par value $0.00015 per share
 
MODN
 
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
ý
Non-accelerated filer
 
☐  
 
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  ý

As of July 24, 2020, the registrant had 34,546,555 shares of common stock outstanding.

1



 
 
Page
 
 
PART I. FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 

1


PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
MODEL N, INC.
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
 
 
As of
June 30, 2020
 
As of
September 30, 2019
Assets
 
 

 
 

Current assets
 
 

 
 

Cash and cash equivalents
 
$
192,372

 
$
60,780

Accounts receivable, net of allowance for doubtful accounts of $43 as of June 30, 2020 and $51 as of September 30, 2019
 
29,255

 
26,953

Prepaid expenses
 
2,379

 
2,776

Other current assets
 
8,228

 
4,039

Total current assets
 
232,234

 
94,548

Property and equipment, net
 
641

 
1,043

Operating lease right-of-use assets
 
4,035

 

Goodwill
 
39,283

 
39,283

Intangible assets, net
 
25,551

 
29,131

Other assets
 
5,438

 
5,588

Total assets
 
$
307,182

 
$
169,593

Liabilities and Stockholders’ Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
3,541

 
$
2,302

Accrued employee compensation
 
14,870

 
19,906

Accrued liabilities
 
4,425

 
4,354

Operating lease liabilities, current portion
 
2,036

 

Deferred revenue, current portion
 
45,249

 
44,875

Long term debt, current portion
 

 
4,911

Total current liabilities
 
70,121

 
76,348

Long term debt
 
112,163

 
39,371

Operating lease liabilities, less current portion
 
2,295

 

Other long-term liabilities
 
1,709

 
1,152

Total liabilities
 
186,288

 
116,871

Commitments and contingencies
 


 


Stockholders’ equity
 
 
 
 
Common Stock, $0.00015 par value; 200,000 shares authorized; 34,547 and 32,995 shares issued and outstanding at June 30, 2020 and September 30, 2019, respectively
 
5

 
5

Preferred Stock, $0.00015 par value; 5,000 shares authorized; no shares issued and outstanding
 

 

Additional paid-in capital
 
344,932

 
266,295

Accumulated other comprehensive loss
 
(1,627
)
 
(1,169
)
Accumulated deficit
 
(222,416
)
 
(212,409
)
Total stockholders’ equity
 
120,894

 
52,722

Total liabilities and stockholders’ equity
 
$
307,182

 
$
169,593

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

2


MODEL N, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Revenues
 

 
 

 
 

 
 
Subscription
$
29,339

 
$
26,638

 
$
86,512

 
$
77,780

Professional services
11,917

 
8,074

 
33,084

 
26,852

Total revenues
41,256

 
34,712

 
119,596

 
104,632

Cost of revenues
 
 
 
 
 
 
 
Subscription
8,374

 
8,658

 
25,882

 
26,248

Professional services
7,699

 
7,206

 
23,026

 
22,929

Total cost of revenues
16,073

 
15,864

 
48,908

 
49,177

Gross profit
25,183

 
18,848

 
70,688

 
55,455

Operating expenses
 
 
 
 
 
 
 
Research and development
8,288

 
7,060

 
25,906

 
21,887

Sales and marketing
9,716

 
7,164

 
29,682

 
23,814

General and administrative
7,559

 
6,713

 
22,069

 
19,702

Total operating expenses
25,563

 
20,937

 
77,657

 
65,403

Loss from operations
(380
)
 
(2,089
)
 
(6,969
)
 
(9,948
)
Interest expense, net
1,986

 
689

 
2,951

 
2,313

Other expenses (income), net
(168
)
 
(4
)
 
(423
)
 
408

Loss before income taxes
(2,198
)
 
(2,774
)
 
(9,497
)
 
(12,669
)
Provision for income taxes
182

 
230

 
510

 
969

Net loss
$
(2,380
)
 
$
(3,004
)
 
$
(10,007
)
 
$
(13,638
)
Net loss per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic and diluted
$
(0.07
)
 
$
(0.09
)
 
$
(0.30
)
 
$
(0.43
)
Weighted average number of shares used in computing net loss per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic and diluted
34,411

 
32,596

 
33,781

 
32,028

 
 
 
 
 
 
 
 

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

3


MODEL N, INC.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(Unaudited)

 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Net loss
$
(2,380
)
 
$
(3,004
)
 
$
(10,007
)
 
$
(13,638
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Unrealized gain (loss) on cash flow hedges
222

 
28

 
(210
)
 
77

Foreign currency translation gain (loss)
(3
)
 
(3
)
 
(248
)
 
239

Total comprehensive loss
$
(2,161
)
 
$
(2,979
)
 
$
(10,465
)
 
$
(13,322
)
 
 
 
 
 
 
 
 

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


4


MODEL N, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

 
Nine Months Ended June 30,
 
2020
 
2019
Cash flows from operating activities
 

 
 

Net loss
$
(10,007
)
 
$
(13,638
)
Adjustments to reconcile net loss to net cash provided by operating activities
 
 
 
Depreciation and amortization
4,163

 
5,191

Stock-based compensation
17,232

 
12,822

Amortization of debt discount and issuance costs
1,118

 
401

Deferred income taxes
33

 
(170
)
Amortization of capitalized contract acquisition costs
1,858

 
1,238

Loss on early extinguishment of debt
319

 

Other non-cash charges
(8
)
 
(108
)
Changes in assets and liabilities
 
 
 
Accounts receivable
(2,292
)
 
2,295

Prepaid expenses and other assets
(3,621
)
 
(1,368
)
Accounts payable
781

 
1,088

Accrued employee compensation
(1,165
)
 
(653
)
Other current and long-term liabilities 
(2,322
)
 
443

Deferred revenue
1,133

 
(2,740
)
Net cash provided by operating activities
7,222

 
4,801

Cash flows from investing activities
 
 
 
Purchases of property and equipment
(190
)
 
(227
)
Net cash used in investing activities
(190
)
 
(227
)
Cash flows from financing activities
 
 
 
Proceeds from exercise of stock options and issuance of employee stock purchase plan
2,442

 
2,198

Proceeds from issuance of convertible senior notes, net of issuance costs
166,894

 

Principal payments on debt
(44,750
)
 
(5,000
)
Net cash provided by (used in) financing activities
124,586

 
(2,802
)
Effect of exchange rate changes on cash and cash equivalents
(26
)
 
53

Net increase in cash and cash equivalents
131,592

 
1,825

Cash and cash equivalents
 
 
 
Beginning of period
60,780

 
56,704

End of period
$
192,372

 
$
58,529

 
 
 
 

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


5


MODEL N, INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.
The Company and Significant Accounting Policies and Estimates
Model N, Inc. (“Model N,” “we,” “us,” “our,” and “the Company”) was incorporated in Delaware on December 14, 1999. The Company is a provider of cloud revenue management solutions for the life sciences and high tech industries. The Company’s solutions enable its customers to maximize revenues and reduce revenue compliance risk by transforming their revenue life cycle from a series of tactical, disjointed operations into a strategic end-to-end process, which enables them to manage the strategy and execution of pricing, contracting, incentives and rebates. The Company’s corporate headquarters are located in San Mateo, California, with additional offices in the United States, India and Switzerland.
Fiscal Year
The Company’s fiscal year ends on September 30. References to fiscal year 2020, for example, refer to the fiscal year ending September 30, 2020.

Basis for Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated balance sheet as of September 30, 2019 has been derived from the audited financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 (“the Annual Report”) on file with the SEC. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report.

In the opinion of management, the unaudited interim consolidated financial statements include all the normal recurring adjustments necessary to present fairly our condensed consolidated financial statements. The results of operations for the nine months ended June 30, 2020 are not necessarily indicative of the operating results for the full fiscal year 2020 or any future periods.

The condensed consolidated financial statements include the accounts of Model N and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, liability and equity allocation of convertible senior notes, legal contingencies, income taxes, stock-based compensation and valuation of goodwill and intangibles. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors. However, actual results could differ significantly from these estimates.

COVID-19
The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. At this point, the extent to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. The estimates discussed above may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

6


New Accounting Pronouncements

Recently Adopted Accounting Guidance
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Under Topic 842, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases and provide enhanced disclosures. The Company adopted Topic 842 on October 1, 2019 using the alternative modified transition method. The Company elected the package of practical expedients and carried forward its historical lease classification, its assessment on whether a contract was or contained a lease, and its initial direct costs for any leases that existed prior to October 1, 2019. The Company also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet. Upon adoption, the Company recognized total operating lease right-of-use (“ROU”) assets and total operating lease liabilities of $6.7 million and $7.2 million, respectively, on the condensed consolidated balance sheet. The difference of $0.5 million represents deferred rent that existed as of the date of adoption, which was an offset to the opening balance of operating lease ROU assets. The adoption had no impact on opening retained earnings.
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This new accounting standard update simplifies the measurement of goodwill by eliminating the step two impairment test. Step two measures a goodwill impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill.  The new guidance requires a comparison of the fair value of the Company’s single reporting unit with the carrying amount and the Company is required to recognize an impairment charge for the amount by which the carrying amount exceeds the fair value. Additionally, the Company will consider the income tax effects from any tax deductible goodwill on the carrying amount when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted. The Company adopted this guidance beginning in the first quarter of fiscal year 2020 and it did not have a material impact on the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted
In August 2018, the FASB issued ASU 2018-15, Intangibles (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard also requires customers to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

Significant Accounting Policies
There have been no changes in the significant accounting policies from those that were disclosed in the Annual Report, except for convertible senior notes, changes associated with lease accounting resulting from the adoption of ASU 2016-02, Leases (Topic 842), and changes resulting from the adoption of ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):  Simplifying the Test for Goodwill Impairment as described below:

7


Convertible Senior Notes
In May 2020, the Company issued $172.5 million aggregate principal amount of 2.625% convertible senior notes. The Company separates its convertible senior notes (the “Notes”) into liability and equity components. The carrying amount of the liability component is calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option is determined by deducting the fair value of the liability component from the principal amount of the Notes. The excess of the principal amount of the Notes over the carrying amount of the liability component (“debt discount”) is amortized to interest expense at an effective interest rate over the contractual term of the Notes. The equity component is recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The Company allocates the issuance costs to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component are amortized to interest expense using the effective interest method over the contractual terms of the Notes. Issuance costs attributable to the equity component are netted with the equity component in stockholders’ equity.

Leases
The Company determines if an arrangement contains a lease at inception. The Company has entered into operating lease agreements primarily for offices. The Company does not have any finance leases.
Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make payments arising from the lease. Operating leases are included in “Operating lease right-of-use assets”, “Operating lease liabilities, current portion”, and “Operating lease liabilities, less current portion” in the condensed consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized at the present value of the future lease payments at commencement date. ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received.
The Company’s lease arrangements may contain lease and non-lease components. The Company elected to combine lease and non-lease components. In determining the present value of the future lease payments, the Company considers only payments that are fixed and determinable at commencement date, including non-lease components. Variable components such as utilities and maintenance costs are expensed as incurred. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate. In determining the appropriate incremental borrowing rate, the Company considers information including, but not limited to, its credit rating, the lease term, and the economic environment where the leased asset is located. Lease terms include periods under options to extend or terminate the lease when the Company is reasonably certain that the option will be exercised. Lease expense is recognized on a straight-line basis over the lease term.
The Company also elected to apply the short-term lease measurement and recognition exemption in which ROU assets and lease liabilities are not recognized for leases with a term of 12 months or less.

Goodwill
The Company records goodwill when consideration paid in an acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable. For purposes of goodwill impairment testing, the Company has one reporting unit. The Company has elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the single reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment test. When performing the goodwill impairment test, the Company compares the fair value of the single reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the fair value with goodwill written down accordingly. There have been no goodwill impairments during the periods presented.


8


2.
Revenues from Contracts with Customers

Revenue Recognition

The Company derives revenues primarily from subscription revenues and professional services revenues.

Disaggregation of Revenues

See Note 14, Geographic Information, for information on revenue by geography.

Customer Contract Balances

The following table reflects contract balances with customers (in thousands):
 
As of
June 30, 2020
 
As of
September 30, 2019
Accounts receivable, net
$
29,255

 
$
26,953

Contract asset
5,477

 
1,588

Deferred revenue
46,511

 
45,385

Capitalized contract acquisition costs
6,950

 
6,626



Accounts Receivable
Accounts receivable represents the Company’s right to consideration that is unconditional, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of accounts receivable amounts.

Contract Asset
Contract asset represents revenue that has been recognized for satisfied performance obligations for which the Company does not have an unconditional right to consideration.

Deferred Revenue
Deferred revenue, which is a contract liability, consists of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred.

The non-current portion of deferred revenue is included in other long-term liabilities in the condensed consolidated balance sheets. During the three and nine months ended June 30, 2020, the Company recognized revenue of $20.8 million and $39.8 million, respectively, that was included in the deferred revenue balances at the beginning of the periods. During the three and nine months ended June 30, 2019, the Company recognized revenue of $17.2 million and $41.2 million, respectively, that was included in the deferred revenue balances at the beginning of the periods.

Capitalized Contract Acquisition Costs

The Company capitalizes incremental costs incurred to acquire contracts with customers, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. The Company incurs these costs in connection with both initial contracts and renewals. Such costs for renewals are not considered commensurate with those for initial contracts given the substantive difference in commission rates in proportion to their respective contract values. The costs in connection with initial contracts and renewals are deferred and amortized over an expected customer life of five years and over the renewal term, respectively, which corresponds to the period of benefit to the customer. The Company determined the period of benefit by considering the Company’s history of customer relationships, length of customer contracts, technological development and obsolescence, and other factors. The current and non-current portion of capitalized contract acquisition costs are included in other current assets and other assets on the condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the condensed consolidated statements of operations.
As of June 30, 2020, the current and non-current portions of capitalized contract acquisition costs were $2.1 million and $4.8 million, respectively. The Company amortized $0.6 million and $1.9 million of contract acquisition costs during the three and nine months ended June 30, 2020, respectively.

9


    
For the three and nine months ended June 30, 2020, there was no impairment related to capitalized contract acquisition costs.

Customer Deposits

Customer deposits primarily relate to payments received from customers which could be refundable pursuant to the terms of the arrangement. These amounts are included in accrued liabilities on the condensed consolidated balance sheets. Customer deposits were $0.6 million and $0.4 million as of June 30, 2020 and September 30, 2019, respectively.

Standard payment terms to customers generally range from thirty to ninety days; however, payment terms and conditions in our customer contracts may vary. In some cases, customers prepay for subscription and services in advance of the delivery; in other cases, payment is due as services are performed or in arrears following the delivery.

Performance Obligations
    
Remaining performance obligations represent non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of June 30, 2020, the aggregate amount of the transaction price allocated to performance obligations either unsatisfied or partially unsatisfied was $156.5 million, 52% of which we expect to recognize as revenue over the next 12 months and the remainder thereafter.


3.
Leases

The Company leases facilities under noncancelable operating leases with lease terms between three years and 10 years. Certain leases include options to extend or terminate the lease. The Company factored into the determination of lease payments the options that it is reasonably certain to exercise.

Operating lease costs were $0.8 million and $2.5 million for the three and nine months ended June 30, 2020, respectively. Short-term lease costs, variable lease costs, and sublease income were immaterial for the three and nine months ended June 30, 2020.

Cash flow information related to operating leases is as follows (in thousands):
 
Nine months ended
June 30, 2020
Cash paid for amounts included in the measurement of operating lease liabilities
$
2,678

Operating lease ROU assets obtained in exchange for new operating lease liabilities
(375
)

The Company early terminated certain leases during the three months ended June 30, 2020 which resulted in a reduction of ROU assets and operating lease liabilities of $1.0 million.

The weighted-average remaining lease term is 3.7 years and the weighted-average discount rate is 5.5% as of June 30, 2020.

Maturities of operating lease liabilities as of June 30, 2020 are as follows (in thousands):
Fiscal Year
 
 
Remaining fiscal 2020
 
$
864

2021
 
1,595

2022
 
760

2023
 
440

2024
 
348

2025 and thereafter
 
770

Total operating lease payments
 
4,777

Less imputed interest
 
446

Total operating lease liabilities
 
$
4,331



10



The Company’s headquarter lease expires on November 30, 2020. In April 2020, the Company entered into a new noncancelable operating lease for its headquarters with a 64 month lease term that will commence on December 1, 2020. The new lease has a five year renewal option which the Company is not reasonably certain to exercise. The future payments over the 64 month lease term are $11.4 million.

Future minimum payments under noncancelable operating leases as of September 30, 2019 under ASC 840 are as follows (in thousands):
Fiscal Year
 
 
2020
 
$
3,400

2021
 
1,700

2022
 
900

2023
 
400

2024
 
100

Total
 
$
6,500



4.
Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, debt and certain accrued liabilities. The Company regularly reviews its financial instruments portfolio to identify and evaluate such instruments that have indications of possible impairment. The Company estimates the fair value of its financial instruments when there is no readily available market data, which involves some level of management estimation and judgment and may not necessarily represent the amounts that could be realized in a current or future sale of these assets.
The table below sets forth the Company’s marketable securities which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
 
 
 
 
 
 
 
 
 
Reported as:
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
Cash and Cash Equivalents
As of June 30, 2020
 

 
 

 
 

 
 

 
 
Level 1:
 
 
 
 
 
 
 
 
 
Money market funds
71,079

 

 

 
71,079

 
71,079

US Treasury securities
$
99,975

 
$

 
$

 
$
99,975

 
$
99,975

Total
$
171,054

 
$

 
$

 
$
171,054

 
$
171,054

 
 
 
 
 
 
 
 
 
 
As of September 30, 2019
 
 
 
 
 
 
 
 
 
Level 1:
 
 
 
 
 
 
 
 
 
Money market funds
$
32,792

 
$

 
$

 
$
32,792

 
$
32,792

Total
$
32,792

 
$

 
$

 
$
32,792

 
$
32,792

 
 
 
 
 
 
 
 
 
 


The Company’s financial instruments not measured at fair value on a recurring basis include cash, accounts receivable, accounts payable and certain accrued liabilities. These financial instruments are reflected in the financial statements at cost and approximate their fair value due to their short-term nature.

See Note 6 for the fair value measurement of the Company’s derivative contracts, Note 7 for the fair value measurement of the Company’s term loan and promissory notes, and Note 8 for the fair value measurement of the Company’s convertible senior notes.



11


5.
Intangible Assets

Intangible assets consisted of the following (in thousands):
 
Estimated
 
As of June 30, 2020
 
Useful Life
(in Years)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Intangible Assets:
 
 
 

 
 

 
 

Customer relationships
3-10
 
$
36,599

 
$
(13,869
)
 
$
22,730

Developed technology
5-6
 
12,083

 
(9,262
)
 
2,821

Total
 
 
$
48,682

 
$
(23,131
)
 
$
25,551

 
 
 
 
 
 
 
 

 
Estimated
 
As of September 30, 2019
 
Useful Life
(in Years)
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Intangible Assets:
 
 
 

 
 

 
 

Customer relationships
3-10
 
$
36,599

 
$
(11,200
)
 
$
25,399

Developed technology
5-6
 
12,083

 
(8,351
)
 
3,732

Backlog
5
 
280

 
(280
)
 

Total
 
 
$
48,962

 
$
(19,831
)
 
$
29,131

 
 
 
 
 
 
 
 

The Company recorded amortization expense related to the acquired intangible assets of $1.2 million and $1.4 million for the three months ended June 30, 2020 and 2019, respectively, and $3.6 million and $4.1 million for the nine months ended June 30, 2020 and 2019, respectively.

Estimated future amortization expense for the intangible assets as of June 30, 2020 is as follows (in thousands):
Fiscal Year
 
 
Remaining fiscal 2020
 
$
1,171

2021
 
4,687

2022
 
4,687

2023
 
3,840

2024
 
3,558

2025 and thereafter
 
7,608

Total future amortization
 
$
25,551

 
 
 



6.
Derivative Instruments and Hedging

The Company uses foreign currency forward contracts to hedge a portion of the forecasted foreign currency-denominated expenses incurred in the normal course of business. These contracts are designated as cash flows hedges. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate movements. The Company does not use any of the derivative instruments for trading or speculative purposes. These contracts have maturities of 12 months or less. The Company records changes in the fair value of cash flow hedges in accumulated other comprehensive loss in the condensed consolidated balance sheets, until the forecasted transaction occurs, at which point, the related gain or loss on the cash flow hedge is reclassified to the financial statement line item to which the derivative relates. The amounts reclassified to expenses related to the hedged transactions were immaterial for the periods presented. The fair value of the outstanding non-deliverable foreign currency forward contracts was measured using Level 2 fair value inputs and was recorded in accrued liabilities for $0.2 million as of June 30, 2020 and immaterial as of September 30, 2019.


12


Notional Amounts of Derivative Contracts
Derivative transactions are measured in terms of the notional amount but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged but is used only as the basis on which the value of foreign exchange payments under these contracts are determined. The notional amounts of the outstanding foreign currency forward contracts designated as cash flow hedges were $5.1 million and $9.4 million as of June 30, 2020 and September 30, 2019, respectively.


7.
Debt
Term Loan – Wells Fargo
On May 4, 2018, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo, as administrative agent, and the lenders party thereto, for a $50.0 million term loan, as well as a revolving line of credit for an amount up to $5.0 million. At the same time and with a portion of the proceeds, the Company repaid in full the $50.0 million term loan the Company entered into in connection with the 2017 Revitas acquisition.
The Company paid a total of $10.2 million of principal in fiscal years 2018 and 2019. In May 2020, the Company terminated the Credit Agreement and repaid in full the outstanding term loan including $39.8 million principal and $0.2 million interest from the proceeds of the convertible senior notes, as discussed in Note 8. The Company recorded a loss on debt extinguishment of $0.3 million representing the unamortized debt discount and issuance costs amount. The term loan had a maturity date of May 4, 2023.

On August 12, 2019, the Company entered into an amendment to the Credit Agreement whereby the applicable margins were revised. At the Company’s election, the term loan under the Credit Agreement and the revolving line of credit will bear interest based upon the Company’s leverage ratio as defined in the Credit Agreement at either (i) a base rate plus applicable margin ranging from 1.5% to 3.5% or (ii) LIBOR rate plus applicable margin ranging from 2.5% to 4.5%. Interest is payable periodically, in arrears, at the end of each interest period the Company elects. For the quarter beginning on April 1, 2020 through the payoff of the term loan, the Company’s interest rate was LIBOR rate plus 2.5%. The effective interest rate for the quarter beginning on April 1, 2020 through the payoff of the term loan for the term loan with Wells Fargo was 4.75%. In addition, the Company is required to pay monthly in arrears an unused line fee ranging from 0.25% to 0.5% of the unused portion of the revolving line of credit based upon the Company’s leverage ratio.

The Credit Agreement contained customary representations and warranties, subject to limitations and exceptions, customary covenants, and certain financial covenants. The Company was in compliance with all covenant requirements through the payoff in conjunction with the issuance of convertible senior notes as discussed in Note 8.

Promissory Notes
Also in connection with the Revitas acquisition, the Company incurred $10.0 million in debt in the form of two $5.0 million promissory notes with the sellers, both of which matured and were paid in full on July 5, 2018 and January 5, 2020, respectively.

The carrying value of the term loan with Wells Fargo approximated fair value since the term loan bore interest at rates that fluctuated with the changes in the base rate or the LIBOR rate as elected by the Company. The carrying value of the promissory note approximated its fair value. The Company classified the term loan with Wells Fargo and the promissory note under level 2 of the fair value measurement hierarchy as these instruments were not actively traded.

8.
Convertible Senior Notes

In May 2020, the Company issued $172.5 million aggregate principal amount of 2.625% convertible senior notes in a private placement, including $22.5 million which represents the exercise in full of the initial purchasers’ option to purchase additional notes. The net proceeds from the issuance of the Notes was $166.4 million, net of initial purchasers’ discounts and debt issuance costs of $6.1 million, $0.5 million of which was not paid as of June 30, 2020. The Company used $40.0 million of the net proceeds to repay in full the debt outstanding under, and terminated the Credit Agreement dated May 4, 2018, as amended, by and among the Company, Wells Fargo, as administrative agent, and the lenders party thereto. See Note 7 for details of the Credit Agreement.

The Notes are senior, unsecured obligations of the Company and bear an interest rate of 2.625% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes mature on June 1, 2025 unless repurchased, redeemed or converted in accordance with their terms prior to such date.

13



The Notes are convertible into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, at an initial conversion rate of 30.0044 shares of common stock per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $33.33 per share of common stock subject to adjustment, with a maximum conversion rate of 38.2555. The Company intends to settle the principal amount of the Notes with cash. Prior to the close of business on the scheduled trading day immediately preceding March 1, 2025, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount, only under the following circumstances:

during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s 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 on each applicable trading day;
during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
upon the occurrence of specified corporate events.

On or after March 1, 2025 and prior to the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount regardless of the foregoing conditions.

Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture) or in connection with any optional redemption are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change (as defined in the Indenture), holders of the Notes may require the Company to repurchase all or a portion of their Notes at a price equal to 100% of the principal amount of Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

The Company may not redeem the Notes prior to June 6, 2023. The Company may redeem for cash all or part of the Notes, at its option, on or after June 6, 2023 and on or before the 41st scheduled trading day immediately before the maturity date, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. No sinking fund is provided for the Notes.

During the three months ended June 30, 2020, the conditions allowing holders of the Notes to convert were not met. The Notes were classified as long-term debt on the condensed consolidated balance sheets as of June 30, 2020.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component of $115.3 million was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $57.2 million and was determined by deducting the fair value of the liability component from the principal amount of the Notes. The excess of the principal amount of the Notes over the carrying amount of the liability component is amortized to interest expense at an effective interest rate over the contractual terms of the Notes. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component were $4.1 million and are amortized to interest expense using the effective interest method over the contractual terms of the Notes. Issuance costs attributable to the equity component of $2.0 million were netted with the equity component in stockholders’ equity.


14


The net carrying amount of the liability and equity components for the Notes as of June 30, 2020 was as follows (in thousands):

Liability component:
 
Principal amount
$
172,500

Unamortized discount
(56,324
)
Unamortized issuance costs
(4,013
)
Net carrying amount
$
112,163

 
 
Equity component, net of issuance costs
$
55,233



The following table sets forth the interest expense recognized related to the Notes (in thousands):

 
 Three and Nine months ended
June 30, 2020
Coupon interest expense
$
491

Amortization of debt discount
925

Amortization of debt issuance costs
45

Total interest expense related to the Notes
$
1,461

Effective interest rate of the liability component
12.32
%


The unamortized debt discount and debt issuance costs will be amortized over 59 months as of June 30, 2020.

As of June 30, 2020, the total estimated fair value of the Notes was approximately $213.2 million which includes the equity component. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market interest rates. The fair value of the Notes is considered a Level 2 measurement as they are not actively traded.

9.
Stockholders’ Equity

The following tables present the changes of the components of stockholders’ equity (in thousands):
 
Three Months Ended June 30, 2020
 
Common Stock
 
Additional
Paid-In Capital
 
Accumulated
Other Comprehensive Loss
 
Accumulated Deficit
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
Balance at March 31, 2020
34,249

 
$
5

 
$
284,099

 
$
(1,846
)
 
$
(220,036
)
 
$
62,222

  Issuance of common stock upon exercise of stock options
35

 

 
200

 

 

 
200

Issuance of common stock upon release of restricted stock units
263

 

 

 

 

 

  Stock-based compensation

 

 
5,400

 

 

 
5,400

Equity component of convertible senior notes, net of issuance costs

 

 
55,233

 

 

 
55,233

  Other comprehensive income

 

 

 
219

 

 
219

  Net loss

 

 

 

 
(2,380
)
 
(2,380
)
Balance at June 30, 2020
34,547

 
$
5

 
$
344,932

 
$
(1,627
)
 
$
(222,416
)
 
$
120,894

 
 
 
 
 
 
 
 
 
 
 
 


15


 
Three Months Ended June 30, 2019
 
Common Stock
 
Additional
Paid-In Capital
 
Accumulated
Other Comprehensive Loss
 
Accumulated Deficit
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
Balance at March 31, 2019
32,481

 
$
5

 
$
255,931

 
$
(994
)
 
$
(203,750
)
 
$
51,192

  Issuance of common stock upon exercise of stock options
24

 

 
180

 

 

 
180

Issuance of common stock upon release of restricted stock units
206

 

 

 

 

 

  Stock-based compensation

 

 
3,723

 

 

 
3,723

  Other comprehensive income

 

 

 
25

 

 
25

  Net loss

 

 

 

 
(3,004
)
 
(3,004
)
Balance at June 30, 2019
32,711

 
$
5

 
$
259,834

 
$
(969
)
 
$
(206,754
)
 
$
52,116

 
 
 
 
 
 
 
 
 
 
 
 

 
Nine Months Ended June 30, 2020
 
Common Stock
 
Additional
Paid-In Capital
 
Accumulated
Other Comprehensive Loss
 
Accumulated Deficit
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
Balance at September 30, 2019
32,995

 
$
5

 
$
266,295

 
$
(1,169
)
 
$
(212,409
)
 
$
52,722

  Issuance of common stock upon exercise of stock options
65

 

 
493

 

 

 
493

  Issuance of common stock upon release of restricted stock units
1,402

 

 

 

 

 

Issuance of common stock upon ESPP purchase
85

 

 
1,949

 

 

 
1,949

  Stock-based compensation

 

 
20,962

 

 

 
20,962

  Equity component of convertible senior notes, net of issuance costs

 

 
55,233

 

 

 
55,233

  Other comprehensive loss

 

 

 
(458
)
 

 
(458
)
  Net loss

 

 

 

 
(10,007
)
 
(10,007
)
Balance at June 30, 2020
34,547


$
5


$
344,932


$
(1,627
)

$
(222,416
)

$
120,894

 
 
 
 
 
 
 
 
 
 
 
 
For the nine months ended June 30, 2020, the additional paid-in capital included $3.7 million related to restricted stock unit grants for the portion of the bonus recorded as stock-based compensation for the year ended September 30, 2019.
 
Nine Months Ended June 30, 2019
 
Common Stock
 
Additional
Paid-In Capital
 
Accumulated
Other Comprehensive Loss
 
Accumulated Deficit
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
Balance at September 30, 2018
31,444

 
$
5

 
$
244,814

 
$
(1,285
)
 
$
(203,500
)
 
$
40,034

  Cumulative effect of a change in
accounting principal

 

 

 

 
10,384

 
10,384

  Issuance of common stock upon exercise of stock options
86

 

 
567

 

 

 
567

  Issuance of common stock upon release of restricted stock units
1,062

 

 

 

 

 

Issuance of common stock upon ESPP purchase
119

 

 
1,631

 

 

 
1,631

  Stock-based compensation

 

 
12,822

 

 

 
12,822

  Other comprehensive loss

 

 

 
316

 

 
316

  Net loss

 

 

 

 
(13,638
)
 
(13,638
)
Balance at June 30, 2019
32,711

 
$
5

 
$
259,834

 
$
(969
)
 
$
(206,754
)
 
$
52,116

 
 
 
 
 
 
 
 
 
 
 
 


16



10.
Stock-based Compensation

As of June 30, 2020, the Company had approximately 2.8 million shares available for future stock awards under its equity plans and any additional releases resulting from an over-achievement relating to performance-based restricted stock units.

The following table summarizes our restricted stock unit (“RSU”) activity which includes performance-based RSUs under all equity plans for the nine months ended June 30, 2020:
 
Restricted 
Stock Units
Outstanding
(in thousands)
 
Weighted
Average
Grant Date
Fair Value
Balance at September 30, 2019
2,350

 
$
16.36

Granted
1,354

 
28.75

Released
(1,402
)
 
19.39

Forfeited
(116
)
 
18.93

Balance at June 30, 2020
2,186

 
$
21.94

 
 
 
 


Stock-based compensation recorded in the condensed consolidated statements of operations is as follows (in thousands):
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Cost of revenues
 
 
 
 
 
 
 
Subscription
$
412

 
$
435

 
$
1,429

 
$
1,364

Professional services
528

 
503

 
1,685

 
1,543

Total stock-based compensation in cost of revenues
940

 
938

 
3,114

 
2,907

Operating expenses
 
 
 
 
 
 
 
Research and development
1,074

 
771

 
3,743

 
2,396

Sales and marketing
1,527

 
440

 
4,589

 
2,824

General and administrative
1,859

 
1,574

 
5,786

 
4,695

Total stock-based compensation in operating expenses
4,460

 
2,785

 
14,118

 
9,915

Total stock-based compensation
$
5,400

 
$
3,723

 
$
17,232

 
$
12,822

 
 
 
 
 
 
 
 



11.
Income Taxes

The Company recorded an income tax provision of $0.2 million, representing effective income tax rates of (8.3)% for both the three months ended June 30, 2020 and 2019; and $0.5 million and $1.0 million, representing effective income tax rates of (5.4)% and (7.6)%, for the nine months ended June 30, 2020 and 2019, respectively. The income tax provision for the three months ended June 30, 2020 and 2019 was primarily related to foreign taxes on the Company’s profitable foreign operations and state minimum taxes. The income tax provision for the nine months ended June 30, 2020 was primarily related to foreign taxes on the Company’s profitable foreign operations and foreign withholding taxes on dividends partially offset by a discrete tax benefit for a true-up in federal income tax payable. The income tax provision for the nine months ended June 30, 2019 was primarily related to the foreign withholding taxes on the dividend distribution and foreign taxes on the Company’s profitable foreign operations.

The Company elected to partially reinvest foreign earnings in certain foreign jurisdictions and expects to repatriate future foreign earnings in certain foreign jurisdictions over time. As a result, the Company will record a deferred tax liability for the additional non-U.S. taxes that are expected to be incurred related to the repatriation of these earnings. During the nine months ended June 30, 2020, the Company repatriated $1.0 million of foreign subsidiary earnings to the U.S. in the form of cash and paid foreign withholding taxes of $0.2 million.

The Company elected to record GILTI as a period cost. The Company realized no benefit for current period losses due to maintaining a full valuation allowance against the U.S. net deferred tax assets.

17



On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted and signed into law in response to the COVID-19 pandemic. GAAP requires recognition of the tax effects of new legislation during the reporting period in which the enactment date occurs. The CARES Act includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for businesses include a five-year net operating loss carryback, suspension of annual deduction limitation of 80% of taxable income from net operating losses generated in a tax year beginning after December 31, 2017, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, technical corrections on net operating loss carryforwards for fiscal year taxpayers and allowing accelerated deductions for qualified improvement property. The CARES Act also provides other non-tax benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined that there is no material impact to the income tax provision for the quarter.

On June 29, 2020, California Assembly Bill 85 (“AB 85”) was signed into law, which suspends the use of net operating losses for certain taxpayers and limits the use of research tax credits for 2020, 2021, and 2022. The Company evaluated the impact of AB 85 and determined that it did not impact the Company’s income tax provision for the quarter.

12.
Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
Numerator
 

 
 

 
 

 
 

Basic and diluted
 

 
 

 
 

 
 

Net loss attributable to common stockholders
$
(2,380
)
 
$
(3,004
)
 
$
(10,007
)
 
$
(13,638
)
Denominator
 
 
 
 
 
 
 
Basic and diluted
 
 
 
 
 
 
 
Weighted average shares used in computing net loss per share attributable to common stockholders
34,411

 
32,596

 
33,781

 
32,028

Net loss per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic and diluted
$
(0.07
)
 
$
(0.09
)
 
$
(0.30
)
 
$
(0.43
)
 
 
 
 
 
 
 
 

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would have been anti-dilutive are as follows (in thousands):
 
As of June 30,
 
2020
 
2019
Stock options
35

 
135

Performance-based RSUs and RSUs
2,186

 
2,453

Shares issuable pursuant to the employee stock purchase plan
66

 
112

Convertible senior notes
5,176