x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 94- 3394123 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Large Accelerated Filer | x | Accelerated Filer | o | ||
Non-accelerated filer | o | (Do not check if a smaller reporting Company) | Smaller Reporting Company | o | |
Emerging Growth Company | o |
• | our quarterly and annual results may fluctuate significantly, including as a result of the timing and success of new product and feature introductions by us, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock; |
• | if we are unable to attract new clients or sell additional services and functionality to our existing clients, our revenue and revenue growth will be harmed; |
• | our recent rapid growth may not be indicative of our future growth, and even if we continue to grow rapidly, we may fail to manage our growth effectively; |
• | failure to adequately expand our sales force could impede our growth; |
• | if we fail to manage our technical operations infrastructure, our existing clients may experience service outages, our new clients may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages; |
• | security breaches and improper access to or disclosure of our data or our clients’ data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and adversely affect our business; |
• | the markets in which we participate are highly competitive, and if we do not compete effectively, our operating results could be harmed; |
• | if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base; |
• | our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully grow and manage these relationships could harm our business; |
• | we are establishing a network of master agents and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues; |
• | we sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results; |
• | because a significant percentage of our revenue is derived from existing clients, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern; |
• | we rely on third-party telecommunications and internet service providers to provide our clients and their customers with telecommunication services and connectivity to our cloud contact center software, any increase in the cost thereof, reduction in efficacy or any failure by these service providers to provide reliable services could cause us to lose customers, increase our customers’ cost of using our solution and subject us to, among other things, claims for credits or damages; |
• | we have a history of losses and we may be unable to achieve or sustain profitability; |
• | the contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new products in order to maintain and grow our business; |
• | we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; |
• | we may not have sufficient cash to service our convertible senior notes and repay such notes, if required; and |
• | failure to comply with laws and regulations could harm our business and our reputation. |
June 30, 2018 | December 31, 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 166,162 | $ | 68,947 | ||||
Marketable investments | 108,140 | — | ||||||
Accounts receivable, net | 20,167 | 19,048 | ||||||
Prepaid expenses and other current assets | 8,437 | 4,840 | ||||||
Deferred contract acquisition costs | 8,083 | — | ||||||
Total current assets | 310,989 | 92,835 | ||||||
Property and equipment, net | 22,019 | 19,888 | ||||||
Intangible assets, net | 841 | 1,073 | ||||||
Goodwill | 11,798 | 11,798 | ||||||
Other assets | 1,026 | 2,602 | ||||||
Deferred contract acquisition costs — less current portion | 18,393 | — | ||||||
Total assets | $ | 365,066 | $ | 128,196 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 6,035 | $ | 4,292 | ||||
Accrued and other current liabilities | 13,615 | 11,787 | ||||||
Accrued federal fees | 1,638 | 1,151 | ||||||
Sales tax liability | 1,201 | 1,326 | ||||||
Notes payable | 31 | 336 | ||||||
Capital leases | 7,442 | 6,651 | ||||||
Deferred revenue | 14,750 | 13,975 | ||||||
Total current liabilities | 44,712 | 39,518 | ||||||
Convertible senior notes | 190,615 | — | ||||||
Revolving line of credit | — | 32,594 | ||||||
Sales tax liability — less current portion | 928 | 1,044 | ||||||
Capital leases — less current portion | 7,869 | 7,161 | ||||||
Other long-term liabilities | 1,436 | 1,041 | ||||||
Total liabilities | 245,560 | 81,358 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value; 5,000 shares authorized, no shares issued and outstanding at June 30, 2018 and December 31, 2017 | — | — | ||||||
Common stock, $0.001 par value; 450,000 shares authorized, 58,276 shares and 56,632 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 58 | 57 | ||||||
Additional paid-in capital | 273,373 | 222,202 | ||||||
Accumulated deficit | (153,925 | ) | (175,421 | ) | ||||
Total stockholders’ equity | 119,506 | 46,838 | ||||||
Total liabilities and stockholders’ equity | $ | 365,066 | $ | 128,196 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Revenue | $ | 61,120 | $ | 47,727 | $ | 120,025 | $ | 94,741 | ||||||||
Cost of revenue | 24,814 | 20,273 | 49,516 | 40,244 | ||||||||||||
Gross profit | 36,306 | 27,454 | 70,509 | 54,497 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 8,367 | 6,836 | 16,139 | 13,683 | ||||||||||||
Sales and marketing | 17,912 | 16,932 | 35,390 | 32,710 | ||||||||||||
General and administrative | 9,833 | 6,845 | 18,936 | 15,705 | ||||||||||||
Total operating expenses | 36,112 | 30,613 | 70,465 | 62,098 | ||||||||||||
Income (loss) from operations | 194 | (3,159 | ) | 44 | (7,601 | ) | ||||||||||
Other income (expense), net: | ||||||||||||||||
Interest expense | (2,378 | ) | (888 | ) | (3,188 | ) | (1,770 | ) | ||||||||
Interest income and other | 206 | 90 | 604 | 208 | ||||||||||||
Total other income (expense), net | (2,172 | ) | (798 | ) | (2,584 | ) | (1,562 | ) | ||||||||
Loss before income taxes | (1,978 | ) | (3,957 | ) | (2,540 | ) | (9,163 | ) | ||||||||
Provision for income taxes | 64 | 50 | 109 | 99 | ||||||||||||
Net loss | $ | (2,042 | ) | $ | (4,007 | ) | $ | (2,649 | ) | $ | (9,262 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.05 | ) | $ | (0.17 | ) | ||||
Shares used in computing net loss per share: | ||||||||||||||||
Basic and diluted | 57,903 | 54,723 | 57,453 | 54,208 | ||||||||||||
Comprehensive Income (Loss): | ||||||||||||||||
Net loss and comprehensive loss | $ | (2,042 | ) | $ | (4,007 | ) | $ | (2,649 | ) | $ | (9,262 | ) |
Six Months Ended | ||||||||
June 30, 2018 | June 30, 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (2,649 | ) | $ | (9,262 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 4,769 | 4,365 | ||||||
Amortization of premium on marketable investments | (43 | ) | — | |||||
Provision for doubtful accounts | 66 | 45 | ||||||
Stock-based compensation | 12,122 | 6,983 | ||||||
Gain on sale of convertible note held for investment | (312 | ) | — | |||||
Non-cash adjustment on investment | (40 | ) | (161 | ) | ||||
Amortization of debt discount and issuance costs | 40 | 40 | ||||||
Amortization of discount and issuance costs on convertible senior notes | 1,733 | — | ||||||
Accretion of interest | 44 | 10 | ||||||
Others | (19 | ) | (14 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,114 | ) | (2,426 | ) | ||||
Prepaid expenses and other current assets | (3,140 | ) | (4,106 | ) | ||||
Deferred contract acquisition costs | (3,338 | ) | — | |||||
Other assets | 4 | 166 | ||||||
Accounts payable | 1,493 | 1,187 | ||||||
Accrued and other current liabilities | 2,415 | 909 | ||||||
Accrued federal fees and sales tax liability | 246 | 171 | ||||||
Deferred revenue | 1,170 | 2,025 | ||||||
Other liabilities | 261 | 311 | ||||||
Net cash provided by operating activities | 13,708 | 243 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of marketable investments | (109,506 | ) | — | |||||
Proceeds from maturities of marketable investments | 1,400 | — | ||||||
Purchases of property and equipment | (1,092 | ) | (1,178 | ) | ||||
Proceeds from sale of convertible note held for investment | 1,923 | — | ||||||
Net cash used in investing activities | (107,275 | ) | (1,178 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $7,946 | 250,804 | — | ||||||
Payments for capped call transactions | (31,412 | ) | — | |||||
Proceeds from exercise of common stock options | 5,821 | 2,303 | ||||||
Proceeds from sale of common stock under ESPP | 2,884 | 1,800 | ||||||
Repayments on revolving line of credit | (32,594 | ) | — | |||||
Payments of notes payable | (318 | ) | (400 | ) | ||||
Payments of capital leases | (4,403 | ) | (3,741 | ) | ||||
Net cash provided by (used in) financing activities | 190,782 | (38 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 97,215 | (973 | ) | |||||
Cash and cash equivalents: | ||||||||
Beginning of period | 68,947 | 58,122 | ||||||
End of period | $ | 166,162 | $ | 57,149 | ||||
Supplemental disclosures of cash flow data: | ||||||||
Cash paid for interest | $ | 1,457 | $ | 1,691 | ||||
Cash paid for income taxes | $ | 67 | $ | 69 | ||||
Non-cash investing and financing activities: | ||||||||
Equipment obtained under capital lease | $ | 4,993 | $ | 4,012 | ||||
Equipment purchased and unpaid at period-end | $ | 737 | $ | 51 |
June 30, 2018 | ||||||||||||
(in thousands) | As Reported | Balances without adoption of ASC 606 | Effect of Change Higher (Lower) | |||||||||
Assets: | ||||||||||||
Accounts receivable, net | $ | 20,167 | $ | 20,064 | $ | 103 | ||||||
Prepaid expenses and other current assets | 8,437 | 8,075 | 362 | |||||||||
Deferred contract acquisition costs | 26,476 | — | 26,476 | |||||||||
Liabilities: | ||||||||||||
Deferred revenue - current | 14,750 | 16,002 | (1,252 | ) | ||||||||
Shareholders’ Equity: | ||||||||||||
Accumulated deficit | (153,925 | ) | (182,118 | ) | 28,193 |
Three Months Ended June 30, 2018 | ||||||||||||
(in thousands, except per share amounts) | As Reported | Balances without adoption of ASC 606 | Effect of Change Higher (Lower) | |||||||||
Revenue | $ | 61,120 | $ | 60,772 | $ | 348 | ||||||
Cost of revenue | 24,814 | 24,668 | 146 | |||||||||
Gross profit | 36,306 | 36,104 | 202 | |||||||||
Sales and marketing | 17,912 | 19,588 | (1,676 | ) | ||||||||
Income (loss) from operations | 194 | (1,684 | ) | 1,878 | ||||||||
Net loss | (2,042 | ) | (3,920 | ) | 1,878 | |||||||
Basic and diluted net loss per share | $ | (0.04 | ) | $ | (0.07 | ) | $ | 0.03 |
Six months ended June 30, 2018 | ||||||||||||
(in thousands, except per share amounts) | As Reported | Balances without adoption of ASC 606 | Effect of Change Higher (Lower) | |||||||||
Revenue | $ | 120,025 | $ | 118,924 | $ | 1,101 | ||||||
Cost of revenue | 49,516 | 49,125 | 391 | |||||||||
Gross profit | 70,509 | 69,799 | 710 | |||||||||
Sales and marketing | 35,390 | 38,728 | (3,338 | ) | ||||||||
Income (loss) from operations | 44 | (4,004 | ) | 4,048 | ||||||||
Net loss | (2,649 | ) | (6,697 | ) | 4,048 | |||||||
Basic and diluted net loss per share | $ | (0.05 | ) | $ | (0.12 | ) | $ | 0.07 |
Six months ended June 30, 2018 | ||||||||||||
(in thousands) | As Reported | Balances without adoption of ASC 606 | Effect of Change Higher (Lower) | |||||||||
Accounts receivable | $ | (1,114 | ) | $ | (1,011 | ) | $ | (103 | ) | |||
Prepaid expenses and other current assets | (3,140 | ) | (2,778 | ) | (362 | ) | ||||||
Deferred contract acquisition costs | (3,338 | ) | — | (3,338 | ) | |||||||
Deferred revenue | 1,170 | 2,422 | (1,252 | ) | ||||||||
Net cash provided by operating activities | 13,708 | 13,708 | — |
June 30, 2018 | January 1, 2018 | |||||||
Accounts receivable, net | $ | 20,167 | $ | 19,151 | ||||
Deferred contract acquisition costs: | ||||||||
Current | $ | 8,083 | $ | 7,059 | ||||
Non-current | 18,393 | 16,079 | ||||||
Total deferred contract acquisition costs | $ | 26,476 | $ | 23,138 | ||||
Contract assets and contract liabilities: | ||||||||
Contract assets (included in prepaid expenses and other current assets) | $ | 991 | $ | 736 | ||||
Contract liabilities (deferred revenue) | 14,750 | 13,568 | ||||||
Net contract assets (liabilities) | $ | (13,759 | ) | $ | (12,832 | ) |
June 30, 2018 | ||||||||||||||||
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
Certificates of deposit | $ | 4,156 | $ | 1 | $ | 0 | $ | 4,157 | ||||||||
U.S. treasury | 989 | — | — | 989 | ||||||||||||
U.S. agency securities and government sponsored securities | 94,879 | 7 | (16 | ) | 94,870 | |||||||||||
Commercial paper | 3,131 | — | — | 3,131 | ||||||||||||
Corporate bonds | 4,994 | — | (1 | ) | 4,993 | |||||||||||
Total | $ | 108,149 | $ | 8 | $ | (17 | ) | $ | 108,140 |
June 30, 2018 | ||||||||
Less than 12 months | ||||||||
Gross Unrealized Losses | Fair Value | |||||||
Certificates of deposit | $ | 0 | $ | 249 | ||||
U.S. agency securities and government sponsored securities | (16 | ) | 32,767 | |||||
Corporate bonds | (1 | ) | 4,993 | |||||
Total | $ | (17 | ) | $ | 38,009 |
June 30, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Cash equivalents | |||||||||||||||
Commercial paper | $ | — | $ | 500 | $ | — | $ | 500 | |||||||
Money market funds | 75,765 | — | — | 75,765 | |||||||||||
Certificates of deposit | — | 498 | — | 498 | |||||||||||
U.S. agency securities | — | 35,157 | — | 35,157 | |||||||||||
Total cash equivalents | $ | 75,765 | $ | 36,155 | $ | — | $ | 111,920 | |||||||
Marketable investments | |||||||||||||||
Certificates of deposit | — | 4,157 | — | 4,157 | |||||||||||
U.S. treasury | 989 | — | — | 989 | |||||||||||
U.S. agency securities and government sponsored securities | — | 94,870 | — | 94,870 | |||||||||||
Commercial paper | — | 3,131 | — | 3,131 | |||||||||||
Corporate bonds | — | 4,993 | — | 4,993 | |||||||||||
Total marketable investments | $ | 989 | $ | 107,151 | $ | — | $ | 108,140 | |||||||
December 31, 2017 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Cash equivalents | |||||||||||||||
Money market funds | $ | 20,092 | $ | — | $ | — | $ | 20,092 | |||||||
Other Assets | |||||||||||||||
Embedded conversion option held for investment | — | — | 984 | 984 |
June 30, 2018 | December 31, 2017 | |||||||
Cash | $ | 54,242 | $ | 48,855 | ||||
Commercial paper | 500 | — | ||||||
Money market funds | 75,765 | 20,092 | ||||||
Certificates of deposit | 498 | — | ||||||
U.S. agency securities | 35,157 | — | ||||||
Cash and cash equivalents | $ | 166,162 | $ | 68,947 |
June 30, 2018 | December 31, 2017 | |||||||
Trade accounts receivable | $ | 19,378 | $ | 17,481 | ||||
Unbilled trade accounts receivable, net of advance client deposits | 817 | 1,600 | ||||||
Allowance for doubtful accounts | (28 | ) | (33 | ) | ||||
Accounts receivable, net | $ | 20,167 | $ | 19,048 |
June 30, 2018 | December 31, 2017 | |||||||
Prepaid expenses | $ | 5,394 | $ | 2,437 | ||||
Other current assets | 2,052 | 2,403 | ||||||
Contract assets | 991 | — | ||||||
Prepaid expenses and other current assets | $ | 8,437 | $ | 4,840 |
June 30, 2018 | December 31, 2017 | |||||||
Computer and network equipment | $ | 47,933 | $ | 47,195 | ||||
Computer software | 7,571 | 6,974 | ||||||
Internal-use software development costs | 500 | 500 | ||||||
Furniture and fixtures | 1,458 | 1,282 | ||||||
Leasehold improvements | 797 | 801 | ||||||
Property and equipment | 58,259 | 56,752 | ||||||
Accumulated depreciation and amortization | (36,240 | ) | (36,864 | ) | ||||
Property and equipment, net | $ | 22,019 | $ | 19,888 |
June 30, 2018 | December 31, 2017 | |||||||
Gross | $ | 48,020 | $ | 46,624 | ||||
Less: accumulated depreciation and amortization | (30,034 | ) | (30,438 | ) | ||||
Total | $ | 17,986 | $ | 16,186 |
June 30, 2018 | December 31, 2017 | |||||||
Accrued compensation and benefits | $ | 9,945 | $ | 8,657 | ||||
Accrued expenses | 3,670 | 3,130 | ||||||
Accrued and other current liabilities | $ | 13,615 | $ | 11,787 |
June 30, 2018 | December 31, 2017 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Developed technology | $ | 2,460 | $ | (1,653 | ) | $ | 807 | $ | 2,460 | $ | (1,478 | ) | $ | 982 | ||||||||||
Customer relationships | 520 | (489 | ) | 31 | 520 | (437 | ) | 83 | ||||||||||||||||
Domain names | 50 | (47 | ) | 3 | 50 | (42 | ) | 8 | ||||||||||||||||
Total | $ | 3,030 | $ | (2,189 | ) | $ | 841 | $ | 3,030 | $ | (1,957 | ) | $ | 1,073 | ||||||||||
Period | Expected Future Amortization Expense | |||
2018 | $ | 210 | ||
2019 | 351 | |||
2020 | 280 | |||
Total | $ | 841 | ||
June 30, 2018 | ||||||
Principal | $ | 258,750 | ||||
Unamortized debt discount | (62,174 | ) | ||||
Unamortized issuance costs | (5,961 | ) | ||||
Net carrying amount | $ | 190,615 |
June 30, 2018 | ||||||
Debt discount for conversion option | $ | 63,756 | ||||
Issuance costs | (1,998 | ) | ||||
Net carrying amount | $ | 61,758 |
Three Months Ended June 30, 2018 | ||||||
Contractual interest expense | $ | 48 | ||||
Amortization of debt discount | 1,582 | |||||
Amortization of issuance costs | 151 | |||||
Total interest expense | $ | 1,781 |
Conversion option | $ | 63,756 | ||||
Payments for capped call transactions | (31,412 | ) | ||||
Issuance costs | (1,998 | ) | ||||
Total | $ | 30,346 |
June 30, 2018 | December 31, 2017 | |||||||
Note payable - FCC civil penalty, gross | $ | — | $ | 333 | ||||
Less: discount | — | (7 | ) | |||||
Note payable, net carrying value | — | 326 | ||||||
Convertible senior notes | 190,615 | — | ||||||
Revolving line of credit | — | 32,594 | ||||||
Interest accretion under 2016 line of credit | 31 | 10 | ||||||
Total debt, net carrying value | $ | 190,646 | $ | 32,930 | ||||
Less: current portion of debt * | $ | 31 | $ | 336 | ||||
Total debt, less current portion ** | $ | 190,615 | $ | 32,594 | ||||
* Included in ‘Notes payable’ in the condensed consolidated balance sheets. | ||||||||
** Included in ‘Convertible senior notes’ and ‘Revolving line of credit’ as of June 30, 2018 and December 31, 2017, respectively, in the condensed consolidated balance sheets. |
Period | Amount to Mature | |||
2018 | $ | 31 | ||
2023 | 258,750 | |||
Total | $ | 258,781 | ||
June 30, 2018 | |||
Stock options outstanding | 3,333 | ||
Restricted stock units outstanding | 2,705 | ||
Shares available for future grant under 2014 Plan | 8,666 | ||
Shares available for future issuance under ESPP | 1,801 | ||
Common stock warrants outstanding | 13 | ||
Total shares of common stock reserved | 16,518 | ||
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||||||||
Outstanding as of December 31, 2017 | 4,047 | $ | 8.00 | ||||||||||
Options granted (weighted average grant date fair value of $14.14 per share) | 268 | 30.37 | |||||||||||
Options exercised | (974 | ) | 5.93 | ||||||||||
Options forfeited or expired | (8 | ) | 4.68 | ||||||||||
Outstanding as of June 30, 2018 | 3,333 | $ | 10.41 | 6.4 | $ | 80,524 | |||||||
Number of Shares | Weighted Average Grant Date Fair Value Per Share | ||||||
Outstanding as of December 31, 2017 | 2,033 | $ | 12.81 | ||||
RSUs granted | 1,285 | 30.51 | |||||
RSUs vested and released | (534 | ) | 12.25 | ||||
RSUs forfeited | (79 | ) | 17.64 | ||||
Outstanding as of June 30, 2018 | 2,705 | $ | 21.18 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Cost of revenue | $ | 853 | $ | 575 | $ | 1,531 | $ | 1,009 | ||||||||
Research and development | 1,064 | 801 | 1,941 | 1,438 | ||||||||||||
Sales and marketing | 1,585 | 1,224 | 2,947 | 2,152 | ||||||||||||
General and administrative | 3,295 | 1,254 | 5,703 | 2,384 | ||||||||||||
Total stock-based compensation | $ | 6,797 | $ | 3,854 | $ | 12,122 | $ | 6,983 | ||||||||
Stock Option | RSU | ESPP | ||||||||||
Unrecognized stock-based compensation expense | $ | 11,366 | $ | 56,023 | $ | 708 | ||||||
Weighted-average amortization period | 2.6 years | 3.0 years | 0.4 years |
Stock Options | Three Months Ended | Six Months Ended | ||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||
Expected term (years) | 6.1 | 6.1 | 6.0 | 6.2 | ||||||
Volatility | 44 | % | 49 | % | 45% | 49% | ||||
Risk-free interest rate | 2.7 | % | 2.0 | % | 2.7% | 2.0% | ||||
Dividend yield (1) | — | — | — | — | ||||||
(1) | The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock. Accordingly, the expected dividend yield is zero. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Net loss | $ | (2,042 | ) | $ | (4,007 | ) | $ | (2,649 | ) | $ | (9,262 | ) | ||||
Weighted-average shares of common stock outstanding | 57,903 | 54,723 | 57,453 | 54,208 | ||||||||||||
Basic and diluted net loss per share | $ | (0.04 | ) | $ | (0.07 | ) | $ | (0.05 | ) | $ | (0.17 | ) | ||||
June 30, 2018 | June 30, 2017 | |||||
Stock options | 3,333 | 4,791 | ||||
Restricted stock units | 2,705 | 2,412 | ||||
Common stock warrants | 13 | 13 | ||||
Total | 6,051 | 7,216 | ||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
United States | $ | 56,890 | $ | 44,830 | $ | 112,061 | $ | 89,188 | ||||||||
International | 4,230 | 2,897 | 7,964 | 5,553 | ||||||||||||
Total revenue | $ | 61,120 | $ | 47,727 | $ | 120,025 | $ | 94,741 | ||||||||
June 30, 2018 | December 31, 2017 | |||||||
United States | $ | 20,089 | $ | 17,949 | ||||
International | 1,930 | 1,939 | ||||||
Property and equipment, net | $ | 22,019 | $ | 19,888 | ||||
Twelve Months Ended | ||||
June 30, 2018 | June 30, 2017 | |||
Annual Dollar-Based Retention Rate | 99% | 98% |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Net loss | $ | (2,042 | ) | $ | (4,007 | ) | $ | (2,649 | ) | $ | (9,262 | ) | ||||
Non-GAAP adjustments: | ||||||||||||||||
Depreciation and amortization (1) | 2,449 | 2,270 | 4,769 | 4,365 | ||||||||||||
Stock-based compensation (2) | 6,797 | 3,854 | 12,122 | 6,983 | ||||||||||||
Interest expense | 2,378 | 888 | 3,188 | 1,770 | ||||||||||||
Interest income and other | (206 | ) | (90 | ) | (604 | ) | (208 | ) | ||||||||
Legal settlement (3) | — | — | — | 1,700 | ||||||||||||
Legal and indemnification fees related to settlement (3) | 241 | — | 241 | 135 | ||||||||||||
Provision for income taxes | 64 | 50 | 109 | 99 | ||||||||||||
Adjusted EBITDA | $ | 9,681 | $ | 2,965 | $ | 17,176 | $ | 5,582 |
(1) | Depreciation and amortization expenses included in our results of operations are as follows (in thousands): |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
Cost of revenue | $ | 1,864 | $ | 1,716 | $ | 3,658 | $ | 3,292 | ||||||||
Research and development | 233 | 237 | 427 | 443 | ||||||||||||
Sales and marketing | 30 | 30 | 59 | 60 | ||||||||||||
General and administrative | 322 | 287 | 625 | 570 | ||||||||||||
Total depreciation and amortization | $ | 2,449 | $ | 2,270 | $ | 4,769 | $ | 4,365 |
(2) | See Note 7 of the notes to condensed consolidated financial statements for stock-based compensation expense included in our results of operations for the periods presented. |
(3) | Represents settlement amount and legal and indemnification fees related to the Melcher litigation. |
Three Months Ended | Six Months Ended | |||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||
Revenue | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Cost of revenue | 41 | % | 42 | % | 41 | % | 42 | % | ||||
Gross profit | 59 | % | 58 | % | 59 | % | 58 | % | ||||
Operating expenses: | ||||||||||||
Research and development | 14 | % | 14 | % | 13 | % | 14 | % | ||||
Sales and marketing | 29 | % | 35 | % | 30 | % | 35 | % | ||||
General and administrative | 16 | % | 16 | % | 16 | % | 17 | % | ||||
Total operating expenses | 59 | % | 65 | % | 59 | % | 66 | % | ||||
Income (loss) from operations | — | % | (7 | )% | — | % | (8 | )% | ||||
Other income (expense), net: | ||||||||||||
Interest expense | (4 | )% | (2 | )% | (3 | )% | (2 | )% | ||||
Interest income and other | 1 | % | 1 | % | 1 | % | — | % | ||||
Total other income (expense), net | (3 | )% | (1 | )% | (2 | )% | (2 | )% | ||||
Loss before income taxes | (3 | )% | (8 | )% | (2 | )% | (10 | )% | ||||
Provision for income taxes | — | % | — | % | — | % | — | % | ||||
Net loss | (3 | )% | (8 | )% | (2 | )% | (10 | )% | ||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Revenue | $ | 61,120 | $ | 47,727 | $ | 13,393 | 28 | % | $ | 120,025 | $ | 94,741 | $ | 25,284 | 27 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Cost of revenue | $ | 24,814 | $ | 20,273 | $ | 4,541 | 22 | % | $ | 49,516 | $ | 40,244 | $ | 9,272 | 23 | % | ||||||||||||||
% of Revenue | 41 | % | 42 | % | 41 | % | 42 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Gross profit | $ | 36,306 | $ | 27,454 | $ | 8,852 | 32 | % | $ | 70,509 | $ | 54,497 | $ | 16,012 | 29 | % | ||||||||||||||
% of Revenue | 59 | % | 58 | % | 59 | % | 58 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Research and development | $ | 8,367 | $ | 6,836 | $ | 1,531 | 22 | % | $ | 16,139 | $ | 13,683 | $ | 2,456 | 18 | % | ||||||||||||||
% of Revenue | 14 | % | 14 | % | 13 | % | 14 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Sales and marketing | $ | 17,912 | $ | 16,932 | $ | 980 | 6 | % | $ | 35,390 | $ | 32,710 | $ | 2,680 | 8 | % | ||||||||||||||
% of Revenue | 29 | % | 35 | % | 30 | % | 35 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
General and administrative | $ | 9,833 | $ | 6,845 | $ | 2,988 | 44 | % | $ | 18,936 | $ | 15,705 | $ | 3,231 | 21 | % | ||||||||||||||
% of Revenue | 16 | % | 16 | % | 16 | % | 17 | % |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | June 30, 2018 | June 30, 2017 | $ Change | % Change | |||||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Interest expense | $ | (2,378 | ) | $ | (888 | ) | $ | (1,490 | ) | (168 | )% | $ | (3,188 | ) | $ | (1,770 | ) | $ | (1,418 | ) | 80 | % | ||||||||
Interest income and other | 206 | 90 | 116 | 129 | % | 604 | 208 | 396 | 190 | % | ||||||||||||||||||||
Total other income (expense), net | $ | (2,172 | ) | $ | (798 | ) | $ | (1,374 | ) | (172 | )% | $ | (2,584 | ) | $ | (1,562 | ) | $ | (1,022 | ) | 65 | % | ||||||||
% of Revenue | (3 | )% | (1 | )% | (2 | )% | (2 | )% |
Six Months Ended | |||||||||||||||
June 30, 2018 | June 30, 2017 | $ Change | % Change | ||||||||||||
Net cash provided by operating activities | $ | 13,708 | $ | 243 | $ | 13,465 | 5,541 | % | |||||||
Net cash used in investing activities | (107,275 | ) | (1,178 | ) | (106,097 | ) | (9,007 | )% | |||||||
Net cash provided by (used in) financing activities | 190,782 | (38 | ) | 190,820 | 502,158 | % | |||||||||
Net increase (decrease) in cash and cash equivalents | $ | 97,215 | $ | (973 | ) | $ | 98,188 | 10,091 | % | ||||||
• | market acceptance of our solution; |
• | our ability to attract new clients and grow our business with existing clients; |
• | client renewal rates; |
• | our ability to adequately expand our sales and service team; |
• | our ability to acquire and maintain strategic and client relationships; |
• | the amount and timing of costs and expenses related to the maintenance and expansion of our business, operations and infrastructure; |
• | the timing and success of new product and feature introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, clients or strategic partners; |
• | network outages or security incidents, which may result in additional expenses or losses, legal and regulatory actions, the loss of clients, the provision of client credits, and harm to our reputation; |
• | seasonal factors that may cause our revenues in the first half of a year to be relatively lower than our revenues in the second half of a year; |
• | inaccessibility or failure of our cloud contact center software due to failures in the products or services provided by third parties; |
• | our ability to expand, and effectively utilize our network of master agents and resellers; |
• | the timing of recognition of revenues under current and future GAAP; |
• | changes in our pricing policies or those of our competitors; |
• | the level of professional services and support we provide our clients; |
• | the components of our revenue; |
• | the addition or loss of key clients, including through acquisitions or consolidations; |
• | general economic, industry and market conditions; |
• | the timing of costs and expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; |
• | compliance with, or changes in, the current and future domestic and international regulatory environment; |
• | the hiring, training and retention of key employees; |
• | litigation or other claims against us; |
• | the ability to expand internationally, and to do so profitability; |
• | our ability to obtain additional financing; |
• | advances and trends in new technologies and industry standards; and |
• | increases or decreases in the costs to provide our solution or pricing changes upon any renewals of client agreements. |
• | compete with other vendors of cloud-based enterprise contact center systems to capture market share, including from providers of legacy on-premise systems; |
• | increase our existing clients’ use of our solution and further develop our partner ecosystem; |
• | strengthen and improve our solution through significant investments in research and development and the introduction of new and enhanced solutions; |
• | introduce our solution to new markets outside of the United States and increase global awareness of our brand; and |
• | selectively pursue acquisitions. |
• | sales and marketing, including a significant expansion of our sales and professional services organization; |
• | our technology infrastructure, including systems architecture, management tools, scalability, availability, performance and security, as well as disaster recovery measures; |
• | solution development, including investments in our solution development team and the development of new solutions, as well as new applications and features for existing solutions; |
• | international expansion; and |
• | general administration, including legal, regulatory compliance and accounting expenses. |
• | cause our clients to seek credits or damages for losses incurred; |
• | cause existing clients to cancel their contracts and move to a competitor; |
• | affect our reputation as a reliable service provider; |
• | make it more difficult for us to attract new clients or expand our business with existing clients; or |
• | require us to replace existing equipment. |
• | clients are not satisfied with our services, prices or the functionality of our solution; |
• | the stability, performance or security of our solution are not satisfactory; |
• | our clients’ business declines due to industry cycles, seasonality, business difficulties or other reasons; |
• | competition increases from other contact center providers; |
• | fewer clients purchase usage from us; |
• | alternative technologies, products or features emerge that we do not provide; |
• | our clients or potential clients experience financial difficulties; or |
• | the U.S. or global economy declines. |
• | damage to third-party and our infrastructure and data centers, related equipment and surrounding properties caused by earthquakes, hurricanes, tornadoes, floods, fires and other natural disasters, explosions and acts of terrorism; |
• | security breaches resulting in loss or disclosure of confidential client and customer data and potential liability to clients and non-client third parties for such disclosures; |
• | inadvertent damage from third parties; and |
• | other hazards that could also result in suspension of operations, personal injury and even loss of life. |
• | the need to establish and protect our brand in international markets; |
• | the need to localize and adapt our solution for specific countries, including translation into foreign languages and associated costs and expenses; |
• | difficulties in staffing and managing foreign operations, particularly hiring and training qualified sales and service personnel; |
• | the need to make implementations, and offer customer care, in various native languages; |
• | different pricing environments, longer sales and accounts receivable payment cycles and collections issues; |
• | weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights outside of the U.S.; |
• | privacy and data protection laws and regulations that are complex, expensive to comply with and may require that client data be stored and processed in a designated territory; |
• | increased risk of piracy, counterfeiting and other misappropriation of our intellectual property in our locations outside the U.S.; |
• | new and different sources of competition; |
• | general economic conditions in international markets; |
• | fluctuations in the value of the U.S. dollar and foreign currencies, which may make our solution more expensive in other countries or may increase our costs, impacting our operating results when translated into U.S. dollars; |
• | compliance with customs duties, tariffs and other international trade complexities; |
• | compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, telecommunications and telemarketing laws and regulations; |
• | increased risk of international telecom fraud; |
• | laws and business practices favoring local competitors; |
• | compliance with laws and regulations for foreign operations, including the Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions and regulatory or contractual limitations on our ability to sell our solution in certain foreign markets, and the risks and costs of non-compliance; |
• | increased financial accounting and reporting burdens and complexities; |
• | restrictions or taxes on the transfer of funds; |
• | adverse tax consequences; and |
• | unstable economic and political conditions. |
• | inability to integrate or benefit from acquisitions in a profitable manner; |
• | unanticipated costs or liabilities associated with the acquisition, including legal claims arising from the activities of companies we acquire; |
• | acquisition-related costs; |
• | difficulty converting the clients of the acquired business to our solution and contract terms, including due to disparities in the revenue, licensing, support or professional services model of the acquired company; |
• | difficulty integrating the accounting systems, operations and personnel of the acquired business; |
• | difficulties and additional costs and expenses associated with supporting legacy products and the hosting infrastructure of the acquired business; |
• | diversion of management’s attention from other business concerns; |
• | harm to our existing relationships with our partners and clients as a result of the acquisition; |
• | the loss of our or the acquired business’s key employees; |
• | diversion of resources that could have been more effectively deployed in other parts of our business; and |
• | use of substantial portions of our available cash to consummate the acquisition. |
• | the Communications Assistance for Law Enforcement Act, or CALEA, which requires covered entities to assist law enforcement in undertaking electronic surveillance; |
• | contributions to the USF which requires that we pay a percentage of our revenues resulting from the provision of interstate telecommunications services to support certain federal programs; |
• | payment of annual FCC regulatory fees based on our interstate and international revenues; |
• | rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund; and |
• | FCC rules regarding Customer Proprietary Network Information, or CPNI, which prohibit us from using such information without client approval, subject to certain exceptions. |
• | actual or anticipated fluctuations in our operating results; |
• | the financial projections we provide to the public, any changes in these projections or our failure to meet these projections; |
• | failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; |
• | ratings changes by any securities analysts who follow our company; |
• | sales of our common stock by us or our significant stockholders, or the public announcement of same; |
• | the assessment of our business or position in our market published in research and other reports; |
• | announcements by us or our competitors of significant product or technical innovations, financings, acquisitions, strategic partnerships, joint ventures or capital commitments; |
• | new products or new sales by us or our competitors; |
• | changes in operating performance and stock market valuations of other technology companies generally, or those in the software as a service industry in particular; |
• | price and volume fluctuations in the overall stock market, including as a result of trends in the U.S. or global economy; |
• | any major change in our board of directors or management; |
• | lawsuits threatened or filed against us; |
• | security breaches or incidents impacting our clients or their customers; |
• | legislation or regulation of our business, the internet and/or contact centers; |
• | loss of key personnel; |
• | new entrants into the contact center market, including the transition by providers of legacy on-premise contact center systems to cloud solutions; |
• | the perceived or real impact of events that harm our direct competitors; |
• | developments with respect to patents or proprietary rights; |
• | general market conditions; and |
• | other events or factors, including those resulting from war, incidents of terrorism or responses to these events, which would be unrelated to our business and industry, and outside of our control. |
• | provide that our board of directors is classified into three classes of directors; |
• | provide that stockholders may remove directors only for cause and only with the approval of holders of at least 66 2⁄3% of our then outstanding capital stock; |
• | provide that the authorized number of directors may be changed only by resolution of the board of directors; |
• | provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; |
• | provide that our stockholders may not take action by written consent, and may only take action at annual or special meetings of our stockholders; |
• | provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice; |
• | restrict the forum for certain litigation against us to Delaware; |
• | do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election); |
• | provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer or the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and |
• | provide that stockholders will be permitted to amend our amended and restated bylaws only upon receiving at least 662/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class. |
Exhibit Number | Description | |
10.3+ | ||
10.4+ | ||
31.1* | ||
31.2* | ||
32.1** | ||
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Schema Linkbase Document | |
101.CAL* | XBRL Taxonomy Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Labels Linkbase Document | |
101.PRE* | XBRL Taxonomy Presentation Linkbase Document | |
Five9, Inc. | |||
Date: | August 6, 2018 | By: | /s/ Rowan Trollope |
Rowan Trollope | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
/s/ Barry Zwarenstein | |||
Barry Zwarenstein | |||
Chief Financial Officer | |||
(Principal Financial Officer and Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Five9, Inc. for the quarter ended June 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 6, 2018 | By: | /s/ Rowan Trollope |
Rowan Trollope | |||
Chief Executive Officer | |||
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Five9, Inc. for the quarter ended June 30, 2018; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | August 6, 2018 | By: | /s/ Barry Zwarenstein |
Barry Zwarenstein | |||
Chief Financial Officer | |||
(Principal Financial Officer) |
Date: | August 6, 2018 | By: | /s/ Rowan Trollope |
Rowan Trollope | |||
Chief Executive Officer |
Date: | August 6, 2018 | By: | /s/ Barry Zwarenstein |
Barry Zwarenstein | |||
Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jul. 26, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Five9, Inc. | |
Trading Symbol | FIVN | |
Entity Central Index Key | 0001288847 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 58,304,771 |
Condensed Consolidated Balance Sheets - Parenthetical - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred Stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Preferred Stock, shares outstanding (in shares) | 0 | 0 |
Common Stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Common Stock, shares authorized (in shares) | 450,000,000 | 450,000,000 |
Common Stock, shares issued (in shares) | 58,275,511 | 56,631,647 |
Common Stock, shares outstanding (in shares) | 58,275,511 | 56,631,647 |
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Statement [Abstract] | ||||
Revenue | $ 61,120 | $ 47,727 | $ 120,025 | $ 94,741 |
Cost of revenue | 24,814 | 20,273 | 49,516 | 40,244 |
Gross profit | 36,306 | 27,454 | 70,509 | 54,497 |
Operating expenses: | ||||
Research and development | 8,367 | 6,836 | 16,139 | 13,683 |
Sales and marketing | 17,912 | 16,932 | 35,390 | 32,710 |
General and administrative | 9,833 | 6,845 | 18,936 | 15,705 |
Total operating expenses | 36,112 | 30,613 | 70,465 | 62,098 |
Income (loss) from operations | 194 | (3,159) | 44 | (7,601) |
Other income (expense), net: | ||||
Interest expense | (2,378) | (888) | (3,188) | (1,770) |
Interest income and other | 206 | 90 | 604 | 208 |
Total other income (expense), net | (2,172) | (798) | (2,584) | (1,562) |
Loss before income taxes | (1,978) | (3,957) | (2,540) | (9,163) |
Provision for income taxes | 64 | 50 | 109 | 99 |
Net loss | $ (2,042) | $ (4,007) | $ (2,649) | $ (9,262) |
Net loss per share: | ||||
Basic and diluted (in USD per share) | $ (0.04) | $ (0.07) | $ (0.05) | $ (0.17) |
Shares used in computing net loss per share: | ||||
Basic and diluted (in shares) | 57,903 | 54,723 | 57,453 | 54,208 |
Comprehensive Income (Loss): | ||||
Net loss and comprehensive loss | $ (2,042) | $ (4,007) | $ (2,649) | $ (9,262) |
Description of Business and Summary of Significant Accounting Policies |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Summary of Significant Accounting Policies | Description of Business and Summary of Significant Accounting Policies Five9, Inc. and its wholly-owned subsidiaries (the “Company”) is a provider of cloud software for contact centers. The Company was incorporated in Delaware in 2001 and is headquartered in San Ramon, California. The Company has offices in Europe and Asia, which primarily provide research, development, sales, marketing, and client support services. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“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 financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts included in the condensed consolidated financial statements have been reclassified to conform to the current period presentation. Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The significant estimates made by management affect revenue, the allowance for doubtful accounts, loss contingencies, including the Company’s accrual for federal fees and sales tax liability, and accrued liabilities. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates. Cash and Cash Equivalents The Company’s cash and cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase. The Company’s cash equivalents consist of investments in U.S. agency securities, commercial paper, certificates of deposit and money market funds. Marketable Investments The Company’s marketable investments consist of U.S agency securities and government sponsored securities, U.S. treasury securities, certificates of deposit, corporate bonds and commercial paper. The Company determines the appropriate classification of its investments in marketable investments at the time of purchase and re-evaluates such designation at each balance sheet date. The Company’s marketable investments have been classified and accounted for as available-for-sale. Marketable investments are carried at fair value. Significant Accounting Policies The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017. Other than the accounting policies discussed in Note 2 related to the adoption of ASC 606, there has been no material change to the Company’s significant accounting policies during the six months ended June 30, 2018. See Note 2 for the updated accounting policies. Recently Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers: Topic 606, amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. The Company adopted ASU 2014-09 and its related amendments (collectively “ASC 606”) effective on January 1, 2018 using the modified retrospective method. See Note 2 for disclosure on the impact of adopting this standard. Recent Accounting Pronouncements Not Yet Effective In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for both finance, or capital, and operating leases with lease terms of more than 12 months. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. Lessor accounting will remain largely unchanged from current GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach that includes a number of optional practical expedients that entities may elect to apply. This guidance is effective for the Company beginning in the first quarter of 2019. Early adoption is permitted. The Company is currently gathering information and evaluating the impact this guidance will have on its consolidated financial statements. There are several other new accounting pronouncements issued by the FASB, which the Company will adopt. However, the Company does not believe any of those accounting pronouncements will have a material impact on its consolidated financial position, operating results or statements of cash flows. |
ASC 606 Adoption Impact and Revenue from Contracts with Customers |
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ASC 606 Adoption Impact and Revenue from Contracts with Customers | ASC 606 Adoption Impact and Revenue from Contracts with Customers ASC 606 Adoption Impact On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method, applying to all contracts. The Company recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the period presented, or “ASC 605.” In connection with the adoption of ASC 606, the Company also adopted ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers (“ASC 340-40”), which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, the Company refers to ASC 606 and ASC 340-40 as the “new standard.” Adoption of the new standard resulted in changes to our accounting policies for revenue recognition, commissions and deferred commissions as discussed below. The Company recorded a net reduction to opening accumulated deficit of $24.1 million as of January 1, 2018 due to the cumulative impact of adopting the new standard. The primary impact of adopting the new standard related to the deferral of $23.1 million in incremental commission costs of obtaining subscription contracts. Under ASC 605, the Company expensed all commission costs as incurred. Under the new standard, the Company defers all incremental commission costs to obtain the contract, and amortizes these costs over a period of benefit determined to be five years. The remaining $1.0 million impact of adopting the new standard related to revenue being recognized earlier than it would have been under ASC 605. Practical Expedients and Exemptions The Company applies a practical expedient that permits the Company to apply ASC 340-40 to a single portfolio of contracts, as they are similar in their characteristics, and the financial statement effects of applying ASC 340-40 to that portfolio would not differ materially from applying it to the individual contracts within that portfolio. Additionally, the Company has elected the optional exemption which allows for the exclusion of the amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less. Impact on Condensed Consolidated Financial Statements Select condensed consolidated balance sheet line items, which reflects the adoption impact of the new standard, are as follows:
Select condensed consolidated statement of operations line items, which reflects the adoption of the new standard, are as follows:
Select condensed consolidated cash flow line items, which reflects the adoption of the new standard, are as follows:
Changes in Accounting Policies Revenue Recognition Revenue is recognized when control of the promised services are transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company generates all of its revenue from contracts with customers. In contracts with multiple performance obligations, it identifies each performance obligation and evaluates whether the performance obligations are distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined. The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation. The Company then looks to how services are transferred to the customer in order to determine the timing of revenue recognition. Most services provided under the Company’s agreements result in the transfer of control over time. The Company’s revenue consists of subscription services and related usage as well as professional services. The Company charges clients subscription fees, usually billed on a monthly basis, for access to the Company’s Virtual Contact Center, or VCC, solution. The monthly subscription fees are primarily based on the number of agent seats, as well as the specific VCC functionalities and applications deployed by the client. Agent seats are defined as the maximum number of named agents allowed to concurrently access the VCC cloud platform. Clients typically have more named agents than agent seats. Multiple named agents may use an agent seat, though not simultaneously. Substantially all of the Company’s clients purchase both subscriptions and related telephony usage. A small percentage of the Company’s clients subscribe to its platform but purchase telephony usage directly from a wholesale telecommunications service provider. The Company does not sell telephony usage on a stand-alone basis to any client. The related usage fees are based on the volume of minutes used for inbound and outbound client interactions. The Company also offers bundled plans, generally for smaller deployments, whereby the client is charged a single monthly fixed fee per agent seat that includes both subscription and unlimited usage in the contiguous 48 states and, in some cases, Canada. Professional services revenue is derived primarily from VCC implementations, including application configuration, system integration, optimization, education and training services. Clients are not permitted to take possession of the Company’s software. The Company offers monthly, annual and multiple-year contracts to its clients, generally with 30 days’ notice required for changes in the number of agent seats and sometimes with a minimum number of agent seats required. Larger clients typically choose annual contracts, which generally include an implementation and ramp period of several months. Fixed subscription fees (including bundled plans) are generally billed monthly in advance, while related usage fees are billed in arrears. Support activities include technical assistance for the Company’s solution and upgrades and enhancements to the VCC cloud platform on a when-and-if-available basis, which are not billed separately. The Company generally requires advance deposits from its clients based on estimated usage when such usage is not billed as part of a bundled plan. Any unused portion of the deposit is refundable to the client upon termination of the arrangement, provided all amounts due have been paid. All fees, except usage deposits, are non-refundable. Professional services are primarily billed on a fixed-fee basis and are performed by the Company directly or, alternatively, clients may also choose to perform these services themselves or engage their own third-party service providers. The estimation of variable consideration for each performance obligation requires the Company to make some subjective judgments resulting in estimated variable consideration that is included in the transaction fee. This is done to the extent that it is probable, in the Company’s judgment, that a significant reversal in the amount of cumulative revenue recognized under the contract will not occur. The Company estimates the variable consideration in order to allocate the overall transaction fee on a relative stand-alone selling price basis to its multiple performance obligations. This requires the estimate of unit quantities, especially during the initial ramp period of the contract, during which the Company bills under an ‘actual usage’ model for subscription-related services. The Company recognizes revenue on fixed fee professional services performance obligations based on the proportion of labor hours expended compared to the total hours expected to complete the related performance obligation. The determination of the total labor hours expected to complete the performance obligations involves some judgment, influencing the initial stand-alone selling price estimate as well as the timing of professional services revenue recognition, although this uncertainty is typically resolved in a short time frame. When a contract with a customer is signed, the Company assesses whether collection of the fees under the arrangement is probable. The Company assesses collection based on a number of factors, including past transaction history and the creditworthiness of the client. The Company maintains a revenue reserve for potential credits to be issued in accordance with service level agreements or for other revenue adjustments. The revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added and excise taxes. The Company records Universal Service Fund, or USF, contributions and other regulatory costs on a gross basis in its condensed consolidated statements of operations and comprehensive loss and records surcharges and sales, use and excise taxes billed to its clients on a net basis. The cost of gross USF contributions payable to the Universal Service Administrative Company, or USAC, and suppliers is presented as a cost of revenue in the condensed consolidated statements of operations and comprehensive loss. Surcharges and sales, use and excise taxes incurred in excess of amounts billed to the Company’s clients are presented in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. Disaggregation of Revenue The Company disaggregates its revenue by geographic region. See Note 11 for more information. Contract Balances The following table provides information about accounts receivable, net, deferred contract acquisition costs, contract assets and contract liabilities from contracts with customers (in thousands):
The Company receives payments from customers based upon billing cycles. Invoice payment terms are usually 30 days or less. Accounts receivable are recorded when the right to consideration becomes unconditional. Deferred contract acquisition costs are recorded when incurred and are amortized over a customer benefit period of five years. The Company’s contract assets consist of unbilled amounts typically resulting from professional services revenue recognition when it exceeds the total amounts billed to the customer. The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized. In the three and six months ended June 30, 2018, the Company recognized revenue of $1.6 million and $8.1 million, respectively, related to its contract liabilities at January 1, 2018. Deferred Contract Acquisition Costs In connection with the adoption of ASC 340-40, the Company capitalizes certain contract acquisition costs consisting primarily of commissions paid when contracts are signed and related incremental fringe benefits. As of January 1, 2018, the date of ASC 340-40 adoption, the Company had $23.1 million capitalized in deferred contract acquisition costs related to contracts where the benefit period had not yet expired. In the three and six months ended June 30, 2018, amortization from amounts capitalized was $2.0 million and $3.9 million, respectively, and amounts expensed as incurred was $0.5 million and $1.0 million, respectively. As of June 30, 2018, the Company had no impairment loss in relation to costs capitalized. Remaining Performance Obligations As of June 30, 2018, the aggregate amount of the total transaction price allocated in contracts with original duration of greater than one year to the remaining performance obligations was $64.0 million. The Company expects to recognize revenue on approximately three-quarters of the remaining performance obligation over the next 24 months, with the balance recognized thereafter. The Company has elected the optional exemption which allows for the exclusion of the amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less. Such remaining performance obligations represent the unsatisfied or partially unsatisfied performance obligations pursuant to ASC 606. |
Investments and Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments and Fair Value Measurements [Text Block] | Investments and Fair Value Measurements Marketable Investments The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable investments as of June 30, 2018 were as follows (in thousands):
The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position as of June 30, 2018 (in thousands):
The contractual maturities of the Company’s marketable investments as of June 30, 2018 were less than one year. Fair Value Measurements The Company carries cash equivalents and marketable investments at fair value. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 — Observable inputs which include unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than Level 1 inputs, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques. The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments. Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy. The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands):
In March 2018, the Company received proceeds of $1.9 million from the conversion and sale of a convertible note with a carrying value of $1.6 million. Proceeds from the sale of the investment totaled $2.1 million. The Company expects to receive the remainder of the proceeds in 2019. As of June 30, 2018, the estimated fair value of the Company’s outstanding 0.125% convertible senior notes due 2023 was $269.7 million. The fair value was determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. See Note 6 for further information on the Company’s 0.125% convertible senior notes due 2023. There were no assets or liabilities measured at fair value on a non-recurring basis as of June 30, 2018. |
Financial Statement Components |
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Financial Statement Components [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Statement Components | Financial Statement Components Cash and cash equivalents consisted of the following (in thousands):
As of June 30, 2018, the Company was required to maintain $25.0 million of unrestricted cash and cash equivalents deposited with two lenders in connection with its credit agreement as a compensating balance. The credit agreement was terminated on July 1, 2018. See Note 6. Accounts receivable, net consisted of the following (in thousands):
Prepaid expenses and other current assets consisted of the following (in thousands):
Property and equipment, net consisted of the following (in thousands):
Depreciation and amortization expense associated with property and equipment was $2.3 million and $4.5 million for the three and six months ended June 30, 2018, respectively, and $2.2 million and $4.1 million for the three and six months ended June 30, 2017, respectively. Property and equipment capitalized under capital lease obligations consist primarily of computer and network equipment and was as follows (in thousands):
Accrued and other current liabilities consisted of the following (in thousands):
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Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Intangible Assets The components of intangible assets were as follows (in thousands):
Amortization expense for intangible assets was $0.1 million and $0.2 million for the three and six months ended June 30, 2018, respectively, and $0.1 million and $0.2 million for each of the three and six months ended June 30, 2017, respectively. As of June 30, 2018, the expected future amortization expense for intangible assets was as follows (in thousands):
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Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt 0.125% Convertible Senior Notes and Capped Call In May 2018, the Company issued $225.0 million aggregate principal amount of 0.125% convertible senior notes due May 1, 2023 in a private offering and an additional $33.75 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment option of the initial purchasers (collectively the “Notes”). The Notes are the Company’s senior unsecured obligations and bear interest at a fixed rate of 0.125% per annum, payable semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018. The total net proceeds from the offering, after deducting initial purchase discounts and estimated debt issuance costs, were approximately $250.7 million. Each $1,000 principal amount of the Notes will initially be convertible into 24.4978 shares of our common stock (the “Conversion Option”) which is equivalent to an initial conversion price of approximately $40.82 per share of common stock, subject to adjustment upon the occurrence of specified events. The Notes will be convertible, in multiples of $1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding November 1, 2022, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2018 (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; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the indenture governing the Notes) 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 in effect on each such trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after November 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. If the Company undergoes a fundamental change (as defined in the indenture governing the Notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their Notes, in principal amounts of $1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period. During the three months ended June 30, 2018, the conditions allowing holders of the Notes to convert were not met. The Notes were therefore not convertible during the three months ended June 30, 2018 and were classified as long-term debt. The Company may not redeem the Notes prior to May 5, 2021. The Company may redeem for cash all or any portion of the Notes, at its option, on or after May 5, 2021 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending not more than two trading days immediately preceding the date on which it provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the Notes. The Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness (including all amounts outstanding under the Company’s senior secured credit facility) to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries. In accounting for the transaction, the Notes were separated into liability and equity components. The carrying amount of the liability component 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 $63.8 million and was determined by deducting the fair value of the liability component from the par value 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. The excess of the principal amount of the liability component over its carrying amount (the “Debt Discount”) is being amortized to interest expense over the contractual term of the Notes at an effective interest rate of 6.39%. In accounting for the debt issuance cost of $8.1 million related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were $6.1 million and is being amortized to interest expense using the effective interest method over the contractual term of the Notes. Issuance costs attributable to the equity component were netted with the equity component in additional paid-in-capital. The net carrying amount of the liability component of the Notes is as follows (in thousands):
The net carrying amount of the equity component of the Notes is as follows (in thousands):
Interest expense related to the Notes is as follows (in thousands):
In connection with the pricing of the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The initial cap price of the Capped Call Transactions is $62.80 per share, and is subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions cover, subject to anti-dilution adjustments, approximately 6.3 million shares of the Company’s common stock. For accounting purposes, the Capped Call Transactions are separate transactions, and not part of the terms of the Notes. As these transactions meet certain accounting criteria, the Capped Call Transactions are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $31.4 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid-in capital. The net impact to the Company’s stockholders’ equity, included in additional paid-in capital, relating to the issuance of the Notes is as follows (in thousands):
2016 Loan and Security Agreement In August 2016, the Company entered into a loan and security agreement, or the 2016 Loan and Security Agreement, with the lenders party thereto and City National Bank, as agent for such lenders. The 2016 Loan and Security Agreement provided for a revolving line of credit, of up to $50.0 million and was scheduled to mature on August 1, 2019. The revolving line of credit bore a variable interest rate equal to the prime rate plus 0.50%, subject to a 0.25% increase if the Company’s adjusted EBITDA was negative at the end of any fiscal quarter. The Company was also required to pay a commitment fee equal to 0.25% of the unused portion of the revolving line of credit as well as an anniversary fee of $31,250 on each of August 1, 2017 and 2018. The obligations of the Company under the 2016 Loan and Security Agreement were guaranteed by its subsidiary, Five9 Acquisition LLC, and were secured by a first priority lien on substantially all of the assets of the Company and Five9 Acquisition LLC. In May 2018, the Company paid off the then outstanding principal balance of the revolving line of credit and on July 1, 2018, the Company terminated the 2016 Loan and Security Agreement. Under the terms of the 2016 Loan and Security Agreement, the outstanding balance could not exceed the Company’s trailing four months of MRR (monthly recurring revenue including subscription and usage) multiplied by the average trailing 12 month dollar based retention rate (calculated on the same basis as in the Company’s periodic reports filed with the SEC). The 2016 Loan and Security Agreement contained certain customary covenants, including the requirement that the Company maintain $25.0 million of unrestricted cash deposited with the lenders for the term of the agreement, a minimum liquidity ratio of unrestricted cash and accounts receivable to the outstanding amounts under the 2016 Loan and Security Agreement, as well as customary events of default. Under the 2016 Loan and Security Agreement, the Company was also prohibited from declaring dividends or making other distributions on capital stock. The Company was in compliance with the covenants as of June 30, 2018. FCC Civil Penalty In June 2015, the Company entered into a consent decree with the Federal Communications Commission, or FCC, Enforcement Bureau, in which the Company agreed to pay a civil penalty of $2.0 million to the U.S. Treasury in twelve equal quarterly installments starting in July 2015 without interest. As a result, the Company discounted the $2.0 million liability, which was accrued in the third quarter of 2014 for the then tentative civil penalty, to its then present value of $1.7 million at an annual interest rate of 12.75% to reflect the imputed interest and reclassified this discounted liability from ‘Accrued federal fees’ to ‘Notes payable.’ The $0.3 million discount was recorded as a reduction to general and administrative expense in the three months ended June 30, 2015 and is being recognized as interest expense over the payment term of the civil penalty. As of June 30, 2018, the Company did not have any outstanding obligations under the civil penalty. As of December 31, 2017, the outstanding civil penalty payable was $0.3 million, of which the net carrying value was $0.3 million, and was included as ‘Notes payable’ in the accompanying condensed consolidated balance sheet. As of June 30, 2018 and December 31, 2017, the Company’s outstanding debt is summarized as follows (in thousands):
Maturities of the Company’s outstanding debt as of June 30, 2018 are as follows (in thousands):
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Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Capital Structure The Company is authorized to issue 450,000,000 shares of common stock with a par value of $0.001 per share. As of June 30, 2018 and December 31, 2017, the Company had 58,275,511 and 56,631,647 shares of common stock issued and outstanding, respectively. The Company is also authorized to designate and issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share in one or more series without stockholder approval and to fix the rights, preferences, privileges and restrictions thereof. As of June 30, 2018 and December 31, 2017, the Company had no shares of preferred stock issued and outstanding. Warrants As of June 30, 2018 and December 31, 2017, the Company had outstanding warrants to purchase 13,013 shares of common stock with a weighted-average exercise price of $5.76 per share. The warrants outstanding as of June 30, 2018 will expire on October 18, 2023. Common Stock Reserved for Future Issuance Shares of common stock reserved for future issuance related to outstanding equity awards, common stock warrants, and employee equity incentive plans were as follows (in thousands):
Equity Incentive Plans Prior to the initial public offering (“IPO”), the Company granted stock options under its Amended and Restated 2004 Equity Incentive Plan, as amended (the “2004 Plan”). In March 2014, the Company’s board of directors and stockholders approved the 2014 Equity Incentive Plan (“2014 Plan”) and 5,300,000 shares of common stock were reserved for issuance under the 2014 Plan. In addition, on the first day of each year beginning in 2015 and ending in 2024, the 2014 Plan provides for an annual automatic increase to the shares reserved for issuance in an amount equal to 5% of the total number of shares outstanding on December 31st of the preceding calendar year or a lesser number as determined by the Company’s board of directors. Pursuant to the automatic annual increase, 2,831,582 additional shares were reserved under the 2014 Plan on January 1, 2018. No further grants were made under the 2004 Plan once the 2014 Plan became effective on April 3, 2014. Upon the effectiveness of the 2014 Plan, all shares reserved for future issuance under the 2004 Plan became available for issuance under the 2014 Plan. After the IPO, any forfeited or expired shares that would have otherwise returned to the 2004 Plan instead return to the 2014 Plan. The 2004 Plan and the 2014 Plan are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Stock Options A summary of the Company’s stock option activity during the six months ended June 30, 2018 is as follows (in thousands, except years and per share data):
The Company has computed the aggregate intrinsic value amounts disclosed in the above table based on the difference between the exercise price of the options and the closing market price of the Company’s common stock of $34.57 per share as of June 30, 2018 for all in-the-money stock options outstanding. Restricted Stock Units A summary of the Company’s restricted stock unit (“RSU”) activity during the six months ended June 30, 2018 is as follows (in thousands, except per share data):
Employee Stock Purchase Plan The Company’s 2014 Employee Stock Purchase Plan (“ESPP”) became effective on April 3, 2014 and is described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The number of shares of common stock originally reserved for issuance under the ESPP was 880,000 shares, which increases automatically each year, beginning on January 1, 2015 and continuing through January 1, 2024, by the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year; (ii) 1,000,000 shares of common stock (subject to adjustment to reflect any split or combination of the Company’s common stock); or (iii) such lesser number as determined by the Company’s board of directors. Pursuant to the automatic annual increase, 566,316 additional shares were reserved under the ESPP on January 1, 2018. During the six months ended June 30, 2018, 136,321 shares were purchased on May 15, 2018 at a price of $21.16 per share under the ESPP. Stock-Based Compensation Stock-based compensation expenses were as follows (in thousands):
As of June 30, 2018, unrecognized stock-based compensation expenses by award type and their expected weighted-average recognition periods are summarized in the following table (in thousands, except years).
The Company recognizes stock-based compensation expense that is calculated based upon awards that have vested, reduced for actual forfeitures. All stock-based compensation for equity awards granted to employees and non-employee directors is measured based on the grant date fair value of the award. The weighted-average assumptions used to value stock options granted during the periods presented were as follows:
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Net Loss Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share | Net Loss Per Share Basic net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the period, and excludes any dilutive effects of employee stock-based awards and warrants. As the Company had net losses for the three and six months ended June 30, 2018 and 2017, all potentially issuable common shares were determined to be anti-dilutive. The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):
The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive (in thousands):
The Company may settle the conversions of the Notes in cash, shares of the Company’s common stock or any combination thereof at its election. The maximum number of shares of the Company’s common stock issuable at the conversion price of $40.82 per share is expected to be 6.3 million shares. However, the Capped Call Transactions are expected to reduce the potential dilution of the Company’s common stock upon any conversion of Notes and/or offset the cash payments the Company is required to make in excess of the principal amount of the Notes. Under the Capped Call Transactions, the number of shares of common stock issuable at the conversion price of $62.80 is expected to be 4.1 million shares. For more information on the Notes and the Capped Call Transactions, see Note 6. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The provision for income taxes for the three and six months ended June 30, 2018 was approximately $64 thousand and $109 thousand, respectively. The provision for income taxes for the three and six months ended June 30, 2017 was approximately $50 thousand and $99 thousand, respectively. The provision for income taxes consisted primarily of foreign income taxes. For the three and six months ended June 30, 2018 and 2017, the provision for income taxes differed from the statutory amount primarily due to the Company realizing no benefit for current year losses due to maintaining a full valuation allowance against its domestic net deferred tax assets. The realization of tax benefits of deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence, the Company does not believe it is more likely than not that the net deferred tax assets will be realizable. Accordingly, the Company has provided a full valuation allowance against the domestic net deferred tax assets as of June 30, 2018 and December 31, 2017. The Company intends to maintain the remaining valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance. During the three and six months ended June 30, 2018, there were no material changes to the total amount of unrecognized tax benefits. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Commitments The Company’s principal commitments consist of future payment obligations under capital leases to finance data centers and other computer and networking equipment purchases, debt agreements (see Note 6), operating lease agreements for office space, research and development, and sales and marketing facilities, and agreements with third parties to provide co-location hosting, telecommunication usage and equipment maintenance services. These commitments as of December 31, 2017 are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and did not change materially during the six months ended June 30, 2018 except for the acquisition of certain additional data center and network equipment and software under multiple capital leases, and certain hosting and telecommunications agreements. As of June 30, 2018, the total minimum future payment commitments under these capital leases added during the six months ended June 30, 2018 were approximately $6.9 million, of which $1.4 million is due during the remainder of 2018, with the remaining $5.5 million due in 2019 to 2021. During the six months ended June 30, 2018, the Company entered into or renewed various hosting and telecommunications agreements for terms of 12 to 36 months commencing on various dates in 2018. These agreements require the Company to make monthly payments over the service term in exchange for certain network services. The Company’s total minimum future payment commitments under these agreements are $2.5 million. Universal Services Fund Liability During the third quarter of 2012, the Company determined that based on its business activities, it is classified as a telecommunications service provider for regulatory purposes and it should make direct contributions to the federal USF and related funds based on revenues it receives from the resale of interstate and international telecommunications services. In order to comply with the obligation to make direct contributions, the Company made a voluntary self-disclosure to the FCC Enforcement Bureau and registered with the USAC, which is charged by the FCC with administering the USF. The Company filed exemption certificates with its wholesale telecommunications service providers in order to eliminate its obligation to reimburse such wholesale telecommunications service providers for their USF contributions calculated on services sold to the Company. In April 2013, the Company began remitting required contributions on a prospective basis directly to USAC. The Company’s registration with USAC subjects it to assessments for unpaid USF contributions, as well as interest thereon and civil penalties, due to its late registration and past failure to recognize its obligation as a USF contributor and as an international carrier. The Company is required to pay assessments for periods prior to the Company’s registration. As of December 31, 2012, the total past due USF contribution being imposed by USAC and accrued by the Company for the period from 2003 through 2012 was $8.1 million, of which $4.7 million was undisputed and $3.4 million was disputed. The Company subsequently updated its filings and increased the liability related to 2008 through 2012 by $0.5 million, arriving at a new total of $3.9 million in disputed liability. In July 2013, the Company and USAC agreed to a financing arrangement for $4.1 million of the undisputed $4.7 million of the unpaid USF contributions whereby the Company issued to USAC a promissory note payable in the principal amount of the $4.1 million and paid off the remaining undisputed $0.6 million. The Company had fully paid the promissory note as of January 2017. In January 2017, the FCC’s Wireline Competition Bureau ruled in the Company’s favor with respect to most of the disputed amount. In September 2017, USAC issued a credit to the Company reflecting the FCC’s ruling for the $3.1 million of the $3.9 million in disputed liability. In addition, USAC reversed the interest and penalties related to the disputed liability of $3.1 million. The remaining $0.8 million in dispute involves USAC’s assessment of liability for the period of 2003 through 2007, which was prior to the five year window during which the Company was required to maintain financial records for USF contribution purposes. The Company filed a Request for Review (a form of appeal) of this disputed amount with the FCC’s Wireline Competition Bureau in 2013, which remains pending. If the Request for Review is not resolved in the Company’s favor, it is possible that the Company will be held to the back assessments of $0.8 million, which includes interest and penalties on that amount. As of June 30, 2018, the accrued liability on the remaining disputed assessments, including interest and penalties for the period of 2003 through 2007, was $0.8 million offset by $0.7 million in other USF credits. State and Local Taxes and Surcharges In April 2012, the Company commenced collecting and remitting sales taxes on sales of subscription services in all the U.S. states in which it determined it was obligated to do so. During the first quarter of 2015, the Company conducted an updated sales tax review of the taxability of sales of its subscription services. As a result, the Company determined that it may be obligated to collect and remit sales taxes on such sales in four additional states. Based on its best estimate of the probable sales tax liability in those four states relating to its sales of subscription services during the period 2011 through 2014, during the three months ended March 31, 2015, the Company recorded a general and administrative expense of $0.6 million to accrue for such taxes. During 2013, the Company analyzed its activities and determined it may be obligated to collect and remit various state and local taxes and surcharges on its usage-based fees. The Company had not remitted state and local taxes on usage-based fees in any of the periods prior to 2014 and therefore accrued a sales tax liability for this contingency. In January 2014, the Company commenced paying such taxes and surcharges to certain state authorities. In June 2014, the Company commenced collecting state and local taxes or surcharges on usage-based fees from its clients on a current basis and remitting such taxes to the applicable U.S. state taxing authorities. As of June 30, 2018 and December 31, 2017, the Company had accrued liabilities of $1.3 million and $1.5 million, respectively, for such contingent sales taxes and surcharges that were not being collected from its clients but may be imposed by various taxing authorities, of which $0.3 million and $0.4 million, respectively, were included in current “Sales tax liability” on the condensed consolidated balance sheets, and the remaining were included in non-current “Sales tax liability” on the condensed consolidated balance sheets. The Company’s estimate of the probable loss incurred under this contingency is based on its analysis of the source location of its usage-based fees and the regulations and rules in each tax jurisdiction. Legal Matters The Company is involved in various legal and regulatory matters arising in the normal course of business. In management’s opinion, resolution of these matters is not expected to have a material impact on the Company’s consolidated results of operations, cash flows, or its financial position. However, due to the uncertain nature of legal matters, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. The Company expenses legal fees as incurred. Indemnification Agreements In the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which it agrees to indemnify clients, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with directors and certain officers and employees that will require it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. Other than as described below, no demands have been made upon the Company to provide indemnification under such agreements and there are no claims that it is aware of that could have a material effect on the consolidated balance sheet, consolidated statement of operations and comprehensive loss, or consolidated statements of cash flows. On October 27, 2016, the Company received notice from Lance Fried, a former officer and director of Face It, Corp., of his claim for indemnification by the Company (as successor in interest to Face It), and for advancement of all legal fees and expenses he incurs in connection with the defense of a lawsuit captioned Melcher, et al. v. Five9, Inc., et al., No. 16-cv-02440, in the U.S. District Court for the Southern District of California. In the lawsuit, plaintiff Carl Melcher, a purported former stockholder of Face It, and his related investment entity Melcher Family Limited Partnership, allege that Face It repurchased the plaintiffs’ stock in September 2013 before Five9 acquired Face It, and that in connection with the repurchase, Fried made material misstatements or omissions to Melcher, by failing to disclose that Face It allegedly was in concurrent discussions about a potential sale of the company to Five9. The lawsuit alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, as well as various claims under state law and common law. To date, the Company has advanced Mr. Fried $62 thousand in connection with this claim. However, the Company disputes that Mr. Fried is entitled to advancement in connection with the Melcher litigation. On January 9, 2018, Mr. Fried initiated an arbitration against the Company in which he alleged that the Company breached advancement obligations to him. On June 11, 2018, the arbitrator ordered the Company to advance the fees Mr. Fried incurs (and has already incurred) in connection with the defense of the Melcher litigation. After the arbitrator’s order, Fried claimed that he is entitled to approximately $0.2 million of fees incurred to date. The Company disputes that amount. Regardless of the arbitrator’s order, Mr. Fried is required to reimburse the Company for any amounts advanced to him if it is ultimately determined that Mr. Fried is not entitled to indemnification in connection with the Melcher litigation. In addition, the Company believes that it has indemnification rights against the former stockholders of Face It (including Mr. Fried) for all losses that are incurred by the Company in connection with the Melcher litigation, including without limitation, amounts incurred to indemnify or advance the legal fees and expenses of Mr. Fried pursuant to his indemnification claim against the Company. The Company has asserted claims in arbitration against both Mr. Fried and the representative of the former Face It stockholders to recoup these losses. These claims are stayed pending the resolution of the Melcher litigation. |
Geographical Information |
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Geographical Information | Geographical Information The following table is a summary of revenues by geographic region based on client billing address and has been estimated based on the amounts billed to clients during the periods presented (in thousands):
The following table summarizes total property and equipment, net in the respective locations (in thousands):
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Description of Business and Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“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 financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The significant estimates made by management affect revenue, the allowance for doubtful accounts, loss contingencies, including the Company’s accrual for federal fees and sales tax liability, and accrued liabilities. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company’s cash and cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase. The Company’s cash equivalents consist of investments in U.S. agency securities, commercial paper, certificates of deposit and money market funds. |
Marketable Investments | Marketable Investments The Company’s marketable investments consist of U.S agency securities and government sponsored securities, U.S. treasury securities, certificates of deposit, corporate bonds and commercial paper. The Company determines the appropriate classification of its investments in marketable investments at the time of purchase and re-evaluates such designation at each balance sheet date. The Company’s marketable investments have been classified and accounted for as available-for-sale. Marketable investments are carried at fair value. |
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Effective | Recently Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers: Topic 606, amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. The Company adopted ASU 2014-09 and its related amendments (collectively “ASC 606”) effective on January 1, 2018 using the modified retrospective method. See Note 2 for disclosure on the impact of adopting this standard. Recent Accounting Pronouncements Not Yet Effective In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, a lessee will be required to recognize assets and liabilities for both finance, or capital, and operating leases with lease terms of more than 12 months. The ASU also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. Lessor accounting will remain largely unchanged from current GAAP. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach that includes a number of optional practical expedients that entities may elect to apply. This guidance is effective for the Company beginning in the first quarter of 2019. Early adoption is permitted. The Company is currently gathering information and evaluating the impact this guidance will have on its consolidated financial statements. There are several other new accounting pronouncements issued by the FASB, which the Company will adopt. However, the Company does not believe any of those accounting pronouncements will have a material impact on its consolidated financial position, operating results or statements of cash flows. |
Accounts Receivable | The Company receives payments from customers based upon billing cycles. Invoice payment terms are usually 30 days or less. Accounts receivable are recorded when the right to consideration becomes unconditional. |
Revenue Recognition | Revenue Recognition Revenue is recognized when control of the promised services are transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company generates all of its revenue from contracts with customers. In contracts with multiple performance obligations, it identifies each performance obligation and evaluates whether the performance obligations are distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined. The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation. The Company then looks to how services are transferred to the customer in order to determine the timing of revenue recognition. Most services provided under the Company’s agreements result in the transfer of control over time. The Company’s revenue consists of subscription services and related usage as well as professional services. The Company charges clients subscription fees, usually billed on a monthly basis, for access to the Company’s Virtual Contact Center, or VCC, solution. The monthly subscription fees are primarily based on the number of agent seats, as well as the specific VCC functionalities and applications deployed by the client. Agent seats are defined as the maximum number of named agents allowed to concurrently access the VCC cloud platform. Clients typically have more named agents than agent seats. Multiple named agents may use an agent seat, though not simultaneously. Substantially all of the Company’s clients purchase both subscriptions and related telephony usage. A small percentage of the Company’s clients subscribe to its platform but purchase telephony usage directly from a wholesale telecommunications service provider. The Company does not sell telephony usage on a stand-alone basis to any client. The related usage fees are based on the volume of minutes used for inbound and outbound client interactions. The Company also offers bundled plans, generally for smaller deployments, whereby the client is charged a single monthly fixed fee per agent seat that includes both subscription and unlimited usage in the contiguous 48 states and, in some cases, Canada. Professional services revenue is derived primarily from VCC implementations, including application configuration, system integration, optimization, education and training services. Clients are not permitted to take possession of the Company’s software. The Company offers monthly, annual and multiple-year contracts to its clients, generally with 30 days’ notice required for changes in the number of agent seats and sometimes with a minimum number of agent seats required. Larger clients typically choose annual contracts, which generally include an implementation and ramp period of several months. Fixed subscription fees (including bundled plans) are generally billed monthly in advance, while related usage fees are billed in arrears. Support activities include technical assistance for the Company’s solution and upgrades and enhancements to the VCC cloud platform on a when-and-if-available basis, which are not billed separately. The Company generally requires advance deposits from its clients based on estimated usage when such usage is not billed as part of a bundled plan. Any unused portion of the deposit is refundable to the client upon termination of the arrangement, provided all amounts due have been paid. All fees, except usage deposits, are non-refundable. Professional services are primarily billed on a fixed-fee basis and are performed by the Company directly or, alternatively, clients may also choose to perform these services themselves or engage their own third-party service providers. The estimation of variable consideration for each performance obligation requires the Company to make some subjective judgments resulting in estimated variable consideration that is included in the transaction fee. This is done to the extent that it is probable, in the Company’s judgment, that a significant reversal in the amount of cumulative revenue recognized under the contract will not occur. The Company estimates the variable consideration in order to allocate the overall transaction fee on a relative stand-alone selling price basis to its multiple performance obligations. This requires the estimate of unit quantities, especially during the initial ramp period of the contract, during which the Company bills under an ‘actual usage’ model for subscription-related services. The Company recognizes revenue on fixed fee professional services performance obligations based on the proportion of labor hours expended compared to the total hours expected to complete the related performance obligation. The determination of the total labor hours expected to complete the performance obligations involves some judgment, influencing the initial stand-alone selling price estimate as well as the timing of professional services revenue recognition, although this uncertainty is typically resolved in a short time frame. When a contract with a customer is signed, the Company assesses whether collection of the fees under the arrangement is probable. The Company assesses collection based on a number of factors, including past transaction history and the creditworthiness of the client. The Company maintains a revenue reserve for potential credits to be issued in accordance with service level agreements or for other revenue adjustments. The revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added and excise taxes. The Company records Universal Service Fund, or USF, contributions and other regulatory costs on a gross basis in its condensed consolidated statements of operations and comprehensive loss and records surcharges and sales, use and excise taxes billed to its clients on a net basis. The cost of gross USF contributions payable to the Universal Service Administrative Company, or USAC, and suppliers is presented as a cost of revenue in the condensed consolidated statements of operations and comprehensive loss. Surcharges and sales, use and excise taxes incurred in excess of amounts billed to the Company’s clients are presented in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. The Company receives payments from customers based upon billing cycles. Invoice payment terms are usually 30 days or less. Accounts receivable are recorded when the right to consideration becomes unconditional. Deferred contract acquisition costs are recorded when incurred and are amortized over a customer benefit period of five years. The Company’s contract assets consist of unbilled amounts typically resulting from professional services revenue recognition when it exceeds the total amounts billed to the customer. The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized. The Company receives payments from customers based upon billing cycles. Invoice payment terms are usually 30 days or less. Accounts receivable are recorded when the right to consideration becomes unconditional. |
Deferred Contract Acquisition Costs | Deferred contract acquisition costs are recorded when incurred and are amortized over a customer benefit period of five years. In connection with the adoption of ASC 340-40, the Company capitalizes certain contract acquisition costs consisting primarily of commissions paid when contracts are signed and related incremental fringe benefits. |
ASC 606 Adoption Impact and Revenue from Contracts with Customers (Tables) |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impacts from New Accounting Pronouncements | Select condensed consolidated balance sheet line items, which reflects the adoption impact of the new standard, are as follows:
Select condensed consolidated statement of operations line items, which reflects the adoption of the new standard, are as follows:
Select condensed consolidated cash flow line items, which reflects the adoption of the new standard, are as follows:
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Schedule of Contract with Customer, Asset and Liability | The following table provides information about accounts receivable, net, deferred contract acquisition costs, contract assets and contract liabilities from contracts with customers (in thousands):
|
Investments and Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Marketable Investments | The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable investments as of June 30, 2018 were as follows (in thousands):
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Schedule of Gross Unrealized Losses and Fair Value of Marketable Investments | The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position as of June 30, 2018 (in thousands):
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Schedule of Assets Carried at Fair Value | The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands):
|
Financial Statement Components (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Statement Components [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents | Cash and cash equivalents consisted of the following (in thousands):
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Schedule of Accounts Receivable | Accounts receivable, net consisted of the following (in thousands):
|
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Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consisted of the following (in thousands):
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Schedule of Property and Equipment | Property and equipment, net consisted of the following (in thousands):
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Schedule of Capital Leased Property and Equipment | Property and equipment capitalized under capital lease obligations consist primarily of computer and network equipment and was as follows (in thousands):
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Schedule of Accrued and Other Current Liabilities | Accrued and other current liabilities consisted of the following (in thousands):
|
Intangible Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets | The components of intangible assets were as follows (in thousands):
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Schedule of Expected Future Amortization Expense of Intangible Assets | As of June 30, 2018, the expected future amortization expense for intangible assets was as follows (in thousands):
|
Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Carrying Amount of Notes and Impact to Additional Paid-in Capital | The net carrying amount of the liability component of the Notes is as follows (in thousands):
The net carrying amount of the equity component of the Notes is as follows (in thousands):
The net impact to the Company’s stockholders’ equity, included in additional paid-in capital, relating to the issuance of the Notes is as follows (in thousands):
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Schedule of Interest Expense Related to the Notes | Interest expense related to the Notes is as follows (in thousands):
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Schedule of Outstanding Debt | As of June 30, 2018 and December 31, 2017, the Company’s outstanding debt is summarized as follows (in thousands):
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Schedule of Maturities of Debt | Maturities of the Company’s outstanding debt as of June 30, 2018 are as follows (in thousands):
|
Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Common Stock Reserved for Future Issuance | Shares of common stock reserved for future issuance related to outstanding equity awards, common stock warrants, and employee equity incentive plans were as follows (in thousands):
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Schedule of Stock Option Activity | A summary of the Company’s stock option activity during the six months ended June 30, 2018 is as follows (in thousands, except years and per share data):
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Schedule of RSU Activity | A summary of the Company’s restricted stock unit (“RSU”) activity during the six months ended June 30, 2018 is as follows (in thousands, except per share data):
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Schedule of Stock-based Compensation Expense | Stock-based compensation expenses were as follows (in thousands):
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Schedule of Unrecognized Compensation Expense | As of June 30, 2018, unrecognized stock-based compensation expenses by award type and their expected weighted-average recognition periods are summarized in the following table (in thousands, except years).
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Schedule of Valuation Assumptions, Stock Option | The weighted-average assumptions used to value stock options granted during the periods presented were as follows:
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Net Loss Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic and Diluted Net Loss Per Share | The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):
|
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Schedule of Antidilutive Securities Excluded from Computation of Net Loss Per Share | The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive (in thousands):
|
Geographical Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenues and Property and Equipment by Geographic Region | The following table is a summary of revenues by geographic region based on client billing address and has been estimated based on the amounts billed to clients during the periods presented (in thousands):
The following table summarizes total property and equipment, net in the respective locations (in thousands):
|
ASC 606 Adoption Impact and Revenue from Contracts with Customers - Schedule of Contract Balances (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Accounts receivable, net | |||
Accounts receivable, net | $ 20,167 | $ 19,151 | $ 19,048 |
Deferred contract acquisition costs: | |||
Current | 8,083 | 7,059 | 0 |
Non-current | 18,393 | 16,079 | 0 |
Total deferred contract acquisition costs | 26,476 | 23,138 | |
Contract assets and contract liabilities: | |||
Contract assets (included in prepaid expenses and other current assets) | 991 | 736 | 0 |
Contract liabilities (deferred revenue) | 14,750 | 13,568 | $ 13,975 |
Net contract assets (liabilities) | $ (13,759) | $ (12,832) |
ASC 606 Adoption Impact and Revenue from Contracts with Customers - Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01 $ in Millions |
Jun. 30, 2018
USD ($)
|
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligations | $ 64.0 |
Percentage of remaining performance obligations expected to be recognized over the next 24 months | 75.00% |
Remaining performance obligations recognition period | 2 years |
Investments and Fair Value Measurements - Schedule of Continuous Unrealized Loss Position (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Debt Securities, Available-for-sale [Line Items] | |
Less than 12 months, gross unrealized losses | $ (17) |
Less than 12 months, fair value | 38,009 |
Certificates of deposit | |
Debt Securities, Available-for-sale [Line Items] | |
Less than 12 months, gross unrealized losses | 0 |
Less than 12 months, fair value | 249 |
U.S. agency securities and government sponsored securities | |
Debt Securities, Available-for-sale [Line Items] | |
Less than 12 months, gross unrealized losses | (16) |
Less than 12 months, fair value | 32,767 |
Corporate bonds | |
Debt Securities, Available-for-sale [Line Items] | |
Less than 12 months, gross unrealized losses | (1) |
Less than 12 months, fair value | $ 4,993 |
Investments and Fair Value Measurements - Narrative (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Fair Value Disclosures [Abstract] | ||
Proceeds from sale of convertible note held for investment | $ 1,923,000 | $ 0 |
Carrying value of convertible notes sold | 1,600,000 | |
Total proceeds from sale of convertible notes receivable | 2,100,000 | |
Level 2 | Convertible debt | ||
Debt Instrument [Line Items] | ||
Fair value of long-term debt | 269,700,000 | |
Nonrecurring | ||
Debt Instrument [Line Items] | ||
Assets measured at fair value on nonrecurring basis | 0 | |
Liabilities measured at fair value on nonrecurring basis | $ 0 |
Financial Statement Components - Schedule of Cash and Cash Equivalents (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
lender
|
Dec. 31, 2017
USD ($)
|
Jun. 30, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
---|---|---|---|---|
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | $ 166,162 | $ 68,947 | $ 57,149 | $ 58,122 |
Revolving Credit Facility | ||||
Cash and Cash Equivalents [Line Items] | ||||
Unrestricted cash required to be deposited with lenders | $ 25,000 | |||
Number of lenders where compensating balance deposited | lender | 2 | |||
Cash | ||||
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | $ 54,242 | 48,855 | ||
Commercial paper | ||||
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | 500 | 0 | ||
Money market funds | ||||
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | 75,765 | 20,092 | ||
Certificates of deposit | ||||
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | 498 | 0 | ||
U.S. treasury | ||||
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | $ 35,157 | $ 0 |
Financial Statement Components - Schedule of Accounts Receivable (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Accounts Receivable [Line Items] | |||
Allowance for doubtful accounts | $ (28) | $ (33) | |
Accounts receivable, net | 20,167 | $ 19,151 | 19,048 |
Trade accounts receivable | |||
Accounts Receivable [Line Items] | |||
Trade accounts receivable | 19,378 | 17,481 | |
Unbilled trade accounts receivable, net of advance client deposits | |||
Accounts Receivable [Line Items] | |||
Trade accounts receivable | $ 817 | $ 1,600 |
Financial Statement Components - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Financial Statement Components [Abstract] | |||
Prepaid expenses | $ 5,394 | $ 2,437 | |
Other current assets | 2,052 | 2,403 | |
Contract assets | 991 | $ 736 | 0 |
Prepaid expenses and other current assets | $ 8,437 | $ 4,840 |
Financial Statement Components - Schedule of Capital Leased Property and Equipment (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Financial Statement Components [Abstract] | ||
Gross | $ 48,020 | $ 46,624 |
Less: accumulated depreciation and amortization | (30,034) | (30,438) |
Total | $ 17,986 | $ 16,186 |
Financial Statement Components - Schedule of Accrued and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Financial Statement Components [Abstract] | ||
Accrued compensation and benefits | $ 9,945 | $ 8,657 |
Accrued expenses | 3,670 | 3,130 |
Accrued and other current liabilities | $ 13,615 | $ 11,787 |
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Acquired Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 3,030 | $ 3,030 |
Accumulated Amortization | (2,189) | (1,957) |
Total | 841 | 1,073 |
Developed technology | ||
Acquired Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 2,460 | 2,460 |
Accumulated Amortization | (1,653) | (1,478) |
Total | 807 | 982 |
Customer relationships | ||
Acquired Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 520 | 520 |
Accumulated Amortization | (489) | (437) |
Total | 31 | 83 |
Domain names | ||
Acquired Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 50 | 50 |
Accumulated Amortization | (47) | (42) |
Total | $ 3 | $ 8 |
Intangible Assets - Schedule of Expected Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2018 | $ 210 | |
2019 | 351 | |
2020 | 280 | |
Total | $ 841 | $ 1,073 |
Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||||
Amortization expense related to intangible assets | $ 0.1 | $ 0.1 | $ 0.2 | $ 0.2 |
Debt - Schedule of Net Carrying Amount of the Liability Component of the Notes (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
May 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Principal | $ 258,781 | ||
Total debt, net carrying value | 190,646 | $ 32,930 | |
Convertible debt | |||
Debt Instrument [Line Items] | |||
Principal | 190,615 | $ 0 | |
Convertible debt | Convertible Senior Notes | |||
Debt Instrument [Line Items] | |||
Principal | 258,750 | ||
Debt Instrument, Unamortized Discount | (62,174) | ||
Unamortized issuance costs | (5,961) | $ (6,100) | |
Total debt, net carrying value | $ 190,615 |
Debt - Schedule of Net Carrying Amount of Equity Component of the Notes (Details) - Convertible debt - Convertible Senior Notes $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Conversion option | $ 63,756 |
Issuance costs | (1,998) |
Net carrying amount | $ 61,758 |
Debt - Schedule of Interest Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Debt Instrument [Line Items] | ||||
Interest Expense | $ 2,378 | $ 888 | $ 3,188 | $ 1,770 |
Convertible Senior Notes | Convertible debt | ||||
Debt Instrument [Line Items] | ||||
Interest Expense, Debt | 48 | |||
Amortization of Debt Discount (Premium) | 1,582 | |||
Amortization of Debt Issuance Costs | 151 | |||
Interest Expense | $ 1,781 |
Debt - Schedule of Equity Component of Debt (Details) - Convertible debt - Convertible Senior Notes $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Debt Instrument [Line Items] | |
Conversion option | $ 63,756 |
Payments for capped call transactions | (31,412) |
Issuance costs | 1,998 |
Adjustments to Additional Paid in Capital, Equity Component of Convertible Debt | $ 30,346 |
Debt - 2016 Loan and Security Agreement (Details) - USD ($) |
Aug. 01, 2016 |
Jun. 30, 2018 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Unrestricted cash required to be deposited with lenders | $ 25,000,000 | |
Line of Credit | Loan and Security Agreement 2016 | Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Credit facility, maximum borrowing capacity | $ 50,000,000 | |
Unused line of credit capacity fee | 0.25% | |
First and second anniversary fee for line of credit | $ 31,250 | |
Prime Rate | Line of Credit | Loan and Security Agreement 2016 | Revolving Credit Facility | ||
Line of Credit Facility [Line Items] | ||
Debt instrument, basis spread | 0.50% | |
Percentage increase in interest rate if adjusted EBITDA is negative at the end of the quarter | 0.25% |
Debt - FCC Civil Penalty (Details) $ in Thousands |
1 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2015
USD ($)
payment
|
Jun. 30, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Sep. 30, 2014
USD ($)
|
|
Debt Instrument [Line Items] | ||||
Principal | $ 258,781 | |||
Total debt, net carrying value | 190,646 | $ 32,930 | ||
FCC Civil Penalty | ||||
Debt Instrument [Line Items] | ||||
Accrued civil penalty liability | $ 2,000 | |||
Notes Payable | ||||
Debt Instrument [Line Items] | ||||
Principal | 0 | 333 | ||
Discount on debt | 0 | 7 | ||
Total debt, net carrying value | $ 0 | 326 | ||
Notes Payable | FCC Civil Penalty | ||||
Debt Instrument [Line Items] | ||||
Principal | $ 2,000 | 300 | ||
Debt instrument, number of quarterly payments | payment | 12 | |||
Debt instrument, stated interest rate | 12.75% | |||
Discount on debt | $ 300 | |||
Total debt, net carrying value | $ 1,700 | $ 300 |
Debt - Schedule of Outstanding Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Principal | $ 258,781 | |
Total debt, net carrying value | 190,646 | $ 32,930 |
Less: current portion of debt | 31 | 336 |
Total debt, less current portion | 190,615 | 32,594 |
Notes Payable | ||
Debt Instrument [Line Items] | ||
Principal | 0 | 333 |
Less: discount | 0 | (7) |
Total debt, net carrying value | 0 | 326 |
Convertible debt | ||
Debt Instrument [Line Items] | ||
Principal | 190,615 | 0 |
Line of Credit | ||
Debt Instrument [Line Items] | ||
Principal | 0 | 32,594 |
Interest accretion under 2016 line of credit | $ 31 | $ 10 |
Debt - Schedule of Maturities of Debt (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2018 | $ 31 |
2023 | 258,750 |
Total | $ 258,781 |
Stockholders' Equity - Capital Structure (Details) - $ / shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Equity [Abstract] | ||
Common Stock, shares authorized (in shares) | 450,000,000 | 450,000,000 |
Common Stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Common Stock, shares issued (in shares) | 58,275,511 | 56,631,647 |
Common Stock, shares outstanding (in shares) | 58,275,511 | 56,631,647 |
Preferred Stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred Stock, par value (in USD per share) | $ 0.001 | $ 0.001 |
Preferred Stock, shares issued (in shares) | 0 | 0 |
Preferred Stock, shares outstanding (in shares) | 0 | 0 |
Stockholders' Equity - Warrants (Details) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Class of Warrant or Right | ||
Warrant expiration date | 2023-10 | |
Common Stock | ||
Class of Warrant or Right | ||
Warrants outstanding (in shares) | 13,013 | 13,013 |
Outstanding warrants exercise price, weighted-average (in USD per share) | $ 5.76 | $ 5.76 |
Stockholders' Equity - Common Stock Reserved for Future Issuance (Details) shares in Thousands |
Jun. 30, 2018
shares
|
---|---|
Class of Stock | |
Common stock reserved for future issuance (in shares) | 16,518 |
Stock options | |
Class of Stock | |
Common stock reserved for future issuance (in shares) | 3,333 |
Restricted stock units | |
Class of Stock | |
Common stock reserved for future issuance (in shares) | 2,705 |
ESPP | |
Class of Stock | |
Common stock reserved for future issuance (in shares) | 1,801 |
Common stock warrants outstanding | |
Class of Stock | |
Common stock reserved for future issuance (in shares) | 13 |
2014 Plan | |
Class of Stock | |
Common stock reserved for future issuance (in shares) | 8,666 |
Stockholders' Equity - Equity Incentive Plans (Details) - 2014 Plan - shares |
Jan. 01, 2018 |
Mar. 31, 2014 |
---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award | ||
Number of shares authorized for issuance | 5,300,000 | |
Automatic annual increase in common stock reserved for issuance, percentage | 5.00% | |
Automatic annual increase in common stock reserved for issuance, shares | 2,831,582 |
Stockholders' Equity - RSU Activity (Details) - Restricted stock units shares in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2018
$ / shares
shares
| |
Number of Shares | |
Outstanding, beginning balance (in shares) | shares | 2,033 |
RSUs granted (in shares) | shares | 1,285 |
RSUs vested and released (in shares) | shares | (534) |
RSUs forfeited (in shares) | shares | (79) |
Outstanding, ending balance (in shares) | shares | 2,705 |
Weighted Average Grant Date Fair Value Per Share | |
Outstanding, beginning balance, weighted-average grant date fair value per share (in USD per share) | $ / shares | $ 12.81 |
RSUs granted, weighted average grant date fair value (in USD per share) | $ / shares | 30.51 |
RSUs vested and released, weighted average grant date fair value (in USD per share) | $ / shares | 12.25 |
RSUs forfeited, weighted average grant date fair value (in USD per share) | $ / shares | 17.64 |
Outstanding, ending balance, weighted-average grant date fair value per share (in USD per share) | $ / shares | $ 21.18 |
Stockholders' Equity - ESPP (Details) - ESPP - $ / shares |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jan. 01, 2018 |
Apr. 03, 2014 |
|
Share-based Compensation Arrangement by Share-based Payment Award | |||
Common stock reserved for future issuance (in shares) | 880,000 | ||
Automatic annual increase in common stock reserved for issuance, percentage | 1.00% | ||
Maximum annual increase of shares reserved | 1,000,000 | ||
Automatic annual increase in common stock reserved for issuance, shares | 566,316 | ||
Purchases made under the ESPP | 136,321 | ||
Weighted-average price per share | $ 21.16 |
Stockholders' Equity - Valuation Assumptions (Details) - Stock options |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Class of Stock | ||||
Expected term (years) | 6 years 1 month | 6 years 1 month 6 days | 6 years | 6 years 2 months 12 days |
Volatility | 44.00% | 49.00% | 45.00% | 49.00% |
Risk-free interest rate | 2.70% | 2.00% | 2.70% | 2.00% |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Net Loss Per Share - Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Earnings Per Share [Abstract] | ||||
Net loss | $ (2,042) | $ (4,007) | $ (2,649) | $ (9,262) |
Weighted-average shares of common stock outstanding (in shares) | 57,903 | 54,723 | 57,453 | 54,208 |
Basic and diluted (in USD per share) | $ (0.04) | $ (0.07) | $ (0.05) | $ (0.17) |
Net Loss Per Share - Antidilutive Securities Excluded from Computation of Diluted Net Loss Per Share (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Anti-dilutive securities excluded from calculation of diluted net loss per share | 6,051 | 7,216 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Anti-dilutive securities excluded from calculation of diluted net loss per share | 3,333 | 4,791 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Anti-dilutive securities excluded from calculation of diluted net loss per share | 2,705 | 2,412 |
Common stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||
Anti-dilutive securities excluded from calculation of diluted net loss per share | 13 | 13 |
Net Loss Per Share - Narrative (Details) - $ / shares shares in Millions |
1 Months Ended | |
---|---|---|
May 31, 2018 |
Jun. 30, 2018 |
|
Debt Conversion [Line Items] | ||
Conversion price on convertible debt (in USD per share) | $ 40.82 | |
Convertible Senior Notes | Convertible debt | ||
Debt Conversion [Line Items] | ||
Conversion price on convertible debt (in USD per share) | $ 40.82 | |
Number of shares covered in the Capped Call Transactions | 6.3 | |
Cap price of the Capped Call Transactions (in dollars per share) | $ 62.80 | |
Number of shares expected to be issued at conversion price under Capped Call Transactions | 4.1 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Income Tax Disclosure [Abstract] | ||||
Provision for income taxes | $ 64 | $ 50 | $ 109 | $ 99 |
Commitments and Contingencies - Commitments (Details) $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Capital lease obligations | |
Other Commitments [Line Items] | |
Capital lease future payment obligations incurred | $ 6.9 |
Capital lease future minimum payments, remainder of 2018 | 1.4 |
Capital lease future minimum payments, due after 2018 | 5.5 |
Hosting and telecommunications agreement | |
Other Commitments [Line Items] | |
Total minimum future payment commitments for various agreements added during the quarter | $ 2.5 |
Minimum | Hosting and telecommunications agreement | |
Other Commitments [Line Items] | |
Period for various agreements | 12 months |
Maximum | Hosting and telecommunications agreement | |
Other Commitments [Line Items] | |
Period for various agreements | 36 months |
Commitments and Contingencies - State and Local Taxes and Surcharges (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Mar. 31, 2015
USD ($)
state
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
Loss Contingencies [Line Items] | ||||||
General and administrative | $ 9,833 | $ 6,845 | $ 18,936 | $ 15,705 | ||
Accrued sales tax liability, current | 1,201 | 1,201 | $ 1,326 | |||
Contingent sales tax liabilities | ||||||
Loss Contingencies [Line Items] | ||||||
Number of states with sales taxes liability | state | 4 | |||||
General and administrative | $ 600 | |||||
Sales tax liability | 1,300 | 1,300 | 1,500 | |||
Accrued sales tax liability, current | $ 300 | $ 300 | $ 400 |
Commitments and Contingencies - Legal Matters (Details) - Indemnification Agreement $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2018
USD ($)
| |
Loss Contingencies [Line Items] | |
Estimate of possible loss | $ 62 |
Amount sought by the plaintiff for fees incurred to date | $ 200 |
Geographical Information - Schedule of Revenue and Property and Equipment by Geographic Region (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Revenues from External Customers and Long-Lived Assets | |||||
Revenue | $ 61,120 | $ 47,727 | $ 120,025 | $ 94,741 | |
Property and equipment, net | 22,019 | 22,019 | $ 19,888 | ||
United States | |||||
Revenues from External Customers and Long-Lived Assets | |||||
Revenue | 56,890 | 44,830 | 112,061 | 89,188 | |
Property and equipment, net | 20,089 | 20,089 | 17,949 | ||
International | |||||
Revenues from External Customers and Long-Lived Assets | |||||
Revenue | 4,230 | $ 2,897 | 7,964 | $ 5,553 | |
Property and equipment, net | $ 1,930 | $ 1,930 | $ 1,939 |
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