UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission File Number: 001-36383

Five9, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	94-3394123
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

3001 Bishop Drive, Suite 350

San Ramon, CA 94583

(Address of Principal Executive Offices) (Zip Code)

(925) 201-2000

(Registrant’s Telephone Number, Including Area Code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, par value $0.001 per share	FIVN	The NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes: ☒    No:  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes: ☒  No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒		Accelerated Filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting Company)	Smaller Reporting Company	☐
			Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  Yes: ☐  No: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes: ☐ No: ☒

As of July 23, 2021, there were 67,699,681 shares of the Registrant’s common stock, par value $0.001 per share, outstanding.

FIVE9, INC.

FORM 10-Q

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements	4
Condensed Consolidated Balance Sheets (Unaudited)	4
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	5
Condensed Consolidated Statements of Stockholder’ Equity (Unaudited)	6
Condensed Consolidated Statements of Cash Flows (Unaudited)	8
Notes to Condensed Consolidated Financial Statements (Unaudited)	9
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Overview	33
Key Operating and Financial Performance Metrics	35
Key Components of Our Results of Operations	37
Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020	38
Liquidity and Capital Resources	41
Critical Accounting Policies and Estimates	43
Recent Accounting Pronouncements	44
Off-Balance Sheet Arrangements	44
Contractual Obligations	44
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk	46
ITEM 4. Controls and Procedures	47
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	48
ITEM 1A. Risk Factors	48
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	53
ITEM 3. Defaults Upon Senior Securities	54
ITEM 4. Mine Safety Disclosures	54
ITEM 5. Other Information	54
ITEM 6. Exhibits	55
SIGNATURES	56

1

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve substantial risks and uncertainties. These statements reflect the current views of our senior management with respect to future events and our financial performance. These forward-looking statements include statements with respect to our business, expenses, strategies, losses, growth plans, product and client initiatives, market growth projections, and our industry. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise.

Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. These factors include the information set forth in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and Part II, Item 1A, of this Quarterly Report, which we encourage you to carefully read, and include the following:

•the occurrence of any event, change, or other circumstances that could delay or prevent closing of the merger (the “Merger”) with Zoom Video Communications, Inc., a Delaware corporation (“Zoom”) or give rise to the termination of that certain Agreement and Plan of Merger, or the Merger Agreement, dated July 16, 2021 by and among us, Zoom, and Summer Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Zoom (“Merger Sub”), or any adverse effects on our business, operations or financial results as a result of the announcement or consummation of the Merger;

•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 retain and expand our sales force will 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;

•our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business;

•we have established, and are continuing to increase, our 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;

•adverse economic conditions may harm our business;

•the effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which it will impact our future results of operations and overall financial performance remain uncertain;

•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 our business;

•we may acquire other companies, or technologies or be the target of strategic transactions, or be impacted by transactions by other companies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results;

•the markets in which we participate involve numerous competitors and 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;

•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

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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 and any failure by these service providers to provide reliable services could cause us to lose clients and subject us to claims for credits or damages, among other things;

•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;

•failure to comply with laws and regulations could harm our business and our reputation; and

•we may not have sufficient cash to service our convertible senior notes and repay such notes, if required.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may differ materially from what we anticipate. You should not place undue reliance on our forward-looking statements. Any forward-looking statements you read in this report reflect our views only as of the date of this report with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	175,199	$	220,372
Marketable investments	390,986		383,171
Accounts receivable, net	53,811		48,731
Prepaid expenses and other current assets	22,110		16,149
Deferred contract acquisition costs, net	26,791		20,695
Total current assets	668,897		689,118
Property and equipment, net	63,107		51,213
Operating lease right-of-use assets	46,966		9,010
Intangible assets, net	45,790		51,684
Goodwill	165,420		165,420
Marketable investments	72,758		42,127
Other assets	3,089		3,236
Deferred contract acquisition costs, net — less current portion	69,689		51,934
Total assets	$	1,135,716	$	1,063,742
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,632	$	17,145
Accrued and other current liabilities	74,024		44,450
Operating lease liabilities	7,758		3,912
Accrued federal fees	5,138		3,745
Sales tax liabilities	1,588		1,714
Finance lease liabilities	36		612
Deferred revenue	33,237		31,983
Total current liabilities	139,413		103,561
Convertible senior notes	773,588		643,316
Sales tax liabilities — less current portion	867		857
Operating lease liabilities — less current portion	46,029		5,379
Other long-term liabilities	13,113		31,465
Total liabilities	973,010		784,578
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock	68		67
Additional paid-in capital	366,637		476,941
Accumulated other comprehensive income	299		335
Accumulated deficit	(204,298)		(198,179)
Total stockholders’ equity	162,706		279,164
Total liabilities and stockholders’ equity	$	1,135,716	$	1,063,742

See accompanying notes to the unaudited condensed consolidated financial statements.

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FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Revenue	$	143,782	$	99,792	$	281,664	$	194,880
Cost of revenue	64,395		42,453		124,198		82,490
Gross profit	79,387		57,339		157,466		112,390
Operating expenses:
Research and development	24,648		17,208		46,769		32,397
Sales and marketing	46,024		32,231		90,823		62,391
General and administrative	22,909		16,129		45,154		30,787
Total operating expenses	93,581		65,568		182,746		125,575
Loss from operations	(14,194)		(8,229)		(25,280)		(13,185)
Other (expense) income, net:
Interest expense	(2,118)		(5,734)		(4,056)		(9,218)
Loss on early extinguishment of debt	—		(5,794)		—		(5,794)
Other (expense) and interest income	(353)		829		(178)		1,901
Total other (expense) income, net	(2,471)		(10,699)		(4,234)		(13,111)
Loss before income taxes	(16,665)		(18,928)		(29,514)		(26,296)
Benefit from income taxes	(135)		(2,876)		(652)		(2,807)
Net loss	$	(16,530)	$	(16,052)	$	(28,862)	$	(23,489)
Net loss per share:
Basic and diluted	$	(0.25)	$	(0.25)	$	(0.43)	$	(0.38)
Shares used in computing net loss per share:
Basic and diluted	67,292		63,282		67,008		62,494
Comprehensive Loss:
Net loss	$	(16,530)	$	(16,052)	$	(28,862)	$	(23,489)
Other comprehensive (loss) income	(80)		(626)		(36)		428
Comprehensive loss	$	(16,610)	$	(16,678)	$	(28,898)	$	(23,061)

See accompanying notes to the unaudited condensed consolidated financial statements.

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FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of March 31, 2020	61,992	$	62	$	368,260	$	1,630	$	(163,486)	$	206,466
Equity component of issuance of the 2025 convertible senior notes, net of issuance costs	—	—		154,363		—		—		154,363
Purchase of capped calls related to the 2025 convertible senior notes	—	—		(90,448)		—		—		(90,448)
Equity component from conversion of the 2023 convertible senior notes	—	—		(293,809)		—		—		(293,809)
Issuance of common stock upon partial conversion of the 2023 convertible senior notes	2,724	3		268,570		—		—		268,573
Issuance of common stock upon exercise of stock options	161	—		3,484		—		—		3,484
Issuance of common stock upon vesting of restricted stock units	316	—		—		—		—		—
Issuance of common stock under ESPP	103	—		5,666		—		—		5,666
Stock-based compensation	—	—		16,791		—		—		16,791
Other comprehensive loss	—	—		—		(626)		—		(626)
Net loss	—	—		—		—		(16,052)		(16,052)
Balance as of June 30, 2020	65,296	$	65	$	432,877	$	1,004	$	(179,538)	$	254,408
Balance as of March 31, 2021	67,029	$	67	$	331,528	$	379	$	(187,768)	$	144,206
Issuance of common stock upon partial conversion of the 2023 convertible senior notes	182	—		(149)		—		—		(149)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes	(28)	—		5		—		—		5
Issuance of common stock upon exercise of stock options	123	—		2,224		—		—		2,224
Issuance of common stock upon vesting of restricted stock units	310	1		—		—		—		1
Issuance of common stock under ESPP	68	—		8,128		—		—		8,128
Stock-based compensation	—	—		24,901		—		—		24,901
Other comprehensive loss	—	—		—		(80)		—		(80)
Net loss	—	—		—		—		(16,530)		(16,530)
Balance as of June 30, 2021	67,684	$	68	$	366,637	$	299	$	(204,298)	$	162,706

See accompanying notes to the unaudited condensed consolidated financial statements.

6

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance as of December 31, 2019	61,544	$	61	$	351,870	$	576	$	(156,049)	$	196,458
Equity component of issuance of the 2025 convertible senior notes, net of issuance costs	—	—		154,363		—		—		154,363
Purchase of capped calls related to the 2025 convertible senior notes	—	—		(90,448)		—		—		(90,448)
Equity component from conversion of the 2023 convertible senior notes	—	—		(293,809)		—		—		(293,809)
Issuance of common stock upon partial conversion of the 2023 convertible senior notes	2,724	3		268,570		—		—		268,573
Issuance of common stock upon exercise of stock options	321	—		6,080		—		—		6,080
Issuance of common stock upon vesting of restricted stock units	604	1		—		—		—		1
Issuance of common stock under ESPP	103	—		5,666		—		—		5,666
Stock-based compensation	—	—		30,585		—		—		30,585
Other comprehensive income	—	—		—		428		—		428
Net loss	—	—		—		—		(23,489)		(23,489)
Balance as of June 30, 2020	65,296	$	65	$	432,877	$	1,004	$	(179,538)	$	254,408
Balance as of December 31, 2020	66,496	$	67	$	476,941	$	335	$	(198,179)	$	279,164
Cumulative effect adjustment due to adoption of ASU 2020-06(1)	—	—		(168,412)		—		22,743		(145,669)
Issuance of common stock upon partial conversion of the 2023 convertible senior notes	325	—		(275)		—		—		(275)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes	(47)	—		7		—		—		7
Issuance of common stock upon exercise of stock options	246	—		4,439		—		—		4,439
Issuance of common stock upon vesting of restricted stock units	596	1		—		—		—		1
Issuance of common stock under ESPP	68	—		8,128		—		—		8,128
Stock-based compensation	—	—		45,809		—		—		45,809
Other comprehensive loss	—	—		—		(36)		—		(36)
Net loss	—	—		—		—		(28,862)		(28,862)
Balance as of June 30, 2021	67,684	$	68	$	366,637	$	299	$	(204,298)	$	162,706

(1) Effective January 1, 2021, the Company adopted ASU 2020-06. Accordingly, the Company recorded a net reduction to opening accumulated deficit of $22.7 million and a net reduction to opening additional paid-in capital of $168.4 million as of January 1, 2021 due to the cumulative impact of adopting this new standard. See Note 1 for more information.

See accompanying notes to the unaudited condensed consolidated financial statements.

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FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Six Months Ended
	June 30, 2021		June 30, 2020
Cash flows from operating activities:
Net loss	$	(28,862)	$	(23,489)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	18,414		11,213
Amortization of operating lease right-of-use assets	4,473		2,786
Amortization of deferred contract acquisition costs	11,468		7,305
Amortization of premium on marketable investments	3,521		630
Provision for doubtful accounts	337		353
Stock-based compensation	45,809		30,585
Amortization of discount and issuance costs on convertible senior notes	1,959		8,571
Loss on early extinguishment of debt	—		5,794
Change in fair of value of contingent consideration	5,200		—
Tax benefit of valuation allowance associated with an acquisition	—		(2,910)
Other	226		82
Changes in operating assets and liabilities:
Accounts receivable	(5,526)		(2,119)
Prepaid expenses and other current assets	(5,962)		(7,065)
Deferred contract acquisition costs	(35,319)		(19,153)
Other assets	147		(1,604)
Accounts payable	1,725		2,553
Accrued and other current liabilities	23,343		9,561
Accrued federal fees and sales tax liabilities	1,277		(945)
Deferred revenue	(2,118)		3,292
Other liabilities	(14,955)		(281)
Net cash provided by operating activities	25,157		25,159
Cash flows from investing activities:
Purchases of marketable investments	(325,628)		(460,899)
Proceeds from maturities of marketable investments	283,605		167,850
Purchases of property and equipment	(19,477)		(14,891)
Cash paid to acquire Virtual Observer	—		(28,313)
Cash paid to acquire substantially all of the assets of Whendu	—		(100)
Net cash used in investing activities	(61,500)		(336,353)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs	—		728,812
Payments for capped call transactions	—		(90,448)
Repurchase of a portion of 2023 convertible senior notes, net of costs	(17,622)		(181,462)
Proceeds from exercise of common stock options	4,439		6,080
Proceeds from sale of common stock under ESPP	8,128		5,666
Payment of holdback related to the Virtual Observer acquisition	(3,200)		—
Payments of finance leases	(575)		(2,195)
Net cash (used in) provided by financing activities	(8,830)		466,453
Net (decrease) increase in cash and cash equivalents	(45,173)		155,259
Cash and cash equivalents:
Beginning of period	220,372		77,976
End of period	$	175,199	$	233,235
Supplemental disclosures of cash flow data:
Cash paid for interest	$	1,912	$	305
Cash paid for income taxes	$	163	$	141
Non-cash investing and financing activities:
Equipment purchased and unpaid at period-end	$	7,818	$	2,838
Capitalization of leasehold improvements and furniture and fixtures through non-cash lease incentive	$	4,815	$	—
Acquisition and related transaction costs accrued at period-end	$	—	$	3,700

See accompanying notes to the unaudited condensed consolidated financial statements.

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FIVE9, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. 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, Asia and Australia, which primarily provide research, development, sales, marketing, and client support services.

Proposed Merger with Zoom

On July 16, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Zoom Video Communications, Inc., a Delaware corporation (“Zoom”) and Summer Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Zoom (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, at the effective time of the merger, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger and continuing as a wholly owned subsidiary of Zoom. See Note 14 for additional details.

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, 2020. 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 within operating activities in the condensed consolidated statements of cash flows have been reclassified to conform to the current period presentation. The condensed consolidated balance sheet and the consolidated statement of stockholders' equity included in this Quarterly Report as of June 30, 2021 differ from the Form 10-K for the year ended December 31, 2020 as it reflects an immaterial error correction due to the reclassification of $2.3 million from treasury stock to additional paid-in-capital. This reclassification was from the shares received for the partial unwind of capped calls related to the 2023 convertible senior notes.

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 and related reserves, as well as the fair value of liabilities assumed through business combinations. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates.

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, 2020.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 2020-06"), which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. The Company elected to

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early adopt ASU 2020-06 as of January 1, 2021 using a modified retrospective transition method. Applying the transition guidance, the Company was required to apply the guidance to all impacted financial instruments that were outstanding as of January 1, 2021 with the cumulative effect recognized as an adjustment to the opening balance of accumulated deficit. As a result of early adopting ASU 2020-06, the Company made certain adjustments to its accounting for the outstanding 0.125% convertible senior notes due 2023 (the "2023 convertible senior notes") and the outstanding 0.500% convertible senior notes due 2025 (the "2025 convertible senior notes", and, together with the 2023 convertible senior notes, the "convertible senior notes"). The adoption of ASU 2020-06 resulted in the re-combination of the liability and equity components of the convertible senior notes into a single liability instrument, which required the Company to record a $168.4 million decrease in additional paid in capital from the derecognition of the separated equity components of these notes, a $145.7 million increase in debt from the derecognition of the discount associated with the separated equity components of the convertible senior notes, and a $22.7 million cumulative effect decrease to the opening balance of its accumulated deficit as of January 1, 2021 upon transition. Interest expense recognized in future periods will be reduced as a result of accounting for the convertible senior notes as a single liability instrument. Since the Company had a net loss for the three and six months ended June 30, 2021, the convertible senior notes were determined to be anti-dilutive and therefore had no impact to basic or diluted net loss per share for the periods as a result of adopting ASU 2020-06.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which amends its guidance to simplify the accounting for income taxes by, among other things, removing exceptions to certain general principles in Topic 740, Income Taxes. The standard is effective for the Company beginning in the first quarter of 2021. The Company has adopted ASU 2019-12 and concluded that the impact on its condensed consolidated financial statements was immaterial.

Recent Accounting Pronouncements Not Yet Effective

The Company has reviewed or is in the process of evaluating all issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such accounting pronouncements will cause a material impact on its condensed consolidated financial position, operating results or cash flows.

2. Revenue

Contract Balances

The following table provides information about accounts receivable, net, deferred contract acquisition costs, net, contract assets and contract liabilities from contracts with customers (in thousands):

	June 30, 2021		December 31, 2020
Accounts receivable, net	$	53,811	$	48,731
Deferred contract acquisition costs, net:
Current	$	26,791	$	20,695
Non-current	69,689		51,934
Total deferred contract acquisition costs, net	$	96,480	$	72,629
Contract assets and contract liabilities:
Contract assets (included in prepaid expenses and other current assets)	$	1,654	$	1,297
Contract liabilities (deferred revenue)	33,237		31,983
Contract liabilities (deferred revenue) (included in other long-term liabilities)	2,592		3,373
Net contract liabilities	$	(34,175)	$	(34,059)

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 an estimated customer benefit period of five years.

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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, 2021, the Company recognized revenue of $5.0 million and $25.3 million, respectively, related to its contract liabilities at December 31, 2020.

Remaining Performance Obligations

As of June 30, 2021, 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 $443.0 million. The Company expects to recognize revenue on approximately three-fourths 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 unsatisfied or partially unsatisfied performance obligations pursuant to ASC 606.

3. 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, 2021 and December 31, 2020 were as follows (in thousands):

	June 30, 2021
Short-Term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	1,788	$	1	$	—	$	1,789
U.S. treasury	237,848		21		(4)		237,865
U.S. agency securities	76,909		12		(3)		76,918
Commercial paper	40,358		—		—		40,358
Municipal bonds	25,236		2		(2)		25,236
Corporate bonds	8,821		1		(2)		8,820
Total	$	390,960	$	37	$	(11)	$	390,986
	June 30, 2021
Long-term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	509	$	1	$	—	$	510
U.S. treasury	2,994		—		—		2,994
U.S. agency securities	53,252		—		(31)		53,221
Municipal bonds	14,858		3		(2)		14,859
Corporate bonds	1,174		—		—		1,174
Total	$	72,787	$	4	$	(33)	$	72,758

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	December 31, 2020
Short-Term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	3,479	$	1	$	—	$	3,480
U.S. treasury	287,315		41		(4)		287,352
U.S. agency securities	67,227		12		(6)		67,233
Commercial paper	5,093		—		—		5,093
Municipal bonds	2,684		1		(1)		2,684
Corporate bonds	17,323		6		—		17,329
Total	$	383,121	$	61	$	(11)	$	383,171
	December 31, 2020
Long-term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. treasury	$	10,189	$	—	$	—	$	10,189
U.S. agency securities	31,469		9		(1)		31,477
Municipal bonds	461		—		—		461
Total	$	42,119	$	9	$	(1)	$	42,127

The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than 12 months as of June 30, 2021 and December 31, 2020 (in thousands):

	June 30, 2021				December 31, 2020
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
U.S. treasury	$	(4)	$	48,266	$	(4)	$	78,549
U.S. agency securities	(34)		81,845		(7)		39,443
Municipal bonds	(4)		17,263		(1)