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Table of Contents
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 March 31, 2023
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)
Delaware94-3394123
(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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common stock, par value $0.001 per shareFIVNThe 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 FilerAccelerated 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 May 1, 2023, there were 71,176,473 shares of the Registrant’s common stock, par value $0.001 per share, outstanding.


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FIVE9, INC.
FORM 10-Q
TABLE OF CONTENTS

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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 under the caption "Risk Factors" set forth in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Part II, Item 1A, of this Quarterly Report, which we encourage you to carefully read, and include the following:
adverse economic conditions, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, and other factors, may continue to harm our business;
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;
if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we might expect, our revenues and gross margins will be harmed, and we will be required to spend more money to grow our client base;
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 have established, and are continuing to increase, our network of technology solution brokers and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues;
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;
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;
our recent Chief Executive Officer transition could disrupt our operations, result in additional executive and personnel transitions and make it more difficult for us to hire and retain employees;
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;
the markets in which we participate involve a high number of competitors that are continuing to increase, and if we do not compete effectively, our operating results could be harmed;
we continue to expand our international operations, which exposes us to significant macroeconomic and other risks;
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 or use a significant amount of our cash resources and otherwise disrupt our operations and harm our operating results;
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;
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 cloud contact center solutions, which we refer to as our solution, in order to maintain and grow our business;
our stock price is volatile;
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, or incorporated into, 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)
March 31, 2023December 31, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$141,359 $180,520 
Marketable investments488,381 433,743 
Accounts receivable, net88,085 87,494 
Prepaid expenses and other current assets32,018 29,711 
Deferred contract acquisition costs, net50,566 47,242 
Total current assets800,409 778,710 
Property and equipment, net101,057 101,221 
Operating lease right-of-use assets45,339 44,120 
Intangible assets, net25,346 28,192 
Goodwill165,420 165,420 
Marketable investments13,498 885 
Other assets15,240 11,057 
Deferred contract acquisition costs, net — less current portion119,799 114,880 
Total assets$1,286,108 $1,244,485 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$22,461 $23,629 
Accrued and other current liabilities62,196 53,092 
Operating lease liabilities11,739 10,626 
Accrued federal fees3,360 2,471 
Sales tax liabilities2,209 2,973 
Deferred revenue58,082 57,816 
Convertible senior notes169 169 
Total current liabilities160,216 150,776 
Convertible senior notes — less current portion739,284 738,376 
Sales tax liabilities — less current portion906 899 
Operating lease liabilities — less current portion41,703 41,389 
Other long-term liabilities4,913 3,080 
Total liabilities947,022 934,520 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock72 71 
Additional paid-in capital690,309 635,668 
Accumulated other comprehensive loss (961)(2,688)
Accumulated deficit(350,334)(323,086)
Total stockholders’ equity339,086 309,965 
Total liabilities and stockholders’ equity$1,286,108 $1,244,485 
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
March 31, 2023March 31, 2022
Revenue$218,439 $182,777 
Cost of revenue104,756 88,867 
Gross profit113,683 93,910 
Operating expenses:
Research and development38,108 35,824 
Sales and marketing76,314 64,611 
General and administrative28,258 24,314 
Total operating expenses142,680 124,749 
Loss from operations(28,997)(30,839)
Other (expense) income, net:
Interest expense(1,845)(1,870)
Interest income and other4,121 845 
Total other income (expense), net2,276 (1,025)
Loss before income taxes(26,721)(31,864)
Provision for income taxes527 2,256 
Net loss$(27,248)$(34,120)
Net loss per share:
Basic and diluted$(0.38)$(0.49)
Shares used in computing net loss per share:
Basic and diluted71,259 68,974 
Comprehensive Loss:
Net loss$(27,248)$(34,120)
Other comprehensive income (loss)1,727 (3,083)
Comprehensive loss$(25,521)$(37,203)
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 StockAdditional Paid-In CapitalAccumulated
Other Comprehensive Income (Loss)
Accumulated
Deficit
Total Stockholders’ Equity
SharesAmount
Balance as of December 30, 202168,488 $68 $439,787 $(287)$(228,436)$211,132 
Issuance of common stock upon partial conversion of the 2023 convertible senior notes540 — (244)— — (244)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes(111)— 2 — — 2 
Issuance of common stock upon exercise of stock options281 1 1,276 — — 1,277 
Issuance of common stock upon vesting of restricted stock units323 1 — — — 1 
Stock-based compensation— — 39,394 — — 39,394 
Other comprehensive loss— — — (3,083)— (3,083)
Net loss— — — — (34,120)(34,120)
Balance as of March 31, 202269,521 $70 $480,215 $(3,370)$(262,556)$214,359 
Balance as of December 31, 202271,047 $71 $635,668 $(2,688)$(323,086)$309,965 
Issuance of common stock upon exercise of stock options139 — 3,125 — — 3,125 
Issuance of common stock upon vesting of restricted stock units358 1 — — — 1 
Stock-based compensation— — 51,516 — — 51,516 
Other comprehensive income— — — 1,727 — 1,727 
Net loss— — — — (27,248)(27,248)
Balance as of March 31, 202371,544 $72 $690,309 $(961)$(350,334)$339,086 


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)
Three Months Ended
March 31, 2023March 31, 2022
Cash flows from operating activities:
Net loss$(27,248)$(34,120)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization11,347 10,795 
Amortization of operating lease right-of-use assets2,934 2,403 
Amortization of deferred contract acquisition costs12,423 8,678 
(Accretion of discount) amortization of premium on marketable investments(1,863)700 
Provision for credit losses317 222 
Stock-based compensation50,743 39,394 
Amortization of discount and issuance costs on convertible senior notes908 930 
Deferred taxes59 1,889 
Other439 470 
Changes in operating assets and liabilities:
Accounts receivable(908)5,566 
Prepaid expenses and other current assets(2,307)(2,162)
Deferred contract acquisition costs(20,665)(20,160)
Other assets(4,231)234 
Accounts payable1,557 11,133 
Accrued and other current liabilities7,599 2,096 
Accrued federal fees and sales tax liabilities133 (1,239)
Deferred revenue181 2,659 
Other liabilities1,994 (764)
Net cash provided by operating activities33,412 28,724 
Cash flows from investing activities:
Purchases of marketable investments(140,892)(105,277)
Proceeds from sales of marketable investments 600 
Proceeds from maturities of marketable investments76,940 130,821 
Purchases of property and equipment(9,928)(12,398)
Capitalization of software development costs(1,806)(569)
Cash paid for an equity investment in a privately-held company (2,000)
Net cash (used in) provided by investing activities(75,686)11,177 
Cash flows from financing activities:
Repurchase of a portion of 2023 convertible senior notes, net of costs (31,905)
Proceeds from exercise of common stock options3,125 1,277 
Net cash provided by (used in) financing activities3,125 (30,628)
Net (decrease) increase in cash, cash equivalents and restricted cash(39,149)9,273 
Cash, cash equivalents and restricted cash:
Beginning of period180,987 90,878 
End of period$141,838 $100,151 
Supplemental disclosures of cash flow data:
Cash paid for interest$2 $ 
Cash paid for income taxes$32 $337 
Non-cash investing and financing activities:
Equipment and software purchased and unpaid at period-end$8,310 $22,365 
Stock-based compensation included in capitalized software development costs$773 $ 
Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Condensed Consolidated Balance Sheets - Beginning of Period:
Cash and cash equivalents$180,520 $90,878 
Restricted cash in other assets467  
Total cash, cash equivalents and restricted cash$180,987 $90,878 
Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Condensed Consolidated Balance Sheets - End of Period:
Cash and cash equivalents$141,359 $100,151 
Restricted cash in other assets479  
Total cash, cash equivalents and restricted cash$141,838 $100,151 
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.
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, 2022. 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
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
There have been no material changes from the significant accounting policies previously disclosed in Part II, Item 8, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on February 24, 2023.
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 statements of cash flows.
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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):
March 31, 2023December 31, 2022
Accounts receivable, net$88,085 $87,494 
Deferred contract acquisition costs, net:
Current$50,566 $47,242 
Non-current119,799 114,880 
Total deferred contract acquisition costs, net$170,365 $162,122 
Contract assets and contract liabilities:
Contract assets (included in prepaid expenses and other current assets)$3,209 $3,401 
Contract liabilities (deferred revenue) (58,082)(57,816)
Noncurrent contract liabilities (deferred revenue) (included in other long-term liabilities)(1,093)(1,178)
Net contract liabilities$(55,966)$(55,593)
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.
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 months ended March 31, 2023, the Company recognized revenue of $31.4 million related to its contract liabilities at December 31, 2022.
Remaining Performance Obligations
As of March 31, 2023, 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 $918.3 million. The Company expects to recognize revenue on approximately three-fifths of the remaining performance obligations over the next 24 months, with the balance recognized thereafter. The Company excludes 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.
3. Investments and Fair Value Measurements
Marketable Investments
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The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable investments as of March 31, 2023 and December 31, 2022 were as follows (in thousands):
March 31, 2023
Short-Term Marketable InvestmentsCostGross Unrealized GainsGross Unrealized LossesFair Value
Certificates of deposit$2,201 $ $(8)$2,193 
U.S. treasury169,888 35 (668)169,255 
U.S. agency securities267,338 50 (1,019)266,369 
Commercial paper35,327 1 (39)35,289 
Municipal bonds12,719  (97)12,622 
Corporate bonds2,663  (10)2,653 
Total$490,136 $86 $(1,841)$488,381 
March 31, 2023
Long-term Marketable InvestmentsCostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. agency securities$11,478 $14 $(1)$11,491 
Corporate bonds2,013  (6)2,007 
Total$13,491 $14 $(7)$13,498 
December 31, 2022
Short-Term Marketable InvestmentsCostGross Unrealized GainsGross Unrealized LossesFair Value
Certificates of deposit$747 $ $(13)$734 
U.S. treasury securities186,776 8 (1,382)185,402 
U.S. agency and government-sponsored securities197,597 29 (1,660)195,966 
Commercial paper25,386   25,386 
Municipal bonds22,764  (145)22,619 
Corporate bonds3,658  (22)3,636 
Total$436,928 $37 $(3,222)$433,743 
December 31, 2022
Long-term Marketable InvestmentsCostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. agency securities$885 $ $ $885 
Total$885 $ $ $885 
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The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than 12 months as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023December 31, 2022
Gross Unrealized LossesFair ValueGross Unrealized LossesFair Value
Certificates of deposit$(8)$490 $(13)$734 
U.S. treasury securities(668)90,248 (1,382)126,534 
U.S. agency securities(1,020)203,987 (1,660)172,458 
Commercial paper(39)28,874   
Municipal bonds(97)12,622 (145)12,623 
Corporate bonds(16)4,660 (22)3,636 
Total$(1,848)$340,881 $(3,222)$315,985 
Although the Company had certain available-for-sale debt securities in an unrealized loss position as of March 31, 2023, no impairment loss was recorded since it did not intend to sell them, did not anticipate a need to sell them, and the decline in fair value was not due to any credit-related factors.

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. The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded.
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The following tables set forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands):
March 31, 2023
Level 1Level 2Level 3Total
Assets
Cash equivalents
Money market funds$17,296 $ $ $17,296 
Total cash equivalents$17,296 $ $ $17,296 
Marketable investments (short and long term)
Certificates of deposit$ $2,193 $ $2,193 
U.S. treasury169,255   169,255 
U.S. agency securities and government sponsored securities 277,860  277,860 
Commercial paper 35,289  35,289 
Municipal bonds 12,622  12,622 
Corporate bonds 4,660  4,660 
Total marketable investments$169,255 $332,624 $ $501,879 
December 31, 2022
Level 1Level 2Level 3Total
Assets
Cash equivalents
Money market funds$37,560 $ $ $37,560 
U.S. treasury securities19,700   19,700 
Total cash equivalents$57,260 $ $ $57,260 
Marketable investments (short and long-term)
Certificates of deposit$ $734 $ $734 
U.S. treasury securities185,402   185,402 
U.S. agency and government-sponsored securities 196,851  196,851 
Commercial paper 25,386  25,386 
Municipal bonds 22,619  22,619 
Corporate bonds 3,636  3,636 
Total marketable investments$185,402 $249,226 $ $434,628 
As of March 31, 2023 and December 31, 2022, the estimated fair value of the Company’s outstanding 2023 convertible senior notes was $0.3 million for each of the periods. As of March 31, 2023 and December 31, 2022, the estimated fair value of the Company's outstanding 2025 convertible senior notes was $700.7 million and $687.1 million, respectively. The fair values were 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 have been classified as Level 2 in the fair value hierarchy. See Note 6 for further information on the Company’s convertible senior notes.
In February 2022, the Company made a $2.0 million equity investment in a privately-held company that it does not have the ability to exercise significant influence over. The Company elected the measurement alternative for an equity security without a readily determinable fair value. Accordingly, this investment will be accounted for at its cost minus impairment, if any, and is classified within Level 3. If the Company identifies observable price
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changes in orderly transactions for such investment or a similar investment, it will measure the investment at fair value as of the date that the observable transactions or events occurred.
Except for the $2.0 million equity investment described above, there were no assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2023 and December 31, 2022.
The fair value of the Company’s other financial instruments, including accounts receivable, accounts payable and other current liabilities, approximate their carrying value due to the relatively short maturity of those instruments. The carrying amounts of the Company’s operating leases approximate their fair value, which is the present value of expected future cash payments based on assumptions about current interest rates and the creditworthiness of the Company.
4. Financial Statement Components
Cash and cash equivalents consisted of the following (in thousands):
March 31, 2023December 31, 2022
Cash$124,063 $123,260 
Money market funds17,296 37,560 
U.S. treasury 19,700 
Total cash and cash equivalents$141,359 $180,520 
Accounts receivable, net consisted of the following (in thousands):
March 31, 2023December 31, 2022
Trade accounts receivable$77,712 $77,621 
Unbilled trade accounts receivable, net of advance client deposits10,614 10,135 
Allowance for credit losses
(241)(262)
Accounts receivable, net$88,085 $87,494 
Prepaid expenses and other current assets consisted of the following (in thousands):
March 31, 2023December 31, 2022
Prepaid expenses$22,149 $17,151 
Other current assets6,660 9,159 
Contract assets3,209 3,401 
Prepaid expenses and other current assets$32,018 $29,711 
Property and equipment, net consisted of the following (in thousands):
March 31, 2023December 31, 2022
Computer and network equipment$142,408 $148,789 
Computer software54,183 50,955 
Internal-use software development costs8,690 6,111 
Furniture and fixtures3,990 3,326 
Leasehold improvements6,003 6,574 
Property and equipment215,274 215,755 
Accumulated depreciation and amortization(114,217)(114,534)
Property and equipment, net$101,057 $101,221 
Depreciation and amortization expense associated with property and equipment was $8.5 million and $7.8 million for the three months ended March 31, 2023 and 2022, respectively.
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Property and equipment capitalized under finance lease obligations consists primarily of computer and network equipment and was immaterial as of March 31, 2023 and December 31, 2022.
Other assets consisted of the following (in thousands):
March 31, 2023December 31, 2022
Other assets$9,275 $5,081 
Equity investment in a privately-held company2,000 2,000 
Deferred tax assets3,965 3,976 
Total$15,240 $11,057 
Accrued and other current liabilities consisted of the following (in thousands):
March 31, 2023December 31, 2022
Accrued expenses$21,964 $19,343 
Accrued compensation and benefits40,232 33,749 
Accrued and other current liabilities$62,196 $53,092 
Other long-term liabilities consisted of the following (in thousands):
March 31, 2023December 31, 2022
Deferred revenue$1,093 $1,178 
Deferred tax liabilities206 157 
Other long-term liabilities3,614 1,745 
Other long-term liabilities$4,913 $3,080 

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Table of Contents
5. Goodwill and Intangible Assets
Goodwill
There was no activity in the Company's goodwill balance during the three months ended March 31, 2023.
Intangible Assets
The following table summarizes the activity in the Company's intangible assets balance during the three months ended March 31, 2023 (in thousands):
Three Months Ended March 31, 2023
Beginning of the period$28,192 
  Amortization(2,846)
End of the period$25,346 
The components of intangible assets were as follows (in thousands):
March 31, 2023December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Amortization period (Years)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Amortization period (Years)
Developed technology$56,214 $(31,647)$24,567 3.0$56,214 $(28,881)$27,333 3.2
Acquired workforce470 (470) 0.0470 (470)0 0.0
Customer relationships1,600 (821)779 2.51,600 (741)859 2.7
Trademarks500 (500) 0.0500 (500) 0.0
Total$58,784 $(33,438)$25,346 3.0$