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, 2022

OR

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

For transition period from               to

Commission File Number 001-36773

___________________________________

WORKIVA INC.

(Exact name of registrant as specified in its charter)

___________________________________

Delaware (State or other jurisdiction of incorporation or organization)	47-2509828 (I.R.S. Employer Identification Number)
2900 University Blvd Ames, IA 50010 (888) 275-3125
(Address of principal executive offices and zip code)
(888) 275-3125
(Registrant's telephone number, including area code)
___________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, par value $.001	WK	New York Stock Exchange

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

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No o

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

Large accelerated filer    ý	Accelerated filer o
Non-accelerated filer    o	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August 4, 2022, there were approximately 48,456,215 shares of the registrant's Class A common stock and 3,890,583 shares of the registrant's Class B common stock outstanding.

WORKIVA INC.

TABLE OF CONTENTS

		Page
	Part I. Financial Information
Item 1.	Unaudited Consolidated Financial Statements:	1
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	37
Item 4.	Controls and Procedures	37
	Part II. Other Information
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
	Signatures	S-1

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.

ii

Part I. Financial Information

Item 1.     Financial Statements

    

WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
	As of June 30, 2022		As of December 31, 2021
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	226,253	$	300,386
Marketable securities	202,712		230,060
Accounts receivable, net of allowance for doubtful accounts of $577 and $591 at June 30, 2022 and December 31, 2021, respectively	75,607		76,848
Deferred costs	29,992		31,152
Other receivables	2,949		3,538
Prepaid expenses and other	17,776		15,108
Total current assets	555,289		657,092
Property and equipment, net	27,331		28,821
Operating lease right-of-use assets	15,049		17,760
Deferred costs, non-current	34,826		33,091
Goodwill	109,040		34,556
Intangible assets, net	30,162		10,434
Other assets	5,061		5,005
Total assets	$	776,758	$	786,759

1

WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)
	As of June 30, 2022		As of December 31, 2021
	(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,797	$	4,114
Accrued expenses and other current liabilities	85,863		84,126
Deferred revenue	272,731		258,023
Convertible senior notes, current	—		298,661
Finance lease obligations	936		1,575
Total current liabilities	365,327		646,499
Convertible senior notes, non-current	339,608		—
Deferred revenue, non-current	34,063		34,181
Other long-term liabilities	1,380		1,605
Operating lease liabilities, non-current	13,688		16,408
Finance lease obligations, non-current	14,838		15,087
Total liabilities	768,904		713,780
Stockholders’ equity
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 48,348,270 and 47,293,775 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	48		47
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 3,890,583 and 4,150,583 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	4		4
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding	—		—
Additional paid-in-capital	498,115		525,646
Accumulated deficit	(481,523)		(452,430)
Accumulated other comprehensive loss	(8,790)		(288)
Total stockholders’ equity	7,854		72,979
Total liabilities and stockholders’ equity	$	776,758	$	786,759

See accompanying notes.

2

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Revenue
Subscription and support	$	113,353	$	91,205	$	220,473	$	176,141
Professional services	18,196		14,382		40,750		33,668
Total revenue	131,549		105,587		261,223		209,809
Cost of revenue
Subscription and support	18,915		14,098		37,448		27,300
Professional services	13,322		10,493		25,662		20,967
Total cost of revenue	32,237		24,591		63,110		48,267
Gross profit	99,312		80,996		198,113		161,542
Operating expenses
Research and development	39,177		27,830		75,061		54,464
Sales and marketing	64,219		41,525		120,319		82,560
General and administrative	24,108		17,384		48,102		34,405
Total operating expenses	127,504		86,739		243,482		171,429
Loss from operations	(28,192)		(5,743)		(45,369)		(9,887)
Interest income	605		255		885		615
Interest expense	(1,512)		(3,502)		(3,030)		(6,987)
Other income (expense), net	668		(156)		503		(540)
Loss before provision for income taxes	(28,431)		(9,146)		(47,011)		(16,799)
Provision for income taxes	430		368		343		39
Net loss	$	(28,861)	$	(9,514)	$	(47,354)	$	(16,838)
Net loss per common share:
Basic and diluted	$	(0.55)	$	(0.19)	$	(0.90)	$	(0.33)
Weighted-average common shares outstanding - basic and diluted	52,850,470		51,065,867		52,724,051		50,657,264

See accompanying notes.

3

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net loss	$	(28,861)	$	(9,514)	$	(47,354)	$	(16,838)
Other comprehensive (loss) income
Foreign currency translation adjustment	(6,172)		48		(6,088)		204
Unrealized loss on available-for-sale securities	(554)		(25)		(2,414)		(230)
Other comprehensive (loss) income	(6,726)		23		(8,502)		(26)
Comprehensive loss	$	(35,587)	$	(9,491)	$	(55,856)	$	(16,864)

See accompanying notes.

4

WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands) (unaudited)
Six Months Ended June 30, 2022
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
Balances at December 31, 2021	51,444	$	51	$	525,646	$	(288)	$	(452,430)	$	72,979
Stock-based compensation expense	—	—		15,309		—		—		15,309
Issuance of common stock upon exercise of stock options	62	1		824		—		—		825
Issuance of common stock under employee stock purchase plan	53	—		5,218		—		—		5,218
Issuance of restricted stock units	545	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(73)	—		(8,570)		—		—		(8,570)
Adoption of ASU 2020-06	—	—		(58,560)		—		18,261		(40,299)
Net loss	—	—		—		—		(18,493)		(18,493)
Other comprehensive loss	—	—		—		(1,776)		—		(1,776)
Balances at March 31, 2022	52,031	$	52	$	479,867	$	(2,064)	$	(452,662)	$	25,193
Stock-based compensation expense	—	—		18,447		—		—		18,447
Issuance of common stock upon exercise of stock options	76	—		1,145		—		—		1,145
Issuance of restricted stock units	144	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(12)	—		(1,344)		—		—		(1,344)
Net loss	—	—		—		—		(28,861)		(28,861)
Other comprehensive loss	—	—		—		(6,726)		—		(6,726)
Balances at June 30, 2022	52,239	$	52	$	498,115	$	(8,790)	$	(481,523)	$	7,854

5

WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
(in thousands) (unaudited)
Six Months Ended June 30, 2021
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders' Equity
Balances at December 31, 2020	48,789	$	49	$	478,698	$	230	$	(414,700)	$	64,277
Stock-based compensation expense	—	—		11,623		—		—		11,623
Issuance of common stock upon exercise of stock options	312	1		4,137		—		—		4,138
Issuance of common stock under employee stock purchase plan	93	—		4,237		—		—		4,237
Issuance of restricted stock units	803	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(70)	—		(7,146)		—		—		(7,146)
Net loss	—	—		—		—		(7,324)		(7,324)
Other comprehensive loss	—	—		—		(49)		—		(49)
Balances at March 31, 2021	49,927	$	50	$	491,549	$	181	$	(422,024)	$	69,756
Stock-based compensation expense	—	—		11,052		—		—		11,052
Issuance of common stock upon exercise of stock options	117	—		1,480		—		—		1,480
Issuance of restricted stock units	318	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(8)	—		(731)		—		—		(731)
Net loss	—	—		—		—		(9,514)		(9,514)
Other comprehensive income	—	—		—		23		—		23
Balances at June 30, 2021	50,354	$	50	$	503,350	$	204	$	(431,538)	$	72,066

See accompanying notes.

6

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Cash flows from operating activities
Net loss	$	(28,861)	$	(9,514)	$	(47,354)	$	(16,838)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	2,725		1,097		4,684		2,151
Stock-based compensation expense	18,447		11,052		33,756		22,675
Provision for (recovery of) doubtful accounts	20		17		(9)		(101)
Amortization of premiums and discounts on marketable securities, net	453		763		1,113		1,388
Amortization of issuance costs and debt discount	324		2,284		648		4,550
Deferred income tax	63		362		(148)		16
Changes in assets and liabilities:
Accounts receivable	(4,844)		(12,106)		1,737		3,159
Deferred costs	(2,734)		(9,018)		(1,290)		(10,077)
Operating lease right-of-use asset	1,307		977		2,608		1,921
Other receivables	385		585		565		424
Prepaid expenses and other	(1,591)		722		(2,723)		(3,025)
Other assets	12		(110)		35		(683)
Accounts payable	(2,300)		(1,172)		2,064		736
Deferred revenue	13,192		11,900		13,798		12,079
Operating lease liability	(1,302)		(1,202)		(2,644)		(2,278)
Accrued expenses and other liabilities	13,388		16,123		907		8,166
Net cash provided by operating activities	8,684		12,760		7,747		24,263
Cash flows from investing activities
Purchase of property and equipment	(671)		(811)		(1,203)		(1,660)
Purchase of marketable securities	(23,798)		(51,217)		(57,946)		(94,872)
Sale of marketable securities	—		250		14,981		250
Maturities of marketable securities	40,536		30,206		66,786		70,792
Acquisitions, net of cash acquired	(99,186)		—		(99,186)		—
Purchase of intangible assets	(6)		(52)		(46)		(123)
Other investments	—		(750)		—		(750)
Net cash used in investing activities	(83,125)		(22,374)		(76,614)		(26,363)

7

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Cash flows from financing activities
Proceeds from option exercises	1,145		1,480		1,970		5,618
Taxes paid related to net share settlements of stock-based compensation awards	(1,344)		(731)		(9,914)		(7,877)
Proceeds from shares issued in connection with employee stock purchase plan	—		—		5,218		4,237
Principal payments on finance lease obligations	(446)		(424)		(888)		(841)
Net cash (used in) provided by financing activities	(645)		325		(3,614)		1,137
Effect of foreign exchange rates on cash	(1,737)		310		(1,652)		326
Net decrease in cash and cash equivalents	(76,823)		(8,979)		(74,133)		(637)
Cash and cash equivalents at beginning of period	303,076		331,173		300,386		322,831
Cash and cash equivalents at end of period	$	226,253	$	322,194	$	226,253	$	322,194
Supplemental cash flow disclosure
Cash paid for interest	$	218	$	242	$	2,383	$	2,430
Cash paid for income taxes, net of refunds	$	438	$	(86)	$	628	$	(66)
Supplemental disclosure of noncash investing and financing activities
Purchases of property and equipment, accrued but not paid	$	—	$	148	$	—	$	148

See accompanying notes.

8

WORKIVA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Organization

Workiva Inc., a Delaware corporation, and its wholly-owned subsidiaries (the “Company” or “we” or “us”) simplifies complex work for thousands of organizations worldwide. We are a leading provider of cloud-based compliance and regulatory reporting solutions that are designed to solve business challenges at the intersection of data, process and people. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, the Asia-Pacific region and Canada.

Basis of Presentation and Principles of Consolidation

The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.

Seasonality has affected our revenue, expenses and cash flows from operations. Revenue from professional services has been higher in the first quarter as many of our customers file their Form 10-K in the first calendar quarter. Our sales and marketing expense also has some degree of seasonality. Sales and marketing expense has historically been higher in the third quarter due to our annual user conference in September. Our transition to a virtual event in September 2020 and September 2021 had mostly mitigated this trend, although we will sponsor a hybrid virtual and in-person event in 2022. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow. The condensed consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 22, 2022.

The unaudited condensed consolidated financial statements include the accounts of Workiva Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

9

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. These estimates include, but are not limited to, the allowance for doubtful accounts, the determination of the relative selling prices of our services, the measurement of material rights, health insurance claims incurred but not yet reported, valuation of available-for-sale marketable securities, useful lives of deferred contract costs, intangible assets and property and equipment, goodwill, income taxes, discount rates used in the valuation of right-of-use assets and lease liabilities, and certain assumptions used in the valuation of equity awards. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates.

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends the accounting related to contract assets and liabilities acquired in business combinations. This ASU requires that entities recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. This update is effective for fiscal years beginning after December 15, 2022 with early adoption permitted. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. Under ASU 2020-06, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. The convertible debt instruments will now be accounted for as a single liability measured at amortized cost. This results in the interest expense recognized for convertible debt instruments to be closer to the coupon interest rate. The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating earnings per share. The new standard is effective for interim and annual periods beginning after December 15, 2021 and can be adopted on either a modified retrospective or full retrospective basis.

We adopted this standard on January 1, 2022 using the modified retrospective method under which financial results reported in prior periods were not adjusted. Adoption of the new standard resulted in a decrease to accumulated deficit of $18.3 million, a decrease to additional paid-in capital of $58.6 million, and an increase to convertible senior notes, non-current of $40.3 million on the consolidated balance sheet. See Note 5 to the condensed consolidated financial statements for more information.

New Accounting Pronouncements Not Yet Adopted

None.

10

2. Supplemental Consolidated Balance Sheet Information

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	As of June 30, 2022		As of December 31, 2021
Accrued vacation	$	13,965	$	11,221
Accrued commissions	9,587		11,122
Accrued bonuses	10,875		8,292
Accrued payroll	3,779		4,494
Estimated health insurance claims	1,942		1,814
Accrued interest	1,455		1,455
ESPP employee contributions	5,586		5,349
Customer deposits	23,728		26,517
Operating lease liabilities	5,575		6,008
Accrued other liabilities	9,371		7,854
	$	85,863	$	84,126

3. Cash Equivalents and Marketable Securities

At June 30, 2022, cash equivalents and marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	162,180	$	—	$	—	$	162,180
Commercial paper	10,492		—		—		10,492
U.S. treasury debt securities	53,886		6		(917)		52,975
Corporate debt securities	142,794		—		(2,033)		140,761
Foreign government debt securities	990		—		(6)		984
	$	370,342	$	6	$	(2,956)	$	367,392
Included in cash and cash equivalents	$	164,681	$	—	$	(1)	$	164,680
Included in marketable securities	$	205,661	$	6	$	(2,955)	$	202,712

At December 31, 2021, cash equivalents and marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	259,754	$	—	$	—	$	259,754
Commercial paper	10,479		—		—		10,479
U.S. treasury debt securities	54,809		2		(206)		54,605
Corporate debt securities	161,792		3		(334)		161,461
Foreign government debt securities	5,014		1		—		5,015
	$	491,848	$	6	$	(540)	$	491,314
Included in cash and cash equivalents	$	261,254	$	—	$	—	$	261,254
Included in marketable securities	$	230,594	$	6	$	(540)	$	230,060

11

The contractual maturities of the investments classified as marketable securities are as follows (in thousands):

	As of June 30, 2022
Due within one year	$	129,022
Due in one to two years	72,068
Due in three to five years	1,622
	$	202,712

The following table presents gross unrealized losses and fair values for those cash equivalents and marketable securities that were in an unrealized loss position as of June 30, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):

	As of June 30, 2022
	Less than 12 months				12 months or greater
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. treasury debt securities	$	43,754	$	(881)	$	2,464	$	(36)
Corporate debt securities	135,340		(1,958)		4,171		(75)
Foreign government debt securities	984		(6)		—		—
Total	$	180,078	$	(2,845)	$	6,635	$	(111)

We do not believe the unrealized losses represent credit losses based on our evaluation of available evidence as of June 30, 2022, which includes an assessment of whether it is more likely than not we will be required to sell the investment before recovery of the investment's amortized cost basis.

4. Fair Value Measurements

We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Inputs are unobservable inputs based on our assumptions.

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Financial Assets

Cash equivalents primarily consist of AAA-rated money market funds with overnight liquidity and no stated maturities. We classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.

When available, our marketable securities are valued using quoted prices for identical instruments in active markets. If we are unable to value our marketable securities using quoted prices for identical instruments in active markets, we value our investments using broker reports that utilize quoted market prices for comparable instruments. We validate, on a sample basis, the derived prices provided by the brokers by comparing their assessment of the fair values of our investments against the fair values of the portfolio balances of another third-party professional pricing service. As of June 30, 2022, all of our marketable securities were valued using quoted prices for comparable instruments in active markets and are classified as Level 2.

Based on our valuation of our money market funds and marketable securities, we concluded that they are classified in either Level 1 or Level 2, and we have no financial assets measured using Level 3 inputs on a recurring basis. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories (in thousands):

	Fair Value Measurements as of June 30, 2022						Fair Value Measurements as of December 31, 2021
Description	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	162,180	$	162,180	$	—	$	259,754	$	259,754	$	—
Commercial paper	10,492		—		10,492		10,479		—		10,479
U.S. treasury debt securities	52,975		—		52,975		54,605		—		54,605
Corporate debt securities	140,761		—		140,761		161,461		—		161,461
Foreign government debt securities	984		—		984		5,015		—		5,015
	$	367,392	$	162,180	$	205,212	$	491,314	$	259,754	$	231,560
Included in cash and cash equivalents	$	164,680					$	261,254
Included in marketable securities	$	202,712					$	230,060

We completed an acquisition on April 1, 2022. The values of the net assets acquired and any resulting goodwill were recorded at fair value using Level 3 inputs. The majority of the related current assets acquired and liabilities assumed were recorded at their carrying values as of the date of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and definite-lived intangible assets acquired in the acquisition were externally estimated primarily based on the income approach. The income approach estimates fair value based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations.

Convertible Senior Notes

As of June 30, 2022, the fair value of our convertible senior notes was $373.2 million. The fair value was determined based on the quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. See Note 5 to the condensed consolidated financial statements for more information.

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5. Convertible Senior Notes

In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including the exercise in full by the initial purchasers of their option to purchase an additional $45.0 million principal amount (the “Notes”). The Notes were issued pursuant to an indenture and are senior, unsecured obligations of the Company. The Notes bear interest at a fixed rate of 1.125% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2020. Proceeds from the issuance of the Notes totaled $335.9 million, net of initial purchaser discounts and issuance costs.

The initial conversion rate is 12.4756 shares of our common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $80.16 per share, subject to adjustment upon the occurrence of specified events.

Holders of the Notes may convert all or a portion of their Notes prior to the close of business on May 15, 2026, in multiples of $1,000 principal amount, only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2019 (and only during such calendar quarter), if the last reported sale price of our Class A common stock, par value $0.001 per share (which we refer to in this offering memorandum as our “Class A common stock”), for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five consecutive business day period immediately following any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined below) 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 our Class A common stock and the conversion rate on each such trading day;

•if we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•upon the occurrence of certain specified corporate events as set forth in the indenture.

On or after May 16, 2026, holders of the Notes may convert their Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes.

Upon conversion, we will pay or deliver, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of our Class A common stock, at our election, in the manner and subject to the terms and conditions provided in the indenture. It is our current intent to settle conversions through a combination settlement of cash and shares of our Class A common stock.

The Company may redeem for cash all or any portion of the Notes, at its option, on or after August 21, 2023, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

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During the second quarter of 2022 none of the conversion conditions were met and therefore the Notes are not convertible at the option of the holders. As a result, the Notes were classified as non-current liabilities on the condensed consolidated balance sheet as of June 30, 2022.

As discussed in Note 1, we adopted ASU 2020‑06 on January 1, 2022 and the Notes are now accounted for as a single liability measured at amortized cost. Upon adoption, interest expense representing the amortization of the issuance costs as well as contractual interest expense is amortized to interest expense at an effective interest rate of 1.5% over the term of the notes. Prior to the adoption of ASU 2020-06, interest expense representing the amortization of the debt discount and issuance costs as well as contractual interest expense was amortized to interest expense at an effective interest rate of 4.3%. As of June 30, 2022 the if-converted value of the Notes was less than the principal amount by $61.0 million.

As of June 30, 2022, the remaining life of the Notes is approximately 4.2 years.

The net carrying amount of the liability and equity components of the Notes was as follows (in thousands):

	June 30, 2022		December 31, 2021
Liability component:
Principal	$	345,000	$	345,000
Unamortized discount	—		(41,193)
Unamortized issuance costs	(5,392)		(5,146)
Net carrying amount	$	339,608	$	298,661
Equity component, net of purchase discounts and issuance costs	$	—	$	58,560

Interest expense related to the Notes is as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Contractual interest expense	$	970	$	970	$	1,940	$	1,941
Amortization of debt discount	—		2,031