(Exact Name of Registrant as Specified in Its Charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
☒ | Smaller reporting company | ||||||||||
Emerging growth company |
TABLE OF CONTENTS | ||||||||
PART I. FINANCIAL INFORMATION | ||||||||
Page | ||||||||
Item 1. | Financial Statements (unaudited) | |||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II. OTHER INFORMATION | ||||||||
Item 1. | ||||||||
Item 1a. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
September 30, 2022 | December 31, 2021 | ||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Marketable securities | |||||||||||
Accounts receivable, less allowance for doubtful accounts of $ | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Restricted cash | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Deferred tax assets | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued other expenses | |||||||||||
Deferred revenue | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Deferred tax liabilities | |||||||||||
Long-term debt | |||||||||||
Other long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and Contingencies (Note 9) | |||||||||||
Preferred stock ($ | |||||||||||
Common stock ($ | |||||||||||
Treasury stock, at cost ( | ( | ||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Cost of revenue | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Income (loss) from operations | ( | ( | ( | ||||||||||||||||||||
Other (income) expense: | |||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Loss on extinguishment of debt | |||||||||||||||||||||||
Other (income) expense, net | ( | ( | ( | ||||||||||||||||||||
Other (income) expense | ( | ||||||||||||||||||||||
Income (loss) before income taxes | ( | ( | ( | ||||||||||||||||||||
Income tax expense (benefit) | ( | ||||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Basic and diluted net income (loss) per share | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Weighted average shares used to compute basic net income (loss) per share | |||||||||||||||||||||||
Weighted average shares used to compute diluted net income (loss) per share |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Other comprehensive loss: | |||||||||||||||||||||||
Foreign currency translation adjustments, net of taxes | ( | ( | ( | ( | |||||||||||||||||||
Unrealized gain (loss) on available-for-sale marketable securities, net of taxes | ( | ||||||||||||||||||||||
Comprehensive income (loss) | $ | $ | ( | $ | ( | $ | ( |
Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehen-sive Loss | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Issuance of common stock under equity incentive plan, net of taxes withheld | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Repurchase and retirement of common stock | ( | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Retirement of treasury stock | ( | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Net loss attributable to common stockholders | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ |
Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehen-sive Loss | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Issuance of common stock under equity incentive plan, net of taxes withheld | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock warrants | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for acquisition | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Net loss attributable to common stockholders | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ |
Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehen-sive Loss | Accumulated Deficit | Total | ||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
Issuance of common stock under equity incentive plan, net of taxes withheld | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan, net of taxes withheld | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Repurchase and retirement of common stock | ( | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
Retirement of treasury stock | ( | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Net loss attributable to common stockholders | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ |
Convertible Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehen-sive Loss | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock under equity incentive plan, net of taxes withheld | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock warrants | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for acquisition | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of convertible preferred stock to common stock in connection with initial public offering | ( | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of redeemable preferred stock warrants to common stock warrants | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to common stockholders | — | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ |
Nine Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Operating activities | |||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Stock-based compensation | |||||||||||
Bad debt expense | |||||||||||
Loss on extinguishment of debt | |||||||||||
Net accretion of discounts and amortization of premiums on investments | ( | ||||||||||
Release of VAT reserve | |||||||||||
Non-cash interest expense | |||||||||||
Loss on impairment | |||||||||||
Revaluation of warrants | ( | ||||||||||
Deferred income taxes | |||||||||||
Other | |||||||||||
Changes in operating assets and liabilities, net of acquisition: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable and accrued expenses | ( | ||||||||||
Deferred revenue | ( | ||||||||||
Other assets and liabilities | |||||||||||
Net cash provided by operating activities | |||||||||||
Investing activities | |||||||||||
Capital expenditures - property and equipment | ( | ( | |||||||||
Capital expenditures - internal-use software development | ( | ( | |||||||||
Purchase of intangible assets | ( | ( | |||||||||
Cash paid for acquisition of businesses, net of cash acquired | ( | ( | |||||||||
Cash paid for asset acquisitions | ( | ||||||||||
Purchase of available-for-sale securities | ( | ||||||||||
Sales of available-for-sale securities | |||||||||||
Maturities of available-for-sale securities | |||||||||||
Purchased interest on available-for-sale securities | ( | ||||||||||
Proceeds from interest on available-for-sale securities | |||||||||||
Proceeds from sale of equipment | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing activities | |||||||||||
Repayment of notes payable | ( | ||||||||||
Repayment of term loan | ( | ||||||||||
Repayment of borrowings under revolving credit facility | ( | ||||||||||
Payment of debt issuance costs | ( | ||||||||||
Proceeds related to the issuance of common stock under equity incentive plan |
Proceeds from the issuance of common stock under employee stock purchase plan | |||||||||||
Employee payroll taxes paid related to net settlement of equity awards | ( | ( | |||||||||
Proceeds from initial public offering, net of underwriting discounts and commissions and other offering costs | |||||||||||
Repurchase and retirement of common stock | ( | ||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||
(Decrease) increase in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash - beginning of period | |||||||||||
Cash, cash equivalents and restricted cash - end of period | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Cash paid for taxes (net of refunds) | |||||||||||
Non-cash investing and financing activities: | |||||||||||
Capitalized stock-based compensation | $ | $ | |||||||||
Property and equipment received but not yet paid, included in Accounts payable and Accrued other expenses | |||||||||||
Costs related to initial public offering included in accounts payable and accrued liabilities | |||||||||||
September 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash included in Prepaid expenses and other current assets(1) | |||||||||||
Restricted cash(2) | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ |
Amount | |||||
Balance as of December 31, 2021 | $ | ||||
Bad debt expense, net of recoveries | |||||
Additions from Cloudways acquisition | |||||
Write-offs | ( | ||||
Balance as of September 30, 2022 | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
North America | % | % | % | % | |||||||||||||||||||
Europe | |||||||||||||||||||||||
Asia | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | % | % | % | % |
Total consideration: | |||||
Cash paid to Cloudways sellers | $ | ||||
Cash contributed to escrow accounts | |||||
Other expenses | |||||
Less: Cash pre-funded from contingent compensation | ( | ||||
Total consideration paid | $ | ||||
Cash and cash equivalents | $ | ||||
Accounts receivable | |||||
Prepayments and other current assets | |||||
Other long term assets | |||||
Identifiable intangible assets | |||||
Accounts payable | ( | ||||
Accrued expenses | ( | ||||
Deferred revenue | ( | ||||
Deferred tax liabilities | ( | ||||
Other current liabilities | ( | ||||
Net identifiable assets acquired | |||||
Goodwill | |||||
Total fair value of net assets acquired | $ |
Intangible assets | Preliminary Fair Value | Weighted Average Useful Life in Years | ||||||
Trade name | $ | |||||||
Developed technology | ||||||||
Customer relationships | ||||||||
Total identifiable intangible assets | $ |
Pro Forma Three Months Ended September 30, | Pro Forma Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Pro-forma revenue | $ | $ | $ | $ | |||||||||||||||||||
Pro-forma net income (loss) | ( | ( | ( |
September 30, 2022 | |||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
U.S. treasury securities | $ | $ | $ | ( | $ | ||||||||||||||||||
Corporate debt securities | ( | ||||||||||||||||||||||
Commercial paper | ( | ||||||||||||||||||||||
Total Marketable securities | $ | $ | $ | ( | $ |
September 30, 2022 | |||||||||||||||||
Level I | Level II | Total | |||||||||||||||
Cash and cash equivalents: | |||||||||||||||||
Cash | $ | $ | $ | ||||||||||||||
Money market funds | |||||||||||||||||
Total Cash and cash equivalents | $ | $ | $ | ||||||||||||||
Marketable securities: | |||||||||||||||||
U.S. treasury securities | $ | $ | $ | ||||||||||||||
Corporate debt securities | |||||||||||||||||
Commercial paper | |||||||||||||||||
Total Marketable securities | $ | $ | $ |
December 31, 2021 | |||||||||||||||||
Level I | Level II | Total | |||||||||||||||
Cash and cash equivalents: | |||||||||||||||||
Cash | $ | $ | $ | ||||||||||||||
Commercial paper | |||||||||||||||||
Certificate of deposits | |||||||||||||||||
Total Cash and cash equivalents | $ | $ | $ |
September 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Convertible Notes | $ | $ | $ | $ |
September 30, 2022 | December 31, 2021 | ||||||||||
Computers and equipment | $ | $ | |||||||||
Furniture and fixtures | |||||||||||
Leasehold improvements | |||||||||||
Internal-use software | |||||||||||
Property and equipment, gross | $ | $ | |||||||||
Less: accumulated amortization | $ | ( | $ | ( | |||||||
Less: accumulated depreciation | ( | ( | |||||||||
Property and equipment, net | $ | $ |
September 30, 2022 | December 31, 2021 | ||||||||||
Prepaid expenses | $ | $ | |||||||||
Restricted cash | |||||||||||
VAT and sales tax receivable | |||||||||||
Other current expenses | |||||||||||
Total prepaid expenses and other current assets | $ | $ |
September 30, 2022 | December 31, 2021 | ||||||||||
Accrued taxes | $ | $ | |||||||||
Contingent compensation | |||||||||||
ESPP withholding | |||||||||||
Sublease liability | |||||||||||
Other current liabilities | |||||||||||
Total other current liabilities | $ | $ |
2022 (three months remaining) | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
Total minimum operating lease payments | $ |
Number of Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Life in Years | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding at January 1, 2022 | $ | $ | |||||||||||||||||||||
Exercised | ( | ||||||||||||||||||||||
Forfeited or cancelled | ( | ||||||||||||||||||||||
Outstanding at September 30, 2022 | |||||||||||||||||||||||
Vested and exercisable at September 30, 2022 | |||||||||||||||||||||||
Vested and unvested expected to vest at September 30, 2022 | $ | $ |
Shares | Weighted-Average Fair Value | ||||||||||
Unvested balance at January 1, 2022 | $ | ||||||||||
Granted | |||||||||||
Vested | ( | ||||||||||
Forfeited or cancelled | ( | ||||||||||
Unvested balance at September 30, 2022 | |||||||||||
Vested and expected to vest at September 30, 2022 | $ |
Shares | Weighted-Average Fair Value | ||||||||||
Unvested balance at January 1, 2022 | $ | ||||||||||
Granted | |||||||||||
Vested | ( | ||||||||||
Forfeited or cancelled | ( | ||||||||||
Adjusted by performance factor | ( | ||||||||||
Unvested balance at September 30, 2022 | $ | ||||||||||
Tranche | Company Stock Price Target | Number of Eligible MRSUs | ||||||||||||
1 | $ | |||||||||||||
2 | $ | |||||||||||||
3 | $ | |||||||||||||
4 | $ | |||||||||||||
5 | $ |
Shares | Weighted-Average Fair Value | ||||||||||
Unvested balance at January 1, 2022 | $ | ||||||||||
Granted | |||||||||||
Unvested balance at September 30, 2022 | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Cost of revenue | $ | $ | $ | $ | |||||||||||||||||||
Research and development | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Basic net income (loss) per share: | |||||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Weighted average shares used to compute net income (loss) per share, basic and diluted | |||||||||||||||||||||||
Basic net income (loss) per share | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Diluted net income (loss) per share: | |||||||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Number of shares used in basic calculation | |||||||||||||||||||||||
Weighted-average effect of diluted securities: | |||||||||||||||||||||||
Stock Options | |||||||||||||||||||||||
RSUs | |||||||||||||||||||||||
PRSUs | |||||||||||||||||||||||
Number of shares used in diluted calculation | |||||||||||||||||||||||
Diluted net income (loss) per share | $ | $ | ( | $ | ( | $ | ( |
As of September 30, | |||||||||||
2022 | 2021 | ||||||||||
Stock Options | |||||||||||
RSUs | |||||||||||
PRSUs | |||||||||||
MRSU | |||||||||||
ESPP | |||||||||||
Convertible Notes | |||||||||||
Total |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Customers paying more than $50 per month | 142,000 | 95,000 | |||||||||
ARPU | $ | 79.22 | $ | 61.97 | |||||||
ARR (in millions) | $ | 641 | $ | 455 | |||||||
Net dollar retention rate | 118 | % | 116 | % | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue | $ | 152,115 | $ | 111,428 | $ | 413,324 | $ | 308,899 | |||||||||||||||
Cost of revenue(1) | 54,536 | 43,506 | 148,539 | 126,195 | |||||||||||||||||||
Gross profit | 97,579 | 67,922 | 264,785 | 182,704 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development(1) | 30,243 | 29,927 | 104,440 | 79,450 | |||||||||||||||||||
Sales and marketing(1) | 19,097 | 13,312 | 56,360 | 35,545 | |||||||||||||||||||
General and administrative(1) | 38,847 | 26,354 | 115,109 | 68,756 | |||||||||||||||||||
Total operating expenses | 88,187 | 69,593 | 275,909 | 183,751 | |||||||||||||||||||
Income (loss) from operations | 9,392 | (1,671) | (11,124) | (1,047) | |||||||||||||||||||
Other (income) expense | (1,147) | 326 | 482 | 5,953 | |||||||||||||||||||
Income (loss) before income taxes | 10,539 | (1,997) | (11,606) | (7,000) | |||||||||||||||||||
Income tax expense (benefit) | 442 | (145) | 2,611 | 378 | |||||||||||||||||||
Net income (loss) attributable to common stockholders | $ | 10,097 | $ | (1,852) | $ | (14,217) | $ | (7,378) |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Cost of revenue | $ | 492 | $ | 196 | $ | 1,405 | $ | 797 | |||||||||||||||
Research and development | 8,236 | 6,099 | 28,617 | 13,794 | |||||||||||||||||||
Sales and marketing | 3,356 | 2,582 | 10,553 | 5,621 | |||||||||||||||||||
General and administrative | 11,510 | 9,678 | 37,183 | 17,168 | |||||||||||||||||||
Total | $ | 23,594 | $ | 18,555 | $ | 77,758 | $ | 37,380 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
Cost of revenue | 36 | 39 | 36 | 41 | |||||||||||||||||||
Gross profit | 64 | 61 | 64 | 59 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 20 | 27 | 25 | 26 | |||||||||||||||||||
Sales and marketing | 13 | 12 | 14 | 12 | |||||||||||||||||||
General and administrative | 26 | 24 | 28 | 22 | |||||||||||||||||||
Total operating expenses | 59 | 63 | 67 | 60 | |||||||||||||||||||
Income (loss) from operations | 5 | (2) | (3) | (1) | |||||||||||||||||||
Other (income) expense | (1) | — | — | 2 | |||||||||||||||||||
Income (loss) before income taxes | 6 | (2) | (3) | (3) | |||||||||||||||||||
Income tax expense (benefit) | — | — | 1 | — | |||||||||||||||||||
Net income (loss) attributable to common stockholders | 6 | % | (2) | % | (4) | % | (3) | % |
Three Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue | $ | 152,115 | $ | 111,428 | $ | 40,687 | 37 | % |
Three Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Cost of revenue | $ | 54,536 | $ | 43,506 | $ | 11,030 | 25 | % |
Three Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Research and development | $ | 30,243 | $ | 29,927 | $ | 316 | 1 | % | |||||||||||||||
Sales and marketing | 19,097 | 13,312 | 5,785 | 43 | % | ||||||||||||||||||
General and administrative | 38,847 | 26,354 | 12,493 | 47 | % | ||||||||||||||||||
Total operating expenses | $ | 88,187 | $ | 69,593 | $ | 18,594 | 27 | % |
Three Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Other (income) expense | $ | (1,147) | $ | 326 | $ | (1,473) | (452) | % |
Three Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Income tax expense (benefit) | $ | 442 | $ | (145) | $ | 587 | (405) | % |
Nine Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Revenue | $ | 413,324 | $ | 308,899 | $ | 104,425 | 34 | % |
Nine Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Cost of revenue | $ | 148,539 | $ | 126,195 | $ | 22,344 | 18 | % |
Nine Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Research and development | $ | 104,440 | $ | 79,450 | $ | 24,990 | 31 | % | |||||||||||||||
Sales and marketing | 56,360 | 35,545 | 20,815 | 59 | % | ||||||||||||||||||
General and administrative | 115,109 | 68,756 | 46,353 | 67 | % | ||||||||||||||||||
Total operating expenses | $ | 275,909 | $ | 183,751 | $ | 92,158 | 50 | % |
Nine Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Other (income) expense | $ | 482 | $ | 5,953 | $ | (5,471) | (92) | % |
Nine Months Ended September 30, | |||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Income tax expense | $ | 2,611 | $ | 378 | $ | 2,233 | 591 | % |
Nine Months Ended September 30, | |||||||||||
(In thousands) | 2022 | 2021 | |||||||||
Net cash provided by operating activities | $ | 130,008 | $ | 100,376 | |||||||
Net cash used in investing activities | (1,199,742) | (81,204) | |||||||||
Net cash (used in) provided by financing activities | (610,541) | 470,267 | |||||||||
(Decrease) increase in cash, cash equivalents and restricted cash | (1,680,275) | 489,439 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Gross profit | $ | 97,579 | $ | 67,922 | $ | 264,785 | $ | 182,704 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Depreciation and amortization | 23,442 | 20,838 | 68,278 | 60,105 | |||||||||||||||||||
Stock-based compensation | 492 | 196 | 1,405 | 797 | |||||||||||||||||||
Adjusted gross profit | $ | 121,513 | $ | 88,956 | $ | 334,468 | $ | 243,606 | |||||||||||||||
Gross margin | 64 | % | 61 | % | 64 | % | 59 | % | |||||||||||||||
Adjusted gross margin | 80 | % | 80 | % | 81 | % | 79 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Income (loss) from operations | $ | 9,392 | $ | (1,671) | $ | (11,124) | $ | (1,047) | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Stock-based compensation | 23,594 | 18,555 | 77,758 | 37,380 | |||||||||||||||||||
Acquisition related compensation | 2,361 | — | 2,361 | — | |||||||||||||||||||
Amortization of acquired intangibles | 1,661 | 168 | 2,687 | 320 | |||||||||||||||||||
Acquisition and integration related costs | 2,700 | 280 | 2,868 | 280 | |||||||||||||||||||
Loss on sublease | — | — | 1,471 | — | |||||||||||||||||||
Asset impairment | 24 | 212 | 144 | 212 | |||||||||||||||||||
Non-GAAP income from operations | $ | 39,732 | $ | 17,544 | $ | 76,165 | $ | 37,145 | |||||||||||||||
Operating margin | 6 | % | (1) | % | (3) | % | — | % | |||||||||||||||
Non-GAAP operating margin | 26 | % | 16 | % | 18 | % | 12 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
GAAP Net income (loss) attributable to common stockholders | $ | 10,097 | $ | (1,852) | $ | (14,217) | $ | (7,378) | |||||||||||||||
Stock-based compensation | 23,594 | 18,555 | 77,758 | 37,380 | |||||||||||||||||||
Acquisition related compensation | 2,361 | — | 2,361 | — | |||||||||||||||||||
Amortization of acquired intangible assets | 1,661 | 168 | 2,687 | 320 | |||||||||||||||||||
Acquisition and integration related costs | 2,700 | 280 | 2,868 | 280 | |||||||||||||||||||
Reclaim of VAT reserve | — | (3,188) | — | (3,188) | |||||||||||||||||||
Loss on sublease | — | — | 1,471 | — | |||||||||||||||||||
Loss on extinguishment of debt | — | — | 407 | 3,435 | |||||||||||||||||||
Asset impairment | 24 | 212 | 144 | 212 | |||||||||||||||||||
Revaluation of warrants | — | — | — | (556) | |||||||||||||||||||
Income tax effects of non-GAAP adjustments(1) | 710 | (19) | 992 | 90 | |||||||||||||||||||
Non-GAAP net income(2) | $ | 41,147 | $ | 14,156 | $ | 74,471 | $ | 30,595 | |||||||||||||||
Non-GAAP diluted net income per share(2)(3) | $ | 0.38 | $ | 0.12 | $ | 0.69 | $ | 0.27 | |||||||||||||||
Weighted-average shares used to compute Non-GAAP diluted net income per share | 113,334 | 120,854 | 114,509 | 114,815 |
Nine Months Ended | |||||||||||
September 30, | |||||||||||
(In thousands) | 2022 | 2021 | |||||||||
Net cash provided by operating activities | $ | 130,008 | $ | 100,376 | |||||||
Adjustments: | |||||||||||
Capital expenditures - property and equipment | (77,717) | (66,480) | |||||||||
Capital expenditures - internal-use software development | (6,593) | (4,297) | |||||||||
Purchase of intangible assets | (4,915) | (5,636) | |||||||||
Free cash flow | $ | 40,783 | $ | 23,963 | |||||||
As a percentage of revenue: | |||||||||||
Net cash provided by operating activities | 31 | % | 32 | % | |||||||
Free cash flow margin | 10 | % | 8 | % |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program(1) | Approximate Dollar Value (in thousands) of Shares that May Yet Be Purchased Under the Program(1) | ||||||||||||||||||||||
July 1-31, 2022 | — | $ | — | — | $ | 50,000 | ||||||||||||||||||||
August 1-31, 2022 | 1,078,650 | 46.35 | 1,078,650 | — | ||||||||||||||||||||||
September 1-30, 2022 | — | — | — | — | ||||||||||||||||||||||
Total | 1,078,650 | $ | 46.35 | 1,078,650 |
Incorporated by Reference | |||||||||||||||||||||||
Exhibit No. | Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed Herewith | |||||||||||||||||
2.1 | 8-K | 001-40252 | 2.1 | August 23, 2022 | |||||||||||||||||||
31.1 | X | ||||||||||||||||||||||
31.2 | X | ||||||||||||||||||||||
32.1* | X | ||||||||||||||||||||||
101.INS | Inline XBRL Instance Document | X | |||||||||||||||||||||
101.SCH | Inline XBRL Taxonomy Extensions Schema | X | |||||||||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | X | |||||||||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | X | |||||||||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | X | |||||||||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | X | |||||||||||||||||||||
104 | Cover Page Interactive File (formatted as Inline XBRL and contained in Exhibit 101) | X |
DigitalOcean Holdings, Inc. | |||||||||||||||||
Date: | November 7, 2022 | By: | /s/ Yancey Spruill | ||||||||||||||
Yancey Spruill | |||||||||||||||||
Chief Executive Officer | |||||||||||||||||
(Principal Executive Officer) | |||||||||||||||||
Date: | November 7, 2022 | By: | /s/ William Sorenson | ||||||||||||||
William Sorenson | |||||||||||||||||
Chief Financial Officer | |||||||||||||||||
(Principal Financial Officer) | |||||||||||||||||
Date: | November 7, 2022 | By: | /s/ Yancey Spruill | |||||||||||
Name: | Yancey Spruill | |||||||||||||
Title: | Chief Executive Officer |
Date: | November 7, 2022 | By: | /s/ William Sorenson | |||||||||||
Name: | William Sorenson | |||||||||||||
Title: | Chief Financial Officer |
Date: | November 7, 2022 | By: | /s/ Yancey Spruill | |||||||||||
Name: | Yancey Spruill | |||||||||||||
Title: | Chief Executive Officer |
Date: | November 7, 2022 | By: | /s/ William Sorenson | |||||||||||
Name: | William Sorenson | |||||||||||||
Title: | Chief Financial Officer |
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Income Statement [Abstract] | ||||
Revenue | $ 152,115 | $ 111,428 | $ 413,324 | $ 308,899 |
Cost of revenue | 54,536 | 43,506 | 148,539 | 126,195 |
Gross profit | 97,579 | 67,922 | 264,785 | 182,704 |
Operating expenses: | ||||
Research and development | 30,243 | 29,927 | 104,440 | 79,450 |
Sales and marketing | 19,097 | 13,312 | 56,360 | 35,545 |
General and administrative | 38,847 | 26,354 | 115,109 | 68,756 |
Total operating expenses | 88,187 | 69,593 | 275,909 | 183,751 |
Income (loss) from operations | 9,392 | (1,671) | (11,124) | (1,047) |
Other (income) expense: | ||||
Interest expense | 2,127 | 186 | 6,281 | 2,675 |
Loss on extinguishment of debt | 0 | 0 | 407 | 3,435 |
Other (income) expense, net | (3,274) | 140 | (6,206) | (157) |
Other (income) expense | (1,147) | 326 | 482 | 5,953 |
Income (loss) before income taxes | 10,539 | (1,997) | (11,606) | (7,000) |
Income tax expense (benefit) | 442 | (145) | 2,611 | 378 |
Net income (loss) attributable to common stockholders | $ 10,097 | $ (1,852) | $ (14,217) | $ (7,378) |
Net loss per share attributable to common stockholders, basic (in dollars per share) | $ 0.10 | $ (0.02) | $ (0.14) | $ (0.08) |
Net loss per share attributable to common stockholders, diluted (in dollars per share) | $ 0.10 | $ (0.02) | $ (0.14) | $ (0.08) |
Weighted-average shares used to compute net loss per share, basic (in shares) | 96,559,000 | 107,955,000 | 102,134,000 | 88,265,000 |
Weighted average shares used to compute net loss per share, diluted (in shares) | 104,931,000 | 107,955,000 | 102,134,000 | 88,265,000 |
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Statement of Other Comprehensive Income [Abstract] | ||||
Net income (loss) attributable to common stockholders | $ 10,097 | $ (1,852) | $ (14,217) | $ (7,378) |
Other comprehensive loss: | ||||
Foreign currency translation adjustments, net of taxes | (252) | (73) | (458) | (101) |
Unrealized gain (loss) on available-for-sale marketable securities, net of taxes | 912 | (3,476) | 0 | |
Comprehensive income (loss) | $ 10,757 | $ (1,925) | $ (18,151) | $ (7,479) |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 6,402 | $ 4,212 |
Preferred stock, par value (in usd per share) | $ 0.000025 | $ 0.000025 |
Preferred stock, shares authorized (in shares) | 10,000,000 | |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.000025 | |
Common stock, shares authorized (in shares) | 750,000,000 | |
Common stock, shares issued (in shares) | 96,229,736 | 109,175,863 |
Common stock, shares outstanding (in shares) | 96,229,736 | 107,207,635 |
Treasury stock, shares (in shares) | 0 | 1,968,228 |
Nature of the Business and Organization |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of the Business and Organization | Nature of the Business and OrganizationDigitalOcean Holdings, Inc. and its subsidiaries (collectively, the “Company”, “we”, “our”, “us”) is a leading cloud computing platform offering on-demand infrastructure and platform tools for developers, start-ups and small-to-medium size businesses. The Company was founded with the guiding principle that the transformative benefits of the cloud should be easy to leverage, broadly accessible, reliable and affordable. The Company’s platform simplifies cloud computing, enabling its customers to rapidly accelerate innovation and increase their productivity and agility. The Company offers mission-critical infrastructure solutions across compute, storage and networking, and also enables developers to extend the native capabilities of the Company’s cloud with fully managed application, container and database offerings.The Company has adopted a holding company structure and the primary operations are performed globally through our wholly-owned operating subsidiaries. |
Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include accounts of the Company and all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of September 30, 2022, results of operations for the three and nine months ended September 30, 2022 and 2021, cash flows for the nine months ended September 30, 2022 and 2021, and stockholders' equity for the three and nine months ended September 30, 2022 and 2021. Use of Estimates The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make, on an ongoing basis, estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Such estimates include, but are not limited to, those related to revenue recognition and allowance for doubtful accounts, useful lives and realizability of long-lived assets, capitalized internal-use software development costs, accounting for stock-based compensation, valuation allowances against deferred tax assets, fair value of marketable securities, the fair value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Restricted Cash The following table reconciles cash, cash equivalents and restricted cash per the Condensed Consolidated Statements of Cash Flows:
(1)Includes contingent compensation related to the Cloudways acquisition. (2)Includes deposits in financial institutions related to letters of credit used to secure lease agreements. Marketable Securities The Company’s marketable securities consist of commercial paper, U.S. treasury securities and commercial debt securities. The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its marketable securities within Current assets on the Condensed Consolidated Balance Sheets. Available-for-sale securities are recorded at fair value each reporting period. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective interest method. Interest income is recognized when earned. Unrealized gains and losses on these marketable securities are presented net of tax and reported as a separate component of Accumulated other comprehensive loss until realized. Realized gains and losses are determined based on the specific identification method and are reported in Other (income) expense, net in the Condensed Consolidated Statements of Operations. The Company periodically evaluates its marketable securities to assess whether an investment’s fair value is less than its amortized cost basis and if the decline in the fair value is attributable to a credit loss. Declines in fair value judged to be related to credit loss are reported in Other (income) expense, net in the Condensed Consolidated Statements of Operations. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable primarily represents revenue recognized that was not invoiced at the balance sheet date and is primarily billed and collected in the following month. Trade accounts receivable are carried at the original invoiced amount less an estimated allowance for doubtful accounts based on the probability of future collection. Management determines the adequacy of the allowance based on historical loss patterns, the number of days that customer invoices are past due and an evaluation of the potential risk of loss associated with specific accounts. When management becomes aware of circumstances that may further decrease the likelihood of collection, it records a specific allowance against amounts due, which reduces the receivable to the amount that management reasonably believes will be collected. The Company records changes in the estimate to the allowance for doubtful accounts through bad debt expense and reverses the allowance after the potential for recovery is considered remote. The following table presents the changes in our allowance for doubtful accounts for the period presented:
Deferred Revenue Deferred revenue was $5,476 and $4,826 as of September 30, 2022 and December 31, 2021, respectively. Revenue recognized during the three months ended September 30, 2022 and 2021 was $246 and $259, respectively, and $2,750 and $2,618 during the nine months ended September 30, 2022 and 2021, respectively, which was included in each deferred revenue balance at the beginning of each respective period. Business Combinations The Company recognizes assets acquired, liabilities assumed, and any contingent consideration related to business combinations based on estimates of their respective fair values on the date of acquisition. The purchase price is allocated to the identifiable net assets acquired, including intangible assets and liabilities assumed, based on estimated fair values at the date of acquisition. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates, or actual results. All subsequent changes to the estimated fair values of the acquired assets and liabilities assumed that occur within the measurement period and are based on facts and circumstances that existed at the acquisition date are recognized as an adjustment to goodwill. Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the selection of valuation methodologies, estimates of future revenue and cash flows and discount rates in determining the fair value of intangible assets acquired and liabilities assumed. The assets purchased and liabilities assumed have been reflected on the Company’s Consolidated Balance Sheets, and the results are included on the Consolidated Statements of Operations and Consolidated Statements of Cash Flows from the date of acquisition. Acquisition-related transaction costs, including legal and accounting fees and other external costs directly related to the acquisition, are recognized separately from the acquisition and expensed as incurred in General and administrative on the Consolidated Statements of Operations. Asset Acquisition The Company applies the principles provided in ASC 805, Business Combinations ("ASC 805") to determine whether a transaction involves an asset or a business. If it is determined an acquisition is an asset acquisition, the purchase consideration (which will include certain transaction costs) is allocated to the acquired assets and liabilities based on their relative fair values. Segment Information The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions, allocation of resources, and assessing financial performance. Accordingly, the Company has one operating and reporting segment. Geographical Information Revenue, as determined based on the billing address of the Company’s customers, was as follows:
Revenue derived from customers in the United States was 31% of total revenue for the three and nine months ended September 30, 2022 and 2021. No country outside of the United States had revenue greater than 10% of total consolidated revenue in any period presented. Property and equipment located in the United States was 48% and 50% as of September 30, 2022 and December 31, 2021, respectively, with the remainder of net assets residing in international locations, primarily in the Netherlands, Singapore and Germany. Concentration of Credit Risk The amounts reflected in the Condensed Consolidated Balance Sheets for cash and cash equivalents, marketable securities, restricted cash, and trade accounts receivable are exposed to concentrations of credit risk. Although the Company maintains cash and cash equivalents with multiple financial institutions, the deposits, at times, may exceed federally insured limits. The Company believes that the financial institutions that hold its cash and cash equivalents are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company’s customer base consists of a significant number of geographically dispersed customers. No customer represented 10% or more of accounts receivable, net as of September 30, 2022 and December 31, 2021. Additionally, no customer accounted for 10% or more of total revenue during the three and nine months ended September 30, 2022 and 2021. Sublease Under ASC 840, Leases, a sublease liability is recorded when the Company ceases to use leased space, which is included in Other current liabilities and Other noncurrent liabilities on the Condensed Consolidated Balance Sheets. A sublease loss is calculated as the present value of lease payments, net of expected sublease income, and other costs that do not have future economic benefit to the Company. The sublease loss is included in General and administrative on the Condensed Consolidated Statements of Operations. Recent Accounting Pronouncements – Pending Adoption The following effective dates represent the requirements for private companies which the Company has elected as an emerging growth company. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), and additional changes, modifications, clarifications, or interpretations related to this guidance thereafter (“ASU 2016-02”). ASU 2016-02 requires a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 with early adoption permitted. The Company expects to elect the package of transition practical expedients, which allows it to carry forward its historical assessment of (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs. In addition, the Company expects to elect the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. The Company has made substantial progress in executing its implementation plan. It is in the process of revising its controls and processes to address the lease standard and is in the process of completing the implementation and data input for the lease accounting software tool that it will use post-adoption. ASU 2016-02 also requires expanded disclosure regarding the amounts, timing and uncertainties of cash flows related to a company’s lease portfolio. The Company is evaluating these disclosure requirements and is incorporating the collection of relevant data into its existing financial reporting processes. While the Company expects the adoption of this standard to result in an increase to the reported assets and liabilities, the Company is currently evaluating the impact of adoption on the condensed consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and to payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. This amendment will be effective for public entities with fiscal years beginning after December 15, 2022, and for all other entities with fiscal years beginning after December 15, 2023, with early adoption permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect on its consolidated financial statements and disclosures. In June 2016, the FASB issued ASU 2016-13, with subsequent amendments, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires immediate recognition of management’s estimates of current expected credit losses. ASU 2016-13 is currently effective for public business entities, and effective for private companies with annual reporting periods beginning after December 15, 2022, and interim periods within annual periods beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adoption on the condensed consolidated financial statements. Recent Accounting Pronouncements – Adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions in FASB Topic 740: Income Taxes (“ASC 740”) related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted the new standard and there was an immaterial impact to the condensed consolidated financial statements and related disclosures.
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Acquisitions |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions Cloudways Ltd. On September 1, 2022 (“Acquisition Date”), the Company acquired 100% of the outstanding equity interests of Cloudways, Ltd. (“Cloudways”) pursuant to a Share Purchase Agreement, dated as of August 19, 2022. This acquisition has been accounted for as a business combination. The results of Cloudways’ operations have been included in the accompanying condensed consolidated financial statements since the Acquisition Date. The acquisition of Cloudways, a leading managed cloud hosting and software-as-a-service provider for small to medium-sized businesses, strengthens the Company’s ability to simplify cloud computing by enabling customers to launch a business and scale it effortlessly. Cloudways was a customer of the Company prior to the acquisition, and the Company recognized revenue of approximately $6,000 from Cloudways from January 1, 2022 through the Acquisition Date. All intercompany transactions will be eliminated upon the consolidation of Cloudways. The acquisition purchase consideration, in accordance with ASC 805, totaled $311,237 and was paid in cash. The acquisition purchase consideration is subject to certain adjustments for working capital, cash, transaction expenses, accrued liabilities and indebtedness. The Share Purchase Agreement includes customary representations and warranties and covenants of the parties. The Company contributed $42,000 to an escrow account on the Acquisition Date to support certain post-closing indemnification obligations. The initial accounting for the business combination is incomplete at the time of this filing due to the limited amount of time between the Acquisition Date and the date that these financial statements are issued. The Company has performed a preliminary valuation analysis of the fair market value of the assets and liabilities of the Cloudways business. The final purchase price allocation will be determined when the Company has completed its evaluation of the valuation analysis. The final allocation could differ materially from the preliminary allocation. The final allocation may include changes in allocations to acquired intangible assets as well as goodwill and other changes to assets and liabilities including deferred tax liabilities. The estimated useful lives of acquired intangible assets are also preliminary. Measurement period adjustments, if any, will be recognized in the reporting period in which the adjustment amounts are determined within twelve months from the Acquisition Date. The following table sets forth the components and the allocation of the purchase price for the business combination and summarizes the preliminary fair values of the assets acquired and liabilities assumed at the Acquisition Date:
The Company amortizes its intangible assets assuming no residual value over periods in which the economic benefit of these assets is consumed (the useful life). The preliminary fair values allocated to the identifiable intangible assets and their estimated useful lives are as follows:
Cloudways’ assets and liabilities were measured at estimated fair values on September 1, 2022. Estimates of fair value represent management’s best estimate and require a complex series of judgments about future events and uncertainties. Third-party valuation specialists were engaged to assist in the valuation of these assets and liabilities. The goodwill is attributable primarily to the revenue synergies expected from combining the operations of both entities, and intangible assets that do not qualify for separate recognition, including the existing workforce acquired through the acquisition. None of the goodwill is expected to be deductible for income tax purposes. Acquisition related costs consist of miscellaneous professional service fees and expenses for acquisition related activities. The Company recognized approximately $2,139 of acquisition related costs that were expensed in the current period. These costs are shown primarily as part of general and administrative expenses in the accompanying condensed consolidated statements of operations. The amount of Cloudways’ revenue and net loss included in the Company’s condensed consolidated statements of operations from the Acquisition Date through September 30, 2022, was $4,923 and $(3,581), respectively. The $4,923 does not include the impact of the elimination of $765 related to DO intercompany revenue with Cloudways. Contingent compensation Contingent compensation costs relate to payments due to a Cloudways seller for $38,830, of which $16,851 is earned on September 1, 2023, and $7,326 is earned on each of March 1, 2024, September 1, 2024 and March 1, 2025. Contingent compensation represents compensation for post-combination services because the payments are contingent on continuing employment of the Cloudways seller, with limited exceptions, at each payment date. For the nine months ended September 30, 2022, the Company recorded an acquisition related compensation expense of $2,361 related to estimated compensation earned by the Cloudways seller to date. This expense is shown as part of General and administrative in the accompanying condensed consolidated statements of operations. Unaudited Pro Forma Financial Information The unaudited pro forma information below summarizes the combined results of the Company and Cloudways as if the Company’s acquisition of Cloudways closed on January 1, 2021 but does not necessarily reflect the combined actual results of operations of the Company and Cloudways that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma information reflects certain adjustments that were directly attributable to the acquisition of Cloudways, including additional amortization adjustments for the fair value of the assets acquired and liabilities assumed and other adjustments the Company believes are reasonable for the pro forma presentation. The pro forma net income (loss) for the three months ended September 30, 2022 was adjusted to exclude nonrecurring acquisition related costs of $2,139.
Other Asset Acquisitions In March 2022, the Company acquired the assets of the CSS Tricks website (“CSS Tricks”) from Midwest Coast Studios LLC for total purchase consideration of $4,000. The intangible assets will be amortized over 3 to 5 years. In June 2022, the Company acquired intangible assets from JournalDev IT Services Private Limited for total purchase consideration of $1,400 to be amortized over 3 years. Nimbella The Company finalized and adjusted the purchase price for the Nimbella acquisition to reflect an decrease of $247 to Goodwill related to the final 2021 pre-acquisition tax return.
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Marketable Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Marketable Securities The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents, on the Condensed Consolidated Balance Sheets as of September 30, 2022. The Company did not hold any available-for-sale marketable securities as of December 31, 2021.
Interest income from investments was $3,309 and $27 for the three months ended September 30, 2022 and 2021, respectively, and $6,899 and $36 for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, all of the Company’s available-for-sale short-term investments were due within one year. The Company does not believe that any unrealized losses are attributable to credit-related factors based on its evaluation of available evidence. To determine whether a decline in value is related to credit loss, the Company evaluates, among other factors: the extent to which the fair value is less than the amortized cost basis, changes to the rating of the security by a rating agency and any adverse conditions specifically related to an issuer of a security or its industry. Unrealized gains and losses on marketable securities are presented net of tax.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value MeasurementsThe fair value of our financial assets measured on a recurring basis is as follows:
The Company classifies its highly liquid money market funds and U.S. treasury securities within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its commercial paper, corporate debt securities and certificates of deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security which may not be actively traded. The Company had no Level 3 financial assets as of September 30, 2022 and December 31, 2021. Financial Instruments Not Recorded at Fair Value on a Recurring Basis The Company reports financial instruments at fair value, with the exception of the 0% Convertible Senior Notes due December 1, 2026 (“Convertible Notes”). Financial instruments that are not recorded at fair value on a recurring basis are measured at fair value on a quarterly basis for disclosure purposes. The carrying values and estimated fair values of financial instruments not recorded at fair value are as follows:
The carrying value of the Convertible Notes as of September 30, 2022 and December 31, 2021 was net of unamortized debt issuance costs of $31,607 and $37,324, respectively. The total fair value of the Convertible Notes was determined based on the closing trading price as of the last day of trading for the period. The Company considers the fair value to be a Level 2 valuation due to the limited trading activity.
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Balance Sheet Details |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Details | Balance Sheet Details Property and equipment, net Property and equipment, net consisted of the following:
Depreciation expense on property and equipment for the three months ended September 30, 2022 and 2021 was $20,982 and $18,969, respectively, and $62,009 and $54,359 for the nine months ended September 30, 2022 and 2021, respectively. The Company capitalized costs related to the development of computer software for internal use of $7,879 and $4,884 for the nine months ended September 30, 2022 and 2021, respectively, which is included in internal-use software costs within Property and equipment, net. Amortization expense related to internal-use software for the three months ended September 30, 2022 and 2021 was $2,983 and $3,245, respectively, and $9,205 and $10,245 for the nine months ended September 30, 2022 and 2021, respectively. The Company recorded an impairment loss of $24 and $144 related to software that is no longer being used during the three and nine months ended September 30, 2022, respectively. The Company recorded an impairment loss of $212 for the three and nine months ended September 30, 2021. This impairment loss is included in Cost of revenue and Research and development on the Condensed Consolidated Statements of Operations. Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following:
Other current liabilities Other current liabilities consisted of the following:
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Debt |
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Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Debt Credit Facility In February and March 2020, the Company entered into and subsequently amended a second amended and restated credit agreement with KeyBank National Association as administrative agent. In November 2021, the Company further amended such credit agreement to revise certain covenants that restricted the incurrence of indebtedness to permit the issuance of the convertible notes discussed below. In March 2022, the Company entered into a third amended and restated credit agreement (the “Credit Facility”) to, among other modifications, (i) remove the term loan component of the existing credit facility which had been previously repaid in full; (ii) increase the maximum borrowing limit of the revolving credit facility from $150,000 to $250,000; (iii) extend the maturity date; (iv) replace the existing maximum total net leverage ratio financial covenant with a maximum senior secured net leverage ratio financial covenant; (v) eliminate the financial covenant requirement of maintaining a minimum debt service coverage ratio; (vi) reduce the interest rates applicable to any principal amounts outstanding on the revolving credit facility as well as the annual commitment fee for unused amounts on the revolving credit facility; and (vii) replace the benchmark reference rate for U.S. Dollar loans from LIBOR to the forward-looking term rate based on the secured overnight financing rate plus a customary adjustment (“Adjusted Term SOFR”). At September 30, 2022, the Company had available borrowing capacity of $250,000 on the Credit Facility. The Credit Facility will mature on the earlier of (a) March 29, 2027 and (b) 90 days before the maturity date applicable to any outstanding convertible notes issued by the Company in an aggregate principal amount equal to or greater than $100,000. The Credit Facility is secured by a first-priority security interest in substantially all of the assets of the Company. The Credit Facility contains certain financial and operational covenants, including a maximum senior secured net leverage ratio financial covenant of 3.50x. As of September 30, 2022, the Company was in compliance with all covenants under the Credit Facility. The per annum interest rate applicable to any principal amounts outstanding under the Credit Facility for U.S. Dollar loans will be equal to (i) Adjusted Term SOFR plus (ii) an applicable margin varying from 1.25% to 2.00%, subject to a pricing grid based on the senior secured net leverage ratio. The Credit Facility provides for an annual commitment fee varying from 0.20% to 0.30%, also subject to a pricing grid based on the senior secured net leverage ratio, applied to the average daily unused amount of the revolving credit facility. The Company incurred commitment fees on the unused balance of the Credit Facility of $128 and $96 for the three months ended September 30, 2022 and 2021, respectively, and $349 and $266 for the nine months ended September 30, 2022 and 2021, respectively. In connection with the Credit Facility, the Company incurred $1,295 of additional debt issuance costs which, together with $662 of the then unamortized financing fees, will be amortized over the remaining term of the facility. The Company recognized a loss on extinguishment of debt of $407 for the nine months ended September 30, 2022. The loss on extinguishment of debt represent a non-cash adjustment to reconcile net income to net cash provided by operating activities within the Condensed Consolidated Statements of Cash Flows. Amortization of deferred financing fees for the three months ended September 30, 2022 and 2021 was $106 and $90, respectively, and $293 and $2,153 for the nine months ended September 30, 2022 and 2021, respectively. Convertible Notes In November 2021, the Company issued $1,500,000 aggregate principal amount of Convertible Notes in a private offering, including the exercise in full of the over-allotment option granted to the initial purchasers of $200,000. The Convertible Notes are senior unsecured obligations of the Company and do not bear regular interest, and the principal amount of the Convertible Notes does not accrete. The Convertible Notes will mature on December 1, 2026 unless earlier converted, redeemed, or repurchased. The net proceeds from this offering were $1,461,795 after deducting underwriting fees, expenses and commissions. Amortization of deferred financing fees for the three and nine months ended September 30, 2022 was $1,874 and $5,605, respectively. Each $1,000 of principal of the Convertible Notes will initially be convertible into 5.6018 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $178.51 per share, subject to adjustment as set forth in the indenture governing the Convertible Notes. Holders of these Convertible Notes may convert their Convertible Notes at their option at any time prior to the close of the business day immediately preceding June 1, 2026, only under the following circumstances: 1.during any calendar quarter commencing after the calendar quarter ending on March 31, 2022, if the last reported sale price of the Company’s common stock exceeds 130% of the conversion price for each of 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 on each applicable trading day; 2.during the five business day period after any ten consecutive trading day period (such ten consecutive trading day period, the “measurement period”) in which the trading price of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the common stock on such trading day and the conversion rate on such trading day; 3.if the Company calls such Convertible Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; and 4.upon the occurrence of specified corporate events or distributions on the common stock. As none of the above circumstances have occurred as of September 30, 2022, the Convertible Notes were not convertible for the fiscal quarter ending September 30, 2022. On or after June 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Convertible Notes at the option of the holder regardless of the foregoing circumstances. Upon conversion of the Convertible Notes, the Company will pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election. It is the Company's current intent to settle the principal amount of the Convertible Notes with common stock. The Company may redeem for cash all or any portion of the Convertible Notes, at its option, on or after December 2, 2024 and on or before the 25th scheduled trading day immediately before the maturity date, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price then in effect on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides a notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid special interest and additional interest, if any, to, but excluding, the redemption date. Upon the occurrence of a fundamental change (as defined in the indenture governing the Convertible Notes), subject to certain conditions, holders may require the Company to repurchase all or a portion of the Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid special interest and additional interest, if any, to, but excluding, the fundamental change repurchase date.
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Operating Leases |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Operating Leases | Operating Leases The Company leases data center facilities and office space under generally non-cancelable operating lease agreements, which expire at various dates through 2027. Facility leases generally include renewal options and may include escalating rental payment provisions. Additionally, the leases may require us to pay a portion of the related operating expenses. Rent expense related to these operating leases for the three months ended September 30, 2022 and 2021 was $15,356 and $12,798, respectively, and $40,187 and $37,128 for the nine months ended September 30, 2022 and 2021, respectively. The Company entered into separate sublease agreements related to its New York office space effective as of March 2022 and June 2022, respectively. As defined within the lease and sublease agreements, the Company remains primarily liable to the landlord for the performance of all obligations in the event that the sublessees do not perform their obligations under their respective leases. As a result of the sublease arrangements, future minimum rental commitments under operating leases will be offset by sublease amounts to be paid by the sublessees. The Company recognized a loss on the sublease of $1,471 for the nine months ended September 30, 2022. The total of minimum sublease amounts to be received in the future under non-cancelable subleases is $5,496 as of September 30, 2022. Future minimum payments under operating lease agreements, net of sublease payments, as of September 30, 2022, were as follows:
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Commitments and Contingencies |
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Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Purchase Commitments As of September 30, 2022, the Company had long-term commitments for bandwidth usage with various networks and internet service providers and entered into purchase orders with various vendors. The Company’s purchase commitments have not materially changed since December 31, 2021. Letters of Credit In conjunction with the execution of certain office space operating leases, letters of credit in the aggregate amount of $1,935 and $2,038 were issued and outstanding as of September 30, 2022 and December 31, 2021, respectively. No draws have been made under such letters of credit. These funds are included as Restricted cash on the Condensed Consolidated Balance Sheets as they are related to long-term operating leases and are included in beginning and ending Cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows. Certain of the letters of credit can be reduced on an annual basis until the end of 2022, at which point the deposit required will similarly reduce to meet minimum threshold requirements. Legal Proceedings The Company may be involved in various legal proceedings and litigation arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate disposition of any such litigation matters, the Company believes that any such legal proceedings will not have a material adverse effect on its condensed consolidated financial position, results of operations, or liquidity.
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Stockholders’ Equity |
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Sep. 30, 2022 | |
Equity [Abstract] | |
Stockholders’ Equity | Stockholders’ Equity Common Stock The Company’s amended and restated certificate of incorporation authorizes the issuance of common and preferred stock. Holders of common stock are entitled to one vote per share. As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 750,000,000 shares of common stock with a par value of $0.000025 per share. Preferred Stock In connection with our initial public offering in March 2021 (“IPO”), the Company's amended and restated certificate of incorporation became effective, which authorized the issuance of 10,000,000 shares of preferred stock with a par value of $0.000025 per share with rights and preferences, including voting rights, designated from time to time by the Company's Board of Directors. No shares of preferred stock were issued or outstanding as of September 30, 2022 or December 31, 2021. Share Buyback Program On February 23, 2022, the Company's Board of Directors approved the repurchase of up to an aggregate of $300,000 of the Company’s common stock throughout fiscal year 2022 (“Previous Program”). As of May 16, 2022, the Company repurchased shares representing the entire amount available under the Previous Program. On May 23, 2022, the Company’s Board of Directors approved a new stock repurchase program authorizing the repurchase of up to an additional $300,000 of its common stock throughout fiscal year 2022 (the “Current Program”). As of August 19, 2022, the Company repurchased shares representing the entire amount available under the Current Program. The Company repurchased and retired 1,078,650 and 13,626,594 shares of common stock in the open market for an aggregate purchase price of $50,000 and $600,000 during the three and nine months ended September 30, 2022, respectively. All purchased shares were retired and are reflected as a reduction of Common stock for the par value of shares, with the excess applied to Additional paid-in capital. Treasury Stock The Company records treasury stock at the cost to acquire shares and is included as a component of Stockholders’ equity. The Company’s Board of Directors approved the retirement of the balance of treasury stock as of August 1, 2022. At December 31, 2021, the Company had 1,968,228 shares of treasury stock which were carried at its cost basis of $4,598 on the Condensed Consolidated Balance Sheets.
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Equity Incentive Plan In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Equity Incentive Plan. The 2021 Equity Incentive Plan is a successor to and continuation of the 2013 Stock Plan. The 2021 Equity Incentive Plan became effective on the date of the IPO with no further grants being made under the 2013 Stock Plan, however, awards outstanding under the 2013 Stock Plan will continue to be governed by their existing terms. The 2021 Equity Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units awards (“RSUs”), performance awards, and other awards to employees, directors, and consultants up to an aggregate of 36,290,381 shares of common stock as of September 30, 2022. Shares issued pursuant to the exercise of these awards are transferable by the holder. Stock Options Stock options granted have a maximum term of ten years from the grant date, are exercisable upon vesting and vest over a period of four years. Stock option activity for the nine months ended September 30, 2022 was as follows:
The aggregate intrinsic value represents the difference between the fair value of common stock and the exercise price of outstanding in-the-money options. The aggregate intrinsic value of exercised options for the nine months ended September 30, 2022 and 2021 was $78,012 and $98,724, respectively. No options were granted during the nine months ended September 30, 2022 and 2021. The aggregate estimated fair value of stock options granted to participants that vested during the nine months ended September 30, 2022 and 2021 was $13,452 and $15,402, respectively. As of September 30, 2022, there was $19,329 of unrecognized stock-based compensation related to outstanding stock options granted that is expected to be recognized over a weighted-average period of 1.77 years. RSUs RSUs granted vest over four years. RSU activity for the nine months ended September 30, 2022 was as follows:
As of September 30, 2022, there was $125,828 of unrecognized stock-based compensation related to outstanding RSUs granted that is expected to be recognized over a weighted-average period of 3.06 years. PRSUs The Company issued performance-based restricted stock units (“PRSUs”) which will vest based on the achievement of each award’s established performance targets. PRSU activity for the nine months ended September 30, 2022 was as follows:
At the end of each reporting period, the Company will adjust compensation expense for the PRSUs based on its best estimate of attainment of the below specified performance metrics. The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be earned during the performance period will be recognized as an adjustment to earnings in the period of the revision. Compensation cost in connection with the probable number of shares that will vest will be recognized using the accelerated attribution method. As of September 30, 2022, the Company determined that it was not probable that the Long Term Incentive Plan (“LTIP”) PRSUs granted to certain executives of the Company with respect to the Company’s 2022 financial performance, and the other PRSU awards would vest. There is $1,714 of unrecognized stock-based compensation that is expected to be recognized over a weighted-average period of 0.94 years in regards to the 2021 LTIP PRSUs with respect to the Company’s 2021 performance. LTIP PRSUs The Company grants LTIP PRSUs to certain executives of the Company during the first fiscal quarter. A percentage of the LTIP PRSUs will become eligible to vest based on the Company’s financial performance level at the end of each fiscal year. The financial performance level is determined as the percentage equal to the sum of the revenue growth percentage and profitability percentage. The number of LTIP PRSUs received will depend on the achievement of financial metrics relative to the approved performance targets. Depending on the actual financial metrics achieved relative to the target financial metrics throughout the defined performance period of the award, the number of LTIP PRSUs that vest could range from 0% to 200% of the target amount, and are subject to the Board of Director’s approval of the level of achievement against the approved performance targets. Assuming the minimum performance target is achieved, one-third of the aggregate number of the LTIP PRSUs shall vest on the later of (i) March 1 or (ii) two trading days following the public release of the Company’s financial results, and the remainder shall vest in eight equal quarterly installments subject, in each case, to the individual’s continuous service through the applicable vesting. On February 24, 2022, the financial performance of the LTIP PRSUs granted in 2021 was determined to be achieved at 155% of the target amount. This resulted in a performance factor reduction of 89,769 shares from the original maximum shares achievable of 398,949. On March 1, 2022, the Company granted an LTIP PRSU award with a maximum shares achievable of 436,387, subject to the above actual financial metrics achieved relative to the target financial metrics for fiscal year 2022. Other PRSUs In addition to the above awards, certain other PRSUs have been awarded subject to other various performance measures including the achievement of revenue targets and product launches. On May 24, 2022, the financial performance of one of the Company’s other PRSUs was determined to be achieved at 100% of the target amount due to a successful product launch. On June 1, 2022, all 60,000 shares were fully vested. MRSUs On July 27, 2021, the Company’s Board of Directors granted a market-based restricted stock unit (“MRSU”) award for 3,000,000 shares of the Company’s common stock to the Company’s Chief Executive Officer, Yancey Spruill, which will vest upon the satisfaction of certain service conditions and the achievement of certain Company stock price goals, as described below. The MRSU, which has a grant date fair value of $75,300 derived by using a discrete model based on multiple stock price-paths developed through the use of a Monte Carlo simulation, is divided into five tranches that will be earned based on the achievement of stock price goals, measured based on the average of the Company’s closing stock price over a consecutive ninety (90) trading day period during the performance period as set forth in the table below.
To the extent earned based on the stock price targets set forth above, the MRSU will vest over a seven-year period beginning on the date of grant in annual amounts equal to 14%, 14%, 14%, 14%, 14%, 15% and 15%, respectively, on each anniversary of the date of grant. MRSU activity for the nine months ended September 30, 2022 was as follows:
As of September 30, 2022, there was $54,817 of unrecognized stock-based compensation related to the MRSUs granted that is expected to be recognized over a weighted-average period of 3.76 years. ESPP In March 2021, the Company’s Board of Directors adopted, and the stockholders approved, the 2021 Employee Stock Purchase Plan (“ESPP”). Eligible employees enroll in the offering period at the start of each purchase period, whereby they may purchase a number of shares at a price per share equal to 85% of the lesser of (1) the stock price at the employee’s first participation in the offering period or (2) the fair market value of the Company’s common stock on the purchase date. After the end of an offering period, a new offering will automatically begin on the date that immediately follows the conclusion of the preceding offering. The ESPP provides for the grant of up to an aggregate of 3,272,076 shares of common stock as of September 30, 2022. 2021 Offering The initial offering period commenced on the IPO date and consisted of two purchase periods, the first of which had a purchase date of November 19, 2021 and the second and final purchase period had a purchase date of May 20, 2022 (the “2021 Offering”). In connection with the purchase period that ended on November 19, 2021, there were 117,996 shares of common stock, net of shares withheld for taxes, purchased by employees at a price of $39.95. In connection with the purchase period that ended on May 20, 2022, there were 144,867 shares of common stock, net of shares withheld for taxes, purchased by employees at a price of $36.26. 2022 Offering A new offering period commenced on May 23, 2022 and will consist of two purchase periods, the first of which will have a purchase date of November 18, 2022 and the second and final purchase will have a purchase date of May 19, 2023 (the “2022 Offering”). Under the terms of the ESPP, in the event that the Company's stock price on the first day of the purchase period beginning on November 21, 2022 is lower than the stock price at the beginning of the offering, the current offering will terminate immediately and a new 12 month offering will automatically begin with purchase dates on May 19, 2023 and November 20, 2023. As of September 30, 2022, 3,009,213 shares of common stock remain available for issuance under the ESPP. During the three and nine months ended September 30, 2022, the Company recorded stock-based compensation associated with the ESPP of $902 and $3,441, respectively, and $186 and $2,108 for the three and nine months ended September 30, 2021. As of September 30, 2022, $2,682 has been withheld on behalf of employees. Restricted Shares In connection with the acquisition of Nimbella, the Company issued 200,204 shares of restricted stock for $63.11 per share for a total value of $12,635 to the founders of Nimbella. These shares vest equally on March 1, 2023 and September 1, 2024 and are expensed on a straight line basis over 36 months. The restricted stock is subject to forfeiture and dependent upon each founder’s continuous service on the vesting date. Total stock-based compensation for the three and nine months ended September 30, 2022 was $1,053 and $3,159, respectively, and $346 for the three and nine months ended September 30, 2021. As of September 30, 2022, there was $8,081 of unrecognized stock-based compensation related to outstanding restricted shares granted that is expected to be recognized over a weighted-average period of 2.20 years. Stock-Based Compensation Stock-based compensation was included in the Condensed Consolidated Statements of Operations as follows:
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Net Loss per Share Attributable to Common Stockholders |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss per Share Attributable to Common Stockholders | Net Loss per Share Attributable to Common Stockholders The following table presents the calculation of basic and diluted net loss per share:
The effect of the Convertible Notes and ESPP were excluded from the calculation of diluted net income per share for the three months ended September 30, 2022 as the effect would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:
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Income Taxes |
9 Months Ended |
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Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The computation of the provision for or benefit from income taxes for interim periods is determined by applying the estimated annual effective tax rate to year-to-date income (loss) before tax and adjusting for discrete tax items recorded in the period, if any. For the three and nine months ended September 30, 2022, the Company recorded a tax expense of $442 and $2,611, respectively. The effective tax rate for the three and nine months ended September 30, 2022 was 4.2% and (22.5)%, respectively. The effective tax rate differs from the statutory rate primarily as a result of not recognizing deferred tax assets for U.S. losses due to a full valuation allowance against the U.S. deferred tax assets, and excess tax benefits from stock-based compensation. For the three and nine months ended September 30, 2021, the Company recorded a tax benefit of $145 and a tax expense of $378, respectively. The effective tax rate for the three and nine months ended September 30, 2021 was 7.3% and (5.4)%, respectively. The effective tax rate differs from the statutory rate primarily as a result of not recognizing deferred tax assets for U.S. losses due to a full valuation allowance against the U.S. deferred tax assets, and excess tax benefits from stock-based compensation. The provision for income taxes consists primarily of income taxes related to international jurisdictions in which the Company conducts business. Based on the available supporting evidence, including the amount and timing of future taxable income, the Company has concluded that it is more likely than not that a significant portion of the deferred tax assets will not be realized. As such, the Company maintains a full valuation allowance on its U.S. deferred tax assets. For the three and nine months ended September 30, 2022, uncertain tax positions recorded by the Company resulted in an expense of $866 and $1,042, respectively. For the three and nine months ended September 30, 2021, uncertain tax positions recorded by the Company resulted in an expense of $206 and $340, respectively. To the extent the remaining uncertain tax positions are ultimately recognized, the Company’s effective tax rate may be impacted in future periods. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.
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Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation and Principles of ConsolidationThe accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include accounts of the Company and all wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make, on an ongoing basis, estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Such estimates include, but are not limited to, those related to revenue recognition and allowance for doubtful accounts, useful lives and realizability of long-lived assets, capitalized internal-use software development costs, accounting for stock-based compensation, valuation allowances against deferred tax assets, fair value of marketable securities, the fair value and useful lives of tangible and intangible assets acquired and liabilities assumed resulting from business combinations. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
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Marketable Securities | Marketable Securities The Company’s marketable securities consist of commercial paper, U.S. treasury securities and commercial debt securities. The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. The Company has classified and accounted for its marketable securities as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its marketable securities within Current assets on the Condensed Consolidated Balance Sheets. Available-for-sale securities are recorded at fair value each reporting period. Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective interest method. Interest income is recognized when earned. Unrealized gains and losses on these marketable securities are presented net of tax and reported as a separate component of Accumulated other comprehensive loss until realized. Realized gains and losses are determined based on the specific identification method and are reported in Other (income) expense, net in the Condensed Consolidated Statements of Operations. The Company periodically evaluates its marketable securities to assess whether an investment’s fair value is less than its amortized cost basis and if the decline in the fair value is attributable to a credit loss. Declines in fair value judged to be related to credit loss are reported in Other (income) expense, net in the Condensed Consolidated Statements of Operations.
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable primarily represents revenue recognized that was not invoiced at the balance sheet date and is primarily billed and collected in the following month. Trade accounts receivable are carried at the original invoiced amount less an estimated allowance for doubtful accounts based on the probability of future collection. Management determines the adequacy of the allowance based on historical loss patterns, the number of days that customer invoices are past due and an evaluation of the potential risk of loss associated with specific accounts. When management becomes aware of circumstances that may further decrease the likelihood of collection, it records a specific allowance against amounts due, which reduces the receivable to the amount that management reasonably believes will be collected. The Company records changes in the estimate to the allowance for doubtful accounts through bad debt expense and reverses the allowance after the potential for recovery is considered remote.
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Business Combinations | Business Combinations The Company recognizes assets acquired, liabilities assumed, and any contingent consideration related to business combinations based on estimates of their respective fair values on the date of acquisition. The purchase price is allocated to the identifiable net assets acquired, including intangible assets and liabilities assumed, based on estimated fair values at the date of acquisition. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates, or actual results. All subsequent changes to the estimated fair values of the acquired assets and liabilities assumed that occur within the measurement period and are based on facts and circumstances that existed at the acquisition date are recognized as an adjustment to goodwill. Determining the fair value of assets acquired and liabilities assumed requires significant judgment, including the selection of valuation methodologies, estimates of future revenue and cash flows and discount rates in determining the fair value of intangible assets acquired and liabilities assumed. The assets purchased and liabilities assumed have been reflected on the Company’s Consolidated Balance Sheets, and the results are included on the Consolidated Statements of Operations and Consolidated Statements of Cash Flows from the date of acquisition. Acquisition-related transaction costs, including legal and accounting fees and other external costs directly related to the acquisition, are recognized separately from the acquisition and expensed as incurred in General and administrative on the Consolidated Statements of Operations.
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Asset Acquisition | Asset Acquisition The Company applies the principles provided in ASC 805, Business Combinations ("ASC 805") to determine whether a transaction involves an asset or a business. If it is determined an acquisition is an asset acquisition, the purchase consideration (which will include certain transaction costs) is allocated to the acquired assets and liabilities based on their relative fair values.
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Segment Information | Segment Information The Company’s chief operating decision maker, the chief executive officer, reviews discrete financial information presented on a consolidated basis for purposes of regularly making operating decisions, allocation of resources, and assessing financial performance. Accordingly, the Company has one operating and reporting segment.
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Concentration of Credit Risk | Concentration of Credit Risk The amounts reflected in the Condensed Consolidated Balance Sheets for cash and cash equivalents, marketable securities, restricted cash, and trade accounts receivable are exposed to concentrations of credit risk. Although the Company maintains cash and cash equivalents with multiple financial institutions, the deposits, at times, may exceed federally insured limits. The Company believes that the financial institutions that hold its cash and cash equivalents are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company’s customer base consists of a significant number of geographically dispersed customers.
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Sublease | Sublease Under ASC 840, Leases, a sublease liability is recorded when the Company ceases to use leased space, which is included in Other current liabilities and Other noncurrent liabilities on the Condensed Consolidated Balance Sheets. A sublease loss is calculated as the present value of lease payments, net of expected sublease income, and other costs that do not have future economic benefit to the Company. The sublease loss is included in General and administrative on the Condensed Consolidated Statements of Operations.
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Recent Accounting Pronouncements – Pending Adoption and Adopted | Recent Accounting Pronouncements – Pending Adoption The following effective dates represent the requirements for private companies which the Company has elected as an emerging growth company. In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), and additional changes, modifications, clarifications, or interpretations related to this guidance thereafter (“ASU 2016-02”). ASU 2016-02 requires a reporting entity to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases to increase transparency and comparability. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 with early adoption permitted. The Company expects to elect the package of transition practical expedients, which allows it to carry forward its historical assessment of (1) whether contracts are or contain leases, (2) lease classification, and (3) initial direct costs. In addition, the Company expects to elect the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. The Company has made substantial progress in executing its implementation plan. It is in the process of revising its controls and processes to address the lease standard and is in the process of completing the implementation and data input for the lease accounting software tool that it will use post-adoption. ASU 2016-02 also requires expanded disclosure regarding the amounts, timing and uncertainties of cash flows related to a company’s lease portfolio. The Company is evaluating these disclosure requirements and is incorporating the collection of relevant data into its existing financial reporting processes. While the Company expects the adoption of this standard to result in an increase to the reported assets and liabilities, the Company is currently evaluating the impact of adoption on the condensed consolidated financial statements. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract liability and to payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in ASU 2021-08 require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. This amendment will be effective for public entities with fiscal years beginning after December 15, 2022, and for all other entities with fiscal years beginning after December 15, 2023, with early adoption permitted. While the Company is continuing to assess the timing of adoption and the potential impacts of ASU 2021-08, it does not expect ASU 2021-08 to have a material effect on its consolidated financial statements and disclosures. In June 2016, the FASB issued ASU 2016-13, with subsequent amendments, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires immediate recognition of management’s estimates of current expected credit losses. ASU 2016-13 is currently effective for public business entities, and effective for private companies with annual reporting periods beginning after December 15, 2022, and interim periods within annual periods beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of adoption on the condensed consolidated financial statements. Recent Accounting Pronouncements – Adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions in FASB Topic 740: Income Taxes (“ASC 740”) related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted the new standard and there was an immaterial impact to the condensed consolidated financial statements and related disclosures.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Cash and Cash Equivalents | The following table reconciles cash, cash equivalents and restricted cash per the Condensed Consolidated Statements of Cash Flows:
(1)Includes contingent compensation related to the Cloudways acquisition. (2)Includes deposits in financial institutions related to letters of credit used to secure lease agreements.
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Reconciliation of Restricted Cash | The following table reconciles cash, cash equivalents and restricted cash per the Condensed Consolidated Statements of Cash Flows:
(1)Includes contingent compensation related to the Cloudways acquisition. (2)Includes deposits in financial institutions related to letters of credit used to secure lease agreements.
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Disclosure of Changes in Allowance for Doubtful Accounts | The following table presents the changes in our allowance for doubtful accounts for the period presented:
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Revenue by Geographic Areas | Revenue, as determined based on the billing address of the Company’s customers, was as follows:
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Acquisitions (Tables) |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | The following table sets forth the components and the allocation of the purchase price for the business combination and summarizes the preliminary fair values of the assets acquired and liabilities assumed at the Acquisition Date:
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Schedule of Assets Acquired | The preliminary fair values allocated to the identifiable intangible assets and their estimated useful lives are as follows:
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Business Acquisition, Pro Forma Information, Nonrecurring Adjustments |
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Marketable Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents, on the Condensed Consolidated Balance Sheets as of September 30, 2022. The Company did not hold any available-for-sale marketable securities as of December 31, 2021.
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liabilities Measured on a Recurring Basis | The fair value of our financial assets measured on a recurring basis is as follows:
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Balance Sheet Details (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment, Net | Property and equipment, net consisted of the following:
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Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consisted of the following:
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Schedule of Other Current Liabilities | Other current liabilities consisted of the following:
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Operating Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Maturities of Operating Leases | Future minimum payments under operating lease agreements, net of sublease payments, as of September 30, 2022, were as follows:
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Stock-Based Compensation (Tables) |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity | Stock option activity for the nine months ended September 30, 2022 was as follows:
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Schedule of RSU Activity | RSU activity for the nine months ended September 30, 2022 was as follows:
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Schedule of PRSU Activity | PRSU activity for the nine months ended September 30, 2022 was as follows:
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Summary of Share-Based Payment Arrangement and Price Targets | The MRSU, which has a grant date fair value of $75,300 derived by using a discrete model based on multiple stock price-paths developed through the use of a Monte Carlo simulation, is divided into five tranches that will be earned based on the achievement of stock price goals, measured based on the average of the Company’s closing stock price over a consecutive ninety (90) trading day period during the performance period as set forth in the table below.
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Schedule of MRSU Activity | MRSU activity for the nine months ended September 30, 2022 was as follows:
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Summary of Stock-Based Compensation Expense | Stock-based compensation was included in the Condensed Consolidated Statements of Operations as follows:
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Net Loss per Share Attributable to Common Stockholders (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Calculation of Basic and Diluted Net Loss Per Share | The following table presents the calculation of basic and diluted net loss per share:
The effect of the Convertible Notes and ESPP were excluded from the calculation of diluted net income per share for the three months ended September 30, 2022 as the effect would have been anti-dilutive.
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Schedule of Anti-Dilutive Securities Excluded from Computation of Net Loss Per Share | Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:
|
Summary of Significant Accounting Policies - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
Dec. 31, 2020 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 24,115 | $ 1,713,387 | $ 589,750 | |
Restricted cash included in Prepaid expenses and other current assets | 9,100 | 0 | ||
Restricted cash | 1,935 | 2,226 | ||
Total cash, cash equivalents and restricted cash | $ 35,150 | $ 1,715,425 | $ 591,976 | $ 102,537 |
Summary of Significant Accounting Policies - Disclosure of Changes in Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Beginning Balance | $ 4,212 | |
Bad debt expense, net of recoveries | 12,217 | $ 6,055 |
Additions from Cloudways acquisition | 691 | |
Write-offs | (10,718) | |
Ending Balance | $ 6,402 |
Summary of Significant Accounting Policies - Revenue by Geographic Areas (Details) - Geographic Concentration Risk - Revenue from Contract with Customer |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration risk, percentage | 100.00% | 100.00% | 100.00% | 100.00% |
North America | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration risk, percentage | 38.00% | 38.00% | 38.00% | 38.00% |
Europe | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration risk, percentage | 30.00% | 28.00% | 30.00% | 29.00% |
Asia | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration risk, percentage | 22.00% | 24.00% | 22.00% | 23.00% |
Other | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Concentration risk, percentage | 10.00% | 10.00% | 10.00% | 10.00% |
Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2022
USD ($)
segment
|
Sep. 30, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
|
|
Concentration Risk [Line Items] | |||||
Deferred revenue | $ | $ 5,476 | $ 5,476 | $ 4,826 | ||
Revenue recognized during period | $ | $ 246 | $ 259 | $ 2,750 | $ 2,618 | |
Number of operating segments | segment | 1 | ||||
Number of reportable segments | segment | 1 | ||||
Geographic Concentration Risk | Revenue from Contract with Customer | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 100.00% | 100.00% | 100.00% | 100.00% | |
U.S. | Geographic Concentration Risk | Revenue from Contract with Customer | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 31.00% | ||||
U.S. | Geographic Concentration Risk | Property and Equipment | |||||
Concentration Risk [Line Items] | |||||
Concentration risk, percentage | 48.00% | 50.00% |
Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Thousands |
Sep. 01, 2022 |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 315,161 | $ 32,170 | |
Cloudways Ltd. | |||
Business Acquisition [Line Items] | |||
Cash paid to Cloudways sellers | $ 278,187 | ||
Cash contributed to escrow accounts | 42,000 | ||
Other expenses | 150 | ||
Less: Cash pre-funded from contingent compensation | (9,100) | ||
Total consideration paid | 311,237 | ||
Cash and cash equivalents | 5,827 | ||
Accounts receivable | 4,753 | ||
Prepayments and other current assets | 547 | ||
Other long term assets | 9 | ||
Identifiable intangible assets | 72,000 | ||
Accounts payable | (1,820) | ||
Accrued expenses | (957) | ||
Deferred revenue | (1,013) | ||
Deferred tax liabilities | (21,686) | ||
Other current liabilities | (29,660) | ||
Net identifiable assets acquired | 28,000 | ||
Goodwill | 283,237 | ||
Total fair value of net assets acquired | $ 311,237 |
Acquisitions - Intangible Assets (Details) - Cloudways Ltd. $ in Thousands |
Sep. 01, 2022
USD ($)
|
---|---|
Acquired Finite-Lived Intangible Assets [Line Items] | |
Total identifiable intangible assets | $ 72,000 |
Trade name | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Total identifiable intangible assets | $ 9,500 |
Weighted Average Useful Life in Years | 10 years |
Developed technology | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Total identifiable intangible assets | $ 31,500 |
Weighted Average Useful Life in Years | 5 years |
Customer relationships | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Total identifiable intangible assets | $ 31,000 |
Weighted Average Useful Life in Years | 7 years |
Acquisitions - Pro Forma (Details) - Cloudways Ltd. - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | ||||
Pro-forma revenue | $ 160,457 | $ 119,703 | $ 444,193 | $ 330,993 |
Pro-forma net income (loss) | $ 10,010 | $ (9,713) | $ (24,837) | $ (31,593) |
Marketable Securities (Details) $ in Thousands |
3 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | $ 804,014 |
Gross Unrealized Gains | 16 |
Gross Unrealized Losses | (3,491) |
Fair Value | 800,539 |
U.S. treasury securities | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 568,706 |
Gross Unrealized Gains | 14 |
Gross Unrealized Losses | (2,342) |
Fair Value | 566,378 |
Corporate debt securities | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 35,032 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | (340) |
Fair Value | 34,692 |
Commercial paper | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 200,276 |
Gross Unrealized Gains | 2 |
Gross Unrealized Losses | (809) |
Fair Value | $ 199,469 |
Marketable Securities - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Interest income | $ 3,309 | $ 27 | $ 6,899 | $ 36 |
Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
Nov. 30, 2021 |
---|---|---|---|
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Unamortized discount and debt issuance costs | $ 31,607 | $ 37,324 | |
Convertible Senior Notes Due 2026 | Senior Notes | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Interest rate | 0.00% |
Fair Value Measurements - Convertible Notes Measurement (Details) - Convertible Notes - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Convertible Notes | $ 1,468,393 | $ 1,462,676 |
Fair Value, Recurring | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Convertible Notes | $ 1,099,185 | $ 1,462,676 |
Balance Sheet Details - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 651,072 | $ 564,136 |
Less: accumulated amortization | (58,410) | (49,268) |
Less: accumulated depreciation | (321,677) | (265,225) |
Property and equipment, net | 270,985 | 249,643 |
Computers and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 566,749 | 487,484 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,511 | 1,511 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 6,820 | 6,820 |
Internal-use software | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 75,992 | $ 68,321 |
Balance Sheet Details - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Depreciation | $ 20,982 | $ 18,969 | $ 62,009 | $ 54,359 |
Capitalized computer software | 7,879 | 4,884 | ||
Amortization expense related to internal-use software | 2,983 | $ 3,245 | 9,205 | 10,245 |
Impairment loss | $ 24 | $ 144 | $ 212 |
Balance Sheet Details - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Prepaid expenses | $ 13,884 | $ 11,473 |
Restricted cash | 9,100 | 0 |
VAT and sales tax receivable | 7,328 | 5,116 |
Other current expenses | 965 | 461 |
Total prepaid expenses and other current assets | $ 31,277 | $ 17,050 |
Balance Sheet Details - Summary of Other Current Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued taxes | $ 39,822 | $ 6,755 |
Contingent compensation | 1,404 | 0 |
ESPP withholding | 2,682 | 1,495 |
Sublease liability | 725 | 0 |
Other current liabilities | 292 | 599 |
Total other current liabilities | $ 44,925 | $ 8,849 |
Operating Leases - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Leases [Abstract] | ||||
Operating leases, rent expense | $ 15,356 | $ 12,798 | $ 40,187 | $ 37,128 |
Sublease loss | 1,471 | |||
Operating Leases, Future Minimum Payments Due, Future Minimum Sublease Rentals | $ 5,496 | $ 5,496 |
Operating Leases - Maturities of Operating Leases (Details) $ in Thousands |
Sep. 30, 2022
USD ($)
|
---|---|
Leases [Abstract] | |
2022 (three months remaining) | $ 13,600 |
2023 | 66,467 |
2024 | 74,689 |
2025 | 40,847 |
2026 | 28,067 |
Thereafter | 32,017 |
Total minimum operating lease payments | $ 255,687 |
Commitments and Contingencies - Narrative (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Letters of credit outstanding, amount | $ 1,935 | $ 2,038 |
Stockholders’ Equity - Preferred Stock (Details) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Equity [Abstract] | ||
Preferred stock, shares authorized (in shares) | 10,000,000 | |
Preferred stock, par value (in usd per share) | $ 0.000025 | $ 0.000025 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Stockholders’ Equity - Redeemable Convertible Preferred Stock (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
Class of Stock [Line Items] | ||
Conversion of convertible preferred stock to common stock in connection with initial public offering (in shares) | 45,472,229 | |
Conversion of convertible preferred stock | $ 173,074 | |
Redeemable convertible preferred stock, outstanding (in shares) | 0 | 45,472,229 |
Stockholders’ Equity - Treasury Stock (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Equity [Abstract] | ||
Treasury stock, shares (in shares) | 0 | 1,968,228 |
Treasury stock, value | $ 0 | $ (4,598) |
Stock-Based Compensation - Equity Incentive Plan (Details) |
Sep. 30, 2022
shares
|
---|---|
2021 Stock Plan | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Aggregate number of shares of common stock awarded (in shares) | 36,290,381 |
Stock-Based Compensation - Stock Options (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options, exercised in period, intrinsic value | $ 78,012 | $ 98,724 | ||
Options, granted, number (in shares) | 0 | |||
Stock options, granted in period, aggregate estimated fair value | 13,452 | $ 15,402 | ||
Stock options, unrecognized stock-based compensation expense | $ 19,329 | $ 19,329 | ||
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options, expiration period | 10 years | |||
Stock options, vesting period | 4 years | |||
Unrecognized stock-based compensation expense, average recognition period | 1 year 9 months 7 days |
Stock-Based Compensation - RSUs (Details) - RSUs $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
RSUs, vesting period | 4 years |
Unrecognized stock-based compensation expense | $ 125,828 |
Unrecognized stock-based compensation expense, average recognition period | 3 years 21 days |
Stock-Based Compensation - Schedule of MRSU Activity (Details) - MRSU |
9 Months Ended |
---|---|
Sep. 30, 2022
$ / shares
shares
| |
Shares | |
Unvested balance at beginning of period (in shares) | shares | 3,000,000 |
Granted (in shares) | shares | 0 |
Unvested balance at end of period (in shares) | shares | 3,000,000 |
Weighted-Average Fair Value | |
Unvested balance at beginning of period (in dollars per share) | $ / shares | $ 25.12 |
Granted (in dollars per share) | $ / shares | 0 |
Unvested balance at end of period (in dollars per share) | $ / shares | $ 25.12 |
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) | $ 442 | $ (145) | $ 2,611 | $ 378 |
Effective income tax rate | 4.20% | 7.30% | (22.50%) | (5.40%) |
Uncertain tax positions expense | $ 866 | $ 206 | $ 1,042 | $ 340 |
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