bigc-10q_20210331.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

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

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

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

As of March 31, 2021, the registrant had 69,095,315 shares of Series 1 common stock, $0.0001 par value per share and 1,200,555 shares of Series 2 common stock, $0.0001 par value per share, outstanding.

	March 31,			December 31,
	2021			2020

Assets
Current assets
Cash and cash equivalents	$	189,578		$	219,447
Restricted cash		1,158			1,160
Marketable securities		18,374			—
Accounts receivable, net		26,067			22,894
Prepaid expenses and other assets		7,307			8,000
Deferred commissions		2,880			2,571
Total current assets		245,364			254,072
Property and equipment, net		6,896			7,122
Right-of-use-assets		11,217			11,842
Prepaid expenses, net of current portion		1,275			—
Deferred commissions, net of current portion		4,077			3,590
Total assets	$	268,829		$	276,626
Liabilities, convertible preferred stock, and stockholders’ equity
Current liabilities
Accounts payable	$	4,658		$	5,788
Accrued liabilities		2,572			3,344
Deferred revenue		13,144			11,406
Current portion of operating lease liabilities		3,243			3,173
Other current liabilities		16,484			22,176
Total current liabilities		40,101			45,887
Deferred revenue, net of current portion		1,559			1,308
Operating lease liabilities, net of current portion		11,831			12,672
Total liabilities		53,491			59,867
Commitments and contingencies (Note 6)
Convertible preferred stock
Convertible preferred stock, $0.0001 par value; 10,000 shares authorized at March 31, 2021 and December 31, 2020; 0 shares issued and outstanding, at March 31, 2021 and December 31, 2020.		—			—
Stockholders’ equity
Common stock, $0.0001 par value; 500,000 shares Series 1 and, 5,051 shares Series 2 authorized at March 31, 2021 and December 31, 2020; 69,095, and 64,461 shares Series 1 issued and outstanding at March 31, 2021 and December 31, 2020, respectively, and 1,201 and 5,051 shares Series 2 issued and, outstanding at March 31, 2021, and December 31, 2020, respectively.		7			7
Additional paid-in capital		537,266			530,143
Accumulated deficit		(321,935	)		(313,391	)
Total stockholders’ equity		215,338			216,759

Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)	$	268,829		$	276,626

The accompanying notes are an integral part of these consolidated financial statements.

	Three months ended March 31,
	2021			2020

Revenue	$	46,660		$	33,174
Cost of revenue		9,250			7,480
Gross profit		37,410			25,694
Operating expenses:
Sales and marketing		20,809			15,762
Research and development		13,535			10,921
General and administrative		11,608			6,466
Total operating expenses		45,952			33,149
Loss from operations		(8,542	)		(7,455	)
Interest income		12			1
Interest expense		—			(762	)
Change in fair value of financial instruments		—			4,413
Other expense		(14	)		(203	)
Loss before provision for income taxes		(8,544	)		(4,006	)
Provision for income taxes		—			17
Net loss	$	(8,544	)	$	(4,023	)
Dividends and accretion of issuance costs on Series F preferred stock	$	—		$	(1,745	)
Net loss attributable to common stockholders	$	(8,544	)	$	(5,768	)
Basic and diluted net loss per share attributable to common stockholders	$	(0.12	)	$	(0.31	)
Weighted average shares used to compute basic and diluted net loss per share attributable to common stockholders		69,792			18,645

The accompanying notes are an integral part of these consolidated financial statements.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

	Convertible Preferred Stock				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive		Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital			Deficit			Loss		(Deficit)
Balance at December 31, 2019		102,030	$	223,754		18,544	$	2	$	17,244		$	(274,549	)	$	—	$	(257,303	)
Exercise of stock options		—		—		448		—		404			—			—		404
Stock-based compensation		—		—		—		—		1,026			—			—		1,026
Accumulated dividend – Series F		—		1,727		—		—		—			(1,727	)		—		(1,727	)
Accretion of Series F issuance costs		—		18		—		—		(18	)		—			—		(18	)
Warrants issued in connection with debt		—		—		—		—		297			—			—		297
Adoption of new accounting standard - See Note 2		—		—		—		—		—			(364	)		—		(364	)
Net loss		—		—		—		—		—			(4,023	)		—		(4,023	)
Balance at March 31, 2020		102,030	$	225,499		18,992	$	2	$	18,953		$	(280,663	)	$	—	$	(261,708	)

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Accumulated Other Comprehensive		Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Loss		Equity
Balance at December 31, 2020		—	$	—		69,512	$	7	$	530,143	$	(313,391	)	$	—	$	216,759
Exercise of stock options		—		—		784		—		1,952		—			—		1,952
Stock-based compensation		—		—		—		—		5,171		—			—		5,171
Net loss		—		—		—		—		—		(8,544	)		—		(8,544	)
Balance at March 31, 2021		—	$	—		70,296	$	7	$	537,266	$	(321,935	)	$	—	$	215,338

The accompanying notes are an integral part of these consolidated financial statements.

	Three months ended March 31,
	2021			2020

Cash flows from operating activities:
Net loss	$	(8,544	)	$	(4,023	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		706			907
Amortization of discount on debt		—			118
Stock-based compensation		5,171			1,026
Allowance for credit losses		726			589
Change in fair value of financial instrument		—			(4,413	)
Changes in operating assets and liabilities:
Accounts receivable		(3,899	)		(1,466	)
Prepaid expenses		(582	)		(1,097	)
Deferred commissions		(796	)		(182	)
Accounts payable		(1,130	)		2,146
Accrued and other current liabilities		(6,399	)		(3,259	)
Deferred revenue		1,989			(336	)
Net cash used in operating activities		(12,758	)		(9,990	)
Cash flows from investing activities:
Purchase of property and equipment		(480	)		(597	)
Purchase of marketable securities		(18,374	)		—
Net cash used in investing activities		(18,854	)		(597	)
Cash flows from financing activities:
Proceeds from exercise of stock options		1,741			404
Proceeds from debt		—			40,745
Repayment of debt		—			(5,600	)
Net cash provided by financing activities		1,741			35,549
Net change in cash and cash equivalents and restricted cash		(29,871	)		24,962
Cash and cash equivalents and restricted cash, beginning of period		220,607			9,150
Cash and cash equivalents and restricted cash, end of period	$	190,736		$	34,112
Supplemental cash flow information:
Cash paid for interest	$	—		$	601
Noncash investing and financing activities:
Issuance of warrants	$	—		$	297
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheet to the amounts shown in the statements of cash flows above:
Cash and cash equivalents		189,578			33,026
Restricted cash		1,158			1,086
Total cash, cash equivalents and restricted cash	$	190,736		$	34,112

The accompanying notes are an integral part of these consolidated financial statements

BigCommerce is leading a new era of ecommerce. Our software-as-a-service (“SaaS”) platform simplifies the creation of beautiful, engaging online stores by delivering a unique combination of ease-of-use, enterprise functionality, and flexibility. We power both our customers’ branded ecommerce stores and their cross-channel connections to popular online marketplaces, social networks, and offline point-of-sale systems.

We provide a comprehensive platform for launching and scaling an ecommerce operation, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integration into third-party services like payments, shipping, and accounting. All our stores run on a single code base and share a global, multi-tenant architecture purpose built for security, high performance, and innovation. Our platform serves stores in a wide variety of sizes, product categories, and purchase types, including business-to-consumer and business-to-business.

We were formed in Australia in December 2003 under the name Interspire Pty Ltd and reorganized into a corporation in Delaware under the name BigCommerce Holdings, Inc. in February 2013.

References in these consolidated financial statements to “we,” “us,” “our,” the “Company,” or “BigCommerce” refer to BigCommerce Holdings, Inc. and its subsidiaries, unless otherwise stated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation. Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2020, which are included in the Company's Annual Report on Form 10-K, filed with the SEC on February 26, 2021. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period.

The accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. Our fiscal year ends on December 31.

The preparation of consolidated financial statements in conformity with GAAP requires certain financial instruments to be recorded at fair value; requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods. Significant estimates, judgments, and assumptions in these consolidated financial statements include: allocating variable consideration for revenue recognition; the amortization period for deferred commissions; the

allowance for credit losses; a determination of the deferred tax asset valuation allowance and the valuation of our common stock used to determine stock-based compensation expense prior to our IPO. Because of the use of estimates inherent in the financial reporting process and given the additional or unforeseen effects from the COVID-19 pandemic, actual results could differ from those estimates, and such differences could be material to our consolidated financial statements.

COVID-19, declared a global pandemic by the World Health Organization on March 11, 2020, has caused disruption to the economies and communities of the United States and our target international markets. In the interest of public health, many governments closed physical stores and places of business deemed non-essential. This precipitated a significant shift in shopping behavior from offline to online. Our business has benefited from this shift, both in accelerated sales growth for our existing customers’ stores, and in our sales of new store subscriptions to customers. Nevertheless, we do not have certainty that those trends will continue; the COVID-19 pandemic and the uncertainty it has created in the global economy could materially adversely affect our business, financial condition, and results of operations.

Our chief operating decision maker is our chief executive officer. Our chief executive officer reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. Accordingly, we have determined that we operate as a single operating and reportable segment. Revenue by geographic region was as follows:

	March 31,		December 31,
(in thousands)	2021		2020

Long-lived assets:
Americas – U.S.	$	6,326	$	6,596
Americas – other		—		—
EMEA		—		—
APAC		570		526
Total long-lived assets	$	6,896	$	7,122

We consider all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of money market funds and investment securities and are stated at fair value.

We maintain a portion of amounts collected through our online payment processor with the online payment processor as a security deposit for future chargebacks. Additionally, we have amounts on deposit with certain financial institutions that serve as collateral for letters of credit and lease deposits.

All marketable securities have been classified as available-for-sale and are carried at estimated fair value. We determine the appropriate classification of our investments in debt securities at the time of purchase. Securities may have stated maturities greater than one year. All marketable securities are considered available to support current operations and are classified as current assets.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value and recognized in other income (expense) in the results of operations. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, an allowance is recorded for the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. Impairment losses attributable to credit loss factors are charged against the allowance when management believes an available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Any unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit loss factors is recognized as a component of accumulated other comprehensive (loss) income, along with unrealized gains. Realized gains and losses and declines in fair value, if any, on available-for-sale securities are included in other income (expense) in the results of operations. The cost of securities sold is based on the specific-identification method.

Accounts receivable are stated at net realizable value and include unbilled receivables. Unbilled receivables arise primarily when we provide subscriptions services in advance of billing. Accounts receivable are net of an allowance for credit losses, are not collateralized, and do not bear interest. Payment terms range from due immediately to due within 60 days. The accounts receivable balance included unbilled receivables of $7.5 million at March 31, 2021 and December 31, 2020.

We assess the collectability of outstanding accounts receivable on an ongoing basis and maintain an allowance for credit losses for accounts receivable deemed uncollectable. Upon adoption of ASU 2016-13, we analyzed the accounts receivable portfolio for significant risks, historical activity, and an estimate of future collectability to determine the amount that will ultimately be collected. This estimate is analyzed quarterly and adjusted as necessary. Identified risks pertaining to our accounts receivable include the delinquency level, customer type, and current economic environment. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Adoption of ASU 2016-13 resulted in an increase in the allowance for credit losses of approximately $0.4 million as of January 1, 2020, primarily related to unbilled receivables.

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives or the related lease terms (if shorter).

Maintenance and repairs that do not enhance or extend the asset’s useful life are charged to operating expenses as incurred.

The carrying values of property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that their net book value may not be recoverable. When such factors and circumstances exist, we compare the projected undiscounted future cash flows associated with groups of assets used in combination over their estimated useful lives against their respective carrying amounts. If projected undiscounted future cash flows are less than the carrying value of the asset group, impairment is recorded for any excess of the carrying amount over the fair value of those assets in the period in which the determination is made.

Research and development expenses consist primarily of personnel and related expenses for our research and development staff, which include: salaries, benefits, bonuses, and stock-based compensation; the cost of certain third-party contractors; and allocated overhead. Expenditures for research and development, other than internal use software costs, are expensed as incurred.

Software development costs associated with internal use software, which are incurred during the application development phase and meet other requirements under the guidance are capitalized. To date, software costs eligible for capitalization have not been significant.

We determine if an arrangement is a lease or contains a lease at inception. At the commencement date of a lease, we recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As our leases typically do not provide an implicit rate, we use our incremental borrowing rate for most leases. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred and excludes lease incentives.

Lease terms may include options to extend or terminate the lease. We record a ROU asset and a lease liability when it is reasonably certain that we will exercise that option. Operating lease costs are recognized on a straight-line basis over the lease term.

We also lease office space under short-term arrangements and have elected not to include these arrangements in the ROU asset or lease liabilities.

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period of the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that those assets will be realized. To date, we have provided a valuation allowance against all of our deferred tax assets as we believe the objective and verifiable evidence of our historical pretax net losses outweighs any positive evidence of its forecasted future results. We will continue to monitor the positive and negative evidence, and we will adjust the valuation allowance as sufficient objective positive evidence becomes available.

We account for uncertain tax positions in accordance with ASC 740, “Income Taxes”, which clarifies the accounting for uncertainty in tax positions. These provisions require recognition of the impact of a tax position in our financial statements only if it is

more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Any interest and penalties related to uncertain tax positions will be reflected as a component of income tax expense.

We issue stock options, restricted stock units ("RSUs") and performance based restricted stock units (“PSUs”). Stock-based compensation related to stock options is measured at the date of grant and is recognized on a straight-line basis over the service period, net of estimated forfeitures. We use the Black-Scholes option-pricing model to estimate the fair value of stock options awarded at the date of grant. Stock-based compensation related to restricted stock units is measured at the date of grant, net of forfeitures, and recognized ratably over the service period. Stock-based compensation related to performance based restricted stock units is measured at the date of grant and recognized using the accelerated attribution method, net of forfeitures, over the remaining service period.

In August 2020, the FASB issued ASU No. 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)" which simplifies the accounting for convertible debt instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. We adopted this standard on January 1, 2021 using the modified retrospective method. The adoption of this standard did not have any material impact on our financial statements.

Our sources of revenue consist of subscription solutions fees and partner and services fees. These services allow customers to access our hosted software over the contract period. The customer is not allowed to take possession of the software or transfer the software. Our revenue arrangements do not contain general rights of refund in the event of cancellations.

Subscription solutions revenue consists primarily of platform subscription fees from all plans. It also includes recurring professional services and sales of SSL certificates. Subscription solutions are charged monthly, quarterly, or annually for our customers to sell their products and process transactions on our platform. Subscription solutions are generally charged per online store and are based on the store’s subscription plan. Monthly subscription fees for Pro and Enterprise plans are adjusted if a customer’s gross merchandise volume or orders processed are above specified plan thresholds on a trailing twelve-month basis. For most subscription solutions arrangements, we have determined we meet the variable consideration allocation exception and, therefore, recognize fixed monthly fees or a pro-rata portion of quarterly or annual fees and any transaction fees as revenue in the month they are earned. A portion of our Enterprise subscription plans include an upfront promotional period in order to incentivize the customer to enter into a subscription arrangement. For these Enterprise arrangements, the total subscription fee is recognized on a straight-line basis over the term of the contract.

Professional services, which primarily consist of education packages, launch services, solutions architecting, implementation consulting, and catalog transfer services, are generally billed and recognized as revenue when delivered.

Contracts with our retail customers are generally month-to-month, while contracts with our enterprise customers generally range from one to three years. Contracts are typically non-cancellable and do not contain refund-type provisions. Revenue is presented net of sales tax and other taxes we collect on behalf of governmental authorities.

Our partner and services revenue consists of revenue share, partner technology integrations, and marketing services provided to partners. Revenue share relates to fees earned by our partners from customers using our platform, where we have an arrangement with such partner to share such fees as they occur. Revenue share is recognized at the time the earning activity is complete, which is generally monthly. Revenue for partner technology integrations is recorded on a straight-line basis over the life of the contract commencing when the integration has been completed. Fees for marketing services are recognized either at the time the earning activity is complete, or ratably over the length of the contract, depending on the nature of the obligations in the contract. Payments received in advance of services being rendered are recorded as deferred revenue and recognized when the obligation is completed.

We also derive revenue from the sales of website themes and applications upon delivery.

We recognize revenue share, and revenue from the sales of third-party applications, on a net basis as we have determined that we are the agent in our arrangements with third-party application providers. All other revenue is recognized on a gross basis, as we have determined we are the principal in these arrangements.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Our subscription contracts are generally comprised of a single performance obligation to provide access to our platform, but can include additional performance obligations. For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, we may be required to allocate the contract’s transaction price to each performance obligation using our best estimate of SSP.

Contracts with our technology solution partners often include multiple performance obligations. In determining whether integration services are distinct from hosting services we consider various factors. These considerations included the level of integration, interdependency, and interrelation between the implementation and hosting service, as well as any promises in the contract. We have concluded that the integration services included in contracts with hosting obligations are not distinct. As a result, we defer any arrangement fees for integration services and recognize such amounts over the life of the hosting obligation. Additional consideration for some partner contracts varies based on the level of customer activity on the platform. We have determined we meet the variable consideration allocation exception and therefore recognize these variable fees in the period they are earned.

Judgment is required to determine the SSP for each distinct performance obligation. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The primary method used to estimate SSP is the expected cost-plus margin approach, which considers margins achieved on standalone sales of similar products, market data related to historical margins within an industry, industry sales price averages, market conditions, and profit objectives.

Cost of revenue consists primarily of personnel-related costs, including: stock-based compensation expenses for customer support and professional services personnel; costs of maintaining and securing our infrastructure and platform; amortization expense associated with capitalized internal-use software; and allocation of overhead costs.

Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of performing the associated services. We recognize revenue from deferred revenue when the services are performed, and the corresponding revenue recognition criteria are met. We recognized $5.7 million of previously deferred revenue during the three months ended March 31, 2021.

The net increase in the deferred revenue balance for the three months ended March 31, 2021 is primarily due to increases in professional services along with a general increase in SaaS related subscriptions. Amounts recognized from deferred revenue represent primarily revenue from the sale of subscription solutions, integration, and marketing services.

As of March 31, 2021, we had $92.9 million of remaining performance obligations, which represents contracted revenue minimums that have not yet been recognized, including amounts that will be invoiced and recognized as revenue in future periods. We expect to recognize approximately 56% of the remaining performance obligations as revenue in the following 12-month periods, and the remaining balance in the periods thereafter.

Certain sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions are not paid on subscription renewals. We amortize deferred sales commissions ratably over the estimated period of our relationship with customers of approximately four years. Based on historical experience, we determine the average life of our customer relationship by taking into consideration our customer contracts and the estimated technological life of our platform and related significant features. We include amortization of deferred commissions in Sales and marketing expense in the consolidated statements of operations. We periodically review the carrying amount of deferred commissions to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. We did not recognize an impairment of deferred commissions for the three months ended March 31, 2021 and 2020 or the year ended December 31, 2020.

Sales commissions of $1.5 million and $0.7 million were deferred for the three months ended March 31, 2021 and 2020, respectively; and deferred commission amortization expense was $0.7 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.

Financial instruments carried at fair value include cash and cash equivalents, restricted cash, marketable securities, and embedded put options. The carrying amount of accounts receivable approximates fair value due to their relatively short maturities.

For assets and liabilities measured at fair value, fair value is the price to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. When determining fair value, we consider the principal or most advantageous market in which it would transact, and assumptions that market participants would use when pricing asset or liabilities.

The accounting standard for fair value establishes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable. The standard requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of inputs that may be used to measure fair value are as follows:

The following tables summarize the estimated fair value of our cash equivalents and marketable securities.

	As of March 31, 2021
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Financial assets:
Money market funds	$	171,802		—		—	$	171,802
Corporate securities		—		18,374		—		18,374
Total financial assets	$	171,802	$	18,374	$	—	$	190,176

4. Fair value measurements, cash equivalents and marketable securities (continued)

The following tables summarizes the estimated fair value of our cash equivalents and marketable securities:

	As of March 31, 2021
(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Cash equivalents:
Money market funds	$	171,802	$	—	$	—	$	171,802
Marketable securities:
Corporate securities	$	18,374		—		—	$	18,374

Property and equipment, which includes software purchased or developed for internal use, is composed of the following:

	As of March 31,			As of December 31,
(in thousands)	2021			2020

Computer software	$	2,422		$	2,347
Computer equipment		8,326			7,938
Furniture and fixtures		2,397			2,379
Leasehold improvements		7,942			7,943
		21,087			20,607
Less: accumulated depreciation and amortization		(14,191	)		(13,485	)
Property and equipment, net	$	6,896		$	7,122

Depreciation expense on property and equipment was $0.7 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and that the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. From time to time, we are subject to various claims that arise in the normal course of business. In the opinion of management, we are unaware of any pending or unasserted claims that would have a material adverse effect on our financial position, liquidity, or results.

Certain executive officers are entitled to payments in the event of termination of employment in connection with a certain change in control.

Our certificate of incorporation and certain contractual arrangements provide for indemnification of our officers and directors for certain events or occurrences. We maintain a directors and officers insurance policy to provide coverage in the event of a claim against an officer of director. Historically, we have not been obligated to make any payments for indemnification obligations, and no liabilities have been recorded for these obligations on the consolidated balance sheets as of March 31, 2021 or December 31, 2020.

We lease certain facilities under operating lease agreements that expire at various dates through 2028. Some of these arrangements contain renewal options and require us to pay taxes, insurance and maintenance costs. Renewal options were not included in the ROU asset and lease liability calculation.

Operating and short-term rent expenses was $0.9 million and $0.8 million for each of the three-month periods ended March 31, 2021 and 2020, respectively. Short-term rent expense was not material for any of the periods presented.

Future minimum lease payments under non-cancellable operating leases are as follows:

Delaware	46-2707656
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11305 Four Points Drive Building II, 3^rd Floor Austin, Texas	78726
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Index to Financial Statements	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION	36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 3.	Defaults Upon Senior Securities	64
Item 4.	Mine Safety Disclosures	64
Item 5.	Other Information	64
Item 6.	Exhibits	64
Signatures		66

Consolidated Financial Statements
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Loss	5
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity	6
Condensed Consolidated Statements of Cash Flows	7
Notes to the Condensed Consolidated Financial Statements	8

(in thousands)
Balance at December 31, 2020	$	1,992
Provision for expected credit losses		726
Accounts written off		(358	)
Balance at March 31, 2021	$	2,360

		Estimated Useful Life
Computer equipment		3 years
Computer software		3 years
Furniture and fixtures		5 years
Leasehold improvements		1-10 years

	As of December 31, 2020
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
Financial assets:
Money market funds	$	196,521	$	—	$	—	$	196,521

Cash flow information (in thousands)	Three months ended March 31,
	2021		2020

Cash paid for operating lease liabilities	$	972	$	871
Right-of-use assets obtained in exchange for operating lease obligations	$	—	$	—

Operating lease information	Three months ended March 31,
	2021			2020

Weighted-average remaining lease-term	5.9 years			6.7 years
Weighted-average discount rate		5.46	%		5.52	%

(in thousands)	March 31, 2021

2021 (April 1st through December 31st)	$	2,971
2022		3,081
2023		2,504
2024		2,255
2025		2,011
Thereafter		4,923
Total minimum lease payments	$	17,745
Less imputed interest		(2,671	)
Total lease liabilities	$	15,074