QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
x | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Page | ||||||||
As of | |||||||||||
September 30, 2020 | December 31, 2019 | ||||||||||
(In thousands, except per share data) | |||||||||||
(Unaudited) | |||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable, net of allowance | |||||||||||
Prepayments and other current assets | |||||||||||
Income taxes receivable | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Right-of-use assets, net | |||||||||||
Other non-current assets, net of allowance | |||||||||||
Goodwill | |||||||||||
Intangible assets, net | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other liabilities | |||||||||||
Income taxes payable | |||||||||||
Convertible senior notes, net | |||||||||||
Deferred revenue | |||||||||||
Total current liabilities | |||||||||||
Deferred tax liability - non-current | |||||||||||
Convertible senior notes, net - non-current | |||||||||||
Long-term operating lease liabilities | |||||||||||
Other long-term liabilities | |||||||||||
Deferred revenue - non-current | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 7) | |||||||||||
Stockholders’ equity | |||||||||||
Common stock, $ | |||||||||||
Preferred stock, $ | |||||||||||
Additional paid in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands, except per share data) (Unaudited) | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Licenses | $ | $ | $ | $ | |||||||||||||||||||
Subscription | |||||||||||||||||||||||
Services and other | |||||||||||||||||||||||
Total revenue | |||||||||||||||||||||||
Cost of revenue | |||||||||||||||||||||||
Licenses | |||||||||||||||||||||||
Subscription | |||||||||||||||||||||||
Services and other | |||||||||||||||||||||||
Total cost of revenue | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Income (loss) from operations | ( | ||||||||||||||||||||||
Other expense, net: | |||||||||||||||||||||||
Interest income | |||||||||||||||||||||||
Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense), net | ( | ( | ( | ||||||||||||||||||||
Total other expense, net | ( | ( | ( | ( | |||||||||||||||||||
Income (loss) before income taxes | ( | ( | ( | ||||||||||||||||||||
Income tax benefit | |||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Net income (loss) per share | |||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted |
For the Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||
Common Stock | Additional paid in capital | Accumulated deficit | Stockholders' equity | ||||||||||||||||||||||||||
Number of shares | Par value | ||||||||||||||||||||||||||||
(In thousands) (Unaudited) | |||||||||||||||||||||||||||||
Balance at June 30, 2020 | ( | ||||||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Restricted stock units vested, net of tax settlement | — | ( | — | ( | |||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at September 30, 2020 | ( |
For the Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||
Common Stock | Additional paid in capital | Accumulated deficit | Stockholders' equity | ||||||||||||||||||||||||||
Number of shares | Par value | ||||||||||||||||||||||||||||
(In thousands) (Unaudited) | |||||||||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Cumulative effect adjustment from the adoption of , net of tax | — | — | — | ( | ( | ||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Restricted stock units vested, net of tax settlement | — | ( | — | ( | |||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Common stock issued under employee stock plan | — | — | |||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at September 30, 2020 | $ | $ | $ | ( | $ |
For the Three Months Ended September 30, 2019 | |||||||||||||||||||||||||||||
Common Stock | Additional paid in capital | Accumulated deficit | Stockholders' equity | ||||||||||||||||||||||||||
Number of shares | Par value | ||||||||||||||||||||||||||||
(In thousands) (Unaudited) | |||||||||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Restricted stock units vested, net of tax settlement | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Equity component of convertible senior notes, net of issuance costs | — | — | — | ||||||||||||||||||||||||||
Purchase of capped calls | — | — | ( | — | ( | ||||||||||||||||||||||||
Deferred tax liability related to issuance of convertible senior notes and capped calls | — | — | ( | — | ( | ||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | ( | $ |
For the Nine Months Ended September 30, 2019 | |||||||||||||||||||||||||||||
Common Stock | Additional paid in capital | Retained earnings (accumulated deficit) | Stockholders' equity | ||||||||||||||||||||||||||
Number of shares | Par value | ||||||||||||||||||||||||||||
(In thousands) (Unaudited) | |||||||||||||||||||||||||||||
Balance at December 31, 2018 | $ | $ | $ | $ | |||||||||||||||||||||||||
Exercise of stock options | — | — | |||||||||||||||||||||||||||
Restricted stock units vested, net of tax settlement | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Incentive units vested | — | — | |||||||||||||||||||||||||||
Common stock issued under employee stock plan | — | — | |||||||||||||||||||||||||||
Equity component of convertible senior notes, net of issuance costs | — | — | — | ||||||||||||||||||||||||||
Purchase of capped calls | — | — | ( | — | ( | ||||||||||||||||||||||||
Deferred tax liability related to issuance of convertible senior notes and capped calls | — | — | ( | — | ( | ||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | $ | ( | $ |
Nine Months Ended | |||||||||||
September 30, 2020 | September 30, 2019 | ||||||||||
(In thousands) (Unaudited) | |||||||||||
Operating activities | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
Depreciation and amortization expense | |||||||||||
Amortization of debt discount and issuance costs | |||||||||||
Amortization of contract acquisition costs | |||||||||||
(Gain) loss on disposal of fixed assets | ( | ||||||||||
Provision for credit losses | |||||||||||
Stock-based compensation expense | |||||||||||
Operating leases, net | ( | ||||||||||
Deferred taxes | ( | ( | |||||||||
Net changes in operating assets and liabilities | |||||||||||
Accounts receivable | |||||||||||
Prepayments and other current assets | ( | ( | |||||||||
Other non-current assets | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other liabilities | |||||||||||
Income taxes | ( | ( | |||||||||
Deferred revenue | |||||||||||
Net cash provided by operating activities | |||||||||||
Investing activities | |||||||||||
Purchase of property and equipment | ( | ( | |||||||||
Proceeds from sale of property and equipment | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Financing activities | |||||||||||
Payment of debt issuance costs | ( | ||||||||||
Proceeds from issuance of convertible senior notes | |||||||||||
Purchases of capped calls | ( | ||||||||||
Taxes associated with net issuances of shares upon vesting of restricted stock units | ( | ||||||||||
Proceeds from employee stock purchase plan contributions | |||||||||||
Exercise of stock options | |||||||||||
Net cash provided by financing activities | |||||||||||
Net 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 | $ | $ |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||
Licenses | Subscription | Services and other | Licenses | Subscription | Services and other | ||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
Timing of revenue recognition | |||||||||||||||||||||||||||||||||||
Revenue recognized at a point in time | $ | $ | — | $ | — | $ | $ | — | $ | — | |||||||||||||||||||||||||
Revenue recognized over time | — | — | |||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ |
Nine Months Ended September 30, 2020 | Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||||||||
Licenses | Subscription | Services and other | Licenses | Subscription | Services and other | ||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
Timing of revenue recognition | |||||||||||||||||||||||||||||||||||
Revenue recognized at a point in time | $ | $ | — | $ | — | $ | $ | — | $ | — | |||||||||||||||||||||||||
Revenue recognized over time | — | — | |||||||||||||||||||||||||||||||||
Total revenue | $ | $ | $ | $ | $ | $ |
Contract Acquisition Costs | |||||||||||
Nine Months Ended | |||||||||||
September 30, 2020 | September 30, 2019 | ||||||||||
(In thousands) | |||||||||||
Beginning Balance | $ | $ | |||||||||
Additional deferred contract acquisition costs | |||||||||||
Amortization of deferred contract acquisition costs | ( | ( | |||||||||
Ending Balance | $ | $ |
Deferred Revenue | |||||||||||
Nine Months Ended | |||||||||||
September 30, 2020 | September 30, 2019 | ||||||||||
(In thousands) | |||||||||||
Beginning Balance | $ | $ | |||||||||
Increase, net | |||||||||||
Ending Balance | $ | $ |
Accounts Receivable | Contract Assets | ||||||||||
Nine Months Ended | |||||||||||
September 30, 2020 | |||||||||||
(In thousands) | |||||||||||
Beginning Balance | $ | $ | |||||||||
Adoption of | |||||||||||
Provision for credit losses, net of recoveries | |||||||||||
Write-offs | ( | ||||||||||
Ending Balance | $ | $ |
As of September 30, 2020 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||
Money market funds | $ | — | — | $ | |||||||||||||||||||
Total cash equivalents | $ | — | — | $ |
As of December 31, 2019 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Cash equivalents: | |||||||||||||||||||||||
Money market funds | $ | — | — | $ | |||||||||||||||||||
Total cash equivalents | $ | — | — | $ |
As of | |||||
October 15, 2019 | |||||
(In thousands) | |||||
Cash and cash equivalents | $ | ||||
Prepayments and other current assets | |||||
Right-of-use assets | |||||
Goodwill | |||||
Intangible assets | |||||
Accounts payable | ( | ||||
Accrued expenses and other liabilities | ( | ||||
Deferred tax liability - non-current | ( | ||||
Total fair value of assets acquired and liabilities assumed | $ |
Amount | Estimated Useful Life | ||||||||||
(In thousands) | (In years) | ||||||||||
Developed technology | $ |
As of | |||||
October 15, 2019 | |||||
(In thousands) | |||||
Cash and cash equivalents | $ | ||||
Accounts receivable | |||||
Prepayments and other current assets | |||||
Deferred tax asset - non-current | |||||
Right-of-use assets | |||||
Goodwill | |||||
Intangible assets | |||||
Accounts payable | ( | ||||
Accrued expenses and other liabilities | ( | ||||
Deferred revenue | ( | ||||
Total fair value of assets acquired and liabilities assumed | $ |
Amount | Estimated Useful Life | ||||||||||
(In thousands) | (In years) | ||||||||||
Developed technology | $ |
(In thousands) | |||||
Balance, December 31, 2019 | $ | ||||
Measurement period adjustments | |||||
Balance, September 30, 2020 | $ |
As of | |||||||||||||||||
Weighted Average Useful Life | September 30, 2020 | December 31, 2019 | |||||||||||||||
Intangible assets, net | (In years) | (In thousands) | |||||||||||||||
Customer lists | $ | $ | |||||||||||||||
Developed technology | |||||||||||||||||
Trade names and trademarks | |||||||||||||||||
Other intangible assets | |||||||||||||||||
Total intangible assets | |||||||||||||||||
Less: Accumulated amortization | ( | ( | |||||||||||||||
Total intangible assets, net | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Cost of revenue - licenses | $ | $ | $ | $ | |||||||||||||||||||
Cost of revenue - subscription | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Total amortization expense | $ | $ | $ | $ |
Year Ending December 31, | (In thousands) | ||||
2020 (except the nine months ended September 30) | $ | ||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 | |||||
Thereafter | |||||
Total amortization expense | $ |
Year Ending December 31, | (In thousands) | ||||
2020 (except the nine months ended September 30) | $ | ||||
2021 | |||||
2022 | |||||
2023 | |||||
2024 | |||||
Thereafter | |||||
Total minimum lease payments | |||||
Less: interest | ( | ||||
Total present value of operating lease liabilities | $ | ||||
Current operating lease liabilities | $ | ||||
Long-term operating lease liabilities | |||||
Total operating lease liabilities | $ |
As of | |||||||||||
September 30, 2020 | December 31, 2019 | ||||||||||
(In thousands) | |||||||||||
Liability component | |||||||||||
Principal | $ | $ | |||||||||
Unamortized discount | ( | ( | |||||||||
Unamortized issuance costs | ( | ( | |||||||||
Net carrying amount | $ | $ | |||||||||
Equity component, net of issuance costs | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Contractual interest expense | $ | $ | $ | $ | |||||||||||||||||||
Amortization of debt discount | |||||||||||||||||||||||
Amortization of debt issuance costs | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Stock Options | ESPP | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
Expected dividend rate | |||||||||||||||||||||||
Expected volatility | |||||||||||||||||||||||
Risk-free interest rate | |||||||||||||||||||||||
Expected term (in years) |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
(In thousands) | (Per share) | (Years) | (In thousands) | ||||||||||||||||||||
Balances at December 31, 2019 | $ | $ | |||||||||||||||||||||
Granted | $ | ||||||||||||||||||||||
Exercised | ( | $ | |||||||||||||||||||||
Forfeited | ( | $ | |||||||||||||||||||||
Balances at September 30, 2020 | $ | $ | |||||||||||||||||||||
Options vested and expected to vest at September 30, 2020 | $ | $ | |||||||||||||||||||||
Options vested and exercisable at September 30, 2020 | $ | $ |
Number of Shares | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
(In thousands) | (Per share) | (Years) | (In thousands) | ||||||||||||||||||||
Balances at December 31, 2019 | $ | $ | |||||||||||||||||||||
Granted | $ | ||||||||||||||||||||||
Vested | ( | $ | |||||||||||||||||||||
Forfeited | ( | $ | |||||||||||||||||||||
Balances at September 30, 2020 | $ | $ | |||||||||||||||||||||
Units expected to vest at September 30, 2020 | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Stock options | $ | $ | $ | $ | |||||||||||||||||||
Incentive units | |||||||||||||||||||||||
RSUs | |||||||||||||||||||||||
ESPP | |||||||||||||||||||||||
Total stock-based compensation expense | $ | $ | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Cost of revenue - subscription | $ | $ | $ | $ | |||||||||||||||||||
Cost of revenue - services and other | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Sales and marketing | |||||||||||||||||||||||
Total stock-based compensation expense | $ | $ | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||||
Numerator | |||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Denominator | |||||||||||||||||||||||
Weighted average shares outstanding | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
Net income (loss) per share | |||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Diluted | $ | ( | $ | $ | ( | $ | ( |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Stock options to purchase common stock | |||||||||||||||||||||||
RSUs issued and outstanding | |||||||||||||||||||||||
ESPP | |||||||||||||||||||||||
Convertible senior notes | |||||||||||||||||||||||
Total |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
United States | $ | $ | $ | $ | |||||||||||||||||||
EMEA (1) | |||||||||||||||||||||||
Rest of the World (1) | |||||||||||||||||||||||
Total revenue | $ | $ | $ | $ |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
Number of customers (at period end) | 1,660 | 1,341 | 1,660 | 1,341 | |||||||||||||||||||
Subscription revenue as a percentage of total revenue | 54 | % | 49 | % | 54 | % | 52 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Licenses | $ | 30,864 | $ | 26,825 | $ | 86,748 | $ | 64,827 | |||||||||||||||
Subscription | 51,004 | 37,383 | 140,807 | 102,929 | |||||||||||||||||||
Services and other | 12,145 | 11,671 | 34,358 | 31,760 | |||||||||||||||||||
Total revenue | 94,013 | 75,879 | 261,913 | 199,516 | |||||||||||||||||||
Cost of revenue | |||||||||||||||||||||||
Licenses | 1,083 | 1,083 | 3,269 | 3,157 | |||||||||||||||||||
Subscription (1) | 9,794 | 6,862 | 26,927 | 18,990 | |||||||||||||||||||
Services and other (1) | 9,922 | 8,985 | 27,597 | 25,361 | |||||||||||||||||||
Total cost of revenue | 20,799 | 16,930 | 57,793 | 47,508 | |||||||||||||||||||
Gross profit | 73,214 | 58,949 | 204,120 | 152,008 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Research and development (1) | 19,314 | 14,148 | 52,775 | 40,318 | |||||||||||||||||||
General and administrative (1) | 8,846 | 10,192 | 27,731 | 27,819 | |||||||||||||||||||
Sales and marketing (1) | 44,092 | 33,274 | 119,886 | 99,298 | |||||||||||||||||||
Total operating expenses | 72,252 | 57,614 | 200,392 | 167,435 | |||||||||||||||||||
Income (loss) from operations | 962 | 1,335 | 3,728 | (15,427) | |||||||||||||||||||
Other expense, net: | |||||||||||||||||||||||
Interest income | 349 | 418 | 1,790 | 843 | |||||||||||||||||||
Interest expense | (4,639) | (408) | (13,757) | (561) | |||||||||||||||||||
Other income (expense), net | 214 | (295) | (222) | (1,018) | |||||||||||||||||||
Total other expense, net | (4,076) | (285) | (12,189) | (736) | |||||||||||||||||||
Income (loss) before income taxes | (3,114) | 1,050 | (8,461) | (16,163) | |||||||||||||||||||
Income tax benefit | 2,438 | 2,618 | 2,410 | 2,244 | |||||||||||||||||||
Net income (loss) | $ | (676) | $ | 3,668 | $ | (6,051) | $ | (13,919) |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Cost of revenue - subscription | $ | 485 | $ | 286 | $ | 1,270 | $ | 830 | |||||||||||||||
Cost of revenue - services and other | 550 | 337 | 1,368 | 1,066 | |||||||||||||||||||
Research and development | 1,712 | 820 | 4,700 | 2,653 | |||||||||||||||||||
General and administrative | 1,944 | 1,710 | 4,896 | 4,725 | |||||||||||||||||||
Sales and marketing | 3,147 | 1,336 | 8,945 | 4,824 | |||||||||||||||||||
Total stock-based compensation expense | $ | 7,838 | $ | 4,489 | $ | 21,179 | $ | 14,098 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Licenses | 33 | % | 35 | % | 33 | % | 32 | % | |||||||||||||||
Subscription | 54 | 49 | 54 | 52 | |||||||||||||||||||
Services and other | 13 | 16 | 13 | 16 | |||||||||||||||||||
Total revenue | 100 | 100 | 100 | 100 | |||||||||||||||||||
Cost of revenue | |||||||||||||||||||||||
Licenses | 1 | 1 | 1 | 2 | |||||||||||||||||||
Subscription | 10 | 9 | 10 | 9 | |||||||||||||||||||
Services and other | 11 | 12 | 11 | 13 | |||||||||||||||||||
Total cost of revenue | 22 | 22 | 22 | 24 | |||||||||||||||||||
Gross profit | 78 | 78 | 78 | 76 | |||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Research and development | 21 | 19 | 20 | 20 | |||||||||||||||||||
General and administrative | 9 | 13 | 11 | 14 | |||||||||||||||||||
Sales and marketing | 47 | 44 | 46 | 50 | |||||||||||||||||||
Total operating expenses | 77 | 76 | 77 | 84 | |||||||||||||||||||
Income (loss) from operations | 1 | 2 | 1 | (8) | |||||||||||||||||||
Other expense, net: | |||||||||||||||||||||||
Interest income | — | 1 | 1 | — | |||||||||||||||||||
Interest expense | (5) | (1) | (5) | — | |||||||||||||||||||
Other income (expense), net | — | — | — | — | |||||||||||||||||||
Total other expense, net | (5) | — | (4) | — | |||||||||||||||||||
Income (loss) before income taxes | (4) | 2 | (3) | (8) | |||||||||||||||||||
Income tax benefit | 3 | 3 | 1 | 1 | |||||||||||||||||||
Net income (loss) | (1) | % | 5 | % | (2) | % | (7) | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | variance $ | variance % | September 30, 2020 | September 30, 2019 | variance $ | variance % | ||||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
Licenses | $ | 30,864 | $ | 26,825 | $ | 4,039 | 15 | % | $ | 86,748 | $ | 64,827 | $ | 21,921 | 34 | % | |||||||||||||||||||||||||||||||
Subscription | 51,004 | 37,383 | 13,621 | 36 | % | 140,807 | 102,929 | 37,878 | 37 | % | |||||||||||||||||||||||||||||||||||||
Services and other | 12,145 | 11,671 | 474 | 4 | % | 34,358 | 31,760 | 2,598 | 8 | % | |||||||||||||||||||||||||||||||||||||
Total revenue | $ | 94,013 | $ | 75,879 | $ | 18,134 | 24 | % | $ | 261,913 | $ | 199,516 | $ | 62,397 | 31 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||
$ | % of revenue | $ | % of revenue | $ | % of revenue | $ | % of revenue | ||||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
United States | $ | 67,917 | 72 | % | $ | 56,071 | 74 | % | $ | 191,613 | 73 | % | $ | 142,030 | 71 | % | |||||||||||||||||||||||||||||||
EMEA (1) | 16,329 | 17 | % | 12,499 | 16 | % | 43,104 | 17 | % | 38,768 | 19 | % | |||||||||||||||||||||||||||||||||||
Rest of the World (1) | 9,767 | 11 | % | 7,309 | 10 | % | 27,196 | 10 | % | 18,718 | 10 | % | |||||||||||||||||||||||||||||||||||
Total revenue | $ | 94,013 | 100 | % | $ | 75,879 | 100 | % | $ | 261,913 | 100 | % | $ | 199,516 | 100 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | variance $ | variance % | September 30, 2020 | September 30, 2019 | variance $ | variance % | ||||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||||||||||||||||||||||||||
Licenses | $ | 29,781 | $ | 25,742 | $ | 4,039 | 16 | % | $ | 83,479 | $ | 61,670 | $ | 21,809 | 35 | % | |||||||||||||||||||||||||||||||
Subscription | 41,210 | 30,521 | 10,689 | 35 | % | 113,880 | 83,939 | 29,941 | 36 | % | |||||||||||||||||||||||||||||||||||||
Services and other | 2,223 | 2,686 | (463) | (17) | % | 6,761 | 6,399 | 362 | 6 | % | |||||||||||||||||||||||||||||||||||||
Total gross profit | $ | 73,214 | $ | 58,949 | $ | 14,265 | 24 | % | $ | 204,120 | $ | 152,008 | $ | 52,112 | 34 | % | |||||||||||||||||||||||||||||||
Gross margin | |||||||||||||||||||||||||||||||||||||||||||||||
Licenses | 96 | % | 96 | % | 96 | % | 95 | % | |||||||||||||||||||||||||||||||||||||||
Subscription | 81 | % | 82 | % | 81 | % | 82 | % | |||||||||||||||||||||||||||||||||||||||
Services and other | 18 | % | 23 | % | 20 | % | 20 | % | |||||||||||||||||||||||||||||||||||||||
Total gross margin | 78 | % | 78 | % | 78 | % | 76 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2020 | September 30, 2019 | variance $ | variance % | September 30, 2020 | September 30, 2019 | variance $ | variance % | ||||||||||||||||||||||||||||||||||||||||
(In thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Research and development | $ | 19,314 | $ | 14,148 | $ | 5,166 | 37 | % | $ | 52,775 | $ | 40,318 | $ | 12,457 | 31 | % | |||||||||||||||||||||||||||||||
General and administrative | 8,846 | 10,192 | (1,346) | (13) | % | 27,731 | 27,819 | (88) | — | % | |||||||||||||||||||||||||||||||||||||
Sales and marketing | 44,092 | 33,274 | 10,818 | 33 | % | 119,886 | 99,298 | 20,588 | 21 | % | |||||||||||||||||||||||||||||||||||||
Total operating expenses | $ | 72,252 | $ | 57,614 | $ | 14,638 | 25 | % | $ | 200,392 | $ | 167,435 | $ | 32,957 | 20 | % |
Nine Months Ended | |||||||||||
September 30, 2020 | September 30, 2019 | ||||||||||
(In thousands) | |||||||||||
Net cash provided by operating activities | $ | 34,406 | $ | 39,654 | |||||||
Net cash used in investing activities | (2,416) | (5,075) | |||||||||
Net cash provided by financing activities | 7,944 | 358,834 | |||||||||
Net increase in cash, cash equivalents and restricted cash | $ | 39,934 | $ | 393,413 |
Exhibit Number | Description | |||||||
2.1*** | ||||||||
2.2*** | ||||||||
3.1 | ||||||||
3.2 | ||||||||
101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
104 | Inline Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. | ||||
** | Furnished herewith (such certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference). | ||||
*** | Certain schedules and exhibits have been omitted in accordance with Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission on request. | ||||
+ | Management contract or compensatory plan or arrangement. |
SailPoint Technologies Holdings, Inc., | ||||||||
Date: November 5, 2020 | By: | /s/ Mark McClain | ||||||
Mark McClain | ||||||||
Chief Executive Officer and Director (Principal Executive Officer) | ||||||||
Date: November 5, 2020 | By: | /s/ Jason Ream | ||||||
Jason Ream | ||||||||
Chief Financial Officer (Principal Financial Officer) |
Date: November 5, 2020 | By: | /s/ Mark McClain | ||||||
Mark McClain | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: November 5, 2020 | By: | /s/ Jason Ream | ||||||
Jason Ream | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
Date: November 5, 2020 | By: | /s/ Mark McClain | ||||||
Mark McClain | ||||||||
Chief Executive Officer | ||||||||
(Principal Executive Officer) |
Date: November 5, 2020 | By: | /s/ Jason Ream | ||||||
Jason Ream | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (in shares) | 90,884,000 | 89,676,000 |
Common stock, shares outstanding (in shares) | 90,884,000 | 89,676,000 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenue | ||||
Total revenue | $ 94,013 | $ 75,879 | $ 261,913 | $ 199,516 |
Cost of revenue | ||||
Total cost of revenue | 20,799 | 16,930 | 57,793 | 47,508 |
Gross profit | 73,214 | 58,949 | 204,120 | 152,008 |
Operating expenses | ||||
Research and development | 19,314 | 14,148 | 52,775 | 40,318 |
General and administrative | 8,846 | 10,192 | 27,731 | 27,819 |
Sales and marketing | 44,092 | 33,274 | 119,886 | 99,298 |
Total operating expenses | 72,252 | 57,614 | 200,392 | 167,435 |
Income (loss) from operations | 962 | 1,335 | 3,728 | (15,427) |
Other expense, net: | ||||
Interest income | 349 | 418 | 1,790 | 843 |
Interest expense | (4,639) | (408) | (13,757) | (561) |
Other income (expense), net | 214 | (295) | (222) | (1,018) |
Total other expense, net | (4,076) | (285) | (12,189) | (736) |
Income (loss) before income taxes | (3,114) | 1,050 | (8,461) | (16,163) |
Income tax benefit | 2,438 | 2,618 | 2,410 | 2,244 |
Net income (loss) | $ (676) | $ 3,668 | $ (6,051) | $ (13,919) |
Net income (loss) per share | ||||
Basic (in dollars per share) | $ (0.01) | $ 0.04 | $ (0.07) | $ (0.16) |
Diluted (in dollars per share) | $ (0.01) | $ 0.04 | $ (0.07) | $ (0.16) |
Weighted average shares outstanding | ||||
Basic (in shares) | 90,764 | 89,143 | 90,320 | 88,739 |
Diluted (in shares) | 90,764 | 90,808 | 90,320 | 88,739 |
Licenses | ||||
Revenue | ||||
Total revenue | $ 30,864 | $ 26,825 | $ 86,748 | $ 64,827 |
Cost of revenue | ||||
Total cost of revenue | 1,083 | 1,083 | 3,269 | 3,157 |
Subscription | ||||
Revenue | ||||
Total revenue | 51,004 | 37,383 | 140,807 | 102,929 |
Cost of revenue | ||||
Total cost of revenue | 9,794 | 6,862 | 26,927 | 18,990 |
Services and other | ||||
Revenue | ||||
Total revenue | 12,145 | 11,671 | 34,358 | 31,760 |
Cost of revenue | ||||
Total cost of revenue | $ 9,922 | $ 8,985 | $ 27,597 | $ 25,361 |
Description of Business and Summary of Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Summary of Significant Accounting Policies | Description of Business and Summary of Significant Accounting Policies SailPoint Technologies Holdings, Inc. (“we,” “our,” “the Company” or “SailPoint”) was incorporated in the state of Delaware on August 8, 2014, in preparation for the purchase of SailPoint Technologies, Inc. The purchase occurred on September 8, 2014 and our certificate of incorporation was amended and restated as of such date. SailPoint Technologies, Inc. was formed July 14, 2004 as a Delaware corporation. The Company designs, develops and markets identity governance software that helps organizations govern user access to critical systems and data. The Company currently markets its products and services worldwide. Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as well as the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), for interim reporting. Accordingly, the Company has condensed or omitted certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, statements of stockholders’ equity and the statements of cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2020 or any future period. These financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 24, 2020 (the “Annual Report”). Use of Estimates The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates such estimates and assumptions for continued reasonableness. In particular, we make estimates with respect to the fair value allocation of multiple performance obligation in revenue recognition, the valuation allowance based on expected credit losses and the collectability of accounts receivable, valuation and estimated useful lives of long-lived assets, fair value of the liability and equity components of the Notes (as defined below), stock-based compensation expense and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon periodic evaluation. Actual results could differ from those estimates. Concentration of Credit Risk and Other Risks Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. As of September 30, 2020 and December 31, 2019, no single customer represented more than 10% of the balance in accounts receivable. Management considers concentration of credit risk to be minimal with respect to accounts receivable due to the positive historical collection experience of the Company. No single customer represented more than 10% of revenue for the three or nine months ended September 30, 2020 or 2019. The Company does not experience concentration of credit risk in foreign countries as no single foreign country represents more than 10% of the Company’s consolidated revenues or net assets. Significant Accounting Policies The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Annual Report, most notably Note 2 “Summary of Significant Accounting Policies”. Except for the adoption of ASU 2016-13 described below, there have been no changes to our significant accounting policies described in our Annual Report that have had a material impact on our unaudited condensed consolidated financial statements and related notes. Recently Adopted Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15), which clarifies the accounting for implementation costs in cloud computing arrangements (“CCAs”). ASU 2018-15 is effective for public entities for annual periods, including interim periods within those annual periods beginning after December 15, 2019 and earlier adoption is permitted. We adopted the standard effective January 1, 2020, using the prospective approach. This adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements. The Company evaluates whether the CCA includes a license to internal-use software. If the CCA includes a software license, the Company accounts for the software license as an intangible asset. Acquired software licenses are recognized and measured at cost, which includes the present value of the license obligation if the license is to be paid for over time. If the CCA does not include a software license, the Company accounts for the arrangement as a service contract (or hosting arrangement) and hosting costs are generally expensed as incurred. With the adoption of ASU 2018-15, the Company evaluates upfront costs including implementation, set-up or other costs (collectively, implementation costs) for hosting arrangements under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred, whereas costs incurred in the development stage are generally capitalized. Capitalized implementation costs are recorded in prepayments and other current assets or other non-current assets and amortized over the expected term of the arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewal options. During the nine months ended September 30, 2020, the Company’s capitalized implementation costs related to hosting arrangements were not material. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Accounting Standards Codification or ASC 326). This standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The standard also expands the required quantitative and qualitative disclosures surrounding expected credit losses. On January 1, 2020, we adopted using the modified retrospective transition method, which requires a cumulative adjustment, if applicable, to be recorded to accumulated deficit. In addition, it is important to note that under the modified retrospective transition method, our prior period results were not recast to reflect this standard. We implemented internal controls and key system functionality to enable the preparation of financial information upon adoption. We recorded a cumulative adjustment in the amount of $0.4 million, net of tax impact, to accumulated deficit as of January 1, 2020. This adoption did not have a material impact on our unaudited condensed consolidated statement of operations or statement of cash flows. In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes exceptions to the general principles in Topic 740 for allocating tax expense between financial statement components, accounting basis differences stemming from an ownership change in foreign investments and interim period income tax accounting for year-to-date losses that exceed projected losses. The guidance becomes effective for annual reporting periods beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted in the first period of the year this guidance is adopted. We adopted the standard effective January 1, 2020, using the prospective approach except for hybrid tax regimes, which we adopted using the modified retrospective approach. This adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Recently Issued Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either the fully retrospective or modified retrospective basis. The Company is currently evaluating the timing, method of adoption and overall impact of this standard on its consolidated financial statements.
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Revenue Recognition |
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Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | Revenue Recognition Disaggregation of Revenue The Company’s revenue by geographic region based on the customer’s location is presented in Note 13 “Segment and Geographic Information.” The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of control and cash flows:
Contract Balances A summary of the activity impacting our contract balances during the reporting periods is presented below:
As of September 30, 2020 and December 31, 2019, $13.5 million and $10.9 million, respectively, of our deferred contract acquisition costs are included in prepayments and other current assets as they are expected to be amortized within the next 12 months. The remaining amount of our deferred contract acquisition costs are included in other non-current assets. There were no material impairments of deferred contract acquisition costs for the periods ended September 30, 2020 or 2019.
Deferred revenue, which is a contract liability, consists primarily of amounts invoiced in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met. During the three and nine months ended September 30, 2020, revenue recognized that was previously deferred was $54.0 million and $122.3 million, respectively, compared to revenue recognized that was previously deferred of approximately $47.2 million and $94.4 million during the three and nine months ended September 30, 2019. The difference between the opening and closing balances of the Company’s contract assets and deferred revenue primarily results from the timing difference between the Company’s performance and the customer billings. Contract assets primarily relate to unbilled amounts, which are netted with deferred revenue at the contract level, and typically result from sales contracts where revenue recognized exceeds the amount billed to the customer, and the right to payment is subject to more than the passage of time. Contract assets are transferred to accounts receivable when the rights become unconditional and the customer is billed. Contract assets are included in prepayments and other current assets and other non-current assets in the unaudited condensed consolidated balance sheets. During the nine months ended September 30, 2020 and 2019, amounts reclassified from contract assets to accounts receivable were $4.0 million and $2.5 million, respectively. Remaining Performance Obligations Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. These remaining performance obligations represent contract revenue that has not yet been recognized and is included in deferred revenue, the balance of which includes both invoices that have been issued to customers but have not been recognized as revenue and amounts that will be invoiced and recognized as revenue in future periods. As of September 30, 2020, amounts allocated to these additional performance obligations are $273.1 million, of which we expect to recognize $167.2 million as revenue over the next 12 months with the remaining balance recognized thereafter.
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Allowance for Expected Credit Losses |
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Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Expected Credit Losses | Allowance for Expected Credit Losses The allowance for expected credit losses is a valuation account that is deducted from the financial asset’s amortized cost basis to present the net amount expected to be collected on contracts with customers. Accounts receivable and contract assets are written off when management believes non-collectability is confirmed. Recoveries of financial assets previously written off shall be recorded directly to earnings when received. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts over a financial asset’s contractual term. The Company’s historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made from qualitative and quantitative factors if economic conditions at the reporting date reflect stronger or weaker economic performance than the historical data implies based on management’s expectations of economic conditions on certain indicators of the Company, industry and economy. We review factors such as past collection experience, age of the accounts receivable balance, significant trends in current balances, internal operations and macroeconomic conditions. As of September 30, 2020, SailPoint evaluated these economic conditions and made adjustments to historical loss information for certain economic risk factors, such as COVID-19. In development of the expected credit loss model, we evaluated our financial assets with similar risk characteristics on a collective (pool) basis for their respective estimated and expected credit loss allowance. A financial asset will be measured individually only if it does not share similar risk characteristics with other financial assets. We believe that historical credit loss patterns by aging bucket and invoice type for accounts receivable are the most significant risk characteristics. Additionally, we analyze renewals and new business separately due to varying historical loss patterns. The Company notes expected credit loss is developed for the contractual life of the financial asset, which accounts receivable and contract assets can be viewed as one financial asset. However, a low percentage of our contract assets do not convert to accounts receivable. Therefore, we consider all contract assets as a single pool. The following table presents the changes in the allowance for expected credit losses for financial assets measured at amortized cost:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present the Company’s financial assets that are measured at fair value on a recurring basis:
The Company’s carrying amounts of financial instruments, including cash, accounts receivable, accounts payable, and accrued expenses are considered Level 1 and approximate their fair values due to their short maturities as of September 30, 2020 and December 31, 2019 and are excluded from the fair value tables above. See Note 9 “Convertible Senior Notes and Capped Call Transactions” for the carrying amount and estimated fair value of our Notes as of September 30, 2020.
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Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | Business Combinations 2019 Acquisitions Orkus On October 15, 2019, the Company acquired 100% of the equity interest in Orkus, Inc. (“Orkus”), a Delaware corporation engaged in the development and license of software products to assist customers in monitoring and controlling access and authorization across hybrid cloud assets. Total consideration related to the acquisition was $16.5 million in cash, of which $2.0 million is to be paid upon the lapse of an indemnification period of 12 months and 24 months of the acquisition date. As of September 30, 2020 and December 31, 2019, $1.0 million of holdback amount is reflected within accrued expenses and other liabilities and $1.0 million is included in other long-term liabilities in the unaudited condensed consolidated balance sheets. The following table summarizes the final purchase price allocation as of the date of acquisition:
The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:
Overwatch.ID On October 15, 2019, the Company acquired 100% of the equity interest in Overwatch.ID, Inc. (“Overwatch.ID”), a Delaware corporation engaged in the development and license of software products focused on access controls security for cloud applications, cloud computing, hybrid IT environments, and on-premises infrastructure. The consideration related to the acquisition was $20.9 million in cash, of which $3.0 million is to be paid upon the lapse of an indemnification period of 12 months and 18 months of the acquisition date. As of September 30, 2020 and December 31, 2019, $3.0 million and $1.5 million, respectively, of the holdback is included within accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheets. As of December 31, 2019, $1.5 million of the holdback is included in other long-term liabilities in the unaudited condensed consolidated balance sheet. The following table summarizes the final purchase price allocation as of the date of acquisition:
The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:
Additional Acquisition Related Information The operating results of the acquired companies are included in our unaudited condensed consolidated statements of income from the respective dates of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our unaudited condensed consolidated statements of operations. These acquisitions have been accounted for as business combinations. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the respective acquisition date. The Company finalized the purchase price within the required one-year measurement period as of the dates of acquisition. The fair value of developed technology was estimated using the replacement cost method (Level 3), which utilized assumptions for the cost to replace, such as the workforce, timing and resources required, as well as a theoretical developer’s profit margin and entrepreneurial incentive and opportunity cost. The Company believes that for each acquisition, the acquired companies will provide opportunities for growth through investing in additional products and capabilities, among other factors. This contributed to a purchase price in excess of the estimated fair value of each acquired company’s net identifiable assets acquired and, as a result, goodwill was recorded in connection with each acquisition. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. Goodwill arising from these acquisitions are not deductible for tax purposes.
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill The following table reflects goodwill activity for the nine months ended September 30, 2020:
There were no impairments of goodwill during the periods ended September 30, 2020 or 2019. Total cost and amortization of intangible assets are comprised of the following:
Amortization expense for the following periods is as follows:
Periodically, the Company evaluates intangible assets for possible impairment. There were no impairments of intangible assets during the periods ended September 30, 2020 or 2019. The total estimated future amortization expense of these intangible assets as of September 30, 2020 is as follows:
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Letters of Credit As of September 30, 2020 and December 31, 2019, the Company had an aggregate of $6.0 million of cash collateral for an unconditional standby letter of credit related to the Company’s corporate headquarters lease. The Company is also required to maintain a small amount of restricted cash to guarantee rent payments in a foreign subsidiary. Operating Leases As of September 30, 2020, our leases, which primarily consist of office leases, have remaining lease terms of less than one year to nine years. Certain leases include early termination and/or extension options; however, exercise of these options is at the Company’s sole discretion. As of September 30, 2020, the Company determined it is not reasonably certain it will exercise the options to extend its leases or terminate them early. As of September 30, 2020, we have no financing leases and our non-cancelable operating lease commitments excludes variable consideration. The undiscounted annual future minimum lease payments are summarized by year in the table below:
Indemnification Arrangements In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to customers, business partners and other parties with respect to certain matters, including losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities with respect to our products and services and business. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in a particular contract. The Company includes service level commitments to customers of our cloud-based products warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those levels. To date, the Company has not incurred any material costs as a result of these commitments, and we expect the time between any potential claims and issuance of the credits to be short. As a result, we have not accrued any liabilities related to these commitments in our unaudited condensed consolidated financial statements. Litigation Claims and Assessments The Company is subject to claims and suits that may arise from time to time in the ordinary course of business. In addition, some legal actions, claims and governmental inquiries may be instituted or asserted in the future against us and our subsidiaries. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, based upon current information, we do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our unaudited condensed consolidated financial statements.
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Credit Agreement |
9 Months Ended |
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Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Credit Agreement | Credit Agreement In 2019, SailPoint Technologies, Inc., as borrower, and certain of our other wholly owned subsidiaries entered into a credit agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time through the date hereof, the “Credit Agreement”). The Credit Agreement is guaranteed by SailPoint Technologies Intermediate Holdings, LLC, a wholly owned subsidiary, and the Borrower’s material domestic subsidiaries (the “Guarantors” and, together with the Borrower, the “Loan Parties”) and is supported by a security interest in substantially all of the Loan Parties’ personal property and assets. Later in 2019, the Company amended the Credit Agreement in connection with the issuance and sale of the Notes. Such amendment included a decrease in the commitments for revolving credit loans from $150.0 million to $75.0 million, with a $15.0 million letter of credit sublimit, which amount can be increased or decreased under certain circumstances and is subject to certain financial covenants. In addition, the Credit Agreement provides for the ability to incur uncommitted term loan facilities if, among other things, the Senior Net Leverage Ratio (as defined in the Credit Agreement), calculated giving pro forma effect to the requested term loan facility, is no greater than 3.50 to 1.00. Borrowings pursuant to the Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions permitted under the Credit Agreement. The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants. The agreement has established priority for the lenders party over all assets of the Company. The interest rates applicable to revolving credit loans under the Credit Agreement are at the Company’s option. The Company pays an unused commitment fee during the term of the Credit Agreement ranging from 0.20% to 0.30% per annum based on the Senior Secured Net Leverage Ratio. Borrowings under the Credit Agreement are scheduled to mature in March 11, 2024. The Company had no outstanding revolving credit loan balance under the Credit Agreement as of September 30, 2020 and December 31, 2019. The Company was in compliance with all applicable covenants as of September 30, 2020. The Company incurred total debt issuance costs of $0.8 million in connection with the Credit Agreement, which the net balance is included in other non-current assets in the accompanying unaudited condensed consolidated balance sheets. These costs are being amortized to interest expense over the life of the Credit Agreement on a straight-line basis. Amortization of debt issuance for the periods ended September 30, 2020 and 2019 was not material and recorded in interest expense in the accompanying unaudited condensed consolidated statements of operations.
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Convertible Senior Notes and Capped Call Transactions |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Senior Notes and Capped Call Transactions | Convertible Senior Notes and Capped Call Transactions In September 2019, the Company issued and sold $400.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2024 (the “Notes”) in a private offering (the “Offering”) to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The net proceeds from the Offering were $391.2 million, after deducting discounts and commissions and other fees and expenses payable by the Company in connection with the Offering. The Company used $37.1 million of the net proceeds from the Offering to pay the cost of the Capped Call Transactions. The Notes were issued pursuant to an indenture (the “Indenture”), by and between the Company and U.S. Bank National Association, as trustee. The Notes are senior unsecured obligations of the Company and will mature on September 15, 2024, unless earlier redeemed, repurchased or converted. The Notes bear interest at a fixed rate of 0.125% per year payable semiannually in arrears on March 15 and September 15 of each year. The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding March 15, 2024, only under the following circumstances: •during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; •during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of common stock and the conversion rate for the Notes on each such trading day; •if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or •upon the occurrence of specified corporate events as set forth in the Indenture. On or after March 15, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, 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, in the manner and subject to the terms and conditions provided in the Indenture. It is the Company’s current intent to settle the principal amount of the Notes with cash. The Notes are convertible at an initial conversion rate of 35.1849 shares of common stock per $1,000 principal amount of the Notes, which is equivalent to an initial conversion price of $28.42 per share of common stock, subject to adjustment upon the occurrence of specified events. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In addition, following certain corporate events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or notice of redemption, as the case may be. For example, upon the occurrence of a make-whole fundamental change, as defined in the purchase agreement, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or during the relevant redemption period. The Company may not redeem the Notes prior to September 20, 2022. The Company may redeem for cash all or any portion of the Notes, at its option, on or after September 20, 2022, if the last reported sale price of common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes, which means that the Company is not required to redeem or retire the Notes periodically. If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable. The Company was in compliance with all applicable covenants as of September 30, 2020. For at least 20 trading days during the period of 30 consecutive trading days ended September 30, 2020, the last reported sale price of the Company’s common stock was equal to or exceeded 130% of the conversion price of the Notes on each applicable trading day. As a result, the Notes are convertible at the option of the holders during the fiscal quarter ending December 31, 2020 and were classified as current liabilities on the unaudited condensed consolidated balance sheet as of September 30, 2020. As of the date of this filing, none of the holders of the Notes have submitted requests for conversion. In accounting for the issuance of the Notes, we separated the Notes into liability and equity components. The carrying amounts of the liability components of the Notes were calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature. The carrying amounts of the equity components, representing the conversion option, were determined by deducting the fair value of the liability components from the par value of the Notes. This difference represents the debt discount that is amortized to interest expense over the terms of the Notes using the effective interest rate method. The carrying amount of the equity components representing the conversion options was $88.8 million for the Notes and is recorded in additional paid in capital and are not remeasured as long as they continue to meet the conditions for equity classification. The Company allocates transaction costs related to the issuance of the Notes to the liability and equity components using the same proportions as the initial carrying value of the Notes. Transaction costs attributable to the liability component were $6.8 million and are being amortized to interest expense at an effective interest method rate of 5.25% over the term of the Notes. Transaction costs attributable to the equity component were $2.0 million and are netted with the equity component of the Notes in additional paid in capital. As of September 30, 2020, the Notes have a remaining life of 48 months. The net carrying amount of the liability and equity components of the Notes for the periods presented is as follows:
The interest expense recognized related to the Notes for the periods presented is as follows:
As of September 30, 2020, the total estimated fair value of the Notes was $610.3 million. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates. The fair value of the Notes is considered Level 2 within the fair value hierarchy and was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, and quoted prices of the Notes in an over-the-counter market. Capped Call Transactions In September 2019, in connection with the pricing of the Notes and in connection with the initial purchasers’ exercise in full of their option to purchase additional Notes, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with the initial purchasers or their respective affiliates and another financial institution. The Capped Call Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Notes, 14.1 million shares of common stock. The Capped Call Transactions are generally expected to reduce potential dilution to common stock upon any conversion of the Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The Capped Call Transactions have an initial strike price of $28.42 per share, which corresponds to the initial conversion price of the Notes and is subject to certain adjustments. The cap price of the Capped Call Transactions is initially $41.34 per share, which is subject to certain adjustments. For accounting purposes, the Capped Calls Transactions are separate transactions and not part of the terms of the Notes. As the Capped Call Transactions are considered indexed to our own stock and are considered equity classified, they are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $37.1 million incurred in connection with the Capped Call Transactions was recorded as a reduction to additional paid in capital.
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation 2015 Stock Option Plans In 2015, the Company adopted (i) the Amended and Restated 2015 Stock Option and Grant Plan and (ii) the 2015 Stock Incentive Plan (together the “2015 Stock Option Plans”) under which it may grant incentive stock options (“ISOs”), nonqualified stock options (“NSOs”) for the right to purchase shares of common stock and grant restricted stock units (“RSUs”). The 2015 Stock Option Plans reserve 5.0 million shares of common stock for issuance as ISOs, 0.5 million shares of RSUs and 0.25 million shares for issuance under the 2015 Stock Incentive Plan. Under the 2015 Stock Option Plans, ISOs may not be granted at less than fair market value on the date of the grant and generally vest over a four-year period based on continued service. Options generally expire ten years after the grant date. As of September 30, 2020, 0.6 million shares were available for issuance under the 2015 Stock Option Plans, including less than 0.1 million shares available for issuance under the 2015 Stock Incentive Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises. 2017 Long Term Incentive Plan In November 2017, the Company’s Board of Directors adopted the 2017 Long Term Incentive Plan (the “2017 Plan”) under which it may grant stock options, NSOs to purchase shares of common stock and RSUs. As of September 30, 2020, the Company had reserved 17.7 million shares of common stock available for issuance under the 2017 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2017 Plan is increased on each January 1 by 4.4 million shares of common stock. Options and RSUs granted to employees under the 2017 Plan generally vest over four years. Common stock subject to an award that expires or is canceled, forfeited, exchanged or otherwise terminated without delivery of shares, and shares withheld or surrendered to pay the exercise price of, or to satisfy the withholding obligations with respect to an award, will become available for future grants under the 2017 Plan. As of September 30, 2020, 11.1 million shares were available for issuance under the 2017 Plan. The Company currently uses authorized and unissued shares to satisfy share award exercises. The fair value for the Company’s stock options granted and Employee Stock Purchase Plan (the "ESPP") purchase rights, as discussed further below, during the periods presented were estimated at grant date using a Black Scholes option-pricing model using the following weighted average assumptions:
The following table summarizes stock option activity for the nine months ended September 30, 2020:
The Company expects all outstanding stock options to fully vest. The weighted average grant date fair value per share for the nine months ended September 30, 2020 and 2019 was $17.27 and $11.48, respectively. The total fair value of shares vested for the three and nine months ended September 30, 2020 was $1.1 million and $4.8 million, respectively, compared to approximately $0.8 million and $3.7 million for the three and nine months ended September 30, 2019, respectively. The total unrecognized compensation expense related to non-vested stock options granted is $14.1 million and is expected to be recognized over a weighted average period of 2.5 years as of September 30, 2020. Incentive Unit Plan In 2014 and 2015, the Company granted shares of the Company’s common stock (the “incentive units”) to certain members of management pursuant to restricted stock agreements (the “RSAs”). The incentive units were granted with an exercise price equal to the fair market value on the date of grant, are subject to vesting, and if exercised in advance of vesting were subject to the Company’s right to repurchase until vested. The Company did not grant any additional incentive units during the periods ended September 30, 2020. During the first quarter of 2019, all of the remaining 0.7 million incentive units were vested with a weighted average grant date fair value of $0.05 per share. Therefore, subsequent to the first quarter of 2019, we incurred no additional stock-based compensation expense and there is no further unrecognized compensation expense or intrinsic value related to non-vested incentive units. Restricted Stock Units The following table summarizes the RSU activity for the Company for the nine months ended September 30, 2020:
The Company expects all outstanding RSUs to fully vest. The total unrecognized compensation related to RSUs was $63.3 million as of September 30, 2020 and is expected to be recognized over a weighted average period of 2.9 years. Employee Stock Purchase Plan The Company initially reserved 1.8 million shares of common stock for issuance under the ESPP. The number of shares available for issuance under the ESPP increases each January 1 by 0.9 million shares of common stock. The ESPP will continue in effect unless terminated prior thereto by the Company’s board of directors or compensation committee, each of which has the right to terminate the ESPP at any time. As of September 30, 2020, 2.8 million shares were available for issuance under the ESPP Plan. During each of the nine months ended September 30, 2020 and 2019, the Company issued and distributed approximately 0.2 million shares of common stock pursuant the ESPP offering periods spanning from December 3, 2019 to June 3, 2020 and January 2, 2019 to June 3, 2019, respectively. The current ESPP offering period is June 4, 2020 through December 2, 2020. Stock-based compensation expense associated with ESPP purchase rights are recognized on a straight-line basis over the offering period. A summary of the Company’s stock-based compensation expense, which includes stock options, incentive units, RSUs and ESPP, is presented below:
A summary of the Company’s stock-based compensation expense as recognized on the unaudited condensed consolidated statements of operations is as follows:
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Income Taxes |
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Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Income Taxes The effective tax rate for the three and nine months ended September 30, 2020 is 78.3% and 28.5%, respectively, compared to (249.3)% and 13.9% for the three and nine months ended September 30, 2019, respectively. The primary drivers for the differences in the rates from the prior-year period to the current-year period are related to differences in forecasted pre-tax book income, the impact of stock compensation, an increase in foreign tax liabilities and the impact of research and development ("R&D") credits. Provision for income taxes consists of U.S. and state income taxes and income taxes in certain foreign jurisdictions in which the Company conducts business. The Company expects to be in an overall deferred tax liability position for the period ended December 31, 2020. Additionally, all deferred tax assets are expected to be fully offset by the turning of its deferred tax liabilities over time, so there is no valuation allowance included in the forecasted effective tax rate for the nine months ended September 30, 2020. The Company still maintains a full valuation allowance for its Israel tax position due to the lack of taxable earnings for the foreseeable future. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the periods ended September 30, 2020 and 2019, the Company did not record any material interest or penalties. The Company files tax returns in the U.S. federal jurisdiction, in several state jurisdictions, and in several foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years before 2016 and is no longer subject to state, local and foreign income tax examinations by tax authorities for years before 2015. The Company is currently under audit for income tax in a single foreign jurisdiction. The audit is ongoing and is not expected to materially impact the unaudited condensed consolidated financial statements. The Company has an Uncertain Tax Position reserve related to this foreign jurisdiction filing that should sufficiently cover any related assessment.
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Net Income (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Share | Net Income (Loss) Per ShareBasic and diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using our weighted average outstanding common shares including the dilutive effect of stock awards. In periods when the Company recognizes a net loss, the Company excludes the impact of outstanding stock awards from the diluted loss per share calculation as their inclusion would have an anti-dilutive effect. The following table sets forth the calculation of basic and diluted net income (loss) per share for the periods presented:
The following weighted average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income (loss) per share for the periods presented because their effect would have been anti-dilutive:
As we expect to settle the principal amount of the Notes in cash and any excess in shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread of 14.1 million shares will have a dilutive impact on diluted net income per share of common stock when the average market price of our common stock for a given period exceeds the conversion price of $28.42 per share.
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Segment and Geographic Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment and Geographic Information | Segment and Geographic InformationASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment and derives revenues from licensing of software, sale of our maintenance, SaaS subscription offerings, professional services and technical support. Revenue is classified by the following major geographic areas: (i) United States, (ii) Europe, the Middle East and Africa (“EMEA”) and (iii) rest of the world. The following are a summary of consolidated revenues within geographic areas:
(1) No single country outside of the United States represented more than 10% of our revenue.
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Description of Business and Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as well as the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”), for interim reporting. Accordingly, the Company has condensed or omitted certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, statements of stockholders’ equity and the statements of cash flows for the interim periods but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2020 or any future period. These financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 24, 2020 (the “Annual Report”).
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Use of Estimates | Use of Estimates The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management periodically evaluates such estimates and assumptions for continued reasonableness. In particular, we make estimates with respect to the fair value allocation of multiple performance obligation in revenue recognition, the valuation allowance based on expected credit losses and the collectability of accounts receivable, valuation and estimated useful lives of long-lived assets, fair value of the liability and equity components of the Notes (as defined below), stock-based compensation expense and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon periodic evaluation. Actual results could differ from those estimates.
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Concentration of Credit and Other Risks | Concentration of Credit Risk and Other Risks Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. As of September 30, 2020 and December 31, 2019, no single customer represented more than 10% of the balance in accounts receivable. Management considers concentration of credit risk to be minimal with respect to accounts receivable due to the positive historical collection experience of the Company. No single customer represented more than 10% of revenue for the three or nine months ended September 30, 2020 or 2019. The Company does not experience concentration of credit risk in foreign countries as no single foreign country represents more than 10% of the Company’s consolidated revenues or net assets.
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Significant Accounting Policies | Significant Accounting Policies The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes in the Annual Report, most notably Note 2 “Summary of Significant Accounting Policies”. Except for the adoption of ASU 2016-13 described below, there have been no changes to our significant accounting policies described in our Annual Report that have had a material impact on our unaudited condensed consolidated financial statements and related notes.
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Recently Adopted Accounting Pronouncements and Recently Issued Accounting Standards Not Yet Adopted | Recently Adopted Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15), which clarifies the accounting for implementation costs in cloud computing arrangements (“CCAs”). ASU 2018-15 is effective for public entities for annual periods, including interim periods within those annual periods beginning after December 15, 2019 and earlier adoption is permitted. We adopted the standard effective January 1, 2020, using the prospective approach. This adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements. The Company evaluates whether the CCA includes a license to internal-use software. If the CCA includes a software license, the Company accounts for the software license as an intangible asset. Acquired software licenses are recognized and measured at cost, which includes the present value of the license obligation if the license is to be paid for over time. If the CCA does not include a software license, the Company accounts for the arrangement as a service contract (or hosting arrangement) and hosting costs are generally expensed as incurred. With the adoption of ASU 2018-15, the Company evaluates upfront costs including implementation, set-up or other costs (collectively, implementation costs) for hosting arrangements under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred, whereas costs incurred in the development stage are generally capitalized. Capitalized implementation costs are recorded in prepayments and other current assets or other non-current assets and amortized over the expected term of the arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewal options. During the nine months ended September 30, 2020, the Company’s capitalized implementation costs related to hosting arrangements were not material. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Accounting Standards Codification or ASC 326). This standard requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The standard replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The standard also expands the required quantitative and qualitative disclosures surrounding expected credit losses. On January 1, 2020, we adopted using the modified retrospective transition method, which requires a cumulative adjustment, if applicable, to be recorded to accumulated deficit. In addition, it is important to note that under the modified retrospective transition method, our prior period results were not recast to reflect this standard. We implemented internal controls and key system functionality to enable the preparation of financial information upon adoption. We recorded a cumulative adjustment in the amount of $0.4 million, net of tax impact, to accumulated deficit as of January 1, 2020. This adoption did not have a material impact on our unaudited condensed consolidated statement of operations or statement of cash flows. In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes exceptions to the general principles in Topic 740 for allocating tax expense between financial statement components, accounting basis differences stemming from an ownership change in foreign investments and interim period income tax accounting for year-to-date losses that exceed projected losses. The guidance becomes effective for annual reporting periods beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted in the first period of the year this guidance is adopted. We adopted the standard effective January 1, 2020, using the prospective approach except for hybrid tax regimes, which we adopted using the modified retrospective approach. This adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements. Recently Issued Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either the fully retrospective or modified retrospective basis. The Company is currently evaluating the timing, method of adoption and overall impact of this standard on its consolidated financial statements.
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Revenue Recognition (Tables) |
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Schedule of Timing of Transfer of Control and Cash Flows | The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of control and cash flows:
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Summary of Contract Balances | A summary of the activity impacting our contract balances during the reporting periods is presented below:
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Allowance for Expected Credit Losses (Tables) |
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Schedule of Changes in Allowance for Expected Credit Losses for Financial Assets Measured at Amortized Cost | The following table presents the changes in the allowance for expected credit losses for financial assets measured at amortized cost:
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Fair Value Measurements (Tables) |
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Assets that are Measured at Fair Value on a Recurring Basis | The following tables present the Company’s financial assets that are measured at fair value on a recurring basis:
|
Business Combinations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orkus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Final Purchase Price Allocation | The following table summarizes the final purchase price allocation as of the date of acquisition:
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Summary of Estimated Fair Values and Useful Lives of Identifiable Intangible Assets Acquired | The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:
|
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Overwatch.ID | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Final Purchase Price Allocation | The following table summarizes the final purchase price allocation as of the date of acquisition:
|
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Summary of Estimated Fair Values and Useful Lives of Identifiable Intangible Assets Acquired | The following table presents the estimated fair values and useful lives of the identifiable intangible assets acquired:
|
Goodwill and Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill Activity | The following table reflects goodwill activity for the nine months ended September 30, 2020:
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Schedule of Cost and Amortization of Intangible Assets | Total cost and amortization of intangible assets are comprised of the following:
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Summary of Amortization Expense | Amortization expense for the following periods is as follows:
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Schedule of Estimated Future Amortization Expense of Intangible Assets | The total estimated future amortization expense of these intangible assets as of September 30, 2020 is as follows:
|
Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Future Minimum Lease Payments | The undiscounted annual future minimum lease payments are summarized by year in the table below:
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Convertible Senior Notes and Capped Call Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Net Carrying Amount of Liability and Equity Components of Notes | The net carrying amount of the liability and equity components of the Notes for the periods presented is as follows:
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Summary of Interest Expense Recognized Related to Notes | The interest expense recognized related to the Notes for the periods presented is as follows:
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value of Stock Options Estimated by Using Assumptions | The fair value for the Company’s stock options granted and Employee Stock Purchase Plan (the "ESPP") purchase rights, as discussed further below, during the periods presented were estimated at grant date using a Black Scholes option-pricing model using the following weighted average assumptions:
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Summary of Stock Option Activity | The following table summarizes stock option activity for the nine months ended September 30, 2020:
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Summary of Restricted Stock Unit Activity | The following table summarizes the RSU activity for the Company for the nine months ended September 30, 2020:
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Summary of Stock-Based Compensation Expense By Underlying Equity Instrument | A summary of the Company’s stock-based compensation expense, which includes stock options, incentive units, RSUs and ESPP, is presented below:
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Summary of Stock-Based Compensation Expense | A summary of the Company’s stock-based compensation expense as recognized on the unaudited condensed consolidated statements of operations is as follows:
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Net Income (Loss) Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Calculation of Basic and Diluted Net Income (Loss) Per Share | The following table sets forth the calculation of basic and diluted net income (loss) per share for the periods presented:
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Schedule of Antidilutive Securities Excluded From Computation of Earnings Per Share | The following weighted average outstanding shares of common stock equivalents were excluded from the computation of the diluted net income (loss) per share for the periods presented because their effect would have been anti-dilutive:
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Segment and Geographic Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Consolidated Total Revenue by Geography | The following are a summary of consolidated revenues within geographic areas:
(1) No single country outside of the United States represented more than 10% of our revenue.
|
Revenue Recognition - Schedule of Timing of Transfer of Control and Cash Flows (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 94,013 | $ 75,879 | $ 261,913 | $ 199,516 |
Licenses | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 30,864 | 26,825 | 86,748 | 64,827 |
Subscription | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 51,004 | 37,383 | 140,807 | 102,929 |
Services and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 12,145 | 11,671 | 34,358 | 31,760 |
Revenue recognized at a point in time | Licenses | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 30,864 | 26,825 | 86,748 | 64,827 |
Revenue recognized over time | Subscription | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 51,004 | 37,383 | 140,807 | 102,929 |
Revenue recognized over time | Services and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 12,145 | $ 11,671 | $ 34,358 | $ 31,760 |
Revenue Recognition - Summary of Activity Impacting Contract Balances (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Capitalized Contract Cost [Roll Forward] | ||
Contract acquisition costs, beginning balance | $ 35,152 | $ 28,043 |
Additional deferred contract acquisition costs | 20,117 | 9,700 |
Amortization of deferred contract acquisition costs | (10,127) | (7,346) |
Contract acquisition costs, ending balance | $ 45,142 | $ 30,397 |
Revenue Recognition - Additional Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
Dec. 31, 2019 |
|
Disaggregation of Revenue [Line Items] | |||||
Impairment losses recognized on contract assets | $ 0 | $ 0 | |||
Revenue recognized that was previously deferred | $ 54,000,000.0 | $ 47,200,000 | 122,300,000 | 94,400,000 | |
Contract asset, reclassified to receivable | 4,000,000.0 | $ 2,500,000 | |||
Revenue expected to recognize | 273,100,000 | 273,100,000 | |||
Deferred Contract Costs Expected To Be Amortized Within Next 12 Months | |||||
Disaggregation of Revenue [Line Items] | |||||
Deferred contract or customer acquisition costs | $ 13,500,000 | $ 13,500,000 | $ 10,900,000 |
Revenue Recognition - Summary of Contract Balances With Deferred Revenue Current and NonCurrent (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Contract With Customer, Liability [Roll Forward] | ||
Deferred revenue, beginning balance | $ 152,033 | $ 114,301 |
Increase, net | 7,057 | 9,537 |
Deferred revenue, ending balance | $ 159,090 | $ 123,838 |
Revenue Recognition - Additional Information (Details1) $ in Millions |
Sep. 30, 2020
USD ($)
|
---|---|
Disaggregation of Revenue [Line Items] | |
Revenue expected to recognize | $ 273.1 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-10-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to recognize | $ 167.2 |
Remaining performance obligations, expected timing of satisfaction, period | 12 months |
Fair Value Measurements - Summary of Financial Assets that are Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets: | ||
Total cash equivalents | $ 2,691 | $ 364,127 |
Level 1 | ||
Assets: | ||
Total cash equivalents | 2,691 | 364,127 |
Money market funds | ||
Assets: | ||
Total cash equivalents | 2,691 | 364,127 |
Money market funds | Level 1 | ||
Assets: | ||
Total cash equivalents | $ 2,691 | $ 364,127 |
Business Combinations - Summary of Final Purchase Price Allocation (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
Oct. 15, 2019 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Goodwill | $ 241,121 | $ 241,051 | |
Orkus | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | $ 0 | ||
Prepayments and other current assets | 34 | ||
Right-of-use assets | 90 | ||
Goodwill | 7,637 | ||
Intangible assets | 9,760 | ||
Accounts payable | (21) | ||
Accrued expenses and other liabilities | (133) | ||
Deferred tax liability - non-current | (861) | ||
Total fair value of assets acquired and liabilities assumed | 16,506 | ||
Overwatch.ID | |||
Business Acquisition [Line Items] | |||
Cash and cash equivalents | 45 | ||
Accounts receivable | 66 | ||
Prepayments and other current assets | 103 | ||
Deferred tax asset - non-current | 687 | ||
Right-of-use assets | 175 | ||
Goodwill | 14,107 | ||
Intangible assets | 6,610 | ||
Accounts payable | (256) | ||
Accrued expenses and other liabilities | (185) | ||
Deferred revenue | (466) | ||
Total fair value of assets acquired and liabilities assumed | $ 20,886 |
Business Combinations - Summary of Estimated Fair Values and Useful Lives of Identifiable Intangible Assets Acquired (Details) $ in Thousands |
Oct. 15, 2019
USD ($)
|
---|---|
Orkus | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets | $ 9,760 |
Overwatch.ID | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets | 6,610 |
Developed technology | Orkus | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets | $ 9,760 |
Estimated Useful Life | 5 years |
Developed technology | Overwatch.ID | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Intangible assets | $ 6,610 |
Estimated Useful Life | 5 years |
Goodwill and Intangible Assets - Schedule of Goodwill Activity (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 241,051 |
Measurement period adjustments | 70 |
Goodwill, ending balance | $ 241,121 |
Goodwill and Intangible Assets - Additional Information (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Impairment of goodwill | $ 0 | $ 0 |
Impairment of intangible assets | $ 0 | $ 0 |
Goodwill and Intangible Assets - Schedule of Cost and Amortization of Intangible Assets (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Dec. 31, 2019 |
|
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 129,059 | $ 129,129 |
Less: Accumulated amortization | (56,992) | (47,478) |
Total intangible assets, net | $ 72,067 | 81,651 |
Customer lists | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life | 15 years | |
Intangible assets, gross | $ 42,500 | 42,500 |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life | 8 years 10 months 24 days | |
Intangible assets, gross | $ 58,370 | 58,440 |
Trade names and trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life | 17 years | |
Intangible assets, gross | $ 24,500 | 24,500 |
Other intangible assets | ||
Finite-Lived Intangible Assets [Line Items] | ||
Weighted Average Useful Life | 4 years 9 months 18 days | |
Intangible assets, gross | $ 3,689 | $ 3,689 |
Goodwill and Intangible Assets - Summary of Amortization Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | $ 3,159 | $ 2,331 | $ 9,514 | $ 6,993 |
Cost of revenue - licenses | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | 1,007 | 1,008 | 3,023 | 3,024 |
Cost of revenue - subscription | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | 921 | 96 | 2,742 | 288 |
Research and development | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | 162 | 159 | 543 | 477 |
Sales and marketing | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization expense | $ 1,069 | $ 1,068 | $ 3,206 | $ 3,204 |
Goodwill and Intangible Assets - Schedule of Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2020 (except the nine months ended September 30) | $ 3,153 | |
2021 | 12,585 | |
2022 | 12,247 | |
2023 | 11,744 | |
2024 | 9,412 | |
Thereafter | 22,926 | |
Total intangible assets, net | $ 72,067 | $ 81,651 |
Commitments and Contingencies - Additional Information (Details) - USD ($) |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Commitments And Contingencies Disclosure [Line Items] | ||
Financing leases | $ 0 | |
Standby Letter of Credit | ||
Commitments And Contingencies Disclosure [Line Items] | ||
Cash collateral | $ 6,000,000.0 | $ 6,000,000.0 |
Minimum | ||
Commitments And Contingencies Disclosure [Line Items] | ||
Remaining lease terms | 1 year | |
Maximum | ||
Commitments And Contingencies Disclosure [Line Items] | ||
Remaining lease terms | 9 years |
Commitments and Contingencies - Summary of Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
2020 (except the nine months ended September 30) | $ 1,416 | |
2021 | 5,832 | |
2022 | 5,734 | |
2023 | 5,264 | |
2024 | 4,951 | |
Thereafter | 22,283 | |
Total minimum lease payments | 45,480 | |
Less: interest | (6,939) | |
Total present value of operating lease liabilities | 38,541 | |
Current operating lease liabilities | 4,314 | |
Long-term operating lease liabilities | $ 34,227 | $ 38,035 |
Convertible Senior Notes and Capped Call Transactions - Summary of Net Carrying Amount of Liability and Equity Components of Notes (Details) - USD ($) |
Sep. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Net carrying amount | $ 322,187,000 | $ 0 | |
Net carrying amount | 0 | 309,051,000 | |
Convertible Senior Notes due 2024 | |||
Debt Instrument [Line Items] | |||
Debt instrument principal amount | 400,000,000 | 400,000,000 | $ 400,000,000.0 |
Unamortized discount | (72,417,000) | (84,542,000) | |
Unamortized issuance costs | (5,396,000) | (6,407,000) | |
Net carrying amount | 322,187,000 | ||
Net carrying amount | 309,051,000 | ||
Equity component, net of issuance costs | $ 86,764,000 | $ 86,764,000 |
Convertible Senior Notes and Capped Call Transactions - Summary of Interest Expense Recognized Related to Notes (Details) - Convertible Senior Notes due 2024 - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Interest Expense Debt [Line Items] | ||||
Contractual interest expense | $ 125 | $ 8 | $ 375 | $ 8 |
Amortization of debt discount | 4,094 | 261 | 12,125 | 261 |
Amortization of debt issuance costs | 337 | 22 | 1,011 | 22 |
Total | $ 4,556 | $ 291 | $ 13,511 | $ 291 |
Stock-Based Compensation - Summary of Stock-Based Compensation Expense By Underlying Equity Instrument (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 7,838 | $ 4,489 | $ 21,179 | $ 14,098 |
ESPP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 705 | 438 | 1,759 | 1,703 |
Incentive units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 0 | 0 | 0 | 351 |
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | 1,479 | 1,232 | 4,307 | 3,868 |
RSUs | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total stock-based compensation expense | $ 5,654 | $ 2,819 | $ 15,113 | $ 8,176 |
Income Taxes - Additional Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Tax Examination [Line Items] | ||||
Effective income tax rate | 78.30% | (249.30%) | 28.50% | 13.90% |
Interest or penalties expense | $ 0 | $ 0 | ||
U.S. Federal | ||||
Income Tax Examination [Line Items] | ||||
Income tax examination description | no longer subject to U.S. federal income tax examinations for years before 2016 | |||
Foreign Tax Authority | ||||
Income Tax Examination [Line Items] | ||||
Income tax examination description | no longer subject to state, local and foreign income tax examinations by tax authorities for years before 2015 |
Net Income (Loss) Per Share - Schedule of Calculation of Basic and Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Numerator | ||||
Net income (loss) | $ (676) | $ 3,668 | $ (6,051) | $ (13,919) |
Denominator | ||||
Weighted average shares outstanding, Basic (in shares) | 90,764 | 89,143 | 90,320 | 88,739 |
Weighted average shares outstanding, Diluted (in shares) | 90,764 | 90,808 | 90,320 | 88,739 |
Net income (loss) per share | ||||
Basic (in dollars per share) | $ (0.01) | $ 0.04 | $ (0.07) | $ (0.16) |
Diluted (in dollars per share) | $ (0.01) | $ 0.04 | $ (0.07) | $ (0.16) |
Net Income (Loss) Per Share - Additional Information (Details) shares in Millions |
9 Months Ended |
---|---|
Sep. 30, 2020
$ / shares
shares
| |
Earnings Per Share [Abstract] | |
Conversion spread | shares | 14.1 |
Debt instrument, conversion price (in dollars per share) | $ / shares | $ 28.42 |
Segment and Geographic Information - Additional Information (Details) |
9 Months Ended |
---|---|
Sep. 30, 2020
Segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Segment and Geographic Information - Summary of Consolidated Total Revenue by Geography (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total revenue | $ 94,013 | $ 75,879 | $ 261,913 | $ 199,516 |
United States | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total revenue | 67,917 | 56,071 | 191,613 | 142,030 |
EMEA | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total revenue | 16,329 | 12,499 | 43,104 | 38,768 |
Rest of the World | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Total revenue | $ 9,767 | $ 7,309 | $ 27,196 | $ 18,718 |