Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Five9, Inc. and its wholly-owned subsidiaries (the “Company”) is a provider of cloud software for contact centers. The Company was incorporated in Delaware in 2001 and is headquartered in San Ramon, California. The Company has offices in Europe, Asia and Australia, which primarily provide research, development, sales, marketing, and client support services.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The significant estimates made by management affect revenue and related reserves, as well as the fair value of liabilities assumed through business combinations. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates.
Significant Accounting Policies
There have been no material changes from the significant accounting policies previously disclosed in Part II, Item 8, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on February 24, 2023.
Recent Accounting Pronouncements Not Yet Effective
The Company has reviewed or is in the process of evaluating all issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such accounting pronouncements will cause a material impact on its condensed consolidated financial position, operating results or statements of cash flows.
2. Revenue
Contract Balances
The following table provides information about accounts receivable, net, deferred contract acquisition costs, net, contract assets and contract liabilities from contracts with customers (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Accounts receivable, net | | $ | 88,085 | | | $ | 87,494 | |
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Deferred contract acquisition costs, net: | | | | |
Current | | $ | 50,566 | | | $ | 47,242 | |
Non-current | | 119,799 | | | 114,880 | |
Total deferred contract acquisition costs, net | | $ | 170,365 | | | $ | 162,122 | |
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Contract assets and contract liabilities: | | | | |
Contract assets (included in prepaid expenses and other current assets) | | $ | 3,209 | | | $ | 3,401 | |
Contract liabilities (deferred revenue) | | (58,082) | | | (57,816) | |
Noncurrent contract liabilities (deferred revenue) (included in other long-term liabilities) | | (1,093) | | | (1,178) | |
Net contract liabilities | | $ | (55,966) | | | $ | (55,593) | |
The Company receives payments from customers based upon billing cycles. Invoice payment terms are usually 30 days or less. Accounts receivable are recorded when the right to consideration becomes unconditional.
Deferred contract acquisition costs are recorded when incurred and are amortized over an estimated customer benefit period of five years.
The Company’s contract assets consist of unbilled amounts typically resulting from professional services revenue recognition when it exceeds the total amounts billed to the customer. The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized.
In the three months ended March 31, 2023, the Company recognized revenue of $31.4 million related to its contract liabilities at December 31, 2022.
Remaining Performance Obligations
As of March 31, 2023, the aggregate amount of the total transaction price allocated in contracts with original duration of greater than one year to the remaining performance obligations was $918.3 million. The Company expects to recognize revenue on approximately three-fifths of the remaining performance obligations over the next 24 months, with the balance recognized thereafter. The Company excludes amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less. Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations.
3. Investments and Fair Value Measurements
Marketable Investments
The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable investments as of March 31, 2023 and December 31, 2022 were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | March 31, 2023 |
Short-Term Marketable Investments | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Certificates of deposit | | $ | 2,201 | | | $ | — | | | $ | (8) | | | $ | 2,193 | |
U.S. treasury | | 169,888 | | | 35 | | | (668) | | | 169,255 | |
U.S. agency securities | | 267,338 | | | 50 | | | (1,019) | | | 266,369 | |
Commercial paper | | 35,327 | | | 1 | | | (39) | | | 35,289 | |
Municipal bonds | | 12,719 | | | — | | | (97) | | | 12,622 | |
Corporate bonds | | 2,663 | | | — | | | (10) | | | 2,653 | |
Total | | $ | 490,136 | | | $ | 86 | | | $ | (1,841) | | | $ | 488,381 | |
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| | March 31, 2023 |
Long-term Marketable Investments | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
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U.S. agency securities | | $ | 11,478 | | | $ | 14 | | | $ | (1) | | | $ | 11,491 | |
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Corporate bonds | | 2,013 | | | — | | | (6) | | | 2,007 | |
Total | | $ | 13,491 | | | $ | 14 | | | $ | (7) | | | $ | 13,498 | |
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| | December 31, 2022 |
Short-Term Marketable Investments | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Certificates of deposit | | $ | 747 | | | $ | — | | | $ | (13) | | | $ | 734 | |
U.S. treasury securities | | 186,776 | | | 8 | | | (1,382) | | | 185,402 | |
U.S. agency and government-sponsored securities | | 197,597 | | | 29 | | | (1,660) | | | 195,966 | |
Commercial paper | | 25,386 | | | — | | | — | | | 25,386 | |
Municipal bonds | | 22,764 | | | — | | | (145) | | | 22,619 | |
Corporate bonds | | 3,658 | | | — | | | (22) | | | 3,636 | |
Total | | $ | 436,928 | | | $ | 37 | | | $ | (3,222) | | | $ | 433,743 | |
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| | December 31, 2022 |
Long-term Marketable Investments | | Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
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U.S. agency securities | | $ | 885 | | | $ | — | | | $ | — | | | $ | 885 | |
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Total | | $ | 885 | | | $ | — | | | $ | — | | | $ | 885 | |
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The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than 12 months as of March 31, 2023 and December 31, 2022 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
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| | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value |
Certificates of deposit | | $ | (8) | | | $ | 490 | | | $ | (13) | | | $ | 734 | |
U.S. treasury securities | | (668) | | | 90,248 | | | (1,382) | | | 126,534 | |
U.S. agency securities | | (1,020) | | | 203,987 | | | (1,660) | | | 172,458 | |
Commercial paper | | (39) | | | 28,874 | | | — | | | — | |
Municipal bonds | | (97) | | | 12,622 | | | (145) | | | 12,623 | |
Corporate bonds | | (16) | | | 4,660 | | | (22) | | | 3,636 | |
Total | | $ | (1,848) | | | $ | 340,881 | | | $ | (3,222) | | | $ | 315,985 | |
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Although the Company had certain available-for-sale debt securities in an unrealized loss position as of March 31, 2023, no impairment loss was recorded since it did not intend to sell them, did not anticipate a need to sell them, and the decline in fair value was not due to any credit-related factors.
Fair Value Measurements
The Company carries cash equivalents and marketable investments at fair value. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 — Observable inputs, which include unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 inputs, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.
The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. The Company performs routine procedures such as comparing prices obtained from independent source to ensure that appropriate fair values are recorded.
The following tables set forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | |
Cash equivalents | | | | | | | |
Money market funds | $ | 17,296 | | | $ | — | | | $ | — | | | $ | 17,296 | |
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Total cash equivalents | $ | 17,296 | | | $ | — | | | $ | — | | | $ | 17,296 | |
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Marketable investments (short and long term) | | | | | | | |
Certificates of deposit | $ | — | | | $ | 2,193 | | | $ | — | | | $ | 2,193 | |
U.S. treasury | 169,255 | | | — | | | — | | | 169,255 | |
U.S. agency securities and government sponsored securities | — | | | 277,860 | | | — | | | 277,860 | |
Commercial paper | — | | | 35,289 | | | — | | | 35,289 | |
Municipal bonds | — | | | 12,622 | | | — | | | 12,622 | |
Corporate bonds | — | | | 4,660 | | | — | | | 4,660 | |
Total marketable investments | $ | 169,255 | | | $ | 332,624 | | | $ | — | | | $ | 501,879 | |
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| December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | |
Cash equivalents | | | | | | | |
Money market funds | $ | 37,560 | | | $ | — | | | $ | — | | | $ | 37,560 | |
U.S. treasury securities | 19,700 | | | — | | | — | | | 19,700 | |
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Total cash equivalents | $ | 57,260 | | | $ | — | | | $ | — | | | $ | 57,260 | |
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Marketable investments (short and long-term) | | | | | | | |
Certificates of deposit | $ | — | | | $ | 734 | | | $ | — | | | $ | 734 | |
U.S. treasury securities | 185,402 | | | — | | | — | | | 185,402 | |
U.S. agency and government-sponsored securities | — | | | 196,851 | | | — | | | 196,851 | |
Commercial paper | — | | | 25,386 | | | — | | | 25,386 | |
Municipal bonds | — | | | 22,619 | | | — | | | 22,619 | |
Corporate bonds | — | | | 3,636 | | | — | | | 3,636 | |
Total marketable investments | $ | 185,402 | | | $ | 249,226 | | | $ | — | | | $ | 434,628 | |
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As of March 31, 2023 and December 31, 2022, the estimated fair value of the Company’s outstanding 2023 convertible senior notes was $0.3 million for each of the periods. As of March 31, 2023 and December 31, 2022, the estimated fair value of the Company's outstanding 2025 convertible senior notes was $700.7 million and $687.1 million, respectively. The fair values were determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 in the fair value hierarchy. See Note 6 for further information on the Company’s convertible senior notes.
In February 2022, the Company made a $2.0 million equity investment in a privately-held company that it does not have the ability to exercise significant influence over. The Company elected the measurement alternative for an equity security without a readily determinable fair value. Accordingly, this investment will be accounted for at its cost minus impairment, if any, and is classified within Level 3. If the Company identifies observable price
changes in orderly transactions for such investment or a similar investment, it will measure the investment at fair value as of the date that the observable transactions or events occurred.
Except for the $2.0 million equity investment described above, there were no assets or liabilities measured at fair value on a non-recurring basis as of March 31, 2023 and December 31, 2022.
The fair value of the Company’s other financial instruments, including accounts receivable, accounts payable and other current liabilities, approximate their carrying value due to the relatively short maturity of those instruments. The carrying amounts of the Company’s operating leases approximate their fair value, which is the present value of expected future cash payments based on assumptions about current interest rates and the creditworthiness of the Company.
4. Financial Statement Components
Cash and cash equivalents consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Cash | | $ | 124,063 | | | $ | 123,260 | |
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Money market funds | | 17,296 | | | 37,560 | |
U.S. treasury | | — | | | 19,700 | |
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Total cash and cash equivalents | | $ | 141,359 | | | $ | 180,520 | |
Accounts receivable, net consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Trade accounts receivable | | $ | 77,712 | | | $ | 77,621 | |
Unbilled trade accounts receivable, net of advance client deposits | | 10,614 | | | 10,135 | |
Allowance for credit losses | | (241) | | | (262) | |
Accounts receivable, net | | $ | 88,085 | | | $ | 87,494 | |
Prepaid expenses and other current assets consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Prepaid expenses | | $ | 22,149 | | | $ | 17,151 | |
Other current assets | | 6,660 | | | 9,159 | |
Contract assets | | 3,209 | | | 3,401 | |
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Prepaid expenses and other current assets | | $ | 32,018 | | | $ | 29,711 | |
Property and equipment, net consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Computer and network equipment | | $ | 142,408 | | | $ | 148,789 | |
Computer software | | 54,183 | | | 50,955 | |
Internal-use software development costs | | 8,690 | | | 6,111 | |
Furniture and fixtures | | 3,990 | | | 3,326 | |
Leasehold improvements | | 6,003 | | | 6,574 | |
Property and equipment | | 215,274 | | | 215,755 | |
Accumulated depreciation and amortization | | (114,217) | | | (114,534) | |
Property and equipment, net | | $ | 101,057 | | | $ | 101,221 | |
Depreciation and amortization expense associated with property and equipment was $8.5 million and $7.8 million for the three months ended March 31, 2023 and 2022, respectively.
Property and equipment capitalized under finance lease obligations consists primarily of computer and network equipment and was immaterial as of March 31, 2023 and December 31, 2022.
Other assets consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Other assets | | $ | 9,275 | | | $ | 5,081 | |
Equity investment in a privately-held company | | 2,000 | | | 2,000 | |
Deferred tax assets | | 3,965 | | | 3,976 | |
Total | | $ | 15,240 | | | $ | 11,057 | |
Accrued and other current liabilities consisted of the following (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Accrued expenses | | $ | 21,964 | | | $ | 19,343 | |
Accrued compensation and benefits | | 40,232 | | | 33,749 | |
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Accrued and other current liabilities | | $ | 62,196 | | | $ | 53,092 | |
Other long-term liabilities consisted of the following (in thousands): | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Deferred revenue | $ | 1,093 | | | $ | 1,178 | |
Deferred tax liabilities | 206 | | | 157 | |
Other long-term liabilities | 3,614 | | | 1,745 | |
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Other long-term liabilities | $ | 4,913 | | | $ | 3,080 | |
5. Goodwill and Intangible Assets
Goodwill
There was no activity in the Company's goodwill balance during the three months ended March 31, 2023.
Intangible Assets
The following table summarizes the activity in the Company's intangible assets balance during the three months ended March 31, 2023 (in thousands): | | | | | | | | | | |
| | Three Months Ended March 31, 2023 | | |
Beginning of the period | | $ | 28,192 | | | |
Amortization | | (2,846) | | | |
End of the period | | $ | 25,346 | | | |
The components of intangible assets were as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | March 31, 2023 | | December 31, 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Weighted Average Remaining Amortization period (Years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Weighted Average Remaining Amortization period (Years) |
Developed technology | | $ | 56,214 | | | $ | (31,647) | | | $ | 24,567 | | | 3.0 | | $ | 56,214 | | | $ | (28,881) | | | $ | 27,333 | | | 3.2 |
Acquired workforce | | 470 | | | (470) | | | — | | | 0.0 | | 470 | | | (470) | | | 0 | | | 0.0 |
Customer relationships | | 1,600 | | | (821) | | | 779 | | | 2.5 | | 1,600 | | | (741) | | | 859 | | | 2.7 |
Trademarks | | 500 | | | (500) | | | — | | | 0.0 | | 500 | | | (500) | | | — | | | 0.0 |
Total | | $ | 58,784 | | | $ | (33,438) | | | $ | 25,346 | | | 3.0 | | $ | 58,784 | | | $ | (30,592) | | | $ | 28,192 | | | 3.2 |
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Amortization expense related to intangible assets was $2.8 million and $2.9 million for the three months ended March 31, 2023 and 2022, respectively.
As of March 31, 2023, the expected future amortization expense for intangible assets was as follows (in thousands): | | | | | | | | |
Period | | Expected Future Amortization Expense |
Remaining 2023 | | $ | 8,024 | |
2024 | | 7,527 | |
2025 | | 5,595 | |
2026 | | 4,200 | |
2027 | | — | |
Thereafter | | — | |
Total | | $ | 25,346 | |
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6. Debt
2025 Convertible Senior Notes and Related Capped Call Transactions
In May and June 2020, the Company issued $747.5 million aggregate principal amount of 2025 convertible senior notes in a private offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $97.5 million principal amount of the 2025 convertible senior
notes. The 2025 convertible senior notes mature on June 1, 2025 and bear interest at a fixed rate of 0.500% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The total net proceeds from the issuance of the 2025 convertible senior notes, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, were approximately $728.8 million.
Each $1,000 principal amount of the 2025 convertible senior notes is initially convertible into 7.4437 shares of the Company’s common stock (the “2025 Conversion Option”), which is equivalent to an initial conversion price of approximately $134.34 per share of common stock, subject to adjustment upon the occurrence of specified events. The initial conversion price represents a premium of approximately 30% to the $103.34 per share closing price of the Company’s common stock on The Nasdaq Global Market on May 21, 2020. The 2025 convertible senior notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding March 1, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (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; (2) during the five business day period after any five consecutive trading day period (the “2025 Measurement Period”) in which the trading price (as defined in the 2025 Indenture governing the 2025 convertible senior notes) per $1,000 principal amount of the 2025 convertible senior notes for each trading day of the 2025 Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate in effect on each such trading day; (3) if the Company calls any or all of the 2025 convertible senior notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after March 1, 2025 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 2025 convertible senior notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. If the Company undergoes a fundamental change (as defined in the indenture governing the 2025 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2025 convertible senior notes, in principal amounts of $1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100% of the principal amount of the 2025 convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.
There have been no changes to the initial conversion price of the 2025 convertible senior notes since issuance. The closing market price of the Company's common stock of $72.29 per share on March 31, 2023, the last trading day during the three months ended March 31, 2023, was below $174.64 per share, which represents 130% of the initial conversion price of $134.34 per share. Additionally, 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, March 31, 2023, was not greater than or equal to 130% of the initial conversion price. As such, during the three months ended March 31, 2023, the conditions allowing holders of the 2025 convertible senior notes to convert were not met. The 2025 convertible senior notes are therefore not convertible during the three months ending June 30, 2023.
The Company may not redeem the 2025 convertible senior notes prior to June 6, 2023. The Company may redeem for cash all or any portion of the 2025 convertible senior notes, at its option, on or after June 6, 2023 and prior to March 1, 2025 if the last reported sale price of its 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 not more than two trading days immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. No sinking fund is provided for the 2025 convertible senior notes.
The 2025 convertible senior notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2025 convertible senior notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated (including the 2023 convertible senior notes); effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally
junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
The net carrying amount of the 2025 convertible senior notes as of March 31, 2023 and as of December 31, 2022 was as follows (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Principal | | $ | 747,500 | | | $ | 747,500 | |
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Unamortized issuance costs | | (8,216) | | | (9,124) | |
Net carrying amount | | $ | 739,284 | | | $ | 738,376 | |
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Interest expense related to the 2025 convertible senior notes was as follows (in thousands): | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Contractual interest expense | | $ | 934 | | | $ | 934 | | | | | |
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Amortization of issuance costs | | 908 | | | 899 | | | | | |
Total interest expense | | $ | 1,842 | | | $ | 1,833 | | | | | |
In connection with the issuance of the 2025 convertible senior notes, the Company entered into privately negotiated capped call transactions (the “2025 Capped Call Transactions”) with certain financial institutions. The initial cap price of the 2025 Capped Call Transactions was $206.68 per share and is subject to certain adjustments under the terms of the 2025 Capped Call Transactions. The 2025 Capped Call Transactions cover, subject to anti-dilution adjustments, approximately 5.6 million shares of the Company’s common stock.
2023 Convertible Senior Notes and Related Capped Call Transactions
In May 2018, the Company issued $258.8 million aggregate principal amount of the 2023 convertible senior notes in a private offering. The 2023 convertible senior notes mature on May 1, 2023 and bear interest at a fixed rate of 0.125% per annum, payable semiannually in arrears on May 1 and November 1 of each year. The total net proceeds from the offering, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, was approximately $250.8 million.
In May 2020, the Company used part of the net proceeds from the issuance of the 2025 convertible senior notes to repurchase, exchange or otherwise retire approximately $181.0 million aggregate principal amount of the 2023 convertible senior notes in privately-negotiated transactions for aggregate consideration of $449.6 million, consisting of $181.0 million in cash and 2,723,581 shares of the Company’s common stock (the "2023 Note Repurchase Transactions").
As of March 31, 2023, after giving effect to the 2023 Note Repurchase Transactions and other settlements upon conversion requests, approximately $0.2 million aggregate principal amount of 2023 convertible senior notes remained outstanding.
Each $1,000 principal amount of the 2023 convertible senior notes was initially convertible into 24.4978 shares of the Company’s common stock (the “2023 Conversion Option”), which is equivalent to an initial conversion price of approximately $40.82 per share of common stock, subject to adjustment upon the occurrence of specified events. The 2023 convertible senior notes were convertible, in multiples of $1,000 principal amount, at the option of the holders at any time prior to the close of business on the business day immediately preceding November 1, 2022, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ended on September 30, 2018 (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; (2) during the five business day period after any five consecutive trading day period (the “2023 Measurement Period”) in which the trading price (as defined in the indenture governing the 2023 convertible senior notes) per $1,000 principal amount of the 2023 convertible senior notes for each trading day of the 2023 Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate in effect on each such trading day; (3) if the Company calls any or all of the 2023 convertible senior notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. Commencing on November 1, 2022, and 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 2023 convertible senior notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. If the Company undergoes a fundamental change (as defined in the indenture governing the 2023 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2023 convertible senior notes, in principal amounts of $1,000 or a multiple thereof, at a fundamental change repurchase price equal to 100% of the principal amount of the 2023 convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their 2023 convertible senior notes in connection with such corporate event or during the relevant redemption period.
There have been no changes to the initial conversion price of the 2023 convertible senior notes since issuance. During each of the quarters from the third quarter of 2019 through the third quarter of 2022, one of the triggers for convertibility of the 2023 convertible senior notes was triggered as the last reported sale price of the Company’s common stock was greater than $53.07 per share, which represents 130% of the initial conversion price of $40.82 per share, for at least 20 trading days in the period of 30 consecutive trading days ended on, and including, the last trading day of the quarter for each quarter of 2020 and 2021 and for the first three quarters of 2022. As a result, the 2023 convertible senior notes were convertible, in multiples of $1,000 principal amount, at the option of the 2023 convertible senior note holders between October 1, 2019 to October 31, 2022. The 2023 convertible senior notes continue to be convertible from November 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date. There were no conversions of the 2023 convertible senior notes during the three months ended March 31, 2023. As of March 31, 2023, approximately $0.2 million aggregate principal amount of the Company's 2023 convertible senior notes remained outstanding.
The 2023 convertible senior notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2023 convertible senior notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated (including the 2025 convertible senior notes); effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.
The net carrying amount of the 2023 convertible senior notes as of March 31, 2023 and as of December 31, 2022 was as follows (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Principal | | $ | 169 | | | $ | 169 | |
| | | | |
Unamortized issuance costs | | — | | | — | |
Net carrying amount | | $ | 169 | | | $ | 169 | |
Interest expense related to the 2023 convertible senior notes was as follows (in thousands): | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Contractual interest expense | | $ | — | | | $ | 6 | | | | | |
| | | | | | | | |
Amortization of issuance costs | | — | | | 31 | | | | | |
Total interest expense | | $ | — | | | $ | 37 | | | | | |
In connection with the issuance of the 2023 convertible senior notes, the Company entered into privately negotiated capped call transactions (the “2023 Capped Call Transactions”) with certain financial institutions. The initial cap price of the 2023 Capped Call Transactions was $62.80 per share, and is subject to certain adjustments under the terms of the 2023 Capped Call Transactions. The 2023 Capped Call Transactions cover, subject to anti-dilution adjustments, approximately 6.3 million shares of the Company’s common stock.
7. Stockholders’ Equity
Capital Structure
Common Stock
The Company is authorized to issue 450,000,000 shares of common stock with a par value of $0.001 per share. As of March 31, 2023 and December 31, 2022, the Company had 71,544,294 and 71,047,179 shares of common stock issued and outstanding, respectively.
Preferred Stock
The Company is authorized to designate and issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share in one or more series without stockholder approval and to fix the rights, preferences, privileges and restrictions thereof. As of March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued and outstanding.
Common Stock Reserved for Future Issuance
Shares of common stock reserved for future issuance related to outstanding equity awards and employee equity incentive plans as of March 31, 2023 were as follows (in thousands): | | | | | | | | |
| | March 31, 2023 |
Stock options outstanding | | 1,303 |
RSUs (including PRSUs) outstanding | | 4,842 |
Shares available for future grant under 2014 Plan | | 16,339 |
Shares available for future issuance under ESPP | | 4,281 |
| | |
Total shares of common stock reserved | | 26,765 |
| | |
Stock Options
A summary of the Company’s stock option activity during the three months ended March 31, 2023 is as follows (in thousands, except years and per share data): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
Outstanding as of December 31, 2022 | | 1,481 | | | $ | 47.75 | | | | | |
Options granted | | — | | | — | | | | | |
Options exercised | | (139) | | | 22.49 | | | | | |
Options forfeited or expired | | (39) | | | 139.87 | | | | | |
Outstanding as of March 31, 2023 | | 1,303 | | | $ | 47.66 | | | 4.5 | | $ | 49,139 | |
| | | | | | | | |
The aggregate intrinsic value amounts are computed based on the difference between the exercise price of the stock options and the fair market value of the Company’s common stock of $72.29 per share as of March 31, 2023 for all in-the-money stock options outstanding.
Restricted Stock Units (including Performance-Based Restricted Stock Units)
A summary of the Company’s restricted stock unit ("RSU") activity (including PRSUs) during the three months ended March 31, 2023 is as follows (in thousands, except per share data): | | | | | | | | | | | | | | |
| | Number of Shares | | Weighted Average Grant Date Fair Value Per Share |
Outstanding as of December 31, 2022 | | 3,718 | | | $ | 103.55 | |
RSUs granted(1) | | 1,673 | | | 71.33 | |
RSUs vested and released | | (358) | | | 114.70 | |
RSUs forfeited or canceled | | (191) | | | 111.80 | |
Outstanding as of March 31, 2023 | | 4,842 | | | 90.00 | |
| | | | |
(1) Includes 35,921 PRSUs granted during the three months ended March 31, 2023.
PRSUs with Market and Service Conditions In 2022, the Company granted 284,282 PRSUs subject to market and service conditions (“market-based PRSUs”) with a grant date fair value of $30.6 million as part of its annual grant of equity incentive awards to certain executives and in connection with the appointment of Michael Burkland as its new Chief Executive Officer. During the first quarter of 2023, the Company granted an additional 35,921 market-based PRSUs with a grant date fair value of $3.1 million. The amount that may be earned pursuant to the PRSUs ranges from 0% to 200% of the target number based on the Company’s relative total shareholder return (“RTSR”) performance as compared to the companies in the S&P Software and Services Select Index during three one-year performance periods. One-third of the total PRSUs may be earned and settled in shares following the end of each one-year performance period based on RTSR performance and subject to continued employment through the payment date, but the amount initially paid for the first two one-year performance periods is limited to 100% of the target amount for such years, and any PRSUs resulting from above-target performance in those first two years will be paid following the end of final one-year performance period, subject to the executive’s continued employment through the payment date. If the Company’s absolute total shareholder return for any performance period is negative, then no more than 100% of the target amount of PRSUs for such period may be earned. If an executive's employment with the Company terminates before the end of the final one-year performance period due to death or disability, 100% (if due to death) or 50% (if due to disability) of the unvested PRSUs may be earned subject to ultimate RTSR performance in each remaining performance period. Upon a qualifying termination of employment in connection with a change in control of the Company, the unvested PRSUs will vest on a double-trigger basis (i) at the target level for the market-based PRSUs granted to certain executives, excluding Michael Burkland, subject to the 2022-2024 performance period, and (ii) for the market-based PRSUs granted to certain executives, including Michael Burkland, subject to the 2023-2025 performance period, (a) at the target level for the uncompleted portions of the performance periods and (b) at the actual level of performance measured through the date of the change in control of the Company, based on the price per share paid in such change in control. The fair value of the PRSUs are determined on their grant date using a Monte Carlo Simulation model based upon assumptions presented below. The Company recognizes the fair value of the PRSUs ratably over their requisite service period.
During the first quarter of 2023, the Company certified the performance results for the 2022 measurement period for the PRSUs subject to the 2022-2024 performance period. Under the PRSU agreements, the TSR payout percentage ranges from 0% to 200%, with a 50% payout at the 25th TSR percentile (threshold), 100% payout at the 55th TSR percentile (target), 200% payout at the 90th percentile or greater (maximum) and no payout below the threshold performance level. The Company determined that its actual total shareholder return was -52.64% for 2022, and that its relative total shareholder return ranking was in the 30.2 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 58.7% of target.
PRSUs with Revenue and Service Conditions In 2022, the Company granted 66,167 PRSUs subject to revenue-based performance and service conditions (“revenue-based PRSUs”) with a grant date fair value of $6.6 million. The amount of revenue-based PRSUs that may be earned will be determined based on achievement of two quarterly revenue goals. One third of the revenue-based PRSUs may be earned based on achievement of the first revenue target and, if achieved, will vest in four quarterly installments, with the first installment occurring on the date such achievement is certified, subject to the executive's continuous service through the applicable vesting dates. Two thirds of the revenue-based PRSUs may be earned based on achievement of the second revenue target and, if achieved, will vest in eight quarterly installments, with the first installment occurring on the date such achievement is certified, subject to the executive's continuous service through the applicable vesting dates. The revenue-based PRSUs are otherwise on the Company's standard award terms for its market-based PRSUs. The Company concluded that the first revenue target was probable of achievement at March 31, 2023, and thus recognized the related stock-based compensation expense through this period. The Company, however, concluded that, as of March 31, 2023, the
second revenue target was not probable of achievement, and thus did not recognize related stock-based compensation expense through this period. The Company will reassess the probability of the achievement of the performance conditions at each reporting period and a cumulative catch-up adjustment will be recorded to stock-based compensation cost for any change in the probability assessment.
Stock-Based Compensation
Stock-based compensation expense was as follows (in thousands): | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Cost of revenue | | $ | 9,333 | | | $ | 7,793 | | | | | |
Research and development | | 12,382 | | | 10,145 | | | | | |
Sales and marketing | | 17,045 | | | 13,424 | | | | | |
General and administrative | | 11,983 | | | 8,032 | | | | | |
Total stock-based compensation expense | | $ | 50,743 | | | $ | 39,394 | | | | | |
| | | | | | | | |
As of March 31, 2023, unrecognized stock-based compensation expense by award type and expected weighted-average recognition periods are summarized in the following table (in thousands, except years). | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stock Option | | RSU (excluding PRSUs) | | PRSU | | ESPP |
Unrecognized stock-based compensation expense | | $ | 9,144 | | | $ | 375,880 | | | $ | 22,462 | | | $ | 1,086 | |
Weighted-average amortization period | | 2.0 years | | 2.8 years | | 2.2 years | | 0.1 years |
The weighted-average assumptions used to value stock options granted during the periods presented were as follows: | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Stock Options | | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Expected term (years) | | — | | | 6.0 | | | | |
Volatility | | — | | | 46.0 | % | | | | |
Risk-free interest rate | | — | | | 1.8 | % | | | | |
Dividend yield (1) | | — | | | — | | | | | |
| | | | | | | | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The weighted-average assumptions used to value PRSUs with market conditions granted during the periods presented were as follows:
| | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
PRSUs (Market Conditions) | | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Closing price of common stock as of grant date | | $ | 68.15 | | | $ | 110.00 | | | | | |
Expected term (years) | | 2.84 | | 2.84 | | | | |
Volatility | | 51.1 | % | | 48.8 | % | | | | |
Risk-free interest rate | | 4.5 | % | | 1.6 | % | | | | |
Dividend yield (1) | | — | | | — | | | | | |
(1)The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock. Accordingly, the expected dividend yield is zero.
8. Net Loss Per Share
Basic net loss per share is calculated by dividing net loss by the weighted average number of shares of common stock outstanding during the period, and excludes any dilutive effects of employee stock-based awards and potential shares upon conversion of the convertible senior notes. Diluted net loss per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options,
vesting of RSUs and PRSUs, and shares of common stock issuable upon conversion of convertible senior notes. As the Company had net losses for the three months ended March 31, 2023 and 2022, all potentially issuable shares of common stock were determined to be anti-dilutive.
The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data): | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended | | |
| March 31, 2023 | | March 31, 2022 | | | | |
Net loss | $ | (27,248) | | | $ | (34,120) | | | | | |
Weighted-average shares used in computing basic and diluted net loss per share | 71,259 | | | 68,974 | | | | | |
Basic and diluted net loss per share | $ | (0.38) | | | $ | (0.49) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The following securities were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive (in thousands): | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Stock options | | 1,303 | | | 1,768 | | | | | |
RSUs (includes PRSUs) | | 4,842 | | | 3,236 | | | | | |
Convertible senior notes | | 5,568 | | | 6,042 | | | | | |
| | | | | | | | |
Total | | 11,713 | | | 11,046 | | | | | |
The Company used the if-converted method for calculating any potential dilutive effect of its convertible senior notes for the three months ended March 31, 2023 and 2022. Under this method, the Company calculates diluted earnings per share under both the cash and share settlement assumptions to determine which is more dilutive. If share settlement is more dilutive, the Company calculates diluted earnings per share assuming that all of the convertible senior notes were converted solely into shares of common stock at the beginning of the reporting period. The potential impact upon the conversion of the convertible senior notes were excluded from the calculation of diluted net loss per share for the three months ended March 31, 2023 and 2022 because the effect would have been anti-dilutive.
9. Income Taxes
The provision for income taxes for the three months ended March 31, 2023 and 2022 was approximately $0.5 million and $2.3 million, respectively. The provision for income taxes for the three months ended March 31, 2023 consisted primarily of state and foreign current income tax expense. The provision for income taxes for the three months ended March 31, 2022 consisted primarily of foreign income tax expense from the intercompany sale of the Company's Australian intellectual property to the United States.
For the three months ended March 31, 2023, the provision for income taxes differed from the statutory amount primarily due to domestic state income taxes, foreign income taxes and the Company realizing no benefit for current year domestic losses due to maintaining a full valuation allowance against its domestic net deferred tax assets. For the three months ended March 31, 2022, the provision for income taxes differed from the statutory amount primarily due to foreign income taxes and the Company realizing no benefit for current year domestic losses due to maintaining a full valuation allowance against its domestic net deferred tax assets.
The realization of tax benefits of deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence, the Company does not believe it is more likely than not that the net deferred tax assets will be realizable. Accordingly, the Company has provided a full valuation allowance against the domestic net deferred tax assets as of March 31, 2023 and December 31, 2022. The Company intends to maintain the remaining valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance. During the three months ended March 31, 2023, there were no material changes to the total amount of unrecognized tax benefits.
10. Commitments and Contingencies
Commitments
The Company’s principal commitments consist of future payment obligations under its convertible senior notes, operating leases for office facilities, cloud services and software and maintenance agreements, and agreements with third parties to provide co-location hosting and telecommunication services. These commitments as of December 31, 2022 are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and material updates to these commitments during the three months ended March 31, 2023 are disclosed herein, including in this Note 10 and in Note 12.
As of March 31, 2023, the Company’s commitments under various co-location hosting and telecommunications agreements totaled $15.3 million for terms ranging up to 60 months. These agreements require the Company to make monthly payments over the service term in exchange for certain network services.
As of March 31, 2023, the Company had outstanding cloud services and software and maintenance agreement commitments totaling $46.3 million, of which $25.2 million is expected to be paid in the remainder of 2023, $17.1 million is expected to be paid in 2024, and the remaining $4.0 million is expected to be paid in 2025.
As of March 31, 2023, $747.7 million of aggregate principal of the convertible senior notes were outstanding. The 2023 convertible senior notes and the 2025 convertible senior notes are due on May 1, 2023 and June 1, 2025, respectively. See Note 6 for more information concerning the convertible senior notes.
Legal Matters
The Company is involved in various legal and regulatory matters arising in the normal course of business. In management’s opinion, resolution of these matters is not expected to have a material impact on the Company’s consolidated results of operations, cash flows, or its financial position. However, due to the uncertain nature of legal matters, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. The Company expenses legal fees as incurred.
Indemnification Agreements
In the ordinary course of business, the Company enters into agreements of varying scope and terms pursuant to which it agrees to indemnify clients, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, including breach of security, services to be provided by the Company or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with its directors, officers and certain employees that requires it, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. There are no claims that the Company is aware of that could have a material effect on the consolidated balance sheets, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.
11. Geographical Information
The following table summarizes revenues by geographic region based on client billing address (in thousands): | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
United States | | $ | 195,363 | | | $ | 167,247 | | | | | |
International | | 23,076 | | | 15,530 | | | | | |
Total revenue | | $ | 218,439 | | | $ | 182,777 | | | | | |
| | | | | | | | |
The following table summarizes total property and equipment, net in the respective locations (in thousands): | | | | | | | | | | | | | | |
| | | | |
| | March 31, 2023 | | December 31, 2022 |
United States | | $ | 93,001 | | | $ | 92,659 | |
International | | 8,056 | | | 8,562 | |
Property and equipment, net | | $ | 101,057 | | | $ | 101,221 | |
| | | | |
12. Leases
The Company has leases for offices, data centers and computer and networking equipment that expire at various dates through 2031. The Company’s leases have remaining terms of one to eight years, some of the leases include a Company option to extend the leases for up to one to five years, and some of the leases include the option to terminate the leases upon 30-days' notice. The Company does not separate lease and non-lease components for real estate operating leases.
The components of lease expenses were as follows (in thousands): | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Operating lease cost | | $ | 3,382 | | | $ | 2,900 | | | | | |
Finance lease cost: | | | | | | | | |
Amortization of right-of-use assets | | $ | 63 | | | $ | 333 | | | | | |
| | | | | | | | |
Total finance lease cost | | $ | 63 | | | $ | 333 | | | | | |
Supplemental cash flow information related to leases was as follows (in thousands): | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
| | March 31, 2023 | | March 31, 2022 | | | | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | | |
Operating cash used in operating leases | | $ | (3,275) | | | $ | (2,709) | | | | | |
| | | | | | | | |
Right of use assets obtained in exchange for lease obligations: | | | | | | | | |
Operating leases | | 4,153 | | | 236 | | | | | |
| | | | | | | | |
Supplemental balance sheet information related to leases was as follows (in thousands): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Operating leases | | | | |
Operating lease right-of-use assets | | $ | 45,339 | | | $ | 44,120 | |
| | | | |
Operating lease liabilities | | $ | 11,739 | | | $ | 10,626 | |
Operating lease liabilities — less current portion | | 41,703 | | | 41,389 | |
Total operating lease liabilities | | $ | 53,442 | | | $ | 52,015 | |
Finance leases | | | | |
Property and equipment, gross | | $ | 30,015 | | | $ | 36,282 | |
Less: accumulated depreciation and amortization | | (29,999) | | | (36,203) | |
Property and equipment, net | | $ | 16 | | | $ | 79 | |
| | | | |
| | | | |
| | | | |
| | | | |
Weighted average remaining terms were as follows (in years): | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Weighted average remaining lease term | | | | |
Operating leases | | 6.1 | | 6.4 |
| | | | |
Weighted average discount rates were as follows: | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
Weighted average discount rate | | | | |
Operating leases | | 3.6 | % | | 3.4 | % |
| | | | |
Maturities of lease liabilities were as follows (in thousands): | | | | | | | | | | |
Year Ending December 31, | | Operating Leases | | |
Remaining 2023 | | $ | 10,155 | | | |
2024 | | 11,379 | | | |
2025 | | 8,436 | | | |
2026 | | 6,541 | | | |
2027 | | 5,733 | | | |
Thereafter | | 17,081 | | | |
Total future minimum lease payments | | 59,325 | | | |
Less: imputed interest | | (5,883) | | | |
Total | | $ | 53,442 | | | |
13. Subsequent Event
The 2023 convertible senior notes matured on May 1, 2023 and were settled in a combination of cash and shares of the Company's common stock. Upon maturity, the outstanding capped calls associated with the repurchase and early settlements of $194.7 million 2023 convertible senior notes were settled, which resulted in the Company receiving 370,877 shares and $74.5 million.