Company Quick10K Filing
Tableau Software
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 87 $14,111
10-Q 2019-07-31 Quarter: 2019-06-30
10-Q 2019-05-06 Quarter: 2019-03-31
10-K 2019-02-22 Annual: 2018-12-31
10-Q 2018-11-08 Quarter: 2018-09-30
10-Q 2018-08-06 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-31
10-K 2018-02-26 Annual: 2017-12-31
10-Q 2017-11-07 Quarter: 2017-09-30
10-Q 2017-08-09 Quarter: 2017-06-30
10-Q 2017-05-08 Quarter: 2017-03-31
10-K 2017-02-23 Annual: 2016-12-31
10-Q 2016-11-04 Quarter: 2016-09-30
10-Q 2016-08-08 Quarter: 2016-06-30
10-Q 2016-05-09 Quarter: 2016-03-31
10-K 2016-02-25 Annual: 2015-12-31
10-Q 2015-11-09 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-08 Quarter: 2015-03-31
10-K 2015-02-27 Annual: 2014-12-31
10-Q 2014-11-07 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-07 Quarter: 2014-03-31
10-K 2014-02-27 Annual: 2013-12-31
10-Q 2013-10-28 Quarter: 2013-09-30
10-Q 2013-08-09 Quarter: 2013-06-30
8-K 2019-08-01 M&A, Delisting, Shareholder Rights, Control, Officers, Amend Bylaw, Exhibits
8-K 2019-06-10 Other Events, Exhibits
8-K 2019-06-09 Enter Agreement, Exhibits
8-K 2019-05-21 Shareholder Vote
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-02-15 Officers
8-K 2019-02-05 Earnings, Exhibits
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-09-24 Officers
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-07-19 Officers
8-K 2018-05-22 Shareholder Vote
8-K 2018-05-02 Earnings, Officers, Other Events, Exhibits
8-K 2018-02-15 Officers
8-K 2018-02-01 Earnings, Officers, Exhibits
DATA 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. Description of Business
Note 2. Summary of Significant Accounting Policies
Note 3. Short-Term and Long-Term Investments
Note 4. Fair Value Measurements
Note 5. Leases
Note 6. Stockholders' Equity
Note 7. Business Combination
Note 8. Revenue
Note 9. Stock-Based Compensation
Note 10. Income Taxes
Note 11. Commitments and Contingencies
Note 12. Segments and Information About Revenues By Geographic Area
Note 13. Net Loss per Share
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sale of Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 exhibit311q22019.htm
EX-31.2 exhibit312q22019.htm
EX-32.1 exhibit321q22019.htm

Tableau Software Earnings 2019-06-30

DATA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
SPLK 18,641 5,070 3,244 1,568 1,266 0 130 17,768 81% 137.0 0%
ANSS 18,612 3,582 659 1,030 913 285 380 17,879 89% 47.1 8%
CHKP 16,409 5,828 2,056 0 0 0 0 16,105 0%
SSNC 13,387 15,938 11,121 4,540 1,949 356 1,012 19,909 43% 19.7 2%
DATA 14,111 1,912 837 1,231 1,077 -143 -128 13,558 87% -105.6 -7%
SYMC 15,134 16,229 10,117 4,255 3,338 910 1,567 17,803 78% 11.4 6%
TTWO 14,343 4,815 2,633 3,186 1,319 355 314 12,912 41% 41.1 7%
PAYC 12,054 1,592 1,117 695 463 167 218 11,178 67% 51.3 10%
OKTA 11,548 1,871 1,472 419 304 -158 -144 10,496 73% -72.7 -8%
DOCU 10,870 1,786 1,217 699 524 -161 -99 10,672 75% -108.1 -9%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

or

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____ to ____

Commission File Number: 001-35925

TABLEAU SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)

    
Delaware
 
47-0945740
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
1621 North 34th Street
Seattle, Washington 98103
(Address of principal executive offices and zip code)

(206) 633-3400
(Registrant's telephone number, including area code)
    
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Class A Common Stock, par value $0.0001
DATA
New York Stock Exchange
                
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). x Yes o No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
 
 
Accelerated filer
Non-accelerated filer
 
 
Smaller reporting company
Emerging growth company
 
 
 
 

 
 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No

As of July 29, 2019, there were approximately 77,093,957 shares of the Registrant's Class A common stock and 10,368,607 shares of the Registrant's Class B common stock outstanding.

 
 



TABLEAU SOFTWARE, INC.
QUARTERLY REPORT ON FORM 10-Q
For the Quarter Ended June 30, 2019
Table of Contents

 
PART I. FINANCIAL INFORMATION
Page
Item 1.
Financial Statements (unaudited)
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
PART II. OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 6.
 


 
 


Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Tableau Software, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

June 30, 2019
 
December 31, 2018

(in thousands, except share data)
Assets

 
 
Current assets
 
 
 
Cash and cash equivalents
$
553,538

 
$
653,022

Short-term investments
491,039

 
369,355

Accounts receivable, net of allowance for doubtful accounts of $1,889 and $1,608
217,454

 
236,063

Prepaid expenses and other current assets
187,027

 
155,012

Income taxes receivable
2,175

 
2,268

Total current assets
1,451,233

 
1,415,720

Long-term investments
24,548

 
26,278

Property and equipment, net
106,016

 
94,537

Operating lease right-of-use assets
221,606

 

Goodwill
45,430

 
42,530

Deferred income taxes
4,866

 
4,733

Other long-term assets
57,916

 
50,927

Total assets
$
1,911,615

 
$
1,634,725

Liabilities and stockholders' equity

 

Current liabilities

 

Accounts payable
$
5,214

 
$
6,652

Accrued compensation and employee-related benefits
87,991

 
105,155

Other accrued liabilities
80,676

 
55,896

Income taxes payable
494

 
2,982

Deferred revenue
373,001

 
377,892

Total current liabilities
547,376

 
548,577

Deferred revenue
21,522

 
16,306

Operating lease liabilities
257,982

 

Other long-term liabilities
10,286

 
56,257

Total liabilities
837,166

 
621,140

Commitments and contingencies (Note 11)

 

Stockholders' equity

 
 
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; none issued

 

Class B common stock, $0.0001 par value, 75,000,000 shares authorized; 10,368,607 and 11,042,131 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
1

 
1

Class A common stock, $0.0001 par value, 750,000,000 shares authorized; 77,004,113 and 73,314,823 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
8

 
7

Additional paid-in capital
1,525,144

 
1,340,628

Accumulated other comprehensive loss
(10,711
)
 
(11,458
)
Accumulated deficit
(439,993
)
 
(315,593
)
Total stockholders' equity
1,074,449

 
1,013,585

Total liabilities and stockholders' equity
$
1,911,615

 
$
1,634,725

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

4

Table of Contents

Tableau Software, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019

2018
 
(in thousands, except per share amounts)
Revenues

 
 
 
 
 
 
License
$
146,748

 
$
137,848

 
$
264,300

 
$
246,641

Maintenance and services
175,356

 
144,441

 
340,264

 
281,855

Total revenues
322,104

 
282,289

 
604,564

 
528,496

Cost of revenues
 
 
 
 
 
 
 
License
5,322

 
4,626

 
10,949

 
8,580

Maintenance and services
34,524

 
30,599

 
68,326

 
59,070

Total cost of revenues (1)
39,846

 
35,225

 
79,275

 
67,650

Gross profit
282,258

 
247,064

 
525,289

 
460,846

Operating expenses
 
 
 
 
 
 
 
Sales and marketing (1)
166,668

 
144,150

 
329,010

 
282,556

Research and development (1)
112,099

 
94,033

 
224,243

 
187,538

General and administrative (1)
43,326

 
29,846

 
105,051

 
62,096

Total operating expenses
322,093

 
268,029

 
658,304

 
532,190

Operating loss
(39,835
)
 
(20,965
)
 
(133,015
)
 
(71,344
)
Other income, net
7,481

 
6,866

 
12,667

 
8,328

Loss before income tax expense (benefit)
(32,354
)
 
(14,099
)
 
(120,348
)
 
(63,016
)
Income tax expense (benefit)
3,164

 
(2,033
)
 
4,052

 
(4,478
)
Net loss
$
(35,518
)
 
$
(12,066
)
 
$
(124,400
)
 
$
(58,538
)
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
Basic
$
(0.41
)
 
$
(0.15
)
 
$
(1.45
)
 
$
(0.72
)
Diluted
$
(0.41
)
 
$
(0.15
)
 
$
(1.45
)
 
$
(0.72
)
 
 
 
 
 
 
 
 
Weighted average shares used to compute net loss per share:
 
 
 
 
 
 
 
Basic
86,711

 
82,247

 
86,076

 
81,647

Diluted
86,711

 
82,247

 
86,076

 
81,647


(1) Includes stock-based compensation expense as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Cost of revenues
$
4,050

 
$
3,299

 
$
7,902


$
6,286

Sales and marketing
24,006

 
22,150

 
46,999


42,165

Research and development
32,907

 
26,837

 
64,548


51,994

General and administrative
8,124

 
6,026

 
15,257


13,630



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

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Tableau Software, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Net loss
$
(35,518
)
 
$
(12,066
)
 
$
(124,400
)
 
$
(58,538
)
Other comprehensive income (loss), net of tax:

 

 
 
 
 
Foreign currency translation
(2,344
)
 
(1,314
)
 
(580
)
 
(728
)
Net unrealized gain (loss) on available-for-sale securities
619

 
74

 
1,327

 
(775
)
Comprehensive loss
$
(37,243
)
 
$
(13,306
)
 
$
(123,653
)
 
$
(60,041
)

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


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Tableau Software, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
 
Common Stock
(Class A and B)
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
(in thousands, except share information)
Balances as of December 31, 2018
84,356,954

 
$
8

 
$
1,340,628

 
$
(11,458
)
 
$
(315,593
)
 
$
1,013,585

Issuance of common stock
1,646,055

 
1

 
6,286

 

 

 
6,287

Repurchase of common stock
(34,986
)
 

 
(4,326
)
 

 

 
(4,326
)
Stock-based compensation expense

 

 
65,619

 

 

 
65,619

Donation of Class A common stock
209,384

 

 
24,230

 

 

 
24,230

Other comprehensive income, net

 

 

 
2,472

 

 
2,472

Net loss

 

 

 

 
(88,882
)
 
(88,882
)
Balances as of March 31, 2019
86,177,407

 
$
9

 
$
1,432,437

 
$
(8,986
)
 
$
(404,475
)
 
$
1,018,985

Issuance of common stock
1,195,313

 

 
23,620

 

 

 
23,620

Stock-based compensation expense

 

 
69,087

 

 

 
69,087

Other comprehensive loss, net

 

 

 
(1,725
)
 

 
(1,725
)
Net loss

 

 

 

 
(35,518
)
 
(35,518
)
Balances as of June 30, 2019
87,372,720

 
$
9

 
$
1,525,144

 
$
(10,711
)
 
$
(439,993
)
 
$
1,074,449

 
 Common Stock
(Class A and B)
 
Additional Paid-in Capital
 
Accumulated Other Comprehensive Loss
 
Accumulated Deficit
 
Total Stockholders' Equity
 
Shares
 
Amount
 
 
(in thousands, except share information)
Balances as of December 31, 2017
80,462,345

 
$
8

 
$
1,168,563

 
$
(11,991
)
 
$
(402,957
)
 
$
753,623

Cumulative effect of a change in accounting principle related to revenue recognition

 

 

 
1,683

 
164,406

 
166,089

Issuance of common stock
1,438,949

 

 
2,492

 

 

 
2,492

Repurchase of common stock
(366,160
)
 

 
(30,007
)
 

 

 
(30,007
)
Stock-based compensation expense

 

 
64,411

 

 

 
64,411

Other comprehensive loss, net

 

 

 
(263
)
 

 
(263
)
Net loss

 

 

 

 
(46,472
)
 
(46,472
)
Balances as of March 31, 2018
81,535,134

 
$
8

 
$
1,205,459

 
$
(10,571
)
 
$
(285,023
)
 
$
909,873

Issuance of common stock
1,718,125

 

 
23,089

 

 

 
23,089

Repurchase of common stock
(312,921
)
 

 
(30,006
)
 

 

 
(30,006
)
Stock-based compensation expense

 

 
58,312

 

 

 
58,312

Other comprehensive loss, net

 

 

 
(1,240
)
 

 
(1,240
)
Net loss

 

 

 

 
(12,066
)
 
(12,066
)
Balances as of June 30, 2018
82,940,338

 
$
8

 
$
1,256,854

 
$
(11,811
)
 
$
(297,089
)
 
$
947,962


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



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Tableau Software, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
 
 (in thousands)
Operating activities

 
 
Net loss
$
(124,400
)
 
$
(58,538
)
Adjustments to reconcile net loss to net cash provided by operating activities

 

Depreciation and amortization expense
29,544

 
19,050

Amortization (accretion) on investments, net
(1,693
)
 
137

Stock-based compensation expense
134,706

 
114,075

Donation of Class A common stock
24,230



Deferred income taxes
(997
)
 
(3,965
)
Changes in operating assets and liabilities
 
 
 
Accounts receivable, net
18,263

 
31,490

Prepaid expenses and other assets
(39,225
)
 
(44,925
)
Income taxes receivable
120

 
(125
)
Deferred revenue
689

 
(3,893
)
Accounts payable and accrued liabilities
(17,123
)
 
8,663

Income taxes payable
(2,461
)
 
(2,713
)
Net cash provided by operating activities 
21,653

 
59,256

Investing activities

 

Purchases of property and equipment
(25,463
)
 
(11,076
)
Business combinations, net of cash acquired
(4,500
)
 
(10,947
)
Purchases of investments
(406,160
)
 
(156,591
)
Maturities of investments
289,375

 
139,685

Sales of investments

 
99

Net cash used in investing activities
(146,748
)
 
(38,830
)
Financing activities

 

Proceeds from issuance of common stock
29,906

 
25,581

Repurchases of common stock
(4,326
)
 
(60,013
)
Net cash provided by (used in) financing activities
25,580

 
(34,432
)
Effect of exchange rate changes on cash and cash equivalents
31

 
(2,781
)
Net decrease in cash and cash equivalents
(99,484
)
 
(16,787
)
Cash and cash equivalents

 

Beginning of period
653,022

 
627,878

End of period
$
553,538

 
$
611,091

 
 
 
 
Non-cash activities
 
 
 
Accrued purchases of property and equipment
$
7,651

 
$
2,513



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

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Tableau Software, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business
Tableau Software, Inc., a Delaware corporation, and its wholly-owned subsidiaries (the "Company," "we," "us" or "our") are headquartered in Seattle, Washington. Our software products put the power of data into the hands of everyday people, allowing a broad population of business users to engage with their data, ask questions, solve problems and create value. Based on innovative core technologies originally developed at Stanford University, our products dramatically reduce the complexity, inflexibility and expense associated with traditional business intelligence applications. We currently offer five key products: Tableau Desktop, a self-service, powerful analytics product for anyone with data; Tableau Server, a business intelligence platform for organizations; Tableau Online, a hosted software-as-a-service ("SaaS") version of Tableau Server; Tableau Prep, a data preparation product for combining, shaping and cleaning data; and Tableau Public, a free cloud-based platform for analyzing and sharing public data.
Proposed Transaction with Salesforce
On June 9, 2019, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with salesforce.com, inc. ("Salesforce") and Sausalito Acquisition Corp. ("Purchaser"), a wholly-owned subsidiary of Salesforce. Pursuant to the terms of the Merger Agreement, on July 3, 2019 Purchaser commenced an exchange offer (the "Offer") to purchase each issued and outstanding share of Class A common stock and Class B common stock of the Company (together, the "Common Stock") for 1.103 shares of Salesforce common stock (the "Offer Consideration"). Promptly following the completion of the Offer, upon the terms and subject to the conditions of the Merger Agreement, Purchaser will merge with and into the Company (the "Merger"), with the Company continuing as the surviving corporation and as a wholly-owned subsidiary of Salesforce. The Merger Agreement contemplates that the Merger will be effected pursuant to Section 251(h) of the Delaware General Corporation Law, which permits completion of the Merger without a vote of the holders of Common Stock upon the acquisition by Purchaser of a majority of the aggregate voting power of Common Stock. At the effective time of the Merger (the "Effective Time"), each share of Common Stock, other than the shares accepted for payment in the Offer and certain shares held by the Company, Salesforce or their respective subsidiaries, will be cancelled and converted into the right to receive the Offer Consideration. Holders of Common Stock will receive cash in lieu of fractional shares. As a result of the Merger, the Company will cease to be a publicly traded company.
The Offer and the Merger are currently expected to close in the third quarter of Salesforce's 2020 fiscal year, ending October 31, 2019, subject to the satisfaction of customary closing conditions, including among others the tender by Company stockholders of shares of Common Stock representing a majority of the aggregate voting power of Common Stock.
The Merger Agreement contains certain termination rights for the Company and Salesforce and further provides that a termination fee of $552 million will be payable by the Company to Salesforce upon termination of the Merger Agreement under certain circumstances, including in the circumstance where the Company terminates to accept and enter into a definitive agreement in respect of a superior proposal.
For additional information related to the Merger Agreement, refer to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company and the Registration Statement on Form S-4 filed by Salesforce, each filed with the Securities and Exchange Commission ("SEC") on July 3, 2019, together with the exhibits and annexes thereto and as amended or supplemented from time to time.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial information has been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the 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. The condensed consolidated balance sheet data as of December 31, 2018 was derived from audited financial statements but does not include all disclosures required by GAAP. The condensed consolidated financial information 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, 2018 filed with the SEC on February 22, 2019.

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In the opinion of management, the unaudited condensed consolidated financial statements and accompanying notes include all normal recurring adjustments necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates include but are not limited to: the collectability of our receivables; the evaluation of our contract assets for impairment; the useful lives of our long-lived assets; the benefit period for deferred commissions; the valuation of investments and the determination of other-than-temporary impairments; the discount rates used in measuring our operating lease liabilities; and the reported amounts of accrued liabilities. For revenue, we make estimates and assumptions related to the standalone selling prices of our products and services and the nature and timing of the delivery of performance obligations from our contracts with customers. We also use estimates in stock-based compensation, income taxes and business combinations. Actual results could differ from those estimates.
Risks and Uncertainties
Inherent in our business are various risks and uncertainties, including our limited history of operating our business at its current scale and development of advanced technologies in a rapidly changing industry. These risks include our ability to manage our growth, to attract new customers, to expand sales to existing customers and to attract, integrate and retain qualified personnel, as well as other risks and uncertainties. In the event that we do not successfully implement our business plan, certain assets may not be recoverable, certain liabilities may not be paid and investments in our capital stock may not be recoverable. Our success depends upon the acceptance of our technology, development of sales and distribution channels and our ability to generate significant revenues from the sale of our technology.
Segments
We follow the authoritative literature that establishes annual and interim reporting standards for operating segments and related disclosures about products and services, geographic regions and major customers.
We operate our business as one operating segment. Our chief operating decision makers are our Chief Executive Officer and Chief Financial Officer, who review financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments, accounts receivable and contract assets.
Our cash and cash equivalents and investments are held and managed by recognized financial institutions that follow our investment policy. Our investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. Our policy limits the amount of credit exposure to any one security issue or issuer.
We extend credit to customers based upon an evaluation of the customer's financial condition. As of June 30, 2019 and December 31, 2018, no individual customer accounted for 10% or more of total accounts receivable or 10% or more of our total contract assets. For the three and six months ended 2019 and 2018, no individual customer accounted for 10% or more of our total revenues.
Leases - Accounting Standards Codification 842
Leases arise from contracts which convey the right to control the use of identified property or equipment for a period of time in exchange for consideration. Our leasing arrangements are primarily for office space we use to conduct our operations. We determine whether contracts include a lease at the inception date, which is generally upon contract signing, considering factors such as whether the contract includes an asset which is physically distinct, which party obtains substantially all of the capacity and economic benefit of the asset, and which party directs how, and for what purpose, the asset is used during the contract period. Our leases commence when the lessor makes the asset available for our use. At commencement we record a lease liability at the present value of future lease payments, net of any future lease incentives to be received. Many of our lease agreements include cancellable future periods subject to termination or extension options. We do not include cancellable lease periods

10

Table of Contents

in our future lease payments unless we are reasonably certain to continue to utilize the asset for those periods. We calculate the present value of future lease payments at commencement using a discount rate which we estimate as the collateralized borrowing rate we would incur on our future lease payments over a similar term. At commencement we also record a corresponding right-of-use asset, which is calculated based on the amount of the lease liability, adjusted for any advance lease payments paid, initial direct costs incurred or lease incentives received prior to commencement. Right-of-use assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets.
Leases are classified at commencement as either operating or finance leases. As of June 30, 2019, all of our leases are classified as operating leases. Rent expense for operating leases is recognized on the straight-line method over the term of the agreement beginning on the lease commencement date.
In accounting for leases, we utilize certain practical expedients and policy elections available under the lease accounting standard. For example, we do not record right-of-use assets or lease liabilities for leases with terms of 12 months or less. For contracts containing real estate leases, we combine lease and non-lease components. The primary impact of this policy election is that we include in our calculation of lease liabilities any fixed and noncancelable future payments due under the contract for items such as parking, common area maintenance, utilities and other costs. Lease-related costs which are variable rather than fixed are expensed in the period incurred.
Assumptions, judgments and estimates impacting the carrying value of our right-of-use assets and liabilities include evaluating whether an arrangement contains a lease, determining whether the lease term should include any cancellable future periods, estimating the discount rate used to calculate our lease liabilities, estimating the fair value and useful life of the leased asset for the purpose of classifying the lease as an operating or finance lease, evaluating whether a lease contract amendment represents a new lease agreement or a modification to the existing lease and evaluating our right-of-use assets for impairment.
We also account for all subleases from the perspective of a lessor. We evaluate the duration of subleases based on the reasonable certainty of any sublessor termination and extension options, as well as the lease term for the underlying asset. As of June 30, 2019, all of our subleases are classified as operating leases. For subleases classified as operating leases, we record sublease income as a reduction of operating expense on the straight-line method over the lease term.
Our accounting policy under the previous lease standard, Accounting Standards Codification ("ASC") 840, is included in our Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC on February 22, 2019.
Recently Adopted Accounting Pronouncements
We adopted the new lease accounting standard, ASC 842, on January 1, 2019 using the modified retrospective transition method, and recorded a balance sheet adjustment on the date of adoption. The new lease standard requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases, and also requires additional quantitative and qualitative disclosures to enable users of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. In adopting ASC 842, we utilized certain practical expedients available under the standard. These practical expedients include waiving reassessment of conclusions reached under the previous lease standard as to whether contracts contain leases, how to classify leases identified and how to account for initial direct costs incurred. We also utilized the practical expedient to use hindsight as of the date of adoption to determine the terms of our leases and to evaluate our right-of-use assets for impairment.
We recorded the following adjustments to our consolidated balance sheet on the date of adoption:

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December 31, 2018
 
January 1, 2019
 
As Reported
 
Adjustment Recorded
 
Adjusted Balance
 
(in thousands)
Prepaid expenses and other current assets
$
155,012

 
$
(378
)
 
$
154,634

Operating lease right-of-use assets

 
210,914

 
210,914

Other long-term assets
50,927

 
(28
)
 
50,899

Other accrued liabilities
55,896

 
14,500

 
70,396

Operating lease liabilities

 
242,916

 
242,916

Other long-term liabilities
56,257

 
(46,908
)
 
9,349


See Note 5 of the accompanying notes to the condensed consolidated financial statements for additional information regarding our operating leases.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, related to credit losses. The new guidance replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. We will adopt this standard in the first quarter of 2020. We are currently evaluating the impact that this standard will have on our consolidated financial statements.

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Note 3. Short-Term and Long-Term Investments
The following tables present our short-term and long-term investments in available-for-sale securities based on remaining contractual years to maturity:
 
June 30, 2019
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
Commercial paper
$
33,234

 
$

 
$

 
$
33,234

U.S. treasury securities
328,308

 
376

 
(29
)
 
328,655

U.S. agency securities
22,720

 
9

 
(3
)
 
22,726

Corporate bonds
106,298

 
136

 
(10
)
 
106,424

Total short-term investments
490,560

 
521

 
(42
)
 
491,039

Long-term investments

 

 

 

Corporate bonds
24,424

 
124

 

 
24,548

Total long-term investments
24,424

 
124

 

 
24,548

Total short-term and long-term investments
$
514,984

 
$
645

 
$
(42
)
 
$
515,587

 
December 31, 2018
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
Commercial paper
$
7,949


$


$


$
7,949

U.S. treasury securities
206,486

 
24

 
(457
)
 
206,053

U.S. agency securities
18,576

 

 
(61
)
 
18,515

Corporate bonds
137,119

 

 
(281
)
 
136,838

Total short-term investments
370,130

 
24

 
(799
)
 
369,355

Long-term investments
 
 
 
 
 
 
 
U.S. treasury securities
13,352

 
5

 
(50
)
 
13,307

Corporate bonds
13,025

 
2

 
(56
)
 
12,971

Total long-term investments
26,377

 
7

 
(106
)
 
26,278

Total short-term and long-term investments
$
396,507

 
$
31

 
$
(905
)
 
$
395,633



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Table of Contents

The following tables present the fair values and the gross unrealized losses related to our investments in available-for-sale securities that were in an unrealized loss position as of June 30, 2019 and December 31, 2018, summarized by the length of time that the investments have been in a continuous unrealized loss position:
 
June 30, 2019
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities
$

 
$

 
$
39,900

 
$
(29
)
 
$
39,900

 
$
(29
)
U.S. agency securities

 

 
3,572

 
(3
)
 
3,572

 
(3
)
Corporate bonds
4,995

 
(2
)
 
9,263

 
(8
)
 
14,258

 
(10
)
Total short-term investments
4,995

 
(2
)

52,735


(40
)

57,730


(42
)

As of June 30, 2019, no investments classified as long-term investments were in an unrealized loss position.
 
December 31, 2018
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities
$
89,320

 
$
(143
)
 
$
79,472

 
$
(314
)
 
$
168,792

 
$
(457
)
U.S. agency securities

 

 
18,515

 
(61
)
 
18,515

 
(61
)
Corporate bonds
91,455

 
(131
)
 
45,383

 
(150
)
 
136,838

 
(281
)
Total short-term investments
180,775

 
(274
)
 
143,370

 
(525
)
 
324,145

 
(799
)
Long-term investments
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities
9,855

 
(50
)
 

 

 
9,855

 
(50
)
Corporate bonds
11,389

 
(56
)
 

 

 
11,389

 
(56
)
Total long-term investments
21,244

 
(106
)
 

 

 
21,244

 
(106
)
Total short-term and long-term investments
$
202,019

 
$
(380
)
 
$
143,370

 
$
(525
)
 
$
345,389

 
$
(905
)

The unrealized losses on investments as of June 30, 2019 were primarily caused by increases in interest rates from the date such investments were purchased. None of the unrealized losses represent other-than-temporary impairments based on our evaluation of available evidence as of June 30, 2019.
Note 4. Fair Value Measurements
We categorize assets and liabilities recorded at fair value based upon the level of judgment associated with inputs used to measure their fair value. The levels of the fair value hierarchy are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

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Level 3—Inputs are unobservable inputs based on our own assumptions and valuation techniques used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
We value our investments using quoted prices for identical instruments in active markets when available. If we are unable to obtain quoted prices for identical instruments in active markets, we value our investments using quoted market prices for comparable instruments. To date, all of our investments can be valued using one of these two methodologies.
The following tables present the fair value of our financial assets using the fair value hierarchy:


June 30, 2019


Level 1

Level 2

Level 3

Total


(in thousands)
Cash equivalents

 
 
 
 
 
 
 
Money market funds

$
458,260


$


$


$
458,260

Commercial paper



11,986




11,986

U.S. treasury securities
 

 
8,041

 

 
8,041

U.S. agency securities
 

 
2,497

 

 
2,497

Short-term investments

 
 
 
 
 
 
 
Commercial paper
 

 
33,234

 

 
33,234

U.S. treasury securities
 

 
328,655

 

 
328,655

U.S. agency securities
 

 
22,726

 

 
22,726

Corporate bonds
 

 
106,424

 

 
106,424

Long-term investments
 
 
 
 
 
 
 
 
Corporate bonds
 

 
24,548

 

 
24,548

Total

$
458,260


$
538,111


$


$
996,371


 
 
December 31, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(in thousands)
Cash equivalents
 
 
 
 
 
 
 
 
Money market funds
 
$
610,732

 
$

 
$

 
$
610,732

Corporate bonds
 

 
3,009

 

 
3,009

Short-term investments
 
 
 
 
 
 
 
 
Commercial paper
 

 
7,949

 

 
7,949

U.S. treasury securities
 

 
206,053

 

 
206,053

U.S. agency securities
 

 
18,515

 

 
18,515

Corporate bonds
 

 
136,838

 

 
136,838

Long-term investments
 
 
 
 
 
 
 
 
U.S. treasury securities
 

 
13,307

 

 
13,307

Corporate bonds
 

 
12,971

 

 
12,971

Total
 
$
610,732

 
$
398,642

 
$

 
$
1,009,374


We did not have any investments in prime money market funds as of June 30, 2019 or December 31, 2018. We did not have any material financial assets or liabilities measured using Level 3 inputs as of June 30, 2019 or December 31, 2018.

15

Table of Contents

Note 5. Leases
Our leasing arrangements are primarily for office space we use to conduct our operations. We have subleased some office space for all or part of the associated head lease. The following table presents our future lease payments for long-term operating leases, net of expected sublease income, as of June 30, 2019:
Period
 
Operating Lease Commitments
 
Expected Sublease Receipts
 
Net Future Operating Lease Commitments
 
 
(in thousands)
Remainder of 2019
 
$
7,658

 
$
(4,980
)
 
$
2,678

2020
 
44,059

 
(7,806
)
 
36,253

2021
 
48,683

 
(1,208
)
 
47,475

2022
 
48,016

 
(625
)
 
47,391

2023
 
48,975

 
(128
)
 
48,847

Thereafter
 
156,062