10-Q 1 frsh-20230331.htm 10-Q frsh-20230331
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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 March 31, 2023
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 001-40806
Freshworks Inc.
(Exact name of registrant as specified in its charter)
Delaware
2950 S Delaware Street, Suite 201
33-1218825
(State or other jurisdiction of incorporation or organization)
San Mateo, CA 94403
(I.R.S. Employer Identification No.)
(Address of Principal executive offices)
(650) 513-0514
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.00001 per share
FRSHThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files).     Yes  ☒   No  ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer
☒
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. ☐ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   ☐      No  ☒
As of April 28, 2023, the number of shares of registrant’s Class A common stock outstanding was 168,032,444 and the number of shares of the registrant’s Class B common stock outstanding was 123,110,145.



FRESHWORKS INC.
TABLE OF CONTENTS
Page
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
1

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would,” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:
•our expectations regarding our annual recurring revenue (ARR), revenue, expenses, and other operating results;
•our ability to acquire new customers and successfully retain existing customers;
•our ability to increase the number of users who access our platform;
•our ability to increase usage of existing products;
•our ability to achieve or sustain profitability;
•future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
•the costs and success of our sales and marketing efforts, and our ability to maintain and enhance our brand;
•the estimated addressable market opportunity for existing products and new products;
•our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;
•our ability to effectively manage our growth, including any international expansion;
•the effects of macroeconomic uncertainties, including rising interest rates, foreign exchange rate volatility, global geopolitical uncertainties, inflationary pressures, the ongoing impacts of the COVID-19 pandemic and other macroeconomic factors beyond our control;
•our ability to protect our intellectual property rights and any costs associated therewith;
•our ability to compete effectively with existing competitors and new market entrants; and
•the size and growth rates of the markets in which we compete.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from these described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may
2

be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
Where You Can Find More Information
We announce material information to the public through a variety of means, including filings with the U.S. Securities and Exchange Commission, press releases, public conference calls, our website (freshworks.com) and the investor relations section of our website (ir.freshworks.com). We use these channels to communicate with investors and the public about our company, our products and services and other matters. Therefore, we encourage investors, the media and others interested in our company to review the information we make public in these locations, as such information could be deemed to be material information.
3

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
FRESHWORKS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
March 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$344,487 $304,083 
Marketable securities806,122 843,405 
Accounts receivable, net of allowance of $7,288 and $6,628
72,807 70,470 
Deferred contract acquisition costs20,761 20,139 
Prepaid expenses and other current assets46,487 38,913 
Total current assets1,290,664 1,277,010 
Property and equipment, net24,214 24,139 
Operating lease right-of-use assets31,175 33,024 
Deferred contract acquisition costs, noncurrent18,865 19,536 
Goodwill6,181 6,181 
Deferred tax assets8,645 8,689 
Other assets11,098 11,637 
Total assets$1,390,842 $1,380,216 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$4,415 $5,908 
Accrued liabilities58,327 59,008 
Deferred revenue220,550 205,626 
Income tax payable2,177 1,150 
Total current liabilities285,469 271,692 
Operating lease liabilities, non-current26,183 28,174 
Other liabilities28,748 28,532 
Total liabilities340,400 328,398 
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $0.00001 par value per share; 10,000,000 shares authorized; zero shares issued and outstanding
— — 
Class A common stock, $0.00001 par value per share; 1,000,000,000 shares authorized; 167,518,238 and 162,825,075 shares issued and outstanding
2 2 
Class B common stock, $0.00001 par value per share; 350,000,000 shares authorized; 123,016,745 and 126,268,150 shares issued and outstanding
1 1 
Additional paid-in capital4,600,688 4,562,319 
Accumulated other comprehensive loss (4,512)(7,431)
Accumulated deficit(3,545,737)(3,503,073)
Total stockholders' equity1,050,442 1,051,818 
Total liabilities and stockholders' equity$1,390,842 $1,380,216 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
FRESHWORKS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)




Three Months Ended March 31,
20232022
Revenue$137,692 $114,637 
Cost of revenue25,236 22,395 
Gross profit112,456 92,242 
Operating expense:
Research and development32,857 30,717 
Sales and marketing86,810 71,466 
General and administrative40,896 37,183 
Total operating expenses160,563 139,366 
Loss from operations(48,107)(47,124)
Interest and other income, net9,479 602 
Loss before income taxes(38,628)(46,522)
Provision for income taxes4,036 2,537 
Net loss(42,664)(49,059)
Net loss per share - basic and diluted$(0.15)$(0.18)
Weighted average shares used in computing net loss per share - basic and diluted290,133 278,186 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
FRESHWORKS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

Three Months Ended March 31,
20232022
Net loss$(42,664)$(49,059)
Other comprehensive loss:
Change in unrealized loss on marketable securities2,922 (3,606)
Net change on cash flow hedges(3)— 
Total other comprehensive income (loss)2,919 (3,606)
Comprehensive loss$(39,745)$(52,665)
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
FRESHWORKS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Three Months Ended March 31, 2023
Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders'
Equity
SharesAmount
Balances as of December 31, 2022289,093 $3 $4,562,319 $(7,431)$(3,503,073)$1,051,818 
Issuance of common stock upon exercise of stock options19 — 6 — — 6 
Issuance of common stock upon vesting and settlement of restricted stock units, net of shares withheld for taxes1,423 — (12,845)— — (12,845)
Stock-based compensation— — 51,208 — — 51,208 
Other comprehensive income— — — 2,919 — 2,919 
Net loss— — — — (42,664)(42,664)
Balances as of March 31, 2023290,535 $3 $4,600,688 $(4,512)$(3,545,737)$1,050,442 
Three Months Ended March 31, 2022
Common StockAdditional
Paid-in
Capital		Accumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Deficit
SharesAmount
Balances as of December 31, 2021273,294 $3 $4,509,724 $(747)$(3,270,941)$1,238,039 
Issuance of common stock upon exercise of stock options113 — 29 — — 29 
Issuance of common stock upon vesting and settlement of restricted stock units, net of shares withheld for taxes9,663 — (120,810)— — (120,810)
Stock-based compensation— — 46,625 — — 46,625 
Unrealized loss on marketable securities— — — (3,606)— (3,606)
Net loss— — — — (49,059)(49,059)
Balances as of March 31, 2022283,070 $3 $4,435,568 $(4,353)$(3,320,000)$1,111,218 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7
FRESHWORKS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
20232022
Cash Flows from Operating Activities:
Net loss$(42,664)$(49,059)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization3,112 2,973 
Amortization of deferred contract acquisition costs5,617 4,275 
Non-cash lease expense1,850 1,404 
Stock-based compensation50,694 46,625 
Premium (discount) amortization on marketable securities(3,520)766 
Change in fair value of equity securities(15)(85)
Deferred income taxes113 309 
Other85 754 
Changes in operating assets and liabilities:
Accounts receivable(2,490)3,160 
Deferred contract acquisition costs(5,568)(5,600)
Prepaid expenses and other assets(7,248)(8,685)
Accounts payable(1,494)(2,059)
Accrued and other liabilities(392)(4,972)
Deferred revenue14,924 14,239 
Operating lease liabilities(1,500)(2,690)
Net cash provided by operating activities11,504 1,355 
Cash Flows from Investing Activities:
Purchases of property and equipment(383)(1,397)
Proceeds from sale of property and equipment24 17 
Capitalized internal-use software(2,025)(1,344)
Purchases of marketable securities(217,754)(151,408)
Sales of marketable securities— 58,736 
Maturities and redemptions of marketable securities261,474 69,750 
Net cash provided by (used in) investing activities41,336 (25,646)
Cash Flows from Financing Activities:
Proceeds from exercise of stock options6 28 
Payment of withholding taxes on net share settlement of equity awards(12,434)(119,948)
Payment of deferred offering costs— (109)
Net cash used in financing activities(12,428)(120,029)
Net increase (decrease) in cash, cash equivalents and restricted cash40,412 (144,320)
Cash, cash equivalents and restricted cash, beginning of period304,158 747,864 
Cash, cash equivalents and restricted cash, end of period$344,570 $603,544 
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents$344,487 $603,466 
Restricted cash included in prepaid expenses and other current assets3 46 
Restricted cash included in other assets80 32 
Total cash, cash equivalents and restricted cash$344,570 $603,544 
Supplemental cash flow information:
Cash paid for taxes$2,158 $3,649 
Non-cash investing and financing activities:
Operating lease right-of-use assets obtained in exchange for operating lease obligations$— $5,324 
Stock-based compensation capitalized as internal-use software$514 $— 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

FRESHWORKS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Freshworks Inc. (Freshworks, or the Company) is a software development company that provides modern software-as-a-service (SaaS) products that are designed with the user in mind. The Company was incorporated in Delaware in 2010 and is headquartered in San Mateo, California.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation.
Unaudited Interim Consolidated Financial Statements
The accompanying condensed consolidated balance sheet as of March 31, 2023, the condensed consolidated statements of operations, of comprehensive loss, of cash flows, and of stockholders’ equity for the three months ended March 31, 2023 and 2022, and the related notes to such condensed consolidated financial statements are unaudited. These unaudited condensed consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2023 and its results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.
The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 23, 2023.
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to, the following:
•determination of standalone selling price (SSP) for each distinct performance obligation included in customer contracts with multiple performance obligations;
•allowance for doubtful accounts;
•expected benefit period of deferred contract acquisition costs;
•capitalization of internal-use software development costs;
•fair value of acquired intangible assets and goodwill;
9

•useful lives of long-lived assets;
•valuation of deferred tax assets;
•valuation of employee defined benefit plan;
•fair value of share-based awards, including performance-based awards; and
•incremental borrowing rate used for operating leases.
Concentrations of Risk
Financial instruments that potentially expose the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, marketable securities, and accounts receivable. The Company’s cash, cash equivalents and marketable securities are generally held with large financial institutions and are in excess of the federally insured limits provided on such deposits. In addition, the Company has cash and cash equivalents held in international bank accounts, which are denominated primarily in Euros, British Pounds, and Indian Rupees.
There were no customers that individually exceeded 10% of the Company’s revenue for the three months ended March 31, 2023 and 2022 or that represented 10% or more of the Company’s consolidated accounts receivable balance as of March 31, 2023.
The Company primarily relies upon its third-party cloud infrastructure partner, Amazon Web Services, to serve customers and operate certain aspects of its services. Any disruption of this cloud infrastructure partner would impact the Company's operations and its business could be adversely impacted.
Significant Accounting Policies
The Company's significant accounting policies are described in the Annual Report on Form 10-K for the year ended December 31, 2022. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and the related notes for the three months ended March 31, 2023. However, starting in 2023, the Company entered into foreign exchange forward contracts to hedge a portion of its forecasted foreign currency expenses and while the impact of the Company's derivative instruments are not material to its condensed consolidated financial statements, the accounting policy on Derivative Instruments is discussed below.
Derivative Instruments
The Company enters into foreign currency forward contracts, most of which were designated as cash flow hedges, in order to manage the volatility of cash flows that relate to cost of revenues and operating expenses denominated in Indian Rupee. All derivative instruments are measured at fair value based upon quoted market prices for comparable instruments and as such, classified within Level 2 of the fair value hierarchy. Derivative assets and liabilities are presented on a gross basis on the condensed consolidated balance sheets under prepaid expenses and other current assets and accrued liabilities, respectively.
Gains or losses related to cash flow hedges are recorded as a component of accumulated other comprehensive income (AOCI) on the condensed consolidated statements of stockholders' equity until the forecasted transaction occurs in earnings. When the forecasted transaction occurs, the related gains and losses are reclassified into earnings within the financial statement line item associated with the underlying hedged transaction. If the underlying hedged transaction does not occur, or it becomes probable that the hedged transaction will not occur, the cumulative unrealized gain or loss is reclassified immediately from AOCI into earnings within interest and other income. Changes in the fair value of currency forward exchange contracts due to changes in time value were excluded from the assessment of effectiveness. The initial value of this excluded component is amortized on a straight-line basis over the life of the hedging instrument and recognized in the financial statement line item to which the hedge relates. A majority of the balance related to foreign exchange derivative instruments included in AOCI at March 31, 2023 is expected to be reclassified into earnings within 12 months.
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Derivative instruments are classified in the condensed consolidated statements of cash flows as cash from operating activities, which reflect the classification of the underlying hedged transactions.
The Company does not use derivative financial instruments for trading or speculative purposes.
As of March 31, 2023, the total notional amount of outstanding designated foreign currency forward contracts was $22.3 million. The fair value of derivative assets and liabilities as of March 31, 2023, and all related unrealized and realized gains and losses during the three months ended March 31, 2023 were not material.
Entering into derivative instruments exposes the Company to credit risk to the extent that the counterparties are unable to meet the terms of the contract. The Company mitigates this credit risk by transacting with major financial institutions with high credit ratings. In addition, the Company has entered into master netting arrangements that mitigates credit risk by permitting net settlement of transactions. As such, the Company's exposure is not considered significant. The Company does not have any collateral requirements with its counterparties.
Recent Accounting Pronouncements
There have been no recently issued accounting pronouncements that are expected to have a material impact on the Company's condensed consolidated financial statements.

2. Revenue From Contracts with Customers
The Company derives revenue from subscription fees and related professional services. The Company sells subscriptions for its cloud-based solutions directly to customers and indirectly through channel partners through arrangements that are non-cancelable and non-refundable. The Company’s subscription arrangements do not provide customers with the right to take possession of the software supporting the solutions and, as a result, are accounted for as service arrangements. The Company records revenue net of sales or value-added taxes.
Disaggregation of Revenue
The following table summarizes revenue by the Company’s service offerings (in thousands):
Three Months Ended March 31,
20232022
Subscription services$134,023 $111,397 
Professional services3,669 3,240 
Total revenue$137,692 $114,637 
See Note 11 for revenue by geographic location.
Deferred Revenue and Remaining Performance Obligations
Deferred revenue consists of customer billings in advance of revenue being recognized from the Company’s subscription and professional services arrangements.
Revenue recognized during the three months ended March 31, 2023 and 2022 from amounts included in deferred revenue at the beginning of these periods was $93.7 million and $72.2 million, respectively.
The aggregate balance of remaining performance obligations as of March 31, 2023 was $325.6 million. The Company expects to recognize $253.7 million of the balance as revenue in the next 12 months and the remainder thereafter. The aggregate balance of remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods.
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Deferred Contract Acquisition Costs
The change in the balance of deferred contract acquisition costs during the periods presented is as follows (in thousands):
Three Months Ended March 31,
20232022
Balance at beginning of the period$39,675 $29,647 
Add: Contract costs capitalized during the period5,568 5,600 
Less: Amortization of contract costs during the period(5,617)(4,275)
Balance at end of the period$39,626 $30,972 

3. Cash Equivalents and Marketable Securities
Cash equivalents and available-for-sale debt securities consisted of the following as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023
Amortized CostUnrealized GainsUnrealized LossesFair Value
Cash equivalents:
Money market funds$155,266 $— $— $155,266 
U.S. treasury securities37,797 9 — 37,806 
U.S. government agency securities48,796 18 — 48,814 
Corporate debt securities10,474 — — 10,474 
Total cash equivalents252,333 27 — 252,360 
Debt securities:
U.S. treasury securities346,566 95 (1,621)345,040 
U.S. government agency securities376,006 232 (2,691)373,547 
Corporate debt securities86,564 — (550)86,014 
Total debt securities809,136 327 (4,862)804,601 
Total cash equivalents and debt securities$1,061,469 $354 $(4,862)$1,056,961 
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December 31, 2022
Amortized CostUnrealized GainsUnrealized LossesFair Value
Cash equivalents:
Money market funds$219,512 $— $— $219,512 
U.S. treasury securities13,912 3 — 13,915 
U.S. government agency securities10,417 2 — 10,419 
Corporate debt securities1,995 1 — 1,996 
Total cash equivalents245,836 6 — 245,842 
Debt securities:
U.S. treasury securities441,909 36 (3,160)438,785 
U.S. government agency securities301,009 35 (3,531)297,513 
Corporate debt securities106,436 — (817)105,619 
Total debt securities849,354 71 (7,508)841,917 
Total cash equivalents and debt securities$1,095,190 $77 $(7,508)$1,087,759 
The following table presents gross unrealized losses and fair values for the securities that were in a continuous unrealized loss position as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023
Less than 12 monthsGreater than 12 monthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
U.S. treasury securities$89,652 $(687)$76,712 $(934)$166,364 $(1,621)
U.S. government agency securities241,211 (1,701)39,039 (990)280,250 (2,691)
Corporate debt securities20,555 (275)20,596 (275)41,151 (550)
Total$351,418 $(2,663)$136,347 $(2,199)$487,765 $(4,862)
December 31, 2022
Less Than 12 Months12 Months or GreaterTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
U.S. treasury securities$190,820 $(1,794)$105,115 $(1,366)$295,935 $(3,160)
U.S. government agency securities220,766 (2,245)42,754 (1,286)263,520 (3,531)
Corporate debt securities30,485 (455)22,864 (362)53,349 (817)
Total$442,071 $(4,494)$170,733 $(3,014)$612,804 $(7,508)
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The amortized cost and fair value of the available-for-sale debt securities based on contractual maturities are as follows (in thousands):
March 31, 2023
Amortized CostFair Value
Due within one year$602,486 $598,941 
Due after one year but within five years206,650 205,660 
Total$809,136 $804,601 
Accrued interest receivable of $3.2 million and $2.8 million was classified in prepaid expenses and other current assets in the condensed consolidated balance sheet as of March 31, 2023 and December 31, 2022, respectively.
In addition to available-for-sale debt securities, marketable securities also include term bond mutual funds, which are measured at fair value. As of March 31, 2023 and December 31, 2022, the fair value of the term bond mutual funds was $1.5 million. The change in fair value of the term bond mutual funds is recorded in interest and other income, net in the condensed consolidated statements of operations. The realized and unrealized gains recognized in the condensed consolidated statements of operations for the term bond mutual funds were not material during the three months ended March 31, 2023 and 2022.
4. Fair Value Measurements
The Company measures its financial assets at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1—Inputs are observable and reflect quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly.
Level 3—Inputs that are unobservable.
Money market funds and U.S. treasury securities are classified within Level 1 because they are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Other debt securities and investments are classified within Level 2 if the investments are valued using model driven valuations which use observable inputs such as quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Available-for-sale debt securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.
The Company did not have any assets or liabilities subject to fair value remeasurement on a nonrecurring basis as of March 31, 2023 and December 31, 2022.
14

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table represents the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023
Fair Value Measured Using
Level 1Level 2Total
Financial assets:
Cash equivalents:
Money market funds$155,266 $— $155,266 
U.S. treasury securities37,806 — 37,806 
U.S. government agency securities— 48,814 48,814 
Corporate debt securities— 10,474 10,474 
Marketable securities:
U.S. treasury securities345,040 — 345,040 
U.S. government agency securities— 373,547 373,547 
Corporate debt securities— 86,014 86,014 
Term bond mutual funds— 1,521 1,521 
Total financial assets$538,112 $520,370 $1,058,482 
December 31, 2022
Fair Value Measured Using
Level 1Level 2Total
Financial assets:
Cash equivalents:
Money market funds$219,512 $— $219,512 
U.S. treasury securities13,915 — 13,915 
U.S. government agency securities— 10,419 10,419 
Corporate debt securities— 1,996 1,996 
Marketable securities:
U.S. treasury securities438,785 — 438,785 
U.S. government agency securities— 297,513 297,513 
Corporate debt securities— 105,619 105,619 
Term bond mutual funds— 1,488 1,488 
Total financial assets$672,212 $417,035 $1,089,247 

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5. Balance Sheet Components
Property and Equipment, net
The following table summarizes property and equipment, net as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023December 31, 2022
Computers$16,499 $16,552 
Capitalized internal-use software22,769 20,230 
Office equipment3,881 3,744 
Furniture and fixtures8,879 8,881 
Motor vehicles1,140 1,158 
Leasehold improvements5,654 5,654 
Construction in progress158 224 
Total property and equipment58,980 56,443 
Less: accumulated depreciation and amortization(34,766)(32,304)
Property and equipment, net$24,214 $24,139 
Capitalization of costs associated with internal-use software were $2.5 million and $1.3 million for the three months ended March 31, 2023 and 2022, respectively. Amortization expense of capitalized internal-use software was $1.1 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, the net carrying value of capitalized internal-use software was $12.6 million and $11.2 million, respectively.
Depreciation expense was $1.7 million for each of the three month periods ended March 31, 2023 and 2022.
Accrued Liabilities
The following table summarizes accrued liabilities as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023December 31, 2022
Accrued compensation$18,721 $20,192 
Accrued third-party cloud infrastructure expenses2,459 2,752 
Accrued reseller commissions6,973 7,731 
Accrued advertising and marketing expenses4,557 4,465 
Advanced payments from customers3,928 3,480 
Accrued taxes6,372 7,730 
Operating lease liabilities, current7,266 6,775 
Contributions withheld for employee stock purchase plan3,836 1,546 
Other accrued expenses4,215 4,337 
Total accrued liabilities$58,327 $59,008 
Noncurrent liabilities include $23.4 million and $23.3 million of long term accrued compensation as of March 31, 2023 and December 31, 2022, respectively.
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6. Leases
The Company has operating leases primarily for office space. The leases have remaining lease terms of one to eight years, some of which include options to extend the lease for up to an additional six years. The Company's leases do not contain any residual value guarantee.
The following table presents various components of the lease costs (in thousands):
Operating LeasesThree Months Ended March 31,
20232022
Operating lease cost$2,494 $1,775 
Short-term lease cost174 315 
Variable lease cost785 669 
The weighted-average remaining term of the Company's operating leases and the weighted-average discount rate used to measure the present value of the operating lease liabilities are as follows:
Lease Term and Discount RateMarch 31, 2023March 31, 2022
Weighted-average remaining lease term (in years)4.65.6
Weighted-average discount rate7.8 %7.7 %
The following table presents supplemental information arising from lease transactions. Cash payments related to short-term leases are not included in the measurement of the operating lease liabilities, and as such, are excluded from the amounts below (in thousands):
Three Months Ended March 31,
Supplemental Cash Flow Information:20232022
Cash payments included in the measurement of operating lease liabilities$2,326 $2,724 
Operating ROU assets obtained in exchange for lease obligations— 5,324 
As of March 31, 2023, maturities of the operating lease liabilities are as follows (in thousands):
Operating Leases
Remainder of 2023$6,907 
20249,761 
20258,795 
20265,533 
20274,235 
Thereafter5,800 
Total lease payments41,032 
Less: imputed interest(7,583)
Present value of operating lease liabilities$33,449 
As of March 31, 2023, there were no future payments related to signed leases that have not yet commenced.
7. Commitments and Contingencies
Other Contractual Commitments
The Company's other contractual commitments primarily consist of third-party cloud infrastructure agreements and service subscription purchase arrangements used to support operations at the enterprise level. As of March 31,
17

2023, other contractual commitments totaling $93.0 million remain outstanding under these agreements through 2025.
Litigation and Loss Contingencies
On November 1, 2022, a purported Company stockholder filed a securities class action complaint in the U.S. District Court for the Northern District of California against the Company, certain of its current officers and directors, and underwriters of the Company's initial public offering (IPO). On April 14, 2023, the court appointed lead plaintiff filed a consolidated amended class action complaint. The complaint alleges that defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 by making material misstatements or omissions in offering documents filed in connection with the IPO. The complaint seeks unspecified damages, interest, fees, costs, and rescission on behalf of purchasers and/or acquirers of common stock issued in the IPO. The Company and the other defendants intend to vigorously defend against the claims in this action.
On March 20, 2023, a purported stockholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The complaint names as defendants the Company’s current directors, as well as the Company as nominal defendant, and asserts state and federal claims based on some of the same alleged misstatements as the securities class action complaint. The derivative complaint seeks unspecified damages, attorneys’ fees, and other costs. The Company and the other defendants intend to vigorously defend against the claims in this action.
From time to time, the Company has been and may be in the future subject to other legal proceedings, claims, investigations, and government inquiries (collectively, Legal Proceedings) in the ordinary course of business. It has received and may receive claims from third parties asserting, among other things, infringement of their intellectual property rights, defamation, labor and employment rights, privacy, and contractual rights. There are no currently pending legal proceedings that the Company believes will have a material adverse impact on the business or condensed consolidated financial statements.
Indemnifications
In the ordinary course of business, the Company enters into contractual arrangements under which the Company agrees to provide indemnification of varying scope and terms to customers, business partners, and other parties with respect to certain matters, including losses arising out of intellectual property infringement claims made by third parties, if the Company has violated applicable laws, if the Company is negligent or commits acts of willful misconduct, and other liabilities with respect to its products and services and its business. In these circumstances, payment is typically conditional on the other party making a claim pursuant to the procedures specified in the particular contract. The Company also indemnifies certain of its officers, directors and certain key employees while they are serving in good faith in their respective capacities. To date, the Company has not incurred any material costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements.
8. Stockholders' Equity and Stock-Based Compensation
Equity Compensation Plans
In August 2021, the board of directors (the Board) adopted the 2021 Equity Incentive Plan (the 2021 Plan) and the 2021 Employee Stock Purchase Plan (ESPP), effective upon the IPO. Pursuant to the 2021 Plan, the Board may grant incentive stock options to purchase shares of the Company’s common stock, non-statutory stock options to purchase shares of the Company’s common stock, stock appreciation rights, restricted stock, RSUs, performance awards (PRSUs) and other awards. The ESPP enables eligible employees to purchase shares of the Company's Class A common stock. Both the 2021 Plan and ESPP include an automatic increase to their shares reserve on January 1 of each year as set forth in the respective plan documents.
In August 2022, the Board adopted the 2022 Inducement Plan (the Inducement Plan) in accordance with Listing Rule 5635(c)(4) of the Nasdaq Stock Market. Under the Inducement Plan, nonstatutory stock options, stock
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appreciation rights, restricted stock, RSUs, PRSUs and other awards may be granted as an inducement material for eligible persons to enter into employment with the Company.
Shares of common stock reserved for future issuance were as follows (in thousands):
March 31, 2023
2011 Stock Plan:
Options, RSUs and PRSUs outstanding19,180 
2021 Equity Incentive Plan:
Options and RSUs outstanding10,747 
Shares reserved for future award issuances66,768 
2022 Inducement Plan:
Options and RSUs outstanding3,509 
Shares reserved for future award issuances6,491 
2021 Employee Stock Purchase Plan11,181 
Total shares of common stock reserved for issuance117,876 
2021 Employee Stock Purchase Plan
Under the ESPP, the price at which common stock is purchased is equal to 85% of the fair market value of a share of the Company’s common stock on the first day of the offering period or the applicable purchase date, whichever is lower. The fair market value of common stock will generally be the closing sales price on the determination date. The ESPP provides an offering period of 24 months, with four purchase periods that are generally six months long and end on May 15 and November 15 of each year, except for the first purchase period, which began upon the completion of the IPO in September 2021 and ended on May 13, 2022.
The ESPP also includes a reset provision for the purchase price if the fair market value of a share of the Company's common stock on the first day of any purchase period is less than or equal to the fair market value of a share of the Company's common stock on the first day of an ongoing offering. If the reset provision is triggered, a new 24-month offering period begins. The reset provision under the ESPP was triggered on May 16, 2022, and again on November 16, 2022. Each triggering of the reset provision was considered a modification in accordance with ASC 718, Stock Based Compensation, with the modification charge recognized on a straight-line basis over the new offering period. The modification did not have a material effect on the Company's stock-based compensation expense during the three months ended March 31, 2023.
During the three months ended March 31, 2023 and 2022, the Company recognized $2.0 million and $3.2 million of stock-based compensation expense related to the ESPP, respectively.
Stock Options
Stock options are generally granted with an exercise price equal to the stock’s fair market value at the date of grant, have a 10-year contractual term, and vest over a four-year period.
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Share Information:Number of Shares (in thousands)Weighted-Average Exercise PriceWeighted-Average Remaining Contractual Term (in years)
Aggregate Intrinsic Value (in thousands) (1)
Balance as of December 31, 20222,758 $9.06 7.3$15,595 
Stock options exercised(19)$0.31 
Stock options cancelled / forfeited / expired(3)$0.16 
Balance as of March 31, 20232,736 $9.12 7.1$17,062 
Options vested and expected to vest as of March 31, 20232,736 $9.12 7.1$17,062 
Options exercisable as of March 31, 2023920 $0.27 2.4$13,884 
(1)Aggregate intrinsic value for stock options represents the difference between the exercise price and the per share fair value of the Company’s common stock as of the end of the period, multiplied by the number of stock options outstanding, exercisable, or vested.


Restricted Stock Units
RSUs are granted at fair market value at the date of the grant and vest over a four-year period.
RSU activity, which includes PRSUs, during the three months ended March 31, 2023 is as follows:
Share Information:Number of SharesWeighted-Average Grant Date Fair Value Per Share
(in thousands, except per share data)
Unvested, as of December 31, 202232,253 $18.86 
Granted1,540 $14.54 
Vested (1)
(2,261)$17.23 
Forfeited(832)$17.39 
Unvested, as of March 31, 202330,700 $18.80 
(1) During the three months ended March 31, 2023, total shares that vested were 2.3 million, of which 0.8 million were withheld for tax purposes.

The total fair value of vested RSUs during the three months ended March 31, 2023 and 2022 was $39.0 million and $106.6 million, respectively.
Performance-Based Awards
In May 2019, the Board approved a grant of 166,390 shares of PRSUs to the Company’s Chief Executive Officer (CEO). The vesting of these PRSUs is contingent upon the satisfaction of certain milestones. The revenue-related milestone and the liquidity event condition were met prior to December 31, 2021. As of March 31, 2023, the time-based vesting was the only condition yet to be satisfied over the remaining requisite service period, and the number of shares to vest subject to this condition is insignificant.
In September 2021, the Board approved a grant of 6,000,000 PRSUs to the Company's CEO with a time-based service condition beginning January 1, 2022, and a market condition involving five separate stock price targets ranging from $70.00 to $200.00 per share for each of the five vesting tranches (CEO Performance Award). These stock price targets will be measured based on the average closing price over a consecutive 60-trading day period, beginning on the first trading day after the expiration of the final lock-up period in February 2022. The vesting of the CEO Performance Award is contingent upon the completion of the requisite service through January 1, 2029 and the achievement of the specified stock price target in each tranche on or before January 1, 2029. The stock price targets are not required to be achieved within the service period of each tranche, and accordingly, multiple tranches
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can vest at the same date if the specified stock price targets are achieved after December 31, 2025. The CEO Performance Award had a total grant date fair value of $131.0 million. The fair value of the CEO Performance Award was determined at grant date by using the Monte Carlo simulation model, which requires certain complex valuation assumption inputs such as measurement period, expected stock price volatility, risk-free interest rate and dividend yield.
The Company recognized stock-based compensation expense associated with PRSUs granted to the CEO of $6.9 million and $6.9 million for the three months ended March 31, 2023 and 2022, respectively. These expenses were recorded in general and administrative expenses in the condensed consolidated statements of operations.
Stock-Based Compensation
Total stock-based compensation expense recorded for the three months ended March 31, 2023 and 2022 was as follows (in thousands):
Three Months Ended March 31,
20232022
Cost of revenue$1,696 $1,526 
Research and development8,979 8,309 
Sales and marketing (1)
15,756 12,536 
General and administrative (2)
24,263 24,254 
Stock-based compensation, net of amounts capitalized50,694 46,625 
Capitalized stock-based compensation514