Company Quick10K Filing
Hubspot
Price154.21 EPS-1
Shares43 P/E-119
MCap6,559 P/FCF92
Net Debt-233 EBIT-36
TEV6,325 TEV/EBIT-176
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-05
10-K 2020-12-31 Filed 2021-02-16
10-Q 2020-09-30 Filed 2020-11-05
10-Q 2020-06-30 Filed 2020-08-05
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-02-12
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-02-12
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-13
10-Q 2017-09-30 Filed 2017-11-01
10-Q 2017-06-30 Filed 2017-08-02
10-Q 2017-03-31 Filed 2017-05-02
10-K 2016-12-31 Filed 2017-02-16
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-02-24
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-05
10-Q 2014-09-30 Filed 2014-11-13
8-K 2020-11-05
8-K 2020-09-15
8-K 2020-08-05
8-K 2020-06-17
8-K 2020-06-04
8-K 2020-06-01
8-K 2020-05-01
8-K 2020-02-12
8-K 2019-11-05
8-K 2019-08-06
8-K 2019-06-05
8-K 2019-05-31
8-K 2019-05-07
8-K 2019-02-13
8-K 2019-02-12
8-K 2018-11-12
8-K 2018-11-07
8-K 2018-08-20
8-K 2018-08-01
8-K 2018-06-13
8-K 2018-06-06
8-K 2018-05-10
8-K 2018-04-23
8-K 2018-02-09

HUBS 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
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
Item 1. Legal Proceedings
Item 1A.Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults on Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 hubs-ex311_6.htm
EX-31.2 hubs-ex312_7.htm
EX-32.1 hubs-ex321_8.htm

Hubspot Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
1.51.20.80.50.1-0.22014201620182020
Assets, Equity
0.20.10.10.0-0.0-0.12014201620182020
Rev, G Profit, Net Income
0.40.30.1-0.0-0.2-0.32014201620182020
Ops, Inv, Fin

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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, 2021

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 001-36680

 

HubSpot, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-2632791

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

25 First Street

       Cambridge, Massachusetts02141

              (Address of principal executive offices)            (Zip Code)

(888) 482-7768

(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

Common Stock, par value $0.001 per share

 

HUBS

 

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.   YES      NO  

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

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

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.    YES      NO  

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

There were 46,725,776 shares of the registrant’s Common Stock issued and outstanding as of April 30, 2021.

 

 

 


 

 

HUBSPOT, INC.

Table of Contents

 

Part I — Financial Information

 

 

 

 

Item 1.

 

Unaudited Consolidated Financial Statements:

 

 

 

Unaudited Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

5

 

 

Unaudited Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020

6

 

 

Unaudited Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020

7

 

 

Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020

8

 

 

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

33

Item 4.

 

Controls and Procedures

34

 

Part II — Other Information

 

 

 

 

Item 1.

 

Legal Proceedings

35

Item 1A.

 

Risk Factors

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

59

Item 3.

 

Default Upon Senior Securities

59

Item 4.

 

Mine Safety Disclosures

59

Item 5.

 

Other Information

59

Item 6.

 

Exhibits

60

Signatures

 

 

 

EX-31.1

 

CERTIFICATION OF THE CEO PURSUANT TO SECTION 302

 

EX-31.2

 

CERTIFICATION OF THE CFO PURSUANT TO SECTION 302

 

EX-32.1

 

CERTIFICATION OF THE CEO AND CFO PURSUANT TO SECTION 906

 

 

 

 

 


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and these statements involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements.  Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross margin and operating expenses;

 

maintaining and expanding our customer base and increasing our average subscription revenue per customer;

 

the impact of competition in our industry and innovation by our competitors;

 

our anticipated growth and expectations regarding our ability to manage our future growth;

 

our expectations regarding the potential impact of the COVID-19 pandemic on our business, operations, and the markets in which we and our partners and customers operate;

 

our anticipated areas of investments, including sales and marketing, research and development, customer service and support, data center infrastructure and service capabilities, and expectations relating to such investments;

 

our predictions about industry and market trends;

 

our ability to anticipate and address the evolution of technology and the technological needs of our customers, to roll-out upgrades to our existing software platform and to develop new and enhanced applications to meet the needs of our customers;

 

our ability to maintain our brand and inbound marketing, selling and servicing thought leadership position;

 

the impact of our corporate culture and our ability to attract, hire and retain necessary qualified employees to expand our operations;

 

the anticipated effect on our business of litigation to which we are or may become a party;

 

our ability to successfully acquire and integrate companies and assets;

 

our plans regarding declaring or paying cash dividends in the foreseeable future; and

 

our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon 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, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “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 those described in the forward-looking 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 we may make.

In this Quarterly Report on Form 10-Q, the terms “HubSpot,” “we,” “us,” and “our” refer to HubSpot, Inc. and its subsidiaries, unless the context indicates otherwise.

3


 

Risk Factor Summary

 

The risk factors detailed in Item 1A entitled “Risk Factors” in this Quarterly Report on Form 10-Q are the risks that we believe are material to our investors and a reader should carefully consider them. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur. The following is a summary of the risk factors detailed in Item 1A:

 

 

The effects of the COVID-19 pandemic have materially affected how we and our customers are operating our businesses, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain.

 

We have a history of losses and may not achieve profitability in the future.

 

We are dependent upon customer renewals, the addition of new customers, increased revenue from existing customers and the continued growth of the market for a CRM Platform.

 

We face significant competition from both established and new companies offering marketing, sales and customer service software and other related applications, as well as internally developed software, which may harm our ability to add new customers, retain existing customers and grow our business.

 

Failure to effectively develop and expand our marketing, sales, customer service, and content management capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.

 

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our CRM Platform may become less competitive.

 

Our ability to introduce new products and features is dependent on adequate research and development resources. If we do not adequately fund our research and development efforts, we may not be able to compete effectively and our business and operating results may be harmed.

 

Interruptions or delays in service from our third-party data center providers could impair our ability to deliver our platform to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue.

 

If our CRM Platform has outages or fails due to defects or similar problems, and if we fail to correct any defect or other software problems, we could lose customers, become subject to service performance or warranty claims or incur significant costs.

 

If our or our customers’ security measures are compromised or unauthorized access to data of our customers or their customers is otherwise obtained, our CRM Platform may be perceived as not being secure, our customers may be harmed and may curtail or cease their use of our platform, our reputation may be damaged and we may incur significant liabilities.

 

We may experience quarterly fluctuations in our operating results due to a number of factors, which makes our future results difficult to predict and could cause our operating results to fall below expectations or our guidance.

 

If we do not accurately predict subscription renewal rates or otherwise fail to forecast our revenue accurately, or if we fail to match our expenditures with corresponding revenue, our operating results could be adversely affected.

 

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

 

 

4


 

 

PART I — Financial Information

 

 

Item 1.

Financial Statements

HubSpot, Inc.

Unaudited Consolidated Balance Sheets

(in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

397,498

 

 

$

378,123

 

Short-term investments

 

 

782,335

 

 

 

873,073

 

Accounts receivable — net of allowance for doubtful accounts of $1,671 and

   $1,993 at March 31, 2021 and December 31, 2020, respectively

 

 

109,602

 

 

 

126,433

 

Deferred commission expense

 

 

47,279

 

 

 

44,576

 

Prepaid expenses and other current assets

 

 

31,459

 

 

 

34,716

 

Total current assets

 

 

1,368,173

 

 

 

1,456,921

 

Long-term investments

 

 

105,990

 

 

 

30,697

 

Property and equipment, net

 

 

96,845

 

 

 

101,123

 

Capitalized software development costs, net

 

 

28,340

 

 

 

24,943

 

Right-of-use assets

 

 

261,601

 

 

 

275,893

 

Deferred commission expense, net of current portion

 

 

30,607

 

 

 

28,296

 

Other assets

 

 

18,795

 

 

 

13,893

 

Intangible assets, net

 

 

11,878

 

 

 

10,282

 

Goodwill

 

 

47,588

 

 

 

31,318

 

Total assets

 

$

1,969,817

 

 

$

1,973,366

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

17,907

 

 

$

13,540

 

Accrued compensation costs

 

 

44,856

 

 

 

44,054

 

Accrued expenses and other current liabilities

 

 

40,868

 

 

 

37,184

 

Convertible senior notes

 

 

11,810

 

 

 

7,837

 

Operating lease liabilities

 

 

30,563

 

 

 

30,020

 

Deferred revenue

 

 

336,183

 

 

 

312,866

 

Total current liabilities

 

 

482,187

 

 

 

445,501

 

Operating lease liabilities, net of current portion

 

 

265,664

 

 

 

279,664

 

Deferred revenue, net of current portion

 

 

3,227

 

 

 

3,636

 

Other long-term liabilities

 

 

11,399

 

 

 

10,811

 

Convertible senior notes

 

 

432,626

 

 

 

471,099

 

Total liabilities

 

 

1,195,103

 

 

 

1,210,711

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock

 

 

47

 

 

 

46

 

Additional paid-in capital

 

 

1,279,113

 

 

 

1,241,167

 

Accumulated other comprehensive loss

 

 

1,874

 

 

 

4,603

 

Accumulated deficit

 

 

(506,320

)

 

 

(483,161

)

Total stockholders’ equity

 

 

774,714

 

 

 

762,655

 

Total liabilities and stockholders’ equity

 

$

1,969,817

 

 

$

1,973,366

 

 

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

5


 

HubSpot, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except per share data)

 

 

For the Three Months Ended March 31,

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

Subscription

$

270,263

 

 

$

191,229

 

Professional services and other

 

11,102

 

 

 

7,739

 

Total revenue

 

281,365

 

 

 

198,968

 

Cost of revenues:

 

 

 

 

 

 

 

Subscription

 

43,853

 

 

 

29,734

 

Professional services and other

 

10,881

 

 

 

8,551

 

Total cost of revenues

 

54,734

 

 

 

38,285

 

Gross profit

 

226,631

 

 

 

160,683

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

68,396

 

 

 

46,202

 

Sales and marketing

 

141,017

 

 

 

102,328

 

General and administrative

 

32,250

 

 

 

26,255

 

Total operating expenses

 

241,663

 

 

 

174,785

 

Loss from operations

 

(15,032

)

 

 

(14,102

)

Other expense:

 

 

 

 

 

 

 

Interest income

 

475

 

 

 

4,057

 

Interest expense

 

(9,399

)

 

 

(5,953

)

Other income (expense)

 

660

 

 

 

(1,052

)

Total other expense

 

(8,264

)

 

 

(2,948

)

Loss before income tax expense

 

(23,296

)

 

 

(17,050

)

Income tax benefit (expense)

 

137

 

 

 

(666

)

Net loss

$

(23,159

)

 

$

(17,716

)

Net loss per share, basic and diluted

$

(0.50

)

 

$

(0.41

)

Weighted average common shares used in computing basic

   and diluted net loss per share:

 

46,428

 

 

 

43,275

 

 

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

6


 

HubSpot, Inc.

Unaudited Consolidated Statements of Comprehensive Loss

(in thousands)

 

 

For the Three Months Ended March 31,

 

 

2021

 

 

2020

 

Net loss

$

(23,159

)

 

$

(17,716

)

Other comprehensive loss:

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

(2,489

)

 

 

(1,077

)

Changes in unrealized (loss) gain on investments, net of income taxes of ($36) for the three months ended March 31, 2021 and $0 for the three months ended March 31, 2020

 

(240

)

 

 

583

 

Comprehensive loss

$

(25,888

)

 

$

(18,210

)

 

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

7


 

HubSpot, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(23,159

)

 

$

(17,716

)

Adjustments to reconcile net loss to net cash and cash equivalents provided

   by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

11,208

 

 

 

8,711

 

Stock-based compensation

 

 

32,423

 

 

 

27,463

 

Loss on early extinguishment of 2022 Convertible Notes

 

 

2,406

 

 

 

 

Repayment of 2022 Convertible Notes attributable to the debt discount

 

 

(9,805

)

 

 

 

Benefit from deferred income taxes

 

 

(1,006

)

 

 

(257

)

Amortization of debt discount and issuance costs

 

 

6,493

 

 

 

5,703

 

Amortization (accretion) of bond discount

 

 

515

 

 

 

(2,154

)

Unrealized currency translation

 

 

(49

)

 

 

781

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

16,475

 

 

 

9,780

 

Prepaid expenses and other assets

 

 

2,715

 

 

 

(15,107

)

Deferred commission expense

 

 

(6,305

)

 

 

(1,523

)

Right-of-use assets

 

 

10,354

 

 

 

5,723

 

Accounts payable

 

 

4,598

 

 

 

1,495

 

Accrued expenses and other liabilities

 

 

(2,429

)

 

 

(5,439

)

Operating lease liabilities

 

 

(9,272

)

 

 

(5,281

)

Deferred revenue

 

 

27,538

 

 

 

10,832

 

Net cash and cash equivalents provided by operating activities

 

 

62,700

 

 

 

23,011

 

Investing Activities:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

(362,288

)

 

 

(439,889

)

Maturities of investments

 

 

376,918

 

 

 

382,875

 

Purchases of property and equipment

 

 

(3,967

)

 

 

(11,098

)

Acquisition of a business, net of cash acquired

 

 

(16,810

)

 

 

 

Purchase of strategic investments

 

 

(1,850

)

 

 

 

Equity method investment

 

 

(2,308

)

 

 

 

Capitalization of software development costs

 

 

(7,341

)

 

 

(4,769

)

Net cash and cash equivalents used in investing activities

 

 

(17,646

)

 

 

(72,881

)

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from settlement of Convertible Note Hedges related to the 2022 Convertible Notes

 

 

723

 

 

 

 

Repayment of 2022 Convertible Notes attributable to the principal

 

 

(35,900

)

 

 

 

Employee taxes paid related to the net share settlement of stock-based awards

 

 

(2,964

)

 

 

(941

)

Proceeds related to the issuance of common stock under stock plans

 

 

16,339

 

 

 

6,854

 

Repayments of finance lease obligations

 

 

 

 

 

(30

)

Net cash and cash equivalents (used in) provided by financing activities

 

 

(21,802

)

 

 

5,883

 

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

 

(3,877

)

 

 

(1,814

)

Net increase in cash, cash equivalents and restricted cash

 

 

19,375

 

 

 

(45,801

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

381,152

 

 

 

278,515

 

Cash, cash equivalents and restricted cash, end of period

 

$

400,527

 

 

$

232,714

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

2,215

 

 

$

746

 

Right-of-use assets obtained in exchange for operating lease liabilities

 

$

1,276

 

 

$

6,396

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Issuance of common stock for repayment of 2022 Convertible Notes

 

$

155,250

 

 

$

 

Capital expenditures incurred but not yet paid

 

$

626

 

 

$

1,204

 

Asset retirement obligations

 

$

 

 

$

87

 

8


 

 

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

9


 

HubSpot, Inc.

Notes to Unaudited Consolidated Financial Statements

 

 

1. Organization and Operations

HubSpot, Inc. (the “Company”) provides a cloud-based customer relationship management (“CRM”) Platform, that enables companies to attract, engage, and delight customers throughout the customer experience. The Company’s CRM Platform comprised of Marketing Hub, Sales Hub, Service Hub, and a CMS Hub features integrated applications and tools that enable businesses to create a cohesive and adaptable customer experience.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) applicable to interim periods, under the rules and regulations of the United States Securities and Exchange Commission (“SEC”).  In the opinion of management, the Company has prepared the accompanying unaudited consolidated financial statements on a basis substantially consistent with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2020, and these consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation.   

The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2021. The year-end balance sheet data was derived from audited financial statements, but this Form 10-Q does not include all disclosures required under GAAP. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted under the rules and regulations of the SEC.

These interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 16, 2021. There have been no changes in the Company’s significant accounting policies from those that were disclosed in the Company’s Annual Report on Form 10-K that have had a material impact on our consolidated financial statements and related notes.

In March 2020, the World Health Organization (“WHO”) declared the outbreak of a disease caused by a novel strain of the coronavirus (“COVID-19”) to be a global pandemic (the “pandemic”). The Company has assessed the impact of the pandemic, and while the broader implications of the pandemic on the results of operations and overall financial performance remain uncertain, the Company assessed the potential impact on the March 31, 2021 financial statements and determined there were no material adjustments necessary with respect to these consolidated financial statements.

In March 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law by the United States. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the pandemic, including tax relief and government loans, grants, and investments. In June 2020, the Jobs Support Scheme (“JSS”) was announced by the Singapore government to provide support to employers and help enterprises retain their local employees during the pandemic. In March 2021, the American Rescue Plan was passed to build upon the measures in the CARES Act and provide direct relief to those impacted by the pandemic. The CARES Act, the JSS and the American Rescue Plan did not have a material impact with respect to these consolidated financial statements.

Recent Accounting Pronouncements

Recent accounting standards not included below are not expected to have a material impact on our consolidated financial position and results of operations.

In August 2020, the FASB issued guidance simplifying the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being bifurcated from the host contract and separately recognized as compared with current GAAP. In addition, it eliminates the treasury stock method for calculating diluted earnings per share for convertible instruments and requires the use of the if-converted method. The new standard will be effective for the Company on January 1, 2022, with early adoption permitted. The Company is currently evaluating the impact of adoption of the standard on its consolidated financial statements.

 

2. Revenues

 

Disaggregation of Revenue

 

10


 

 

The Company provides disaggregation of revenue based on geographic region (Note 16) and based on the subscription versus professional services and other classification on the consolidated statements of operations as it believes these best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

 

Deferred Revenue and Deferred Commission Expense

 

Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue, depending on whether the revenue recognition criteria have been met. Deferred revenue represents amounts billed for which revenue has not yet been recognized. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue, and the remaining portion is recorded as long-term deferred revenue. Deferred revenue during the three months ended March 31, 2021 increased by $22.9 million resulting from $304.3 million of additional invoicing and was offset by revenue recognized of $281.4 million during the same period. $162.1 million of revenue was recognized during the three month period ended March 31, 2021 that was included in deferred revenue at the beginning of the period. As of March 31, 2021, approximately $269.4 million of revenue is expected to be recognized from remaining performance obligations for contracts with original performance obligations that exceed one year. The Company expects to recognize revenue on approximately 94% of these remaining performance obligations over the next 24 months, with the balance recognized thereafter.  

 

Additional contract liabilities of $1.7 million were included in accrued expenses and other current liabilities on the consolidated balance sheet as of March 31, 2021 and December 31, 2020.

The incremental direct costs of obtaining a contract, which primarily consist of sales commissions paid for new subscription contracts, are deferred and amortized on a straight-line basis over a period of approximately one to three years.  The one to three-year period has been determined by taking into consideration the type of product sold, the commitment term of the customer contract, the nature of the Company’s technology development life-cycle, and an estimated customer relationship period.  Sales commissions for upgrade contracts are deferred and amortized on a straight-line basis over the remaining estimated customer relationship period of the related customer.  Deferred commission expense that will be recorded as expense during the succeeding 12-month period is recorded as current deferred commission expense, and the remaining portion is recorded as long-term deferred commission expense.

Deferred commission expense during the three months ended March 31, 2021 increased by $5.0 million as a result of deferring incremental costs of obtaining a contract of $20.6 million and was offset by amortization of $15.6 million during the same period.

 

3. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. For purposes of this calculation, options to purchase common stock, restricted stock units (“RSUs”), shares issued pursuant to the Employee Stock Purchase Plan (“ESPP”), the Warrants (defined in Note 9), the Conversion Option of the 2022 Notes, and the Conversion Option of the 2025 Notes (the “Conversion Options”) (Note 9) are considered to be potential common stock equivalents.

A reconciliation of the denominator used in the calculation of basic and diluted net loss per share is as follows:

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

 

2020

 

Net loss

$

(23,159

)

 

$

(17,716

)

Weighted-average common shares outstanding — basic

 

46,428

 

 

 

43,275

 

Dilutive effect of share equivalents resulting from stock options, RSUs, ESPP, Warrants and the Conversion Options

 

 

 

 

 

Weighted-average common shares, outstanding — diluted

 

46,428

 

 

 

43,275

 

Net loss per share, basic and diluted

$

(0.50

)

 

$

(0.41

)

 

Since the Company incurred net losses for each of the periods presented, diluted net loss per share is the same as basic net loss per share. All of the Company’s outstanding stock options, RSUs, and shares issuable under the ESPP, as well as the Warrants and Conversion Options were excluded in the calculation of diluted net loss per share as the effect would be anti-dilutive.

 

The Company expects to settle the principal amount of the 2022 Notes and 2025 Notes (collectively, the “Notes”) (Note 9) in cash, and therefore, the Company uses the treasury stock method for calculating any potential dilutive effect of the Warrants and Conversion Options on diluted net income per share, if applicable.  As a result, only the amount by which the conversion cost of the Notes, if settled in shares, exceeds the aggregated principal amount of the Notes (the “Conversion Spread”) is considered in the diluted earnings per share computation. The Conversion Spread has a dilutive impact on net income per share when the average market price

11


 

of the Company’s common stock for a given period of time exceeds the initial conversion price of $94.77 per share for the 2022 Notes and $282.52 for the 2025 Notes. The average stock price for the quarter ended March 31, 2021 was $439.38.

 

As the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the calendar quarter ended March 31, 2021 was equal to or greater than 130% of the conversion price of $94.77 on each applicable trading day, the 2022 Notes are convertible at the option of the holders thereof during the calendar quarter ended June 30, 2021. In the first quarter of 2021, the Company settled $44.5 million of principal balance of the 2022 Notes in cash. As of April 30, 2021, the Company has received conversion notices for approximately $12.7 million of the principal balance of the 2022 Notes, which will be settled in cash during the quarter ended June 30, 2021. For disclosure purposes, the potentially dilutive effect of the Conversion Spread is calculated and included in the table below.

 

As the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the calendar quarter ended March 31, 2021 was equal to or greater than 130% of the conversion price of $282.52 on each applicable trading day, the 2025 Notes are convertible at the option of the holders thereof during the calendar quarter ended June 30, 2021. As of April 30, 2021, no holders have converted or indicated their intention to convert the 2025 Notes. For disclosure purposes, the potentially dilutive effect of the Conversion Spread is calculated and included in the table below.

 

The following table contains all potentially dilutive common stock equivalents.

 

 

 

As of March 31,

 

 

 

 

2021

 

 

 

2020

 

 

 

(in thousands)

 

Options to purchase common shares

 

 

769

 

 

 

1,401

 

RSUs

 

 

1,451

 

 

 

1,697

 

Conversion Option of the 2022 Notes and Warrants

 

 

1,957

 

 

 

3,093

 

Conversion Option of the 2025 Notes

 

 

581

 

 

 

 

ESPP

 

 

10

 

 

 

 

 

 

4. Fair Value of Financial Instruments

The Company measures certain financial assets at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

 

Level 1 — Quoted prices in active markets for identical assets or liabilities.

 

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

12


 

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities at March 31, 2021 and December 31, 2020:

 

 

 

March 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Cash equivalents and investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

212,377

 

 

$

 

 

$

 

 

$

212,377

 

Commercial paper

 

 

 

 

 

176,859

 

 

 

 

 

 

176,859

 

Corporate bonds

 

 

 

 

 

221,375

 

 

 

 

 

 

221,375

 

U.S. Government agency securities

 

 

 

 

 

1,803

 

 

 

 

 

 

1,803

 

U.S. Treasury securities

 

 

 

 

 

513,284

 

 

 

 

 

 

513,284

 

Restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

 

 

 

3,029

 

 

 

 

 

 

3,029

 

Total

 

$

212,377

 

 

$

916,350

 

 

$

 

 

$

1,128,727

 

 

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Cash equivalents and investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

172,485

 

 

$

 

 

$

 

 

$

172,485

 

Commercial paper

 

 

 

 

 

12,233

 

 

 

 

 

 

12,233

 

Corporate bonds

 

 

 

 

 

116,371

 

 

 

 

 

 

116,371

 

U.S. Treasury securities

 

 

 

 

 

774,772

 

 

 

 

 

 

774,772

 

Certificates of deposit

 

 

 

 

 

 

394