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•	our ability to retain clients and sell additional solutions to new and existing clients;

•	our ability to attract and enroll new members;

•	the growth and success of our partners and reseller relationships;

•	our ability to estimate the size of our target market;

•	uncertainty in the healthcare regulatory environment;

•	our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, operating expenses, paying users, and free cash flow;

•	our ability to achieve or maintain profitability;

•	the demand for our solutions or for chronic condition management in general;

•	our ability to compete successfully in competitive markets;

•	our ability to respond to rapid technological changes;

•	our expectations and management of future growth;

•	our ability to develop new solutions, or enhancements to our existing solutions, and bring them to market in a timely manner;

•	our ability to offer high-quality coaching and monitoring;

•	our ability to attract and retain key personnel and highly qualified personnel;

•	our ability to protect our brand;

•	our ability to expand payor relationships;

•	our ability to maintain, protect, and enhance our intellectual property;

•	restrictions and penalties as a result of privacy and data protection laws;

•	our expectations about the impact of natural disasters and public health epidemics, such as the coronavirus, on our business, results of operations and financial condition;

•	our ability to successfully identify, acquire, and integrate companies and assets;

•	the increased expenses associated with being a public company;

•	our anticipated uses of net proceeds from our initial public offering; and

•	the future trading prices of our common stock.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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Nature of the Business

Livongo Health, Inc. (“we”, “us”, “the Company”, or “Livongo”) was incorporated in the state of Delaware on October 16, 2008, under the name of EosHealth, Inc. In September 2014, we changed our name to Livongo Health, Inc. Livongo empowers people with chronic conditions to live better and healthier lives. We have created a unified platform that provides smart, cellular-connected devices, supplies, informed coaching, data science-enabled insights and facilitates access to medications across multiple chronic conditions to help our members lead better lives. We currently offer Livongo for Diabetes, Livongo for Hypertension, Livongo for Prediabetes and Weight Management, and Livongo for Behavioral Health by myStrength. We create consumer-first experiences with high member satisfaction, measurable, sustainable health outcomes, and more cost-effective care for our members and our clients. This approach is leading to better clinical and financial outcomes while also creating a better experience for people with chronic conditions and their care team of family, friends, and medical professionals. Our headquarters are located in Mountain View, California, and we serve customers throughout North America.

Initial Public Offering

In July 2019, we completed our initial public offering ("IPO") in which we issued and sold 14,590,050 shares of our common stock at an offering price of $28.00 per share, including 1,903,050 shares of common stock pursuant to the exercise in full of the underwriters' option to purchase additional shares. We received net proceeds of $377.5 million, after deducting underwriting discounts and commissions of $28.6 million and offering costs of $2.4 million. Offering costs were capitalized and consisted of fees and expenses incurred in connection with the sale of our common stock in the IPO, including the legal, accounting, printing and other IPO-related costs. Upon completion of the IPO, these deferred offering costs were reclassified to stockholders’ equity and recorded against the proceeds from the offering. Immediately prior to the closing of the IPO, all 58,615,488 shares of our then-outstanding redeemable convertible preferred stock automatically converted into 58,615,488 shares of common stock at their respective conversion ratios and we reclassified $236.9 million of redeemable convertible preferred stock to additional paid-in capital and $0.1 million to common stock on our condensed consolidated balance sheet.

Reverse Stock Split

In June 2019, our board of directors and stockholders approved a 1-for-2 reverse stock split of our common stock and redeemable convertible preferred stock, which was effected on June 27, 2019 pursuant to an amendment to our amended and restated certificate of incorporation. The par value of the common stock and redeemable convertible preferred stock was not adjusted as a result of the reverse stock split. All references to redeemable convertible preferred stock, common stock, options to purchase common stock, restricted stock awards, restricted stock units, common stock warrants, per share data, and related information included in the accompanying condensed consolidated financial statements have been adjusted to reflect this reverse stock split for all periods presented.

Liquidity and Capital Resources

We have incurred losses since inception. As of March 31, 2020, we had an accumulated deficit of $169.8 million. During the three months ended March 31, 2020, we incurred a net loss of $5.6 million and used $10.4 million of cash in operating activities. During the three months ended March 31, 2019, we incurred a net loss of $14.4 million and used $25.2 million in operating activities.

As described above, we received net proceeds of $377.5 million from our IPO in July 2019. Prior to our IPO, we primarily funded our operations through the sale of our redeemable convertible preferred stock. The continued execution of our long-term business plan may require us to explore financing options such as issuance of equity or debt instruments. While we have historically been successful in obtaining equity financing, there can be no assurance that such additional financing, if necessary, will be available or, if available, that such financings can be obtained on satisfactory terms.

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Risks and Uncertainties

Basis of Presentation

The condensed consolidated financial statements and accompanying notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Livongo Health, Inc. and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

The condensed consolidated balance sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by U.S. GAAP. The accompanying interim condensed consolidated balance sheets as of March 31, 2020, the interim condensed consolidated statements of operations and the interim condensed consolidated statements of redeemable convertible preferred stock and stockholders’ deficit for the three months ended March 31, 2020 and 2019, and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 are unaudited. These interim condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, include all adjustments necessary to fairly state our financial position as of March 31, 2020, the results of our operations for the three months ended March 31, 2020 and 2019 and result of our cash flows for the three months ended March 31, 2020 and 2019. The financial data and other financial information disclosure in the notes to these interim condensed consolidated financial statements related to the three months periods are also unaudited. The results for the three months ended March 31, 2020 are not necessarily indicative of the operating results expected for the year ending December 31, 2020 or any future period.

Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in our latest annual report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 24, 2020. We have revised our condensed consolidated statements of operations and cash flows for the three months ended March 31, 2019 to reflect the adoption of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASC 606, as of January 1, 2019, on a modified retrospective basis. This revision was made because our financial statements presented in our Quarterly Report on Form 10-Q for the period ended March 31, 2019 were prepared in accordance with ASC 605, the prior accounting standard. In addition, we made other adjustments to our financial results for the first quarter through the third quarter of 2019 to correct errors that consist of (i) a $1.9 million total adjustment for the capitalization and amortization of device costs for Livongo for Hypertension and Livongo for Prediabetes and Weight Management, (ii) a $1.2 million total reduction of sales and marketing expenses for the capitalization and amortization of certain sales commissions, and (iii) a $0.4 million increase in sales and marketing expenses. We evaluated the materiality of these revisions, quantitatively and qualitatively, and determined that these revisions were not material to any of our previously issued condensed consolidated financial statements.

Comprehensive Loss

For the three months ended March 31, 2020 and 2019, there was no difference between comprehensive loss and net loss.

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Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Such estimates, judgments, and assumptions include: revenue recognition, allowance for doubtful accounts, the period of benefit for deferred commissions, the period of benefit for deferred device costs, estimated costs for capitalized internal-use software, assessment of the useful life and recoverability of long-lived assets, fair values of stock-based awards, contingent consideration in business combinations, the incremental borrowing rate ("IBR") applied in lease accounting, and income taxes. Actual results could be different from these estimates. While the COVID-19 pandemic has not had a material adverse impact on our results of operations to date, our estimates for revenue recognition and allowance for doubtful accounts, as well as our other estimates, judgments, and assumptions, may be materially and adversely different from our actual results as a result of the COVID-19 pandemic. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements will be affected.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we may not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies until required by private company accounting standards.

Concentration of Risk

Financial instruments that potentially subject us to credit risk consist principally of cash, cash equivalents, certificates of deposit, and accounts receivable. We maintain our cash primarily with domestic financial institutions of high credit quality, which may exceed federal deposit insurance corporation limits. We invest our cash equivalents in highly rated money market funds and short-term investments in certificates of deposit. We have not experienced any losses in such accounts. We believe we are not exposed to any significant credit risk on cash, cash equivalents, investments and restricted cash and perform periodic evaluations of the credit standing of such institutions.

Our sales are predominately to self-insured employers, healthcare providers, and insurance carriers located throughout North America. Accounts receivable are recorded at the invoiced amount, and are stated at realizable value, net of an allowance for doubtful accounts. We perform ongoing assessments of our clients to assess the collectability of the accounts based on a number of factors, including past transaction experience, age of the accounts receivable, review of the invoicing terms of the contracts, and recent communication with clients. We have not experienced material credit losses from our accounts receivable.

Significant clients and partners are those which represent 10% or more of our net accounts receivable balance or revenue during the period at each respective consolidated balance sheet date. There were no clients that represented 10% or more of our revenue or accounts receivable balance for the periods presented. For each significant partner that represented 10% or more of our accounts receivable balance or revenue during the periods presented, revenue as a percentage of total revenue and accounts receivable as a percentage of net accounts receivable were as follows:

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	Revenue						Accounts Receivable
	Three Months Ended March 31,						March 31,			December 31,
	2020			2019			2020			2019
Partner A	24	%		25	%		20	%		23	%
Partner B	18	%		23	%		22	%		25	%

We utilize a limited number of manufacturing vendors to build and assemble our products. The hardware components included in our devices are sourced from various suppliers by the manufacturer and are principally industry standard parts and components that are available from multiple vendors. Quality or performance failures of the glucometer or changes in the contractors’ or

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vendors’ financial or business condition could disrupt our ability to supply quality products to our clients and thereby have a material adverse impact on our business, financial condition and results of operations.

Recent Accounting Pronouncements Adopted in Fiscal 2020

Leases: In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance (collectively, "ASC 842"), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. This ASU is effective for us for the interim periods and year ending December 31, 2020. Early adoption is permitted. We adopted ASC 842 on January 1, 2020 using the modified retrospective approach by electing to use the optional transition method which allows us to continue to apply the previous guidance, including disclosure requirements, in the comparative periods presented.

We elected to use certain practical expedients permitted under the transition guidance within the new guidance, which allows us to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. We also elected not to use the hindsight practical expedient in determining the lease term and impairment of the operating lease right-of-use ("ROU") assets and elected not to record operating leases with an initial term of 12 months or less on our condensed consolidated balance sheets. We elected not to separate lease and non-lease components for all classes of underlying assets.

Adoption of the new lease standard resulted in the recording of ROU assets and operating lease liabilities of approximately $18.1 million and $18.6 million, respectively, as of January 1, 2020. The difference between the ROU assets and operating lease liabilities primarily relates to deferred rent of $0.5 million recorded in accordance with the previous lease guidance. The adoption had no impact on total cash flows from operations other than a change within operating cash flows.

We determine if an arrangement is or contains a lease at inception. Our lease agreements do not contain any material options to extend or terminate leases, any material residual value guarantees, any material restrictions or covenants, or any material variable lease payments. Any variable lease payments consist of common area maintenance, taxes and other costs and are expensed as incurred. We have performed an evaluation of our other contracts with customers and suppliers in accordance with ASC 842 and have determined that, none of our other contracts contain a lease.

ROU assets represent our right to use an underlying asset for the lease term, while operating lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. In determining the present value of lease payments, we use our IBR based on the information available at the lease commencement date, including the lease term, for operating leases. The incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be for a secured borrowing in the country where the lease was executed. Upon adoption, the ROU asset was valued at the amount of the operating lease liabilities adjusted for lease incentives, prepaid rent, and deferred rent as of January 1, 2020.

The adoption of the new standard resulted in changes to our accounting policies for leases and in additional disclosures. See Note 8.

Stock-Based Compensation: In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting. The standard simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to the nonemployees with the requirements for share-based payments granted to employees. ASU No. 2018-07 is effective for us for the interim periods and the year beginning January 1, 2020. Early adoption is permitted. We adopted this new standard using a prospective method on January 1, 2020. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Disclosure of Fair Value Measurement: In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, including interim reporting periods within those fiscal years. ASU 2018-13 is effective for us for the interim periods and the year beginning January 1, 2020. We adopted the new standard using a prospective method effective on January 1, 2020. The adoption of this ASU resulted in additional disclosures in Note 6 of our condensed consolidated financial statements.

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New Accounting Pronouncements Not Yet Adopted

Credit Losses: In June 2018, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently. For trade receivables, loans, and other financial assets, we will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than a reduction in the amortized cost basis of the securities. This new standard is effective for us for the interim periods within and the year ending December 31, 2020. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements.

Cloud Computing Arrangements Implementation Costs: In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. This ASU is effective for us for the year ending December 31, 2021, and interim periods within the year ending December 31, 2022. Early adoption is permitted. This standard could be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently evaluating the impact of this ASU on our consolidated financial statements and expect to apply this standard using the prospective transition method.

Income Taxes: In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies that accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. This new standard is effective for our interim periods and year beginning January 1, 2022. Early adoption is permitted. Most amendments within this standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

3.	Revenue, Deferred Revenue and Deferred Costs and Other

Deferred Revenue

Deferred revenue activity is as follows (in thousands):

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	Three Months Ended March 31,
	2020				2019
Balance at beginning of period	$	4,599			$	2,051
Amounts billed but unrecognized	3,140				1,378
Revenue recognized	(1,640		)		(1,309		)
Assumed from business combination	—				1,407
Balance at end of period	$	6,099			$	3,527

Balance at the end of period (in thousands):

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	March 31,				December 31,
	2020				2019
Deferred revenue, current	$	5,351			$	3,945
Deferred revenue, noncurrent	748				654
Total deferred revenue	$	6,099			$	4,599

We expect to recognize $5.4 million of revenue in the next 12 months and $0.7 million of revenue thereafter, related to future performance obligations that were unsatisfied or partially satisfied as of March 31, 2020.

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Accrued Rebates

Accrued rebates represent the amounts in client contracts that are subject to pricing adjustments based on various performance metrics, such as member satisfaction scores, cost savings guarantees and health outcome guarantees, which if not met typically require us to refund a portion of the per participant per month fee paid. We defer an estimate of the amount of consideration that we expect to refund to our clients from the monthly per participant per month fee until the performance metric is met. As of March 31, 2020 and December 31, 2019, accrued rebates of $1.7 million and $1.2 million, respectively, were recorded within accrued expenses and other current liabilities on our condensed consolidated balance sheets.

The activity is as follows (in thousands):

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	Three Months Ended March 31,
	2020				2019
Balance at beginning of period	$	1,152			$	609
ASC 606 adoption date impact adjustment	—				(222		)
Amount deferred	776				193
Revenue recognized	(198		)		(2		)
Payments	—				(45		)
Balance at end of period	$	1,730			$	533

Deferred Costs and Other

Deferred costs and other activity is as follows (in thousands):

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	Three Months Ended March 31, 2020
	Deferred Device Costs				Deferred Contract Costs				Deferred Execution Credits				Total
Balance at beginning of period	$	18,579			$	2,988			$	184			$	21,751
Additions	17,144				174				418				17,736
Revenue recognized	—				—				(130		)		(130		)
Cost of revenue recognized	(5,973		)		—				—				(5,973		)
Sales and marketing expenses recognized	—				(294		)		—				(294		)
Balance at end of period	$	29,750			$	2,868			$	472			$	33,090

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	Three Months Ended March 31, 2019
	Deferred Device Costs				Deferred Contract Costs				Deferred Execution Credits				Total
Balance at beginning of period	$	8,469			$	—			$	—			$	8,469
ASC 606 adoption date impact adjustment	—				3,692				771				4,463
Additions	8,495				—				112				8,607
Revenue recognized	—				—				(245		)		(245		)
Cost of revenue recognized	(2,598		)		—				—				(2,598		)
Sales and marketing expenses recognized	—				(254		)		—				(254		)
Balance at end of period	$	14,366			$	3,438			$	638			$	18,442

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Balance at the end of period (in thousands):

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	March 31, 2020
	Deferred Device Costs				Deferred Contract Costs				Deferred Execution Credits				Total
Deferred costs, current	$	20,961			$	1,162			$	472			$	22,595
Deferred costs, noncurrent	8,789				1,706				—				10,495
Total deferred costs	$	29,750			$	2,868			$	472			$	33,090

Copy History

	December 31, 2019
	Deferred Device Costs				Deferred Contract Costs				Deferred Execution Credits				Total
Deferred costs, current	$	14,746			$	1,121			$	184			$	16,051
Deferred costs, noncurrent	3,833				1,867				—				5,700
Total deferred costs	$	18,579			$	2,988			$	184			$	21,751

Retrofit Inc.

We acquired all of the issued and outstanding shares of Retrofit Inc. (“Retrofit”), a privately-held, Illinois-based entity, and a leading provider of weight-management and disease-prevention programs, through a share purchase agreement (the “Retrofit Purchase Agreement”) in exchange for cash consideration (the “Retrofit Acquisition”) in April 2018. The Retrofit Acquisition provides us with an evidence-based diabetes prevention program that enhances our data science capabilities and our expertise in holistic weight management including nutrition, exercise and mindset.

The total consideration transferred as part of the Retrofit Acquisition consisted of a cash payment on the closing date, adjusted for customary closing adjustments, of $12.4 million. Upon the close of the Retrofit Acquisition, as part of the Retrofit Purchase Agreement, we placed in escrow an earn-out consideration of $7.0 million held by a third-party escrow agent to be released to the former stockholders of Retrofit contingent upon achieving future qualified member targets as determined on December 31, 2019, 2020, and 2021 (the “Retrofit Contingent Consideration”). We recorded a corresponding escrow asset of $7.0 million on our condensed consolidated balance sheet upon the close of the acquisition. We estimated the fair value of the Retrofit Contingent Consideration to be $6.2 million as of the acquisition date using a Monte Carlo simulation model, which together with the cash consideration resulted in total purchase consideration of $18.6 million. The Retrofit Contingent Consideration is subject to remeasurement at each reporting date until the payments are released from escrow, with the remeasurement adjustment reported in our condensed consolidated statements of operations. For the three months ended March 31, 2020 and 2019, the fair value of the Retrofit Contingent Consideration had increased and we recorded an expense of $0.1 million and less than $0.1 million, respectively, within the change in fair value of contingent consideration on our condensed consolidated statement of operations. In April 2019, we released $1.8 million from the escrow deposit, of which $1.3 million was paid to the former stockholders of Retrofit. As of March 31, 2020 and December 31, 2019, the remaining Retrofit Contingent Consideration was $2.9 million and $2.8 million, respectively.

myStrength, Inc.

In February 2019, we acquired all of the issued and outstanding shares of myStrength, Inc. (“myStrength”), a privately-held entity based in Denver, Colorado, and a leading provider of digital behavioral health solutions through an agreement and plan of merger (the “myStrength Purchase Agreement”) in exchange for cash consideration (the “myStrength Acquisition”). The myStrength Acquisition has enabled us to more fully address the health of the whole person by bringing behavioral health conditions including depression, anxiety, stress, substance use disorder, chronic pain, opioid addiction and recovery, and insomnia to our Applied Health Signals solution.

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The total consideration for the myStrength Acquisition was $30.1 million in cash, subject to a closing adjustment of $0.1 million. As part of the myStrength Purchase Agreement, we are obligated to pay an earn-out consideration up to $5.0 million contingent upon satisfying future milestones for the year ended December 31, 2019 (the “myStrength Contingent Consideration”). We estimated the fair value of the myStrength Contingent Consideration to be $3.3 million as of the acquisition date using a Monte Carlo simulation model, which together with the cash consideration, resulted in total purchase consideration of $33.5 million. The myStrength Contingent Consideration was subject to remeasurement at each reporting date until the payments are made, with the remeasurement adjustment reported in our condensed consolidated statements of operations. For the three months ended March 31, 2019, we increased the fair value of the myStrength Contingent Consideration and recorded an expense of $0.6 million in our condensed consolidated statements of operations. In December 2019, we paid $2.4 million of the myStrength contingent consideration to the former shareholders of myStrength. In the three months ended March 31, 2020, we paid the remaining fair value of the myStrength contingent consideration of $2.6 million.

The purchase consideration of $33.5 million was allocated as follows:

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	Amount
	(in thousands)
Cash and cash equivalents	$	2,643
Accounts receivable	1,337
Other current assets	140
Property and equipment	114
Intangible assets	13,900
Other assets	34
Total assets acquired	18,168
Accounts payable	173
Accrued expenses and other liabilities	1,787
Deferred revenue	1,407
Deferred tax liability, net	1,396
Total liabilities assumed	4,763
Goodwill	20,092
Total purchase consideration	$	33,497

The following table sets forth the components of the identifiable intangible assets acquired and their estimated useful lives as of the acquisition date:

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	Cost				Useful Life
	(in thousands)				(years)
Customer relationships	$	4,300			7.0
Developed technology	9,200				7.0
Trade name	400				5.0
Total	$	13,900

The estimated fair values of the intangible assets acquired were determined based on the income approach to measure the fair value of the trade name, customer relationships, and developed technology. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy.

Additionally, in the first quarter of 2019, we incurred a total of $0.2 million of acquisition-related costs as a result of the myStrength acquisition.

Goodwill represents the excess of the purchase consideration over the estimated acquisition date fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill is primarily attributable to expected post-acquisition synergies from integrating myStrength’s assembled workforce and developed technology into our product offerings and cross-selling opportunities. Goodwill recorded is not deductible for income tax purposes. The results of operations of myStrength have been included in our consolidated financial statements from the respective date of purchase.

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Unaudited Pro Forma Financial Information

The following unaudited pro forma information presents the combined results of operations as if the myStrength Acquisition had been completed on January 1, 2018, the beginning of the comparable prior annual reporting period. The unaudited pro forma results include adjustments primarily related to the following: (i) interest expense related to the legacy debt of myStrength that was not acquired; (ii) amortization of the acquired intangible assets; (iii) fair value adjustment for deferred revenue; (iv) the inclusion of acquisition-related costs as of the earliest period presented; and (v) the associated tax impact of the acquisitions and these unaudited pro forma adjustments.

	March 31, 2019
	(in thousands)
Revenue	$	32,666
Net loss	$	(13,031	)

Inventories

Inventories of $19.2 million and $29.0 million, as of March 31, 2020 and December 31, 2019, respectively, consisted of finished goods.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

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	March 31,				December 31,
	2020				2019
	(in thousands)
Prepaid expenses	$	7,170			$	6,691
Escrow deposit, current	5,342				2,100
Interest receivable	606				504
Prepaid rent	263				352
Short-term deposits	484				201
Other current assets	4				12
Total	$	13,869			$	9,860

Property and Equipment, Net

Property and equipment consisted of the following:

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	March 31,				December 31,
	2020				2019
	(in thousands)
Computer, equipment and software	$	3,442			$	2,218
Furniture and fixtures	1,463				915
Capitalized internal-use software	12,545				11,229
Leasehold improvements	1,664				1,092
Property and equipment	19,114				15,454
Less: accumulated depreciation	(6,279		)		(5,100		)
Property and equipment, net	$	12,835			$	10,354

Depreciation and amortization expense was $1.2 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively.

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Intangible Assets, Net

Intangible assets consisted of the following as of March 31, 2020:

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	Gross Value				Accumulated Amortization				Net Book Value				Weighted- Average Remaining Useful Life
	(in thousands)												(years)
Customer relationships	$	8,190			$	(1,479	)		$	6,711			6.8
Developed technology	11,020				(2,268		)		8,752				5.4
Trade name	448				(138		)		310				3.8
Total	$	19,658			$	(3,885	)		$	15,773

Intangible assets consisted of the following as of December 31, 2019:

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	Gross Value				Accumulated Amortization				Net Book Value				Weighted- Average Remaining Useful Life
	(in thousands)												(years)
Customer relationships	$	8,190			$	(1,227	)		$	6,963			7.1
Developed technology	11,020				(1,848		)		9,172				5.7
Trade names	448				(114		)		334				4.0
Total	$	19,658			$	(3,189	)		$	16,469

Amortization expense for intangible assets for the three months ended March 31, 2020 and 2019 is as follows:

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	Three Months Ended March 31,
	2020				2019
	(in thousands)
Customer relationships	$	252			$	209
Developed technology	420				327
Trade names	24				28
Total	$	696			$	564

The expected future amortization expense related to intangible assets as of March 31, 2020 was as follows:

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	Amount
	(in thousands)
Remainder of 2020	$	2,073
2021	2,762
2022	2,750
2023	2,494
2024	2,324
Thereafter	3,370
Total	$	15,773

Goodwill

Goodwill was $35.8 million as of March 31, 2020 and December 31, 2019. Through March 31, 2020, there have not been any impairment of goodwill.

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Other Noncurrent Assets

Other noncurrent assets consisted of the following:

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	March 31,				December 31,
	2020				2019
	(in thousands)
Escrow deposit, noncurrent	$	—			$	3,150
Other	215				310
Total	$	215			$	3,460

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

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	March 31,				December 31,
	2020				2019
	(in thousands)
Accrued bonus	$	3,304			$	8,652
Vendor accruals	4,305				3,984
Contingent consideration, current	2,915				3,004
Accrued commissions	3,046				2,611
Accrued payroll and employee benefits	2,545				2,291
Accrued sales and use taxes	194				932
Accrued rebates	1,730				1,152
Employee contribution to ESPP	2,303				1,805
Operating lease liabilities, current	2,877				—
Other accrued expenses	5,849				3,370
Total	$	29,068			$	27,801

The following table sets forth the fair value of our financial assets and liabilities by level within the fair value hierarchy:

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	March 31, 2020
	Level 1				Level 2				Level 3				Fair Value
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	105,566			$	—			$	—			$	105,566
Short-term investment:
Certificate of deposit	150,000								—				150,000
Total assets at fair value	$	255,566			$	—			$	—