10-Q 1 wk-20230930.htm 10-Q wk-20230930
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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 September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from               to
Commission File Number 001-36773
___________________________________
WORKIVA INC.
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
(State or other jurisdiction of incorporation or organization)
47-2509828
(I.R.S. Employer Identification Number)
2900 University Blvd
Ames, IA 50010
(888) 275-3125
(Address of principal executive offices and zip code)
(888) 275-3125
(Registrant's telephone number, including area code)
___________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A common stock, par value $.001WKNew 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 ý No o
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 ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer    ý
Accelerated filer o
Non-accelerated filer    o
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 Exchange Act): Yes ☐ No ý
As of October 24, 2023, there were approximately 50,202,454 shares of the registrant's Class A common stock and 3,845,583 shares of the registrant's Class B common stock outstanding.


WORKIVA INC.
TABLE OF CONTENTS
Page
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.
ii
Part I. Financial Information
Item 1.     Financial Statements
    
WORKIVA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
As of September 30, 2023As of December 31, 2022
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$404,885 $240,197 
Marketable securities377,533 190,595 
Accounts receivable, net of allowance for doubtful accounts of $801 and $744 at September 30, 2023 and December 31, 2022, respectively
98,861 106,316 
Deferred costs36,953 38,350 
Other receivables7,017 6,674 
Prepaid expenses and other21,902 17,957 
Total current assets947,151 600,089 
Property and equipment, net25,102 27,096 
Operating lease right-of-use assets10,228 13,932 
Deferred costs, non-current28,816 33,682 
Goodwill108,851 109,740 
Intangible assets, net23,585 28,234 
Other assets5,395 6,847 
Total assets$1,149,128 $819,620 
1
WORKIVA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)
As of September 30, 2023As of December 31, 2022
(unaudited)
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities
Accounts payable
$4,909 $6,174 
Accrued expenses and other current liabilities
94,158 83,999 
Deferred revenue
338,418 316,263 
Finance lease obligations525 504 
Total current liabilities438,010 406,940 
Convertible senior notes, non-current761,847 340,257 
Deferred revenue, non-current
38,216 38,237 
Other long-term liabilities
1,539 1,518 
Operating lease liabilities, non-current9,023 12,102 
Finance lease obligations, non-current14,186 14,583 
Total liabilities1,262,821 813,637 
Stockholders’ (deficit) equity
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 50,173,423 and 48,761,804 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
50 49 
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 3,845,583 and 3,890,583 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
4 4 
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding
— — 
Additional paid-in-capital
541,093 537,732 
Accumulated deficit
(648,445)(525,116)
Accumulated other comprehensive loss(6,395)(6,686)
Total stockholders’ (deficit) equity(113,693)5,983 
Total liabilities and stockholders’ (deficit) equity$1,149,128 $819,620 
See accompanying notes.
2
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three months ended September 30,Nine months ended September 30,
2023202220232022
Revenue
Subscription and support$143,421 $118,591 $409,857 $339,064 
Professional services14,754 14,258 53,529 55,008 
Total revenue158,175 132,849 463,386 394,072 
Cost of revenue
Subscription and support24,864 19,235 74,080 56,683 
Professional services13,491 13,184 42,297 38,846 
Total cost of revenue38,355 32,419 116,377 95,529 
Gross profit119,820 100,430 347,009 298,543 
Operating expenses
Research and development41,747 38,583 130,235 113,644 
Sales and marketing72,576 64,560 215,168 184,879 
General and administrative21,022 27,405 86,660 75,507 
Total operating expenses135,345 130,548 432,063 374,030 
Loss from operations(15,525)(30,118)(85,054)(75,487)
Interest income7,294 1,440 15,546 2,325 
Interest expense(47,437)(1,510)(50,437)(4,540)
Other (expense) income, net(71)964 (1,450)1,467 
Loss before provision for income taxes(55,739)(29,224)(121,395)(76,235)
Provision for income taxes530 467 1,934 810 
Net loss$(56,269)$(29,691)$(123,329)$(77,045)
Net loss per common share:
Basic and diluted$(1.04)$(0.56)$(2.28)$(1.46)
Weighted-average common shares outstanding - basic and diluted54,256,941 53,081,564 53,987,791 52,844,532 

See accompanying notes.

3
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
Three months ended September 30,Nine months ended September 30,
2023202220232022
Net loss$(56,269)$(29,691)$(123,329)$(77,045)
Other comprehensive (loss) income
Foreign currency translation adjustment(3,189)(7,256)(1,180)(13,344)
Unrealized gain (loss) on available-for-sale securities208 (619)1,471 (3,033)
Other comprehensive (loss) income(2,981)(7,875)291 (16,377)
Comprehensive loss$(59,250)$(37,566)$(123,038)$(93,422)

See accompanying notes.

4
WORKIVA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
(unaudited)
Nine Months Ended September 30, 2023
Common Stock (Class A and B)
SharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive LossAccumulated Deficit
Total Stockholders' Equity (Deficit)
Balances at December 31, 202252,652 $53 $537,732 $(6,686)$(525,116)$5,983 
Stock-based compensation expense— — 38,042 — — 38,042 
Issuance of common stock upon exercise of stock options102 — 1,457 — — 1,457 
Issuance of common stock under employee stock purchase plan107 — 5,546 — — 5,546 
Issuance of restricted stock units449 — — — — — 
Tax withholding related to net share settlements of stock-based compensation awards(78)— (7,228)— — (7,228)
Net loss— — — — (46,150)(46,150)
Other comprehensive income— — — 3,280 — 3,280 
Balances at March 31, 202353,232 $53 $575,549 $(3,406)$(571,266)$930 
Stock-based compensation expense— — 20,610 — — 20,610 
Issuance of common stock upon exercise of stock options47 1 746 — — 747 
Issuance of restricted stock units266 — — — — — 
Tax withholding related to net share settlements of stock-based compensation awards(12)— (1,212)— — (1,212)
Net loss— — — — (20,910)(20,910)
Other comprehensive loss— — — (8)— (8)
Balances at June 30, 202353,533 $54 $595,693 $(3,414)$(592,176)$157 
Stock-based compensation expense——19,377——19,377 
Issuance of common stock upon exercise of stock options70—1,120——1,120 
Issuance of common stock under employee stock purchase plan93—6,967——6,967 
Issuance of restricted stock units332————— 
Tax withholding related to net share settlements of stock-based compensation awards(9)—(984)——(984)
Induced conversion of convertible senior notes
——(81,080)——(81,080)
Net loss————(56,269)(56,269)
Other comprehensive loss———(2,981)—(2,981)
Balances at September 30, 202354,019$54 $541,093 $(6,395)$(648,445)$(113,693)
5
WORKIVA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (continued)
(in thousands)
(unaudited)
Nine Months Ended September 30, 2022
Common Stock (Class A and B)
SharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive LossAccumulated Deficit
Total Stockholders' Equity (Deficit)
Balances at December 31, 202151,444 $51 $525,646 $(288)$(452,430)$72,979 
Stock-based compensation expense— — 15,309 — — 15,309 
Issuance of common stock upon exercise of stock options62 1 824 — — 825 
Issuance of common stock under employee stock purchase plan53 — 5,218 — — 5,218 
Issuance of restricted stock units545 — — — — — 
Tax withholding related to net share settlements of stock-based compensation awards(73)— (8,570)— — (8,570)
Adoption of ASU 2020-06— — (58,560)— 18,261 (40,299)
Net loss— — — — (18,493)(18,493)
Other comprehensive loss— — — (1,776)— (1,776)
Balances at March 31, 202252,031 $52 $479,867 $(2,064)$(452,662)$25,193 
Stock-based compensation expense— — 18,447 — — 18,447 
Issuance of common stock upon exercise of stock options76 — 1,145 — — 1,145 
Issuance of restricted stock units144 — — — — — 
Tax withholding related to net share settlements of stock-based compensation awards(12)— (1,344)— — (1,344)
Net loss— — — — (28,861)(28,861)
Other comprehensive loss— — — (6,726)— (6,726)
Balances at June 30, 202252,239 $52 $498,115 $(8,790)$(481,523)$7,854 
Stock-based compensation expense— — 20,297 — — 20,297 
Issuance of common stock upon exercise of stock options43 — 625 — — 625 
Issuance of common stock under employee stock purchase plan79 1 4,037 — — 4,038 
Issuance of restricted stock units145 — — — — — 
Tax withholding related to net share settlements of stock-based compensation awards(11)— (738)— — (738)
Net loss— — — — (29,691)(29,691)
Other comprehensive loss— — — (7,875)— (7,875)
Balances at September 30, 202252,495 $53 $522,336 $(16,665)$(511,214)$(5,490)

See accompanying notes.
6
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended September 30,Nine months ended September 30,
2023202220232022
Cash flows from operating activities
Net loss$(56,269)$(29,691)$(123,329)$(77,045)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization2,686 2,681 8,353 7,365 
Stock-based compensation expense19,377 20,297 78,029 54,053 
Provision for doubtful accounts8 91 57 82 
Realized loss on sale of available-for-sale securities, net— — 708 — 
(Accretion) amortization of premiums and discounts on marketable securities, net(1,930)129 (4,530)1,242 
Amortization of issuance costs and debt discount472 325 1,122 973 
Induced conversion expense
45,144 — 45,144 — 
Deferred income tax(14)57 (17)(91)
Changes in assets and liabilities:
Accounts receivable(15,234)(7,927)7,243 (6,190)
Deferred costs3,116 (1,372)6,248 (2,662)
Operating lease right-of-use asset1,244 1,269 3,807 3,877 
Other receivables(1,556)(527)(1,842)38 
Prepaid expenses and other3,452 3,593 (3,985)870 
Other assets1,043 (1,140)1,479 (1,105)
Accounts payable(386)3,931 (1,267)5,995 
Deferred revenue11,120 14,775 22,225 28,573 
Operating lease liability(750)(1,113)(3,129)(3,757)
Accrued expenses and other liabilities3,468 (523)10,217 384 
Net cash provided by operating activities14,991 4,855 46,533 12,602 
Cash flows from investing activities
Purchase of property and equipment(895)(1,023)(1,732)(2,226)
Purchase of marketable securities(144,989)(41,618)(322,008)(99,564)
Sale of marketable securities— — 65,052 14,981 
Maturities of marketable securities36,906 40,071 76,811 106,857 
Acquisitions, net of cash acquired— — — (99,186)
Purchase of intangible assets(48)(62)(167)(108)
Net cash used in investing activities(109,026)(2,632)(182,044)(79,246)
7
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)
Three months ended September 30,Nine months ended September 30,
2023202220232022
Cash flows from financing activities
Proceeds from option exercises1,120 625 3,324 2,595 
Taxes paid related to net share settlements of stock-based compensation awards(984)(738)(9,424)(10,652)
Proceeds from shares issued in connection with employee stock purchase plan6,967 4,038 12,513 9,256 
Proceeds from the issuance of convertible senior notes, net of issuance costs691,113 — 691,113 — 
Payments for repurchase of convertible senior notes
(396,869)— (396,869)— 
Principal payments on finance lease obligations(127)(454)(376)(1,342)
Net cash provided by (used in) financing activities301,220 3,471 300,281 (143)
Effect of foreign exchange rates on cash(1,239)(2,450)(82)(4,102)
Net increase (decrease) in cash and cash equivalents205,946 3,244 164,688 (70,889)
Cash and cash equivalents at beginning of period198,939 226,253 240,197 300,386 
Cash and cash equivalents at end of period$404,885 $229,497 $404,885 $229,497 
Supplemental cash flow disclosure
Cash paid for interest$2,160 $2,152 $4,509 $4,535 
Cash paid for income taxes, net of refunds$604 $225 $2,126 $852 

See accompanying notes.

8
WORKIVA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies
Organization
Workiva Inc., a Delaware corporation, and its wholly-owned subsidiaries (the “Company” or “we” or “us”) is on a mission to power transparent reporting for a better world. We believe that consumers, employees, shareholders, and other stakeholders today expect more from business – more action, transparency, and disclosure of financial and non-financial information. We build solutions to meet that demand and streamline processes, connect data and teams, and ensure consistency – all within the Workiva platform, the world’s leading cloud platform for assured integrated reporting. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, the Asia-Pacific region and Canada.
Basis of Presentation and Principles of Consolidation
The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet data as of December 31, 2022 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.
Seasonality affects our revenue, expenses and cash flows from operations. Revenue from professional services has been higher in the first quarter as many of our customers file their 10-K in the first calendar quarter. Our sales and marketing expense also has some degree of seasonality. With the exception of September 2020 and September 2021 when we transitioned to a virtual event, sales and marketing expense has historically been higher in the third quarter due to our annual user conference in September. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow. The condensed consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 21, 2023.
The unaudited condensed consolidated financial statements include the accounts of Workiva Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
9
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. These estimates include, but are not limited to, the allowance for doubtful accounts, the determination of the relative selling prices of our services, the measurement of material rights, health insurance claims incurred but not yet reported, valuation of available-for-sale marketable securities, useful lives of deferred contract costs, intangible assets and property and equipment, goodwill, income taxes, discount rates used in the valuation of right-of-use assets and lease liabilities, and certain assumptions used in the valuation of equity awards. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates.
Recently Adopted Accounting Pronouncements
None.
New Accounting Pronouncements Not Yet Adopted
None.
2. Supplemental Consolidated Balance Sheet Information
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
As of September 30, 2023As of December 31, 2022
Accrued vacation$15,551 $12,939 
Accrued commissions6,083 10,841 
Accrued bonuses21,796 5,597 
Accrued payroll5,181 5,318 
Estimated health insurance claims2,573 1,841 
Accrued interest1,116 1,455 
ESPP employee contributions4,163 5,661 
Customer deposits24,932 25,520 
Operating lease liabilities4,463 5,720 
Accrued other liabilities8,300 9,107 
$94,158 $83,999 

10
3. Cash Equivalents and Marketable Securities
At September 30, 2023, cash equivalents and marketable securities consisted of the following (in thousands):
Amortized Cost
Unrealized Gains
Unrealized Losses
Aggregate Fair Value
Money market funds$260,895 $— $— $260,895 
Commercial paper72,852 — — 72,852 
U.S. treasury debt securities157,080 7 (305)156,782 
U.S. government agency debt securities61,190 — (118)61,072 
Corporate debt securities125,397 2 (728)124,671 
Foreign government debt securities997 — (16)981 
$678,411 $9 $(1,167)$677,253 
Included in cash and cash equivalents$299,720 $— $— $299,720 
Included in marketable securities$378,691 $9 $(1,167)$377,533 
At December 31, 2022, cash equivalents and marketable securities consisted of the following (in thousands):
Amortized Cost
Unrealized Gains
Unrealized Losses
Aggregate Fair Value
Money market funds$182,878 $— $— $182,878 
U.S. treasury debt securities72,151 1 (899)71,253 
Corporate debt securities120,081 62 (1,771)118,372 
Foreign government debt securities993 — (23)970 
$376,103 $63 $(2,693)$373,473 
Included in cash and cash equivalents$182,878 $— $— $182,878 
Included in marketable securities$193,225 $63 $(2,693)$190,595 

The contractual maturities of the investments classified as marketable securities are as follows (in thousands):
As of September 30, 2023
Due within one year$250,767 
Due in one to two years126,766 
$377,533 
The following table presents gross unrealized losses and fair values for those cash equivalents and marketable securities that were in an unrealized loss position as of September 30, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):
11
As of September 30, 2023
Less than 12 months
12 months or greater
Fair Value
Unrealized Loss
Fair Value
Unrealized Loss
U.S. treasury debt securities$90,224 $(230)$6,567 $(76)
U.S. government agency debt securities61,072 (118)— — 
Corporate debt securities90,732 (463)27,945 (264)
Foreign government debt securities— — 981 (16)
Total$242,028 $(811)$35,493 $(356)
We do not believe the unrealized losses represent credit losses based on our evaluation of available evidence as of September 30, 2023, which includes an assessment of whether it is more likely than not we will be required to sell the investment before recovery of the investment's amortized cost basis.
4. Fair Value Measurements
We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 - Inputs are unobservable inputs based on our assumptions.
12
Financial Assets
Cash equivalents primarily consist of AAA-rated money market funds with overnight liquidity and no stated maturities. We classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.
When available, our marketable securities are valued using quoted prices for identical instruments in active markets. If we are unable to value our marketable securities using quoted prices for identical instruments in active markets, we value our investments using broker reports that utilize quoted market prices for comparable instruments. We validate, on a sample basis, the derived prices provided by the brokers by comparing their assessment of the fair values of our investments against the fair values of the portfolio balances of another third-party professional pricing service. As of September 30, 2023, all of our marketable securities were valued using quoted prices for comparable instruments in active markets and are classified as Level 2.
Based on our valuation of our money market funds and marketable securities, we concluded that they are classified in either Level 1 or Level 2, and we have no financial assets measured using Level 3 inputs on a recurring basis. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories (in thousands):
Fair Value Measurements as of September 30, 2023Fair Value Measurements as of December 31, 2022
Description
Total
Level 1
Level 2
Total
Level 1
Level 2
Money market funds$260,895 $260,895 $— $182,878 $182,878 $— 
Commercial paper72,852 — 72,852 — — — 
U.S. treasury debt securities156,782 — 156,782 71,253 — 71,253 
U.S. government agency debt securities61,072 — 61,072 — — — 
Corporate debt securities124,671 — 124,671 118,372 — 118,372 
Foreign government debt securities981 — 981 970 — 970 
$677,253 $260,895 $416,358 $373,473 $182,878 $190,595 
Included in cash and cash equivalents$299,720 $182,878 
Included in marketable securities$377,533 $190,595 
Convertible Senior Notes
As of September 30, 2023, the fair value of our convertible senior notes due in 2026 and 2028 was $97.7 million and $689.7 million, respectively. The fair value was determined based on the quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. See Note 5 to the condensed consolidated financial statements for more information.
13
5. Convertible Senior Notes
The following table presents details of our convertible senior notes, which are further discussed below (original principal in thousands):
Month Issued
Maturity Date
Free Convertibility Date
Redemption Date
Original Principal (including overallotment)
Initial Conversion Rate per $1,000 Principal
Initial Conversion Price
2026 Notes
August 2019August 15, 2026May 15, 2026August 21, 2023$345,000 12.4756$80.16 
2028 Notes
August 2023August 15, 2028May 15, 2028August 21, 2026$702,000 7.4690$133.89 
In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including the exercise in full by the initial purchasers of their option to purchase an additional $45.0 million principal amount (the "2026 Notes”). The 2026 Notes bear interest at a fixed rate of 1.125% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2020. Proceeds from the issuance of the 2026 Notes totaled $335.9 million, net of initial purchaser discounts and issuance costs.
In August 2023, we issued $702.0 million aggregate principal amount of 1.250% convertible senior notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including the partial exercise of 77.0 million principal amount by the initial purchasers of their option to purchase up to an additional $100 million principal amount (the "2028 Notes”). The 2028 Notes bear interest at a fixed rate of 1.250% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2024. Proceeds from the issuance of the 2028 Notes totaled $691.1 million, net of initial purchaser discounts and issuance costs.
The 2026 Notes and the 2028 Notes are together referred to as the "Notes".
The Notes were issued pursuant to an indenture and are senior, unsecured obligations of the Company. The 2028 Notes will rank equally with all of the Company’s existing and future senior unsecured indebtedness, including the Company’s outstanding 2026 Notes.
Holders of the Notes may convert all or a portion of their Notes prior to the close of business on their respective Free Convertibility dates, in multiples of $1,000 principal amount, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter in which the respective Notes were issued (and only during such calendar quarter), if the last reported sale price of our Class A common stock, par value $0.001 per share (which we refer to in this offering memorandum as our “Class A common stock”), for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•during the five consecutive business day period immediately following any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined below) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate on each such trading day;
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•if we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
•upon the occurrence of certain specified corporate events as set forth in the relevant indenture.
On or after the relevant Free Convertibility Date, holders of the Notes may convert their Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes.
Upon conversion, we will pay or deliver, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of our Class A common stock, at our election, in the manner and subject to the terms and conditions provided in the indenture.
The Company may redeem for cash all or any portion of the Notes, at its option, on or after the respective Redemption Date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the respective Redemption Date.
During the third quarter of 2023 none of the conversion conditions were met and therefore the Notes are not convertible at the option of the holders. As a result, the Notes were classified as non-current liabilities on the condensed consolidated balance sheet as of September 30, 2023.
Interest expense representing the amortization of issuance costs as well as contractual interest expense is amortized to interest expense at an effective interest rate of 1.5% and 1.6% over the term of the 2026 Notes and 2028 Notes, respectively.
As of September 30, 2023, the remaining life of the 2026 Notes and 2028 Notes were approximately 2.8 years and 4.9 years.
Partial Repurchase of 2026 Notes
We used $396.9 million of the net proceeds from the 2028 Notes offering discussed above to repurchase $273.8 million principal amount, together with accrued and unpaid interest thereon, of our 2026 Notes in separate and individually negotiated transactions with certain holders. The repurchase was accounted for as an induced conversion. The fair value of the repurchased 2026 Notes on the date of repurchase was $351.8 million. The consideration in excess of fair value resulted in a loss on induced conversion of $45.1 million which was recorded as interest expense in the condensed consolidated statement of operations. The difference between the fair value and the carrying value of the 2026 Notes on the date of repurchase of $81.1 million, including unamortized debt issuance costs of $3.1 million, was recorded in additional paid-in capital.
The net carrying amount of the Notes was as follows (in thousands):
September 30, 2023December 31, 2022
2026 Notes
2028 Notes
2026 Notes
2028 Notes
Principal$71,242 $702,000 $345,000 $— 
Unamortized issuance costs(778)(10,617)(4,743)— 
Net carrying amount$70,464 $691,383 $340,257 $— 
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Interest expense related to the Notes was as follows (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Contractual interest expense$1,618 $970 $3,558 $2,910 
Amortization of issuance costs472 325 1,122 973 
Total interest expense$2,090 $1,295 $4,680 $3,883 


6. Commitments and Contingencies
Litigation
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We evaluate the development of legal matters on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of any currently pending legal proceedings to which we are a party will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
7. Stock-Based Compensation
We grant stock-based incentive awards to attract, motivate and retain qualified employees, non-employee directors and consultants, and to align their financial interests with those of our stockholders. We utilize stock-based compensation in the form of restricted stock units, performance restricted stock units, options to purchase Class A common stock and Employee Stock Purchase Plan ("ESPP") purchase rights. Prior to our corporate conversion in December 2014, awards were provided under the 2009 Unit Incentive Plan (“the 2009 Plan”). The 2009 Plan was amended to provide that no further awards will be issued thereunder, and our board of directors and stockholders adopted and approved our 2014 Equity Incentive Plan (“the 2014 Plan” and, together with the 2009 Plan, “the Plans”).
Stock-Based Compensation Expense
Stock-based compensation expense was recorded in the following cost and expense categories consistent with the respective employee or service provider’s related cash compensation (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Cost of revenue
Subscription and support
$1,247 $855 $3,732 $2,557 
Professional services
623 533 1,923 1,578 
Operating expenses
Research and development
4,155 3,399 13,677 9,272 
Sales and marketing
7,108 4,657 20,769 14,388 
General and administrative
6,244 10,853 37,928 26,258 
Total
$19,377 $20,297 $78,029 $54,053 
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During the first nine months of 2023, we recognized an additional $18.1 million in stock-based compensation pursuant to certain transition agreements with former executives who retired during the period.
Stock Options
The following table summarizes the option activity under the Plans for the nine months ended September 30, 2023:




Options

Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Outstanding at December 31, 20221,509,172 $14.57 3.2
Granted— — 
Forfeited(10)13.60 
Expired— — 
Exercised(219,354)15.16 
Outstanding at September 30, 20231,289,808 $14.47 2.5
Exercisable at September 30, 20231,289,808 $14.47 2.5
Restricted Stock Units and Performance Restricted Stock Units
The following table summarizes the restricted stock unit and performance restricted stock unit activity under the Plans for the nine months ended September 30, 2023:




Number of Shares
Weighted-
Average
Grant Date Fair Value
Unvested at December 31, 20221,921,927 $93.80 
Granted1,148,206 94.70 
Forfeited(106,570)92.53 
Vested(1)
(689,844)86.47 
Unvested at September 30, 20232,273,719 $96.51 
(1) During the nine months ended September 30, 2023, in accordance with our Nonqualified Deferred Compensation Plan, recipients elected to defer settlement of 2,925 shares of their vested restricted stock units and 359,812 shares were released from deferral.
Employee Stock Purchase Plan
During the nine months ended September 30, 2023, 200,436 shares of common stock were purchased under the ESPP at a weighted-average price of $62.43 per share, resulting in cash proceeds of $12.5 million.
Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At September 30, 2023, there was approximately $1.3 million of total unrecognized compensation expense related to the ESPP, which is expected to be recognized over a weighted-average period of 0.3 years.
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8. Revenue Recognition
Disaggregation of Revenue
Revenues by industry are derived from leading software providers. The following table presents our revenues disaggregated by industry (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Industrials$23,461 $18,810 $68,670 $56,398 
Diversified financials22,927 17,472 66,916 51,864 
Information technology17,041 15,283 50,925 45,418 
Banks15,951 13,871 46,554 39,943 
Consumer discretionary15,224 13,301 44,511 38,147 
Healthcare13,549 11,701 39,949 35,158 
Insurance9,725 8,161 28,031 23,683 
Real estate6,600 5,647 19,765 17,651 
Energy6,618 5,577 19,883 17,169 
Utilities5,854 5,383 17,165 16,800 
Materials5,852 5,121 17,391 15,954 
Public administration4,886 3,844 13,754 11,046 
Consumer staples4,557 4,213 13,544 12,626 
Telecommunication services
4,449 3,262 12,352 9,724 
Other
1,481 1,203 3,976 2,491 
Total revenues
$158,175 $132,849 $463,386 $394,072 
The following table presents our revenues disaggregated by type of good or service (in thousands):
Three months ended September 30,Nine months ended September 30,
2023202220232022
Subscription and support$143,421 $118,591 $409,857 $339,064 
XBRL professional services11,555 10,634 42,719 41,844 
Other services3,199 3,624 10,810 13,164 
Total revenues
$158,175 $132,849 $463,386 $394,072 
Deferred Revenue
We recognized $129.9 million and $107.7 million of revenue during the three months ended September 30, 2023 and 2022, respectively, that was included in the deferred revenue balances at the beginning of the respective periods. We recognized $277.8 million and $224.6 million of revenue during the nine months ended September 30, 2023 and 2022, respectively, that was included in the deferred revenue balances at the beginning of the respective periods.
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Transaction Price Allocated to the Remaining Performance Obligations
As of September 30, 2023, we expect revenue of approximately $835.5 million to be recognized from remaining performance obligations for subscription contracts. We expect to recognize approximately $466.7 million of these remaining performance obligations over the next 12 months with the balance substantially recognized in the 24 months thereafter.
9. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible senior notes, outstanding stock options, stock related to unvested restricted stock units, and common stock issuable pursuant to the ESPP to the extent dilutive. Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.
The net loss per share is allocated based on the participation rights of the Class A and Class B common shares as if the loss for the year has been distributed. As the liquidation and dividend rights are identical, the net loss is allocated on a proportionate basis.
A reconciliation of the denominator used in the calculation of basic and diluted loss per share is as follows (in thousands, except share and per share data):
Three months ended
September 30, 2023September 30, 2022
Class A
Class B
Class A
Class B
Numerator
Net loss$(52,281)$(3,988)$(27,515)$(2,176)
Denominator
Weighted-average common shares outstanding - basic and diluted50,411,358 3,845,583 49,190,981 3,890,583 
Basic and diluted net loss per share$(1.04)$(1.04)$(0.56)$(0.56)
Nine months ended
September 30, 2023September 30, 2022
Class AClass BClass AClass B
Numerator
Net loss$(114,522)$(8,807)$(71,310)$(5,735)
Denominator
Weighted-average common shares outstanding - basic and diluted50,132,483 3,855,308 48,911,092