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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, 2022
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 April 28, 2022, there were approximately 48,186,532 shares of the registrant's Class A common stock and 3,890,583 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, 2021, 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 March 31, 2022As of December 31, 2021
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$303,076 $300,386 
Marketable securities220,457 230,060 
Accounts receivable, net of allowance for doubtful accounts of $561 and $591 at March 31, 2022 and December 31, 2021, respectively
70,133 76,848 
Deferred costs31,816 31,152 
Other receivables3,359 3,538 
Prepaid expenses and other16,217 15,108 
Total current assets645,058 657,092 
Property and equipment, net28,091 28,821 
Operating lease right-of-use assets16,460 17,760 
Deferred costs, non-current30,879 33,091 
Goodwill34,556 34,556 
Intangible assets, net9,677 10,434 
Other assets5,162 5,005 
Total assets$769,883 $786,759 
1

WORKIVA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)
As of March 31, 2022As of December 31, 2021
(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$8,379 $4,114 
Accrued expenses and other current liabilities
71,589 84,126 
Deferred revenue
259,387 258,023 
Convertible senior notes, current 298,661 
Finance lease obligations1,257 1,575 
Total current liabilities340,612 646,499 
Convertible senior notes, non-current339,283  
Deferred revenue, non-current
33,204 34,181 
Other long-term liabilities
1,602 1,605 
Operating lease liabilities, non-current15,026 16,408 
Finance lease obligations, non-current14,963 15,087 
Total liabilities744,690 713,780 
Stockholders’ equity
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 48,139,939 and 47,293,775 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
48 47 
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 3,890,583 and 4,150,583 shares issued and outstanding at March 31, 2022 and December 31, 2021, 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
479,867 525,646 
Accumulated deficit
(452,662)(452,430)
Accumulated other comprehensive loss(2,064)(288)
Total stockholders’ equity25,193 72,979 
Total liabilities and stockholders’ equity$769,883 $786,759 
See accompanying notes.
2

WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three months ended March 31,
20222021
Revenue
Subscription and support$107,120 $84,936 
Professional services22,554 19,286 
Total revenue129,674 104,222 
Cost of revenue
Subscription and support18,533 13,202 
Professional services12,340 10,474 
Total cost of revenue30,873 23,676 
Gross profit98,801 80,546 
Operating expenses
Research and development35,884 26,634 
Sales and marketing56,100 41,035 
General and administrative23,994 17,021 
Total operating expenses115,978 84,690 
Loss from operations(17,177)(4,144)
Interest income280 360 
Interest expense(1,518)(3,485)
Other expense, net(165)(384)
Loss before benefit for income taxes(18,580)(7,653)
Benefit for income taxes(87)(329)
Net loss$(18,493)$(7,324)
Net loss per common share:
Basic and diluted$(0.35)$(0.15)
Weighted-average common shares outstanding - basic and diluted52,596,228 50,244,120 

See accompanying notes.

3

WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
Three months ended March 31,
20222021
Net loss$(18,493)$(7,324)
Other comprehensive loss, net of tax
Foreign currency translation adjustment, net of tax84 156 
Unrealized loss on available-for-sale securities, net of tax(1,860)(205)
Other comprehensive loss, net of tax(1,776)(49)
Comprehensive loss$(20,269)$(7,373)

See accompanying notes.

4

WORKIVA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Three Months Ended March 31, 2022
Common Stock (Class A and B)
SharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
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 
Three Months Ended March 31, 2021
Common Stock (Class A and B)
SharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
Balances at December 31, 202048,789 $49 $478,698 $230 $(414,700)$64,277 
Stock-based compensation expense— — 11,623 — — 11,623 
Issuance of common stock upon exercise of stock options312 1 4,137 — — 4,138 
Issuance of common stock under employee stock purchase plan93 — 4,237 — — 4,237 
Issuance of restricted stock units803 — — — — — 
Tax withholding related to net share settlements of stock-based compensation awards(70)— (7,146)— — (7,146)
Net loss— — — — (7,324)(7,324)
Other comprehensive loss— — — (49)— (49)
Balances at March 31, 202149,927 $50 $491,549 $181 $(422,024)$69,756 

See accompanying notes.
5

WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended March 31,
20222021
Cash flows from operating activities
Net loss$(18,493)$(7,324)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization1,959 1,054 
Stock-based compensation expense15,309 11,623 
Recovery of doubtful accounts(29)(118)
Amortization of premiums and discounts on marketable securities, net660 625 
Amortization of issuance costs and debt discount324 2,266 
Deferred income tax(211)(346)
Changes in assets and liabilities:
Accounts receivable6,581 15,265 
Deferred costs1,444 (1,059)
Operating lease right-of-use asset1,301 944 
Other receivables180 (161)
Prepaid expenses and other(1,132)(3,747)
Other assets23 (573)
Accounts payable4,364 1,908 
Deferred revenue606 179 
Operating lease liability(1,342)(1,076)
Accrued expenses and other liabilities(12,481)(7,957)
Net cash (used in) provided by operating activities(937)11,503 
Cash flows from investing activities
Purchase of property and equipment(532)(849)
Purchase of marketable securities(34,148)(43,655)
Sale of marketable securities14,981  
Maturities of marketable securities26,250 40,586 
Purchase of intangible assets(40)(71)
Net cash provided by (used in) investing activities6,511 (3,989)
6

WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)
Three months ended March 31,
20222021
Cash flows from financing activities
Proceeds from option exercises825 4,138 
Taxes paid related to net share settlements of stock-based compensation awards(8,570)(7,146)
Proceeds from shares issued in connection with employee stock purchase plan5,218 4,237 
Principal payments on finance lease obligations(442)(417)
Net cash (used in) provided by financing activities(2,969)812 
Effect of foreign exchange rates on cash85 16 
Net increase in cash and cash equivalents2,690 8,342 
Cash and cash equivalents at beginning of period300,386 322,831 
Cash and cash equivalents at end of period$303,076 $331,173 
Supplemental cash flow disclosure
Cash paid for interest$2,165 $2,188 
Cash paid for income taxes, net of refunds$190 $20 
Supplemental disclosure of noncash investing and financing activities
Purchases of property and equipment, accrued but not paid$262 $ 

See accompanying notes.

7

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”) simplifies complex work for thousands of organizations worldwide. We are a leading provider of cloud-based compliance and regulatory reporting solutions that are designed to solve business challenges at the intersection of data, process and people. 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. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2021 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 months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.
Seasonality has affected 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 Form 10-K in the first calendar quarter. Our sales and marketing expense also has some degree of seasonality. Sales and marketing expense has historically been higher in the third quarter due to our annual user conference in September. Our transition to a virtual event in September 2020 and September 2021 has mostly mitigated this trend, although we currently intend to sponsor a hybrid virtual and in-person event in 2022. 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, 2021 filed with the SEC on February 22, 2022.
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.
8

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
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends the accounting related to contract assets and liabilities acquired in business combinations. This ASU requires that entities recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. This update is effective for fiscal years beginning after December 15, 2022 with early adoption permitted. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. Under ASU 2020-06, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. The convertible debt instruments will now be accounted for as a single liability measured at amortized cost. This results in the interest expense recognized for convertible debt instruments to be closer to the coupon interest rate. The new guidance also requires the if-converted method to be applied for all convertible instruments when calculating earnings per share. The new standard is effective for interim and annual periods beginning after December 15, 2021 and can be adopted on either a modified retrospective or full retrospective basis.
We adopted this standard on January 1, 2022 using the modified retrospective method under which financial results reported in prior periods were not adjusted. Adoption of the new standard resulted in a decrease to accumulated deficit of $18.3 million, a decrease to additional paid-in capital of $58.6 million, and an increase to convertible senior notes, non-current of $40.3 million on the consolidated balance sheet. See Note 5 to the condensed consolidated financial statements for more information.
New Accounting Pronouncements Not Yet Adopted
None.
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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 March 31, 2022As of December 31, 2021
Accrued vacation$13,273 $11,221 
Accrued commissions4,875 11,122 
Accrued bonuses6,475 8,292 
Accrued payroll4,737 4,494 
Estimated health insurance claims1,885 1,814 
Accrued interest485 1,455 
ESPP employee contributions3,262 5,349 
Customer deposits23,675 26,517 
Operating lease liabilities5,929 6,008 
Accrued other liabilities6,993 7,854 
$71,589 $84,126 

3. Cash Equivalents and Marketable Securities
At March 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$157,635 $— $— $157,635 
Commercial paper10,486   10,486 
U.S. treasury debt securities55,324 6 (740)54,590 
Corporate debt securities160,043  (1,660)158,383 
Foreign government debt securities1,000   1,000 
$384,488 $6 $(2,400)$382,094 
Included in cash and cash equivalents$161,637 $— $— $161,637 
Included in marketable securities$222,851 $6 $(2,400)$220,457 
At December 31, 2021, cash equivalents and marketable securities consisted of the following (in thousands):
Amortized Cost
Unrealized Gains
Unrealized Losses
Aggregate Fair Value
Money market funds$259,754 $— $— $259,754 
Commercial paper10,479   10,479 
U.S. treasury debt securities54,809 2 (206)54,605 
Corporate debt securities161,792 3 (334)161,461 
Foreign government debt securities5,014 1  5,015 
$491,848 $6 $(540)$491,314 
Included in cash and cash equivalents$261,254 $— $— $261,254 
Included in marketable securities$230,594 $6 $(540)$230,060 

10

The contractual maturities of the investments classified as marketable securities are as follows (in thousands):
As of March 31, 2022
Due within one year$116,239 
Due in one to two years102,582 
Due in three to five years1,636 
$220,457 
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 March 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):
As of March 31, 2022
Less than 12 months
12 months or greater
Fair Value
Unrealized Loss
Fair Value
Unrealized Loss
U.S. treasury debt securities$44,362 $(710)$2,470 $(30)
Corporate debt securities155,900 (1,635)1,982 (25)
Total$200,262 $(2,345)$4,452 $(55)
We do not believe the unrealized losses represent credit losses based on our evaluation of available evidence as of March 31, 2022, 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.
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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 March 31, 2022, 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 March 31, 2022Fair Value Measurements as of December 31, 2021
Description
Total
Level 1
Level 2
Total
Level 1
Level 2
Money market funds$157,635 $157,635 $ $259,754 $259,754 $ 
Commercial paper10,486  10,486 10,479  10,479 
U.S. treasury debt securities54,590  54,590 54,605  54,605 
Corporate debt securities158,383  158,383 161,461  161,461 
Foreign government debt securities1,000  1,000 5,015  5,015 
$382,094 $157,635 $224,459 $491,314 $259,754 $231,560 
Included in cash and cash equivalents$161,637 $261,254 
Included in marketable securities$220,457 $230,060 
Convertible Senior Notes
As of March 31, 2022, the fair value of our convertible senior notes was $558.5 million. 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.
5. Convertible Senior Notes
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 “Notes”). The Notes were issued pursuant to an indenture and are senior, unsecured obligations of the Company. The 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 Notes totaled $335.9 million, net of initial purchaser discounts and issuance costs.
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The initial conversion rate is 12.4756 shares of our common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $80.16 per share, subject to adjustment upon the occurrence of specified events.
Holders of the Notes may convert all or a portion of their Notes prior to the close of business on May 15, 2026, in multiples of $1,000 principal amount, only under the following circumstances:
during any calendar quarter commencing after the calendar quarter ending on September 30, 2019 (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;
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 indenture.
On or after May 16, 2026, 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. It is our current intent to settle conversions through a combination settlement of cash and shares of our Class A common stock with a specified dollar amount per $1,000 principal amount of Notes of $1,000.
The Company may redeem for cash all or any portion of the Notes, at its option, on or after August 21, 2023, 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 redemption date.
During the first quarter of 2022 none of the conversion conditions were met and the Notes are no longer 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 March 31, 2022.
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As discussed in Note 1, we adopted ASU 2020‑06 on January 1, 2022 and the Notes are now accounted for as a single liability measured at amortized cost. Upon adoption, interest expense representing the amortization of the issuance costs as well as contractual interest expense is amortized to interest expense at an effective interest rate of 1.5% over the term of the notes. Prior to the adoption of ASU 2020-06, interest expense representing the amortization of the debt discount and issuance costs as well as contractual interest expense was amortized to interest expense at an effective interest rate of 4.3%. As of March 31, 2022 the if-converted value of the Notes exceeded the principal amount by $162.9 million.
As of March 31, 2022, the remaining life of the Notes is approximately 4.4 years.
The net carrying amount of the liability and equity components of the Notes was as follows (in thousands):
March 31, 2022December 31, 2021
Liability component:
Principal$345,000 $345,000 
Unamortized discount (41,193)
Unamortized issuance costs(5,717)(5,146)
Net carrying amount$339,283 $298,661 
Equity component, net of purchase discounts and issuance costs$— $58,560 

Interest expense related to the Notes is as follows (in thousands):
Three months ended March 31,
20222021
Contractual interest expense$970 $971 
Amortization of debt discount 2,015 
Amortization of issuance costs324 251 
Total interest expense$1,294 $3,237 

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.

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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 stock units, options to purchase Class A common stock and 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 March 31,
20222021
Cost of revenue
Subscription and support
$790 $496 
Professional services
452 367 
Operating expenses
Research and development
2,725 2,431 
Sales and marketing
4,085 3,549 
General and administrative
7,257 4,780 
Total
$15,309 $11,623 
Stock Options
The following table summarizes the option activity under the Plans for the three months ended March 31, 2022:




Options

Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Outstanding at December 31, 20211,755,180 $14.42 4.0
Granted  
Forfeited  
Exercised(62,237)13.25 
Outstanding at March 31, 20221,692,943 $14.47 3.8
Exercisable at March 31, 20221,692,943 $14.47 3.8
Restricted Stock Units
The following table summarizes the restricted stock unit activity under the Plans for the three months ended March 31, 2022:
15





Number of Shares
Weighted-
Average
Grant Date Fair Value
Unvested at December 31, 20211,891,699 $73.04 
Granted653,882 119.44 
Forfeited(24,096)83.18 
Vested(1)
(555,209)56.82 
Unvested at March 31, 20221,966,276 $92.96 
(1) During the three months ended March 31, 2022, in accordance with our Nonqualified Deferred Compensation Plan, recipients of 12,368 shares had elected to defer settlement of the vested restricted stock units and 1,693 shares were released from deferral.
During the first quarter of 2022, performance restricted stock units (“PSUs”) were granted for the first time to our executives under the 2014 Plan. The fair value of a PSU is determined using the closing price of our common stock on the grant date. Each PSU grant vests in annual tranches over a three-year service period. Total units earned for grants made in 2022 may vary between 0% and 200% of the units granted based on the attainment of company-specific performance targets during the related three-year period and upon continued service. Stock-based compensation expense for PSUs is recognized on a graded-vesting basis if it is probable that the performance conditions will be achieved. Adjustments to compensation expense are made each period based on changes in our estimate of the number of PSUs that are probable of vesting. PSUs will vest with continued service and upon achievement of the relevant performance targets.
Employee Stock Purchase Plan
During the three months ended March 31, 2022, 52,546 shares of common stock were purchased under the ESPP at a weighted-average price of $99.30 per share, resulting in cash proceeds of $5.2 million.
Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At March 31, 2022, there was approximately $1.2 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
The following table presents our revenues disaggregated by industry (in thousands).
Three months ended March 31,
20222021
Industrials$18,570 $13,877 
Diversified financials17,127 13,279 
Information technology14,637 10,663 
Banks12,985 11,610 
Consumer discretionary12,218 9,531 
Healthcare11,625 9,057 
Insurance7,777 6,584 
Real estate6,076 5,339 
Utilities5,960 4,828 
Energy5,746 5,284 
Materials5,674 4,846 
Other11,279 9,324 
Total revenues
$129,674 $104,222 
Revenues by industry are derived from leading software providers. In the fourth quarter of 2021 we refined our policy surrounding customer industry categorization and accordingly the prior year amounts have been updated to reflect these refinements.
The following table presents our revenues disaggregated by type of good or service (in thousands):
Three months ended March 31,
20222021
Subscription and support$107,120 $84,936 
XBRL professional services17,693 14,486 
Other services4,861 4,800 
Total revenues
$129,674 $104,222 
Deferred Revenue
We recognized $101.1 million and $79.3 million of revenue during the three months ended March 31, 2022 and 2021, respectively, that was included in the deferred revenue balances at the beginning of the respective periods.
Transaction Price Allocated to the Remaining Performance Obligations
As of March 31, 2022, we expect revenue of approximately $603.9 million to be recognized from remaining performance obligations for subscription contracts. We expect to recognize approximately $351.1 million of these remaining performance obligations over the next 12 months with the balance substantially recognized in the 24 months thereafter.
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9. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible senior notes, outstanding stock options, stock related to unvested restricted stock units, and common stock issuable pursuant to the ESPP to the extent dilutive. Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.
The net loss per share is allocated based on the participation rights of the Class A and Class B common shares as if the loss for the year has been distributed. As the liquidation and dividend rights are identical, the net loss is allocated on a proportionate basis.
A reconciliation of the denominator used in the calculation of basic and diluted loss per share is as follows (in thousands, except share and per share data):
Three months ended
March 31, 2022March 31, 2021
Class A
Class B
Class A
Class B
Numerator
Net loss$(17,079)$(1,414)$(6,161)$(1,163)
Denominator
Weighted-average common shares outstanding - basic and diluted48,575,645 4,020,583 42,264,288 7,979,832 
Basic and diluted net loss per share$(0.35)$(0.35)$(0.15)$(0.15)
The anti-dilutive securities excluded from the weighted-average shares used to calculate the diluted net loss per common share were as follows:
As of
March 31, 2022March 31, 2021
Shares subject to outstanding common stock options1,692,943 2,588,566 
Shares subject to unvested restricted stock units1,966,276 2,237,862 
Shares issuable pursuant to the ESPP64,043 59,359 
In addition, as of March 31, 2022 and March 31, 2021 approximately 4.3 million shares of our Class A common stock underlying our Convertible Senior Notes were excluded from the weighted-average shares used to calculate the diluted net loss per common share as they are considered anti-dilutive. Upon adoption of ASU 2020-06 on January 1, 2022, we use the if-converted method for calculating any potential dilutive effect of the Notes on diluted net income per share, if applicable. Prior to adoption of ASU 2020-06 we used the treasury stock method.
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10. Intangible Assets
The following table presents the components of net intangible assets (in thousands):
As of March 31, 2022As of December 31, 2021
Weighted Average Useful Life (Years)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology4$7,920 $(1,196)$6,724 $7,920 $(701)$7,219 
Acquired customer-related8.7360 (29)331 360 (14)346 
Acquired trade names21,478 (206)1,272 1,478 (21)1,457 
Patents102,780 (1,430)1,350 2,740 (1,328)1,412 
Total5.2$12,538 $(2,861)$9,677 $12,498 $(