Persuasive evidence•Identification of an arrangement exists;the performance obligations in the contract
The service has been or is being provided•Determination of the transaction price
•Allocation of the transaction price to the customer;performance obligations in the contract
Collection•Recognition of the fees is reasonably assured; andThe amount of fees to be paid by the customer is fixedrevenue when, or determinable.Collectability is assessed based onas, we satisfy a number of factors, including past transaction history with the customer and the creditworthiness of the customer. Collateral is not requested from the customer. If it is determined that the collection of a fee is not probable, the revenue is deferred until collection becomes probable, which is generally upon the receipt of cash.performance obligation
Subscription and Support Revenue
We recognize the aggregate minimum subscription and support fees ratablyrevenue on a straight-lineratable basis over the contract term beginning on the date that our service is made available to the customer. Our subscription term, provided that an enforceable contract has been signed by both parties,contracts are generally twelve to 36 months in duration, are billed either annually or in advance and are non-cancelable. We consider the access to our SaaS solutions has been grantedplatform and related support services in a customer contract to be a series of distinct services which comprise a single performance obligation because they are substantially the customer,same and have the fee for the subscription and support is fixed or determinable, and collection is reasonably assured.same pattern of transfer.
Professional Services Revenue and Customer Options
OurProfessional services revenues primarily consist of fees for document set up, XBRL tagging, and consulting with our customers on business processes and best practices for using our platform. We have determined that an agreement to purchase these professional services constitutes an option to purchase services in accordance with ASC 606 rather than an agreement that creates enforceable rights and obligations because of the customer’s contractual right to cancel services that have not yet been used. In the limited case of agreements where we determined that the option provides the customer with a material right, we allocate a portion of the transaction price to the material right based upon the relative standalone selling price. Professional service agreements that do not contain a material right are not requiredaccounted for customerswhen the customer exercises its option to utilize our solution. We recognize revenuepurchase additional services.
Revenue is recognized for our professionaldocument set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services contracts whenare recognized as the services are performed.
Our professional services revenue is higher in the first calendar quarter because many of our customers employ our professional services just before they file their Form 10-K.
Contracts with Multiple Deliverable Arrangements Performance Obligations
Some of our contracts with customers contain multiple performance obligations. For arrangements with multiple deliverables, we evaluate whether the individual deliverables qualify as separate units of accounting. In order to treat deliverables in a multiple deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. For deliverables that have standalone value upon delivery,these contracts, we account for each deliverablethe individual performance obligations separately and recognize revenue for the respective deliverables asif they are delivered.
Subscription contracts have standalone value as we sell the subscriptions separately. In determining whether professional services can be accounted for separately from subscription services, we consider the availability of the professional services from other vendors, the nature of our professional services and whether we sell our solutions to new customers without professional services. We have
determined that we have established standalone value for our professional services. This determination was made due primarily to the ability of the customer to complete these tasks without assistance and the sale of services separate from the initial subscription order. Because we established standalone value for our professional services, such service arrangements are being accounted for separately from subscription services.
When multiple deliverables included in an arrangement are separable into different units of accounting, the arrangement considerationdistinct. The transaction price is allocated to the identified separate units of accounting basedperformance obligations on theira relative selling price. Multiple deliverable arrangements accounting guidance provides a hierarchy to use when determining the relativestandalone selling price for each unit of accounting. Vendor-specific objective evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a standalone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence (TPE) of selling price is used to establish the selling price if it exists. VSOE and TPE do not currently exist for any of our deliverables. Accordingly, for arrangements with multiple deliverables that can be separated into different units of accounting, we allocate the arrangement fee to the separate units of accounting based on our best estimate of selling price. The amount of arrangement fee allocated is limited by contingent revenue, if any.
basis. We determine our best estimate ofthe standalone selling price for our deliverablesprices based on our overall pricing objectives, taking into consideration market conditions and entity-specific factors. We evaluate our best estimate of selling price by reviewing historical data related to sales of our deliverables, including comparing the percentages of our contract prices to our list prices. We also may consider several other data points in our evaluation,factors, including the sizevalue of our arrangements, length of term, the cloud solutions sold, customer demographics and the numbers and types of users within our arrangements.
While changes in assumptions or judgments or changes to the elements of the arrangement could cause an increase or decrease in the amount of revenue that we report in a particular period, these changes have not historically been significant because our recurring revenue is primarily subscription and support revenue.
Stock-Based Compensation
We measure and recognize compensation expense for all stock-based awards granted to our employees, non-employee directors, and other service providers based on the estimated fair value of the award on the grant date or reporting date, if required to be remeasured under the guidance. We utilize stock-based compensation in the form of restricted stock awards, restricted stock units, options to purchase Class A common stock and ESPP purchase rights. The fair value of each stock option award and ESPP purchase right is determined at the date of grant by applying the Black-Scholes option pricing model. The fair value of each restricted stock award is based on the number of shares granted and the closing price of our Class A common stock as reported on the New York Stock Exchange on the date of grant. The fair value of these awards is recognized as an expense on a straight line basis over the requisite service period.
All stock-based awards made since the date of our initial public offering have been for Class A common stock. All references to common stock in this “Stock-Based Compensation” section are to our Class A common stock and Class B common stock, as applicable.
Our option pricing model requires the input of highly subjective assumptions, including the expected term of the option, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
These assumptions are estimated as follows:
Fair Value of Our Common Stock: The fair value of our common stock is based on the closing price of our Class A common stock on the New York Stock Exchange.Risk-Free Interest Rate: We base the risk-free interest rate used in the Black-Scholes option pricing model on the implied yield available on U.S. Treasury STRIPS with remaining terms similar to the expected term on the options.Expected Term: We estimate the expected term using the simplified method due to the lack of historical exercise activity for our company. The simplified method calculates the expected term as the mid-point between the vesting date and the contractual expiration date of the award.Volatility: Due to the limited trading history of our common stock, we estimate volatility for option grants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the option grant for a term that is approximately equal to the options’ expected life.Dividend yield: We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.
Please refer to Note 8 of the notes to consolidated financial statements for additional information on our estimates related to stock-based compensation.
Recent Accounting Pronouncements
Refer to Note 1 of the notes to consolidated financial statements for a full description of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign currency rates, although we also have some exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.
Foreign Currency Risk
Our sales contracts are denominated predominantly in U.S. dollars and, to a lesser extent, the Canadian dollar, Euro, and British Pound Sterling. Consequently, our customer billings denominated in foreign currency are subject to foreign currency exchange risk. A portion of our operating expenses is incurred outside the United States and is denominated in foreign currencies. These operating expenses are also subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Canadian dollar, Euro, British pound, Singapore dollar, Australian dollar, and British pound.Hong Kong dollar. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, we have not entered into derivatives or hedging transactions as our exposure to foreign currency exchange rates has not been material to our historical operating results, but we may do so in the future if our exposure to foreign currency should become more significant. Foreign currency transaction gains (losses)losses are included in net loss and were $(372,000), $67,000$503,000, $329,000 and $(293,000)$609,000 in the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.
Inflation Risk
Inflationary factors, such as increases in our operating expenses, may adversely affect our results of operations, as our customers typically purchase services from us on a subscription basis over a period of time. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, an increase in the rate of inflation in the future may have an adverse effect on our levels of operating expenses as a percentage of revenue if we are unable to increase the prices for our subscription-based solutions to keep pace with these increased expenses.
Interest Rate Risk
As part of our build-to-suit lease arrangement, in addition to the base rent amount, we are responsible for the underlying mortgage held by the lessor, which is subject to a variable interest rate equal to the prime lending rate plus 1%. In addition, in August 2014, we entered into a $15.0 million credit facility. The credit facility is denominated in U.S. dollars and borrowings are subject to a variable interest rate equal to the prime lending rate. A hypothetical 10% increase or decrease in interest rates after December 31, 2017 would not have a material impact on our results of operations, our cash flows or the fair values of our outstanding debt or financing obligations.
Interest Rate Sensitivity
We had cash, cash equivalents and marketable securities totaling $76.7$530.4 million as of December 31, 2017.2021. The cash, cash equivalents and marketable securities are held for working capital purposes. Our investments are made primarily for capital preservation purposes. We do not enter into investments for trading or speculative purposes.
Our cash and cash equivalents consist primarily of cash and money market funds. Our exposure to market risk for changes in interest rates is limited because our cash and cash equivalents have a short-term maturity and are used primarily for working capital purposes.
Our portfolio of marketable securities was invested primarily in commercial paper and U.S. corporate and U.S. treasury debt securities and is subject to market risk due primarily to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Accordingly, our future
investment income may fluctuate as a result of changes in interest rates, or we may suffer losses in principal if we are forced to sell securities that decline in market value as a result of changes in interest rates. However, because we classify our marketable securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.caused by expected credit losses.
An immediate increase of 100-basis points in interest rates would have resulted in an $166,000$1.8 million market value reduction in our investment portfolio as of December 31, 2017.2021. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Fluctuations in the value of our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities.
In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026. As these Notes have a fixed annual interest rate, we have no financial or economic interest exposure associated with changes in interest rates. However, the fair value of fixed rate debt instruments fluctuates when interest rates change. Additionally, the fair value can be affected when the market price of our common stock fluctuates. We carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only.
Item 8. Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors and Stockholders of Workiva Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Workiva Inc. (the Company) as of December 31, 20172021 and 2016, and2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2017,2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 20182022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
| | | | | |
| Revenue Recognition |
Description of the Matter | As described in Note 1 to the consolidated financial statements, the Company recognizes revenue upon transfer of control of cloud-based software and professional services in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. |
| |
| The Company assessed the terms and conditions associated with customer contracts to identify whether the services constitute an agreement that creates enforceable rights and obligations or an option to purchase. In addition, the Company identified the performance obligations and whether they were distinct. The transaction price was allocated to the separate performance obligations on a relative standalone selling price basis. The assessment of terms and conditions for the identification of performance obligations may involve judgment. |
| |
| Auditing the Company’s accounting for revenue recognition was challenging given the significant audit effort to evaluate the terms and conditions in the customer contracts and the identification and determination of distinct performance obligations in customer contracts. |
| |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s revenue recognition process, including management’s review of terms and conditions and the identification of distinct performance obligations in customer contracts. |
| |
| To test the Company’s accounting for revenue recognition, we performed audit procedures that included, among others, reperforming management’s assessment of the distinct performance obligations within the arrangement based on its terms and conditions for a sample of customer contracts. We tested the application of the revenue recognition accounting requirements for each of the significant service offerings to determine whether the performance obligations identified by the Company were distinct. We also assessed the appropriateness of the related disclosures in the consolidated financial statements. |
/s/ Ernst & Young LLP
We have served as the Company'sCompany’s auditor since 2010.
Chicago, Illinois
February 22, 20182022
Report of Independent Registered Public Accounting Firm
TheTo the Stockholders and the Board of Directors and Stockholders ofWorkiva Inc.
Opinion on Internal Control overOver Financial Reporting
We have audited Workiva Inc.'s (the Company)’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the CompanyWorkiva Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172021 and 2016, and2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 20172021, and the related notes and our report dated February 22, 20182022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chicago, Illinois
February 22, 2018
2022
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WORKIVA INC.
CONSOLIDATED BALANCE SHEETS |
(in thousands, except share and per share amounts) |
| As of December 31, |
| 2021 | | 2020 |
| | | |
ASSETS | | | |
| | | |
Current assets | | | |
Cash and cash equivalents | $ | 300,386 | | | $ | 322,831 | |
Marketable securities | 230,060 | | | 207,207 | |
Accounts receivable, net of allowance for doubtful accounts of $591 and $717 at December 31, 2021 and 2020, respectively | 76,848 | | | 68,922 | |
Deferred costs | 31,152 | | | 21,923 | |
Other receivables | 3,538 | | | 3,155 | |
Prepaid expenses and other | 15,108 | | | 9,047 | |
Total current assets | 657,092 | | | 633,085 | |
| | | |
Property and equipment, net | 28,821 | | | 29,365 | |
Operating lease right-of-use assets | 17,760 | | | 15,844 | |
Deferred costs, non-current | 33,091 | | | 23,421 | |
Goodwill | 34,556 | | | — | |
Intangible assets, net | 10,434 | | | 1,583 | |
Other assets | 5,005 | | | 3,708 | |
Total assets | $ | 786,759 | | | $ | 707,006 | |
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| | | |
Current liabilities | | | |
Accounts payable | $ | 4,114 | | | $ | 2,843 | |
Accrued expenses and other current liabilities | 84,126 | | | 68,256 | |
Deferred revenue | 258,023 | | | 208,990 | |
Convertible senior notes, current | 298,661 | | | — | |
Finance lease obligations | 1,575 | | | 1,705 | |
Total current liabilities | 646,499 | | | 281,794 | |
| | | |
Convertible senior notes, non-current | — | | | 289,490 | |
Deferred revenue, non-current | 34,181 | | | 35,894 | |
Other long-term liabilities | 1,605 | | | 1,680 | |
Operating lease liabilities, non-current | 16,408 | | | 17,209 | |
Finance lease obligations, non-current | 15,087 | | | 16,662 | |
Total liabilities | 713,780 | | | 642,729 | |
| | | |
Stockholders’ equity | | | |
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 47,293,775 and 40,719,189 shares issued and outstanding at December 31, 2021 and 2020, respectively | 47 | | | 41 | |
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 4,150,583 and 8,069,610 shares issued and outstanding at December 31, 2021 and 2020, respectively | 4 | | | 8 | |
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding | — | | | — | |
Additional paid-in-capital | 525,646 | | | 478,698 | |
Accumulated deficit | (452,430) | | | (414,700) | |
Accumulated other comprehensive (loss) income | (288) | | | 230 | |
Total stockholders’ equity | 72,979 | | | 64,277 | |
Total liabilities and stockholders’ equity | $ | 786,759 | | | $ | 707,006 | |
See accompanying notes.
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WORKIVA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Revenue | | | | | |
Subscription and support | $ | 379,340 | | | $ | 295,877 | | | $ | 245,765 | |
Professional services | 63,945 | | | 55,717 | | | 52,126 | |
Total revenue | 443,285 | | | 351,594 | | | 297,891 | |
Cost of revenue | | | | | |
Subscription and support | 60,551 | | | 49,503 | | | 42,881 | |
Professional services | 43,282 | | | 40,674 | | | 42,131 | |
Total cost of revenue | 103,833 | | | 90,177 | | | 85,012 | |
Gross profit | 339,452 | | | 261,417 | | | 212,879 | |
Operating expenses | | | | | |
Research and development | 115,735 | | | 94,844 | | | 89,921 | |
Sales and marketing | 178,785 | | | 144,687 | | | 120,300 | |
General and administrative | 74,287 | | | 59,688 | | | 48,064 | |
Total operating expenses | 368,807 | | | 299,219 | | | 258,285 | |
Loss from operations | (29,355) | | | (37,802) | | | (45,406) | |
Interest income | 1,041 | | | 3,282 | | | 4,657 | |
Interest expense | (14,015) | | | (13,964) | | | (6,027) | |
Other income and (expense), net | 3,229 | | | (205) | | | (564) | |
Loss before (benefit) provision for income taxes | (39,100) | | | (48,689) | | | (47,340) | |
(Benefit) Provision for income taxes | (1,370) | | | (291) | | | 139 | |
Net loss | $ | (37,730) | | | $ | (48,398) | | | $ | (47,479) | |
Net loss per common share: | | | | | |
Basic and diluted | $ | (0.74) | | | $ | (1.00) | | | $ | (1.03) | |
Weighted-average common shares outstanding - basic and diluted | 51,126,510 | | | 48,448,166 | | | 46,302,656 | |
See accompanying notes.
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WORKIVA INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Net loss | $ | (37,730) | | | $ | (48,398) | | | $ | (47,479) | |
Other comprehensive (loss) income, net of tax | | | | | |
Foreign currency translation adjustment, net of income tax expense | 266 | | | (137) | | | 13 | |
Unrealized (loss) gain on available-for-sale securities, net of income tax expense | (784) | | | 80 | | | 176 | |
| | | | | |
| | | | | |
Other comprehensive (loss) income, net of tax | (518) | | | (57) | | | 189 | |
Comprehensive loss | $ | (38,248) | | | $ | (48,455) | | | $ | (47,290) | |
See accompanying notes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (in thousands) |
| Common Stock (Class A and B) | | Additional Paid-in-Capital | | Accumulated Other Comprehensive Income | | Accumulated Deficit | | Total Stockholders' Equity (Deficit) |
| Shares | | Amount | | | | |
Balances at December 31, 2018 | 44,044 | | | $ | 44 | | | $ | 297,145 | | | $ | 98 | | | $ | (307,027) | | | $ | (9,740) | |
Cumulative-effect of change in accounting principle | — | | | — | | | — | | | — | | | (11,796) | | | (11,796) | |
Stock-based compensation expense | — | | | — | | | 35,784 | | | — | | | — | | | 35,784 | |
Issuance of common stock upon exercise of stock options | 1,997 | | | 3 | | | 24,149 | | | — | | | — | | | 24,152 | |
Issuance of common stock under employee stock purchase plan | 188 | | | — | | | 4,922 | | | — | | | — | | | 4,922 | |
Issuance of restricted stock units | 420 | | | — | | | — | | | — | | | — | | | — | |
Tax withholdings related to net share settlements of stock-based compensation awards | (10) | | | — | | | (390) | | | — | | | — | | | (390) | |
Equity component of convertible senior notes, net | — | | | — | | | 58,560 | | | — | | | — | | | 58,560 | |
Net loss | — | | | — | | | — | | | — | | | (47,479) | | | (47,479) | |
Other comprehensive income | — | | | — | | | — | | | 189 | | | — | | | 189 | |
Balances at December 31, 2019 | 46,639 | | | $ | 47 | | | $ | 420,170 | | | $ | 287 | | | $ | (366,302) | | | $ | 54,202 | |
Stock-based compensation expense | — | | | — | | | 45,771 | | | — | | | — | | | 45,771 | |
Issuance of common stock upon exercise of stock options | 1,398 | | | 2 | | | 19,187 | | | — | | | — | | | 19,189 | |
Issuance of common stock under employee stock purchase plan | 187 | | | — | | | 7,227 | | | — | | | — | | | 7,227 | |
Issuance of restricted stock units | 796 | | | — | | | — | | | — | | | — | | | — | |
Tax withholdings related to net share settlements of stock-based compensation awards | (231) | | | — | | | (13,657) | | | — | | | — | | | (13,657) | |
Net loss | — | | | — | | | — | | | — | | | (48,398) | | | (48,398) | |
Other comprehensive loss | — | | | — | | | — | | | (57) | | | — | | | (57) | |
Balances at December 31, 2020 | 48,789 | | | $ | 49 | | | $ | 478,698 | | | $ | 230 | | | $ | (414,700) | | | $ | 64,277 | |
Stock-based compensation expense | — | | | — | | | 48,633 | | | — | | | — | | | 48,633 | |
Issuance of common stock upon exercise of stock options | 1,141 | | | 2 | | | 16,598 | | | — | | | — | | | 16,600 | |
Issuance of common stock under employee stock purchase plan | 149 | | | — | | | 8,861 | | | — | | | — | | | 8,861 | |
Issuance of restricted stock units | 1,578 | | | — | | | — | | | — | | | — | | | — | |
Tax withholdings related to net share settlements of stock-based compensation awards | (213) | | | — | | | (27,144) | | | — | | | — | | | (27,144) | |
Net loss | — | | | — | | | — | | | — | | | (37,730) | | | (37,730) | |
Other comprehensive loss | — | | | — | | | — | | | (518) | | | — | | | (518) | |
Balances at December 31, 2021 | 51,444 | | | $ | 51 | | | $ | 525,646 | | | $ | (288) | | | $ | (452,430) | | | $ | 72,979 | |
See accompanying notes.
| | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Cash flows from operating activities | | | | | |
Net loss | $ | (37,730) | | | $ | (48,398) | | | $ | (47,479) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 5,244 | | | 4,296 | | | 3,844 | |
Stock-based compensation expense | 48,633 | | | 45,771 | | | 35,784 | |
Recovery of doubtful accounts | (125) | | | (159) | | | (92) | |
Amortization of premiums and discounts on marketable securities, net | 3,024 | | | 668 | | | 13 | |
Amortization of debt discount and issuance costs | 9,171 | | | 8,889 | | | 3,262 | |
| | | | | |
| | | | | |
Gain on settlement of equity securities | (3,698) | | | — | | | — | |
Deferred income tax | (1,973) | | | — | | | (65) | |
Changes in assets and liabilities: | | | | | |
Accounts receivable | (7,683) | | | (8,028) | | | 5,166 | |
Deferred costs | (19,207) | | | (15,953) | | | (10,268) | |
Operating lease right-of-use asset | 4,197 | | | 3,906 | | | 2,552 | |
Other receivables | (391) | | | (680) | | | (1,250) | |
Prepaid expenses and other | (6,522) | | | (2,492) | | | (2,084) | |
Other assets | (1,222) | | | (215) | | | (1,860) | |
Accounts payable | 972 | | | (4,106) | | | 2,153 | |
Deferred revenue | 47,419 | | | 37,479 | | | 32,039 | |
Operating lease liability | (4,934) | | | (4,525) | | | (3,035) | |
Accrued expenses and other liabilities | 14,669 | | | 16,790 | | | 12,238 | |
Net cash provided by operating activities | 49,844 | | | 33,243 | | | 30,918 | |
| | | | | |
Cash flows from investing activities | | | | | |
Purchase of property and equipment | (3,534) | | | (1,873) | | | (3,104) | |
Purchase of marketable securities | (170,070) | | | (175,926) | | | (112,565) | |
Maturities of marketable securities | 143,159 | | | 62,922 | | | 26,840 | |
Sale of marketable securities | 250 | | | 11,423 | | | 498 | |
Acquisitions, net of cash acquired | (37,467) | | | — | | | — | |
Purchase of intangible assets | (219) | | | (296) | | | (734) | |
Other investments | (750) | | | — | | | (1,000) | |
Net cash used in investing activities | (68,631) | | | (103,750) | | | (90,065) | |
| | | | | |
| | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED BALANCE SHEETS |
(in thousands, except share and per share amounts) |
| As of December 31, |
| 2017 | | 2016 |
ASSETS | | | |
| | | |
Current assets | | | |
Cash and cash equivalents | $ | 60,333 | | $ | 51,281 |
Marketable securities | 16,364 | | 11,435 |
Accounts receivable, net of allowance for doubtful accounts of $388 and $900 at December 31, 2017 and December 31, 2016, respectively | 28,800 | | 22,535 |
Deferred commissions | 2,376 | | 1,864 |
Other receivables | 975 | | 1,545 |
Prepaid expenses | 6,444 | | 9,382 |
Total current assets | 115,292 | | 98,042 |
| | | |
Property and equipment, net | 40,444 | | 42,590 |
Intangible assets, net | 1,118 | | 1,012 |
Other assets | 861 | | 1,499 |
Total assets | $ | 157,715 | | $ | 143,143 |
| | | |
| | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED BALANCE SHEETS (continued) |
(in thousands, except share and per share amounts) |
| As of December 31, |
| 2017 | | 2016 |
| | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| | | |
Current liabilities | | | |
Accounts payable | $ | 3,060 | | $ | 849 |
Accrued expenses and other current liabilities | 20,212 | | 20,695 |
Deferred revenue | 104,684 | | 76,016 |
Deferred government grant obligation | 217 | | 1,022 |
Current portion of capital lease and financing obligations | 1,168 | | 1,285 |
Current portion of long-term debt | — | | 20 |
Total current liabilities | 129,341 | | 99,887 |
| | | |
Deferred revenue | 22,709 | | 21,485 |
Deferred government grant obligation | 278 | | 1,000 |
Other long-term liabilities | 3,896 | | 4,100 |
Capital lease and financing obligations | 18,425 | | 19,743 |
Long-term debt | — | | 53 |
Total liabilities | 174,649 | | 146,268 |
| | | |
Stockholders’ deficit | | | |
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 32,165,407 and 30,369,199 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively | 32 | | 30 |
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 10,203,371 and 10,891,888 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively | 10 | | 11 |
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding | — | | — |
Additional paid-in-capital | 248,289 | | 217,454 |
Accumulated deficit | (265,337) | | (220,911) |
Accumulated other comprehensive income | 72 | | 291 |
Total stockholders’ deficit | (16,934) | | (3,125) |
Total liabilities and stockholders’ deficit | $ | 157,715 | | $ | 143,143 |
| | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) |
(in thousands) |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Cash flows from financing activities | | | | | |
Proceeds from option exercises | 16,600 | | | 19,189 | | | 24,152 | |
Taxes paid related to net share settlements of stock-based compensation awards | (27,144) | | | (13,657) | | | (390) | |
Proceeds from shares issued in connection with employee stock purchase plan | 8,861 | | | 7,227 | | | 4,922 | |
Proceeds from the issuance of convertible senior notes, net of issuance costs | — | | | — | | | 335,899 | |
| | | | | |
Principal payments on finance lease obligations | (1,705) | | | (1,641) | | | (1,565) | |
| | | | | |
| | | | | |
Net cash (used in) provided by financing activities | (3,388) | | | 11,118 | | | 363,018 | |
Effect of foreign exchange rates on cash | (270) | | | 478 | | | 287 | |
| | | | | |
Net (decrease) increase in cash and cash equivalents | (22,445) | | | (58,911) | | | 304,158 | |
Cash and cash equivalents at beginning of year | 322,831 | | | 381,742 | | | 77,584 | |
Cash and cash equivalents at end of year | $ | 300,386 | | | $ | 322,831 | | | $ | 381,742 | |
| | | | | |
Supplemental cash flow disclosure | | | | | |
Cash paid for interest | $ | 4,837 | | | $ | 5,067 | | | $ | 1,340 | |
Cash paid for income taxes, net of refunds | $ | (41) | | | $ | 679 | | | $ | 371 | |
| | | | | |
Supplemental disclosure of noncash investing and financing activities | | | | | |
| | | | | |
Allowance for tenant improvements | $ | — | | | $ | 149 | | | $ | 270 | |
Purchases of property and equipment, accrued but not paid | $ | 350 | | | $ | 263 | | | $ | 144 | |
See accompanying notes.
| | | | | | | | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except share and per share amounts) |
| Year ended December 31, |
| 2017 | | 2016 | | 2015 |
Revenue | | | | | |
Subscription and support | $ | 169,283 | | $ | 143,120 | | $ | 116,288 |
Professional services | 38,586 | | 35,526 | | 28,984 |
Total revenue | 207,869 | | 178,646 | | 145,272 |
Cost of revenue | | | | | |
Subscription and support | 32,646 | | 27,895 | | 22,559 |
Professional services | 27,599 | | 23,730 | | 17,645 |
Total cost of revenue | 60,245 | | 51,625 | | 40,204 |
Gross profit | 147,624 | | 127,021 | | 105,068 |
Operating expenses | | | | | |
Research and development | 68,172 | | 57,438 | | 50,466 |
Sales and marketing | 84,161 | | 80,466 | | 69,569 |
General and administrative | 39,594 | | 32,695 | | 28,716 |
Total operating expenses | 191,927 | | 170,599 | | 148,751 |
Loss from operations | (44,303) | | (43,578) | | (43,683) |
Interest expense | (1,845) | | (1,875) | | (2,025) |
Other income, net | 1,783 | | 1,500 | | 2,302 |
Loss before provision (benefit) for income taxes | (44,365) | | (43,953) | | (43,406) |
Provision (benefit) for income taxes | 61 | | 24 | | (7) |
Net loss | $ | (44,426) | | $ | (43,977) | | $ | (43,399) |
Net loss per common share: | | | | | |
Basic and diluted | $ | (1.07) | | $ | (1.08) | | $ | (1.09) |
Weighted-average common shares outstanding - basic and diluted | 41,618,838 | | 40,671,133 | | 39,852,624 |
See accompanying notes.
| | | | | | | | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
(in thousands) |
| Year ended December 31, |
| 2017 | | 2016 | | 2015 |
Net loss | $ | (44,426) | | $ | (43,977) | | $ | (43,399) |
Other comprehensive (loss) income, net of tax | | | | | |
Foreign currency translation adjustment, net of income tax (expense) of ($2), ($13) and ($101) for the years ended December 31, 2017, 2016 and 2015, respectively | (159) | | 18 | | 133 |
Unrealized gain (loss) on available-for-sale securities, net of income tax (expense) benefit of $2, ($19), and $25 for the years ended December 31, 2017, 2016 and 2015, respectively | (60) | | 32 | | (39) |
| | | | | |
| | | | | |
Other comprehensive (loss) income, net of tax | (219) | | 50 | | 94 |
Comprehensive loss | $ | (44,645) | | $ | (43,927) | | $ | (43,305) |
See accompanying notes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) |
(in thousands) |
| Common Stock (Class A and B) | | Additional Paid-in-Capital | | Accumulated Other Comprehensive Income | | Accumulated Deficit | | Total Stockholders' Equity (Deficit) |
| Shares | | Amount | | | | |
Balances at December 31, 2014 | 39,641 | | $ | 39 | | $ | 189,168 | | $ | 147 | | $ | (133,535) | | $ | 55,819 |
Stock-based compensation expense | — | | — | | 11,000 | | — | | — | | 11,000 |
Grant of restricted stock award | 600 | | — | | — | | — | | — | | — |
Issuance of common stock upon exercise of stock options | 707 | | 2 | | 2,242 | | — | | — | | 2,244 |
Net loss | — | | — | | — | | — | | (43,399) | | (43,399) |
Distribution to members | — | | — | | (35) | | — | | — | | (35) |
Cost of offering | — | | — | | (4) | | — | | — | | (4) |
Other comprehensive income | — | | — | | — | | 94 | | — | | 94 |
Balances at December 31, 2015 | 40,948 | | $ | 41 | | $ | 202,371 | | $ | 241 | | $ | (176,934) | | $ | 25,719 |
Stock-based compensation expense | — | | — | | 14,247 | | — | | — | | 14,247 |
Issuance of common stock upon exercise of stock options | 374 | | — | | 1,597 | | — | | — | | 1,597 |
Tax withholdings related to net share settlements of stock-based compensation awards | (61) | | — | | (761) | | — | | — | | (761) |
Net loss | — | | — | | — | | — | | (43,977) | | (43,977) |
Other comprehensive income | — | | — | | — | | 50 | | — | | 50 |
Balances at December 31, 2016 | 41,261 | | $ | 41 | | $ | 217,454 | | $ | 291 | | $ | (220,911) | | $ | (3,125) |
Stock-based compensation expense | — | | — | | 19,476 | | — | | — | | 19,476 |
Issuance of common stock upon exercise of stock options | 1,159 | | 1 | | 12,484 | | — | | — | | 12,485 |
Issuance of restricted stock units | 30 | | — | | — | | — | | — | | — |
Tax withholdings related to net share settlements of stock-based compensation awards | (81) | | — | | (1,125) | | — | | — | | (1,125) |
Net loss | — | | — | | — | | — | | (44,426) | | (44,426) |
Other comprehensive loss | — | | — | | — | | (219) | | — | | (219) |
Balances at December 31, 2017 | 42,369 | | $ | 42 | | $ | 248,289 | | $ | 72 | | $ | (265,337) | | $ | (16,934) |
See accompanying notes.
| | | | | | | | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) |
| Year ended December 31, |
| 2017 | | 2016 | | 2015 |
Cash flows from operating activities | | | | | |
Net loss | $ | (44,426) | | $ | (43,977) | | $ | (43,399) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities | | | | | |
Depreciation and amortization | 3,546 | | 3,820 | | 4,410 |
Stock-based compensation expense | 19,476 | | 14,247 | | 11,000 |
(Recovery of) provision for doubtful accounts | (517) | | 185 | | 449 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Realized gain on sale of available-for-sale securities, net | — | | (6) | | (13) |
Amortization of premiums and discounts on marketable securities, net | 101 | | 147 | | 77 |
Recognition of deferred government grant obligation | (1,578) | | (1,141) | | (2,383) |
Deferred income tax | — | | (32) | | (76) |
Changes in assets and liabilities: | | | | | |
Accounts receivable | (5,546) | | (7,101) | | (5,080) |
Deferred commissions | (498) | | (497) | | (520) |
Other receivables | 577 | | (732) | | (523) |
Prepaid expenses | 2,952 | | (5,513) | | (734) |
Other assets | 618 | | (654) | | 81 |
Accounts payable | 2,206 | | (3,930) | | 2,331 |
Deferred revenue | 29,367 | | 34,211 | | 7,297 |
Accrued expenses and other liabilities | (758) | | 604 | | 5,390 |
Change in restricted cash | — | | — | | 101 |
Net cash provided by (used in) operating activities | 5,520 | | (10,369) | | (21,592) |
| | | | | |
Cash flows from investing activities | | | | | |
Purchase of property and equipment | (1,188) | | (1,901) | | (1,843) |
Purchase of marketable securities | (14,369) | | (1,301) | | (24,069) |
Maturities of marketable securities | 9,281 | | — | | — |
Sale of marketable securities | — | | 7,197 | | 6,521 |
Purchase of intangible assets | (197) | | (190) | | (386) |
Net cash (used in) provided by investing activities | (6,473) | | 3,805 | | (19,777) |
| | | | | | | | | | | | | | | | | |
WORKIVA INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) |
(in thousands) |
| Year ended December 31, |
| 2017 | | 2016 | | 2015 |
Cash flows from financing activities | | | | | |
Payment of equity issuance costs | — | | — | | (1,346) |
Proceeds from option exercises | 12,485 | | 1,597 | | 2,244 |
Taxes paid related to net share settlements of stock-based compensation awards | (1,125) | | (761) | | — |
Changes in restricted cash | — | | — | | 300 |
Repayment of other long-term debt | (73) | | (18) | | (84) |
Principal payments on capital lease and financing obligations | (1,435) | | (1,863) | | (2,282) |
Distributions to members | — | | — | | (381) |
Proceeds from government grants | 51 | | 183 | | 548 |
Deferred financing costs | (81) | | (33) | | — |
Repayment of government grant | — | | — | | (101) |
Net cash provided by (used in) financing activities | 9,822 | | (895) | | (1,102) |
Effect of foreign exchange rates on cash | 183 | | (10) | | 90 |
| | | | | |
Net increase (decrease) in cash and cash equivalents | 9,052 | | (7,469) | | (42,381) |
Cash and cash equivalents at beginning of year | 51,281 | | 58,750 | | 101,131 |
Cash and cash equivalents at end of year | $ | 60,333 | | $ | 51,281 | | $ | 58,750 |
| | | | | |
Supplemental cash flow disclosure | | | | | |
Cash paid for interest | $ | 1,627 | | $ | 1,835 | | $ | 2,048 |
Cash paid for income taxes, net of refunds | $ | 42 | | $ | 47 | | $ | 64 |
| | | | | |
Supplemental disclosure of noncash investing and financing activities | | | | | |
Fixed assets acquired through capital lease arrangements | $ | — | | $ | — | | $ | 527 |
Government grant recorded against property and equipment, net | $ | — | | $ | — | | $ | 908 |
Allowance for tenant improvements | $ | — | | $ | 481 | | $ | 698 |
Purchases of property and equipment, accrued but not paid | $ | — | | $ | — | | $ | 354 |
See accompanying notes.
WORKIVA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Organization
Workiva Inc., a Delaware corporation, and its wholly-owned subsidiaries (the "Company"“Company” or "we"“we” or "us"“us”) created Wdesk, an intuitive cloud platform that modernizes how peoplesimplifies complex work withinfor thousands of organizations. Wdesk is built onorganizations worldwide. We are a data management engine, offering controlled collaboration, data connections, granular permissions and a full audit trail. We offer Wdesk solutions for a wide rangeleading provider of use cases in the following markets: finance and accounting, audit and internal controls, risk andcloud-based compliance and performanceregulatory reporting solutions that are designed to solve business challenges at the intersection of data, process and management reporting.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 consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Workiva Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Seasonality affects our revenue, expenses and cash flows from operations. Revenue from professional services is generally higher in the first quarter as many of our customers file their 10-K in the first calendar quarter. Sales and marketing expense is generally higher in the third quarter since we hold our annual user conference in September. Our transition to a virtual event in September 2020 and September 2021 has mostly mitigated this trend. In addition, the timing of cash bonus payments to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow.
Segments
Our chief operating decision maker reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable by the chief operating decision maker, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level. Accordingly, we determined we have 1 operating and reportable segment.
Foreign Currency
We translate the financial statements of our foreign subsidiaries, which have a functional currency in the respective country’s local currency, to U.S. dollars using month-end exchange rates for assets and liabilities and average exchange rates for revenue, costs and expenses. Translation gains and losses are recorded in accumulated other comprehensive income as a component of stockholders’ equity.equity (deficit). Gains and losses resulting from foreign currency transactions that are denominated in currencies other than the entity's functional currency are included within “Otherother (expense) income, net”net on the consolidated statements of operations. We recorded $(372,000), $67,000 and $(293,000)
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, collectability of accounts receivable, 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, the fair value of the liability and equity components of the convertible senior notes, 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.
Cash and Cash Equivalents
Cash consists of cash on deposit with banks that is stated at cost, which approximates fair value. We invest our excess cash primarily in highly liquid money market funds and marketable securities. We classify all highly liquid investments with stated maturities of three months or less from date of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three months as marketable securities.
Marketable Securities
Our marketable securities consist of U.S.commercial paper, corporate debt securities, and U.S. treasury debt securities and foreign government debt securities. We classify our marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our investments, including securities with maturities beyond twelve months as current assets in the accompanying consolidated balance sheets. Available-for-sale securities are recorded at fair value each reporting period. Unrealized gains and losses are excluded from earnings and recorded as a separate component within “Accumulatedaccumulated other comprehensive income”income on the consolidated balance sheets until realized. Dividend income is reported within “Otherother (expense) income, net”net on the consolidated statements of operations. We evaluate our investments to assess whether those withthe amortized cost basis is in excess of estimated fair value and determine what amount of that difference, if any, is caused by expected credit losses. Allowance for credit losses are recognized as a charge in other (expense) income, net on the consolidated statements of operations, and any remaining unrealized loss positionslosses are included in accumulated other than temporarily impaired.comprehensive income on the consolidated balance sheets. There were no credit losses recorded for the years ended December 31, 2021 and 2020. There was no impairment charge for any unrealized losses in 2019. We consider impairments to be other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realizeddetermine realized gains and losses and declines in value judged to be other than temporary are determined basedon the sale of marketable securities on the specific identification method and are reportedrecord such gains and losses in “Otherother (expense) income, net”net on the consolidated statements of operations.
Fair Value of Financial Instruments
Our financial assets, which include cash equivalents and marketable securities, are measured and recorded at fair value on a recurring basis. Our other current financial assets and our other current financial liabilities have fair values that approximate their carrying value due to their short-term maturities.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with high credit-quality financial institutions. Such deposits may be in excess of federally insured limits. To date, we have not experienced any losses on our cash and cash equivalents. We perform periodic evaluations of the relative credit standing of the financial institutions.
Our accounts receivable are derived primarily from customers located in North America. We perform ongoing credit evaluations of our customers’ financial condition and require no collateral from our customers. We maintain an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable balances. We did not have a significant concentration of accounts receivable from any single customer or from customers in any single country outside of the United States at December 31, 20172021 or 2016.2020.
Deferred Costs
We pay sales commissions for initial contracts and expansions of existing contracts with customers. These commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions paid where the amortization period is one year or less are expensed as incurred. All other sales commissions are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be three years. We determined the period of benefit by taking into consideration our standard contract terms and conditions, rate of technological change and other factors. Amortization expense is included in sales and marketing expense in the accompanying consolidated statements of operations.
Property and Equipment, net
Property and equipment is stated at cost, net of accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to ten years. We amortize leasehold improvements and assets under capitalfinance leases or financing arrangements over the lesser of the term of the lease including renewal options that are reasonably assured or the estimated useful life of the assets. Depreciation and amortization expense related to property and equipment totaled $3.4$4.1 million, $3.7$3.8 million and $4.4$3.4 million for the years ended December 31, 2017, 20162021, 2020 and 2015, respectively, and included $1.6 million, $2.1 million and $2.4 million of amortization of assets recorded under capital leases during the years ended December 31, 2017, 2016 and 2015,2019, respectively.
Revenue Recognition
We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. Our customer contracts typically rangeWe recognize revenue when control of these services is transferred to our customers in length from threean amount that reflects the consideration we expect to 36 months. Our arrangements do not contain general rights of return. Our subscription contracts do not provide customers withbe entitled to in exchange for those services.
We determine revenue recognition through the right to take possessionfollowing steps:
•Identification of the software supportingcontract, or contracts, with a customer
•Identification of the applications and,performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, we satisfy a result, are accounted for as service contracts.performance obligation
We commencereport revenue recognition for subscriptions to our cloud applications and professional services when all of the following criteria are met:
There is persuasive evidence of an arrangement;The service has been or is being provided to the customer;Collection of the fees is reasonably assured; andThe amount of fees to be paid by the customer is fixed or determinable.
Collectability is assessed based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. Collateral is not requested from the customer. If it is determined that the collection of a fee is not probable, the revenue is deferred until collection becomes probable, which is generally upon the receipt of cash.
Revenue is reported net of sales and other taxes collected from customers to be remitted to government authorities.
Subscription and Support Revenue
We recognize the aggregate minimum subscription and support fees ratably on a straight-line basis over the subscription term, provided that an enforceable contract has been signed by both parties, access to our SaaS solutions has been granted to the customer, the fee for the subscription and support is fixed or determinable, and collection is reasonably assured.
Professional Services Revenue
We recognize revenue for our professional services contracts when the services are performed.
Multiple Deliverable Arrangements
For arrangements with multiple deliverables, we evaluate whether the individual deliverables qualify as separate units of accounting. In order to treat deliverables in a multiple deliverable arrangement as separate units of accounting, the deliverables must have standalone value upon delivery. For deliverables that have standalone value upon delivery, we account for each deliverable separately and recognize revenue for the respective deliverables as they are delivered.
Subscription contracts have standalone value as we sell the subscriptions separately. In determining whether professional services can be accounted for separately from subscription services, we consider the availability of the professional services from other vendors, the nature of our professional services and whether we sell our applications to new customers without professional services. In the years ended December 31, 2017, 2016 and 2015, we determined that we had established standalone value for our professional services. This determination was made due primarily to the ability of the customer to complete these tasks without assistance and the sale of services separate from the initial subscription order. Because we established standalone value for our professional services in the years ended December 31, 2017, 2016 and 2015, such service arrangements are being accounted for separately from subscription services.
When multiple deliverables included in an arrangement are separable into different units of accounting, the arrangement consideration is allocated to the identified separate units of accounting based
Subscription and Support Revenue
We recognize subscription and support revenue on theira ratable basis over the contract term beginning on the date that our service is made available to the customer. Our subscription contracts are generally twelve to 36 months in duration, are billed either annually or in advance and are non-cancelable. We consider the access to our platform and related support services in a customer contract to be a series of distinct services which comprise a single performance obligation because they are substantially the same and have the same pattern of transfer.
Professional Services Revenue and Customer Options
Professional services revenues primarily consist of fees for document set up, XBRL tagging, and consulting with our customers on business processes and best practices. We have determined that an agreement to purchase these professional services constitutes an option to purchase services in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 606, Revenue from Contracts with Customers, (ASC 606) rather than an agreement that creates enforceable rights and obligations because of the customer's contractual right to cancel services that have not yet been used. In the limited case of agreements where we determined that the option provides the customer with a material right, we allocate a portion of the transaction price to the material right based upon the relative standalone selling price. Professional service agreements that do not contain a material right are accounted for when the customer exercises its option to purchase additional services. Revenue is recognized for document set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services are recognized as the services are performed.
Contracts with Multiple deliverable arrangements accounting guidance provides a hierarchy to use when determiningPerformance Obligations
Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for the relative selling price for each unit of accounting. Vendor-specific objective evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a standalone basis, should be usedindividual performance obligations separately if it exists. If VSOE of sellingthey are distinct. The transaction price is not available, third-party evidence (TPE) of selling price is used to establish the selling price if it exists. VSOE and TPE do not currently exist for any of our deliverables. Accordingly, for arrangements with multiple deliverables that can be separated into different units of accounting, we allocate the arrangement feeallocated to the separate units of accounting basedperformance obligations on our best estimate ofa relative standalone selling price. The amount of arrangement fee allocated is limited by contingent revenue, if any.
price basis. We determine our best estimate ofthe standalone selling price for our deliverablesprices based on our overall pricing objectives, taking into consideration market conditions and entity-specific factors. We evaluate our best estimate of selling price by reviewing historical data related to sales of our deliverables, including comparing the percentages of our contract prices to our list prices. We also may consider several other data points in our evaluation,factors, including the sizevalue of our arrangements, length of term, the cloud applications sold, customer demographics and the numbers and types of users within our arrangements.
Deferred Revenue
We typically invoice our customers for subscription and support fees annually in advance on one- to three-year contract terms. For contracts with a quarterly, annual, two-two or three-year basis, with payment due atthree year term, customers sometimes elect to pay the start of theentire multi-year subscription term.term in advance. Unpaid invoice amounts for non-cancelable services starting in future periods are excluded fromincluded in accounts receivable and deferred revenue. Invoiced amounts are reflected as accounts receivable once we have initiated services with an offset to deferred revenue or revenue depending on whether the revenue recognition criteria have been met. Deferred revenue also includes certain deferred professional service fees that are recognized upon completion of the service. The portion of deferred revenue that we anticipate will be recognized after the succeeding twelve-month period is recorded as non-current deferred revenue, and the remaining portion is recorded as current deferred revenue.
Customer Deposits
As an agreement to purchase professional services constitutes a customer option, fees received in advance of these services being performed are considered customer deposits and are included in accrued expenses and other current liabilities on the consolidated balance sheets. Unpaid invoice amounts for these professional services starting in future periods are excluded from accounts receivable and accrued expenses and other current liabilities.
Cost of Revenue
Cost of revenue consists primarily of personnel and related costs directly associated with the professional services and customer success teams and training personnel, including salaries, benefits, bonuses, and stock-based compensation; the costs of contracted third-party vendors; the costs of server usage by our customers; information technology costs; and facility costs.
Sales and Marketing Expenses and Deferred Commissions
Sales and marketing expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, commissions, travel, and stock-based compensation. Other costs included in this expense are marketing and promotional events, our annual user conference, online marketing, product marketing, information technology costs, and facility costs. We amortize sales commissions that are directly attributable to a contract over the lesser of 12 months or the non-cancelable term of the customer contract based on the terms of our commission arrangements.
Advertising costs are charged to sales and marketing expense as incurred. Advertising expense totaled $2.7$5.6 million, $2.7$3.8 million and $2.8$3.4 million for the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively.
Research and Development Expenses
Research and development expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, and stock-based compensation, costs of server usage by our developers, information technology costs, and facility costs.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and related costs for our executive, finance, legal, human resources, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation; legal, accounting, and other professional service fees; other corporate expenses; information technology costs; and facility costs.
Leases
We categorizedetermine whether an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities on our consolidated balance sheets. Finance leases are included in property and equipment, net, finance lease obligations, and finance lease obligations, non-current on our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at their inception as either operatingthe commencement date. Our variable lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We do not include options to extend or capital leases and may receive renewal or expansion options, rent holidays, and leasehold improvement and other incentives onterminate the lease term unless it is reasonably certain lease agreements.that we will exercise any such options. We recognize rent expense under our operating leases on a straight-line basis. For finance leases, we record interest expense on the lease costsliability in addition to amortizing the right-of-use asset (generally straight-line) over the shorter of the lease term or the useful life of the right-of-use asset.
We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We do not recognize right-of-use assets or lease liabilities for short-term leases, which have a lease term of twelve months or less, and instead will recognize lease payments as expense on a straight-line basis taking into account adjustments for free or escalating rental payments, renewals at our option that are reasonably assured and deferred payment terms. Additionally, lease incentives are accounted for as a reduction of lease costs over the termlease term.
Acquisitions
When we acquire a business, the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the agreement. Leasehold improvements are capitalized at costacquisition date. During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of assets acquired and amortized overliabilities assumed may be recorded, with the shorter of their useful life orcorresponding offset to goodwill. Upon the termconclusion of the lease.
Government Grants
Government grants receivedmeasurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statement of operations.
Goodwill
Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. Goodwill is tested for impairment at the reporting unit level on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We perform our annual goodwill impairment test as of October 1. For the year ended December 31, 2021, we determined there were no events or circumstances which indicated that the carrying value of a liability onreporting unit exceeded the balance sheet until all contingencies are resolved and the grant is determined to be realized. fair value.
Intangible Assets
We account for intangible assets under Accounting Standards Codification (ASC) 350, Goodwill and Other. Intangible assets consist of legal fees incurred for patents and intangible assets acquired in a business combination or asset acquisition, primarily technology, customer-related assets, and trade names. Patents are recorded at cost to obtain and amortized over the useful lives of the assets of ten years, using the straight-line method.lives. Certain patents are in the legal application process and therefore are not currently being amortized.
Accumulated amortizationIntangible assets acquired in a business combination or an asset acquisition are recorded at fair value on the date of patents as of December 31, 2017acquisition and 2016 was approximately $218,000 and $127,000, respectively. Future amortization expense for legally approved patents isamortized over their estimated at $94,000 per year through 2022 and approximately $211,000 thereafter.useful lives.
Impairment of Long-Lived Assets
Long-lived assets, such as property, equipment, and softwareright-of-use assets, and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. If circumstances require that a long-lived asset or asset group be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. There were no impairment losses related to long-lived assets in any of the periods presented.
Stock-Based Compensation
We measure all share-based payments, including grants of options to purchase common stock and the issuance of restricted stock or restricted stock units to employees, service providers and board members, using a fair-value based method. We record forfeitures as they occur. The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statement of operations based on the estimated fair value of those awards on the grant date or reporting date, if required to be remeasured, and amortized on a straight-line basis over the requisite service period. We use the Black-Scholes option-pricing model to determine the fair values of stock option awards.shares to be issued pursuant to our Employee Stock Purchase Plan (“ESPP”). For restricted stock and restricted stock units, fair value is based on the closing price of our common stock on the grant date.
Income Taxes
We record current income taxes based on our estimates of current taxable income and provide for deferred income taxes to reflect estimated future income tax payments and receipts. We are subject to U.S. federal income taxes as well as state taxes. In addition, we are subject to taxes in the foreign jurisdictions where we operate.
We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment rate.
On December 22, 2017, the U.S. federal government enacted legislation commonly referred to as the “Tax Cuts and Jobs Act” (the “TCJA”). The TCJA makes widespread changes to the Internal Revenue Code, including, among other items, the introduction of a new international "Global Intangible Low-Taxed Income" ("GILTI") regime effective January 1, 2018. Companies may adopt one of two views in regards to establishing deferred taxes in accordance with the new ("GILTI") regime under ASC 740. Companies mayWe account for the effects of GILTI either (1)Global Intangible Low-Taxed Income in the period the entity becomes subject to GILTI, or (2) establish deferred taxes (similar to the guidance that currently exists with respect to basis differences that will reverse under current Subpart F rules) for basis differences that upon reversal will be subject to GILTI. We have elected to account for GILTI in the period we become subject to GILTI.incurred.
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
We record uncertain tax positions in accordance with ASC 740, Income Taxes,, on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
We recognize interest and penalties related to unrecognized tax benefits on the (benefit) provision for income tax expensetaxes line in the accompanying consolidated statementstatements of operations. Interest and penalties were not significant during the years ended December 31, 2021, 2020 and 2019. Accrued interest and penalties are included on the related tax liabilityaccrued expenses and other current liabilities line in the consolidated balance sheet. sheets.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts. We regularly review our receivables that remain outstanding past their applicable payment terms and established an allowance for potential write-offs by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and current and forecasted economic conditions that may affect a customer’s ability to pay. Accounts receivable deemed uncollectible are charged against the allowance once collection efforts have been exhausted.
Recently Adopted Accounting Pronouncements
In March 2016,December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing intraperiod allocation, and calculating income taxes in interim periods. Further, ASU 2016-09, Stock Compensation (Topic 718): Improvements2019-12 adds guidance to Employee Share-Based Payment Accounting. Under this ASU, entities are permittedreduce complexity in certain areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to make an accounting policy election either to estimate forfeitures on share-based payment awards, as required by current guidance, or to recognize forfeitures as they occur in addition to other changes.members of a consolidated group. The guidancestandard became effective for interim and annual periods beginning after December 15, 2016. We adopted this standard effective January 1, 2017. We elected to recognize forfeitures on share-based payment awards as they occur. The2020, with early adoption along with the remaining provisions of ASU 2016-09, did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual reporting period. The new standard must be adopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption.permitted. Effective January 1, 2017,2021, we adopted this standard. The adoption of this new guidancestandard did not have a material impact on our consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
In May 2014,October 2021, the FASB issued guidance codifiedASU 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 Recognition - Revenue from Contracts with Customers (ASU 2014-09), which amends the guidance in former ASC 605, Revenue Recognition. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has issued several amendments and updates to the new revenue standard, including guidance related to when an entity should recognize revenue gross as a principal or net as an agent and how an entity should identify performance obligations. As amended, ASU 2014-09This update is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2017. Early adoption is permitted for all entities only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.
2022. We adopted this guidance as of January 1, 2018, utilizing the modified retrospective transition method only with respect to contracts that were not completed as of January 1, 2018. This transition adjustment will be recorded as a one-time decrease to the opening balance of our accumulated deficit as of January 1, 2018 and will be comprised of the following revenue and cost items.
The adoption of ASC 606 will require us to recognize revenue from certain of our professional services over time rather than upon completion of the services. We expect this change will result in some acceleration of revenue recognition.
We have determined that an agreement to purchase our professional services constitutes an option to purchase services in accordance with ASC 606-10-55-41 rather than an agreement that creates enforceable rights and obligations because of the customer’s contractual right to cancel the unused services. We have determined that certain of our professional service agreements do not contain a material right and are only accounted for in accordance with ASC 606 when the customer exercises its option to purchase additional goods or services. In the case of agreements where we have determined that the option provides the customer with a material right, we will be required to allocate a portion of the transaction price to the material right. The treatment of customer options under ASC 606 may result in a different allocation of the transaction price than under current guidance.
In addition, under current guidance, the amount that is allocated to, and recognized as revenue related to, a delivered service is limited to the amount that is not contingent on completion of the remaining performance obligations. We expect the removal of this limitation on contingent revenue under ASC 606 to result in revenue being recognized earlier for certain contracts.
In addition, ASU 2014-09 requires that all incremental costs of obtaining a contract with a customer be recognized as an asset. The guidance also requires that these costs be deferred over a term that is consistent with the transfer of services related to the asset. Based on our preliminary analysis, we believe this term will be approximately three years compared to one year or less under current guidance. We elected to apply this guidance to the incremental costs related to open contracts as of January 1, 2018. We expect to record a $5.3 million adjustment to the opening balance of our accumulated deficit to capitalize additional costs of obtaining a contract as of January 1, 2018.
Under ASC 606, in addition to recording deferred revenue when the related cash payments are received for noncancellable services, we will record deferred revenue when payments are due in advance of our performance of those services. We expect this change will result in an offsetting increase in accounts receivable and deferred revenue.
In the fourth quarter of 2017, we substantially completed our project plan to apply the necessary changes to accounting processes, procedures, systems and internal controls, and we plan to finalize our transition adjustment under ASU 2014-09 in the first quarter of 2018.
In February 2016, the FASB issued guidance codified in ASC 842, Leases, which supersedes the guidance in former ASC 840, Leases, to increase transparency and comparability among organizations by requiring recognition of lease assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. We planintend to adopt this guidancestandard on the effective date. We are currently evaluating the impact the provisions will have on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that companies include amounts generally described as restricted cashJanuary 1, 2022 and restricted cash equivalents, along with cash and cash equivalents, when reconcilingdo not expect the beginning-of-period and end-of-period amounts shown on the statement of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those annual periods. We are adopting this guidance as of the effective date. The adoption of this guidance is not expectedupdate to have a material impact on our consolidated financial statements.
In May 2017,August 2020, the FASB issued ASU 2017-09, Compensation –2020-06, Stock Compensation (Topic 718): Scope of Modification Accounting for Convertible Instruments and Contracts in an Entity's Own Equit.y. 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 under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This ASU clarifies whenwill also result in the interest expense recognized for convertible debt instruments to account for a changebe closer to the terms or conditions of a share-based payment award as a modification. Under thecoupon interest rate. The new guidance modification accounting is required only ifalso requires the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.if-converted method to be applied for all convertible instruments when calculating earnings per share. The ASUnew standard is effective for interim and annual reporting periods beginning after December 15, 20172021 and interim periods within those annual periods. Early adoption is permitted. can be adopted on either a modified retrospective or full retrospective basis.
We are adoptingwill adopt this guidance asstandard on January 1, 2022 using the modified retrospective method. Adoption of the effective date. The implementation of thisnew standard is not expected to haveresult in a significant impactdecrease to accumulated deficit of approximately $18 million, a decrease to additional paid-in capital of approximately $58 million, and an increase to convertible senior notes, current of approximately $40 million on ourthe consolidated financial statements.
balance sheet.
2. Cash Equivalents and Marketable Securities
At December 31, 2017,2021, cash equivalents and marketable securities consisted of the following (in thousands):
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| | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value |
U.S. treasury debt securities | | $ | 3,083 | | $ | — | | $ | (8) | | $ | 3,075 |
U.S. corporate debt securities | | 13,350 | | — | | (61) | | 13,289 |
Money market funds | | 49,452 | | — | | — | | 49,452 |
| | $ | 65,885 | | $ | — | | $ | (69) | | $ | 65,816 |
Included in cash and cash equivalents | | $ | 49,452 | | $ | — | | $ | — | | $ | 49,452 |
Included in marketable securities | | $ | 16,433 | | $ | — | | $ | (69) | | $ | 16,364 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value |
Money market funds | | $ | 259,754 | | | $ | — | | | $ | — | | | $ | 259,754 | |
Commercial paper | | 10,479 | | | — | | | — | | | 10,479 | |
U.S. treasury debt securities | | 54,809 | | | 2 | | | (206) | | | 54,605 | |
Corporate debt securities | | 161,792 | | | 3 | | | (334) | | | 161,461 | |
Foreign government debt securities | | 5,014 | | | 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 | |
At December 31, 2016,2020, cash equivalents and marketable securities consisted of the following (in thousands):
| | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value | | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value |
Money market funds | | Money market funds | | $ | 265,578 | | | $ | — | | | $ | — | | | $ | 265,578 | |
Commercial paper | | Commercial paper | | 21,489 | | | — | | | — | | | 21,489 | |
U.S. treasury debt securities | U.S. treasury debt securities | | $ | 3,503 | | $ | — | | $ | (5) | | $ | 3,498 | U.S. treasury debt securities | | 51,731 | | | 80 | | | (2) | | | 51,809 | |
U.S. corporate debt securities | | 7,943 | | 1 | | (7) | | 7,937 | |
Money market funds | | 43,496 | | — | | — | | 43,496 | |
Corporate debt securities | | Corporate debt securities | | 147,715 | | | 214 | | | (47) | | | 147,882 | |
Foreign government debt securities | | Foreign government debt securities | | 1,025 | | | 2 | | | — | | | 1,027 | |
| | $ | 54,942 | | $ | 1 | | $ | (12) | | $ | 54,931 | | $ | 487,538 | | | $ | 296 | | | $ | (49) | | | $ | 487,785 | |
Included in cash and cash equivalents | Included in cash and cash equivalents | | $ | 43,496 | | $ | — | | $ | — | | $ | 43,496 | Included in cash and cash equivalents | | $ | 280,578 | | | $ | — | | | $ | — | | | $ | 280,578 | |
Included in marketable securities | Included in marketable securities | | $ | 11,446 | | $ | 1 | | $ | (12) | | $ | 11,435 | Included in marketable securities | | $ | 206,960 | | | $ | 296 | | | $ | (49) | | | $ | 207,207 | |
The contractual maturities of the investments classified as marketable securities are as follows (in thousands):
| | | | | |
| As of December 31, 2021 |
Due within one year | $ | 138,637 | |
Due in one to two years | 91,423 | |
Due in three to five years | — | |
| $ | 230,060 | |
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 December 31, 2017,2021, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2021 |
| | Less than 12 months | | 12 months or greater |
| | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss |
U.S. treasury debt securities | | $ | 46,553 | | | $ | (206) | | | $ | — | | | $ | — | |
Corporate debt securities | | 156,588 | | | (334) | | | — | | | — | |
Total | | $ | 203,141 | | | $ | (540) | | | $ | — | | | $ | — | |
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| | As of December 31, 2017 |
| | Less than 12 months | | 12 months or greater |
| | Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss |
U.S. treasury debt securities | | $ | 1,976 | | $ | (7) | | $ | 1,099 | | $ | (1) |
U.S. corporate debt securities | | 13,289 | | (61) | | — | | — |
Total | | $ | 15,265 | | $ | (68) | | $ | 1,099 | | $ | (1) |
We do not believe any of the unrealized losses represented an other-than-temporary impairmentrepresent credit losses based on our evaluation of available evidence which includes our intent as of December 31, 20172021, which includes an assessment of whether it is more likely than not we will be required to hold these investments untilsell the investment before recovery of the investment’s amortized cost basis is recovered. basis.
3. Supplemental Consolidated Balance Sheet and Statement of Operations Information
Property and Equipment, net
Property and equipment, net as of December 31, 20172021 and 20162020 consisted of (in thousands):
| | | As of December 31, | | As of December 31, |
| | 2017 | | 2016 | | 2021 | | 2020 |
Buildings | $ | 36,608 | | $ | 36,603 | |
Building under finance lease | | Building under finance lease | $ | 21,574 | | | $ | 21,574 | |
Computers, equipment and software | Computers, equipment and software | 6,277 | | 5,954 | Computers, equipment and software | 10,495 | | | 7,995 | |
Furniture and fixtures | Furniture and fixtures | 8,428 | | 8,283 | Furniture and fixtures | 8,373 | | | 8,284 | |
Vehicles | Vehicles | 97 | | 97 | Vehicles | 97 | | | 97 | |
Leasehold improvements | Leasehold improvements | 4,669 | | 4,682 | Leasehold improvements | 7,907 | | | 7,755 | |
Construction in process | | Construction in process | 361 | | | 93 | |
| | 56,079 | | 55,619 | | 48,807 | | | 45,798 | |
Less: accumulated depreciation and amortization | Less: accumulated depreciation and amortization | (15,635) | | (13,029) | Less: accumulated depreciation and amortization | (19,986) | | | (16,433) | |
| | $ | 40,444 | | $ | 42,590 | | $ | 28,821 | | | $ | 29,365 | |
The following assets included in propertyAccumulated amortization related to finance leases was $2.7 million and equipment, net were acquired under capital$1.8 million as of December 31, 2021 and financing leases (see Note 5) (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2017 | | 2016 |
Buildings | $ | 36,608 | | $ | 36,603 |
Computers and equipment | 666 | | 1,747 |
| 37,274 | | 38,350 |
Less: accumulated amortization | (5,891) | | (5,134) |
| $ | 31,383 | | $ | 33,216 |
2020, respectively.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of December 31, 20172021 and 20162020 consisted of (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2017 | | 2016 |
Accrued vacation | $ | 6,087 | | $ | 4,368 |
Accrued commissions | 3,297 | | 2,382 |
Accrued bonuses | 4,419 | | 8,927 |
Estimated health insurance claims | 1,090 | | 1,210 |
ESPP employee contributions | 1,419 | | — |
Accrued other liabilities | 3,900 | | 3,808 |
| $ | 20,212 | | $ | 20,695 |
Other Income, net
Other income, net for the years ended December 31, 2017, 2016 and 2015 consisted of (in thousands):
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2017 | | 2016 | | 2015 |
Interest income | $ | 586 | | $ | 286 | | $ | 151 |
Recognition of IEDA government grant | — | | — | | 1,638 |
Income from training reimbursement program | 1,578 | | 1,141 | | 744 |
(Losses) gains on foreign currency transactions | (372) | | 67 | | (293) |
Other | (9) | | 6 | | 62 |
| $ | 1,783 | | $ | 1,500 | | $ | 2,302 |
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
Accrued vacation | $ | 11,221 | | | $ | 10,294 | |
Accrued commissions | 11,122 | | | 12,678 | |
Accrued bonuses | 8,292 | | | 6,573 | |
Accrued payroll | 4,494 | | | 2,631 | |
Estimated health insurance claims | 1,814 | | | 1,224 | |
Accrued interest | 1,455 | | | 1,455 | |
ESPP employee contributions | 5,349 | | | 4,269 | |
Customer deposits | 26,517 | | | 18,283 | |
Operating lease liabilities | 6,008 | | | 4,541 | |
Accrued other liabilities | 7,854 | | | 6,308 | |
| $ | 84,126 | | | $ | 68,256 | |
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.
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 December 31, 20172021 and 2016,2020, 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.2. 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 December 31, 2017 | | Fair Value Measurements as of December 31, 2016 | | Fair Value Measurements as of December 31, 2021 | | Fair Value Measurements as of December 31, 2020 |
Description | Description | | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 | Description | | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
Money market funds | Money market funds | | $ | 49,452 | | $ | 49,452 | | $ | — | | $ | 43,496 | | $ | 43,496 | | $ | — | Money market funds | | $ | 259,754 | | | $ | 259,754 | | | $ | — | | | $ | 265,578 | | | $ | 265,578 | | | $ | — | |
Commercial paper | | Commercial paper | | 10,479 | | | — | | | 10,479 | | | 21,489 | | | — | | | 21,489 | |
U.S. treasury debt securities | U.S. treasury debt securities | | 3,075 | | — | | 3,075 | | 3,498 | | — | | 3,498 | U.S. treasury debt securities | | 54,605 | | | — | | | 54,605 | | | 51,809 | | | — | | | 51,809 | |
U.S. corporate debt securities | | 13,289 | | — | | 13,289 | | 7,937 | | — | | 7,937 | |
Corporate debt securities | | Corporate debt securities | | 161,461 | | | — | | | 161,461 | | | 147,882 | | | — | | | 147,882 | |
Foreign government debt securities | | Foreign government debt securities | | 5,015 | | | — | | | 5,015 | | | 1,027 | | | — | | | 1,027 | |
| | $ | 65,816 | | $ | 49,452 | | $ | 16,364 | | $ | 54,931 | | $ | 43,496 | | $ | 11,435 | | $ | 491,314 | | | $ | 259,754 | | | $ | 231,560 | | | $ | 487,785 | | | $ | 265,578 | | | $ | 222,207 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Included in cash and cash equivalents | Included in cash and cash equivalents | | $ | 49,452 | | $ | 43,496 | | Included in cash and cash equivalents | | $ | 261,254 | | | $ | 280,578 | | |
Included in marketable securities | Included in marketable securities | | $ | 16,364 | | $ | 11,435 | | Included in marketable securities | | $ | 230,060 | | | $ | 207,207 | | |
We completed acquisitions during the year ended December 31, 2021. The values of the net assets acquired and any resulting goodwill were recorded at fair value using Level 3 inputs. The majority of the related current assets acquired and liabilities assumed were recorded at their carrying values as of the date of acquisition, as their carrying values approximated their fair values due to their short-term nature. The fair values of goodwill and definite-lived intangible assets acquired in the acquisition was externally estimated primarily based on the income approach. The income approach estimates fair value
based on the present value of the cash flows that the assets are expected to generate in the future. We developed internal estimates for the expected cash flows and discount rates used in the present value calculations.
Convertible Senior Notes
As of December 31, 2021, the fair value of our convertible senior notes was $614.7 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 8 to the consolidated financial statements for more information.
5. CommitmentsDeferred Costs
Deferred costs, which primarily consist of costs to obtain contracts with customers, were $64.2 million and Contingencies
Lease Commitments
We lease certain office and residential space under non-cancelable operating leases with various lease terms through June 2043. Rent expense$45.3 million for the years ended December 31, 2017, 20162021 and 20152020, respectively. Amortization expense for the deferred costs was $4.7 million, $3.9$34.1 million and $3.7$21.0 million respectively.
In January 2018, we signed a new lease for approximately 30,000 square feet that will replace our existing offices in Denver and Boulder. The aggregate annual payments under the new lease will be approximately $1.0 million and are subject to annual increases over the lease term, which expires in February 2029.
We lease computer equipment under capital lease agreements that expire through September 2018. The total amount financed under these capital leases was $0.5 million during the year ended December 31, 2015. No new assets were financed under capital leases during the years ended December 31, 20172021 and 2016.
Build2020, respectively. There were no material impairment losses in relation to Suit
We entered into a lease agreement for land and an office building in Ames, Iowa, which was constructed in two phases. As part of the lease agreement, the landlord was responsible for constructing the building in accordance with our specifications and agreed to fund $11.8 millioncosts capitalized for the first phase and $11.1 million for the second phase of construction. We were the developer of the project and responsible for construction costs in excess of these amounts. As a result of this involvement, we were deemed the “owner” for accounting purposes during the construction period and were required to capitalize the construction costs associated with the office building. Upon completion of each phase of the project, we performed a sale-leaseback analysis pursuant to ASC 840, Leases, to determine if the building could be removed from the balance sheet. We determined there was continuing involvement, which precluded derecognition of the building. The construction liability of $11.8 million was reclassified to a financing obligation, and $17.1 million of costs capitalized during construction was placed in service during June 2013 for the initial phase. Upon completion of the second phase of the project, the construction liability of $11.1 million was reclassified to a financing obligation, and $19.9 million of costs capitalized during construction was placed in service during 2014.periods presented.
6. Commitments and Contingencies Total cash payments due under the arrangement were allocated on a relative fair value basis between rent related to the land lease and debt service payments related to the financing obligation. The portion of the lease payments allocated to the land is expensed on a straight-line basis over the term of the lease from the point we took possession of the land and including renewal periods where renewal was deemed reasonably assured at the inception of the lease. The lease contains purchase options to acquire the landlord’s interest in the land lease and building at any time beginning three years from the commencement date of the lease. In addition, the lease requires us upon certain events, such as a change in control, to purchase the building from the landlord. The purchase options were deemed to be fair value at the inception of the lease.
As of December 31, 2017, future estimated minimum lease payments under non-cancelable operating, capital and financing leases were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Operating Leases | | Capital Leases | | Financing Obligations |
2018 | | $ | 3,659 | | $ | 66 | | $ | 2,792 |
2019 | | 2,630 | | — | | 2,792 |
2020 | | 2,235 | | — | | 2,792 |
2021 | | 2,187 | | — | | 2,792 |
2022 | | 1,887 | | — | | 2,564 |
Thereafter | | 6,246 | | — | | 25,650 |
Total minimum lease payments | | $ | 18,844 | | 66 | | 39,382 |
Less: Amount representing interest | | | | (2) | | (19,853) |
Present value of capital lease and financing obligations | | | | $ | 64 | | $ | 19,529 |
Government Grants
Since 2009, we have participated in a program with a local area community college, enlisted by the state of Iowa, that provides reimbursement of training dollars spent on employees hired in Iowa. The community college funds training through the sale of certificates for the amount of anticipated training expenses to be incurred and an estimate of the costs to administer the program. At each payroll date, the state allows us to divert a specified portion of employee state income tax withholdings for the qualified employees to the community college. The community college uses the funds to pay for the program and principal and interest on the certificates. In the event that the funds generated from withholding taxes are insufficient to pay the principal and interest on the certificates, we would be liable for any shortfall. To date, we have entered into five agreements under this program. In addition, we have been reimbursed for training costs incurred for a total of 410 employees.
During the years ended December 31, 2017, 2016 and 2015, we were reimbursed $52,000, $83,000 and $0, respectively. We have concluded that the realization of these amounts is contingent on continuing employment levels. Therefore, in accordance with ASC 450, the amounts received are recorded on the balance sheet as a liability until all contingencies have been resolved. We release the liability to “Other income, net” on our statement of operations once the amounts diverted and paid to the community college have reduced the total principal and interest due on the certificates to a level below the amounts reimbursed to date. The amount recognized in other income is measured as the excess of the reimbursements received as of each balance sheet date over the total principal and interest due on the certificates, net of amounts diverted. To the extent we have not diverted amounts sufficient to reduce the principal and interest on the certificates to a level below the reimbursements received for each of the programs, there is no benefit recorded in the statement of operations.
During the years ended December 31, 2017, 2016 and 2015, the total benefit recorded on the statement of operations was $1.6 million, $1.0 million and $744,000, respectively. At December 31, 2017 and 2016, there was $261,000 and $1.8 million included in “Deferred government grant obligation” on the consolidated balance sheet, respectively. The deferred liability is classified as current or non-current based on the estimated timing of when the amounts will be recorded as income. At December 31, 2017 and 2016, there was $217,000 and $1.0 million classified as a current liability, respectively.
In February 2011, we received financing from the Iowa Economic Development Authority (IEDA) that provided for a grant in the form of a forgivable loan totaling $2.3 million. In December 2015, after completing the project close out procedures, IEDA determined that 10 of the 251 positions originally hired under this grant did not meet minimum wage requirements resulting in a repayment of $88,000. The remaining balance under the forgivable loan portion of this government grant of $2.2 million was recognized during the fourth quarter of 2015, with $608,000 recorded as a reduction of our property and equipment and $1.6 million included in “Other income, net” on the consolidated statement of operations. At December 31, 2017 and 2016, there were no amounts outstanding related to the forgivable loan included in “Deferred government grant obligation” on the consolidated balance sheet.
Other Purchase Commitments
In November 2017, we enteredWe enter into an agreementcertain non-cancelable agreements with a third party providerthird-party providers for our use of cloud services and cloud infrastructure services for a periodin the ordinary course of two years beginning December 1, 2017. The agreement provides thatbusiness. Under these agreements, we are committed to pay $4.1purchase $13.7 million in fiscal year 2022, $13.5 million in fiscal year 2023, and $4.8$11.1 million during the years ended December 31, 2018 and 2019, respectively.in fiscal year 2024.
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. Leases
6. Debt
Other Long-Term Debt
In August 2014, we entered into a $15.0 million credit facilityWe lease certain office space, residential space, buildings and land with Silicon Valley Bank, which was subsequently amended.various lease terms through June 2043. Certain office leases include 1 or more options to renew, with renewal terms that can extend the lease term from 1 to 5 years. The credit facility can be usedexercise of lease renewal options is at our sole discretion and are assessed whether to fund working capital and general business requirements and matures in August 2018. The credit facility is secured by allfactor as part of our assets, has first priority over our other debt obligations, and requiresthe lease term at lease inception. Our leases generally require us to maintain certain financial covenants, includingpay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs in addition to a base or fixed rent.
The components of lease expense recognized in the maintenanceconsolidated statements of at least $5.0 million of cash on hand or unused borrowing capacity. The credit facility contains certain restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens, experience changes in management and enter into new businesses. The credit facility has a variable interest rate equal to the bank’s prime lending rate with interest payable monthly and the principal balance due at maturity. The credit facility’s interest rate was 4.5% at December 31, 2017. We recorded no interest expense for the years ended December 31, 2017, 2016 and 2015 related to such debt agreement. No amountsoperations were outstanding under the credit facility as of December 31, 2017 and 2016.
follows (in thousands):
7. | | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Operating lease cost | $ | 4,750 | | | $ | 4,475 | | | $ | 3,544 | |
Finance lease cost: | | | | | |
Amortization of right-of-use assets | 880 | | | 922 | | | 926 | |
Interest on lease obligations | 956 | | | 1,197 | | | 1,306 | |
Short-term lease cost | 1,667 | | | 1,727 | | | 1,324 | |
Variable lease cost | 1,163 | | | 1,214 | | | 923 | |
| $ | 9,416 | | | $ | 9,535 | | | $ | 8,023 | |
Supplemental cash flow information related to leases was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
Operating cash flows from operating leases | $ | 6,028 | | | $ | 5,350 | | | $ | 4,018 | |
Finance cash flows from finance leases | 1,705 | | | 1,641 | | | 1,565 | |
Right-of-use assets obtained in exchange for lease obligations: | | | | | |
Operating leases | $ | 6,299 | | | $ | 4,121 | | | $ | 2,207 | |
Finance leases | — | | | — | | | — | |
Other supplemental information related to leases was as follows:
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
Weighted Average Remaining Lease Term (in years) | | | | | |
Operating leases | 5.7 | | 6.5 | | 7.6 |
Finance leases | 21.4 | | 22.4 | | 23.4 |
Weighted Average Discount Rate | | | | | |
Operating leases | 4.9 | % | | 5.5 | % | | 5.7 | % |
Finance leases | 5.5 | % | | 5.5 | % | | 6.0 | % |
As of December 31, 2021, the aggregate annual lease obligations were as follows (in thousands):
| | | | | | | | | | | |
| Operating Leases | | Finance Leases |
2022 | $ | 6,946 | | | $ | 2,436 | |
2023 | 5,561 | | | 1,315 | |
2024 | 4,247 | | | 1,315 | |
2025 | 2,572 | | | 1,315 | |
2026 | 1,536 | | | 1,315 | |
Thereafter | 5,439 | | | 18,661 | |
Total lease obligations | 26,301 | | | 26,357 | |
Less: Amount representing interest | (3,885) | | | (9,695) | |
Net lease obligations | $ | 22,416 | | | $ | 16,662 | |
8. Debt
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.
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 5 consecutive business day period immediately following any 10 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.
If we undergo a fundamental change (as defined in the indenture), holders may require us to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date or if we deliver a notice of redemption, we will increase, in certain circumstances, the conversion rate for a holder who elects to convert its Notes in connection with such corporate event or notice of redemption, as the case may be.
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.
In accounting for the issuance of the Notes, we separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar debt instruments that do not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability components from the par value of the Notes. The difference represents the debt discount that is amortized to interest expense at an effective interest rate of 4.3% over the term of the Notes. The carrying amount of the equity component was $60.1 million and is recorded in additional paid-in-capital. The equity component is not remeasured as long as it continues to meet the conditions for equity classification.
In accounting for the issuance costs related to the Notes, we allocated the total amount incurred to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component were $7.5 million. The issuance costs allocated to the liability component are amortized to interest expense under the effective interest rate method over the contractual term of the Notes. Issuance costs attributable to the equity component of the Notes were $1.6 million and are netted against the equity components representing the conversion option in additional paid-in capital.
During the third and fourth quarters of 2021 one of the conversion conditions was met and the Notes are convertible at the option of the holders through March 31, 2022. Specifically, the last reported sale price of our Class A common stock exceeded 130% of the conversion price of the Notes for more than 20 trading days during the 30 consecutive trading days ended September 30, 2021 and December 31, 2021. As a result, the Notes are classified as current liabilities on the condensed consolidated balance sheet as of December 31, 2021. As of December 31, 2021, and through the date of this filing, we have not received any conversion requests for the Notes.
As of December 31, 2021 the if-converted value of the Notes exceeded the principal amount by $216.6 million.
As of December 31, 2021, the remaining life of the Notes is approximately 4.8 years.
The net carrying amount of the liability and equity components of the Notes was as follows (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
Liability component: | | | |
Principal | $ | 345,000 | | | $ | 345,000 | |
Unamortized discount | (41,193) | | (49,346) |
Unamortized issuance costs | (5,146) | | | (6,164) | |
Net carrying amount | $ | 298,661 | | | $ | 289,490 | |
| | | |
Equity component, net of purchase discounts and issuance costs | $ | 58,560 | | | $ | 58,560 | |
Interest expense related to the Notes is as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Contractual interest expense | $ | 3,881 | | | $ | 3,880 | | | $ | 1,444 | |
Amortization of debt discount | 8,153 | | | 7,901 | | | 2,900 | |
Amortization of issuance costs | 1,018 | | | 988 | | | 362 | |
Total interest expense | $ | 13,052 | | | $ | 12,769 | | | $ | 4,706 | |
9. Stockholders’ Equity (Deficit)
We have two2 classes of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of our Class A common stock and our Class B common stock are identical, except with respect to voting and conversion. Each share of our Class A common stock is entitled to one1 vote per share and is not convertible into any other shares of our capital stock. Each share of our Class B common stock is entitled to ten10 votes per share and is convertible into one1 share of our Class A common stock at any time. Our Class B common stock also will automatically convert into shares of our Class A common stock upon certain transfers and other events.
8.10. 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 awards, restricted 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(“the 2009 Plan)Plan”). Immediately prior to our IPO, theThe 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(“the 2014 PlanPlan” and, together with the 2009 Plan, the Plans)“the Plans”).
As of December 31, 2017,2021, awards granted under the 2009 Plan consisted of stock options and awards granted under the 2014 Plan consisted of stock options restricted stock awards and restricted stock units. There were no other grants of any other award types under the Plans.
In June 2016, stockholders approved an amendment to the 2014 Plan that increased the number of shares available for grant by 3,900,000. As of December 31, 2017, 1,999,4152021, 1,180,086 shares of Class A common stock were available for grant under the 2014 Plan.
Our Employee Stock Purchase Plan (“ESPP”)ESPP became effective on June 13, 2017. Under the ESPP, eligible employees are granted options to purchase shares of Class A common stock at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. Options to purchase shares are granted twice yearly on or about July 15 and January 15 and are exercisable on or about the succeeding January 14 and July 14, respectively, of each year. As of December 31, 2017, 5,000,0002021, 4,296,514 shares of Class A common stock were available for issuance under the ESPP. No participant may purchase more than $12,500 worth of Class A common stock in a six-monthsix-month offering period. The ESPP’s initial offering period began in July 2017. As of December 31, 2017, we held employee contributions of approximately $1.4 million for future purchases under the ESPP included within accrued expenses and other current liabilities on the consolidated balance sheet. Accordingly, no shares of Class A common stock had been purchased or distributed pursuant to the ESPP as of December 31, 2017.
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):
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2017 | | 2016 | | 2015 |
Cost of revenue | | | | | |
Subscription and support | $ | 738 | | $ | 493 | | $ | 363 |
Professional services | 465 | | 411 | | 349 |
Operating expenses | | | | | |
Research and development | 2,224 | | 2,365 | | 1,924 |
Sales and marketing | 2,983 | | 2,075 | | 1,727 |
General and administrative | 13,066 | | 8,903 | | 6,637 |
Total | $ | 19,476 | | $ | 14,247 | | $ | 11,000 |
The fair value of each option grant and ESPP purchase right is estimated on the date of grant using the Black-Scholes option-pricing model. For stock options, expected volatility is based on the historical volatility of our Class A common stock and historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the options. For the ESPP purchase rights, expected volatility is based on the historical volatility of our Class A common stock. The expected term represents the period of time the options and the ESPP purchase rights are expected to be outstanding. For stock options, the expected term is based on the “simplified method” as defined by SEC Staff Accounting Bulletin No. 110 (Topic 14.D.2). We use the “simplified method” due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the options. The expected term for the ESPP purchase rights approximates the offering period. The risk-free interest rate is based on yields on U.S. Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) with a maturity similar to the estimated expected term of the options and ESPP purchase rights.
The fair value of our stock options and ESPP purchase rights was estimated assuming no expected dividends and the following weighted-average assumptions:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2017 | | 2016 | | 2015 |
Stock Options | | | | | |
Expected term (in years) | 0.2 - 6.1 | | 6.0 - 6.1 | | 6.1 |
Risk-free interest rate | 1.5% - 2.2% | | 1.2% - 2.1% | | 1.4% - 1.9% |
Expected volatility | 23.7% - 43.8% | | 43.0% - 45.3% | | 42.4% - 47.1% |
| | | | | |
ESPP | | | | | |
Expected term (in years) | 0.5 | | — | | — |
Risk-free interest rate | 1.2% | | | —% | | | —% | |
Expected volatility | 28.5% | | | —% | | | —% | |
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
Cost of revenue | | | | | |
Subscription and support | $ | 2,868 | | | $ | 1,709 | | | $ | 1,554 | |
Professional services | 1,729 | | | 1,434 | | | 1,725 | |
Operating expenses | | | | | |
Research and development | 9,590 | | | 8,100 | | | 8,006 | |
Sales and marketing | 13,901 | | | 11,062 | | | 8,792 | |
General and administrative | 20,545 | | | 23,466 | | | 15,707 | |
Total | $ | 48,633 | | | $ | 45,771 | | | $ | 35,784 | |
Stock Options
The following table summarizes the option activity under the Plans for the year ended December 31, 2017:2021:
| | | Options | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value |
| Options | | Weighted- Average Exercise Price | | Weighted- Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value |
| | | | | | | | (in thousands) | | | | | | | | (in thousands) |
Outstanding at December 31, 2016 | 7,532,455 | | $ | 12.22 | | 7.2 | | $ | 19,988 | |
Outstanding at December 31, 2020 | | Outstanding at December 31, 2020 | 2,903,167 | | | $ | 14.48 | | | 4.7 | | $ | 223,941 | |
Granted | Granted | 2,111,253 | | 16.10 | | Granted | — | | | — | | |
Forfeited | Forfeited | (339,111) | | 14.93 | | Forfeited | (6,895) | | | 19.29 | | |
Exercised | Exercised | (1,158,820) | | 10.77 | | Exercised | (1,141,092) | | | 14.55 | | |
Outstanding at December 31, 2017 | 8,145,777 | | $ | 13.33 | | 7.0 | | $ | 65,913 | |
Outstanding at December 31, 2021 | | Outstanding at December 31, 2021 | 1,755,180 | | | $ | 14.42 | | | 4.0 | | $ | 203,720 | |
| | | | | | | | |
Exercisable at December 31, 2017 | 4,607,812 | | $ | 11.49 | | 5.7 | | $ | 45,653 | |
Exercisable at December 31, 2021 | | Exercisable at December 31, 2021 | 1,755,180 | | | $ | 14.42 | | | 4.0 | | $ | 203,720 | |
Options to purchase Class A common stock generally vest over a three- or four-yearfour-year period and are generally granted for a term of ten years. The total intrinsic value of options exercised during the years ended December 31, 2017, 20162021, 2020 and 20152019 was $9.8$123.4 million, $3.9$55.8 million and $8.4$75.6 million, respectively.
The weighted-average grant-date fair value ofNo options were granted during the years ended December 31, 2017, 20162021, 2020 and 2015 was $6.79, $6.79 and $6.53, respectively.2019. The total fair value of options vested during the years ended December 31, 2017, 20162021, 2020 and 20152019 was approximately $10.2$0.9 million, $9.3$3.5 million and $8.7$5.8 million, respectively. TotalAs of December 31, 2021 there was no unrecognized compensation expense of $19.7 million related to options will be recognized over a weighted-average period of 2.5 years.options.
Restricted Stock AwardsUnits
We haveRestricted stock units granted restricted stock awards to our executive officers thatemployees generally vest inover a three- or four-year period in equal, annual installments from the date of grant andor with three-year cliff vesting. Restricted stock units granted to non-employee members of our Board of Directors with one-year cliff vesting from the date of grant. The recipient of an award of restricted stock under the Plan may vote and receive dividends on the shares of restricted stock covered by the award. The fair value for restricted stock awards is calculated based on the stock price on the date of grant. The total fair value of restricted stock awards vested during the years ended December 31, 2017, 2016, and 2015 was approximately $2.7 million, $3.3 million, and $750,000 respectively.
The following table summarizes the restricted stock award activity under the Plan for the year ended December 31, 2017:
| | | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
| | | |
Unvested at December 31, 2016 | 353,335 | | $ | 13.40 |
Granted | — | | — |
Forfeited | — | | — |
Vested | (190,003) | | 13.40 |
Unvested at December 31, 2017 | 163,332 | | $ | 13.40 |
Compensation expense associated with unvested restricted stock awards is recognized on a straight-line basis over the vesting period. At December 31, 2017, there was approximately $0.2 million of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 0.1 years.
Restricted Stock Units
Wegenerally have granted restricted stock units to our executive officers that vest in three equal annual installments from the date of grant and to non-employee members of our Board of Directors with one-yearone-year cliff vesting from the date of grant. The recipient of a restricted stock unit award under the 2014 Plan will have no rights as a stockholder until share certificates are issued by us, but, at the discretion of our Compensation Committee, has the right to receive a dividend equivalent payment in the form of additional restricted stock units. Additionally, until the shares are issued, they have no voting rights and may not be bought or sold. The fair value for restricted stock unit awards is calculated based on the stock price on the date of grant. The total fair value of restricted stock units vested during the year ended December 31, 2017 was approximately $3.6 million. No restricted stock units vested during the years ended December 31, 2016 or 2015.2021, 2020, and 2019 was approximately $54.9 million, $27.7 million, and $8.8 million, respectively.
The following table summarizes the restricted stock unit activity under the Plan for the year ended December 31, 2017:2021:
| | | Number of Shares | | Weighted-Average Grant Date Fair Value | | Number of Shares | | Weighted-Average Grant Date Fair Value |
| | | | | | | | |
Unvested at December 31, 2016 | 381,952 | | $ | 15.11 | |
Unvested at December 31, 2020 | | Unvested at December 31, 2020 | 2,904,616 | | | $ | 35.72 | |
Granted | Granted | 413,792 | | 13.95 | Granted | 916,634 | | | 109.64 | |
Forfeited | Forfeited | — | | — | Forfeited | (218,852) | | | 64.36 | |
Vested(1) | Vested(1) | (221,672) | | 14.48 | Vested(1) | (1,710,699) | | | 31.89 | |
Unvested at December 31, 2017 | 574,072 | | $ | 14.51 | |
Unvested at December 31, 2021 | | Unvested at December 31, 2021 | 1,891,699 | | | $ | 73.04 | |
(1) As ofDuring the year ended December 31, 2017,2021, in accordance with our Nonqualified Deferred Compensation Plan, recipients of 191,485402,832 shares had elected to defer settlement of the vested restricted stock units and 270,567 were released from deferral. This resulted in accordance with our Nonqualified Deferred Compensation Plan.total deferred units of 695,869 as of December 31, 2021.
Compensation expense associated with unvested restricted stock units is recognized on a straight-line basis over the vesting period. At December 31, 2017,2021, there was approximately $5.0$100.6 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 1.62.7 years.
Employee Stock Purchase Plan
The fair value of each option grant issued under the ESPP is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on the historical volatility of our Class A common stock, and the expected term represents the period of time the ESPP purchase rights are expected to be outstanding and approximates the offering period. The risk-free interest rate is based on yields on U.S. Treasury STRIPS (“Separate Trading of Registered Interest and Principal of Securities”) with a maturity similar to the estimated expected term of the ESPP purchase rights.
The fair value of our ESPP purchase rights was estimated assuming no expected dividends and the following weighted-average assumptions:
| | | | | | | | | | | | | | | | | |
| Year ended December 31, |
| 2021 | | 2020 | | 2019 |
ESPP | | | | | |
Expected term (in years) | 0.5 | | 0.5 | | 0.5 |
Risk-free interest rate | 0.1% | | 0.2% - 1.5% | | 1.9% - 2.6% |
Expected volatility | 41.8% - 45.0% | | 40.6% - 61.0% | | 35.0% - 49.0% |
The following table summarizes the ESPP activity under the Plan for the years ended December 31, 2021, 2020 and 2019:
| | | | | | | | | | | | | | | | | | | | |
| | For the year ended December 31, |
| | 2021 | | 2020 | | 2019 |
Shares issued | | 148,864 | | | 186,855 | | | 188,390 | |
Weighted-average purchase price | | $ | 59.52 | | | $ | 38.68 | | | $ | 26.13 | |
Total proceeds (in thousands) | | $ | 8,861 | | | $ | 7,227 | | | $ | 4,922 | |
Employee Stock Purchase Plan
Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At December 31, 2017,2021, there was approximately $27,000$129,438 of total unrecognized compensation expense related to the ESPP, which is expected to be recognized over a weighted-average period of 0.03 years.
14 days.
9.11. Accumulated Other Comprehensive Income
The following table summarizes the activity of accumulated other comprehensive income during the years ended December 31, 2017, 20162021, 2020 and 20152019 (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| | Accumulated translation adjustment | | Accumulated unrealized holding gains (losses) on available-for-sale securities | | Accumulated other comprehensive income |
Balance at December 31, 2014 | | $ | 147 | | $ | — | | $ | 147 |
Other comprehensive income (loss) | | 133 | | (39) | | 94 |
Balance at December 31, 2015 | | 280 | | (39) | | 241 |
Other comprehensive income | | 18 | | 32 | | 50 |
Balance at December 31, 2016 | | 298 | | (7) | | 291 |
Other comprehensive loss | | (159) | | (60) | | (219) |
Balance at December 31, 2017 | | $ | 139 | | $ | (67) | | $ | 72 |
| | | | | | | | | | | | | | | | | | | | |
| | Accumulated translation adjustment | | Accumulated unrealized holding gains (losses) on available-for-sale securities | | Accumulated other comprehensive income (loss) |
Balance at December 31, 2018 | | $ | 165 | | | $ | (67) | | | $ | 98 | |
Other comprehensive income | | 13 | | | 176 | | | 189 | |
Balance at December 31, 2019 | | 178 | | | 109 | | | 287 | |
Other comprehensive (loss) income | | (137) | | | 80 | | | (57) | |
Balance at December 31, 2020 | | 41 | | | 189 | | | 230 | |
Other comprehensive income (loss) | | 266 | | | (784) | | | (518) | |
Balance at December 31, 2021 | | $ | 307 | | | $ | (595) | | | $ | (288) | |
10. Segments12. Acquisitions
Our chief operating decision maker reviews financial information presented on a consolidated basis for purposesMark V Systems Limited
On December 29, 2021, we acquired all of allocating resources and evaluating financial performance. There are no segment managers who are held accountable by the chief operating decision maker, or anyone else, for operations, operating results and planning for levels or components belowstock in Mark V Systems Limited, the author of the only open source eXtensible Business Reporting Language validation engine, which ensures the continued accessibility of the open source validation engine. The acquisition was not material to the consolidated unit level. Accordingly,financial statements.
AuditNet, LLC
On December 10, 2021, we determined we have one operating and reportable segment. During the years ended December 31, 2017, 2016 and 2015, 92.1%, 93.8% and 94.3% of our revenue, respectively, and substantiallyacquired all of the membership interests in AuditNet, LLC, a global audit content and services provider, which strengthens Workiva’s risk and assurance offerings. The acquisition was not material to the consolidated financial statements.
OneCloud, Inc.
On July 30, 2021, we acquired all of the equity interest in OneCloud, Inc. (“OneCloud”), an integration platform as a service (“iPaaS”) company, in order to extend our long-lived assets were attributableintegration and data preparation capabilities, for $35.1 million, net of cash acquired of $1.5 million.
We previously held an investment in OneCloud which was accounted for as an investment in equity securities. Prior to operationsperforming purchase accounting we remeasured the previous ownership interest to fair value, increasing the value to $4.7 million, which resulted in a gain of $3.7 million recorded in other income (expense), net in the United States.
condensed consolidated statement of operations.
11.The transaction has been accounted for as a business combination and the purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. The goodwill recognized was primarily attributable to the assembled workforce and strategic benefits that are expected to be achieved and is not deductible for income tax purposes.
The following table presents a preliminary allocation of the purchase price to the assets acquired and liabilities assumed at the date of acquisition (in thousands):
| | | | | |
Cash consideration | $ | 36,564 | |
Previously held equity interest | 4,698 | |
Total consideration | $ | 41,262 | |
| |
Cash | $ | 1,497 | |
Intangible assets | 7,000 | |
Goodwill | 34,556 | |
Other assets | 548 | |
Deferred revenue | (900) | |
Deferred tax liability | (1,265) | |
Other liabilities | (174) | |
Fair value of assets and liabilities | $ | 41,262 | |
We incurred costs related to the acquisition of approximately $0.4 million during the year ended December 31, 2021. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in our condensed consolidated statements of operations.
The amount of revenues and net loss from the acquisition included in our consolidated statements of operations for the year ended December 31, 2021 were insignificant.
13. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill were as follows (in thousands):
| | | | | |
December 31, 2020 | $ | — | |
Acquisition and purchase accounting adjustment | 34,556 | |
| |
December 31, 2021 | $ | 34,556 | |
Intangible Assets
The following table presents the components of net intangible assets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Weighted Average Useful Life (Years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Acquired technology | 4 | | $ | 7,920 | | | $ | (701) | | | $ | 7,219 | | | $ | — | | | $ | — | | | $ | — | |
Acquired customer-related | 8.7 | | 360 | | | (14) | | | 346 | | | — | | | — | | | — | |
Acquired trade names | 2 | | 1,478 | | | (21) | | | 1,457 | | | — | | | — | | | — | |
Patents | 10 | | 2,740 | | | (1,328) | | | 1,412 | | | 2,538 | | | (955) | | | 1,583 | |
Total | 5.2 | | $ | 12,498 | | | $ | (2,064) | | | $ | 10,434 | | | $ | 2,538 | | | $ | (955) | | | $ | 1,583 | |
Amortization expense related to intangible assets was $1.1 million, $0.4 million and $0.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, expected remaining amortization expense of intangible assets by fiscal year is as follows (in thousands):
| | | | | |
2022 | $ | 3,074 | |
2023 | 2,962 | |
2024 | 2,201 | |
2025 | 1,473 | |
2026 | 163 | |
Thereafter | 561 | |
Total expected amortization expense | $ | 10,434 | |
14. Geographic Information
Revenues by geographical region consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2021 | | 2020 | | 2019 |
Subscription and support revenue | | | | | |
Americas | $ | 342,673 | | | $ | 273,574 | | | $ | 233,653 | |
Other | 36,666 | | | 22,303 | | | 12,112 | |
Professional services revenue | | | | | |
Americas | 58,312 | | | 51,142 | | | 49,323 | |
Other | 5,634 | | | 4,575 | | | 2,803 | |
| $ | 443,285 | | | $ | 351,594 | | | $ | 297,891 | |
Revenues by geography are generally based on the country of the customer as specified in our subscription order. Total Americas revenue attributed to the United States was approximately 93%, 94%, and 95% during each of the years ended December 31, 2021, 2020, and 2019, respectively. No other country represented more than 10% of total revenue during the years presented.
Our long-lived assets, which primarily consist of property and equipment and operating lease right-of-use assets, are attributed to a country based on the physical location of the assets. Aggregate long-lived assets by geographical region consisted of the following (in thousands):
| | | | | | | | | | | |
| For the year ended December 31, |
| 2021 | | 2020 |
United States | $ | 40,585 | | | $ | 42,422 | |
United Kingdom | 4,437 | | | 69 | |
Other | 1,559 | | | 2,718 | |
| $ | 46,581 | | | $ | 45,209 | |
15. Revenue Recognition
Disaggregation of Revenue
The following table presents our revenues disaggregated by industry (in thousands):
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2021 | | 2020 | | 2019 |
Information technology | $ | 47,697 | | | $ | 34,878 | | | $ | 30,798 | |
Diversified financials | 57,470 | | | 44,326 | | | 34,614 | |
Consumer discretionary | 41,826 | | | 34,029 | | | 29,147 | |
Industrials | 59,797 | | | 46,764 | | | 39,210 | |
Healthcare | 39,394 | | | 30,676 | | | 24,764 | |
Banks | 46,702 | | | 39,630 | | | 33,573 | |
Insurance | 27,206 | | | 21,993 | | | 18,047 | |
Energy | 21,093 | | | 18,380 | | | 18,113 | |
Real estate | 21,042 | | | 18,070 | | | 16,572 | |
Utilities | 21,319 | | | 13,561 | | | 12,231 | |
Materials | 19,357 | | | 16,321 | | | 14,761 | |
Public administration | 13,719 | | | 11,433 | | | 6,974 | |
Consumer staples | 13,146 | | | 10,683 | | | 9,570 | |
Other | 13,517 | | | 10,850 | | | 9,517 | |
Total revenues | $ | 443,285 | | | $ | 351,594 | | | $ | 297,891 | |
Revenues by industry are derived from leading software providers. In 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):
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2021 | | 2020 | | 2019 |
Subscription and support | $ | 379,340 | | | $ | 295,877 | | | $ | 245,765 | |
XBRL professional services | 44,763 | | | 38,032 | | | 38,734 | |
Other services | 19,182 | | | 17,685 | | | 13,392 | |
Total revenues | $ | 443,285 | | | $ | 351,594 | | | $ | 297,891 | |
Deferred Revenue
During the year ended December 31, 2021, we recognized $239.3 million of revenue that was included in the deferred revenue balance at the beginning of the period.
Transaction Price Allocated to the Remaining Performance Obligations
As of December 31, 2021, revenue of approximately $576.2 million is expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize approximately $336.0 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.
16. Income Taxes
Loss before income tax provision (benefit) consisted of the following (in thousands):
| | | For the year ended December 31, | | For the year ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
United States | United States | $ | (44,246) | | $ | (43,952) | | $ | (42,788) | United States | $ | (41,567) | | | $ | (50,193) | | | $ | (46,580) | |
Foreign | Foreign | (119) | | (1) | | (618) | Foreign | 2,467 | | | 1,504 | | | (760) | |
Total | Total | $ | (44,365) | | $ | (43,953) | | $ | (43,406) | Total | $ | (39,100) | | | $ | (48,689) | | | $ | (47,340) | |
The provision (benefit) for income taxes consisted of the following (in thousands):
| | | For the year ended December 31, | | For the year ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
Current | Current | | | | | | Current | | | | | |
Federal | | Federal | $ | — | | | $ | — | | | $ | — | |
State | State | $ | 42 | | $ | 12 | | $ | 69 | State | 98 | | | 120 | | | 59 | |
Foreign | Foreign | 19 | | 44 | | — | Foreign | 479 | | | (148) | | | 252 | |
Total Current | Total Current | $ | 61 | | $ | 56 | | $ | 69 | Total Current | $ | 577 | | | $ | (28) | | | $ | 311 | |
| | | | | | | | | | | | |
Deferred | Deferred | | Deferred | |
Federal | Federal | $ | — | | $ | (32) | | $ | (76) | Federal | $ | (1,252) | | | $ | — | | | $ | (65) | |
State | | State | (374) | | | — | | | — | |
Foreign | | Foreign | (321) | | | (263) | | | (107) | |
Total Deferred | Total Deferred | $ | — | | $ | (32) | | $ | (76) | Total Deferred | $ | (1,947) | | | $ | (263) | | | $ | (172) | |
| | | | | | | | | | | | |
Total | Total | $ | 61 | | $ | 24 | | $ | (7) | Total | $ | (1,370) | | | $ | (291) | | | $ | 139 | |
During the years ended December 31, 2021, 2020 and 2019, we recorded a federal income tax benefit of $1,252,000, $0, and $65,000, respectively. The current year benefit was related to current year acquisitions. As the reversal of the acquired net deferred tax liabilities will be recognized on future tax returns, these provide an objective source of taxable income. Therefore, a corresponding portion of our valuation allowance has been released to reflect this availability, resulting in a federal and state tax benefit reflected in the table above. The prior year federal benefit was primarily related to the allocation of tax expense (benefit) between continuing operations and other comprehensive income (loss) when applying the exception to the ASC 740 intraperiod tax allocation rule. Prior to the adoption of ASU 2019-12, intraperiod tax allocation rules required us to allocate the provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income. In periods in which we have a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, such as other comprehensive income, we must allocate the tax provision to the other categories of earnings and then record a related tax benefit in continuing operations. This exception to the general rule applies even when a valuation allowance is in place at the beginning and end of the year.
In response to the COVID-19 pandemic, the Canada Revenue Agency extended the filing due dates allowing for the Scientific Research and Experimental Development (“SR&ED”) reporting deadlines to be extended for six months, but no later than December 31, 2020. We were able to leverage this deadline extension and amended our 2018 Canadian return for the SR&ED credit thus generating a current and deferred foreign tax benefit for the year ended December 31, 2020.
The items accounting for the difference between income taxes computed at the federal statutory income tax rate and the provision for income taxes consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2021 | | 2020 | | 2019 |
Federal statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
Effect of: | | | | | |
Tax benefit at federal statutory rate | $ | (8,211) | | | $ | (10,225) | | | $ | (9,941) | |
State taxes, net of federal benefit | (15,350) | | | (3,394) | | | (4,985) | |
Revaluation of deferred tax items due to tax rate change (state) | — | | | (404) | | | — | |
Section 162(m) limitations | 9,008 | | | 6,682 | | | 2,944 | |
Stock-based compensation | (49,020) | | | (12,665) | | | (14,728) | |
Nondeductible permanent items | 1,422 | | | 2,001 | | | 1,103 | |
Tax benefit of federal R&D credit | (3,694) | | | (3,509) | | | (3,141) | |
Valuation allowance | 63,369 | | | 21,981 | | | 29,068 | |
Other | 1,106 | | | (758) | | | (181) | |
Total income tax provision | $ | (1,370) | | | $ | (291) | | | $ | 139 | |
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2017 | | 2016 | | 2015 |
Federal statutory rate | 35.0 | % | | 35.0 | % | | 35.0 | % |
Effect of: | | | | | |
Tax benefit at federal statutory rate | $ | (15,528) | | $ | (15,384) | | $ | (15,192) |
State taxes, net of federal benefit | (1,802) | | (1,377) | | (1,833) |
Revaluation of deferred tax items due to tax rate change (federal and state) | 22,880 | | — | | — |
Revaluation of deferred tax asset for current year net operating loss due to tax rate change | 4,134 | | — | | — |
Permanent differences including section 162(m) limitations, stock compensation, gain on foreign restructuring, and meals & entertainment | 5,141 | | 1,292 | | 636 |
Tax benefit of federal R&D credit | (2,366) | | (1,781) | | (1,270) |
| | | | | |
Recognition of excess tax benefits related to share-based payments | (3,606) | | — | | — |
Valuation allowance | (8,586) | | 17,013 | | 17,697 |
Other | (206) | | 261 | | (45) |
Total income tax provision | $ | 61 | | $ | 24 | | $ | (7) |
The components of deferred tax assets and liabilities were as follows (in thousands):
| | | | | | | | | | | |
| As of December 31, |
| 2017 | | 2016 |
Deferred tax assets: | | | |
Property and equipment | $ | 15 | | $ | 12 |
Accruals and reserves | 199 | | 1,104 |
Deferred rent | 931 | | 1,565 |
Compensation and benefits | 11,973 | | 16,048 |
Deferred revenue | 4,762 | | 3,255 |
Net operating loss and credits | 41,108 | | 45,625 |
Other | 167 | | 180 |
Total deferred tax assets | 59,155 | | 67,789 |
Valuation allowance | (58,639) | | (67,225) |
Total deferred tax assets | 516 | | 564 |
Deferred tax liabilities: | | | |
Property and equipment | (440) | | (403) |
Other deferred tax liabilities | (76) | | (161) |
Deferred tax liabilities | (516) | | (564) |
Total | $ | — | | $ | — |
On December 22, 2017, the U.S. federal government enacted legislation commonly referred to as the "Tax Cuts and Jobs Act" (the "TCJA"). The TCJA makes widespread changes to the Internal Revenue Code, including, among other items, a reduction in the federal corporate tax rate from 35% to 21%, effective January 1, 2018. The carrying value of our deferred tax assets and liabilities is also determined by the enacted U.S. corporate income tax rate. Consequently, any changes in the U.S. corporate income tax rate will impact the carrying value of our deferred tax assets and liabilities. Under the new corporate income tax rate of 21%, deferred income tax assets, net have decreased by $22.9 million and the valuation allowance has decreased by $22.9 million. There was no net effect of the tax reform enactment on the financial statements as of December 31, 2017.
We continue to evaluate the impacts of the TCJA and will consider additional guidance from the U.S. Treasury Department, IRS or other standard-setting bodies. Further adjustments, if any, will be recorded by us during the measurement period in 2018 as permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.
Effective July 1, 2017, the Company completed a restructuring of its foreign operations. A newly formed holding company was set up in the United Kingdom, Workiva Holdings Limited, which will be treated as a controlled foreign corporation from a U.S. income tax perspective. The outstanding stock ownership of the existing foreign subsidiaries were contributed to Workiva Holdings Limited, effective July 1, 2017, which triggered a taxable gain for the difference in fair market value compared to the tax basis in the entities for U.S. income tax purposes. The estimated gain recorded is $13.9 million which is included as a permanent book-tax difference. The gain is expected to be fully offset by current year net operating losses. | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
Deferred tax assets: | | | |
Property and equipment | $ | 2,770 | | | $ | 2,636 | |
Accruals and reserves | 48 | | | 173 | |
Lease liability | 9,014 | | | 9,984 | |
Compensation and benefits | 15,266 | | | 19,035 | |
Deferred revenue | 21,709 | | | 11,753 | |
Net operating loss and credits | 150,448 | | | 91,300 | |
Interest expense | 4,035 | | | 2,521 | |
Other | 546 | | | 347 | |
Total deferred tax assets | 203,836 | | | 137,749 | |
Valuation allowance | (174,771) | | | (111,402) | |
Total deferred tax assets | 29,065 | | | 26,347 | |
Deferred tax liabilities: | | | |
Property and equipment | (48) | | | (10) | |
Right-of-use asset | (8,275) | | | (8,772) | |
Convertible notes | (10,916) | | | (13,076) | |
Acquired intangibles | (2,022) | | | — | |
Deferred commissions | (6,761) | | | (3,900) | |
Other deferred tax liabilities | (321) | | | (222) | |
Deferred tax liabilities | (28,343) | | | (25,980) | |
Total | $ | 722 | | | $ | 367 | |
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2017.2021. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, we recognized a full valuation allowance against our net US deferred tax asset at December 31, 2017,2021, because we believe it is more likely than not that these benefits will not be realized.
As of December 31, 2017,2021, we have federal and state net operating loss carryforwards of approximately $133.8$481.8 million and $101.2$466.9 million, respectively, available to reduce any future taxable income. The federal net operating loss carryforwards will expire in varying amounts between years 2034beginning in 2034. Federal and 2037.some state net operating losses incurred after 2017 will have an indefinite carryforward. The state net operating loss carryforwards will expire in varying amounts between years 2021 and 2037.beginning in 2021. Additionally, we have total net operating loss carryforwards from international operations of $480,000$2.9 million that will expire in varying amounts beginning in 2033.do not expire. We also have approximately $6.0$19.8 million of federal and $1.3$3.1 million of state tax credit carryforwards as of December 31, 2017.2021. The federal credits will expire in varying amounts between the years 2034 and 2037.2040. The state credits expire beginning in 2021.
2022. Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code, as amended, and similar state provisions.
A reconciliation of the gross unrecognized tax benefits is as follows (in thousands):
| | | | | | | | | | | |
| For the year ended December 31, |
| 2017 | | 2016 |
Unrecognized tax benefits-beginning of period | $ | 168 | | $ | — |
Additions for tax positions related to prior year | — | | 168 |
Reductions for tax positions related to prior year | — | | — |
Foreign currency adjustments | 23 | | — |
Additions for tax positions related to current year | — | | — |
Unrecognized tax benefits-end of period | $ | 191 | | $ | 168 |
We have analyzed our inventory of tax positions taken with respect to all applicable income tax issues for all open tax years. The gross unrecognized tax benefits, if recognized, would not materially affect the effective tax rate as of December 31, 2017,2021, due to the availability of net operating losses.
We do not expect our gross unrecognized tax benefits to change significantly over the next 12 months. Our policy is to classify interest and penalties associated with uncertain tax positions, if any, as a component of our income tax provision. Interest and penalties were not significant during the years ended December 31, 2017, 2016 and 2015.
We are subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2017,2021, tax years for 20142017 through 20172020 are subject to examination by the tax authorities. With few exceptions,Generally, as of December 31, 2017,2021, we are no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2014. 2017. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward.
17. 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 our convertible senior notes, outstanding stock options, stock related to unvested restricted stock, awards, 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 contractual 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.
We consider unvested restricted stock awards granted under the 2014 Equity Incentive Plan to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares. In future periods to the extent we are profitable, we will subtract earnings allocated to these participating securities from net income to determine net income attributable to common stockholders.
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):
| | | Year ended | | Year ended |
| | December 31, 2017 | | December 31, 2016 | | December 31, 2015 | | December 31, 2021 | | December 31, 2020 | | December 31, 2019 |
| | Class A | | Class B | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B | | Class A | | Class B |
Numerator | Numerator | | | | | | | | | | | | Numerator | | | | | | | | | | | |
Net loss | Net loss | $ | (33,016) | | $ | (11,410) | | $ | (31,644) | | $ | (12,333) | | $ | (30,075) | | $ | (13,324) | Net loss | $ | (32,724) | | | $ | (5,006) | | | $ | (39,966) | | | $ | (8,432) | | | $ | (38,135) | | | $ | (9,344) | |
| | |
Denominator | Denominator | | Denominator | |
Weighted-average common shares outstanding - basic and diluted | Weighted-average common shares outstanding - basic and diluted | 30,929,899 | | 10,688,939 | | 29,265,605 | | 11,405,528 | | 27,617,350 | | 12,235,274 | Weighted-average common shares outstanding - basic and diluted | 44,343,177 | | | 6,783,333 | | | 40,007,839 | | | 8,440,327 | | | 37,190,224 | | | 9,112,432 | |
Basic and diluted net loss per share | Basic and diluted net loss per share | $ | (1.07) | | $ | (1.07) | | $ | (1.08) | | $ | (1.08) | | $ | (1.09) | | $ | (1.09) | Basic and diluted net loss per share | $ | (0.74) | | | $ | (0.74) | | | $ | (1.00) | | | $ | (1.00) | | | $ | (1.03) | | | $ | (1.03) | |
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 December 31, | | As of December 31, |
| | 2017 | | 2016 | | 2015 | | 2021 | | 2020 | | 2019 |
Shares subject to outstanding common stock options | Shares subject to outstanding common stock options | 8,145,777 | | 7,532,455 | | 6,969,133 | Shares subject to outstanding common stock options | 1,755,180 | | | 2,903,167 | | | 4,353,167 | |
Shares subject to unvested restricted stock awards | 163,332 | | 353,335 | | 600,025 | |
Shares subject to unvested restricted stock units | | Shares subject to unvested restricted stock units | 1,891,699 | | | 2,904,616 | | | 3,039,020 | |
Shares issuable pursuant to the ESPP | Shares issuable pursuant to the ESPP | 85,509 | | — | | — | Shares issuable pursuant to the ESPP | 53,877 | | | 94,390 | | | 76,466 | |
Additionally, approximately 4.3 million shares of our Class A common stock underlying the conversion option in the Notes, are not considered in the calculation of diluted net loss per share as the effect would be anti-dilutive. We use the treasury stock method for calculating any potential dilutive effect of the conversion option on diluted net income per share, if applicable.
13. Unaudited Quarterly Results of Operations
The following tables set forth selected unaudited quarterly consolidated statement of operations data for each of the quarters indicated as well as the percentage of total revenue for each line item shown. The unaudited information should be read in conjunction with our financial statements and related notes included elsewhere in this report. We believe that the following unaudited information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended |
| Dec 31, 2017 | | Sep 30, 2017 | | Jun 30, 2017 | | Mar 31, 2017 | | Dec 31, 2016 | | Sep 30, 2016 | | Jun 30, 2016 | | Mar 31, 2016 |
| (in thousands) |
Revenue | | | | | | | | | | | | | | | |
Subscription and support | $ | 45,549 | | $ | 43,214 | | $ | 40,980 | | $ | 39,540 | | $ | 38,329 | | $ | 36,237 | | $ | 34,969 | | $ | 33,585 |
Professional services | 8,957 | | 8,854 | | 8,411 | | 12,364 | | 8,045 | | 8,473 | | 8,042 | | 10,966 |
Total revenue | 54,506 | | 52,068 | | 49,391 | | 51,904 | | 46,374 | | 44,710 | | 43,011 | | 44,551 |
Cost of revenue | | | | | | | | | | | | | | | |
Subscription and support | 8,779 | | 8,472 | | 7,758 | | 7,637 | | 7,244 | | 6,694 | | 7,039 | | 6,918 |
Professional services | 7,310 | | 7,180 | | 6,528 | | 6,581 | | 5,964 | | 6,040 | | 5,538 | | 6,188 |
Total cost of revenue | 16,089 | | 15,652 | | 14,286 | | 14,218 | | 13,208 | | 12,734 | | 12,577 | | 13,106 |
Gross profit | 38,417 | | 36,416 | | 35,105 | | 37,686 | | 33,166 | | 31,976 | | 30,434 | | 31,445 |
Operating expenses | | | | | | | | | | | | | | | |
Research and development | 18,870 | | 17,527 | | 16,239 | | 15,536 | | 14,533 | | 14,342 | | 14,047 | | 14,516 |
Sales and marketing | 21,949 | | 23,712 | | 19,787 | | 18,713 | | 18,196 | | 22,354 | | 19,828 | | 20,088 |
General and administrative (1) | 12,271 | | 8,959 | | 8,943 | | 9,421 | | 7,845 | | 8,015 | | 7,882 | | 8,953 |
Total operating expenses | 53,090 | | 50,198 | | 44,969 | | 43,670 | | 40,574 | | 44,711 | | 41,757 | | 43,557 |
Loss from operations | (14,673) | | (13,782) | | (9,864) | | (5,984) | | (7,408) | | (12,735) | | (11,323) | | (12,112) |
Interest expense | (451) | | (464) | | (475) | | (455) | | (455) | | (462) | | (468) | | (490) |
Other income, net | 797 | | 198 | | 176 | | 612 | | 348 | | 298 | | 278 | | 576 |
Loss before (benefit) provision for income taxes | (14,327) | | (14,048) | | (10,163) | | (5,827) | | (7,515) | | (12,899) | | (11,513) | | (12,026) |
(Benefit) provision for income taxes | (6) | | 25 | | 33 | | 9 | | 1 | | (8) | | 12 | | 19 |
Net loss | $ | (14,321) | | $ | (14,073) | | $ | (10,196) | | $ | (5,836) | | $ | (7,516) | | $ | (12,891) | | $ | (11,525) | | $ | (12,045) |
Net loss per common share: | | | | | | | | | | | | | | | |
Basic and diluted | $ | (0.34) | | $ | (0.34) | | $ | (0.25) | | $ | (0.14) | | $ | (0.18) | | $ | (0.32) | | $ | (0.28) | | $ | (0.30) |
Weighted-average common shares outstanding - basic and diluted | 42,108,764 | | 41,815,139 | | 41,429,691 | | 41,108,611 | | 40,872,772 | | 40,762,960 | | 40,593,908 | | 40,451,668 |
(1) During the fourth quarter of 2017, we recorded an additional $1.9 million to general and administrative expense due to certain severance arrangements.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer, our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Our disclosure controls and procedures are intended to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Based on that assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 20172021 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report with respect to our internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K, and is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
In October 2017, we implemented a new financial accounting module to our accounting system to support revenue recognition in accordance with ASC 606. In addition, we have made enhancements and modifications to existing internal controls and procedures to ensure compliance with the new guidance. These changes to our control environment were substantially completed in the fourth quarter of 2017.
Other than the items noted above, thereThere was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended December 31, 20172021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Item 9B. Other Information
Employment Agreements
On February 19, 2018, we entered into executive employment agreements with Scott Ryan, Executive Vice President, Global Sales, and Mithun Banarjee, Executive Vice President, Global Operations. These agreements provide for at-will employment and include an initial base salary, an indication of eligibility for an annual cash incentive award opportunity, and equity awards at the discretion of our board of directors. These agreements also contain restrictions on non-competition and non-solicitation for the six-month period following termination. In addition, each of Messrs. Ryan and Banarjee has executed our standard confidential information and invention assignment agreement.
The employment agreements with Messrs. Ryan and Banarjee provide that certain payments and benefits would be due upon a termination of employment or a change in control.
If the employment of either Mr. Ryan or Mr. Banarjee is terminated by us for “cause” or by him without “good reason,” we will pay him (i) accrued but unpaid salary and benefits and (ii) any earned but unpaid bonus from the prior year.
If the employment of either Mr. Ryan or Mr. Banarjee is terminated due to his death or disability we will pay to him (i) accrued but unpaid salary and benefits, (ii) any earned but unpaid bonus from the prior year, (iii) a pro-rated bonus for the current year and (iv) a lump-sum payment equal to his annual base salary plus his target bonus for the current year.
If the employment of either Mr. Ryan or Mr. Banarjee is terminated by us without cause or by him for good reason, we will pay to him (i) accrued but unpaid salary and benefits, (ii) any earned but unpaid bonus from the prior year, (iii) a pro-rated bonus for the current year and (iv) a severance payment equal to two times his annual base salary plus his target bonus for the current year. In addition, the vesting of his outstanding equity awards will be accelerated, and he will be released from his non-competition and non-solicitation restrictions.
If the employment of either Mr. Ryan or Mr. Banarjee is terminated by us without cause or by him for good reason in the three months prior to or twelve months following a change in control, we will pay to him (i) accrued but unpaid salary and benefits, (ii) any earned but unpaid bonus from the prior year, (iii) his target bonus for the year in which the termination occurs (or if greater, the year in which the change in control occurs) and (iv) a severance payment equal to three times his annual base salary plus target bonus. In addition, the vesting of his outstanding equity awards will be accelerated, and he will be released from his non-competition and non-solicitation restrictions.
Short-Term Incentive Plan
On February 16, 2018,15, 2022, the Compensation Committee of our Board of Directors approved the 20182022 Short-Term Incentive Plan applicable to our executive officers for the fiscal year ending December 31, 2018.2022. The Plan provides executive officers with the opportunity to earn cash bonuses based upon the achievement of pre-established performance metrics determined by the Committee, which may include one or more of revenue growth, operating cash flow, or operating loss excluding stock compensation. The Committee sets the target award for each participating executive as a percentage of base salary. Following the end of fiscal 2018,2022, the Committee will review our attainment of the metrics and determine actual payouts, subject to upward or downward adjustment in its discretion.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Part III.
Item 10. Directors, Executive Officers and Corporate Governance
a) Directors of the Company.
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the heading “Election of Directors” and is incorporated herein by reference.
b) Executive Officers of the Company.
Matthew M. Rizai, Ph.D. 61, has served as our Chairman and Chief Executive Officer since December 2014 and served as the Chief Executive Officer and a Managing Director of Workiva LLC from 2009 to December 2014. He has over 20 years of experience as a Mechanical Engineer and nearly 15 years of experience leading technology companies. Prior to founding Workiva, Mr. Rizai was the Chairman and Chief Executive Officer of Engineering Animation, Inc. (NASDAQ: EAII) (EAI) from 1990 to 2000, when it was acquired by Unigraphics Solutions (now part of Siemens USA). Prior to EAI, Mr. Rizai was a senior research engineer at General Motors Research Laboratories, an analyst at Arch Development Corporation, and a development engineer at Ford Motor Company. He also co-founded Computer Aided Design Software, Inc. From 2003 to 2013, Mr. Rizai was a board member of Stafford Development Company, a real estate, hospitality, restaurant and health care services company based in Tifton, GA. Mr. Rizai earned a B.S., M.S. and Ph.D. in Mechanical Engineering from Michigan State University and an M.B.A. from the University of Chicago Booth School of Business.
Martin J. Vanderploeg, Ph.D., 61,65, has served as our President and Chief Executive Officer since June 2018, and as President and Chief Operating Officer since December 2014 and2014. Prior to that, Mr. Vanderploeg served as the Chief Operating Officer and a Managing Director of Workiva LLC from 2008 tothrough December 2014. He has over 20 years of experience in mechanical engineering and advising early stage technology companies. Prior to founding Workiva in 2008, Mr. Vanderploeg was a founder of EAI and served as EAI’sEAI's Executive Vice President from 1993 until EAI was acquired by Unigraphics Solutions in 2000. Mr. Vanderploeg served as Chief Technology Officer of EAI from 1989 to 1999. Following the acquisition of EAI, Mr. Vanderploeg continued to be an advisor to various technology start-up companies. Prior to EAI, Mr. Vanderploeg was a tenured professor of mechanical engineering at Iowa State University from 1985 to 1993 and was the founder and director of the Iowa State University Visualization Laboratory. Mr. Vanderploeg earned a B.S., M.S. and Ph.D. in mechanical engineering from Michigan State University.
Julie Iskow, 60, has served as our Executive Vice President and Chief Operating Officer since October 2019. Prior to joining Workiva, Ms. Iskow served as Chief Technology Officer of Medidata Solutions, Inc. since April 2015, as well as its Executive Vice President of Product Development since July 2016. Ms. Iskow served as Senior Vice President of Global Product Development at Medidata from April 2015 to July 2016. From December 2013 to March 2015, Ms. Iskow served as Chief Information Officer and Senior Vice President at WageWorks, Inc., and prior to that as its Senior Vice President of Product Development and Vice President of Product Development. Ms. Iskow has also served as Vice President of Engineering at Asyst Technologies and GW Associates, Inc. Before joining GW Associates, she was a member of the faculty at the University of Vermont. Ms. Iskow earned a B.S. degree from University of California, Berkeley and an M.S. degree from University of California, Davis. Since May 2019, Ms. Iskow has been an independent director of Vocera Communications, Inc. (NYSE: VCRA) and is a member of its Governance and Nominating Committee.
Jill Klindt, 45, has served as Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer since February 2021. She served as Senior Vice President, Chief Accounting Officer and Treasurer from March 2017 to February 2021; as Chief Accounting Officer and Vice President from December 2014 to March 2017, and Senior Director of Finance and Accounting of Workiva LLC from 2008 to December 2014. Prior to joining Workiva, Ms. Klindt served as Financial Analysis Manager at Financial Intelligence, LLC; as a Financial Consultant at Wells Fargo Financial; as a Senior Financial Analyst at CitiMortgage; and a Financial Accounting Analyst at Principal Residential Mortgage. She was also an Accountant of both Prairie iNet and EAI. Ms. Klindt is a Certified Public Accountant (inactive) with a B.S. in Accounting from Iowa State University.
Jeffrey D. Trom, Ph.D., 57,61, has served as Executive Vice President and Chief Technology Officer since December 2014 and served as a Managing Director and Chief Technology Officer of Workiva LLC from 2008 to December 2014. He has over 20 years of experience working with information technology and development. Prior to founding Workiva, Mr. Trom was a founder of EAI and served as EAI’s Vice President from 1990 and as Chief Technology Officer in charge of software architecture, development and deployment from 1999 until EAI was acquired by Unigraphics Solutions in
2000. Thereafter, Mr. Trom served as a technical consultant for various technology companies, including Electronic Data Systems from 2000 to 2002. He is president of the board of Middle Creek Montessori, a non-profit school in Bozeman, Montana. Mr. Trom earned a B.S. and M.S. in Mechanical Engineering from University of Iowa and a Ph.D. in Mechanical Engineering from Iowa State University.
Joseph H. HowellMithun Banarjee, 65, has served as our Executive Vice President for Strategic Initiatives since December 2014 and served as a Managing Director of Workiva LLC from 2008 to December 2014. He has over 25 years of experience in senior financial management and SEC reporting experience, including with early stage companies. Prior to founding Workiva in 2008, Mr. Howell was the Managing Director of Financial Intelligence, LLC from 2007 until 2008. From 2002 to 2004, Mr. Howell served as Chief Financial Officer of Eid Passport, and, from 2000 to 2002, he was the Chief Financial Officer of
Webridge, Inc., which was acquired by Click Commerce. He was also the Chief Financial Officer from 1998 to 2000 of EMusic.com (NASDAQ: EMUS), which was acquired by Universal Music Group. In addition, Mr. Howell served as the Chief Financial Officer of Merix Corporation (NASDAQ: MERX) from 1995 to 1998, Acting Chief Financial Officer for Borland Software (NASDAQ: BORL) from 1994 to 1995, and the Chief Accounting Officer for Borland Software from 1988 to 1995. Mr. Howell is a certified public accountant (inactive), and he earned a B.A. from the University of Michigan and an M.S. in Accounting from Eastern Michigan University.
J. Stuart Miller, 57,43, has served as our Executive Vice President and Chief FinancialCustomer Officer since December 2014. He also served as our Treasurer from December 2014 to June 2017 and served as Chief Financial Officer of Workiva LLC from April 2014 to December 2014. He has over 25 years of experience advising on mergers and acquisitions and capital raising for various companies. Prior to joining Workiva in April 2014,August 2018. Previously, Mr. Miller was a Managing Director of Colonnade Advisors, a mergers and acquisitions advisory firm that he founded in 1999. Previously, he was a Managing Director in the Investment Banking Department of J.P. Morgan. Mr. Miller joined J.P. Morgan from Credit Suisse First Boston, where he had worked in the Investment Banking Department. He earned a B.A. from Washington & Lee University and an M.B.A. from Harvard Business School.
Troy M. Calkins, 51, Mr. Calkins has served as our Executive Vice President, Chief Legal and Administrative Officer and Corporate Secretary since November 2017, after previously serving as our Executive Vice President, General Counsel and Secretary since December 2014. He also served as General Counsel of Workiva LLC from February 2014 to December 2014. Prior to joining Workiva, he was a partner at Drinker Biddle & Reath LLP, where he spent 19 years in the firm’s Corporate and Securities Practice Group. His practice focused on counseling both private and public companies on legal strategy, corporate compliance and governance, and private and public securities offerings. He earned a B.A. from Michigan State University and a J.D. from the University of Michigan Law School.
Scott Ryan, 46, Mr. Ryan has served as our Executive Vice President of Global Sales since March 2017. Previously, he served as our Vice President of Global Sales from August 2016 to March 2017. Prior to Workiva, Mr. Ryan was employed by IBM in various sales leadership positions from April 2005 to August 2016, most recently as the Vice President of North America Cyber Security Sales. Prior to IBM, he held software sales and leadership positions at various levels at Interwoven and SAS Institute. Mr. Ryan also served as a U.S. Army officer. He earned a B.S. in System Engineering from the U.S. Military Academy at West Point and an M.B.A. from the Darden School of Business at the University of Virginia.
Mitz Banarjee, 39, Mr. Banarjee has served as our Executive Vice President of Global Operations since September 2017. Previously, Mr. Banarjee served as ourfrom August 2017 to August 2018, Executive Vice President of Global Client Services from March to August 2017, Vice President of Global Client Services from March 2015 to March 2017 and Director of Customer First Culture from December 2014 to February 2015. He also served Workiva LLC as Director of Customer First Culture from March 2012 to December 2014 and Director of Customer Operations from March 2010 to February 2012. Prior to Workiva, Mr. Banarjee was Director of Client Services at Yodle (acquired by Web.com in 2016). Previously, he managed customer relationship teams at AT&T and AOL. He earned a B.A. in Information Systems from the University of Lincoln in England, UK.
Brandon E. Ziegler, 48, was promoted to Executive Vice President and Chief Legal Officer of Workiva Inc. in March 2021, and has served as its Corporate Secretary since May 2020. Prior to that, Mr. Ziegler was Workiva's Senior Vice President and General Counsel from March 2020 to March 2021. Mr. Ziegler was previously Senior Vice President, Deputy General Counsel and Assistant Corporate Secretary at Medidata Solutions, a leading technology and data platform for life sciences from July 2016 to March 2020. Prior to Medidata, Mr. Ziegler was head of ADP’s legal department for multinational corporations as Vice President and Assistant General Counsel from February 2007 to July 2016. Before moving in-house, Mr. Ziegler worked in private practice in New York and has extensive legal experience counseling public and private companies in global corporate development, corporate governance and commercial transactions. He earned a B.A. (cum laude) from Duke University and a J.D. from Brooklyn Law School where he was an international business law fellow.
Michael D. Hawkins, 46, has served as our Executive Vice President, Sales since August 2021. Previously, Mr. Hawkins served as our Senior Vice President of Sales from August 2019 to August 2021, Vice President of Sales from March 2015 to August 2019, Director of Sales from January 2013 through March 2015, Area Sales Manager from January 2012 to December 2012, and Regional Sales Director from August 2010 to December 2011. Prior to joining Workiva, Mr. Hawkins was Business Development Manager at ExactTarget from July 2008 to August 2010, as Account Executive at OnForce from May 2006 to September 2007, and as Account Executive and Director of Sales at Truist (formerly CreateHope, Inc.) from May 2001 to April 2006. Mr. Hawkins earned a B.A. from Miami University and a J.D. from George Washington University Law School.
c) Delinquent Section 16(a) Beneficial Ownership Reporting Compliance.Reports.
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the heading “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” and is incorporated herein by reference.
d) Code of Ethics.
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the heading “Corporate Governance” and is incorporated herein by reference.
e) Information regarding our Audit Committee and Nominating and Governance Committee is set forth in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the heading “Corporate Governance” and is incorporated herein by reference.
Item 11. Executive Compensation
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the headings “Executive Compensation” and “Director Compensation” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the headings “Ownership of Common Stock” and “Equity Compensation Plan Information” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions and Director Independence
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the headings “Certain Relationships and Related-Party and Other Transactions” and “Corporate Governance” and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Our independent registered public accounting firm is Ernst & Young LLP, Chicago, Illinois.
This information is included in our definitive proxy statement for the 20182022 Annual Meeting of Stockholders under the heading “Ratification of the Appointment of Independent Registered Public Accounting Firm” and is incorporated herein by reference.
Part IV.
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Form 10-K:10-K or incorporated by reference herein:
1.All financial statements. See Index to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.
2.Financial Statement Schedules. Financial statement schedules are omitted as they are either not required or the information is otherwise included in the consolidated financial statements.
3.Exhibits:
| | | | | | | | |
Exhibit Number | | Description |
| |
3.01 | |
3.1 | | |
| | |
3.2 3.02 | | Bylaws of Workiva Inc., incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on December 16, 2014. |
| |
4.1 4.01 | | |
| | |
4.2 4.02 | | |
| | |
4.3 4.03 | | |
| | |
10.1* 4.04 | | Description of Capital Stock, incorporated by reference from Exhibit 4.06 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019. |
| | |
10.01* | | |
| |
10.2* 10.02* | | |
| |
10.3* 10.03* | | |
| |
10.4* 10.04* | | |
| |
10.5* 10.05* | | |
| | |
10.6* 10.06* | | Form of Employment Agreement, incorporated by reference from Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on November 3, 2021. |
| | |
| | | | | | | | |
Exhibit Number | | Description |
| |
10.7* 10.07* | | |
| | |
10.8 10.08 | | |
| | | | | | | | |
Exhibit Number 10.09* | | Description |
| | |
10.9 | | |
| | |
10.10 | | |
| |
10.12 | | |
| | |
10.13* | | |
| | |
10.14* 10.10* | | |
| | |
10.15 10.11* | | |
| | |
10.16* | | |
| | |
10.17* 10.12* | | |
| | |
10.18 10.13* | | |
| | |
10.14* | | |
| | |
10.15* | | |
| | |
12.1 21.01 | | |
| | |
21.1 | | |
| |
23.1 23.01 | | |
| | |
24.1 24.01 | | Power of attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K). |
| | |
31.01 | | |
31.1 | | |
| | |
31.2 31.02 | | |
| | |
| | | | | | | | |
Exhibit Number 32.01# | | Description |
| | |
32.1# | | |
| | |
32.2# 32.02# | | |
| | |
101.INS 101 | | The following financial information from Workiva Inc.'s Annual Report on Form 10-K for the year ended December 31, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Loss, (iv) the Statements of Changes in Stockholders Equity (Deficit), (v) the Consolidated Statements of Cash Flows, and (vi) Notes to the Consolidated Financial Statements. |
| | |
104 | | XBRL Instance Document - the instance document does not appear in theCover Page Interactive Data File because its XBRL tags are embedded within the- (formatted as Inline XBRL document. and contained in Exhibit 101) |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document. |
| | |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
| | |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
| | |
* Indicates a management contract or compensatory plan.
# As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Annual Report on Form 10-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any filing of Workiva Inc. under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 22nd day of February, 2018.2022.
| | | | | | | | |
| WORKIVA INC. |
| | |
| By: | /s/ Martin J. Vanderploeg, Ph.D. |
| Name: | Martin J. Vanderploeg, Ph.D. |
| Title: | |
By: | /s/ Matthew M. Rizai, Ph.D. |
Name: | Matthew M. Rizai, Ph.D. |
Title: | ChairmanPresident and Chief Executive Officer |
| | |
POWER OF ATTORNEY
The undersigned officers and directors of Workiva Inc. hereby severally constitute Matthew M. RizaiMartin J. Vanderploeg our true and lawful attorney, with full power to him, to sign for us in our names in the capacities indicated below the Annual Report on Form 10-K filed herewith and any and all amendments thereto, and generally do all such things in our name and on our behalf in our capacities as officers and directors to enable Workiva Inc. to comply with the provisions of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any one of them on the Annual Report on Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated and on the dates indicated.
| | | | | | | | | | | | | | |
Signature | | Title | | Date |
| | | | |
/s/ Matthew M. Rizai,Martin J. Vanderploeg, Ph.D. | | Chairman of the board andPresident, Chief Executive Officer and Director
(Principal Executive Officer) | | February 22, 2018 |
Matthew M. Rizai, Ph.D. | | | |
| | | | |
/s/ J. Stuart Miller | | Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
| | February 22, 2018 |
J. Stuart Miller | | | |
| | | | |
/s/ Jill Klindt | | Senior Vice President, Treasurer and Chief Accounting Officer
(Principal Accounting Officer)
| | February 22, 2018 |
Jill Klindt | | | |
| | | | |
/s/ Eugene S. Katz | | Director | | February 22, 2018 |
Eugene S. Katz | | | |
| | | | |
/s/ Michael M. Crow, Ph.D. | | Director | | February 22, 2018 |
Michael M. Crow, Ph.D. | | | |
| | | | |
/s/ Robert H. Herz | | Director | | February 22, 2018 |
Robert H. Herz | | | |
| | | | |
/s/ David S. Mulcahy | | Director | | February 22, 2018 |
David S. Mulcahy | | | |
| | | | |
/s/ Suku Radia | | Director | | February 22, 2018 |
Suku Radia | | | |
| | | | |
/s/ Martin J. Vanderploeg, Ph.D. | | Director | | February 22, 20182022 |
Martin J. Vanderploeg, Ph.D. | | | |
| | | | |
/s/ Jill Klindt | | Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer (Principal Financial Officer) | | February 22, 2022 |
Jill Klindt | | | |
| | | | |
/s/ Brigid A. Bonner | | Director | | February 22, 2022 |
Brigid A. Bonner | | | |
| | | | |
/s/ Michael M. Crow, Ph.D. | | Director | | February 22, 2022 |
Michael M. Crow, Ph.D. | | | |
| | | | |
/s/ Robert H. Herz | | Director | | February 22, 2022 |
Robert H. Herz | | | |
| | | | |
/s/ Julie Iskow | | Director | | February 22, 2022 |
Julie Iskow | | | |
| | | | |
/s/ David S. Mulcahy | | Director | | February 22, 2022 |
David S. Mulcahy | | | |
| | | | |
/s/ Suku Radia | | Director | | February 22, 2022 |
Suku Radia | | | |