Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

As of November ~~1, 2017,~~4, 2019, the registrant had ~~28,254,691~~33,790,452 shares of common stock issued and outstanding.

	As of September 30, 2017			As of December 31, 2016			September 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	23,628		$	60,765		$	194,742		$	59,978
Restricted cash		297			—			1,026			90
Short-term investments		24,029			—			—			45,541
Accounts receivable, net		22,273			17,812			51,824			41,107
Prepaid expenses		3,564			1,770			10,347			4,890
Other current assets		2,780			2,536
Deferred costs and other current assets								10,548			10,909
Total current assets		76,571			82,883			268,487			162,515
Property and equipment, net		2,844			2,923			6,029			4,650
Capitalized software development costs, net		9,672			8,792			14,092			12,893
Goodwill		31,343			9,676			90,706			48,382
Intangible assets, net		9,499			3,940			70,624			23,197
Other assets		190			108
Restricted cash								3,347			—
Deferred costs and other assets								26,423			10,543
Total assets	$	130,119		$	108,322		$	479,708		$	262,180
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,223		$	2,434		$	8,832		$	2,719
Accrued payroll and employee related liabilities		9,778			7,456			19,674			17,108
Accrued expenses		2,003			1,957			5,481			5,565
Deferred revenue		63,040			51,388			112,058			92,738
Contingent liabilities		1,705			—
Note payable								—			427
Other current liabilities		614			548			6,482			1,490
Total current liabilities		80,363			63,783			152,527			120,047
Long-term liabilities:
Deferred revenue, noncurrent		1,455			1,246			4,371			2,898
Convertible senior notes								97,764			94,097
Deferred tax liabilities		594			494			1,197			1,032
Other long term liabilities		533			447			12,751			1,948
Total liabilities		82,945			65,970			268,610			220,022
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $0.001, 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2017 and December 31, 2016, respectively		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 28,203,369 and 27,150,674 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		28			27
Preferred stock, par value $0.001, 10,000,000 shares authorized, 0 shares issued or outstanding as of September 30, 2019 and December 31, 2018, respectively								—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 33,778,616 and 29,700,192 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively								34			30
Additional paid-in capital		150,614			132,246			404,676			194,866
Accumulated deficit		(103,488	)		(89,618	)		(186,788	)		(147,670	)
Accumulated other comprehensive income (loss)		20			(303	)
Accumulated other comprehensive loss								(6,824	)		(5,068	)
Total stockholders’ equity		47,174			42,352			211,098			42,158
Total liabilities and stockholders’ equity	$	130,119		$	108,322		$	479,708		$	262,180

	Three Months Ended						Nine Months Ended						Three Months Ended September 30,						Nine Months Ended September 30,
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			2019			2018			2019			2018
Revenue	$	27,312		$	19,932		$	75,177		$	55,566		$	52,547		$	38,925		$	143,771		$	105,266
Cost of revenue		8,076			6,173			22,969			17,324			16,454			12,296			45,174			33,488
Gross profit		19,236			13,759			52,208			38,242			36,093			26,629			98,597			71,778
Operating expenses:
Sales and marketing		11,626			8,605			33,589			25,659			21,903			16,348			63,989			51,303
Research and development		5,626			3,917			16,082			10,560			12,877			10,350			37,164			30,548
General and administrative		6,375			3,666			16,640			10,252			13,435			7,130			34,457			23,609
Total operating expenses		23,627			16,188			66,311			46,471			48,215			33,828			135,610			105,460
Operating loss		(4,391	)		(2,429	)		(14,103	)		(8,229	)		(12,122	)		(7,199	)		(37,013	)		(33,682	)
Other income (expense), net:
Interest and investment income		106			—			234			—			1,032			460			3,541			1,316
Interest expense		(2	)		(195	)		(5	)		(506	)		(1,697	)		(1,592	)		(4,986	)		(4,736	)
Other income (expense), net		(23	)		30			(61	)		2
Other expense, net														(35	)		(33	)		(129	)		(237	)
Total other income (expense), net		81			(165	)		168			(504	)		(700	)		(1,165	)		(1,574	)		(3,657	)
Loss before income taxes		(4,310	)		(2,594	)		(13,935	)		(8,733	)		(12,822	)		(8,364	)		(38,587	)		(37,339	)
(Provision for) benefit from income taxes		79			(35	)		65			75
Provision for income taxes														(99	)		(86	)		(531	)		(371	)
Net loss	$	(4,231	)	$	(2,629	)	$	(13,870	)	$	(8,658	)	$	(12,921	)	$	(8,450	)	$	(39,118	)	$	(37,710	)
Net loss per share attributable to common stockholders:
Basic	$	(0.15	)	$	(0.18	)	$	(0.50	)	$	(0.66	)	$	(0.39	)	$	(0.29	)	$	(1.19	)	$	(1.30	)
Diluted	$	(0.15	)	$	(0.18	)	$	(0.50	)	$	(0.66	)	$	(0.39	)	$	(0.29	)	$	(1.19	)	$	(1.30	)
Weighted-average common shares outstanding:
Basic		28,100,172			14,772,006			27,719,519			13,124,480			33,524,771			29,460,156			32,941,826			28,918,304
Diluted		28,100,172			14,772,006			27,719,519			13,124,480			33,524,771			29,460,156			32,941,826			28,918,304

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended

Nine Months Ended

September 30, 2017

September 30, 2016

September 30, 2017

September 30, 2016

Net loss

$
(4,231
)

$
(2,629
)

$
(13,870
)

$
(8,658
)
Other comprehensive income (loss):

Foreign currency translation adjustment, net of taxes

197

66

323

(300
)
Total comprehensive loss

$
(4,034
)

$
(2,563
)

$
(13,547
)

$
(8,958
)

	Common stock					Additional paid-in			Accumulated			Accumulated- other comprehensive
	Shares			Par value		capital			deficit			income (loss)			Total
Balance at December 31, 2018		29,700,192		$	30	$	194,866		$	(147,670	)	$	(5,068	)	$	42,158
Issuance of common stock, net of cost		2,645,000			3		138,836			—			—			138,839
Stock-based compensation		—			—		7,849			—			—			7,849
Vesting of restricted stock units		16,849			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(5,301	)		—		(333	)		—			—			(333	)
Exercise of stock options		501,083			—		8,746			—			—			8,746
Issuance of shares under employee stock purchase plan		24,266			—		1,283			—			—			1,283
Other comprehensive income		—			—		—			—			22			22
Net loss		—			—		—			(14,134	)		—			(14,134	)
Balance at March 31, 2019		32,882,089			33		351,247			(161,804	)		(5,046	)		184,430
Issuance of common stock, net of cost		—			—		(5	)		—			—			(5	)
Stock-based compensation		—			—		8,282			—			—			8,282
Vesting of restricted stock units		25,720			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(1,410	)		—		(116	)		—			—			(116	)
Exercise of stock options		243,920			—		4,741			—			—			4,741
Other comprehensive income		—			—		—			—			271			271
Net loss		—			—		—			(12,063	)		—			(12,063	)
Balance at June 30, 2019		33,150,319			33		364,149			(173,867	)		(4,775	)		185,540
Issuance of common stock in connection with acquisition of NC4		320,998			—		32,838			—			—			32,838
Stock-based compensation		—			—		8,383			—			—			8,383
Vesting of restricted stock units		229,284			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(46,664	)		—		(4,082	)		—			—			(4,082	)
Exercise of stock options		106,464			1		2,334			—			—			2,335
Issuance of shares under employee stock purchase plan		18,215			—		1,054			—			—			1,054
Other comprehensive loss		—			—		—			—			(2,049	)		(2,049	)
Net loss		—			—		—			(12,921	)		—			(12,921	)
Balance at September 30, 2019		33,778,616		$	34	$	404,676		$	(186,788	)	$	(6,824	)	$	211,098

	Common stock					Additional paid-in			Accumulated			Accumulated- other comprehensive
	Shares			Par value		capital			deficit			income (loss)			Total
Balance at December 31, 2017		28,330,460		$	28	$	164,995		$	(109,252	)	$	220		$	55,991
Cumulative effect of adoption of ASU 2014-09, net of taxes		—			—		—			9,097			—			9,097
Stock-based compensation		—			—		6,694			—			—			6,694
Vesting of restricted stock units		222,624			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(27,771	)		—		(1,022	)		—			—			(1,022	)
Exercise of stock options		153,744			1		1,465			—			—			1,466
Issuance of shares under employee stock purchase plan		44,193			—		881			—			—			881
Other comprehensive loss		—			—		—			—			(267	)		(267	)
Net loss		—			—		—			(12,342	)		—			(12,342	)
Balance at March 31, 2018		28,723,250			29		173,013			(112,497	)		(47	)		60,498
Stock-based compensation		—			—		10,022			—			—			10,022
Vesting of restricted stock units		221,624			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(53,326	)		—		(2,750	)		—			—			(2,750	)
Exercise of stock options		367,819			—		4,369			—			—			4,369
Other comprehensive loss		—			—		—			—			(2,384	)		(2,384	)
Net loss		—			—		—			(16,918	)		—			(16,918	)
Balance at June 30, 2018		29,259,367			29		184,654			(129,415	)		(2,431	)		52,837
Stock-based compensation		—			—		3,541			—			—			3,541
Vesting of restricted stock units		226,883			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(73,372	)		—		(4,149	)		—			—			(4,149	)
Exercise of stock options		182,263			—		2,986			—			—			2,986
Issuance of shares under employee stock purchase plan		30,324			—		877			—			—			877
Other comprehensive income		—			—		—			—			81			81
Net loss		—			—		—			(8,450	)		—			(8,450	)
Balance at September 30, 2018		29,625,465		$	29	$	187,909		$	(137,865	)	$	(2,350	)	$	47,723

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2019			2018
Cash flows from operating activities:
Net loss	$	(13,870	)	$	(8,658	)	$	(39,118	)	$	(37,710	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		7,646			5,675			13,192			10,172
Loss on disposal of assets		15			74
Deferred income taxes		62			(224	)
Non-cash interest expense on line of credit and term loan		—			67
Non-cash investment income		(74	)		—
Amortization of deferred costs								5,486			3,928
Accretion of interest on convertible senior notes								3,667			3,435
Provision for doubtful accounts and sales reserve		588			95			642			158
Stock-based compensation		4,838			2,127			24,094			20,007
Increase (decrease) in operating assets and liabilities:
Other non-cash adjustments								(47	)		(345	)
Changes in operating assets and liabilities:
Accounts receivable		(3,591	)		(391	)		(8,405	)		1,524
Prepaid expenses		(1,552	)		(1,188	)		(5,144	)		(2,439	)
Deferred costs								(8,438	)		(6,991	)
Other assets		(980	)		(1,743	)		924			(1,584	)
Accounts payable		820			251			7,318			(113	)
Accrued payroll and employee related liabilities		2,263			1,558			1,974			2,109
Accrued expenses		(54	)		305			(296	)		(621	)
Deferred revenue		7,801			8,605			12,373			7,237
Other liabilities		467			(18	)		632			457
Net cash provided by operating activities		4,379			6,535
Net cash provided by (used in) operating activities								8,854			(776	)
Cash flows from investing activities:
Capital expenditures		(1,337	)		(739	)		(4,417	)		(855	)
Proceeds from sale leaseback transaction		794			—
Proceeds from landlord reimbursement								1,143			—
Payments for acquisition of business, net of acquired cash		(21,235	)		—			(58,419	)		(35,857	)
Change in restricted cash		(294	)		—
Purchase of short-term investments		(29,955	)		—			(1,975	)		(57,709	)
Maturities of short-term investments		6,000			—			47,765			74,069
Additions to intangibles								—			(184	)
Additions to capitalized software development costs		(4,586	)		(4,294	)		(5,867	)		(6,722	)
Net cash used in investing activities		(50,613	)		(5,033	)		(21,770	)		(27,258	)
Cash flows from financing activities:
Proceeds from line of credit		—			9,500
Payments on line of credit		—			(19,500	)
Payment on term loan		—			(5,000	)
Payments of issuance costs relating to the line of credit and term loan		—			(19	)
Principal payments on capital leases		—			(58	)
Proceeds from public offering, net of underwriters discount and commissions		10,444			69,750
Payments of public offering costs		(872	)		(1,372	)
Payments of debt issuance costs		(40	)		—
Payment of contingent consideration		(3,750	)		—
Payments on notes payable		—			(2,018	)
Restricted stock units withheld to settle employee tax withholding liability								(4,531	)		(7,921	)
Proceeds from public offering, net of costs								139,110			—
Proceeds from employee stock purchase plan		1,540			—			2,337			1,758
Proceeds from option exercises		2,087			748
Proceeds from exercise of warrants		—			25
Proceeds from stock option exercises								15,822			8,821
Other								(548	)		(635	)
Net cash provided by financing activities		9,409			52,056			152,190			2,023
Effect of exchange rates on cash and cash equivalents		(312	)		160
Net (decrease) increase in cash and cash equivalents		(37,137	)		53,718
Cash and cash equivalents—beginning of period		60,765			8,578
Cash and cash equivalents—end of period	$	23,628		$	62,296
Effect of exchange rates on cash, cash equivalents and restricted cash								(227	)		(746	)
Net increase (decrease) in cash, cash equivalents and restricted cash								139,047			(26,757	)
Cash, cash equivalents and restricted cash—beginning of period								60,068			103,051
Cash, cash equivalents and restricted cash—end of period							$	199,115		$	76,294
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	—		$	488		$	863		$	771
Taxes, net of refunds received		25			—			—			43
Supplemental disclosure of non-cash activities:
Capitalized assets included in accounts payable and accrued expenses		24			132			122			278
Deferred offering costs in accounts payable and accrued expenses		—			885
Debt issuance costs included in accounts payable and accrued expenses		100			—
Capitalized development costs included in accounts payable and accrued expenses								7			—
Common stock issued in connection with acquisition								32,838			—
Contingent consideration in connection with acquisition								550			—
Note payable issued for asset acquisition								—			52
Stock-based compensation capitalized for software development		34			38			420			250

Everbridge, Inc., a Delaware corporation (together with its wholly-owned subsidiaries, referred to as “Everbridge” or the “Company”), is a global software company that provides ~~critical event management and~~ enterprise ~~safety~~software applications that ~~enable customers to~~ automate and accelerate ~~the process of keeping~~organizations’ operational response to critical events in order to keep people safe and businesses ~~running during critical events.~~running. The Company’s SaaS-based platform enables the Company’s customers to quickly and reliably deliver messaging to a large group of people during critical situations. The Company’s enterprise applications, such as Mass Notification, Incident Management, ~~IT Alerting,~~ Safety Connection, ~~Community Engagement, CareConverge, Crisis Commander and~~IT Alerting, Visual Command Center, Public Warning, Crisis Management, Community Engagement and Secure Messaging, automate numerous critical event management ~~and enterprise safety~~ processes. The Company generates revenue primarily from subscription fees to the Company’s enterprise applications. The Company has operations in the United States, Norway, India, the Netherlands, Sweden, ~~the United Kingdom~~England, Germany and China.

On September 21, 2016, the Company completed an initial public offering (“IPO”) in which the Company sold 6,250,000 shares of its common stock at the public offering price of $12.00 per share. The Company received net proceeds of $66.1 million, after deducting underwriting discounts and commissions and offering expenses paid and payable by the Company, from sales of its shares in the IPO.

In April 2017, the Company completed a follow-on public offering in which the Company sold 553,825 shares of its common stock, which included 26,825 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at a public offering price of $19.85 per share. In addition, 3,162,164 shares of the Company’s common stock were sold by selling stockholders of the Company, which included 73,000 shares sold pursuant to the exercise of employee stock options by certain selling stockholders. The Company received net proceeds of $9.9 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company. The Company did not receive any proceeds from the sales by the selling stockholders.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“~~U.S.~~ GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with ~~U.S.~~ GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018.

The condensed consolidated balance sheet as of December 31, ~~2016,~~2018, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by ~~U.S.~~ GAAP on an annual reporting basis. In order to conform to the current year’s presentation, current Deferred costs of $6.5 million and noncurrent Deferred costs of $10.3 million as of December 31, 2018 are reported in Deferred costs and other current assets and Deferred costs and other assets, respectively, with no effect on Total current assets or Total assets, respectively.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, statements of stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ~~2017~~2019 or any future period.

Effective January 1, 2019, the Company adopted the requirements of Accounting Standards Update (“ASU”) No. 2016-02, Leases, as discussed in this Note 2 and Note 16.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

The preparation of consolidated financial statements in conformity with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Assets and liabilities which are subject to judgment and use of estimates include the determination of the period of benefit for deferred commissions, allowances for doubtful accounts, the fair value of assets acquired and liabilities assumed in business combinations, the recoverability of goodwill and long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and intangible assets, contingencies, and the valuation and assumptions underlying stock-based compensation. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company ~~engaged~~engages valuation specialists to assist with management’s determination of the valuation of its fair values of assets acquired and liabilities assumed in business ~~combinations.~~combinations and certain market-based performance equity awards.

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable.

The Company maintains cash balances at several banks. Accounts located in the United States are insured by the Federal Deposit Insurance Corporation ~~or FDIC,~~(“FDIC”) up to $250,000. From time to time, balances may exceed amounts insured by the FDIC. The Company has not experienced any losses in such amounts.

The Company’s accounts receivable are generally unsecured and are derived from revenue earned from customers primarily located in the United States, Norway, Sweden and the United Kingdom and are generally denominated in U.S. dollars, Norwegian Krone, Swedish ~~kronor~~Kronor or British ~~pounds.~~Pounds. Each reporting period, the Company reevaluates each customer’s ability to satisfy credit obligations and maintains an allowance for doubtful accounts based on the evaluations. NaN single customer comprised more than 10% of the Company’s total revenue for the three and nine months ended September 30, 2019 and 2018. No single customer comprised more than 10% of the Company’s total ~~revenue or~~ accounts receivable ~~for the three or nine months ended~~as of September 30, ~~2017~~2019 and ~~2016.~~2018.

The Company considers all highly liquid instruments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. As of September 30, ~~2017, $19.5~~2019, $174.8 million of the Company’s cash equivalents were invested in money market ~~funds~~funds.

The Company’s restricted cash balance primarily consist of cash held at a financial institution for collateral against performance on the Company’s customer contracts and ~~U.S. government securities.~~certain other cash deposits for specific purposes.

Short-term investments consist of highly liquid investments, primarily commercial paper, U.S. Treasury and U.S. agency securities, with maturities over three months from the date of ~~purchase.~~purchase and less than 12 months from the date of the balance sheet. Debt securities, money market funds and U.S. agency bonds that the Company has the ability and positive intent to hold to maturity are carried at amortized cost, which approximates fair value. There were 0 short-term investments at September 30, 2019. Short-term investments of ~~$24.0~~$45.5 million ~~and none~~ at ~~September 30, 2017 and~~ December 31, ~~2016, respectively,~~2018 were classified as held-to-maturity and primarily comprised of U.S. treasury and U.S. government and agency securities. All held-to-maturity securities ~~at September 30, 2017~~ have maturity dates within one year.

~~There~~Except for the accounting policies for leases that were updated, as set forth below, as a result of adopting ASU No. 2016-02, there have been no changes to the Company’s significant accounting policies described in the ~~Company’s~~ Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018 filed with the SEC on March 1, 2019, that have had a material impact on the Company’s condensed consolidated financial statements and related notes.

The Company derives its revenues primarily from subscription services and professional services. Revenues are recognized when control of these services is transferred to the Company’s customers in an amount that reflects the consideration it expects to be entitled to in exchange for those services.

Subscription services revenues primarily consist of fees that provide customers access to one or more of the Company’s hosted applications for critical event management, with routine customer support. Revenue is generally recognized over time on a ratable

basis over the contract term beginning on the date that the Company’s service is made available to the customer. All services are recognized using an output measure of progress looking at time elapsed as the contract generally provides the customer equal benefit throughout the contract period. The Company’s subscription contracts are generally two years or longer in length, billed annually in advance, and non-cancelable.

Professional services revenues primarily consist of fees for deployment and optimization services, as well as training. The majority of the Company’s consulting contracts revenue is recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion performed.

On occasion we may sell software and related post contract support for on premise usage which is outside of our core business. These sales have been to a limited number of customers and is not a significant revenue stream for the Company.

Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis for those performance obligations with stable observable prices and then the residual method applied for any performance obligation that has pricing, which is highly variable. The Company determines the standalone selling prices based on the Company’s overall pricing objectives, taking into consideration market conditions and other factors, including the value of the Company’s contracts, the applications sold, customer demographics, geographic locations, and the number and types of users within the Company’s contracts.

The Company does not offer rights of return for its products and services in the normal course of business.

The Company’s contracts with customers generally do not include customer acceptance clauses.

Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount, net of an allowance for doubtful accounts, which is not material. Other receivables represent unbilled receivables related to subscription and professional services contracts.

Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized on a straight-line basis over a period of benefit that the Company has determined to be four years. The Company has determined the period of benefit by taking into consideration its customer contracts, its technology and other factors. Sales commissions attributed to renewals are not material and are not commensurate with initial and growth sales. Amortization of deferred commissions is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations.

Deferred revenue consists of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current.

In ~~January 2017,~~instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from its customers or to provide customers with financing. Examples include invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period.

In February 2016, the Financial Accounting Standards Board ~~or FASB, issued Accounting Standards Update, or~~ (“~~ASU”~~FASB”)~~, ASU 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company expects to adopt this guidance for interim and annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

~~In January 2017, the FASB~~ issued ASU ~~2017-01,~~ ~~Business Combinations~~2016-02, Leases (Topic ~~805): Clarifying the Definition of a Business~~. This guidance narrows the definition of a business. This standard provides guidance to assist entities with evaluating when a set of transferred assets and activities is a business. This guidance is effective for interim and annual reporting periods beginning after December 15, 2017, and early adoption is permitted. This guidance must be applied prospectively to transactions occurring within the period of adoption. The Company expects to adopt this guidance effective January 1, 2018. The Company does not expect the adoption of this guidance to have a material impact on its financial position, results of operations or cash flows.

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~. This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. As a result, restricted cash will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, and the new guidance is to be applied retrospectively. The Company does not expect the adoption of this guidance to have a material impact on its cash flows.

~~In September 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~. This guidance clarifies the presentation requirements of eight specific issues within the statement of cash flows. The new guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements, as the Company's treatment of the relevant affected items within its consolidated statement of cash flows is consistent with the requirements of this guidance.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~842), to require lessees to recognize most leases on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. The ASU requires lessees to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use (“ROU”) asset on the balance sheet. The guidance requires disclosure of key information about leasing arrangements that is intended to give financial statement users the ability to assess the amount, timing and potential uncertainty of cash flows related to leases. The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting.

The Company adopted the standard on January 1, 2019 using the modified retrospective approach. The Company elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements and recognize a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. The Company also elected the “package of practical expedients”, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

Results for reporting periods beginning after January 1, 2019 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Upon adoption of the new lease standard, on January 1, 2019, the Company capitalized ROU assets of $14.7 million and $16.9 million of lease liabilities, within the Company’s condensed consolidated balance sheets upon adoption. Additionally, the Company reversed its deferred rent liability of $2.2 million, which upon adoption became a component of the right-of-use asset. The adoption of this standard did not have an impact on the Company’s condensed consolidated statement of operations or cash flows and did not result in a cumulative catch-up adjustment to the opening balance of retained earnings.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this update allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act of 2017. The new standard is effective for the Company beginning on January 1, 2019, with early adoption permitted. The Company adopted ASU 2018-02 effective January 1, 2019. The adoption of this standard did not have an impact on the Company’s condensed consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share Based Payments. The improvement expands stock-based compensation guidance to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. The new standard is effective for the Company beginning on January 1, 2019, with early adoption permitted. The Company adopted ASU 2018-07 effective January 1, 2019. The adoption of this standard did not have an impact on our condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13 (as amended through May 2019), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables and held-to-maturity debt securities, which will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands disclosure requirements. ASU 2016-13 is effective for the Company beginning in the first quarter of 2020 and early adoption is permitted. The guidance will be applied using the modified-retrospective approach. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of the FASB’s disclosure framework project. Adoption of this guidance is required for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, a new standard on a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement (“CCA”). Under the new guidance, customers will assess if a CCA includes a software license and if a CCA does include a software license, implementation and set-up costs will be accounted for consistent with existing internal-use software implementation guidance. Implementation costs associated with a CCA that do not include a software license would be expensed to operating expenses. The standard also provides classification guidance on these implementation costs as well as additional quantitative and qualitative disclosures. The standard is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. Entities can choose to adopt the new guidance prospectively or retrospectively. The Company is currently assessing the impact this standard will have on the Company’s consolidated financial statements.

Other accounting standard updates effective for interim and annual periods beginning after December ~~15,~~31, 2018 ~~with early adoption permitted. Adoption of~~are not expected to have a material impact on the ~~ASU is modified retrospective. We are still in the process of evaluating the ASU but currently plan to adopt the ASU on January 1, 2019~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606),~~ ~~which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU 2015-14,~~ ~~Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date~~, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU 2016-08, ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~, which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new revenue recognition standard will be effective for the Company effective January 1, 2018. The new standard permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method).

~~The Company currently anticipates adopting the standard using the modified retrospective method.~~

~~The Company is continuing to assess the impact of adopting ASU 2014-09 on its~~Company’s financial position, results of operations and related disclosures and has not yet determined whether the effect of the revenue portion will be material. Additionally, as the Company continues to assess the new standard along with industry trends and additional interpretive guidance, the Company may adjust its implementation plan accordingly.

~~The Company believes that the new standard will impact the following policies and disclosures:~~

The sales commission accounting under the new standard is significantly different than the Company's current commission capitalization policy. The new standard will result in additional types of costs being capitalized. Additionally, all amounts capitalized are expected to be amortized over a period that is longer than the Company's current policy of amortizing the deferred amounts over the specific revenue contract terms. While the Company has not yet finalized its assessment of the impact will have on its financial position and results of operations, the Company believes it will be material.

~~The Company does not expect the adoption of ASU 2014-09 to have any impact on its operating~~or cash flows.

	As of			As of			As of			As of
	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
Accounts receivable	$	23,192		$	18,231		$	52,980		$	41,818
Allowance for doubtful accounts and sales reserve		(919	)		(419	)
Allowance for doubtful accounts								(1,156	)		(711	)
Net accounts receivable	$	22,273		$	17,812		$	51,824		$	41,107

Bad debt expense ~~and sales credits reserve were $0.2 million and $0.6 million for the three and nine months ended September 30, 2017, respectively, and $0.1~~was $0.3 million and $0.1 million for the three months ended September 30, 2019 and 2018, respectively. Bad debt expense was $0.6 million and $0.1 million for the nine months ended September 30, ~~2016,~~2019 and 2018, respectively.

The following table summarizes the changes in the allowance for doubtful accounts (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Balance, beginning of period	$	(610	)	$	(377	)	$	(374	)	$	(336	)	$	(1,051	)	$	(716	)	$	(711	)	$	(863	)
Additions		(195	)		(8	)		(484	)		(95	)		(253	)		(134	)		(642	)		(25	)
Write-offs		11			33			64			79			148			30			197			68
Balance, end of period	$	(794	)	$	(352	)	$	(794	)	$	(352	)	$	(1,156	)	$	(820	)	$	(1,156	)	$	(820	)

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
Balance, beginning of period	$	(116	)	$	(45	)	$	(45	)	$	(45	)	$	(195	)	$	(209	)	$	(200	)	$	(100	)
Additions		(24	)		—			(104	)		—			—			—			—			(133	)
Write-offs		15			—			24			—			4			69			9			93
Balance, end of period	$	(125	)	$	(45	)	$	(125	)	$	(45	)	$	(191	)	$	(140	)	$	(191	)	$	(140	)

	Useful life in years		As of September 30, 2017			As of December 31, 2016			Useful life in years		As of September 30, 2019			As of December 31, 2018
Furniture and equipment		5	$	1,794		$	928			5	$	1,734		$	1,189
Leasehold improvements ⁽¹⁾										5		4,025			2,776
System hardware		5		1,623			3,320			5		1,471			1,404
Office computers		3		2,285			1,777			3		4,667			3,745
Computer and system software		3		1,186			1,478			3		1,471			1,385
				6,888			7,503					13,368			10,499
Less accumulated depreciation and amortization				(4,044	)		(4,580	)				(7,339	)		(5,849	)
Property and equipment, net			$	2,844		$	2,923				$	6,029		$	4,650

Depreciation and amortization expense for property and equipment was ~~$0.4~~$0.6 million and ~~$1.5~~$0.5 million for the three months ended September 30, 2019 and 2018, respectively. Depreciation and amortization expense for property and equipment was $1.7 million and $1.4 million for the nine months ended September 30, ~~2017, respectively,~~2019 and ~~$0.4 million and $1.2 million for the three and nine months ended September 30, 2016,~~2018, respectively.

Capitalized software development costs consisted of the following (in thousands):

				As of September 30, 2017								As of September 30, 2019
	Gross carrying amount		Amortization period	Accumulated amortization			Net carrying amount		Gross carrying amount		Amortization period	Accumulated amortization			Net carrying amount
Capitalized software development costs	$	35,278	3 years	$	(25,606	)	$	9,672	$	47,820	3 years	$	(33,728	)	$	14,092
Total capitalized software development costs	$	35,278		$	(25,606	)	$	9,672	$	47,820		$	(33,728	)	$	14,092

				As of December 31, 2016								As of December 31, 2018
	Gross carrying amount		Amortization period	Accumulated amortization			Net carrying amount		Gross carrying amount		Amortization period	Accumulated amortization			Net carrying amount
Capitalized software development costs	$	30,658	3 years	$	(21,866	)	$	8,792	$	45,677	3 years	$	(32,784	)	$	12,893
Total capitalized software development costs	$	30,658		$	(21,866	)	$	8,792	$	45,677		$	(32,784	)	$	12,893

The Company capitalized software development costs of ~~$4.6~~$6.3 million and ~~$5.5~~$7.0 million for the nine months ended September 30, ~~2017~~2019 and ~~the year ended December 31, 2016,~~2018, respectively.

Amortization expense for capitalized software development costs was ~~$1.2~~$1.8 million and ~~$3.7~~$1.5 million for the three months ended September 30, 2019 and 2018, respectively. Amortization expense for capitalized software development was $5.1 million and $4.3 million for the nine months ended September 30, ~~2017, respectively,~~2019 and ~~$1.3 million and $3.6 million for the three and nine months ended September 30, 2016,~~2018, respectively. Amortization of capitalized software development costs is classified within cost of revenue in the consolidated statements of operations.

The expected amortization of capitalized software development costs, as of September 30, ~~2017,~~2019, for each of the following years is as follows (in thousands):

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable ~~capital leases~~ and accrued liabilities approximate fair value because of the short maturity of these items.

Certain assets, including long-lived assets, goodwill and intangible assets are also subject to measurement at fair value on a non-recurring basis if they are deemed to be impaired as a result of an impairment review. For the nine months ended September 30, ~~2017~~2019 and year ended December 31, ~~2016, no~~2018, 0 impairments were identified.

The following table summarizes the Company's financial assets and liabilities measured at fair value on a recurring basis at September 30, ~~2017~~2019 and December 31, ~~2016~~2018 by level within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

	As of September 30, 2017
	Quoted			Significant						As of September 30, 2019
	Prices in			Other		Significant				Quoted		Significant
	Active			Observable		Unobservable				Prices in		Other		Significant
	Markets			Inputs		Inputs		Total Fair		Active		Observable		Unobservable
	(Level 1)			(Level 2)		(Level 3)		Value		Markets		Inputs		Inputs		Total Fair
	(in thousands)									(Level 1)		(Level 2)		(Level 3)		Value
Assets:
Cash equivalents:
Money market funds	$	9,957			—		—	$	9,957	$	174,819	$	—	$	—	$	174,819
U.S. treasury securities		—			2,498				2,498
U.S. government and agency securities		—			6,999		—		6,999
Short-term investments
U.S. treasury securities		—			7,289		—		7,289
U.S. government and agency securities		—			16,740		—		16,740
Total financial assets	$	9,957		$	33,526	$	—	$	43,483	$	174,819	$	—	$	—	$	174,819
Liabilities:
Contingent consideration		—			—	$	1,705	$	1,705	$	—	$	—	$	550	$	550
Total financial liabilities	$	—		$	—	$	1,705	$	1,705	$	—	$	—	$	550	$	550

	As of December 31, 2016									As of December 31, 2018
	Quoted			Significant						Quoted		Significant
	Prices in		��	Other		Significant				Prices in		Other		Significant
	Active			Observable		Unobservable				Active		Observable		Unobservable
	Markets			Inputs		Inputs		Total Fair		Markets		Inputs		Inputs		Total Fair
	(Level 1)			(Level 2)		(Level 3)		Value		(Level 1)		(Level 2)		(Level 3)		Value
	(in thousands)
Assets:
Cash equivalents
Cash equivalents:
Money market funds	$	57,032			—		—	$	57,032	$	47,258	$	—	$	—	$	47,258
U.S. government and agency securities											—		2,272		—		2,272
Short-term investments:
U.S. treasury securities											—		38,809		—		38,809
U.S. government and agency securities											—		6,732		—		6,732
Total financial assets	$	57,032		$	—	$	—	$	57,032	$	47,258	$	47,813	$	—	$	95,071
Liabilities:
Contingent consideration		—			—	$	388	$	388
Total financial liabilities	$	—		$	—	$	388	$	388

The Company classifies and discloses fair value measurements in one of the following three categories of fair value hierarchy:

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy. The Company did ~~not~~0t have any transfers into and out of Level 1 or Level 2 during the nine months ended September 30, ~~2017. No assets or investments were classified as Level 3 as of September 30, 2017. The Company did not have any short-term investments as of December 31, 2016.~~

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets. At ~~September 30, 2017~~December 31, 2018, the Company’s Level 2 securities were priced by pricing vendors. These pricing vendors utilize the most recent observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities. There were 0 Level 2 securities at September 30, 2019.

The following table summarizes the changes in Level 3 financial instruments (in thousands).:

AtThe Company estimates the fair value of the convertible senior notes based on their last actively traded prices (Level 1) or market-observable inputs (Level 2). As of September 30, 2019 and December 31, ~~2016,~~2018, the ~~Company recorded~~fair value of the ~~contingent consideration from~~convertible senior notes was determined to be $217.9 million and $189.8 million, respectively, and the ~~Crisis Commander acquisition under long-term other liabilities.~~carrying value of the notes was $97.8 million and $94.1 million, respectively.

Goodwill was ~~$31.3~~$90.7 million and ~~$9.7~~$48.4 million as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, respectively. There were no0 impairments recorded against goodwill during the nine months ended September 30, ~~2017~~2019 and for the year ended December 31, ~~2016.~~2018. The following table displays the changes in the gross carrying amount of goodwill (in thousands):

				As of September 30, 2017								As of September 30, 2019
	Gross carrying amount		Weighted average life (years)	Accumulated amortization			Net carrying amount		Gross carrying amount		Weighted average life (years)	Accumulated amortization			Net carrying amount
Amortizable intangible assets:
Developed technology	$	4,065	3.1	$	(1,724	)	$	2,341	$	9,436	3.00	$	(3,412	)	$	6,024
Trade names and patents		2,495	5.1		(584	)		1,911
Tradenames										11,452	3.48		(1,940	)		9,512
Non-compete										240	2.00		(240	)		—
Customer relationships		8,537	5.0		(3,450	)		5,087		63,119	6.84		(8,031	)		55,088
Non-compete arrangement		240	2.0		(80	)		160
Total intangible assets	$	15,337		$	(5,838	)	$	9,499	$	84,247		$	(13,623	)	$	70,624

				As of December 31, 2016								As of December 31, 2018
	Gross carrying amount		Weighted average life (years)	Accumulated amortization			Net carrying amount		Gross carrying amount		Weighted average life (years)	Accumulated amortization			Net carrying amount
Amortizable intangible assets:
Developed technology	$	1,490	3.60	$	(878	)	$	612	$	5,090	3.04	$	(3,225	)	$	1,865
Trade names and patents		883	6.08		(254	)		629
Tradenames										3,193	4.51		(1,526	)		1,667
Non-compete										240	2.00		(230	)		10
Customer relationships		4,779	5.00		(2,080	)		2,699		26,990	6.39		(7,335	)		19,655
Total intangible assets	$	7,152		$	(3,212	)	$	3,940	$	35,513		$	(12,316	)	$	23,197

Amortization expense for intangible assets was ~~$0.9~~$3.1 million and ~~$2.4~~$1.9 million for the three months ended September 30, 2019 and 2018, respectively. Amortization expense for intangible assets was $6.4 million and $4.5 million for the nine months ended September 30, ~~2017, respectively~~2019 and ~~$0.3 million and $0.9 million for the three and nine months ended September 30, 2016,~~2018, respectively.

The expected amortization of the intangible assets, as of September 30, ~~2017,~~2019, for each of the next five years and thereafter is as follows (in thousands):

The Company continually evaluates potential acquisitions that either strategically fit within the Company’s existing portfolio or expand the Company’s portfolio into new product lines or adjacent markets. The Company has completed a number of acquisitions that have been accounted for as business combinations and have resulted in the recognition of goodwill in the Company’s financial statements. This goodwill includes the know-how of the assembled workforce, the ability of the workforce to further improve technology and product offerings, customer relationships and the expected cash flows resulting from these efforts. Goodwill may also include expected synergies resulting from the complementary strategic fit these businesses bring to existing operations. The business acquisition discussed below is included in the Company’s results of operations from their respective dates of acquisition.

On April 1, 2019, the Company entered into a Stock Purchase Agreement with Mission Mode Solutions, Inc. (“Mission Mode”) pursuant to which the Company purchased all of the issued and outstanding shares of stock of Mission Mode for base consideration of $6.8 million. There is also a contingent payment of up to $1.0 million that can be earned in addition to the base consideration by the sellers based on successfully converting Mission Mode’s customers to the Company’s products. At the date of the acquisition, the Company preliminarily assessed the probabilities of Mission Mode meeting the future sales and billing thresholds and determined them to be probable. Therefore, contingent consideration was recorded as part of the purchase price allocation and the preliminary fair value of the contingent consideration was determined to be $0.6 million. The Company’s acquisition of Mission Mode was made primarily to expand the Company’s customer base and to a lesser extent to complement some of the existing facets of Mission Mode’s business with the Company’s existing products.

The Company accounted for the ~~IDV Solutions LLC, or IDV and Crisis Commander acquisitions~~acquisition of Mission Mode using the ~~purchase~~acquisition method of accounting for business combinations under ~~ASC~~FASB Accounting Standards Codification (“ASC”) 805, Business Combinations. The total purchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

AsFair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the ~~Company finalizes the~~estimated fair value assigned to each class of assets acquired and liabilities assumed, ~~additional~~as well as asset lives and the expected future cash flows and related discount rates, can materially impact the Company’s results of operations. Significant inputs used for the model included the amount of cash flows, the expected period of the cash flows and the discount rates.

The following table summarizes the allocation of the purchase consideration and the estimated fair value of the assets acquired and the liabilities assumed as well as the aggregate consideration during the three months ended June 30, 2019 for the acquisition of Mission Mode made by the Company (in thousands):

The weighted average useful life of all identified acquired intangible assets is 6.90 years. The weighted average useful lives for acquired technologies, customer relationships and trade names are 3.0 years, 7.0 years and 1.0 year, respectively. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method and the estimated useful lives of one to seven years. The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

As a result of the acquisition, the Company recorded $2.9 million of goodwill. The goodwill balance is primarily attributed to the anticipated synergies from the acquisition and expanded market opportunities with respect to the integration of Mission Mode’s products with the Company's other solutions. The Company believes that the factors listed above in relation to the purchase of Mission Mode support the amount of goodwill recorded as a result of the purchase price paid for the acquisition, in relation to other acquired tangible and intangible assets. The resulting goodwill from the Mission Mode acquisition is not deductible for income tax purposes.

For the nine months ended September 30, 2019, the Company incurred transaction costs of $0.1 million in connection with the Mission Mode acquisition, which were expensed as incurred and included in general and administrative expenses within the accompanying consolidated statements of operations.

Neither the investment in the assets nor the results of operations of the acquisition of Mission Mode was significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not presented.

On July 29, 2019, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with NC4 Inc., NC4 Public Sector LLC, and Celerium Group Inc., pursuant to which the Company purchased all of the outstanding membership interests of NC4 Inc. and NC4 Public Sector LLC (collectively, “NC4”) for total consideration of approximately $84.5 million. The Company paid approximately $51.7 million in cash at closing from the Company’s cash and cash equivalents, which is subject to certain post-closing net working capital adjustments provided for in the Purchase Agreement. The remaining purchase price was paid with 320,998 newly issued shares of the Company’s common stock. On the date of this acquisition the price of the Company’s common stock on the Nasdaq Global Market was $102.18 price per share. On August 1, 2019, the Acquisition was consummated pursuant to the Purchase Agreement, except the transfer of the NC4 Public Sector business which was consummated on September 30, 2019. The Company determined that the two transactions should be accounted for as a single transaction in accordance with ASC 810-10-40-6, Consolidation, as the transactions were entered in contemplation of one another and were essentially a single transaction designed to achieve an overall commercial effect. The Company’s acquisition of NC4 was made primarily to expand the Company’s customer base and to a lesser extent to complement some of the existing facets of NC4’s business with the Company’s existing products.

The Company accounted for the acquisition of NC4 using the acquisition method of accounting for business combinations under ASC 805. Acquired assets and liabilities were recorded at their estimated fair values as of the acquisition date.

As the Company finalizes their estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months). Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives and the expected future cash flows and related discount rates, can ~~materiality~~materially impact ~~our~~the Company’s results of operations. Significant inputs used for the model included the amount of cash flows, the expected period of the cash flows and the discount rates. The finalization of the ~~purchase~~acquisition accounting valuation assessment may result in a change in the valuation of ~~the contingent consideration~~accounts receivable, deferred tax assets and liabilities, deferred revenue, and intangible assets, which ~~may~~could have a material impact on ~~our~~the Company’s results of operations and financial position.

On January 27, 2017, the Company acquired IDV, in exchange for current cash consideration of $21.2 million, net of cash acquired and the fair value of contingent future consideration. At the date of acquisition, $2.5 million was deposited in an escrow account for fifteen months. The ~~escrow fund~~initial accounting is available to provide security to the Company to compensate it for losses it may incur as a result of any inaccuracy in the representations or warranties of IDV or the sellers contained in the IDV purchase agreement, any failure to comply with any covenant contained in the IDV purchase agreement or any liabilities or obligations related to the operation of IDV’s business prior to the closing of the acquisition.

In addition, in order to earn any future contingent consideration, IDV is required to meet certain billings thresholds at June 30, 2017 and December 31, 2017. At the date of the acquisition, the Company preliminarily assessed the probabilities of IDV meeting the future sales and billing thresholds and determined them to be probable. Therefore, contingent consideration was recorded as part of the purchase price allocation and the preliminary fair value of the contingent consideration was determined to be $5.0 million. Based on sales and billings thresholds met as of June 30, 2017, the Company paid $3.8 million of the contingent considerationincomplete as of September 30, ~~2017. IDV~~2019 for the acquired assets and liabilities noted above as the Company is ~~a provider~~currently in process of ~~threat~~completing the assessment of valuation inputs and ~~operational visualization software located in Lansing, Michigan. The Company acquired IDV for its customer base and to complement some~~assumptions as well as completing the assessment of the ~~existing facets~~tax attributes of ~~its~~the business ~~with the Company’s existing customers.~~combination.

The following table summarizes the ~~allocation of the purchase consideration and the~~preliminary estimated fair value of the assets acquired and the liabilities assumed as well as the aggregate consideration during the three months ended September 30, 2019 for the acquisition of ~~IDV~~NC4 made by the ~~Company. The purchase price allocations for IDV included in the table below are preliminary. The following table also summarizes the aggregate consideration for IDV as of September 30, 2017~~Company (in thousands):

			NC4
Assets acquired	IDV
Accounts receivable		1,462	$	2,611
Other assets		242
Other current assets				530
Property and equipment		174		75
Acquired technology				5,210
Trade names		1,590		8,610
Acquired technology		2,490
Customer relationships		3,400		35,490
Non-compete arrangement		240
Goodwill		21,196		40,424
Total assets acquired	$	30,794		92,950
Liabilities assumed
Accounts payable and accrued expenses		347
Deferred revenue		4,060		7,540
Other liabilities		132
Other current liabilities				917
Net assets acquired	$	26,255	$	84,493
Consideration paid
Cash paid, net of cash acquired		21,235
Acquisition date fair value of contingent consideration		5,020
Cash paid			$	51,655
Fair value of common stock issued				32,838
Total	$	26,255	$	84,493

The weighted average useful life of all identified acquired intangible assets is ~~4.26~~5.88 years. The ~~weighted~~ average useful lives for acquired technologies, customer relationships ~~non-compete arrangements~~ and trade names are 3.0 years, ~~5.0 years, 2.0~~7.0 years and ~~5.0~~3.0 years, respectively. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method and the estimated useful lives of ~~two~~three to ~~five~~seven years. The straight-line method of amortization represents the Company’s best estimate of the ~~distribution~~period of ~~the economic value~~expected cash flows of the identifiable intangible assets.

As a result of the acquisition, the Company recorded ~~$21.2~~$40.4 million of goodwill. The goodwill balance is primarily attributed to the anticipated synergies from the acquisition and expanded market opportunities with respect to the integration of ~~IDV’s~~NC4’s products with the Company's other ~~solutions~~.solutions. The Company believes that the factors listed above in relation to the purchase of ~~IDV~~NC4 support the amount of goodwill recorded as a result of the purchase price paid for the acquisition, in relation to other acquired tangible and intangible assets. The resulting goodwill from the ~~IDV~~NC4 acquisition is deductible for income tax purposes.

For both the three and nine months ended September 30, ~~2017,~~2019, the Company incurred transaction costs of ~~none and $0.1~~$0.2 million ~~respectively~~ in connection with the ~~IDV~~NC4 acquisition, which were expensed as incurred and included in general and administrative expenses within the accompanying consolidated statements of operations.

The following tables reflect the unaudited pro forma combined results of operations for the three and nine months ended September 30, 2017 and the three and nine months ended September 30, 2016 as if the acquisition of IDV had taken place on January 1, 2016, as well as the results of acquired business included in our unaudited financial information for the three months ended September 30, ~~2017.~~2019 as well as the unaudited pro forma combined results of operations for the three and nine months ended September 30, 2019 and the three and nine months ended September 30, 2018 as if the acquisition of NC4 had taken place on January 1, 2018. The unaudited pro forma financial information includes the effects of certain adjustments, including the amortization of acquired intangible assets and the associated tax effect and the elimination of the Company’s and the acquiree’s non-recurring acquisition related ~~expenses:~~expenses (in thousands, except per share amounts):

The unaudited pro forma information presented does not purport to be indicative of the results that would have been achieved had the acquisition been consummated at January 1, ~~2016~~2018 nor of the results which may occur in the future. The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable.

OnFor the year ended December ~~30, 2016,~~31, 2018, the Company ~~completed~~acquired Unified Messaging Systems ASA, PlanetRisk, Inc. and Respond B.V. and accounted for the acquisitions using the acquisition method of ~~Crisis Commander,~~accounting for business combinations under ASC 805. The acquisitions were not material individually or on a ~~privately held SaaS mobile crisis management company based~~consolidated basis.

On April 3, 2018, the Company acquired Unified Messaging Systems ASA (“UMS”) in ~~Norsborg, Sweden.~~ exchange for cash consideration of $31.9 million, net of cash acquired. UMS is an industry leader in the area of critical communication and population alerting systems and is headquartered in Oslo, Norway.The ~~acquisition was consummated pursuant~~Company acquired UMS for its customer base and to complement some of the existing facets of UMS’ business with the Company’s existing products.

On May 1, 2018, the Company acquired certain assets from PlanetRisk, Inc. (“PlanetRisk”) in exchange for cash consideration of $2.0 million. PlanetRisk is a ~~purchase agreement~~provider of data analytics and visualization solutions. The Company acquired these assets from PlanetRisk for ~~an initial preliminary~~its customer base and to complement some of the existing facets of PlanetRisk’s business with the Company’s existing products.

On May 18, 2018, the Company acquired Respond B.V. (“Respond”) in exchange for current cash consideration of $2.0 million, net of cash acquired and issued a note to be paid one year after the transaction date in the amount of $0.4 million, for a total purchase price of ~~$2.7 million, subject~~$2.3 million. Respond is a provider of critical communication solutions and is headquartered in the Netherlands. The Company acquired Respond for its customer base and to ~~earn out payments contingent on meeting certain revenue thresholds, which are expected to be paid in March 2018.~~

~~The excess~~complement some of ~~purchase consideration over~~ the ~~fair value~~existing facets of net tangible liabilities assumed and identifiable intangible assets acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of assets acquired and liabilities assumed may be subject to change as additional information is received. Thus, the provisional measurements of fair value have been recorded.

~~The goodwill balance is primarily attributed to the anticipated synergies from the acquisition and expanded market opportunities with respect to the integration of Crisis Commander’s platform~~Respond’s business with the ~~Company's other solutions. The goodwill balance is not deductible for U.S. income tax purposes.~~Company’s existing products.

~~The~~For the three and nine months ended September 30, 2018, the Company incurred transaction costs of $0.3 million and $0.6 million, respectively, in connection with the UMS, PlanetRisk and Respond acquisitions, which were expensed as incurred and included in general and administrative expenses within the accompanying consolidated statements of operations.

Neither the investment in the assets ~~and~~nor the results of operations of ~~Crisis Commander were not~~the acquisition of UMS, PlanetRisk and Respond was significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not presented.

In November 2017, the Company issued $115.0 million aggregate principal amount of 1.50% convertible senior notes (the “Notes”) due November 1, 2022, unless earlier repurchased by the Company or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on May 1 and November 1 of each year, commencing on May 1, 2018.

The Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank, National Association, as trustee. The Notes are unsecured and rank: senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated; effectively subordinated in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally subordinated to all existing and future indebtedness and other liabilities incurred by the Company’s subsidiaries.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election. The Company’s current intention is to settle the conversion in shares of common stock if a conversion were to occur.

The Notes have an initial conversion rate of 29.6626 shares of common stock per $1,000 principal amount of Notes. This represents an initial effective conversion price of approximately $33.71 per share of common stock and approximately 3.4 million shares issuable upon conversion. Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a Note, except in limited circumstances. Accrued but unpaid interest will be deemed to be paid by cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock paid or delivered, as the case may be, to the holder upon conversion of a Note.

Prior to the close of business on the business day immediately preceding May 1, 2022, the Notes will be convertible at the option of holders during certain periods, only upon satisfaction of certain conditions set forth below. On or after May 1, 2022, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at the conversion rate at any time regardless of whether the conditions set forth below have been met.

Holders may convert all or a portion of their Notes prior to the close of business on the business day immediately preceding May 1, 2022, in multiples of $1,000 principal amount, only under the following circumstances:

Based on the market price of the Company’s common stock during the 30 trading days preceding June 30, 2018, the Notes are convertible at the option of the debt holder as of September 30, 2018. No debt holders have exercised their right for conversion as of September 30, 2019. The Notes are classified as long-term on the consolidated balance sheet as of September 30, 2019 as it is the Company’s intent to settle all of the debt at maturity or to settle in shares if exercised by the debt holder prior to maturity.

Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and with similar maturity, the Company estimated the implied interest rate of its Notes to be approximately 6.93%, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the equity component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the Notes, which resulted in a fair value of the liability component of $92.1 million upon issuance, calculated as the present value of implied future payments based on the $115.0 million aggregate principal amount. The excess of the principal amount of the liability component over its carrying amount, or the debt discount, is amortized to interest expense over the term of the Notes. The $22.9 million difference between the aggregate principal amount of $115.0 million and the estimated fair value of the liability component was recorded in additional paid-in capital as the Notes were not considered redeemable.

The following table sets forth total interest expense recognized related to the Notes (in thousands):

As of September 30, 2019 and December 31, 2018, the fair value of the Notes, which was determined based on inputs that are observable in the market or that could be derived from, or corroborated with, observable market data, quoted price of the Notes in an over-the-counter market (Level 2), and carrying value of debt instruments (carrying value excludes the equity component of the Company’s convertible notes classified in equity) were as follows (in thousands):

In connection with the issuance of the Notes, the Company entered into capped call transactions with certain counterparties affiliated with the initial purchasers and others. The capped call transactions are expected to reduce potential dilution of earnings per share upon conversion of the Notes. Under the capped call transactions, the Company purchased capped call options that in the aggregate relate to the total number of shares of the Company’s common stock underlying the Notes, with an initial strike price of approximately $33.71 per share, which corresponds to the initial conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes, and have a cap price of approximately $47.20. The cost of the purchased capped calls of $12.9 million was recorded to shareholders’ equity as of December 31, 2018 and will not be re-measured.

Based on the closing price of the Company’s common stock of $61.71 on September 30, 2019, the if-converted value of the Notes was more than their respective principal amounts.

As of September 30, ~~2017,~~2019, the Company had authorized 10,000,000 shares of preferred stock, par value $0.001, of which no0 shares were outstanding.

As of September 30, ~~2017,~~2019, the Company had authorized 100,000,000 shares of common stock, par value $0.001. Holders of common stock are entitled to one vote per share. At September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, there were ~~28,203,369~~33,778,616 and ~~27,150,674~~29,700,192 shares of common stock issued and outstanding, respectively.

The Company’s 2016 Equity Incentive Plan (the “2016 Plan”) became effective on September 15, 2016. The 2016 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and performance share awards to employees, directors and consultants of the Company. A total of 3,893,118 shares of the Company’s common stock were initially reserved for issuance under the 2016 Plan, which is the sum of (1) 2,000,000 shares, (2) the number of shares reserved for issuance under the Company’s 2008 Equity Incentive Plan ~~(the “2008 Plan”)~~or the 2008 Plan, at the time the 2016 Plan became effective (up to a maximum of 42,934 shares) and (3) shares subject to stock options or other stock awards granted under the 2008 Plan that would have otherwise returned to the Company’s 2008 Plan (up to a maximum of 1,850,184 shares). The number of shares of common stock reserved for issuance under the 2016 Plan will automatically increase on January 1 of each year, beginning on January 1, 2017, by 3% of the number of shares of the Company’s capital stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors.

As a result of the adoption of the 2016 Plan, no0 further grants may be made under the 2008 Plan. The 2008 Plan provided for the grant of stock options to the Company’s employees, directors and consultants. Stock option awards were granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant as determined by the Company’s board of directors. The option awards generally vested over four years and were exercisable any time after vesting. The stock options expire ten years after the date of grant.

The Company’s Employee Stock Purchase Plan ~~(“2016~~(the “2016 ESPP”) became effective on September 15, 2016. A total of 500,000 shares of the Company’s common stock were initially reserved for issuance under the 2016 Plan. The number of shares reserved for issuance under the 2016 ESPP will automatically increase on January 1 of each year, beginning on January 1, 2017, by the lesser of 200,000 shares of the Company’s common stock, 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors.

The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan limitations. ~~Except for the initial offering period, the~~The 2016 ESPP provides for separate six-month offering periods beginning each March and September of each fiscal year.

On each purchase date, eligible employees will purchase the Company’s stock at a price per share equal to 85% of the lesser of (i) the fair market value of the Company’s common stock on the offering date or (ii) the fair market value of the Company’s common stock on the purchase date.

For the nine months ended September 30, ~~2017, 128,786~~2019 and 2018, 42,481 and 74,517 shares of common stock were purchased under the 2016 ~~ESPP.~~ESPP, respectively. The 2016 ESPP is considered compensatory for purposes of stock-based compensation expense. The Company recorded stock-based compensation expense of $0.2 million and $0.2 million for the three months ended September 30, 2019 and 2018, respectively. The Company recorded stock-based compensation expense of $0.7 million and $0.5 million for the nine months ended September 30, 2019 and 2018, respectively.

The Company recorded stock-based compensation expense of ~~$2.8~~$1.3 million and ~~$4.9~~$0.7 million for the three ~~and nine~~ months ended September 30, ~~2017,~~2019 and 2018, respectively. The Company recorded stock-based compensation expense of ~~$0.8~~$4.7 million and ~~$2.2~~$4.7 million for the ~~three and~~ nine months ended September 30, ~~2016,~~2019 and 2018, respectively.

The total intrinsic value of options exercised for the ~~three and~~ nine months ended September 30, ~~2017~~2019 was ~~$2.9 million and $6.5 million, respectively.~~$44.5 million. This intrinsic value represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option. Based on the fair market value of the Company’s common stock at September 30, ~~2017,~~2019, the total intrinsic value of all outstanding options was ~~$26.7~~$28.2 million.

The fair value of stock option grants isand ESPP are determined using the Black-Scholes option pricing model with the following weighted average assumptions. In addition, the fair value per share on grant date is presented below:

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Employee Stock Options:
Fair value per share on grant date	$23.17 - $23.60		$8.94 - $9.02		$18.05 - $24.87		$8.51 - $9.02			—	$58.75			—	$33.06 - $58.75
Expected term (in years)(1)		6.00	5.99 - 6.11		6.00 - 6.11		5.29 - 6.11			—		6.00		—		6.00
Expected volatility(2)	60%		70%		60%		70%			—	45%			—	45% - 50%
Risk-free interest rate(3)	1.82% - 1.93%		1.21% - 1.25%		1.82% - 2.47%		1.21% - 1.86%			—	2.72%			—	2.72% - 2.98%
Dividend rate(4)		0%		0%		0%		0%		—	0%			—	0%
Employee Stock Purchase Plan:
Expected term (in years)(1)		0.50		—		0.50		—		0.50		0.50		0.50		0.50
Expected volatility(2)	60%			—	60%			—	45%		45% - 50%		45%		45% - 60%
Risk-free interest rate(3)	1.18%			—	0.45% - 1.18%			—	1.93% - 2.52%		1.89% - 2.33%		1.93% - 2.52%		1.18% - 2.33%
Dividend rate(4)		0%		—		0%		—	0%		0%		0%		0%

Total unrecognized compensation cost related to nonvested stock options was approximately ~~$15.3~~$7.6 million as of September 30, ~~2017,~~2019 and is expected to be recognized over a weighted average period of ~~3.12~~2.1 years.

A summary of activities under the 2008 Plan and the 2016 Plan is shown as follows for the year ended December 31, ~~2016~~2018 and the nine months ended September 30, ~~2017:~~2019:

	Stock options outstanding			Weighted average exercise price		Stock options outstanding			Weighted average exercise price
Outstanding at December 31, 2015		1,821,722		$	8.68
Outstanding at December 31, 2017							2,440,290		$	16.55
Granted		292,204			14.75		557,896			35.01
Exercised		(163,968	)		4.30		(778,370	)		13.04
Forfeited		(65,533	)		8.03		(473,743	)		22.35
Outstanding at December 31, 2016		1,884,425			10.02
Outstanding at December 31, 2018							1,746,073			22.43
Granted		997,244			22.47		—			—
Exercised		(370,084	)		5.64		(851,467	)		18.58
Forfeited		(42,032	)		15.50		(96,758	)		23.95
Outstanding at September 30, 2017		2,469,553		$	15.61
Outstanding at September 30, 2019							797,848			26.36

Stock-based compensation expense is recognized over the award’s expected vesting schedule, which is reduced for forfeitures.

~~In August 2017, we~~During the nine months ended September 30, 2019, the Company granted ~~286,000~~359,474 restricted stock units (“RSUs”) to members of ~~our~~its senior management and certain other employees pursuant to the 2016 Plan. ~~We account~~The Company accounts for ~~restricted stock units~~RSUs issued to employees at fair value, based on the market price of ~~our~~the Company’s common stock on the date of grant. During the three months ended September 30, ~~2017~~2019 and ~~2016 we~~2018, the Company recorded ~~$0.4~~$3.7 million and ~~none,~~$2.3 million, respectively, of stock-based compensation related to the ~~restricted stock units~~RSUs that had been issued to-date. During the nine months ended September 30, ~~2017~~2019 and ~~2016 we~~2018, the Company recorded ~~$0.4~~$12.0 million and ~~none,~~$4.4 million, respectively, of stock-based compensation related to the ~~restricted stock units that had been issued to-date.~~RSUs. There were ~~no restricted stock units which~~272,022 RSUs that vested during the ~~three and~~ nine months ended September 30, ~~2017 and 2016, respectively.~~

2019. There were 138,155 RSUs that vested during the nine months ended September 30, 2018.

As of September 30, ~~2017,~~2019, there was ~~$6.3~~$36.3 million of unrecognized compensation expense related to unvested employee ~~restricted stock unit~~RSU awards which is expected to be recognized over a weighted-average period of approximately ~~2.8~~2.55 years. For ~~restricted stock unit awards~~RSUs subject to graded vesting, ~~we recognize~~the Company recognizes compensation cost on a straight-line basis over the service period for the entire award.

During the nine months ended September 30, 2019, the Company granted 328,343 performance-based restricted stock units (“PSUs”) to members of its management pursuant to the 2016 Plan. The PSUs generally vest based on the Company achieving certain revenue growth thresholds which range from 20% to 40% compounded annual growth over a measurement period of two years for the first 50% of PSUs and three years for the remaining PSUs. The vesting of the PSUs is subject to the employee’s continued employment with the Company through the date of achievement. The share price of the Company’s common stock on the date of issuance of the PSUs ranged from $54.83 to $98.92 per share. The fair value is based on value of the common stock at the date of issuance and the probability of achieving the performance metric. Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions. During the three months ended September 30, 2019 and 2018, the Company recognized $3.1 million and $0.2 million, respectively, of stock compensation expense in connection with the PSU awards. During the nine months ended September 30, 2019 and 2018, the Company recognized $6.7 million and $0.4 million, respectively, of stock compensation expense in connection with the PSU awards.

As of September 30, 2019, there was $31.8 million of unrecognized compensation expense related to unvested PSUs which is expected to be recognized over a weighted-average period of approximately 2.14 years. Compensation cost is recognized under the accelerated method and is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions.

~~In August 2017, we~~The Company granted ~~286,000~~0 market-based restricted stock units ~~to members of our senior management~~(“market-based RSUs”) pursuant to the 2016 ~~Plan.~~ ~~The restricted stock units vest~~Plan during the nine months ended September 30, 2019. Market-based RSUs vested based on the Company achieving certain stock price thresholds, which range from $35 per share to ~~$55~~$65 per share for 30 consecutive trading days as reported by The Nasdaq Stock Market, LLC, subject to the employee’s continued employment with the Company through the date of achievement. The share price of ~~our~~the Company’s common stock on the date of issuance of the market-based ~~restricted stock unit~~RSUs was ~~$23.60~~$23.16 to $51.99 per share. The fair value iswas based on values calculated under the Monte Carlo simulation model on the grant date. The key estimates used in the Monte-Carlo simulation were a risk-free rate of 2.26% to 2.85%, dividend yield of ~~zero,~~0, expected term of 10 years and volatility of 50% to 60%. Compensation cost is not adjusted in future periods for subsequent changes in the expected outcome of market related conditions. NaN stock-based compensation expense was recorded during the nine months ended September 30, 2019 as all issued market-based RSUs were fully vested previously. For the three and nine months ended September 30, ~~2017, we~~2018, the Company recognized ~~$1.0~~$0.1 million and $10.3 million, respectively, of stock compensation expense in connection with these ~~awards, which is included in general and administrative expenses.~~awards.

As of September 30, ~~2017,~~2019, there was ~~$6.8 million of~~0 unrecognized compensation expense related to unvested ~~market based awards which is expected to be recognized over a weighted-average period of approximately 1.1 years. We recognize~~market-based awards. The Company recognizes compensation cost on a straight-line basis over the service period for the entire award.

There were 657 and 543,825 market-based RSUs which had vested during the nine months ended September 30, 2019 and 2018, respectively.

A summary of activity in connection with the Company’s RSUs, market-based RSUs and PSUs for the nine-month period ended September 30, 2019 is as follows:

The Company recorded the total stock-based compensation expense as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
Cost of revenue	$	141	$	46	$	266	$	135	$	509	$	312	$	1,356	$	1,877
Sales and marketing		691		211		1,250		503		2,423		1,180		7,338		7,147
Research and development		416		87		738		263		1,732		1,091		5,560		5,606
General and administrative		1,555		415		2,618		1,264		3,637		958		9,840		5,627
Total	$	2,803	$	759	$	4,872	$	2,165	$	8,301	$	3,541	$	24,094	$	20,257

Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share ~~of common stock~~ is computed by giving effect to all potential dilutive shares of common stock. Basic and diluted net loss per share of common stock were the same for all periods presented as the impact of all potentially dilutive securities outstanding was anti-dilutive. The Company uses the if converted method for calculating any potential dilutive effect on diluted loss per share.

The following common equivalent shares were excluded from the diluted net loss per share calculation because their inclusion would have been anti-dilutive:

	Three Months Ended September 30,				Nine Months Ended September 30,				As of September 30,
	2017		2016		2017		2016		2019		2018
Stock options		2,469,553		1,846,853		2,469,553		1,846,853		797,848		1,836,671
Convertible senior notes										3,411,199		3,411,199
Non-vested performance-based restricted stock units										594,723		93,362
Non-vested market-based restricted stock units		286,000		—		286,000		—		—		11,877
Non-vested restricted stock units		286,000		—		286,000		—		650,093		417,209
Total		3,041,553		1,846,853		3,041,553		1,846,853		5,453,863		5,770,318

The Company is required to reserve and keep available from the Company’s authorized but unissued shares of common stock a number of shares equal to the number of shares subject to outstanding awards under the 2008 Plan and the number of shares reserved for issuance under each of the 2016 Plan and 2016 ESPP.

The amount of such shares of the Company’s common stock reserved for these purposes at September 30, ~~2017~~2019 is as follows:

In connection with the issuance of the Notes in November 2017, the Company paid $12.9 million to enter into capped call option agreements to reduce the potential dilution to holders of the Company’s common stock upon conversion of the Notes. The capped call option agreements are excluded from the calculation of diluted net loss per share attributable to common stockholders, as their effect is antidilutive.

The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax. The Company does not provide for USU.S. deferred income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are reinvested indefinitely.

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter. The Company’s quarterly tax provision, and its quarterly estimate of its annual effective tax rate, are subject to significant volatility due to several factors, including the Company’s ability to accurately predict its pre-tax income and loss in multiple jurisdictions.

For the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company recorded ~~a tax benefit for income taxes of $79,000 and~~ a provision for income taxes of ~~$35,000,~~$0.1 million and $0.1 million, respectively, resulting in an effective tax ~~benefit of 1.83% and effective tax~~ rate of ~~1.35%~~0.77% and 1.03%, respectively. For the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the Company recorded a ~~tax benefit~~provision for income taxes of ~~$65,000~~$0.5 million and ~~a tax benefit of $75,000,~~$0.4 million, respectively, resulting in an effective tax ~~benefit~~rate of ~~0.47%~~1.38% and ~~benefit of 0.86%~~0.99%, respectively. During the current year periods, the effective tax rate is lower than the statutory federal tax rate as the Company was not able to benefit from its net operating losses due to its full valuation allowance.

As of September 30, ~~2017,~~2019, the Company had gross tax-effected unrecognized tax ~~benefits~~provision of ~~$0.3~~$0.6 million, of which ~~$0.3~~$0.6 million, if recognized, would favorably impact the effective tax rate. The Company’s existing tax positions will continue to generate an increase in unrecognized tax benefits in subsequent periods. The Company’s policy is to record interest and penalties related to unrecognized tax benefits as income tax expense. During the three and nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, the amounts recorded related to the accrual of interest and penalties were immaterial in each period.

The Company operates as ~~one~~1 operating segment. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker ~~or CODM,~~(“CODM”), who is the Company’s chief executive officer, in deciding how to allocate resources and assess the Company’s financial and operational performance. While the Company has applications that address multiple use cases, all of the Company’s applications operate on and leverage a single technology platform and are deployed and sold in an identical way. In addition, the Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. As a result, the Company has determined that the Company’s business operates in a single operating segment. Since the Company operates as one operating segment, all required financial segment information can be found in the consolidated financial statements.

~~Revenue by location is determined by the billing address of the customer. Approximately 90% and 90% of~~The following table disaggregates the Company’s revenue by geography which provides information as to the major source of revenue (in thousands):

The following table presents the Company’s revenues disaggregated by revenue source (in thousands):

The Company does not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are performed. There are a small number of professional services that may occur over a period of time, but that period of time is generally very short in duration. Any contract assets that may arise are recorded in other assets in the Company’s consolidated balance sheet. As of September 30, 2019, the Company had $1.6 million in receivables related to services performed which were not billed.

The Company’s contract liabilities consist of advance payments and deferred revenue. The Company’s contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. The Company classifies advance payments and deferred revenue as current or noncurrent based on the timing of when it expects to recognize revenue. Generally, all contract liabilities are expected to be recognized within one year and are included in deferred revenue in the Company’s consolidated balance sheet. The noncurrent portion of deferred revenue is included and separately disclosed in the Company’s consolidated balance sheet.

Current deferred costs, which primarily consist of deferred sales commissions, were $7.7 million and $6.5 million as of September 30, 2019 and December 31, 2018, respectively. Noncurrent deferred costs, which primarily consist of deferred sales commissions, were $12.0 million and $10.3 million as of September 30, 2019 and December 31, 2018, respectively. During the three months ended September 30, 2019 and 2018, amortization expense for the deferred costs was ~~from~~$1.9 million and $1.4 million, respectively. During the ~~United States~~nine months ended September 30, 2019 and 2018, amortization expense for the deferred costs was $5.5 million and $3.9 million, respectively. There was 0 impairment loss in relation to the costs capitalized for the three and nine months ended September 30, ~~2017,~~2019 and the year ended December 31, 2018, respectively. ~~Approximately 90%~~

$36.9 million and ~~89%~~$77.0 million of subscription services revenue was recognized during the three and nine months ended September 30, 2019 and was included in the deferred revenue balances at the beginning of the respective period. $4.1 million and $5.2 million of professional services revenue was recognized during the three and nine months ended September 30, 2019 and was included in the deferred revenue balances at the beginning of the respective period.

As of September 30, 2019, approximately $250.9 million of revenue is expected to be recognized from remaining performance obligations for subscription contracts.

The Company expects to recognize revenue on approximately $138.8 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

As of September 30, 2019, approximately $12.2 million of revenue is expected to be recognized from remaining performance obligations for professional services contracts. The Company expects to recognize revenue on approximately $8.7 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

The Company’s leases relate primarily to office facilities that expire on various dates from 2019 through 2027. The terms of the Company's non-cancelable operating lease arrangements typically contain fixed lease payment which increases over the term of the lease at fixed rates, rent holidays and provide for additional renewal periods. Lease expense is recognized over the term of the lease on a straight-line basis. All of the Company’s ~~revenue was~~leases are classified as operating leases. The Company has determined that periods covered by options to extend the Company’s leases are excluded from the ~~United States~~lease term as the Company is not reasonably certain the Company will exercise such options. Operating lease expense, including expenses related to short-term leases, were $1.2 million and $0.9 million for the three months ended September 30, 2019 and 2018, respectively, and $3.5 million and $2.6 million for the nine months ended September 30, 2019 and 2018, respectively.

The Company records its ROU Assets within other assets (long term) and its operating lease liabilities within other current and long-term liabilities.

Additional information related to the Company’s leases as of and for the nine months ended September 30, 2019, is as follows (in thousands, except lease term and discount rate):

Maturities of lease liabilities as of September 30, 2019 were as follows (in thousands):

The following table presents components of lease expense for the three and nine months ended September 30, 2016, respectively. No other individual country comprised more than 10% of total revenue for the three and nine months ended September 30, 2017 and 2016. Property and equipment by geographic location is based on the location of the legal entity that owns the asset. 2019 (in thousands):

As of September 30, ~~2017, more than 88% of the Company’s property~~2019, we do not have any leases that have not yet commenced that create significant rights and ~~equipment was located in the United States.~~

The Company leases office space in Pasadena, California; San Francisco, California; Burlington, Massachusetts; Colchester, England; Windsor, England; Lansing, Michigan, Orlando, Florida, Norsborg, Sweden and Beijing, China under operating leases and recognizes escalating rent expense on a straight-line basis over the expected lease term.

There were no material changes in our commitments under contractual obligations, as disclosed in the Company’s audited consolidated financial statements for the year ended December 31, 2016 and related notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, except those disclosed below.

In December 2016, the Company entered into a new lease for its executive offices in Burlington, Massachusetts that began on June 1, 2017 and will account for $7.8 million in minimum lease payments over the next five years.

In January 2017, as a result of the acquisition of IDV, the Company inherited leases for IDV’s executive offices in Lansing, Michigan and sales office in Orlando, Florida which will expire over the next seven years and will account for $1.4 million in minimum lease payments.

In June 2017, the Company entered into a new lease for its offices in Beijing, China that will increase its future minimum lease payments beginning in July 2017 by $0.8 million over the next two years.

In June 2017, the Company entered into a new lease for its offices in Maidenhead, United Kingdom that will increase its future minimum lease payments beginning in July 2017 by $0.2 million over the next four years.obligations.

~~As of September 30, 2017, future~~Fiscal year 2018 lease commitments in accordance with prior guidance

Future minimum lease payments under non-cancelable operating leases, ~~are~~including short-term leases as of September 30, 2019 were as follows (in thousands):

Rent expense was $0.8 million and $1.7 million for the three and nine months ended September 30, 2017, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2016, respectively.

InFrom time to time the ~~normal~~Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of ~~business,~~business. Although the results of litigation and claims cannot be predicted with certainty, the Company ~~has been subjected to various unasserted claims. The Company does~~currently believes that the final outcome of these ordinary course matters will not ~~believe these will~~ have a material adverse ~~impact to the~~effect on its business, operating results, financial ~~statements.~~

The Company has a revolving line of credit agreement with Western Alliance Bank, which provides for a $15.0 million revolving secured credit facility maturing on June 30, 2018. Amounts outstanding under the line of credit bear interest at the prime rate plus 0.75% with accrued interest payable on a monthly basis and outstanding and unpaid principal due upon maturity. Western Alliance Bank maintains a security interest in substantially allcondition or cash flows. Regardless of the ~~Company’s tangible~~outcome, litigation can have an adverse impact because of defense and ~~intangible assets, excluding intellectual property, to secure any outstanding amounts under the loan agreement. The loan agreement contains customary events~~settlement costs, diversion of ~~default, conditions to borrowing~~management resources and covenants, including restrictions on the Company’s ability to dispose of assets, make acquisitions, incur debt, incur liens and make distributions and dividends to stockholders. The loan agreement also includes a financial covenant related to the Company’s recurring revenue renewal rate. During the continuance of an event of default, Western Alliance Bank may accelerate amounts outstanding, terminate the credit facility and foreclose on the collateral.other factors.

~~As of September 30, 2017, no amounts had been drawn under the credit facility.~~

The Company has entered into employment contracts with certain of the Company’s executive officers which provide for at-will employment. However, under the provisions of the contracts, the Company would incur severance obligations of up to twelve months of the executive’s annual base salary for certain events, such as involuntary terminations.

The Company evaluated subsequent events and concluded that no subsequent events have occurred that would require recognition in the unaudited Condensed Consolidated Financial Statements or disclosure in the notes thereto.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) our audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, ~~2016~~2018 included in our Annual Report on Form 10-K filed with the SEC on March ~~23, 2017.~~1, 2019. This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended ~~or the Exchange Act.~~(the “Exchange Act”). These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements include, but are not limited to, statements with respect to our outlook; the impact of new accounting standards; our ability to service our debt; our business strategy, including with respect to potential acquisitions; plans and objectives of future operations; and our future financial and business performance. The events described in these forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors”, set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Everbridge is a global software company that provides enterprise software applications that automate and accelerate organizations’ operational response to critical events in order to keep people safe and businesses ~~running faster.~~running. During public safety threats such as active shooter situations, terrorist attacks or severe weather conditions, as well as critical business events such as IT outages, cyber-attacks or other incidents such as product recalls or supply-chain interruptions, ~~our SaaS-based platform enables our~~over 4,800 global customers rely on the company’s Critical Event Management Platform to quickly and reliably aggregate and assess threat data, locate people at risk and responders able to assist, automate the execution of pre-defined communications processes through the secure delivery to over 100 different communication devices, and track progress on executing response plans. Our customers use our platform to identify and assess hundreds of different types of threats to their organizations, people, assets or brand. Our solutions enable organizations to deliver intelligent, contextual messages to, and receive verification of delivery from, hundreds orof millions of recipients, across multiple communications modalities such as voice, SMS and ~~e-mail. Our applications enable the delivery of messages in near real-time to more than 100 different communication devices,~~e-mail, in over 200 countries and territories, in 1522 languages and dialects – all simultaneously. We delivered 1.5 billion communications in 2016. We automate the process of sending contextual notifications to multiple constituencies and receiving return information on a person’s or operation’s status so that organizations can act quickly and precisely. Our Critical Event Management platform is comprised of a comprehensive set of software applications that address the full spectrum of tasks an organization has to perform to manage a critical event, including Mass Notification, Incident Management, Safety Connection, IT Alerting, Visual Command Center, Public Warning, Crisis ~~Commander,~~Management, Community Engagement and Secure Messaging. We believe that our broad suite of integrated, enterprise applications delivered via a single global platform is a significant competitive advantage in the market for Critical Event Management solutions, which we refer to generally as CEM.

Our customer base has grown from 867 customers at the end of 2011 to more than ~~3,500~~4,800 customers as of September 30, ~~2017.~~2019. As of September 30, ~~2017,~~2019, our customers were based in 3850 countries and included ~~eight~~9 of the 10 largest U.S. cities, ~~eight~~8 of the 10 largest U.S.-based investment banks, 2546 of the 2550 busiest North American airports, ~~six~~6 of the 10 largest global consulting firms, ~~six~~6 of the 10 largest global ~~auto makers,~~automakers, all ~~four~~4 of the largest global accounting firms, ~~four~~9 of the 10 largest U.S.-based health care providers and ~~four~~5 of the 10 largest U.S.-based health insurers. We provide our applications to customers of varying sizes, including enterprises, small businesses, non-profit organizations, educational institutions and governmental agencies. Our customers span a wide variety of industries including technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, higher education and professional services.

We sell all of our critical event management ~~and enterprise safety~~ applications on a subscription basis. We generally enter into contracts that range from one to three years in length, with an average contract duration of ~~2.0~~2.3 years as of September 30, ~~2017,~~2019, and generally bill and collect payment annually in advance. We derive ~~substantially all~~most of our revenue from subscriptions to ~~our critical event management and enterprise safety~~ applications. ~~Historically, we derived more than 86% of our revenue in each of the last three fiscal years from sales of our Mass Notification application.~~ Over 90% of the revenue that we recognized in each of the eight most recently completed quarters was generated from contracts entered into in prior quarters or renewals of those contracts; the balance of the revenue that we recognized in each such quarter was generated from contracts entered into with new customers or new contracts, other than renewals, entered into with existing customers in such quarter. Historically, we derived more than 60% of our revenue in each of the last three fiscal years from sales of our Mass Notification application. Our pricing model is based on the number of applications subscribed to and, per application, the number of people, locations and things connected to our platform as well as the volume of communications. We also offer premium services including data feeds for social media, threat intelligence and weather. We generate additional revenue by expanding the number of applications that our customers subscribe to and the number of contacts and devices connected to our platform.

We generated revenue of ~~$27.3~~$52.5 million and ~~$19.9~~$38.9 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, representing a period-over-period increase of 35%. We generated revenue of $143.8 million and $105.3 million for the nine months ended September 30, 2019 and 2018, respectively, representing a period-over-period increase of 37%. We ~~generated revenue~~had net losses of ~~$75.2~~ $12.9

million and ~~$55.6~~$8.5 million for the three months ended September 30, 2019 and 2018, respectively. We had net losses of $39.1 million and $37.7 million for the nine months ended September 30, ~~2017~~2019 and 2016, respectively, representing a period-over-period increase of 35%. We had net losses of $4.2 million and $2.6 million for the three months ended September 30, 2017 and 2016, respectively. We had net losses of $13.9 million and $8.7 million for the nine months ended September 30, 2017 and 2016,2018, respectively. Our ~~Adjusted EBITDA,~~adjusted earnings before interest taxes depreciation and amortization (“EBITDA”) which is a measure that is not calculated and presented in accordance with generally accepted accounting principles in the United States ~~or GAAP,~~(“GAAP”) was ~~$0.8~~$1.6 million and ~~$0.3~~$0.2 million for the three months ended September 30, ~~2017~~2019 and ~~2016, respectively. Our Adjusted EBITDA was $(1.6)~~2018, respectively, and $0.1 million and ~~$(0.4)~~$(3.5) million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. See “Other Metrics” below for a discussion of the limitations of adjusted EBITDA and a reconciliation of ad~~justed~~adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.

As of September 30, ~~2017~~2019 and ~~December 31, 2016, 15%~~2018, 28% and ~~14%~~29% of our customers, respectively, were located outside of the United States and these customers generated ~~10%~~20% and ~~10%~~20% of our total revenue for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively and 22% and 17% of our total revenue for the nine months ended September 30, 2019 and 2018, respectively.

We have focused on rapidly growing our business and believe that the future growth of our business is dependent on many factors, including our ability to increase the functionality of our platform and applications, expand our customer base, accelerate adoption of our applications beyond Mass Notification within our existing customer base and expand our international presence. Our future growth will also depend on the growth in the market for critical event management ~~and enterprise safety~~ solutions and our ability to effectively compete. In order to further penetrate the market for critical event management ~~and enterprise safety~~ solutions and capitalize on what we believe to be a significant opportunity, we intend to continue to invest in research and development, build-out our data center infrastructure and services capabilities and hire additional sales representatives, both domestically and internationally, to drive sales to new customers and incremental sales of new applications to existing customers. Nevertheless, we expect to continue to incur losses in the near term and, if we are unable to achieve our growth objectives, we may not be able to achieve profitability.

In ~~September 2016,~~July 2019, we ~~closed our initial public offering, or IPO, in~~entered into a Membership Interest Purchase Agreement with NC4 Inc., NC4 Public Sector LLC, and Celerium Group Inc., pursuant to which we ~~sold a~~purchased all of the issued and outstanding membership interest of NC4 Inc. and NC4 Public Sector LLC (collectively, “NC4”) for total consideration of ~~6,250,000~~approximately $84.5 million. We paid approximately $51.7 million in cash at closing and paid the remaining purchase price with 320,998 newly issued shares of our common stock. ~~We received net cash proceeds~~On the date of ~~$66.1 million, net of underwriting discounts and commissions and other costs associated with~~this acquisition, the ~~offering paid by us.~~

In December 2016, we acquired 100% of the shares of Svensk Krisledning AB, or Crisis Commander. We acquired Crisis Commander for cash consideration of approximately $2.3 million with additional time and performance-based milestones that could result in additional payments of $0.4 million. Crisis Commander is a SaaS mobile crisis management company operating out of Sweden.

In January 2017, we acquired 100% of the membership interests of IDV Solutions, LLC, or IDV. We acquired IDV for cash consideration of approximately $21.2 million, with additional time and performance-based milestones that could result in additional payments of $6.2 million. IDV is a provider of threat assessment and operational visualization software located in Lansing, Michigan.

~~In April 2017, we completed our follow on public offering, in which we sold a total of 553,825 shares~~price of our common stock ~~which included 26,825 shares sold pursuant to~~on the ~~exercise by the underwriters of an option to purchase shares at a public offering price of $19.85~~Nasdaq Global Market was $102.18 per share. ~~In addition, 3,162,164 shares~~Our acquisition of ~~our common stock were sold by certain~~NC4 was made primarily to expand the Company’s customer base and to a lesser extent to complement some of ~~our~~the existing ~~stockholders. We received cash proceeds~~facets of ~~$9.9 million, net of underwriting discounts and commissions and other costs associated~~NC4’s business with the ~~offering paid or payable by us. We did not receive any of the proceeds from the sales by the selling stockholders.~~Company’s existing products.

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries. Business acquisitions are included in our consolidated financial statements from the date of the acquisition. Our purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All intercompany balances and transactions have been eliminated in consolidation.

We report our financial results as one operating segment. Our operating results are regularly reviewed on a consolidated basis by our chief executive officer, who is our chief operating decision maker, principally to make strategic decisions regarding how we allocate our resources and to assess our consolidated operating performance.

We derive substantially all of our revenue from the sale of subscriptions to our critical event management and enterprise safety applications.

We generally bill and collect payment for our subscriptions annually in advance. All revenue billed in advance of services being delivered is recorded in deferred revenue. The initial subscription period typically ranges from one to three years. We offer varying levels of customer support based on customer needs and the complexity of their businesses, including the level of usage by a customer in terms of minutes or the amount of data used to transmit the notifications. Our pricing model is based on the number of applications subscribed to and, per application, the number of people, locations and things connected to our platform as well as the volume of communications. We also offer premium services including data feeds for social media, threat intelligence and weather. We generate additional revenue by expanding the number of premium features and applications that our customers subscribe to and the number of contacts connected to our platform.

We ~~generate an immaterial amount of revenue from set-up fees, which consist of participant process mapping, configuration, customer data migration and integration. We~~ also sell professional services, which primarily consist of fees for deployment and optimization services, as well as training. In addition, on occasion we may sell our software and related post contract support for on premise usage which is outside of our core business. These sales have been ~~immaterial~~ to ~~date.~~a limited number of customers and is not a significant revenue stream for the Company.

Cost of revenue includes expenses related to the fulfillment of our subscription services, consisting primarily of employee-related expenses for data center operations and customer support, including salaries, bonuses, benefits and stock-based compensation expense. Cost of revenue also includes hosting costs, messaging costs and depreciation and amortization. As we add data center capacity and support personnel in advance of anticipated growth, our cost of revenue will increase and, if anticipated revenue growth does not occur, our gross profit will be adversely affected.

Operating expenses consist of sales and marketing, research and development and general and administrative expenses. Salaries, bonuses, stock-based compensation expense and other personnel costs are the most significant components of each of these expense categories. We include stock-based compensation expense incurred in connection with the grant of stock options within the applicable operating expense category based on the equity award recipient’s functional area.

Sales and marketing expense primarily consists of employee-related expenses for sales, marketing and public relations employees, including salaries, bonuses, commissions, benefits and stock-based compensation expense. Sales and marketing expense also includes trade show, market research, advertising and other related external marketing expense as well as office and software related costs to support sales. We defer certain sales commissions related to acquiring new customers and amortize these expenses ratably over the ~~term~~period of ~~the corresponding subscription agreement.~~benefit that we have determined to be four years. We plan to continue to expand our sales and marketing functions to grow our customer base and increase sales to existing customers. This growth will include adding sales personnel and expanding our marketing activities to continue to generate additional leads and build brand awareness. In the near term, we expect our sales and marketing expense to increase on an absolute dollar basis as we hire new sales representatives in the United States and worldwide and grow our marketing staff.

Research and development expense primarily consists of employee-related expenses for research and development staff, including salaries, bonuses, benefits and stock-based compensation expense. Research and development expense also includes the cost of certain third-party services, office related costs to support research and development activities, software subscriptions and hosting costs. We capitalize certain software development costs that are attributable to developing new applications and adding incremental functionality to our platform and amortize these costs over the estimated life of the new application or incremental functionality, which is generally three years. We focus our research and development efforts on improving our applications, developing new applications and delivering new functionality. In the near term, we expect our research and development expense to increase on an absolute dollar basis as we continue to increase the functionality of our platform and applications.

General and administrative expense primarily consists of employee-related expenses for administrative, legal, finance and human resource personnel, including salaries, bonuses, benefits and stock-based compensation expense. General and administrative expense also includes professional fees, insurance premiums, corporate expenses, transaction-related costs, office-related expenses, facility costs, depreciation and amortization and software license costs. In the near term, we expect our general and administrative expense to increase on an absolute dollar basis as we incur the costs associated with being a publicly traded company.

Interest income consists of interest earned on our cash balances held at financial institutions. Investment income consist of interest earned on our ~~short term~~short-term investments which consist of U.S. treasuries, U.S. government agency obligations and money market funds.

Interest expense consists of interest on our outstanding debt ~~obligations and interest on our capital leases.~~obligations.

Other expense, net consists primarily of realized foreign currency gains and losses.

The following tables set forth our results of operations for the periods presented and as a percentage of our total revenue for those periods. The period-to-period comparison of our historical results is not necessarily indicative of the results that may be expected in the future.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
	(in thousands)												(in thousands)
Revenue	$	27,312		$	19,932		$	75,177		$	55,566		$	52,547		$	38,925		$	143,771		$	105,266
Cost of revenue^{(1) (2)}		8,076			6,173			22,969			17,324			16,454			12,296			45,174			33,488
Gross profit		19,236			13,759			52,208			38,242			36,093			26,629			98,597			71,778
Operating expenses:
Sales and marketing⁽¹⁾⁽²⁾	$	11,626		$	8,605		$	33,589		$	25,659			21,903			16,348			63,989			51,303
Research and development^{(1) (2)}		5,626			3,917			16,082			10,560			12,877			10,350			37,164			30,548
General and administrative^{(1) (2)}		6,375			3,666			16,640			10,252			13,435			7,130			34,457			23,609
Total operating expenses		23,627			16,188			66,311			46,471			48,215			33,828			135,610			105,460
Operating loss		(4,391	)		(2,429	)		(14,103	)		(8,229	)		(12,122	)		(7,199	)		(37,013	)		(33,682	)
Other income (expenses), net		81			(165	)		168			(504	)
Other income (expense), net														(700	)		(1,165	)		(1,574	)		(3,657	)
Loss before income taxes		(4,310	)		(2,594	)		(13,935	)		(8,733	)		(12,822	)		(8,364	)		(38,587	)		(37,339	)
(Provision for) benefit from income taxes		79			(35	)		65			75
Net loss attributable to common stockholders	$	(4,231	)	$	(2,629	)	$	(13,870	)	$	(8,658	)
Provision for income taxes														(99	)		(86	)		(531	)		(371	)
Net loss													$	(12,921	)	$	(8,450	)	$	(39,118	)	$	(37,710	)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		Three Months Ended September 30,				Nine Months Ended September 30,
	(in thousands)								2019		2018		2019		2018
Cost of revenue	$	141	$	46	$	266	$	135	$	509	$	312	$	1,356	$	1,877
Sales and marketing		691		211		1,250		503		2,423		1,180		7,338		7,147
Research and development		416		87		738		263		1,732		1,091		5,560		5,606
General and administrative		1,555		415		2,618		1,264		3,637		958		9,840		5,627
Total	$	2,803	$	759	$	4,872	$	2,165	$	8,301	$	3,541	$	24,094	$	20,257

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		Three Months Ended September 30,				Nine Months Ended September 30,
	(in thousands)								2019		2018		2019		2018
Cost of revenue	$	1,591	$	1,470	$	5,372	$	4,452	$	2,451	$	2,087	$	6,712	$	5,909
Sales and marketing		78		43		228		158		203		80		544		239
Research and development		56		18		148		225		130		68		371		204
General and administrative		693		443		1,898		840		2,708		1,609		5,565		3,820
Total	$	2,418	$	1,974	$	7,646	$	5,675	$	5,492	$	3,844	$	13,192	$	10,172

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Consolidated Statements of Operations, as a percentage
of revenue(1)

Revenue

100
%

100
%

100
%

100
%
Cost of revenue

30
%

31
%

31
%

31
%
Gross profit

70
%

69
%

69
%

69
%
Operating expenses:

Sales and marketing

43
%

43
%

45
%

46
%
Research and development

21
%

20
%

21
%

19
%
General and administrative

23
%

18
%

22
%

18
%
Total operating expenses

87
%

81
%

88
%

84
%
Operating loss

(16
)%

(12
)%

(19
)%

(15
)%
Other income (expenses), net

*

(1
)%

*

(1
)%
Loss before income taxes

(16
)%

(13
)%

(19
)%

(16
)%
(Provision for) benefit from income taxes

*

*

*

*

Net loss attributable to common stockholders

(16
)%

(13
)%

(19
)%

(16
)%

The following table sets forth our consolidated statements of operations as a percentage of revenue ⁽¹⁾:

Comparison of the Three Months Ended September 30, ~~2017~~2019 and ~~2016~~2018

Revenue increased by ~~$7.4~~$13.6 million for the three months ended September 30, ~~2017~~2019 compared to the same period in ~~2016.~~2018. The increase was due to a ~~$5.0~~$13.6 million increase in sales of our ~~historical solutions~~products driven by expansion of our customer base from ~~3,076~~4,267 customers as of September 30, ~~2016~~2018 to ~~3,560~~4,851 customers as of September 30, ~~2017,~~2019, including increased sales to larger organizations with greater numbers of contacts and locations. ~~In addition, $2.4 million of the increase was the result of revenue from Crisis Commander and IDV, which were acquired in December 2016 and January 2017, respectively.~~

	Three Months Ended September 30,						Change					Three Months Ended September 30,						Change
	2017			2016			$		%			2019			2018			$		%
	(dollars in thousands)											(dollars in thousands)
Cost of revenue	$	8,076		$	6,173		$	1,903		30.8	%	$	16,454		$	12,296		$	4,158		33.8	%
Gross margin %		70	%		69	%							69	%		68	%

Cost of revenue increased by ~~$1.9~~$4.2 million for the three months ended September 30, ~~2017~~2019 compared to the same period in ~~2016.~~2018. The increase was due to a ~~$0.9~~$2.3 million increase in employee-related costs associated with our increased headcount from 95163 employees as of September 30, ~~2016~~2018 to ~~121~~228 employees as of September 30, 2017. In addition, $0.8 million of the increase was attributed to an increase in hosting, software and messaging costs and $0.2 million attributed to an increase in office related expenses to support revenue generating activities.

Gross margin percentage increased due to a decrease in amortization of acquired intangible assets and capitalized software, which was offset by our continued investment in personnel to support our growth.

Sales and marketing expense increased by $3.0 million for the three months ended September 30, 2017 compared to the same period in 2016. The increase was primarily due to a $2.1 million increase in stock compensation and employee-related costs associated with our increased headcount from 165 employees as of September 30, 2016 to 206 employees as of September 30, 2017. The remaining increase was principally the result of a $0.5 million increase in costs related to outside sales representatives and consultants and a $0.3 million increase in software costs and office related expenses to support the sales team.

Research and development expense increased by $1.7 million for the three months ended September 30, 2017 compared to the same period in 2016. The increase was primarily due to a $1.7 million increase in stock compensation and employee-related costs associated with our increased headcount from 116 employees as of September 30, 2016 to 153 employees as of September 30, 2017. The remaining increase was principally the result of a $0.1 million increase in hosting cost to support research and development activities and a $0.2 million increase in office related expenses. A total of $1.2 million of internally developed software costs during the three months ended September 30, 2016 and $1.5 million of internally developed software costs during the three months ended September 30, 2017 were capitalized, resulting in a decrease of the expense by $0.3 million in the 2017 period.

General and administrative expense increased by $2.7 million for the three months ended September 30, 2017 compared to the same period in 2016. The increase was primarily due to a $2.1 million increase in stock compensation and employee-related costs associated with our increased headcount from 60 employees as of September 30, 2016 to 73 employees as of September 30, 2017. The remaining increase was due to a $0.2 million increase in depreciation and amortization attributable to our acquired intangible assets and a $0.4 million increase in office related expenses to support the administrative team.

Other income (expense), net changed by $0.2 million for the three months ended September 30, 2017 compared to the same period in 2016 as we paid off our debt in September 2016 resulting in a $0.2 million reduction in interest expense related to our line of credit and term loan between the two periods. In addition, we earned $0.1 million in interest and investment income as a result of proceeds invested from our public offerings.

Revenue increased by $19.6 million for the nine months ended September 30, 2017 compared to the same period in 2016. The increase was due to a $13.8 million increase in sales of our historical solutions driven by expansion of our customer base from 3,076 customers as of September 30, 2016 to 3,560 as of September 30, 2017, including increased sales to larger organizations with greater numbers of contacts and locations. In addition, $5.8 million of the increase was the result of revenue from Crisis Commander and IDV which were acquired in December 2016 and January 2017, respectively.

Cost of revenue increased by $5.6 million for the nine months ended September 30, 2017 compared to the same period in 2016. The increase was primarily due to a $2.6 million increase in employee-related costs associated with our increased headcount from 95 employees as of September 30, 2016 to 121 employees as of September 30, 2017.2019. In addition, $1.8 million of the increase was attributed to an increase in hosting, software and messaging costs ~~$0.9~~and $0.4 million increase in depreciation and amortization expense ~~attributable~~attributed to our fixed assets, acquired ~~intangible assets~~intangibles and ~~a $0.2~~capitalized software. These increases were offset by $0.4 million ~~increase in office related expenses to support revenue generating activities.~~of capitalized internally developed software costs.

Gross margin percentage ~~remained constant~~increased due to anrevenue growth outpacing the increase in ~~revenue, primarily offset by an increase in amortization of acquired intangible assets and capitalized software, as well as our continued investment in personnel to support our growth.~~cost.

	Nine Months Ended September 30,						Change					Three Months Ended September 30,						Change
	2017			2016			$		%			2019			2018			$		%
	(dollars in thousands)											(dollars in thousands)
Sales and marketing	$	33,589		$	25,659		$	7,930		30.9	%	$	21,903		$	16,348		$	5,555		34.0	%
% of revenue		45	%		46	%							42	%		42	%

Sales and marketing expense increased by ~~$7.9~~$5.6 million for the ~~nine~~three months ended September 30, ~~2017~~2019 compared to the same period in ~~2016.~~2018. The increase was primarily due to a ~~$6.3~~$5.1 million increase in stock compensation and employee-related costs associated with our increased headcount from ~~165~~292 employees as of September 30, ~~2016~~2018 to ~~206~~338 employees as of September 30, ~~2017.~~2019. The remaining increase was principally the result of a ~~$0.4 million increase in advertising costs, a $0.5 million increase in outside sales representatives and consultants, a $0.2 million increase in software cost and a $0.5~~$0.3 million increase in office related expenses to support the sales ~~team.~~team and a $0.2 million increase in advertising related cost and trade show expense.

	Nine Months Ended September 30,						Change					Three Months Ended September 30,						Change
	2017			2016			$		%			2019			2018			$		%
	(dollars in thousands)											(dollars in thousands)
Research and development	$	16,082		$	10,560		$	5,522		52.3	%	$	12,877		$	10,350		$	2,527		24.4	%
% of revenue		21	%		19	%							25	%		27	%

Research and development expense increased by ~~$5.5~~$2.5 million for the ~~nine~~three months ended September 30, ~~2017~~2019 compared to the same period in ~~2016.~~2018. The increase was primarily due to a ~~$5.0~~$2.2 million increase in employee-related costs associated with our increased headcount from 236 employees as of September 30, 2018 to 251 employees as of September 30, 2019. A total of $2.2 million of internally developed software costs during the three months ended September 30, 2018 and $1.6 million of internally developed software costs during the three months ended September 30, 2019 were capitalized, resulting in an increase of the expense by $0.6 million in the third quarter of 2019.

General and administrative expense increased by $6.3 million for the three months ended September 30, 2019 compared to the same period in 2018. The increase was primarily due to a $4.1 million increase in stock compensation and employee-related costs associated with our increased headcount from ~~116~~92 employees as of September 30, ~~2016~~2018 to ~~153~~111 employees as of September 30, ~~2017.~~2019. The remaining increase was due to a $1.1 million increase in depreciation and amortization, a $0.5 million increase in office related expenses to support the administrative team, a $0.3 million increase in public company cost and $0.1 million in software costs to support the administrative team.

Other expense decreased by $0.5 million for the three months ended September 30, 2019 compared to the same period in 2018 as we raised $139.1 million, net of cost in January 2019 from our follow-on offering, resulting in a $0.6 million increase in interest income.

Revenue increased by $38.5 million for the nine months ended September 30, 2019 compared to the same period in 2018. The increase was due to a $38.5 million increase in sales of our products driven by expansion of our customer base from 4,267 customers as of September 30, 2018 to 4,851 customers as of September 30, 2019, including increased sales to larger organizations with greater numbers of contacts and locations.

Cost of revenue increased by $11.7 million for the nine months ended September 30, 2019 compared to the same period in 2018. The increase was primarily due to a $7.6 million increase in hosting, software and messaging costs and a $3.8 million increase in employee-related costs associated with our increased headcount from 163 employees as of September 30, 2018 to 228 employees as of September 30, 2019. The remaining increase was principally the result of a ~~$0.6~~$0.8 million increase in depreciation and amortization expense attributed to our fixed assets, acquired intangibles and capitalized software and a $0.4 million increase in office related expenses to support revenue generating activities. These increases were partially offset by $1.2 million of capitalized internally developed software costs.

Gross margin percentage increased due to revenue growth outpacing the increase in cost along with a reduction of stock compensation expense.

Sales and marketing expense increased by $12.7 million for the nine months ended September 30, 2019 compared to the same period in 2018. The increase was primarily due to a $10.7 million increase in employee-related costs associated with our increased headcount from 292 employees as of September 30, 2018 to 338 employees as of September 30, 2019. The remaining increase was principally the result of a $0.9 million increase in office related expenses to support revenue generating activities, a $0.8 million increase in advertising related costs and trade show expenses and a $0.2 million increase in software cost to support the sales team.

Research and development expense increased by $6.6 million for the nine months ended September 30, 2019 compared to the same period in 2018. The increase was primarily due to a $4.1 million increase in employee-related costs associated with our increased headcount from 236 employees as of September 30, 2018 to 251 employees as of September 30, 2019. The remaining increase was principally the result of a $0.8 million increase in hosting and software cost ~~to support research and development activities~~ and a ~~$0.3~~$0.2 million increase in office related expenses to support research and development activities. A total of ~~$4.3~~$6.5 million of internally developed software costs during the nine months ended September 30, ~~2016~~2018 and ~~$4.7~~$5.0 million of internally developed software costs during the nine months ended September 30, ~~2017~~2019 were capitalized, resulting in ~~a decrease~~an increase of the expense by ~~$0.4~~$1.5 million in the ~~2017~~2019 period.

	Nine Months Ended September 30,						Change					Nine Months Ended September 30,						Change
	2017			2016			$		%			2019			2018			$		%
	(dollars in thousands)											(dollars in thousands)
General and administrative	$	16,640		$	10,252		$	6,388		62.3	%	$	34,457		$	23,609		$	10,848		45.9	%
% of revenue		22	%		18	%							24	%		22	%

General and administrative expense increased by ~~$6.4~~$10.8 million for the nine months ended September 30, ~~2017~~2019 compared to the same period in ~~2016.~~2018. The increase was primarily due to a ~~$3.9~~$6.6 million increase in ~~stock compensation and~~ employee-related costs associated with our increased headcount from 6092 employees as of September 30, ~~2016~~2018 to 73111 employees as of September 30, ~~2017.~~2019. The remaining increase was due to a ~~$1.0~~$1.7 million increase in depreciation and amortization expense attributable to our acquired intangible assets, a ~~$0.8~~$1.0 million increase in office related expenses to support the administrative team, a $0.9 million increase in cost to operate as a public company and an$0.3 million increase ~~of $0.7 million~~ in ~~office related expenses~~software costs to support the administrative team.

	Nine Months Ended September 30,					Change					Nine Months Ended September 30,						Change
	2017		2016			$		%			2019			2018			$		%
	(dollars in thousands)										(dollars in thousands)
Other income (expense), net	$	168	$	(504	)	$	672		(133.3	)%	$	(1,574	)	$	(3,657	)	$	2,083		57.0	%
% of revenue	*			(1	)%							(1	)%		(3	)%

Other ~~income (expense)~~expense decreased by ~~$0.7~~$2.1 million for the nine months ended September 30, ~~2017~~2019 compared to the same period in ~~2016~~2018 as we ~~paid off our debt in September 2016 resulting in a $0.5~~raised $139.1 million ~~reduction in interest expense related to our line of credit and term loan between the two periods. In addition, we earned $0.2 million in interest and investment income~~ as a result of proceeds invested from our public ~~offerings.~~

We regularly monitor a number of financial and operating metrics in order to measure our current performance and estimate our future performance. Our other business metrics may be calculated in a manner different than similar other business metrics used by other ~~companies.~~companies (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		Three Months Ended September 30,				Nine Months Ended September 30,
	(in thousands)								2019		2018		2019		2018
Gross profit	$	19,236	$	13,759	$	52,208	$	38,242	$	36,093	$	26,629	$	98,597	$	71,778
Amortization of acquired intangibles		293		566		1,325		1,751		640		389		1,330		1,022
Stock-based compensation expense		141		46		266		135		509		312		1,356		1,877
Adjusted gross margin	$	19,670	$	14,371	$	53,799	$	40,128	$	37,242	$	27,330	$	101,283	$	74,677

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2019			2018			2019			2018
	(in thousands)
Net cash provided by operating activities	$	6,738		$	8,226		$	4,379		$	6,535
Net cash provided by (used in) operating activities													$	12,343		$	676		$	8,854		$	(776	)
Capital expenditures		(832	)		(393	)		(1,337	)		(739	)		(542	)		(441	)		(4,417	)		(855	)
Capitalized software development costs		(1,542	)		(1,254	)		(4,586	)		(4,294	)		(1,918	)		(2,684	)		(5,867	)		(6,722	)
Free cash flow	$	4,364		$	6,579		$	(1,544	)	$	1,502		$	9,883		$	(2,449	)	$	(1,430	)	$	(8,353	)

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain additional supplemental non-GAAP financial measures, including non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP total operating expenses, non-GAAP operating loss and non-GAAP net loss, which we collectively refer to as non-GAAP financial measures. These non-GAAP financial measures exclude all or a combination of the following (as reflected in the following reconciliation tables): stock-based compensation expense and amortization of acquired intangibles. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision making. While our non-GAAP financial measures are an important tool for financial and operational decision making and for evaluating our own operating results over different periods of time, you should consider our non-GAAP financial measures alongside our GAAP financial results.

We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allow for more meaningful comparisons between our operating results from period to period. We believe that excluding the impact of amortization of acquired intangibles allows for more meaningful comparisons between operating results from period to period as the intangibles are valued at the time of acquisition and are amortized over a period of several years after the acquisition. Accordingly, we believe that excluding these expenses provides investors and management with greater visibility of the underlying performance of our business operations, facilitates comparison of our results with other periods and may also facilitate comparison with the results of other companies in our industry.

There are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

The following table reconciles our GAAP to non-GAAP numbers for the three and nine months ended September 30, ~~2017~~2019 and ~~2016:~~2018 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			Three Months Ended September 30,						Nine Months Ended September 30,
	(in thousands)												2019			2018			2019			2018
Cost of revenue	$	8,076		$	6,173		$	22,969		$	17,324		$	16,454		$	12,296		$	45,174		$	33,488
Amortization of acquired intangibles		(293	)		(566	)		(1,325	)		(1,751	)		(640	)		(389	)		(1,330	)		(1,022	)
Stock-based compensation expense		(141	)		(46	)		(266	)		(135	)		(509	)		(312	)		(1,356	)		(1,877	)
Non-GAAP cost of revenue		7,642			5,561			21,378			15,438		$	15,305		$	11,595		$	42,488		$	30,589

Gross profit		19,236			13,759			52,208			38,242		$	36,093		$	26,629		$	98,597		$	71,778
Amortization of acquired intangibles		293			566			1,325			1,751			640			389			1,330			1,022
Stock-based compensation expense		141			46			266			135			509			312			1,356			1,877
Non-GAAP gross profit		19,670			14,371			53,799			40,128		$	37,242		$	27,330		$	101,283		$	74,677
Non-GAAP gross margin		72.0	%		72.1	%		71.6	%		72.2	%		70.9	%		70.2	%		70.4	%		70.9	%

Sales and marketing expense		11,626			8,605			33,589			25,659		$	21,903		$	16,348		$	63,989		$	51,303
Stock-based compensation expense		(691	)		(211	)		(1,250	)		(503	)		(2,423	)		(1,180	)		(7,338	)		(7,147	)
Non-GAAP sales and marketing		10,935			8,394			32,339			25,156		$	19,480		$	15,168		$	56,651		$	44,156

Research and development expense		5,626			3,917			16,082			10,560		$	12,877		$	10,350		$	37,164		$	30,548
Stock-based compensation expense		(416	)		(87	)		(738	)		(263	)		(1,732	)		(1,091	)		(5,560	)		(5,606	)
Non-GAAP research and development		5,210			3,830			15,344			10,297		$	11,145		$	9,259		$	31,604		$	24,942

General and administrative expense		6,375			3,666			16,640			10,252		$	13,435		$	7,130		$	34,457		$	23,609
Amortization of acquired intangibles		(560	)		(224	)		(1,562	)		(701	)		(2,530	)		(1,464	)		(5,082	)		(3,461	)
Stock-based compensation expense		(1,555	)		(415	)		(2,618	)		(1,264	)		(3,637	)		(958	)		(9,840	)		(5,627	)
Non-GAAP general and administrative		4,260			3,027			12,460			8,287		$	7,268		$	4,708		$	19,535		$	14,521

Total operating expenses		23,627			16,188			66,311			46,471		$	48,215		$	33,828		$	135,610		$	105,460
Amortization of acquired intangibles		(560	)		(224	)		(1,562	)		(701	)		(2,530	)		(1,464	)		(5,082	)		(3,461	)
Stock-based compensation expense		(2,662	)		(713	)		(4,606	)		(2,030	)		(7,792	)		(3,229	)		(22,738	)		(18,380	)
Non-GAAP total operating expenses	$	20,405		$	15,251		$	60,143		$	43,740		$	37,893		$	29,135		$	107,790		$	83,619

Operating loss	$	(4,391	)	$	(2,429	)	$	(14,103	)	$	(8,229	)	$	(12,122	)	$	(7,199	)	$	(37,013	)	$	(33,682	)
Amortization of acquired intangibles		853			790			2,887			2,452			3,170			1,853			6,412			4,483
Stock-based compensation expense		2,803			759			4,872			2,165			8,301			3,541			24,094			20,257
Non-GAAP operating loss	$	(735	)	$	(880	)	$	(6,344	)	$	(3,612	)	$	(651	)	$	(1,805	)	$	(6,507	)	$	(8,942	)

Net loss	$	(4,231	)	$	(2,629	)	$	(13,870	)	$	(8,658	)	$	(12,921	)	$	(8,450	)	$	(39,118	)	$	(37,710	)
Amortization of acquired intangibles		853			790			2,887			2,452			3,170			1,853			6,412			4,483
Stock-based compensation expense		2,803			759			4,872			2,165			8,301			3,541			24,094			20,257
Non-GAAP net loss	$	(575	)	$	(1,080	)	$	(6,111	)	$	(4,041	)	$	(1,450	)	$	(3,056	)	$	(8,612	)	$	(12,970	)

To date, we have financed our operations primarily through cash from ~~operating activities,~~sales to our customers, along with equity issuances and debt financing arrangements. Our principal source of liquidity is cash and cash equivalents ~~and investments~~ totaling ~~$47.7~~$194.7 million as of September 30, ~~2017,~~2019, which includes ~~the remaining net proceeds from~~$139.1 million received in January 2019 as a result of our initial and follow-on public offerings completed in September 2016 and April 2017, respectively. We received net proceeds of $66.1 million and $9.9 million, after deducting underwriting discounts and offering expenses paid or payable by us from our initial and follow-on public offering ~~respectively. Our negative working capital balance as~~ of ~~September 30, 2017 was primarily~~common stock. We have generated significant losses since inception and expect to continue to generate losses for the ~~result of a deferred revenue balance of $63.0 million.~~foreseeable future.

We believe that our cash and cash equivalent balances ~~our available borrowings under our revolving line of credit~~ and the cash flows generated by our operations will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. However, our belief may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section of this Quarterly Report on Form 10-Q titled “Risk Factors.” We cannot assure you that we will be able to raise additional capital on acceptable terms or at all. In addition, if we fail to meet our operating plan during the next 12 months, our liquidity could be adversely affected.

On September 21, 2016, we closed our initial public offering in which we issued and sold 6,250,000 shares of common stock at a public offering price of $12.00 per share for net proceeds of approximately $66.1 million, after deducting underwriting discounts and commissions and offering expenses paid by us.

On April 4, 2017, we closed a follow-on public offering in which we issued and sold 553,825 shares of common stock at a public offering price of $19.85 per share for net proceeds of approximately $9.9 million, after deducting underwriting discounts and commissions and offering expenses paid by us.

In June 2015, we entered into a loan and security agreement with Western Alliance Bank (formerly known as Bridge Bank) to provide a secured revolving line of credit that allows us to borrow up to $10.0 million for working capital and general business requirements. In February 2016, we entered into an amendment of our loan and security agreement with Western Alliance Bank to (1) increase the capacity of our revolving line of credit by $5.0 million to $15.0 million and (2) set the minimum prime rate based on which interest due is calculated at 3.25%. No other changes were made to the loan and security agreement. The loan and security agreement, as amended, allows us to borrow up to $15.0 million for working capital and general business requirements. Amounts outstanding under the line of credit bear interest at the prime rate plus 0.75% with accrued interest payable on a monthly basis and outstanding and unpaid principal due upon maturity of the credit facility in June 2018. As of September 30, 2017, the total amount available to be borrowed by us was $15.0 million and we had no outstanding balance on the revolving line of credit.

The following table summarizes our cash flows for the periods indicated (in thousands):

Our historical uses of cash have primarily consisted of cash used for operating activities, such as expansion of our sales and marketing operations, research and development activities and other working capital needs.

Our net loss and cash flows provided or used in by operating activities are significantly influenced by our investments in headcount and infrastructure to support our growth, marketing and sponsorship expenses, and our ability to bill and collect in a timely manner. Our net loss has been significantly greater than our use of cash for operating activities due to the inclusion of non-cash expenses and charges.

Operating activities ~~provided $4.4~~generated $8.9 million in cash in the nine months ended September 30, ~~2017,~~2019, which includes an increase in non-cash operating expenses of $47.0 million partially offset by our net loss of $39.1 million. Specifically, we recognized non-cash charges aggregating to $13.2 million for depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, $24.1 million for stock-based compensation, $5.5 million for amortization of deferred commissions, $3.7 million related to the accretion of interest on our convertible senior notes and $0.6 million for provision for doubtful accounts. The net change in operating assets and liabilities of $0.9 million reflected a $12.4 million increase in deferred revenue, a $7.0 million net increase in accounts payable and accrued expenses as a result of timing of payments made to vendors, a $2.0 million increase in accrued employee related expenses due to timing of payments to employees, a $0.9 million decrease in other assets and a $0.6 million increase in other liabilities. These amounts were offset by an $8.4 million increase in accounts receivable, an $8.4 million increase in deferred cost and a $5.1 million increase in prepaid expenses for upfront payments made for prepaid software and insurance.

Operating activities used $0.8 million in cash in the nine months ended September 30, 2018, primarily from ~~$5.2~~$0.4 million in cash used in operations as a result of changes in operating assets and liabilities, which was ~~increased~~decreased by ~~$13.1~~$37.3 million of non-cash operating expenses and ~~partially~~ offset by our net loss of ~~$13.9~~$37.7 million. Specifically, we recognized non-cash charges aggregating to ~~$7.6~~$10.2 million for depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, ~~and $4.8~~$20.0 million for stock-based compensation, $3.9 million for amortization of deferred commissions and ~~an increase~~$3.4 million related to the accretion of ~~$0.6~~interest on our convertible senior notes which was offset by a decrease of $0.3 million for our ~~bad debt~~change in fair value of contingent consideration and ~~sales return provision.~~$0.3 million of investment income. The change in operating assets and liabilities reflected a ~~$7.8~~$7.2 million increase in deferred revenue, a ~~$0.8~~$1.5 million ~~increase~~decrease in accounts ~~payable as~~receivable, a ~~result of timing of payments made to vendors, a $2.3~~$2.1 million increase in accrued employee related expenses due to timing of payments to employees, and a $0.5 million increase in other liabilities. These increases were partially offset by a ~~$3.6~~$7.0 million increase in ~~accounts receivable, $1.6~~deferred cost, a $0.6 million increase in accrued expenses as a result of timing of payments made to vendors, a $2.4 million increase in prepaid expenses for upfront payments made for prepaid software and insurance, and a ~~$1.0~~$1.6 million increase in other assets.

Operating activities provided $6.5 million in cash in the nine months ended September 30, 2016, primarily from $7.4 million in cash provided by operations as a result of changes in operating assets and liabilities, which was increased by $7.8 million of non-cash operating expenses and partially offset by our net loss of $8.7 million. Specifically, we recognized non-cash charges aggregating $5.7 million for depreciation and amortization of intangible assets, capitalized software development costs and property and equipment and $2.1 million for stock-based compensation, an increase of $0.1 million for our accounts receivable provision and an increase of $0.1 million related to disposal of assets, which was offset by a decrease of $0.2 million in our deferred tax liability balance. The change in operating assets and liabilities reflected a $8.6 million increase in deferred revenue, a $0.3 million increase in accounts payable, a $1.6 million increase in accrued employee related expenses and a $0.3 million increase in accrued expenses. These increases were partially offset by a $0.4 million increase in accounts receivables, a $1.7 million increase in other assets due to timing of payments made for deferred initial public offering costs and commissions and a $1.2 million increase in pre-paid expenses.

Our investing activities consist primarily of capital expenditures for capitalized software development costs, business ~~acquisition and~~acquisitions, property and equipment ~~expenses.~~expenses and purchase and sales of short-term investments.

We used $21.8 million in cash for investing activities in the nine months ended September 30, 2019, due to $58.4 million cash paid for the acquisitions of NC4 and Mission Mode, $5.9 million investment in software development, $4.4 million purchase of property and equipment and $2.0 million in purchases of short-term investments. These were offset by maturities of short-term investments of $47.8 million and $1.1 million attributed to a landlord reimbursement.

Investing activities used ~~$50.6~~$27.3 million in cash in the nine months ended September 30, ~~2017,~~2018, primarily from our purchase of ~~IDV~~UMS, PlanetRisk and Respond for ~~$21.2~~an aggregate of $35.9 million, ~~our~~purchase of short-term investments of $57.7 million, investment in software development of ~~$4.6~~$6.7 million, our purchase of property and equipment of ~~$1.3~~$0.9 million and a ~~$0.3 million change in restricted cash and $30.0~~$0.2 million in purchases of ~~short-term investments.~~intangible assets. This was offset by cash provided of ~~$0.8~~$74.1 million ~~attributed to landlord reimbursements for tenant improvements~~ in ~~our Burlington, Massachusetts office lease and~~ maturities of our short-term ~~investments of $6.0 million.~~

Investing activities used $5.0 million in cash in the nine months ended September 30, 2016, primarily from our investment in software development of $4.3 million and property and equipment of $0.7 million.investments.

Cash generated by financing activities includes proceeds from the issuance of common stock ~~as a result of~~from our follow-on public offering, ~~and upon the~~ exercise of employee stock options and contributions ~~from~~to our employee stock purchase plan. Cash used in financing activities includes ~~deferred initial public~~payments for debt and offering issuance costs, ~~costs associated with our follow-on public offering~~payment of contingent consideration and ~~payments on capital leases, notes payable and repayments~~employee withholding liabilities from the exercise of ~~debt under our credit facilities.~~market based restricted stock units.

Financing activities provided ~~$9.4~~$152.2 million of cash in the nine months ended September 30, ~~2017,~~2019, which reflects proceeds of ~~$10.4~~$139.1 million from our ~~follow-on public~~common stock offering, ~~$1.5~~proceeds of $15.8 million from the exercise of stock options and $2.3 million from the issuance of stock under our employee stock purchase plan. These were offset by a $4.5 million payment for restricted stock unit employee withholding taxes.

Financing activities provided $2.0 million of cash in the nine months ended September 30, 2018, which reflects proceeds of $1.8 million from the issuance of stock under our employee stock purchase plan and proceeds of ~~$2.1~~$8.8 million from the exercise of stock options. This amount was offset by a ~~$3.8~~$7.9 million payment for employee withholding taxes and $0.4 million of contingent consideration ~~attributed~~related to our ~~purchase of IDV and $0.9 million of costs paid in connection with our initial and follow-on public offerings.~~

Financing activities provided $52.1 million of cash in the nine months ended September 30, 2016, which reflects proceeds of $69.8 million from our initial public offering, net of underwriter’s discount and commissions, $0.7 million from the exercise of stock options and proceeds from our line of credit of $9.5 million. These amounts were offset by payments of $19.5 million on our line of credit, payment of $5.0 million on our term loan, $1.4 million of costs paid in connection with our initial public offering and payment of notes payable related to the Vocal Limited acquisition of ~~$2.0 million.~~IDV.

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, ~~revenue,~~revenues, costs and expenses, and related disclosures. WeOn an ongoing basis, we evaluate our estimates and ~~assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.~~assumptions. Our actual results ~~could~~may differ from these ~~estimates.~~estimates under different assumptions or conditions.

~~We believe~~Except for the accounting policies for leases that ~~the assumptions~~were updated, as set forth in footnote 2 and 16, as a result of adopting ASU No. 2016-02, there have been no changes to our critical accounting policies and estimates ~~associated~~described in the Annual Report on Form 10-K for the year ended December 31, 2018, filed with ~~revenue recognition, deferred revenue, business combinations, goodwill, software development costs and stock-based compensation~~the SEC on March 1, 2019, that have ~~the greatest potential~~had a material impact on our condensed consolidated financial ~~statements. Therefore, we consider these to be our critical accounting policies.~~

~~There have been no material changes to our critical accounting policies as compared to the critical accounting policies disclosed in the Annual Report 10-K filed with the SEC on March 23, 3017.~~statements and related notes.

See Note 2 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of recently issued and adopted accounting pronouncements.

As of September 30, ~~2017,~~2019, there were no material changes in our commitments under contractual obligations except for scheduled payments from the ongoing business, as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, except as set forth below. In June 2017, we entered into a new lease for our research and development office in Beijing, China that will increase our future minimum lease payments beginning in July 2017 by $0.8 million over the next two years. In addition, in June 2017, we entered into a new lease for our sales office in Maidenhead, United Kingdom that will increase our future minimum lease payments beginning in July 2017 by $0.2 million over the next four years. Finally, as a result of the acquisition of IDV Solutions LLC, we inherited leases resulting in minimum lease payments totaling $1.4 million which will be paid over the next seven years.2018.

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts.

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 the result of fluctuations in interest rates and foreign exchange rates as well as, to a lesser extent, inflation.

Our investment portfolio is exposed to market risk from changes in interest rates. The fair market value of fixed rate securities may be adversely impacted by fluctuations in interest rates while income earned on floating rate securities may decline as a result of decreases in interest rates. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We attempt to ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. We have historically maintained a relatively short average maturity for our investment portfolio, and we believe a hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not change the fair value of our interest sensitive financial instruments by a material amount. In addition, if a 100 basis point change in overall interest rates were to occur in 2019, our interest income would not change significantly in relation to amounts we would expect to earn, based on our cash, cash equivalents, and investments as of September 30, 2019.

Changes in interest rates may also impact gains or losses from the conversion of our outstanding convertible senior notes. In November 2017, we issued $115 million in aggregate principal amount of our 1.50% convertible senior notes due 2022 (the “Notes”). At our election, the Notes are convertible into cash, shares of our common stock, or a combination of cash and shares of our common stock in each case under certain circumstances, including trading price conditions related to our common stock. In the second quarter of 2018, the trading price of our common stock reached a price for a sustained period at 130% above the conversion price of $33.71, resulting in the Notes becoming convertible at the option of the holder during the third quarter of 2018. No Note holders have exercised their right for conversion as of September 30, 2019. Upon conversion, we are required to record a gain or loss for the difference between the fair value of the debt to be extinguished and its corresponding net carrying value. The fair value of the debt to be extinguished depends on our then-current incremental borrowing rate. If our incremental borrowing rate at the time of conversion is higher or lower than the implied interest rate of the Notes, we will record a gain or loss in our consolidated statement of operations during the period in which the Notes are converted. An incremental borrowing rate that is a hypothetical 100 basis points lower than the implicit interest rate upon conversion of $115 million aggregate principal amount of the Notes would result in a loss of approximately $1.2 million.

We are exposed to interest rate risk in the ordinary course of our business. Our cash, ~~includes~~cash equivalents and investments include cash in readily available checking and money market accounts and marketable securities. These securities are not dependent on interest rate fluctuations that may cause the principal amount of these assets to fluctuate.

We had cash and cash equivalents of ~~$23.6~~$194.7 million as of September 30, ~~2017,~~2019, which ~~consists~~consisted of ~~cash,~~bank deposits and money market ~~funds and U.S. government securities.~~funds. To date, fluctuations in interest income have not been significant. We have no outstanding debt subject to interest rate risk as of September 30, 2017. Amounts outstanding under our revolving line of credit carry a variable interest rate of the prime rate, but in no event less than 3.25%, plus 0.75%. As of September 30, 2017, the applicable prime rate was 4.25%. We monitor our cost of borrowing under our revolving line of credit, if any, taking into account our funding requirements, and our expectation for short-term rates in the future.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. ~~Although our credit facility and term loan have variable interest rates, a~~A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than our functional currency, the U.S. dollar, principally British ~~pounds~~Pounds, Norwegian Krone and Swedish ~~kronor.~~Kronor. Movements in foreign currencies in which we transact business could significantly affect future net earnings. We do not currently engage in any hedging activity to reduce our potential exposure to currency fluctuations, although we may choose to do so in the future. A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency rate.

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~or the Exchange Act,~~(the “Exchange Act”), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at a ~~reasonable.~~reasonable assurance level.

On January 27, 2017, the Company completed the acquisition of IDV Solutions, LLC, or IDV. See Note 8, "Business Combinations," to the unaudited interim consolidated financial statements included in this Quarterly report on Form 10-Q for a discussion of the acquisition and related financial data. The Company is in the process of integrating IDV and the Company’s internal controls over financial reporting. As a result of these integration activities, certain controls will be evaluated and may be changed. Excluding the IDV acquisition, there wasThere were no ~~change~~changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that ~~has~~ materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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 are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together 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.

We operate in a rapidly changing environment that involves a number of risks which could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I-Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2018, as filed with the SEC on March ~~23, 2017.~~1, 2019. During the ~~three~~nine months ended September 30, ~~2017,~~2019, there were no material changes to the risk factors that were disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

Our initial public offering of common stock was effected through a Registration Statement on Form S-1 (File No. 333-2133217), which was declared or became effective on September 16, 2016. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) and other periodic reports previously filed with the SEC. Consistent with such prior disclosures, we used ~~$23.5 million in cash to acquire Svensk Krisledning AB and IDV Solutions, LLC~~.None

On August 1, 2017, the compensation committee of our board of directors (the “Compensation Committee”), approved a form of Restricted Stock Unit Award Agreement (the “RSU Award Agreement”) for restricted stock units to be issued from time to time under our 2016 Equity Incentive Plan. Under the terms of the RSU Award Agreement, we may issue the right to receive, upon vesting and the satisfaction of any required tax withholding obligation, shares of common stock, which will become vested as set forth in the applicable award on the basis of one share of common stock for each restricted stock unit, provided that the grantee has remained continuously employed by us from the grant date to such vesting date. Restricted stock units may vest based on the passage of time and/or based on the achievement of such performance-based criteria as are listed in our 2016 Equity Incentive Plan. The form of RSU Award Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

In connection with the approval of the RSU Award Agreement, the Compensation Committee approved the grant of restricted stock units to certain executive officers, including Jaime Ellertson, Joel Rosen and Elliot J. Mark, who are our named executive officers, and Kenneth S. Goldman, who is our principal financial officer. Certain of the restricted stock units are subject to time-based vesting and vest in annual installments over three years from the date of grant, and the remainder are subject to market-based vesting and vest on our achieving certain stock price thresholds which range from $35 to $55 per share for 30 consecutive trading days as reported by The Nasdaq Stock Market, LLC. Messrs. Ellertson, Rosen, Mark and Goldman were granted 50,000, 17,000, 17,000 and 19,000 restricted stock units subject to time-based vesting, respectively, and they were granted 50,000, 17,000, 17,000 and 19,000 restricted stock units subject to market-based vesting, respectively.

The Compensation Committee approved the adoption of our 2017 Management Incentive Plan (the “Bonus Plan”) for our executive officers, including Messrs. Ellertson, Rosen, Mark and Goldman. The Bonus Plan is designed to award cash incentive payments for performance in 2017 to participants based on the achievement of our-wide performance goals set by the compensation committee. Bonuses under the Bonus Plan will be measured as of December 31, 2017 and are expected to be paid in the first quarter of 2018. The annual cash targets for Messrs. Ellertson, Rosen, Mark and Goldman under the Bonus Plan are set at $206,000, $93,000, $105,000 and $116,000, respectively, 75% of which is subject to the achievement of certain sales, customer retention and growth targets and 25% of which is subject to the achievement of other company objectives. Messrs. Ellertson, Rosen, Mark and Goldman are eligible to receive more than 100% of their target bonuses if our performance exceeds the targets set forth in the Bonus Plan.

The foregoing description of the terms of the Bonus Plan is qualified in its entirety by reference to the Bonus Plan, a copy of which is attached hereto as Exhibit 10.4 and is incorporated herein by reference.None

Pursuant to the requirements 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.

Delaware		26-2919312
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

25 Corporate Drive, Suite 400 Burlington, Massachusetts		01803
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value per share		EVBG		The Nasdaq Capital Market

Large accelerated filer	☐☒	Accelerated filer	☐

Non-accelerated filer	☒ ~~(Do not check if a small reporting company)~~☐	~~Small~~Smaller reporting company	☐

Emerging growth company	☒☐

		Page

PART I.	FINANCIAL INFORMATION	3

Item 1.	Condensed Consolidated Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets ~~as of September 30, 2017 and December 31, 2016~~	3

	Condensed Consolidated Statements of Operations ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~	4

	Condensed Consolidated Statements of Comprehensive Loss ~~for the Three and Nine Months Ended September 30, 2017 and 2016~~	5

	Condensed Consolidated Statements of Stockholders’ Equity ~~for the Nine Months Ended September 30, 2017~~	6

	Condensed Consolidated Statements of Cash Flows ~~for the Nine Months Ended September 30, 2017 and 2016~~	7

	~~Notes to the Condensed Consolidated Financial Statements~~	8

	Notes to the Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2431

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3744

Item 4.	Controls and Procedures	3845

PART II.	OTHER INFORMATION	3947

Item 1.	Legal Proceedings	3947

Item 1A.	Risk Factors	3947

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3947

Item 3.	Defaults Upon Senior Securities	3947

Item 4.	Mine Safety Disclosures	3947

Item 5.	Other Information	3947

Item 6.	Exhibits	4148

Signatures		4249


2019 (for the remaining three months)	$	2,144
2020		6,459
2021		3,963
2022		1,526
	$	14,092

	Amounts
2017 (for the remaining three months)	$	1,475
2018		4,384
2019		3,127
2020		686
	$	9,672

	Amount
Fair Value at December 31, 2016	$	388
Foreign currency translation		47
Contingent consideration from IDV acquisition		5,020
Payments made during the year		(3,750	)
Balance at September 30, 2017	$	1,705


Fair Value at December 31, 2018	$	—
Additions from acquisition		550
Balance at September 30, 2019	$	550

	Amount
Balance at December 31, 2016	$	9,676
Foreign currency translation		471
IDV acquisition		21,196
Balance at September 30, 2017	$	31,343


2019 (for the remaining three months)	$	4,015
2020		14,786
2021		14,410
2022		11,200
2023		8,367
Thereafter		17,846
	$	70,624

	Mission Mode
Assets acquired
Accounts receivable	$	295
Other assets		7
Property and equipment		6
Trade names		220
Acquired technology		310
Customer relationships		4,600
Goodwill		2,918
Total assets acquired		8,356
Liabilities assumed
Accounts payable and accrued expenses		152
Deferred revenue		880
Other liabilities		10
Net assets acquired	$	7,314
Consideration paid
Cash paid, net of cash acquired	$	6,764
Contingent consideration		550
Total	$	7,314

	Revenue		Net income (loss)
Results of acquired business included in our three and nine months ended (in thousands):
From the acquisition date to September 30, 2017	$	4,900	$	(2,274	)
For the nine months ended September 30, 2017 pro forma	$	5,437	$	(2,419	)
For the nine months ended September 30, 2016 pro forma	$	7,713	$	(1,189	)
For the three months ended September 30, 2017	$	1,882	$	(691	)
For the three months ended September 30, 2016 pro forma	$	2,595	$	(48	)

	As of September 30, 2019			As of December 31, 2018
Liability component:
Principal	$	115,000		$	115,000
Less: debt discount, net of amortization		(17,236	)		(20,903	)
Net carrying amount	$	97,764		$	94,097
Equity component ⁽¹⁾		22,094			22,094

	As of September 30, 2019				As of December 31, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Convertible senior notes	$	217,947	$	97,764	$	189,802	$	94,097

	Vested				Nonvested
	Options outstanding		Weighted average exercise price		Options outstanding		Weighted average exercise price
Outstanding at September 30, 2017		768,956	$	9.45		1,700,597	$	18.40
Outstanding at December 31, 2016		809,900	$	6.81		1,074,525	$	12.44

	Number of Shares
Outstanding as of December 31, 2018		904,033
Granted		687,817
Vested		(271,853	)
Forfeited		(75,181	)
Outstanding as of September 30, 2019		1,244,816

	Number of Shares
Stock options issued and outstanding		~~2,469,553~~797,848
Additional shares available for grant under equity plans		~~2,436,005~~2,394,561
Total		~~4,905,558~~3,192,409

	Three Months Ended September 30,				Nine Months Ended September 30,
Primary Geographic Markets	2019		2018		2019		2018
United States	$	41,827	$	31,140	$	112,483	$	87,318
International		10,720		7,785		31,288		17,948
Total	$	52,547	$	38,925	$	143,771	$	105,266

	September 30, 2019
Balance sheet information
ROU assets	$	13,824
Lease liabilities, current	$	3,514
Lease liabilities, non-current		12,714
Total lease liabilities	$	16,228
Supplemental data
Weighted average remaining lease term	4.33 years
Weighted average discount rate		7.00	%
Cash paid for amounts included in lease liabilities	$	2,648
ROU assets obtained in exchange for lease obligations	$	17,726


Year ending December 31,
2019 (for the remaining three months)	$	1,160
2020		4,487
2021		4,341
2022		4,044
2023		3,929
Thereafter		2,023
Total undiscounted lease payments		19,984
Less: imputed interest		(3,756	)
Total lease liabilities	$	16,228


2019 (for the remaining three months)	$	1,221
2020		4,612
2021		4,341
2022		4,044
2023		3,929
Thereafter		2,023
Total minimum lease payments	$	20,170

~~3.1~~⁽¹⁾		~~Amended and Restated Certificate of Incorporation of Everbridge, Inc.~~

~~3.2~~⁽²⁾		~~Amended and Restated Bylaws of Everbridge, Inc.~~

~~10.1~~⁽³⁾+		~~Form of Restricted Stock Unit Award Agreement under the Everbridge, Inc. 2016 Equity Incentive Plan, as amended.~~

~~10.2~~⁽⁴⁾+		~~Employment Agreement, dated as of June 22, 2017, by and between Everbridge, Inc. and Javier Colado.~~

~~10.3~~⁽⁵⁾+		~~Offer Letter, dated as of July 24, 2017, by and between Everbridge, Inc. and Robert Hughes.~~

~~10.4~~⁽⁶⁾+		~~2017 Bonus Plan of Everbridge, Inc.~~

31.1*		~~Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

31.2*		~~Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1**		~~Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

32.2**		~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

101.INS*		~~XBRL Instance Document~~

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~~

	Everbridge, Inc.

Date: November ~~7, 2017~~8, 2019	By:	/s/ ~~Jaime Ellertson~~David Meredith
		~~Jaime Ellertson~~David Meredith
		Chief Executive Officer and Chairman of the Board of Directors

Date: November ~~7, 2017~~8, 2019	By:	/s/ ~~Kenneth S. Goldman~~Patrick Brickley
		~~Kenneth S. Goldman~~Patrick Brickley
		Senior Vice President and Chief Financial Officer