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,~~May 4, 2020, the registrant had ~~28,254,691~~34,358,105 shares of common stock issued and outstanding.

	As of September 30, 2017			As of December 31, 2016			March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	23,628		$	60,765		$	498,387		$	531,575
Restricted cash		297			—			4,756			4,737
Short-term investments		24,029			—
Accounts receivable, net		22,273			17,812			70,760			68,642
Prepaid expenses		3,564			1,770			9,949			6,675
Other current assets		2,780			2,536
Deferred costs and other current assets								18,468			13,501
Total current assets		76,571			82,883			602,320			625,130
Property and equipment, net		2,844			2,923			7,107			6,284
Capitalized software development costs, net		9,672			8,792			14,394			14,287
Goodwill		31,343			9,676			141,727			91,421
Intangible assets, net		9,499			3,940			83,869			67,100
Other assets		190			108
Restricted cash								3,353			3,350
Prepaid expenses								2,707			2,009
Deferred costs and other assets								31,602			27,715
Total assets	$	130,119		$	108,322		$	887,079		$	837,296
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,223		$	2,434		$	6,971		$	7,808
Accrued payroll and employee related liabilities		9,778			7,456			26,884			22,248
Accrued expenses		2,003			1,957			7,648			4,496
Deferred revenue		63,040			51,388			141,858			129,995
Contingent liabilities		1,705			—			2,530			—
Other current liabilities		614			548			6,667			4,819
Total current liabilities		80,363			63,783			192,558			169,366
Long-term liabilities:
Deferred revenue, noncurrent		1,455			1,246			3,673			3,471
Convertible senior notes								435,718			430,282
Deferred tax liabilities		594			494			5,472			2,002
Other long term liabilities		533			447
Other long-term liabilities								16,150			11,863
Total liabilities		82,945			65,970			653,571			616,984
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 March 31, 2020 and December 31, 2019, respectively								—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 34,348,008 and 33,848,627 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively								34			34
Additional paid-in capital		150,614			132,246			471,046			425,945
Accumulated deficit		(103,488	)		(89,618	)		(225,305	)		(199,920	)
Accumulated other comprehensive income (loss)		20			(303	)
Accumulated other comprehensive loss								(12,267	)		(5,747	)
Total stockholders’ equity		47,174			42,352			233,508			220,312
Total liabilities and stockholders’ equity	$	130,119		$	108,322		$	887,079		$	837,296

	Three Months Ended						Nine Months Ended						Three Months Ended March 31,
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			2020			2019
Revenue	$	27,312		$	19,932		$	75,177		$	55,566		$	58,900		$	42,819
Cost of revenue		8,076			6,173			22,969			17,324			20,889			13,981
Gross profit		19,236			13,759			52,208			38,242			38,011			28,838
Operating expenses:
Sales and marketing		11,626			8,605			33,589			25,659			29,588			20,071
Research and development		5,626			3,917			16,082			10,560			14,172			11,485
General and administrative		6,375			3,666			16,640			10,252			15,911			10,558
Total operating expenses		23,627			16,188			66,311			46,471			59,671			42,114
Operating loss		(4,391	)		(2,429	)		(14,103	)		(8,229	)		(21,660	)		(13,276	)
Other income (expense), net:
Interest and investment income		106			—			234			—			1,573			1,177
Interest expense		(2	)		(195	)		(5	)		(506	)		(5,922	)		(1,635	)
Other income (expense), net		(23	)		30			(61	)		2
Other expense, net														(77	)		(106	)
Total other income (expense), net		81			(165	)		168			(504	)		(4,426	)		(564	)
Loss before income taxes		(4,310	)		(2,594	)		(13,935	)		(8,733	)		(26,086	)		(13,840	)
(Provision for) benefit from income taxes		79			(35	)		65			75
Benefit from (provision for) income taxes														701			(294	)
Net loss	$	(4,231	)	$	(2,629	)	$	(13,870	)	$	(8,658	)	$	(25,385	)	$	(14,134	)
Net loss per share attributable to common stockholders:
Basic	$	(0.15	)	$	(0.18	)	$	(0.50	)	$	(0.66	)	$	(0.74	)	$	(0.44	)
Diluted	$	(0.15	)	$	(0.18	)	$	(0.50	)	$	(0.66	)	$	(0.74	)	$	(0.44	)
Weighted-average common shares outstanding:
Basic		28,100,172			14,772,006			27,719,519			13,124,480			34,075,071			32,271,067
Diluted		28,100,172			14,772,006			27,719,519			13,124,480			34,075,071			32,271,067

~~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, 2019		33,848,627		$	34	$	425,945		$	(199,920	)	$	(5,747	)	$	220,312
Issuance of common stock in connection with acquisitions		301,941			—		30,434			—			—			30,434
Stock-based compensation		—			—		10,368			—			—			10,368
Vesting of restricted stock units		44,606			—		—			—			—			—
Restricted stock units withheld to settle employee tax withholding liability		(4,483	)		—		(400	)		—			—			(400	)
Exercise of stock options		126,374			—		2,989			—			—			2,989
Issuance of shares under employee stock purchase plan		30,943			—		1,710			—			—			1,710
Other comprehensive loss		—			—		—			—			(6,520	)		(6,520	)
Net loss		—			—		—			(25,385	)		—			(25,385	)
Balance at March 31, 2020		34,348,008		$	34	$	471,046		$	(225,305	)	$	(12,267	)	$	233,508

	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

Common stock

Additional
paid-in

Accumulated

Accumulated—
other
comprehensive

Shares

Par value

capital

deficit

income (loss)

Total

Balance at December 31, 2016

27,150,674

$
27

$
132,246

$
(89,618
)

$
(303
)

$
42,352

Stock-based compensation

—

—

4,872

—

—

4,872

Issuance of common stock in follow-on
offering, net

553,825

1

9,869

—

—

9,870

Exercise of stock options

370,084

—

2,087

—

—

2,087

Issuance of shares under employee
stock purchase plan

128,786

—

1,540

—

—

1,540

Other comprehensive income

—

—

—

—

323

323

Net loss

—

—

—

(13,870
)

—

(13,870
)
Balance at September 30, 2017

28,203,369

$
28

$
150,614

$
(103,488
)

$
20

$
47,174

	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net loss	$	(13,870	)	$	(8,658	)	$	(25,385	)	$	(14,134	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		7,646			5,675			6,656			3,705
Loss on disposal of assets		15			74
Amortization of deferred costs								2,922			1,598
Deferred income taxes		62			(224	)		(1,246	)		41
Non-cash interest expense on line of credit and term loan		—			67
Non-cash investment income		(74	)		—
Provision for doubtful accounts and sales reserve		588			95
Accretion of interest on convertible senior notes								5,436			1,201
Provision for credit losses and sales reserve								925			148
Stock-based compensation		4,838			2,127			10,310			7,785
Increase (decrease) in operating assets and liabilities:
Other non-cash adjustments								—			(189	)
Changes in operating assets and liabilities:
Accounts receivable		(3,591	)		(391	)		445			5,543
Prepaid expenses		(1,552	)		(1,188	)		(3,057	)		(4,233	)
Deferred costs								(4,720	)		(2,227	)
Other assets		(980	)		(1,743	)		(4,069	)		2,153
Accounts payable		820			251			(1,072	)		4,112
Accrued payroll and employee related liabilities		2,263			1,558			3,221			1,205
Accrued expenses		(54	)		305			1,732			(1,065	)
Deferred revenue		7,801			8,605			5,118			2,767
Other liabilities		467			(18	)		3,585			277
Net cash provided by operating activities		4,379			6,535			801			8,687
Cash flows from investing activities:
Capital expenditures		(1,337	)		(739	)		(524	)		(2,773	)
Proceeds from sale leaseback transaction		794			—
Payments for acquisition of business, net of acquired cash		(21,235	)		—			(34,941	)		—
Change in restricted cash		(294	)		—
Additions to capitalized software development costs								(2,004	)		(2,018	)
Purchase of short-term investments		(29,955	)		—			—			(1,975	)
Maturities of short-term investments		6,000			—			—			24,750
Additions to capitalized software development costs		(4,586	)		(4,294	)
Net cash used in investing activities		(50,613	)		(5,033	)
Net cash provided by (used in) investing activities								(37,469	)		17,984
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	)
Proceeds from public offering, net of costs								—			139,115
Proceeds from employee stock purchase plan		1,540			—			1,710			1,283
Proceeds from option exercises		2,087			748
Proceeds from exercise of warrants		—			25
Proceeds from stock option exercises								2,989			8,746
Other								(531	)		(506	)
Net cash provided by financing activities		9,409			52,056			4,168			148,638
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								(666	)		(28	)
Net increase (decrease) in cash, cash equivalents and restricted cash								(33,166	)		175,281
Cash, cash equivalents and restricted cash—beginning of period								539,662			60,068
Cash, cash equivalents and restricted cash—end of period							$	506,496		$	235,349
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	—		$	488
Taxes, net of refunds received		25			—		$	184		$	—
Supplemental disclosure of non-cash activities:
Capitalized assets included in accounts payable and accrued expenses		24			132			226			689
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								13			16
Common stock issued in connection with acquisitions								30,434			—
Contingent consideration in connection with acquisitions								2,530			—
Purchase accounting payable, net								464			—
Stock-based compensation capitalized for software development		34			38			58			64

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, Risk Intelligence 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, 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.~~2019.

The condensed consolidated balance sheet as of December 31, ~~2016,~~2019, 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 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~~2020 or any future period.

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, relative stand-alone selling price for identified performance obligations in our revenue transactions, allowances for ~~doubtful accounts,~~credit losses, the fair value of assets acquired and liabilities assumed in business combinations, the fair value of contingent consideration, 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 convertible senior notes, and certain market-based performance equity awards. There have been significant changes to the global economic situation as a consequence of the COVID-19 pandemic. The global outbreak has caused instability and volatility in multiple markets where the Company conducts business which could cause changes to estimates as a result of the financial circumstances. Such changes to estimates could potentially result in impacts that would be material to the consolidated financial statements, particularly with respect to the timing of revenue recognition resulting from potential implementation delays, evaluating the recoverability of long-lived assets with finite useful lives for impairment and estimates of credit losses for accounts receivables and contract assets. NaN impairments were recorded as of the balance sheet date; however, due to significant uncertainty surrounding the situation, management's judgment regarding this could change in the future. As of the date of issuance of these financial statements, the Company’s results of operations have not been significantly impacted by the COVID-19 pandemic; however, the Company continues to monitor the situation.

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 and cash equivalent 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, Netherlands, Sweden and the United Kingdom and are generally denominated in U.S. dollars, Norwegian Krone, Euro, 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~~credit risk based on the evaluations. NoNaN single customer comprised more than 10% of the Company’s total revenue ~~or accounts receivable~~ for the three ~~or nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~2019. NaN single customer comprised more than 10% of the Company’s total accounts receivable as of March 31, 2020 and 2019.

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 equivalents consist of funds deposited into money market funds. Cash and cash equivalents are recorded at cost, which approximates fair value. As

The Company’s restricted cash balance primarily consists of ~~September 30, 2017, $19.5 million of~~cash held at a financial institution for collateral against performance on the Company’s customer contracts and certain other cash ~~equivalents were invested in money market funds and U.S. government securities.~~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. Short-term investments of $24.0 million and none at September 30, 2017 and December 31, 2016, respectively, were classified as held-to-maturity and primarily comprised of U.S. treasury and U.S. agency securities. All held-to-maturity securities ~~at September 30, 2017~~ have maturity dates within one year.

~~There~~Except for the accounting policies for credit losses that were updated, as set forth below, as a result of adopting Accounting Standards Update (“ASU”) No. 2016-13 (as amended through November 2019), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and the accounting policies for the implementation, set-up, and other upfront costs incurred in a cloud computing arrangement, as set forth below, as a result of adopting ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, 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.~~2019 filed with the SEC on February 28, 2020, 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 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 the Company may sell software and related post contract support for on premise usage as well as professional services which is outside of the Company’s core business. The Company’s on premise license transactions are perpetual in nature and are recognized at a point in time when made available to the customer.

Most 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, pricing when certain services are sold on a standalone basis, the applications sold, customer demographics, geographic locations, and the volume of services and users.

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 credit risk, which is not material. Other receivables represent unbilled receivables related to subscription and professional services contracts, net of an allowance for credit losses, which is not material. On January 1, 2020, the Company adopted ASU 2016-13 (as amended through March 2020), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. See Recently Adopted Accounting Pronouncements below.

Sales commissions earned by the Company’s sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Subscription-related commissions 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. Sales commissions attributable to professional services are expensed within twelve months of selling the service to the customer. 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 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 June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 (as amended through March 2020), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 introduced a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables, contract assets and held-to-maturity debt securities, which requires the Company to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also expands disclosure requirements.

The Company adopted the standard on January 1, 2020 using the modified retrospective approach. Adoption of ASU 2016-13 resulted in changes to the Company’s accounting policies for trade and other receivables and contract assets. Upon adoption of ASU 2016-13 the Company evaluates trade receivables and contract assets on a collective (i.e., pool) basis if they share similar risk characteristics.

Based on the results of the Company’s evaluation, the adoption of ASU 2016-13 did not have a material impact on the Company’s net loss for the quarter ended March 31, 2020. Adoption of the standard had no impact on total cash provided from or used in operating, financing, or investing activities in the Company’s condensed consolidated statements of cash flows.

Accounts receivable includes trade accounts receivables from the Company’s customers, net of an allowance for credit risk. Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company’s contract assets relate to services performed which were not billed, net of an allowance for credit risk. Allowance for credit risk for accounts receivables and contract assets is established based on various factors including credit profiles of the Company’s customers, historical payments and current economic trends. The Company reviews its allowance for accounts receivables and contract assets by assessing individual accounts receivable or unbilled contract assets over a specific aging and amount. All other balances are pooled based on historical collection experience. The estimate of expected credit losses is based on information about past events, current economic conditions, and forecasts of future economic conditions that affect the collectability. Accounts receivable and contract assets are written-off on a case by case basis, net of any amounts that may be collected. See Note 3.

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. The guidance includes retrospective and prospective basis application dependent on the requirements of specific amendments. The Company adopted ASU 2018-13 on January 1, 2020 on a prospective basis. The adoption of this standard did not have an impact on the Company’s condensed 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, related to a customer's accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement (“CCA”). Under the new guidance, implementation costs associated with a CCA for a hosting arrangement that is a service contract are accounted for consistent with existing internal-use software implementation guidance. ASU 2018-15 also provides classification guidance on these implementation costs as well as additional quantitative and qualitative disclosures. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

In January ~~2017,~~2020, the ~~Financial~~FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with FASB Accounting Standards ~~Board,~~Codification (“ASC”) 321, Investments – Equity Securities, should be considered immediately before applying or ~~FASB, issued Accounting Standards Update,~~upon discontinuing the equity method. Certain non-derivative forward contracts or ~~(“ASU”), ASU 2017-04,~~ ~~Intangibles-Goodwill~~purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and ~~Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity~~consideration shall not be given to ~~recognize a goodwill impairment charge~~how entities will account for the ~~amount by which~~resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the ~~goodwill carrying amount exceeds~~Company beginning in the ~~reporting unit’s fair value. This guidance~~first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The Company is currently assessing the impact this standard will have on the Company’s condensed consolidated financial statements.

Other accounting standard updates effective for interim and annual ~~goodwill impairment tests in fiscal years~~periods beginning after December ~~15,~~31, 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 doesare not ~~expect the adoption of this guidance~~expected to have a material impact on ~~its~~the Company’s financial position, results of operations or cash flows.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (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~~

(3) Accounts Receivableand 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 effectiveContract Assets, Net

On 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~~, 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 also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. The ASU is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. Adoption of 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 for2020, the Company ~~effective January 1, 2018.~~adopted ASU 2016-13 using the modified retrospective approach. See Note 2. 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 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~~2016-13 had an immaterial impact on ~~its operating cash flows.~~

~~(3) Accounts Receivable, Net~~the Company’s opening balance of accumulated deficit.

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 million and $0.1 million for the three and nine months ended September 30, 2016, respectively.

The following table summarizes the changes in the allowance for ~~doubtful~~credit losses for accounts receivable (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Balance, beginning of period	$	(610	)	$	(377	)	$	(374	)	$	(336	)	$	(1,125	)	$	(711	)
Additions		(195	)		(8	)		(484	)		(95	)
Provision for expected credit losses														(743	)		(148	)
Write-offs		11			33			64			79			115			49
Balance, end of period	$	(794	)	$	(352	)	$	(794	)	$	(352	)	$	(1,753	)	$	(810	)

The following table summarizes the changes in the allowance for credit losses for contract assets (in thousands):

Credit loss expense was $0.7 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively.

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Balance, beginning of period	$	(116	)	$	(45	)	$	(45	)	$	(45	)	$	(175	)	$	(200	)
Additions		(24	)		—			(104	)		—			(200	)		—
Write-offs		15			—			24			—			—			—
Balance, end of period	$	(125	)	$	(45	)	$	(125	)	$	(45	)	$	(375	)	$	(200	)

									Useful life		As of			As of
	Useful life in years		As of September 30, 2017			As of December 31, 2016			in years		March 31, 2020			December 31, 2019
Furniture and equipment		5	$	1,794		$	928			5	$	2,107		$	1,785
Leasehold improvements ⁽¹⁾										5		4,672			4,074
System hardware		5		1,623			3,320			5		1,589			1,596
Office computers		3		2,285			1,777			3		5,803			5,309
Computer and system software		3		1,186			1,478			3		1,451			1,451
				6,888			7,503					15,622			14,215
Less accumulated depreciation and amortization				(4,044	)		(4,580	)				(8,515	)		(7,931	)
Property and equipment, net			$	2,844		$	2,923				$	7,107		$	6,284

Depreciation and amortization expense for property and equipment was ~~$0.4~~$0.6 million and ~~$1.5~~$0.5 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 and ~~$0.4 million and $1.2 million for the three and nine months ended September 30, 2016,~~2019, respectively.

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

				As of September 30, 2017								As of March 31, 2020
	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	$	51,867	3 years	$	(37,473	)	$	14,394
Total capitalized software development costs	$	35,278		$	(25,606	)	$	9,672	$	51,867		$	(37,473	)	$	14,394

				As of December 31, 2016								As of December 31, 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	$	30,658	3 years	$	(21,866	)	$	8,792	$	49,909	3 years	$	(35,622	)	$	14,287
Total capitalized software development costs	$	30,658		$	(21,866	)	$	8,792	$	49,909		$	(35,622	)	$	14,287

The Company capitalized software development costs of ~~$4.6~~$2.0 millionand ~~$5.5~~$2.1 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~the year ended December 31, 2016,~~2019, respectively.

Amortization expense for capitalized software development costs was ~~$1.2~~$1.9 million and ~~$3.7~~$1.5 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 and ~~$1.3 million and $3.6 million for the three and nine months ended September 30, 2016,~~2019, 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,~~March 31, 2020, 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~~three months ended ~~September 30, 2017~~March 31, 2020 and year ended December 31, ~~2016, no~~2019, 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~~March 31, 2020 and December 31, ~~2016~~2019 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 March 31, 2020
	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	$	473,254	$	—	$	—	$	473,254
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	$	473,254	$	—	$	—	$	473,254
Liabilities:
Contingent consideration		—			—	$	1,705	$	1,705	$	—	$	—	$	2,530	$	2,530
Total financial liabilities	$	—		$	—	$	1,705	$	1,705	$	—	$	—	$	2,530	$	2,530

	As of December 31, 2016									As of December 31, 2019
	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	$	511,436	$	—	$	—	$	511,436
Total financial assets	$	57,032		$	—	$	—	$	57,032	$	511,436	$	—	$	—	$	511,436
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~~three 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~~March 31, ~~2016.~~2020.

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 the Company’s~~There were 0 Level 2securities 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.at March 31, 2020 and December 31, 2019.

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

~~At December 31, 2016, the Company recorded~~The valuation of the contingent consideration ~~from~~was derived using estimates of the ~~Crisis Commander acquisition under long-term other liabilities.~~probability of achievement within specified time periods based on projections of future revenue metrics per the terms of the applicable agreements. These include estimates of the Company’s assessment of the probability of meeting such results, with the probability-weighted earn-out using a Monte Carlo Simulation Model then discounted to estimate fair value. The various operating performance measures included in these contingent consideration agreements primarily relate to product revenue. As these are unobservable inputs, the contingent consideration liabilities are included in Level 3 inputs.

The 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 March 31, 2020 and December 31, 2019, the fair value of the 0.125% convertible senior notes due December 15, 2024 (the “2024 Notes”) was determined to be $518.8 million and $450.4 million, respectively, and the carrying value of the notes was $355.5 million and $351.1 million, respectively. As of March 31, 2020 and December 31, 2019, the fair value of the 1.50% convertible senior notes due November 1, 2022 (the “2022 Notes”) was determined to be $306.4 million and $215.8 million, respectively, and the carrying value of the notes was $80.3 million and $79.2 million, respectively.

Goodwill was $31.3 million and $9.7 million as of September 30, 2017 and December 31, 2016, respectively. There were no impairments recorded against goodwill during the nine months ended September 30, 2017 and for the year ended December 31, 2016. The following table displays the changes in the gross carrying amount of goodwill (in thousands):

There were 0 impairments recorded against goodwill during the three months ended March 31, 2020 and for the year ended December 31, 2019.

				As of September 30, 2017								As of March 31, 2020
	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	$	13,588	3.00	$	(4,858	)	$	8,730
Trade names and patents		2,495	5.1		(584	)		1,911
Tradenames										13,692	3.54		(3,651	)		10,041
Customer relationships		8,537	5.0		(3,450	)		5,087		77,433	7.00		(12,335	)		65,098
Non-compete arrangement		240	2.0		(80	)		160
Total intangible assets	$	15,337		$	(5,838	)	$	9,499	$	104,713		$	(20,844	)	$	83,869

				As of December 31, 2016									As of December 31, 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	$	1,490	3.60	$	(878	)	$	612	$	9,485		3.00	$	(4,232	)	$	5,253
Trade names and patents		883	6.08		(254	)		629
Tradenames										11,437		3.50		(2,724	)		8,713
Customer relationships		4,779	5.00		(2,080	)		2,699		63,667		6.84		(10,533	)		53,134
Total intangible assets	$	7,152		$	(3,212	)	$	3,940	$	84,589			$	(17,489	)	$	67,100

Amortization expense for intangible assets was ~~$0.9~~$4.1 million and ~~$2.4~~$1.6 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively~~March 31, 2020 and ~~$0.3~~2019, respectively. The Company recorded amortization expense attributed to developed technology within cost of revenue of $0.7 million and ~~$0.9~~$0.3 million for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2020 and 2019, respectively.

The expected amortization of the intangible assets, as of ~~September 30, 2017,~~March 31, 2020, 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 ~~the IDV Solutions LLC, or IDV and Crisis Commander acquisitions using the purchase method of accounting for~~as business combinations under ASC 805, Business Combinations,~~. The total purchase price is allocated to~~ and have resulted in the ~~tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as~~recognition of goodwill in the Company’s financial statements. This goodwill includes the know-how of the ~~acquisition date.~~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.

As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price 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~~Significant estimation was required by management in determining the fair value of the ~~purchase accounting assessment may result in a change in~~customer relationship intangible assets and technology-related intangible assets. The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of these intangible assets, as well as the sensitivity of the respective fair values to the underlying significant assumptions. The Company used the income approach to measure the fair value of intangible assets. The significant assumptions used to estimate the fair value of the intangible assets included revenue growth rates, customer attrition rates, amount and expected period of cash flows and discount rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions.The valuation of the contingent consideration was derived using estimates of the probability of achievement within specified time periods based on projections of future revenue metrics per the terms of the applicable agreements. These include estimates of the Company’s assessment of the probability of meeting such results, with the probability-weighted earn-out using a Monte Carlo Simulation Model then discounted to estimate fair value.The various operating performance measures included in these contingent consideration agreements primarily relate to product revenue.

The business acquisitions discussed below are included in the Company’s results of operations from their respective dates of acquisition.

During the three months ended March 31, 2020, the Company acquired Connexient, Inc., CNL Software Limited and ~~intangible~~One2Many Group B.V. These acquisitions were not material individually or on a consolidated basis. Additionally, neither the investment in the assets ~~which may have a material impact on our~~nor the results of operations of these acquisitions were significant to the Company’s consolidated financial position or results of operations, and ~~financial position.~~thus pro forma information is not required to be presented.

On ~~January 27, 2017,~~February 7, 2020, the Company ~~acquired IDV, in exchange~~entered into a Stock Purchase Agreement with Connexient, Inc. (“Connexient”) pursuant to which the Company purchased all of the issued and outstanding shares of stock of Connexient for ~~current cash~~a base consideration of ~~$21.2~~$20.2 million. The Company paid $11.5 million ~~net~~in cash at closing and paid the remaining purchase price with 96,611 newly issued shares of ~~cash acquired and~~ the ~~fair value of contingent future consideration. At~~Company’s common stock. On the date of this acquisition, ~~$2.5 million~~the average price of the Company’s common stock on the Nasdaq Global Market was ~~deposited in an escrow account for fifteen months. The escrow fund is available to provide security~~$93.32 per share. In addition to the ~~Company~~base purchase price, there is also a potential contingent payment of up to ~~compensate it for losses it may incur as a result of any inaccuracy in the representations or warranties of IDV or~~$6.0 million that can be earned by 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.~~based on fiscal year 2020 revenue metrics. At the date of the acquisition, the Company preliminarily assessed the probabilities of ~~IDV~~Connexient meeting the ~~future sales and billing thresholds~~fiscal year 2020 revenue metrics 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~~$0.3 million. Based on sales and billings thresholds met as of June 30, 2017, the Company paid $3.8 million of the contingent consideration as of September 30, 2017. IDV is a provider of threat assessment and operational visualization software located in Lansing, Michigan. The Company acquired ~~IDV for its~~Connexient to expand the Company’s customer base and for its strategic technology assets to ~~complement some~~enhance the Company’s CEM suite of solutions to broaden support for Internet of Things (“IoT”) applications.

As the Company finalizes its estimation of the ~~existing facets~~fair value of ~~its~~the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months). The initial accounting is incomplete as of March 31, 2020 for the acquired assets and liabilities as the Company is currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination.The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities, deferred revenue, contingent consideration and intangible assets, along with the opening working capital accounts, which could have a material impact on the Company’s ~~existing customers.~~results of operations and financial position.

The following table summarizes the ~~allocation of the purchase consideration and the~~ preliminary estimated fair value of the assets acquired and the liabilities assumed, which were recorded as of the acquisition date, as well as the aggregate consideration during the three months ended March 31, 2020 for the acquisition of ~~IDV~~ Connexient 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):

			Connexient
Assets acquired	IDV
Accounts receivable		1,462	$	849
Prepaid expenses and other current assets				518
Property and equipment				9
Acquired technology				1,220
Trade names				630
Customer relationships				7,800
Goodwill				14,634
Other assets		242		238
Property and equipment		174
Trade names		1,590
Acquired technology		2,490
Customer relationships		3,400
Non-compete arrangement		240
Goodwill		21,196
Total assets acquired	$	30,794		25,898
Liabilities assumed
Accounts payable and accrued expenses		347
Accounts payable				727
Accrued expenses				208
Deferred revenue		4,060		2,420
Deferred tax liabilities				1,986
Other liabilities		132		211
Net assets acquired	$	26,255	$	20,346
Consideration paid
Cash paid, net of cash acquired		21,235
Acquisition date fair value of contingent consideration		5,020
Cash consideration, net of cash acquired			$	10,991
Fair value of common stock issued				9,015
Contingent consideration				340
Total	$	26,255	$	20,346

The weighted average useful life of all identified acquired intangible assets is ~~4.26~~7.92 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~~9.0 years and ~~5.0~~4.0 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 to five years.~~method. 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 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~~Connexient’s products with the Company's other ~~solutions~~.solutions. The Company believes that the factors listed above in relation to the purchase of ~~IDV~~Connexient 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~~Connexient acquisition is not deductible for income tax purposes.

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, the Company incurred transaction costs of ~~none and~~less than $0.1 million ~~respectively~~ in connection with the ~~IDV~~Connexient acquisition, which were expensed as incurred and included in general and administrative ~~expenses within~~expenses.

On February 25, 2020, the ~~accompanying consolidated statements~~Company entered into a Stock Purchase Agreement with CNL Software Limited (“CNL Software”) for a base consideration of ~~operations.~~approximately $35.6 million. The Company paid approximately $19.6 million in cash at closing and paid the remaining purchase price with 153,217 newly issued shares of the Company’s common stock. On the date of this acquisition, the average price of the Company’s common stock on the Nasdaq Global Market was $104.10 per share. The Company acquired CNL Software to expand the Company’s customer base and for its strategic technology assets to enhance the Company’s CEM suite of solutions to broaden support for IoT applications.

As the Company finalizes its 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). The initial accounting is incomplete as of March 31, 2020 for the acquired assets and liabilities as the Company is currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination. The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities, deferred revenue, and intangible assets, along with the opening working capital accounts, which could have a material impact on the Company’s results of operations and financial position.

The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed, which were recorded as of the acquisition date, as well as the aggregate consideration during the three months ended March 31, 2020 for the acquisition of CNL Softwaremade by the Company (in thousands):

The weighted average useful life of all identified acquired intangible assets is 5.01 years. The average useful lives for acquired technologies, customer relationships and trade names are 3.0 years, 6.0 years and 4.0 years, respectively. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method. The straight-line method of amortization represents the Company’s best estimate of the period of expected cash flows of the identifiable intangible assets.

The goodwill balance is primarily attributed to the anticipated synergies from the acquisition and expanded market opportunities with respect to the integration of CNLSoftware’s products with the Company's other solutions. The Company believes that the factors listed above in relation to the purchase of CNLSoftware 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 CNL Software acquisition is not deductible for income tax purposes.

For the three months ended March 31, 2020, the Company incurred transaction costs of less than $0.1 million in connection with the CNL Software acquisition, which were expensed as incurred and included in general and administrative expenses.

On March 19, 2020, the Company entered into a Stock Purchase Agreement with One2Many Group B.V. (“one2many”) pursuant to which the Company purchased all of the issued and outstanding shares of stock of one2many for a base consideration of $13.0 million. The Company paid $5.5 million in cash at closing, acquired purchase liabilities of $2.0 million and paid the remaining purchase price with 52,113 newly issued shares of the Company’s common stock. On the date of this acquisition, the average price of the Company’s common stock on the Nasdaq Global Market was $104.95 per share. In addition to the base purchase price, there is also a potential contingent payment of up to approximately $15.0 million that can be earned by the sellers based on revenue metrics during the period of March 1, 2020 through February 28, 2021. The potential contingent payment includes an amount payable to the Company if a certain revenue threshold is not met during the period of March 1, 2020 through February 28, 2021. At the date of the acquisition, the Company preliminarily assessed the probabilities of one2many meeting the revenue metrics during the period of March 1, 2020 through February 28, 2021 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 $2.2 million. The Company acquired one2many to expand the Company’s customer base and for its cell broadcast technology to enhance the Company’s public warning applications.

As the Company finalizes its 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). The initial accounting is incomplete as of March 31, 2020 for the acquired assets and liabilities as the Company is currently in the process of completing the assessment of valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination.The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and liabilities, deferred revenue, contingent consideration and intangible assets, along with the opening working capital accounts, which could have a material impact on the Company’s results of operations and financial position.

The weighted average useful life of all identified acquired intangible assets is 5.67 years. The average useful lives for acquired technologies, customer relationships and trade names are 3.0 years, 7.0 years and 3.0 years, respectively. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method. The straight-line method of amortization represents the Company’s best estimate of the period of expected cash flows of the identifiable intangible assets.

The goodwill balance is primarily attributed to the anticipated synergies from the acquisition and expanded market opportunities with respect to the integration of one2many’s products with the Company's other solutions. The Company believes that the factors listed above in relation to the purchase of one2many 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 one2many acquisition is not deductible for income tax purposes.

For the three months ended March 31, 2020, the Company incurred transaction costs of less than $0.1 million in connection with the one2many acquisition, which were expensed as incurred and included in general and administrative expenses.

On April 1, 2019, the Company entered into a Stock Purchase Agreement with MissionMode Solutions, Inc. (“MissionMode”) pursuant to which the Company purchased all of the issued and outstanding shares of stock of MissionMode for base consideration of $6.8 million. There was also a potential contingent payment of up to $1.0 million that could have been earned in addition to the base consideration by the sellers based on successfully converting MissionMode’s customers to the Company’s products. At the date of the acquisition, the Company assessed the probabilities of MissionMode meeting the threshold to convert MissionMode’s customers to the Company’s products required for the seller to earn the contingent payment. Therefore, contingent consideration was recorded as part of the purchase price allocation and the fair value of the contingent consideration was determined to be $0.6 million. At December 31, 2019, it was determined to not be probable that MissionMode would meet the threshold to convert MissionMode’s customers to the Company’s products which resulted in a decrease of the contingent consideration obligation in the amount of $0.6 million. The Company’s acquisition of MissionMode was made primarily to expand the Company’s customer base and to a lesser extent to complement some of the existing facets of MissionMode’s business with the Company’s existing products.

Neither the investment in the assets nor the results of operations of the acquisition of MissionMode 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 interest 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. 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 average price of the Company’s common stock on the Nasdaq Global Market was $102.18 per share. On August 1, 2019, the Acquisition was consummated pursuant to the Purchase Agreement, except for 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 following table summarizes the estimated fair value of the assets acquired and the liabilities assumed, which were recorded as of the acquisition date, as well as the aggregate consideration during the year ended December 31, 2019 for the acquisition of NC4 made by the Company (in thousands):

The weighted average useful life of all identified acquired intangible assets is 5.88 years. The average useful lives for acquired technologies, customer relationships and trade names are 3.0 years, 7.0 years and 3.0 years, respectively. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method. The straight-line method of amortization represents the Company’s best estimate of the period of expected cash flows of the identifiable intangible assets.

As a result of the acquisition, the Company recorded $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 NC4’s products with the Company's other solutions. The Company believes that the factors listed above in relation to the purchase of 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 NC4 acquisition is deductible for income tax purposes.

For the year ended December 31, 2019, the Company incurred transaction costs of $0.2 million in connection with the NC4 acquisition, which were expensed as incurred and included in general and administrative expenses.

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~~March 31, 2019 as if the acquisition of ~~IDV~~NC4 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.~~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 amount):

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.

OnIn December ~~30, 2016,~~2019, the Company ~~completed~~issued $450.0 million aggregate principal amount of 0.125% convertible senior notes due 2024, including $75.0 million aggregate principal amount of 2024 Notes issued upon the ~~acquisition~~initial purchasers’ exercise in full of ~~Crisis Commander, a privately held SaaS mobile crisis management company based in Norsborg, Sweden.~~their option to purchase additional 2024 Notes. The ~~acquisition was consummated~~2024 Notes will mature on December 15, 2024, unless earlier redeemed or repurchased by the Company or converted by the holder pursuant to their terms. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020.

The 2024 Notes are governed by an Indenture between the Company, as issuer, and U.S. Bank National Association, as trustee (the “2024 Notes Indenture”). The 2024 Notes are unsecured and rank: senior in right of payment to the Company’s indebtedness that is expressly subordinated in right of payment to the 2024 Notes; equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated, including its 1.50% convertible senior notes due 2022 (see 1.50% Convertible Senior Notes Due 2022 below); effectively junior 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 junior 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 ~~purchase agreement for~~combination of cash and shares of common stock, at the Company’s election.

The 2024 Notes have an initial ~~preliminary purchase~~conversion rate of 8.8999 shares of common stock per $1,000 principal amount of 2024 Notes. This represents an initial effective conversion price of ~~$2.7~~approximately $112.36 per share of common stock and approximately 4.0 million ~~subject to earn out payments contingent on meeting~~shares issuable upon conversion. Throughout the term of the 2024 Notes, the conversion rate may be adjusted upon the occurrence of certain ~~revenue thresholds, which are expected~~events. Holders of the 2024 Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a 2024 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 2024 Note.

Holders may convert all or a portion of their 2024 Notes prior to the close of business on the business day immediately preceding June 15, 2024, in multiples of $1,000 principal amount, only under the following circumstances:

On or after June 15, 2024 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 2024 Notes at the conversion rate at any time regardless of whether the conditions set forth below have been met.

As of March ~~2018.~~31, 2020, the 2024 Notes are not yet convertible. The 2024 Notes are classified as long-term on the condensed consolidated balance sheet as of March 31, 2020 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.

The 2024 Notes are not redeemable by the Company prior to December 20, 2022. The Company may redeem for cash all or any portion of the 2024 Notes, at its option, on or after December 20, 2022 if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2024 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

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 2024 Notes to be approximately 5.16%, 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 2024 Notes, which resulted in a fair value of the liability component of $360.4 million upon issuance, calculated as the present value of implied future payments based on the $450.0 million aggregate principal amount. The excess of ~~purchase consideration~~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 2024 Notes. The $89.6 million difference between the aggregate principal amount of $450.0 million and the estimated fair value of the liability component was recorded in additional paid-in capital as the 2024 Notes were not considered redeemable.

Significant judgment is required in determining the liability component of the related convertible senior notes as well as the balance sheet classification of the elements of the convertible senior notes. The Company accounted for the convertible senior notes and the partial repurchase of the 2022 Notes, discussed below, as separate liability and equity components, determining the fair value of ~~net tangible liabilities assumed~~the respective liability components based on an estimate of the fair value of a similar liability without a conversion option and ~~identifiable intangible assets acquired~~assigning the residual value to the equity component.

The Company estimated the fair value of the liability component of the convertible senior notes using a discounted cash flow model with a risk adjusted yield for similar debt instruments, absent any embedded conversion feature. In estimating the risk adjusted yield, the Company utilized both an income and market approach. For the income approach, the Company used a convertible bond pricing model, which included several assumptions including volatility and the risk-free rate. For the market approach, the Company performed an evaluation of issuances of convertible debt securities issued by other comparable companies. Additionally, a detailed analysis of the terms of the convertible senior notes transactions was required to determine existence of any derivatives that may require separate mark-to-market accounting under applicable accounting guidance.

In accounting for the transaction costs related to the issuance of the 2024 Notes, the Company allocated the total amount incurred to the liability and equity components based on their estimated relative fair values. Transaction costs attributable to the liability component, totaling $10.2 million, are being amortized to expense over the term of the 2024 Notes, and transaction costs attributable to the equity component, totaling $2.6 million, and were netted with the equity component in shareholders’ equity.

The following table sets forth total interest expense recognized related to the 2024 Notes (in thousands):

As of March 31, 2020 and December 31, 2019, the fair value of the 2024 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 2024 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 2024 Notes classified in equity) were as follows (in thousands):

In connection with the issuance of the 2024 Notes, the Company entered into capped call transactions with certain counterparties affiliated with the initial purchasers and other financial institutions. The capped call transactions are expected to reduce potential dilution of earnings per share upon conversion of the 2024 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 2024 Notes, with an initial strike price of approximately $112.36 per share, which corresponds to the initial conversion price of the 2024 Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2024 Notes, and with a cap price of approximately $166.46. The cost of the purchased capped calls of $44.9 million was recorded ~~as goodwill.~~to shareholders’ equity and will not be re-measured.

Based on the closing price of the Company’s common stock of $106.36 on March 31, 2020, the if-converted value of the 2024 Notes was less than their respective principal amounts.

In November 2017, the Company issued $115.0 million aggregate principal amount of 1.50% convertible senior notes due 2022 (the “2022 Notes”) including $15.0 million aggregate principal amount of 2022 Notes issued upon the initial purchasers’ exercise in full of their option to purchase additional 2022 Notes. The ~~fair values assigned~~2022 Notes will mature on November 1, 2022, unless earlier redeemed or repurchased by the Company or converted by the holder pursuant to ~~tangible~~their terms. Interest is payable semiannually in arrears on May 1 and ~~identifiable intangible assets acquired and liabilities assumed are based~~November 1 of each year, commencing 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.May 1, 2018.

The ~~goodwill balance is primarily attributed to~~2022 Notes are governed by an Indenture between the ~~anticipated synergies from the acquisition~~Company, as issuer, and ~~expanded market opportunities with respect to the integration~~U.S. Bank, National Association, as trustee (the “2022 Notes Indenture”). The 2022 Notes are unsecured and rank: senior in right of ~~Crisis Commander’s platform with the Company's other solutions. The goodwill balance is not deductible for U.S. income tax purposes.~~

~~The assets and results of operations of Crisis Commander were not significant~~payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the 2022 Notes; equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated, including the Company’s 2024 Notes; 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 2022 Notes have an initial conversion rate of 29.6626 shares of common stock per $1,000 principal amount of 2022 Notes. This represents an initial effective conversion price of approximately $33.71 per share of common stock and initially approximately 3.4 million shares issuable upon conversion. Throughout the term of the 2022 Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the 2022 Notes will not receive any cash payment representing accrued and unpaid interest, if any, upon conversion of a 2022 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 2022 Note.

Holders may convert all or a portion of their 2022 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:

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 2022 Notes at the conversion rate at any time regardless of whether the conditions set forth below have been met.

The 2022 Notes are not redeemable by the Company prior to November 6, 2020. The Company may redeem for cash all or any portion of the 2022 Notes, at its option, on or after November 6, 2020 if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Based on the market price of the Company’s common stock during the 30 trading days preceding June 30, 2018, the 2022 Notes were convertible at the option of the debt holder as of September 30, 2018 and continue to be convertible at the option of the debt holder as of March 31, 2020. In connection with the issuance of the 2024 Notes in December 2019, the Company paid $57.8 million to repurchase $23.0 million aggregate principal amount of the 2022 Notes. The Company determined the fair value of the liability portion being extinguished immediately prior to extinguishment. 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 2022 Notes to be approximately 4.64%. The fair value of such liability portion was then deducted from the amount of consideration transferred and allocated to the liability component. The difference between the fair value of the liability and its carrying value, inclusive of any unamortized debt issue costs, were recognized as an extinguishment loss in the amount of $1.4 million in Loss on extinguishment of convertible notes on the consolidated ~~financial position or results~~statement of operations and ~~thus pro forma information~~comprehensive loss during the year ended December 31, 2019. The remaining consideration was allocated to the reacquisition of the equity component and recognized as a reduction of Additional paid-in capital on the consolidated balance sheet in the amount of $36.7 million. The Company also partially terminated capped call options entered into in connection with the 2022 Notes during fiscal year 2019 and received $5.8 million recorded to additional paid-in capital on the consolidated balance sheet. No debt holders have exercised their right for conversion as of March 31, 2020. The 2022 Notes are classified as long-term on the consolidated balance sheet as of March 31, 2020 and December 31, 2019. The Company may repurchase the 2022 Notes prior to maturity and intends 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 2022 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 2022 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 2022 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 2022 Notes were not ~~presented.~~considered redeemable.

In accounting for the transaction costs related to the issuance of the 2022 Notes, the Company allocated the total amount incurred to the liability and equity components based on their estimated relative fair values. Transaction costs attributable to the liability component on the remaining outstanding notes as of the issuance date, totaling $2.5 million, are being amortized to expense over the term of the 2022 Notes, and transaction costs attributable to the equity component as of the issuance date, totaling $0.8 million, and were netted with the equity component in shareholders’ equity.

The following table sets forth total interest expense recognized related to the 2022 Notes (in thousands):

As of March 31, 2020 and December 31, 2019, the fair value of the 2022 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 2022 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 2022 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 2022 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 2022 Notes, with an initial strike price of approximately $33.71 per share, which corresponds to the initial conversion price of the 2022 Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2022 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 and will not be re-measured.

Based on the closing price of the Company’s common stock of $106.36 on March 31, 2020, the if-converted value of the 2022 Notes was more than their respective principal amounts.

As of ~~September 30, 2017,~~March 31, 2020, 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,~~March 31, 2020, 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~~March 31, 2020 and December 31, ~~2016,~~2019, there were ~~28,203,369~~34,348,008 and ~~27,150,674~~33,848,627 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”) 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, no 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~~three months ended ~~September 30, 2017, 128,786~~March 31, 2020 and 2019, 30,943 and 24,266 shares of common stock were purchased under the 2016 ~~ESPP. The 2016~~ ESPP, ~~is considered compensatory for purposes of stock-based compensation expense.~~

~~The Company recorded stock-based compensation expense of $2.8 million and $4.9 million for the three and nine months ended September 30, 2017,~~ respectively. The Company recorded stock-based compensation expense of ~~$0.8~~$0.3 million and ~~$2.2~~$0.3 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, respectively. As of March 31, 2020, unrecognized compensation cost related to the 2016 ~~respectively.~~ESPP was $0.5 million which will be amortized over a weighted-average period of 0.46 years.

Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant based on the closing market price of its common stock as reported on The Nasdaq Global Market. The option awards generally vest over four years and are exercisable any time after vesting. The stock options expire ten years after the date of grant.

There were 0 stock options granted during the three months ended March 31, 2020 and 2019. The Company recorded stock-based compensation expense of $0.9 million and $1.9 million for the three months ended March 31, 2020 and 2019, respectively, attributed to stock options.

The total intrinsic value of options exercised for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and 2019 was ~~$2.9~~$9.2 million and ~~$6.5~~$22.2 million, respectively. 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,~~March 31, 2020 and 2019, the total intrinsic value of all outstanding options was ~~$26.7 million.~~$47.1 million and $62.2 million, respectively.

The fair value of ~~stock option grants~~shares issuable under the ESPP is 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:~~ assumptions:

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

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

Expected term (in years)

6.00

5.99 - 6.11

6.00 - 6.11

5.29 - 6.11

Expected volatility

60%

70%

60%

70%

Risk-free interest rate

1.82% - 1.93%

1.21% - 1.25%

1.82% - 2.47%

1.21% - 1.86%

Dividend rate

0%

0%

0%

0%

Employee Stock Purchase Plan:

Expected term (in years)

0.50

—

0.50

—

Expected volatility

60%

—

60%

—

Risk-free interest rate

1.18%

—

0.45% - 1.18%

—

Dividend rate

0%

—

0%

—

	Three Months Ended March 31,
	2020		2019
Employee Stock Purchase Plan:
Expected term (in years) ⁽¹⁾		0.50		0.50
Expected volatility ⁽²⁾	55%		45%
Risk-free interest rate ⁽³⁾	0.29%		2.52%
Dividend rate ⁽⁴⁾	0%		0%

Total unrecognized compensation cost related to nonvested stock options was approximately ~~$15.3~~$5.7 million as of ~~September 30, 2017,~~March 31, 2020 and is expected to be recognized over a weighted average period of ~~3.12~~1.7 years. The amount of cash received from the exercise of stock options during the three months ended March 31, 2020 and 2019 was $3.0 million and $8.7 million, respectively.

~~A summary~~The following table summarizes the Company’s stock option activity:

Stock options outstanding, vested and expected to vest and exercisable are as follows:

During the three months ended March 31, 2020, the Company granted 81,845 restricted stock units (“RSUs”) to members of ~~activities~~its senior management and certain other employees pursuant to the 2016 Plan. The Company accounts for RSUs issued to employees at fair value, based on the market price of the Company’s common stock on the date of grant. The weighted-average grant date fair values of RSUs granted during the three months ended March 31, 2020 and 2019 were $96.85 and $57.81, respectively. The fair values of RSUs that vested during the three months ended March 31, 2020 and 2019, were $2.2 million and $0.6 million, respectively. During the three months ended March 31, 2020 and 2019, the Company recorded $4.5 million and $3.8 million, respectively, of stock-based compensation related to the RSUs. There were 44,606 RSUs that vested during the three months ended March 31, 2020.

As of March 31, 2020, there was $37.3 million of unrecognized compensation expense related to unvested RSUs which is expected to be recognized over a weighted-average period of approximately 2.57 years. For RSUs subject to graded vesting, the Company recognizes compensation cost on a straight-line basis over the service period for the entire award.

During the three months ended March 31, 2020, the Company granted 76,845 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. During the three months ended March 31, 2020, the share price of the Company’s common stock on the date of issuance of the PSUs ranged from $82.23 to $108.95 per share. During the three months ended March 31, 2019, the share price of the Company’s common stock on the date of issuance of the PSUs ranged from $54.83 to $64.86 per

share. The fair value is based on the value of the Company’s common stock at the date of issuance and the probability of achieving the performance metric. The Company has assessed the probability of achievement of the award at 100% based on past performance of achievement of the performance metric. Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions. The weighted-average grant date fair values of PSUs granted during the three months ended March 31, 2020 and 2019 were $97.23 and $57.18, respectively. NaN PSUs vested during the three months ended March 31, 2020 and 2019. During the three months ended March 31, 2020 and 2019, the Company recognized $4.6 million and $1.9 million, respectively, of stock compensation expense in connection with the PSU awards.

As of March 31, 2020, there was $32.0 million of unrecognized compensation expense related to unvested PSUs which is expected to be recognized over a weighted-average period of approximately 1.90 years. Compensation cost is recognized under the ~~2008 Plan~~accelerated method and is adjusted in future periods for subsequent changes in the ~~2016 Plan is shown~~expected outcome of the performance related conditions.

The following table summarizes the Company’s RSU and PSU activity for the three months ended March 31, 2020:

The Company recorded the total stock-based compensation expense as follows ~~for the year ended December 31, 2016 and the nine months ended September 30, 2017:~~(in thousands):

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

~~Stock options outstanding, and options exercisable and vested are as follows:~~

In August 2017, we granted 286,000 restricted stock units to members of our senior management pursuant to the 2016 Plan. We account for restricted stock units issued to employees at fair value, based on the market price of our stock on the date of grant. During the three months ended September 30, 2017 and 2016 we recorded $0.4 million and none, respectively, of stock-based compensation related to the restricted stock units that had been issued to-date. During the nine months ended September 30, 2017 and 2016 we recorded $0.4 million and none, respectively, of stock-based compensation related to the restricted stock units that had been issued to-date. There were no restricted stock units which vested during the three and nine months ended September 30, 2017 and 2016, respectively.

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

~~In August 2017, we granted 286,000 market-based restricted stock units to members of our senior management pursuant to the 2016 Plan.~~ ~~The restricted stock units vest based on the Company achieving certain stock price thresholds which range from $35 per share to $55 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 common stock on the date of issuance of the market-based restricted stock unit was $23.60 per share. The fair value is 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%, dividend yield of zero, expected term of 10 years and volatility of 60%. Compensation cost is not adjusted in future periods for subsequent changes in the expected outcome of market related conditions. For the three and nine months ended September 30, 2017, we recognized $1.0 million, respectively, of stock compensation expense in connection with these awards, which is included in general and administrative expenses.

As of September 30, 2017, there was $6.8 million of 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 compensation cost on a straight-line basis over the service period for the entire award.

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

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 convertible senior notes 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:

In connection with the issuance of the 2024 Notes in December 2019, the Company paid $44.9 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 2024 Notes. In connection with the issuance of the 2022 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 2022 Notes. In December 2019, the Company partially terminated capped call options related to the 2022 Notes and received $5.8 million. 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 required to reserve and keep available ~~from the Company’s~~out of its authorized but unissued shares of common stock asuch number of shares ~~equal to~~sufficient for the ~~number~~exercise of all shares ~~subject to outstanding awards~~granted and available for grant under the Company’s 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~~March 31, 2020 was 5.4 million shares. Additionally, the Company is ~~as follows:~~

required to reserve and keep available out of its authorized but unissued shares of common stock shares that become issuable pursuant to the terms of the 2024 Notes and 2022 Notes.

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~~March 31, 2020 and ~~2016,~~2019, the Company recorded a ~~tax~~ benefit ~~for~~from income taxes of ~~$79,000~~$0.7 million and a provision for income taxes of ~~$35,000,~~$0.3 million, respectively, resulting in an effective tax ~~benefit of 1.83% and effective tax~~ rate of ~~1.35%, respectively. For the nine months ended September 30, 2017~~(2.69)% and ~~2016, the Company recorded a tax benefit of $65,000 and a tax benefit of $75,000, respectively, resulting in an effective tax benefit of 0.47% and benefit of 0.86%~~2.12%, respectively. During the ~~current year periods,~~first quarter of 2020 there were deferred tax liabilities recorded in connection with the ~~effective~~preliminary purchase price accounting for the Company’s completed first quarter acquisitions and certain of such deferred tax ~~rate is lower than~~liabilities will be a source of future taxable income to realize a portion of Company’s deferred tax assets, which resulted in a discrete tax benefit of approximately $1.0 million being recorded in the ~~statutory federal tax rate as the Company~~quarter. This benefit was ~~not able to benefit from its net operating losses due to its full valuation allowance.~~offset by foreign income taxes and state taxes of $0.3 million.

As of ~~September 30, 2017,~~March 31, 2020, 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~~March 31, 2020 and ~~2016,~~2019, the amounts recorded related to the accrual of interest and penalties were immaterial in each period.

In response to the COVID-19 pandemic, the United States passed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act in March 2020. The CARES Act includes various income and payroll tax measures. The income tax measures are not expected to materially impact our financial statements.

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 ~~was from~~by geography which provides information as to the ~~United States for the three and nine months ended September 30, 2017, respectively. Approximately 90% and 89%~~major source of revenue (in thousands):

The following table presents the Company’s revenues disaggregated by revenue ~~was from~~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 ~~United States~~Company’s consolidated balance sheet net of an allowance for credit losses, which is not material.

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 ~~three~~end of each reporting period. The Company classifies advance payments and ~~nine months ended September 30, 2016, respectively. No other individual country comprised more than 10% of total~~deferred revenue ~~for the three and nine months ended September 30, 2017 and 2016. Property and equipment by geographic location is~~as current or noncurrent based on the ~~location~~timing of ~~the legal entity that owns the asset. As of September 30, 2017, more than 88% 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 ~~property~~consolidated balance sheet. The noncurrent portion of deferred revenue is included 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~~separately disclosed in the Company’s ~~audited~~ consolidated ~~financial statements~~balance sheet.

Current deferred costs, which primarily consist of deferred sales commissions, were $11.4 million and $9.9 million as of March 31, 2020 and December 31, 2019, respectively. Noncurrent deferred costs, which primarily consist of deferred sales commissions, were $14.5 million and $14.2 million as of March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020 and 2019, amortization expense for the deferred costs was $2.9 million and $1.6 million, respectively. There was 0 impairment loss in relation to the costs capitalized for the three months ended March 31, 2020 and the year ended December 31, ~~2016~~2019, respectively.

$46.4 million and ~~related notes thereto contained~~$31.7 million of subscription services revenue was recognized during the three months ended March 31, 2020 and 2019, respectively, and was included in the ~~Company’s Annual Report~~deferred revenue balances at the beginning of the respective period. $3.5 millionof professional services revenue was recognized during the three months ended March 31, 2020 and was included in the deferred revenue balance at the beginning of the period. Professional services revenue recognized during the three months ended March 31, 2019 from deferred revenue balances at the beginning of the respective period was not material.

As of March 31, 2020, approximately $298.1 million of revenue is expected to be recognized from remaining performance obligations for subscription and other contracts. The Company expects to recognize revenue 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~~approximately $167.0 million ~~in minimum lease payments~~of these remaining performance obligations over the next ~~five years.~~12 months, with the balance recognized thereafter.

~~In January 2017, as a result~~As of ~~the acquisition~~March 31, 2020, approximately $5.7 million of ~~IDV, the~~revenue is expected to be recognized from remaining performance obligations for professional services contracts. The Company ~~inherited leases for IDV’s executive offices in Lansing, Michigan and sales office in Orlando, Florida which will expire~~expects to recognize revenue on approximately $4.9 million of these remaining performance obligations over the next ~~seven years~~12 months, with the balance recognized thereafter.

The Company’s leases relate primarily to office facilities that expire on various dates from 2020 through 2029. 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 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 lease term as the Company is not reasonably certain the Company will ~~account for~~exercise such options. Operating lease expense, including expenses related to short-term leases, were $1.4 million ~~in minimum~~and $1.1 million for the three months ended March 31, 2020 and 2019, respectively.

The Company records its right-of-use (“ROU”) asset within other assets (long term) and its operating 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.liabilities within other current and long-term liabilities.

AsAdditional information related to the Company’s leases is as follows (in thousands, except lease term and discount rate):

Cash paid for amounts included in lease liabilities during the three months ended March 31, 2020 and 2019 was $1.2 million and $0.4 million, respectively.

Maturities of ~~September 30, 2017, future minimum~~ lease ~~payments under non-cancelable operating leases are~~liabilities as of March 31, 2020 were as follows (in thousands):

~~Rent~~The following table presents components of lease expense ~~was $0.8 million and $1.7 million~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 and ~~$0.4 million~~2019 (in thousands):

As of March 31, 2020, we do not have any leases that have not yet commenced that create significant rights and ~~$1.2 million for~~obligations.

From time to time the ~~three and nine months ended September 30, 2016, respectively.~~

InCompany may become involved in legal proceedings or be subject to claims arising in the ~~normal~~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~~2019 included in our Annual Report on Form 10-K filed with the SEC on ~~March 23, 2017.~~February 28, 2020. 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;the length and severity of the recent COVID-19 outbreak and its impact on the global economy and our financial results; 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, global customers rely on our ~~SaaS-based~~Critical Event Management platform ~~enables our customers~~ 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 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, Risk Intelligence 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~~5,200 customers as of ~~September 30, 2017. As of September 30, 2017, our~~March 31, 2020. Our customers ~~were~~are based in 3850 countries and ~~included~~include eight of the 10 largest U.S. cities, ~~eight~~nine of the 10 largest U.S.-based investment banks, 2547 of the 2550 busiest North American airports, ~~six~~nine of the 10 largest global consulting firms, ~~six~~seven of the 10 largest global ~~auto makers,~~automakers, all four of the largest global accounting firms, ~~four~~nine of the 10 largest U.S.-based health care providers and ~~four~~six 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~~1.9 years as of ~~September 30, 2017,~~March 31, 2020, 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%~~91% 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 61% 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~~$58.9 million and ~~$19.9~~$42.8 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively, representing a period-over-period increase of ~~37%. We generated revenue of $75.2 million and $55.6 million for the nine months ended September 30, 2017 and 2016, respectively, representing a period-over-period increase of 35%~~38%. We had net losses of ~~$4.2~~$25.4 million and ~~$2.6~~$14.1 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively. We had net losses of $13.9 million and $8.7 million for the nine months ended September 30, 2017 and 2016, respectively. Our Adjusted EBITDA, which is a measure that is not calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP, was $0.8 million and $0.3 million for the three months ended September 30, 2017 and 2016, respectively. Our Adjusted EBITDA was $(1.6) million and $(0.4) million for the nine months ended September 30, 2017 and 2016, respectively. See “Other Metrics” below for a discussion of the limitations of adjusted EBITDA and a reconciliation of ad~~justed EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.~~

As of ~~September 30, 2017~~March 31, 2020 and ~~December 31, 2016, 15%~~2019, 24% and ~~14%~~29% of our customers, respectively, were located outside of the United States and these customers generated ~~10% and 10%~~20% of our total revenue for both the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, 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.

On February 7, 2020, we ~~closed our initial public offering, or IPO, in~~entered into a Stock Purchase Agreement with Connexient, Inc. (“Connexient”) pursuant to which we ~~sold~~purchased all of the issued and outstanding shares of stock of Connexient for a ~~total~~base consideration of ~~6,250,000~~$20.2 million. We paid $11.5 million in cash at closing and paid the remaining purchase price with 96,611 newly issued shares of our common stock. ~~We received net cash proceeds~~On the date of ~~$66.1~~this acquisition, the average price of our common stock on the Nasdaq Global Market was $93.32 per share. In addition to the base purchase price, there is also a potential contingent payment of up to $6.0 million ~~net of underwriting discounts and commissions and other costs associated with~~that can be earned by the ~~offering paid by us.~~

~~In December 2016, we acquired 100%~~sellers based on fiscal year 2020 revenue metrics. At the date of the ~~shares~~acquisition, we preliminarily assessed the probabilities of ~~Svensk Krisledning AB, or Crisis Commander.~~Connexient meeting the fiscal year 2020 revenue metrics 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 $0.3 million. We acquired ~~Crisis Commander~~Connexient to expand our customer base and for ~~cash~~its strategic technology assets to enhance our CEM suite of solutions to broaden support for Internet of Things (“IoT”) applications.

On February 25, 2020, we entered into a Stock Purchase Agreement with CNL Software Limited (“CNL Software”) for a base consideration of approximately ~~$2.3~~$35.6 million. We paid approximately $19.6 million in cash at closing and paid the remaining purchase price 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~~153,217 newly issued shares of our common stock. On the date of this acquisition, the average price of our common stock ~~which included 26,825 shares sold~~on the Nasdaq Global Market was $104.10 per share. We acquired CNL Software to expand our customer base and for its strategic technology assets to enhance our CEM suite of solutions to broaden support for IoT applications.

On March 19, 2020, we entered into a Stock Purchase Agreement with One2Many Group B.V. (“one2many”) pursuant to which we purchased all of the ~~exercise by~~issued and outstanding shares of stock of one2many for a base consideration of $13.0 million. We paid $5.5 million in cash at closing, acquired purchase liabilities of $2.0 million and paid the ~~underwriters~~remaining purchase price with 52,113 newly issued shares of ~~an option to purchase shares at a public offering~~our common stock. On the date of this acquisition, the average price of ~~$19.85~~our common stock on the Nasdaq Global Market was $104.95 per share. In addition ~~3,162,164 shares~~to the base purchase price, there is also a potential contingent payment of up to approximately $15.0 million that can be earned by the sellers based on revenue metrics during the period of March 1, 2020 through February 28, 2021. The potential contingent payment includes an amount payable to us if a certain revenue threshold is not met during the period of March 1, 2020 through February 28, 2021. At the date of the acquisition, we preliminarily assessed the probabilities of one2many meeting the revenue metrics during the period of March 1, 2020 through February 28, 2021 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 $2.2 million. We acquired one2many to expand our customer base and for its cell broadcast technology to enhance our public warning applications.

In March 2020, the World Health Organization declared COVID-19 a pandemic. At this time, the extent to which the coronavirus may impact our financial condition or results of operations is uncertain. During the first quarter of 2020, financial results and operations for our Americas and international geographies were not significantly impacted by the COVID-19 outbreak that occurred in many countries beginning in early 2020. We are taking a variety of measures to ensure the availability and functioning of our ~~common stock were sold by certain~~critical infrastructure, to promote the safety and security of our ~~existing~~employees and to support the communities in which we operate. These measures include requiring remote working arrangements for employees where practicable, among other modifications. We are following public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home arrangements. All of these policies and initiatives could impact our operations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required or that we determine are in the best interests of our employees, customers, suppliers and stockholders. ~~We received cash proceeds~~Due to the speed with which the situation is developing, we are not able at this time to estimate the impact of ~~$9.9 million, net~~COVID-19 on our

financial results and operations, but the impact could be material for the remainder of ~~underwriting discounts~~fiscal year 2020 and ~~commissions and other costs~~could be material during any future period affected either directly or indirectly by this pandemic. Due to our primarily subscription-based business model, the effect of the coronavirus may not be fully reflected in our results of operations until future periods, if at all. See Part II—Item 1A, “Risk Factors,” included herein for an update that we made to the risk factors presented in our Annual Report on Form 10-K for the year ended December 31, 2019 to include information on risks associated with ~~the offering paid or payable by us. We did not receive any~~pandemics in general and COVID-19 specifically. The extent of the ~~proceeds~~impact of COVID-19 on our operational and financial performance will depend on certain developments, including new information which may emerge concerning the severity of the outbreak, international actions being taken to contain and treat it, impact on our customers and our sales cycles, and impact on our employees, all of which are highly uncertain and cannot be predicted.

In the first quarter of 2020, we launched COVID-19 Shield, a new set of Coronavirus Protection Solutions designed to protect the safety of employees and customers, maintain business operations, safeguard supply chains, and reduce costs and liabilities stemming from the ~~sales by~~impact of the ~~selling stockholders.~~global coronavirus pandemic.

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 us.

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 or services and amortize these expenses ratably over the ~~term~~period of benefit that we have determined to be four years. Sales commissions attributable to professional services are expensed within twelve months of selling the ~~corresponding subscription agreement.~~service to the customer. 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 continue to 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 including amortization of debt discounts and ~~interest on our capital leases.~~offering costs.

Other income and 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.~~future (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

(in thousands)

Revenue

$
27,312

$
19,932

$
75,177

$
55,566

Cost of revenue^{(1) (2)}

8,076

6,173

22,969

17,324

Gross profit

19,236

13,759

52,208

38,242

Operating expenses:

Sales and marketing⁽¹⁾⁽²⁾

$
11,626

$
8,605

$
33,589

$
25,659

Research and development^{(1) (2)}

5,626

3,917

16,082

10,560

General and administrative^{(1) (2)}

6,375

3,666

16,640

10,252

Total operating expenses

23,627

16,188

66,311

46,471

Operating loss

(4,391
)

(2,429
)

(14,103
)

(8,229
)
Other income (expenses), net

81

(165
)

168

(504
)
Loss before income taxes

(4,310
)

(2,594
)

(13,935
)

(8,733
)
(Provision for) benefit from income taxes

79

(35
)

65

75

Net loss attributable to common stockholders

$
(4,231
)

$
(2,629
)

$
(13,870
)

$
(8,658
)

	Three Months Ended March 31,
	2020			2019
Revenue	$	58,900		$	42,819
Cost of revenue⁽¹⁾		20,889			13,981
Gross profit		38,011			28,838
Operating expenses:
Sales and marketing⁽¹⁾		29,588			20,071
Research and development⁽¹⁾		14,172			11,485
General and administrative⁽¹⁾		15,911			10,558
Total operating expenses		59,671			42,114
Operating loss		(21,660	)		(13,276	)
Other income (expense), net		(4,426	)		(564	)
Loss before income taxes		(26,086	)		(13,840	)
Benefit from (provision for) income taxes		701			(294	)
Net loss	$	(25,385	)	$	(14,134	)

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2020		2019
	(in thousands)
Stock-based compensation expense
Cost of revenue	$	1,591	$	1,470	$	5,372	$	4,452	$	608	$	435
Sales and marketing		78		43		228		158		3,608		2,368
Research and development		56		18		148		225		1,874		1,410
General and administrative		693		443		1,898		840		4,220		3,572
Total	$	2,418	$	1,974	$	7,646	$	5,675	$	10,310	$	7,785

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
)%

	Three Months Ended March 31,
	2020		2019
Depreciation and amortization expense:
Cost of revenue	$	2,665	$	2,013
Sales and marketing		233		147
Research and development		131		108
General and administrative		3,627		1,437
Total	$	6,656	$	3,705

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

Comparison of the Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

Revenue increased by ~~$7.4~~$16.1 million for the three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. The increase was due to a ~~$5.0~~$16.1 million increase in sales of our ~~historical solutions~~products driven by expansion of our customer base from ~~3,076~~4,532 customers as of ~~September 30, 2016~~March 31, 2019 to ~~3,560~~5,218 customers as of ~~September 30, 2017,~~March 31, 2020, 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 March 31,						Change
	2017			2016			$		%
	(dollars in thousands)
(dollars in thousands)												2020			2019			$		%
Cost of revenue	$	8,076		$	6,173		$	1,903		30.8	%	$	20,889		$	13,981		$	6,908		49.4	%
Gross margin %		70	%		69	%							65	%		67	%

Cost of revenue increased by ~~$1.9~~$6.9 million for the three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. The increase was due to a ~~$0.9~~$3.5 million increase in hosting, software and messaging costs, a $2.6 million increase in employee-related costs associated with our increased headcount from 95174 employees as of ~~September 30, 2016~~March 31, 2019 to ~~121~~248 employees as of ~~September 30, 2017. In addition, $0.8~~March 31, 2020, a $0.7 million ~~of the~~ increase ~~was~~in depreciation and amortization expense attributed to ~~an increase in hosting,~~our fixed assets, acquired intangibles and capitalized software and ~~messaging costs and $0.2~~a $0.1 million ~~attributed to an~~ increase in office related ~~expenses to support revenue generating activities.~~expenses.

Gross margin percentage ~~increased~~decreased 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.

	Three Months Ended September 30,						Change					Three Months Ended March 31,						Change
	2017			2016			$		%
	(dollars in thousands)
(dollars in thousands)												2020			2019			$		%
Sales and marketing	$	11,626		$	8,605		$	3,021		35.1	%	$	29,588		$	20,071		$	9,517		47.4	%
% of revenue		43	%		43	%							50	%		47	%

Sales and marketing expense increased by ~~$3.0~~$9.5 million for the three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. The increase was primarily due to ~~a $2.1~~an $8.6 million increase in ~~stock compensation and~~ employee-related costs, which includes stock-based compensation, associated with our increased headcount from ~~165~~290 employees as of ~~September 30, 2016~~March 31, 2019 to ~~206~~399 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. In addition, $1.8 million of the increase was attributed to an increase in hosting, software and messaging costs, $0.9 million increase in depreciation and amortization expense attributable to our acquired intangible assets and a $0.2 million increase in office related expenses to support revenue generating activities.

Gross margin percentage remained constant due to an 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.

Sales and marketing expense increased by $7.9 million for the nine months ended September 30, 2017 compared to the same period in 2016. The increase was primarily due to a $6.3 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.March 31, 2020. 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 million increase in~~ office related expenses to support the sales team, a $0.4 million increase in advertising related cost and trade show expense, and a $0.1 million increase in software expenses to support the sales team.

	Nine Months Ended September 30,						Change					Three Months Ended March 31,						Change
	2017			2016			$		%
	(dollars in thousands)
(dollars in thousands)												2020			2019			$		%
Research and development	$	16,082		$	10,560		$	5,522		52.3	%	$	14,172		$	11,485		$	2,687		23.4	%
% of revenue		21	%		19	%							24	%		27	%

Research and development expense increased by ~~$5.5~~$2.7 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. The increase was primarily due to a ~~$5.0~~$1.8 million increase in ~~stock compensation and~~ employee-related costs, which includes stock-based compensation, associated with our increased headcount from ~~116~~232 employees as of ~~September 30, 2016~~March 31, 2019 to ~~153~~260 employees as of ~~September 30, 2017. The remaining~~March 31, 2020, a $0.9 million increase ~~was principally the result of~~in professional services, and a ~~$0.6~~$0.3 million increase in hosting and software ~~cost to support research and development activities and a $0.3 million increase in office~~ related ~~expenses~~costs to support research and development activities. A total of ~~$4.3~~$1.6 million of internally developed software costs during the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 and ~~$4.7~~$1.9 million of internally developed software costs during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 were capitalized, resulting in a ~~decrease of~~$0.3 million offset to the ~~expense by $0.4 million~~increase in the ~~2017 period.~~first quarter of 2020.

	Nine Months Ended September 30,						Change					Three Months Ended March 31,						Change
	2017			2016			$		%
	(dollars in thousands)
(dollars in thousands)												2020			2019			$		%
General and administrative	$	16,640		$	10,252		$	6,388		62.3	%	$	15,911		$	10,558		$	5,353		50.7	%
% of revenue		22	%		18	%							27	%		25	%

General and administrative expense increased by ~~$6.4~~$5.4 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016.~~2019. The increase was primarily due to a ~~$3.9~~$2.2 million increase in ~~stock compensation~~depreciation and amortization and a $2.0 million increase in employee-related costs, which includes stock-based compensation, associated with our increased headcount from 6091 employees as of ~~September 30, 2016~~March 31, 2019 to 73124 employees as of ~~September 30, 2017.~~March 31, 2020. The remaining increase was due to a ~~$1.0~~$0.4 million ~~increase~~ in ~~depreciation~~software costs to support the administrative team and ~~amortization expense attributable to our acquired intangible assets,~~ a ~~$0.8~~$0.3 million increase ~~in cost to operate as a public company and an increase of $0.7 million~~ in office related expenses to support the administrative team.

	Nine Months Ended September 30,					Change					Three Months Ended March 31,						Change
	2017		2016			$		%
	(dollars in thousands)
(dollars in thousands)											2020			2019			$			%
Other income (expense), net	$	168	$	(504	)	$	672		(133.3	)%	$	(4,426	)	$	(564	)	$	(3,862	)		(684.8	)%
% of revenue	*			(1	)%							(8	)%		(1	)%

Other ~~income (expense) decreased~~expense increased by ~~$0.7~~$3.9 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 compared to the same period in ~~2016 as we paid off our debt in September 2016 resulting in~~2019 primarily due to a ~~$0.5~~$4.3 million ~~reduction~~increase in interest expense related to our ~~line~~convertible senior notes offset by $0.6 million of ~~credit and term loan between the two periods. In addition, we~~interest income earned ~~$0.2 million in interest and investment income~~on our investments as a result of proceeds invested from our ~~public~~convertible note and common stock offerings.

We regularly monitor a number of financial and operating metrics ~~in order~~including the following key metrics to evaluate our business, measure our ~~current~~ performance, identify trends affecting our business, formulate business plans, and ~~estimate our future performance.~~make strategic decisions. 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 March 31,
	(in thousands)								2020		2019
Gross profit	$	19,236	$	13,759	$	52,208	$	38,242	$	38,011	$	28,838
Amortization of acquired intangibles		293		566		1,325		1,751		739		333
Stock-based compensation expense		141		46		266		135
Stock-based compensation										608		435
Adjusted gross margin	$	19,670	$	14,371	$	53,799	$	40,128	$	39,358	$	29,606

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			Three Months Ended March 31,
	(in thousands)												2020			2019
Net cash provided by operating activities	$	6,738		$	8,226		$	4,379		$	6,535		$	801		$	8,687
Capital expenditures		(832	)		(393	)		(1,337	)		(739	)		(524	)		(2,773	)
Capitalized software development costs		(1,542	)		(1,254	)		(4,586	)		(4,294	)		(2,004	)		(2,018	)
Free cash flow	$	4,364		$	6,579		$	(1,544	)	$	1,502		$	(1,727	)	$	3,896

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.~~intangibles and accretion of interest on convertible senior notes. 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~~which can vary based on plan design, share price, share price volatility, and the ~~variety~~expected lives of equity instruments ~~that can impact our non-cash expense.~~granted. 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. We believe that excluding the impact of accretion of interest on convertible senior notes allows for more meaningful comparisons between operating results from period to period as accretion of interest on convertible senior notes relates to interest cost for the time value of money and are non-operating in nature. 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~~financial measures for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~2019 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			Three Months Ended March 31,
	(in thousands)												2020			2019
Cost of revenue	$	8,076		$	6,173		$	22,969		$	17,324		$	20,889		$	13,981
Amortization of acquired intangibles		(293	)		(566	)		(1,325	)		(1,751	)		(739	)		(333	)
Stock-based compensation expense		(141	)		(46	)		(266	)		(135	)		(608	)		(435	)
Non-GAAP cost of revenue		7,642			5,561			21,378			15,438		$	19,542		$	13,213

Gross profit		19,236			13,759			52,208			38,242		$	38,011		$	28,838
Amortization of acquired intangibles		293			566			1,325			1,751			739			333
Stock-based compensation expense		141			46			266			135			608			435
Non-GAAP gross profit		19,670			14,371			53,799			40,128		$	39,358		$	29,606
Non-GAAP gross margin		72.0	%		72.1	%		71.6	%		72.2	%		66.8	%		69.1	%

Sales and marketing expense		11,626			8,605			33,589			25,659		$	29,588		$	20,071
Stock-based compensation expense		(691	)		(211	)		(1,250	)		(503	)		(3,608	)		(2,368	)
Non-GAAP sales and marketing		10,935			8,394			32,339			25,156		$	25,980		$	17,703

Research and development expense		5,626			3,917			16,082			10,560		$	14,172		$	11,485
Stock-based compensation expense		(416	)		(87	)		(738	)		(263	)		(1,874	)		(1,410	)
Non-GAAP research and development		5,210			3,830			15,344			10,297		$	12,298		$	10,075

General and administrative expense		6,375			3,666			16,640			10,252		$	15,911		$	10,558
Amortization of acquired intangibles		(560	)		(224	)		(1,562	)		(701	)		(3,407	)		(1,297	)
Stock-based compensation expense		(1,555	)		(415	)		(2,618	)		(1,264	)		(4,220	)		(3,572	)
Non-GAAP general and administrative		4,260			3,027			12,460			8,287		$	8,284		$	5,689

Total operating expenses		23,627			16,188			66,311			46,471		$	59,671		$	42,114
Amortization of acquired intangibles		(560	)		(224	)		(1,562	)		(701	)		(3,407	)		(1,297	)
Stock-based compensation expense		(2,662	)		(713	)		(4,606	)		(2,030	)		(9,702	)		(7,350	)
Non-GAAP total operating expenses	$	20,405		$	15,251		$	60,143		$	43,740		$	46,562		$	33,467

Operating loss	$	(4,391	)	$	(2,429	)	$	(14,103	)	$	(8,229	)	$	(21,660	)	$	(13,276	)
Amortization of acquired intangibles		853			790			2,887			2,452			4,146			1,630
Stock-based compensation expense		2,803			759			4,872			2,165			10,310			7,785
Non-GAAP operating loss	$	(735	)	$	(880	)	$	(6,344	)	$	(3,612	)	$	(7,204	)	$	(3,861	)

Net loss	$	(4,231	)	$	(2,629	)	$	(13,870	)	$	(8,658	)	$	(25,385	)	$	(14,134	)
Amortization of acquired intangibles		853			790			2,887			2,452			4,146			1,630
Stock-based compensation expense		2,803			759			4,872			2,165			10,310			7,785
Accretion of interest on convertible senior notes														5,436			1,201
Non-GAAP net loss	$	(575	)	$	(1,080	)	$	(6,111	)	$	(4,041	)	$	(5,493	)	$	(3,518	)

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~~$498.4 million as of ~~September 30, 2017, which includes~~March 31, 2020. We have generated significant losses since inception and expect to continue to generate losses for the remaining net proceeds from 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 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. As a result, we did not apply for, nor receive, a loan under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. However, our belief may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. We believe that our financial resources will allow us to manage the anticipated impact of COVID-19 on our business operations for the foreseeable future, which could include delays in payments from our customers. The challenges posed by COVID-19 on our business are expected to evolve rapidly. We will continue to evaluate our financial position in light of future developments, particularly those relating to COVID-19. 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):

	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
	(in thousands)
Cash and cash equivalents at beginning of period	$	60,765		$	8,578
Cash, cash equivalents and restricted cash at beginning of period							$	539,662		$	60,068
Cash provided by operating activities		4,379			6,535			801			8,687
Cash used in investing activities		(50,613	)		(5,033	)
Cash provided by (used in) investing activities								(37,469	)		17,984
Cash provided by financing activities		9,409			52,056			4,168			148,638
Effects of exchange rates on cash		(312	)		160			(666	)		(28	)
Cash and cash equivalents at end of period	$	23,628		$	62,296
Cash, cash equivalents and restricted cash at end of period							$	506,496		$	235,349

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 by or used in 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~~$0.8 million in cash in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, primarily from ~~$5.2~~an increase in non-cash operating expenses of $25.0 million and $1.2 million in cash ~~used in operations as a result of changes in~~provided by operating assets and liabilities, which was ~~increased by $13.1 million of non-cash operating expenses and partially~~ offset by our net loss of ~~$13.9~~$25.4 million. Specifically, we recognized non-cash charges aggregating to ~~$7.6~~$10.3 million for stock-based compensation, $6.7 million for depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, ~~and $4.8~~$5.4 million related to the accretion of interest on our convertible senior notes, $2.9 million for ~~stock-based compensation~~amortization of deferred commissions, and ~~an increase of $0.6~~$0.9 million for ~~our bad debt and sales return provision.~~provision for credit losses, offset by $1.2 million decrease in deferred income taxes. The net change in operating assets and liabilities of $1.2 million reflected a ~~$7.8~~$5.1 million increase in deferred revenue, a ~~$0.8~~$3.6 million increase in ~~accounts payable as~~other liabilities, a ~~result of timing of payments made to vendors, a $2.3~~$3.2 million increase in accrued employee related expenses due to timing of payments to employees, a $1.7 million increase in accrued expenses as a result of timing of payments made to vendors, and a ~~$0.5~~$0.4 million decrease in accounts receivable. These amounts were offset by a $4.7 million increase in deferred cost, a $4.1 million increase in other ~~liabilities. These increases were partially offset by~~assets, a ~~$3.6 million increase in accounts receivable, $1.6~~$3.1 million increase in prepaid expenses for upfront payments made for prepaid software and insurance, and a ~~$1.0~~$1.1 million ~~increase~~net decrease in ~~other assets.~~accounts payable.

Operating activities provided ~~$6.5~~$8.7 million in cash in the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019, primarily from ~~$7.4~~$8.5 million in cash provided by operations as a result of changes in operating assets and liabilities, which was increased by ~~$7.8~~$14.3 million of non-cash operating expenses and partially offset by our net loss of ~~$8.7~~$14.1 million. Specifically, we recognized non-cash charges aggregating ~~$5.7~~to $3.7 million for depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, ~~and $2.1~~$7.8 million for stock-based compensation, ~~an increase~~$1.6 million for amortization of ~~$0.1~~deferred costs, $1.2 million related to the accretion of interest on our convertible senior notes, and $0.2 million for our ~~accounts receivable~~bad debt 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.~~of investment income. The change in operating assets and liabilities reflected a ~~$8.6~~$5.5 million ~~increase~~decrease in ~~deferred revenue,~~accounts receivable, a ~~$0.3~~$2.1 million decrease in other assets, a $3.1 million increase in accounts payable and accrued expenses as a ~~$1.6~~result of timing of payments made to vendors, a $1.2 million increase in accrued employee related expenses due to timing of payments to employees, a $2.8 million increase in deferred revenue and a $0.3 million increase in ~~accrued expenses.~~other liabilities. These increases were partially offset by a ~~$0.4~~$4.2 million increase in ~~accounts receivables, a $1.7 million increase in other assets due to timing of~~prepaid expenses for upfront payments made for ~~deferred initial public offering costs~~prepaid software and ~~commissions~~insurance and a ~~$1.2~~$2.3 million ~~increase~~decrease in ~~pre-paid expenses.~~deferred costs.

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.

Investing activities used ~~$50.6~~$37.5 million in cash in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, due to $34.9 million of cash paid for the acquisitions of Connexient, CNL Software and one2many, a $2.0 million investment in software development, and $0.5 million in purchases of property and equipment.

Investing activities provided $18.0 million in cash in the three months ended March 31, 2019, primarily ~~from~~as a result of cash provided of $24.8 million in maturities of our short-term investments, which was offset by our purchase of ~~IDV for $21.2~~short-term investments of $2.0 million, ~~our~~ investment in software development of ~~$4.6~~$2.0 million and our purchase of property and equipment of $1.3 million, a $0.3 million change in restricted cash and $30.0 million in purchases of short-term investments. This was offset by cash provided of $0.8 million attributed to landlord reimbursements for tenant improvements in our Burlington, Massachusetts office lease and maturities of our short-term investments of $6.0$2.8 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.

Cash generated by financing activities includes proceeds from the issuance of common stock ~~as a result of~~from our follow-on public offering, borrowings under the 0.125% convertible senior notes due December 15, 2024 (the “2024 Notes”) and ~~upon the~~1.50% convertible senior notes due November 1, 2022 (the “2022 Notes”), 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~~$4.2 million of cash in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, which reflects proceeds of ~~$10.4~~$3.0 million from the exercise of stock options and $1.7 million from the issuance of stock under our employee stock purchase plan. These amounts were offset by cash payments of $0.5 million for other financing activities.

Financing activities provided $148.6 million of cash in the three months ended March 31, 2019, which reflects proceeds of $139.1 million from our ~~follow-on public~~common stock offering, ~~$1.5~~$1.3 million from the issuance of stock under our employee stock purchase plan and proceeds of ~~$2.1~~$8.7 million from the exercise of stock options. This amount was offset by a ~~$3.8~~$0.3 million payment for ~~contingent consideration attributed to our purchase of IDV~~employee withholding taxes, $0.1 million in payments on capital leases and ~~$0.9~~a $0.1 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 millionpayment 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.a note payable.

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of ~~these~~our condensed consolidated financial statements requires us to make estimates, assumptions and ~~assumptions~~judgements that affect the reported amounts of assets, liabilities, ~~revenue,~~revenues, costs and expenses, and related disclosures.We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. 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. Our~~ actual results ~~could~~may differ from these ~~estimates.~~estimates. The future effects of the COVID-19 pandemic on our results of operations, cash flows, and financial position are unclear; however, we believe we have used reasonable estimates and assumptions in preparing the condensed consolidated financial statements.

~~We believe~~Except for the accounting policies related to our accounts receivable and contract asset allowance for credit risk that ~~the assumptions~~were updated as set forth in Notes 2 and 3 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, as a result of adopting Accounting Standards Update 2016-13 (as amended through March 2020), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, 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, 2019, filed with ~~revenue recognition, deferred revenue, business combinations, goodwill, software development costs and stock-based compensation~~the SEC on February 28, 2020, 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,~~March 31, 2020, 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.2019.

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 2020, 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 March 31, 2020.

Changes in interest rates may also impact gains or losses from the conversion of our outstanding convertible senior notes. In December 2019, we issued $450 million in aggregate principal amount of our 2024 Notes. In November 2017, we issued $115 million in aggregate principal amount of our 2022 Notes. The 2024 Notes and 2022 Notes are convertible under certain circumstances, including trading price conditions related to our common stock, and upon conversion, we will pay or deliver, as the case may be, 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 2022 Notes becoming convertible at the option of the holder during the third quarter of 2018. The 2022 Notes were still convertible at the option of the holder at March 31, 2020. No 2022 Notes holders have exercised their right for conversion as of March 31, 2020. The 2024 Notes were not convertible at March 31, 2020. 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 2024 Notes and 2022 Notes, we will record a gain or loss in our consolidated statement of operations during the period in which the 2024 Notes and 2022 Notes are converted. An incremental borrowing rate that is a hypothetical 100 basis points lower than the implicit interest rate upon conversion of the 2024 Notes and 2022 Notes would result in a loss of approximately $5.4 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~~$498.4 million as of ~~September 30, 2017,~~March 31, 2020, 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 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, Euro, 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. In response to the COVID-19 pandemic, our employees began working from home starting in March 2020. Management is continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact to their design and operating effectiveness.

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~~The risk factors set forth below are new or contain changes to the ~~other information set forth~~similarly titled risk factors included in ~~this Quarterly~~our Annual Report on Form ~~10-Q,~~10-K for the ~~risks and uncertainties that we believe are most important~~fiscal year ended December 31, 2019. Except for ~~you~~the additions or updates to ~~consider are discussed~~these risk factors set forth below, there have been no material changes in our risk factors from those disclosed 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,~~2019, as filed with the SEC on February 28, 2020.

The ongoing COVID-19 pandemic could materially and adversely affect our business, results of operations and financial condition.

In March ~~23, 2017. During~~2020, the ~~three months ended September 30, 2017,~~World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. We are unable to accurately predict the full impact that the COVID-19 pandemic will have on our results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures. Our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our customers, partners, suppliers and others with whom we work, for an indefinite period of time. To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees began working remotely in March 2020. In addition, many of our customers and prospective customers are working remotely, which may delay the timing of their purchases of our products and services. The disruptions to our operations caused by the COVID-19 pandemic may result in inefficiencies, delays and additional costs in our sales and marketing, professional services and research and development efforts, which cannot be predicted or quantified at this time. To the extent that disruptions occur, we may not be able to fully mitigate any such inefficiencies, delays and additional costs through remote or other alternative work arrangements. In addition, given the economic uncertainty created by the COVID-19 pandemic, we have and may continue to see delays in our sales cycle, failures of customers to renew at all or to renew at the anticipated scope their subscriptions with us, requests from customers for payment term deferrals as well as pricing or bundling concessions, which, if significant, could materially and adversely affect our business, results of operations and financial condition. In addition, our third-party service providers may experience financial difficulties or business disruptions that could negatively affect their operations and their ability to supply us with services needed for our products and operations. Although such events did not have a material adverse impact on our financial results for the first quarter of fiscal year 2020, there ~~were~~can be no assurance that these events will not have a material adverse impact on our financial results in subsequent quarters or the full fiscal year.

Negative conditions in the general economy both in the United States and abroad, including conditions resulting from the COVID-19 pandemic, changes in gross domestic product growth, financial and credit market fluctuations, energy costs, international trade relations and other geopolitical issues, the availability and cost of credit and the global housing and mortgage markets could cause a decrease in consumer discretionary spending and business investment and diminish growth expectations in the U.S. economy and abroad. More generally, the COVID-19 pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets, which could materially and adversely affect demand for our products and services and could materially and adversely impact our results and financial condition even after the pandemic is contained and the shelter-in-place orders are lifted. For example, we may be unable to collect receivables from those customers significantly impacted by the ~~risk factors that were disclosed~~COVID-19 pandemic, which may be more pronounced in industry verticals more directly impacted by the COVID-19 pandemic. Also, a decrease in subscriptions and/or renewals in a given period could negatively affect our revenues in future periods, particularly if experienced on a sustained basis, because a substantial proportion of our software subscriptions yield revenue recognized over time. The pandemic may also have the effect of heightening many of the other risks described herein and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019, including risks associated with our guidance, our customers, our potential customers, our market opportunity, renewals and sales cycles, among others. We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic on our business.

The full extent of the COVID-19 pandemic’s impact on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets, the timing of economic recovery and any new information that may emerge concerning the severity of the virus, its spread to other regions as well as the actions taken to contain it, among others. Any of these impacts could have a material adverse impact on our business,

results of operations and financial condition and ability to execute and capitalize on our strategies. Due to the current uncertainty regarding the severity and duration of the COVID-19 pandemic, we cannot predict whether our response to date or the actions we may take in the future will be effective in mitigating the effects of the COVID-19 pandemic on our business, results of operations or financial condition. Accordingly, we are unable at this time to predict the impact of the COVID-19 pandemic on our operations, liquidity, and financial results, and, depending on the magnitude and duration of the COVID-19 pandemic, such impact may be material.

Our quarterly operating results may vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline.

Our operating results, including the levels of our revenue, renewal rates, cash flows, deferred revenue and gross margins, have historically varied from period to period, and we expect that these items will continue to do so as a result of a number of factors, many of which are outside of our control, including:

Fluctuations in our quarterly operating results, key metrics, non-GAAP metrics and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty caused by and the unprecedented nature of the current COVID-19 pandemic. Each factor above or discussed elsewhere herein or the cumulative effect of some of these factors may result in fluctuations in our operating results. This variability and unpredictability could result in our failure to meet expectations with respect to operating results, or those of securities analysts or investors, for a particular period. If we fail to meet or exceed expectations for our operating results for these or any other reasons, the market price of our stock could fall and we could face costly lawsuits, including securities class action suits.

We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.

We have provided and may continue to provide guidance about our business, future operating results and other business metrics. In developing this guidance, our management must make certain assumptions and judgments about our future performance. Some of those key assumptions relate to the impact of the COVID-19 pandemic, the anticipated contributions from the acquisitions of Connexient, CNL Software, and one2many and the associated economic uncertainty on our business and the timing and scope of economic recovery globally, which are inherently difficult to predict. This guidance, which consists of forward-looking statements, is qualified by, and subject to, such assumptions, estimates and expectations as of the date hereof, and the other information contained in or referred to in the factors described above and our current and periodic reports filed with the Securities and Exchange Commission. While presented with numerical specificity, this guidance is necessarily speculative in nature, and is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change. It can be expected that some or all of the assumptions, estimates and expectations of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release of such guidance. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control, including due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic, and which could adversely affect our operations and operating results. There are no comparable recent events that provide guidance as to the probable effect of the COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change. We are relying on the reports and models of economic and medical experts in making assumptions relating to the duration of this crisis and predictions as to timing and pace of any future economic recovery. If these models are incorrect or incomplete, or if we fail to accurately predict the full impact that the COVID-19 pandemic will have on all aspects of our business, the guidance and other forward-looking statements we provide as of this date may also be incorrect or incomplete. Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors or other interested parties, the price of our common stock would decline.

~~None~~On February 7, 2020, we issued 96,611 shares of our common stock to various persons and entities as partial consideration for our purchase of Connexient, Inc. The offer, sale and issuance of these shares was deemed to be exempt from registration under the Securities Act in reliance on Rule 506 of Regulation D. The recipients of the shares acquired them for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to these shares. The recipients were all accredited investors within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access to information about us. No underwriters or placement agents were involved in this transaction.

On February 25, 2020, we issued 153,217 shares of our common stock to various persons as partial consideration for our purchase of CNL Software Limited. The offer, sale and issuance of these shares was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The recipients of the shares acquired them for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to these shares. The recipients were all accredited investors within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access to information about us. No underwriters or placement agents were involved in this transaction.

On March 19, 2020, we issued 52,113 shares of our common stock to various persons and entities as partial consideration for our purchase of One2Many Group B.V. The offer, sale and issuance of these shares was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The recipients of the shares acquired them for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to these shares. The recipients were all accredited investors within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access to information about us. No underwriters or placement agents were involved in this transaction.

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 Stock 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

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2434

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3747

Item 4.	Controls and Procedures	3848

PART II.	OTHER INFORMATION	3949

Item 1.	Legal Proceedings	3949

Item 1A.	Risk Factors	3949

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3951

Item 3.	Defaults Upon Senior Securities	3952

Item 4.	Mine Safety Disclosures	3952

Item 5.	Other Information	3952

Item 6.	Exhibits	4153

Signatures		4254


2020 (for the remaining nine months)	$	5,770
2021		5,198
2022		3,270
2023		156
	$	14,394

	Three Months Ended March 31, 2020
Balance, beginning of period	$	—
Provision for expected credit losses		(25	)
Write-offs		—
Balance, end of period	$	(25	)

	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, 2019	$	—
Addition from Connexient acquisition		340
Addition from one2many acquisition		2,190
Fair value at March 31, 2020	$	2,530

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


2020 (for the remaining nine months)	$	13,951
2021		18,376
2022		15,178
2023		11,017
2024		10,294
Thereafter		15,053
	$	83,869

	CNL Software
Assets acquired
Accounts receivable	$	1,926
Prepaid expenses and other current assets		640
Property and equipment		731
Acquired technology		2,150
Trade names		1,080
Customer relationships		5,500
Goodwill		28,811
Other assets		1,313
Total assets acquired		42,151
Liabilities assumed
Accounts payable		419
Accrued expenses		1,875
Deferred revenue		3,110
Deferred tax liabilities		1,614
Other liabilities		1,276
Net assets acquired	$	33,857
Consideration paid
Cash paid, net of cash acquired	$	17,907
Fair value of common stock issued		15,950
Total	$	33,857

	one2many
Assets acquired
Accounts receivable	$	521
Other current assets		1,575
Property and equipment		19
Acquired technology		970
Trade names		580
Customer relationships		3,100
Goodwill		10,724
Other assets		176
Total assets acquired		17,665
Liabilities assumed
Accounts payable		72
Accrued expenses		668
Deferred revenue		1,460
Deferred tax liabilities		1,163
Other current liabilities		136
Net assets acquired	$	14,166
Consideration paid
Cash consideration, net of cash acquired	$	6,507
Fair value of common stock issued		5,469
Contingent consideration		2,190
Total	$	14,166

	NC4
Assets acquired
Accounts receivable	$	2,611
Other current assets		530
Property and equipment		75
Acquired technology		5,210
Trade names		8,610
Customer relationships		35,490
Goodwill		40,384
Total assets acquired		92,910
Liabilities assumed
Deferred revenue		7,540
Other current liabilities		917
Net assets acquired	$	84,453
Consideration paid
Cash paid	$	51,655
Fair value of common stock issued		32,798
Total	$	84,453

	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	)

		Revenue				Net loss				Basic and Diluted Loss Per Share
For the three months ended March 31, 2019 pro forma		$	47,373			$	(16,020	)		$	(0.49	)

	Three Months Ended March 31, 2020
0.125% coupon	$	141
Amortization of debt discount and transaction costs		4,406
	$	4,547

	As of March 31, 2020				As of December 31, 2019
	Fair Value		Carrying Value		Fair Value		Carrying Value
2024 Notes	$	518,787	$	355,465	$	450,414	$	351,058

	Stock options outstanding			Weighted average exercise price
Outstanding at December 31, 2019		723,383		$	26.56
Granted		—			—
Exercised		(126,374	)		23.80
Forfeited		(2,248	)		31.95
Outstanding at March 30, 2020		594,761			27.13

	As of March 31, 2020
	Number of shares		Remaining contractual life (years)		Weighted- average exercise price
Outstanding		594,761		7.26	$	27.13
Vested and expected to vest		582,485		7.25		27.02
Exercisable		176,160		6.30		19.21

	Number of Shares
Outstanding at December 31, 2019		1,314,791
Granted		158,690
Vested		(44,606	)
Forfeited		(3,176	)
Outstanding at March 31, 2020		1,425,699

	Stock options outstanding			Weighted average exercise price
Outstanding at December 31, 2015		1,821,722		$	8.68
Granted		292,204			14.75
Exercised		(163,968	)		4.30
Forfeited		(65,533	)		8.03
Outstanding at December 31, 2016		1,884,425			10.02
Granted		997,244			22.47
Exercised		(370,084	)		5.64
Forfeited		(42,032	)		15.50
Outstanding at September 30, 2017		2,469,553		$	15.61

	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

	As of March 31,
	2020		2019
Convertible senior notes		6,733,914		3,411,199
Stock-based compensation grants		2,020,460		2,281,105
Total		8,754,374		5,692,304

	~~Number of~~ ~~Shares~~
~~Stock options issued and outstanding~~		~~2,469,553~~
~~Additional shares available for grant under equity plans~~		~~2,436,005~~
~~Total~~		~~4,905,558~~

	Three Months Ended March 31,
Primary Geographic Markets	2020		2019
United States	$	46,949	$	34,084
International		11,951		8,735
Total	$	58,900	$	42,819

Year ending December 31,
2020 (for the remaining nine months)	$	3,875
2021		5,278
2022		4,861
2023		4,787
2024		2,384
Thereafter		3,733
Total undiscounted lease payments		24,918
Less: imputed interest		(4,951	)
Total lease liabilities	$	19,967

~~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~~May 8, 2020	By:	/s/ ~~Jaime Ellertson~~David Meredith
		~~Jaime Ellertson~~David Meredith
		Chief Executive Officer and Chairman of the Board of Directors

Date: ~~November 7, 2017~~May 8, 2020	By:	/s/ ~~Kenneth S. Goldman~~Patrick Brickley
		~~Kenneth S. Goldman~~Patrick Brickley
		Senior Vice President and Chief Financial Officer