| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies The Company’s significant accounting policies are discussed in “Note 2 — Summary of Significant Accounting Policies” to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Except for accounting policies related to the adoption of the new leasing standard as described herein, there have been no significant changes to these policies that have had a material impact on the Company’s condensed consolidated financial statements and related notes for the three months ended March 31, 2020. The following describes the impact of certain policies. Revenue Recognition The Company recognizes revenue under Accounting Standards Codification Topic 606 (“ASC 606”), Revenue from Contracts with Customers Disaggregation of Revenue The following table presents revenue by category: Three Months Ended March 31, 2020 2019 Subscription term-based licenses: Multi-year subscription term-based licenses $ 23,988 $ 23,431 1-year subscription term-based licenses 14,149 9,294 Total subscription term-based licenses 38,137 32,725 Subscription SaaS and support and maintenance 18,681 14,895 Professional services and other 4,594 2,818 Total revenue $ 61,412 $ 50,438 The following table presents revenue by geographic region, which is based on the delivery address of the customer, and is summarized by geographic area: Three Months Ended March 31, 2020 2019 United States $ 43,029 $ 38,231 International 18,383 12,207 Total revenue $ 61,412 $ 50,438 Other than the United States, no other individual country exceeded 10% of total revenue for the three months ended March 31, 2020 or 2019. Contract Balances Contract assets represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition policy, for contracts that have not yet been invoiced to customers where there is a remaining performance obligation, typically for multi-year arrangements. Three Months Ended March 31, 2020 2019 Beginning balance $ 86,010 $ 67,468 Ending balance 85,213 70,300 Change $ (797) $ 2,832 Contract liabilities consist of customer billings in advance of revenue being recognized. The opening and closing balances of contract liabilities included in deferred revenue were as follows: Three Months Ended March 31, 2020 2019 Beginning balance $ 47,507 $ 35,367 Ending balance 38,343 37,975 Change $ (9,164) $ 2,608 The change in deferred revenue relates primarily to invoicing customers and recognizing revenue in conjunction with the satisfaction of performance obligations. Revenue recognized during the three months ended March 31, 2020 and 2019 that was included in the deferred revenue balances at the beginning of the respective periods was as follows: Three Months Ended March 31, 2020 2019 Deferred revenue recognized as revenue $ 22,968 $ 15,536 Remaining Performance Obligations Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and noncancelable amounts to be invoiced. As of March 31, 2020, the Company had $116.6 million of transaction price allocated to remaining performance obligations, of which 90% is expected to be recognized as revenue over the next 24 months, with the remainder to be recognized thereafter. Deferred Commissions The following table summarizes the account activity of deferred commissions for the three months ended March 31, 2020 and 2019: Three Months Ended March 31, 2020 2019 Beginning balance $ 13,670 $ 11,033 Additions to deferred commissions 1,536 1,298 Amortization of deferred commissions (2,102) (1,396) Ending balance $ 13,104 $ 10,935 Deferred commissions, current $ 5,303 $ 3,831 Deferred commissions, noncurrent 7,801 7,104 Total deferred commissions $ 13,104 $ 10,935 Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases Effective January 1, 2020, the Company adopted ASC 842 using the modified retrospective transition approach through a cumulative-effect adjustment, which resulted in the recognition of right-of-use assets of $14.6 million and lease liabilities of $18.9 million. As part of applying the modified retrospective transition method, the Company elected to apply the package of transition practical expedients within the new guidance. As required by ASC 842, these expedients have been elected as a package and have been consistently applied across the Company’s lease portfolio. Given this election, the Company need not reassess the following: ● whether any expired or existing contracts are or contain leases; ● the lease classification for any expired or existing leases; or ● the treatment of initial direct costs relating to any existing leases. The Company also elected to apply the transition practical expedient to use hindsight in determining lease term and in assessing impairment of right-of-use assets. As a result of adoption of this standard and election of the transition practical expedients, the Company recognized right-of-use assets and lease liabilities for those leases classified as operating leases under ASC 840 that continued to be classified as operating leases under ASC 842 at the later of (1) the earliest period presented or (2) the applicable lease commencement date. In applying the modified retrospective transition method to these leases, the Company measured lease liabilities at the present value of the sum of remaining minimum rental payments (as defined under ASC 840), as the leases contained no residual value guarantees. These lease liabilities have been measured using the Company’s incremental borrowing rates at the later of (1) the earliest period presented or (2) the commencement date of the applicable lease. Additionally, right-of-use assets for these operating leases have been measured as the initial measurement of applicable lease liabilities adjusted for any prepaid/accrued rent and unamortized lease incentives. The adoption of ASC 842 did not have a material impact on the condensed consolidated statements of cash flows or condensed consolidated statements of operations and comprehensive loss. Expanded disclosures around the Company’s lease agreements under ASC 842 are included in Note 12 of these condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments method, which will generally result in earlier recognition of allowances for losses. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments – Credit Losses (Topic 326) In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) | 2. Summary of Significant Accounting Policies Stock Split On September 5, 2019, the Company effected a 170-for-1 stock split of its issued and outstanding shares of common stock and made comparable and equitable adjustments to its equity awards in accordance with the terms of the awards. The par value of the common and preferred stock was not adjusted as a result of the stock split. Accordingly, all share and per share amounts for the periods presented in the accompanying consolidated financial statements and notes thereto have been adjusted retrospectively, where applicable, to reflect this stock split. In connection with the stock split, the Company’s Board of Directors (the “Board”) and stockholders approved the Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 85,000,000 shares (after giving effect to the stock split) to 500,000,000 shares and to increase the number of authorized shares of preferred stock from 34,000,000 shares (after giving effect to the stock split) to 50,000,000 shares. Offering Costs Prior to the IPO, the Company capitalized offering costs incurred in connection with the anticipated sale of common stock in the IPO, including legal, accounting, printing and other IPO-related costs. The balance of offering costs included within prepaid expenses and other current assets at December 31, 2018 was $1.3 million. Upon completion of the IPO and the exercise of the underwriters’ option to purchase additional shares, $5.5 million and $0.4 million, respectively, of offering costs were reclassified to stockholders’ equity and recorded against the proceeds received by the Company. Segment and Geographic Information The Company operates in a single operating segment. Operating segments are defined as components of an enterprise for which discrete financial information is available and is regularly reviewed by the chief operating decision maker in order to make decisions regarding resource allocation and performance assessment. The Company has determined that its chief operating decision maker is its Chief Executive Officer. The Company's chief operating decision maker reviews the Company's financial information on a consolidated basis for purposes of allocating resources and evaluating financial performance. Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements. Revenue by geographic region is based on the delivery address of the customer, and is summarized by geographic area as follows: Year Ended December 31, 2019 2018 2017 (in thousands) United States $ 188,283 $ 154,609 $ 130,135 International 54,615 46,953 42,404 Total revenue $ 242,898 $ 201,562 $ 172,539 Other than the United States, no other individual country exceeded 10% of total revenue for the years ended December 31, 2019, 2018 or 2017. The Company's long-lived assets are composed of property and equipment, net, and are summarized by geographic area as follows: December 31, 2019 2018 (in thousands) United States $ 10,015 $ 4,388 International 1,168 1,242 Total property and equipment, net $ 11,183 $ 5,630 Outside of the United States and Canada, no other individual country held greater than 10% of total long-lived assets at December 31, 2019 or 2018. Foreign Currency The reporting currency of the Company is the U.S. dollar. For the subsidiary where the U.S. dollar is the functional currency, foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. . Resulting gains and losses are recorded in in the consolidated statements of operations in the period of occurrence. The Company’s foreign subsidiaries are translated from the applicable functional currency to the U.S. dollar using the average exchange rates during the reporting period, while assets and liabilities are translated at the period-end exchange rates. Resulting gains or losses from translating foreign currency are included in accumulated other comprehensive income (loss). Cash and Cash Equivalents Cash consists of deposits with financial institutions whereas cash equivalents primarily consist of money market funds. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable represent amounts owed to the Company by its customers that are recorded at the invoiced amount. The Company reports accounts receivable net of allowance for doubtful accounts. Management makes judgments and estimates of the probable loss related to uncollectible accounts receivable considering a number of factors including collection trends, prevailing and anticipated economic conditions, and specific customer credit risk. The Company’s allowance for doubtful accounts activity has historically not been significant. Probable losses are recorded in general and administrative expense in the accompanying consolidated statements of operations. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents on deposit at several financial institutions as well as accounts receivable. The Company deposits cash with high-credit-quality financial institutions, which, at times, may exceed federally insured amounts. The Company invests its cash equivalents in highly-rated money market funds. Additionally, the Company performs ongoing credit evaluations of its customers’ financial condition and will limit the amount of credit as deemed necessary, but currently does not require collateral from customers. As of December 31, 2019 and 2018, no single customer represented greater than 10% of accounts receivable. For the years ended December 31, 2019, 2018 and 2017, no single customer represented greater than 10% of revenue. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a three-level valuation hierarchy for the disclosure of fair value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on the inputs used in its valuation as of the measurement date, and notably the extent to which the inputs are market-based (observable) or internally determined (unobservable). The three levels are defined as follows: ● Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. ● Level 2: Observable inputs, other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3: Unobservable inputs reflecting the Company’s own assumptions used to measure assets and liabilities at fair value and which require significant management judgment or estimation. Property and Equipment Property and equipment are stated at historical cost less accumulated depreciation. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is computed using the straight-line method based on the following estimated useful lives: Asset Type Useful Life Computer equipment 3 years Purchased computer software 1 - 3 years Furniture and fixtures 3 - 5 years Leasehold improvements Lesser of the lease term or 10 years Other 3 - 5 years Capitalized Software Costs Costs for the development of new software products sold to customers and substantial enhancements to existing software products sold to customers are expensed as incurred until technological feasibility has been established, at which time any additional costs are capitalized during the development stage and until the software is generally released. The Company believes its current process for developing software will be essentially completed concurrently with the establishment of technological feasibility; hence, no costs have been capitalized to date. For development costs related to software to be used internally, the Company follows guidance of Accounting Standards Codification Topic 350-40, Internal Use Software and requires companies to capitalize qualifying computer software costs that are incurred during the application development stage. These capitalized costs are included in intangible assets in the consolidated balance sheets and are amortized on a straight-line basis over the expected useful life of the software, which is estimated to be between three The Company capitalizes the cost of software purchased from third-party vendors and has classified such costs as property and equipment in the consolidated balance sheets. These costs are amortized over their useful lives, which are primarily estimated to be three years. Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. The Company evaluates goodwill for impairment annually in the fourth quarter of each year and as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company’s test for goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. If qualitative factors indicate that the fair value of the reporting unit is more likely than not less than its carrying amount, then a quantitative goodwill impairment test is performed. Under the quantitative impairment test, if the carrying amount of the reporting unit exceeds its fair value, then an impairment loss is recognized in an amount equal to that excess, not to exceed the total amount of goodwill. For purposes of the annual impairment test, the Company has determined it has one reporting unit. There was no impairment of goodwill recorded during the years ended December 31, 2019, 2018 or 2017. Intangible Assets Intangible assets with finite lives arising from business combinations are initially recorded at fair value and amortized over their useful lives using the straight-line method. The estimated useful life for each acquired intangible asset class is as follows: Asset Type Useful Life Developed technology 4 - 9 years Customer relationships 9 - 13 years Trade names 10 years Product backlog 2 - 3 years Non-compete agreements 3 years The Company records acquired in-process research and development as indefinite-lived intangible assets. Purchased intangible assets with indefinite lives are not amortized but assessed for potential impairment annually and when events or circumstances indicate that their carrying amounts might be impaired. Impairment of Long-Lived Assets The Company reviews long-lived assets, including property and equipment and finite-lived intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Such events and changes may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends and changes in the Company’s business strategy. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. There were no events or changes in circumstances that indicated the Company’s long-lived assets were impaired Deferred Debt Issuance Costs Issuance costs incurred to obtain debt financing are deferred and amortized to interest expense using the effective interest method over the contractual term of the debt. Total deferred debt issuance costs incurred by the Company were $1.2 million, $6.0 million and $6.8 million related to the 2019 Credit Facilities, the 2018 Credit Facilities, and the 2016 Credit Facilities respectively (discussed in Note 7). The carrying value of deferred debt issuance costs was $1.2 million and $5.2 million at December 31, 2019 and 2018, respectively, which is included as a reduction to long-term debt in the accompanying consolidated balance sheets. Deferred Rent Certain of the Company’s operating leases contain credits for tenant improvements, rent holidays and rent escalation clauses. For these leases, the Company recognizes the related rent expense on a straight-line basis. The difference between the amounts charged to expense and the rent paid is recorded as deferred lease costs and amortized over the lease term. Revenue Recognition The Company recognizes revenue under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers 1. Identification of the contract with a customer The Company contracts with its customers through order forms, which in some cases are governed by master sales agreements. The Company determines that it has a contract with a customer when the order form has been approved, each party’s rights regarding the products or services to be transferred can be identified, the payment terms for the products or services can be identified, the Company has determined the customer has the ability and intent to pay and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit, reputation and financial or other information pertaining to the customer. At contract inception, the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and whether the combined or single contract includes more than one performance obligation. 2. Determination of whether the goods or services in a contract comprise performance obligations Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both (i) capable of being distinct, whereby the customer can benefit from a product or service either on its own or together with other resources that are readily available from third parties or from the Company, and (ii) are distinct in the context of the contract, whereby the transfer of certain products or services is separately identifiable from other promises in the contract. The Company sells its solutions through subscription-based contracts. The Company’s subscriptions for solutions deployed on-premise within the customer’s technology infrastructure are comprised of a term-based license and an obligation to provide support and maintenance, where the term-based license and the support and maintenance constitute separate performance obligations. The Company’s SaaS subscriptions provide customers the right to access cloud-hosted software and support for the SaaS service, which the Company considers to be a single performance obligation. The Company also renews subscriptions for support and maintenance, which the Company considers to be a single performance obligation. Professional services consist of consulting and training services. These services are distinct performance obligations from subscriptions and do not result in significant customization of the software. 3. Measurement of the transaction price The Company determines the transaction price based on the consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer. This transaction price is exclusive of amounts collected on behalf of third parties, such as sales tax and value-added tax. The Company does not offer refunds, rebates or credits to customers in the normal course of business, so the impact of variable consideration has not been material. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that its contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide customers with a simple and predictable way to purchase the Company’s subscriptions, not to provide customers with financing. 4. Allocation of the transaction price to separate performance obligations If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on each obligation’s relative standalone selling price (“SSP”). The SSP is determined based on the prices at which the Company separately sells the product, assuming the majority of these fall within a pricing range. In instances where SSP is not directly observable, such as when the Company does not sell the software license separately, the Company determines the SSP using information that may include market conditions and other observable inputs that can require significant judgment. There is typically a range of standalone selling prices for individual products and services based on a stratification of those products and services by quantity and other circumstances. If one of the performance obligations is outside of the SSP range, the Company determines SSP to be the nearest endpoint of the range. 5. Recognition of revenue when or as the Company satisfies each performance obligation Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to the customer. The Company’s software subscriptions include both upfront revenue recognition when the Company transfers control of the term-based license to the customer, as well as revenue recognized ratably over the contract period for support and maintenance based on the stand-ready nature of these subscription elements. Revenue for the Company’s SaaS products is recognized ratably over the contract period as the Company satisfies the performance obligation. Professional services revenue provided on a time and materials basis is recognized as these services are performed. Revenue from training services and sponsorship fees is recognized on the date the services are complete. The Company generates sales directly through its sales team as well as through its channel partners. Where channel partners are involved, the Company has determined that it is the principal in these arrangements. Sales to channel partners are generally made at a discount, and revenues are recorded at the discounted price once the revenue recognition criteria above have been met. In certain instances, the Company pays referral fees to its partners, which the Company has determined to be commensurate with internal sales commissions and thus records these payments as sales commissions. Channel partners generally receive an order from an end customer prior to placing an order with the Company, and payment from channel partners is not contingent on the partner’s collection from end customers. Disaggregation of Revenue The following table presents revenue by category: Year Ended December 31, 2019 2018 2017 (in thousands) Subscription term-based licenses: Multi-year subscription term-based licenses $ 113,151 $ 88,925 $ 86,421 1-year subscription term-based licenses 48,255 44,743 35,678 Total subscription term-based licenses 161,406 133,668 122,099 Subscription SaaS and support and maintenance 63,939 51,323 38,120 Professional services and other 17,553 16,571 12,320 Total revenue $ 242,898 $ 201,562 $ 172,539 Contract Balances Contract assets represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition policy, for contracts that have not yet been invoiced to customers where there is a remaining performance obligation, typically for multi-year arrangements. The opening and closing balances of contract assets were as follows: Year Ended December 31, 2019 2018 2017 (in thousands) Beginning balance $ 67,468 $ 60,662 $ 38,491 Ending balance 86,010 67,468 60,662 Change $ 18,542 $ 6,806 $ 22,171 Contract liabilities consist of customer billings in advance of revenue being recognized. The Company primarily invoices its customers for subscription arrangements annually in advance, though certain contracts require invoicing for the entire subscription in advance. Amounts anticipated to be recognized within one year of the balance sheet date are recorded as deferred revenue, current; the remaining portion is recorded as deferred revenue, noncurrent in the consolidated balance sheets. The opening and closing balances of contract liabilities included in deferred revenue were as follows: Year Ended December 31, 2019 2018 2017 (in thousands) Beginning balance $ 35,367 $ 33,810 $ 27,606 Ending balance 47,507 35,367 33,810 Change $ 12,140 $ 1,557 $ 6,204 The change in deferred revenue relates primarily to invoicing customers and recognizing revenue in conjunction with the satisfaction of performance obligations. Revenue recognized during the years ended December 31, 2019, 2018 and 2017 that was included in the deferred revenue balances at the beginning of the respective periods was as follows: Year Ended December 31, 2019 2018 2017 (in thousands) Deferred revenue recognized as revenue $ 33,100 $ 31,391 $ 26,332 Remaining Performance Obligations Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and noncancelable amounts to be invoiced. As of December 31, 2019, the Company had $135.6 million of transaction price allocated to remaining performance obligations, of which 89% is expected to be recognized as revenue over the next 24 months, with the remainder to be recognized thereafter. Deferred Commissions Sales commissions earned by the Company’s internal and external sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for new contracts and additional sales to existing customers are deferred and recorded in deferred commissions, current and noncurrent in the Company’s consolidated balance sheets. Deferred commissions are amortized over the period of benefit, which the Company has determined to be generally four years. The Company determined the period of benefit by taking into consideration its customer contracts, its technology and other factors. Deferred commissions are amortized consistent with the pattern of revenue recognition for each performance obligation for contracts for which the commissions were earned. The Company includes amortization of deferred commissions in sales and marketing expense in the consolidated statements of operations. The Company periodically reviews the carrying amount of deferred commissions to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. The Company did not recognize an impairment of deferred commissions during the years ended December 31, 2019, 2018 or 2017. The following table summarizes the account activity of deferred commissions for the years ended December 31, 2019, 2018 and 2017: Year Ended December 31, 2019 2018 2017 (in thousands) Beginning balance $ 11,033 $ 6,354 $ 2,121 Additions to deferred commissions 9,060 9,981 7,693 Amortization of deferred commissions (6,423) (5,302) (3,460) Ending balance $ 13,670 $ 11,033 $ 6,354 Deferred commissions, current $ 5,814 $ 3,746 $ 1,858 Deferred commissions, noncurrent 7,856 7,287 4,496 Total deferred commissions $ 13,670 $ 11,033 $ 6,354 Research and Development Research and development costs include direct and allocated expenses. Other than software development costs that qualify for capitalization as discussed above, research and development costs are expensed as incurred. Advertising Costs The Company expenses advertising costs as incurred. Advertising expense is included within sales and marketing expense in the consolidated statements of operations. For the years ended December 31, 2019, 2018 and 2017, advertising expenses were $1.9 million, $1.5 million and $1.2 million, respectively. Stock-Based Compensation Stock-based compensation expense for time-based awards is determined based on the grant-date fair value, net of forfeitures, and is recognized on a straight-line basis over the requisite service period of the award, which is typically the vesting term of the award. Prior to the adoption of ASU 2016-09 on January 1, 2018, the Company estimated the forfeiture rate annually using its historical experience of forfeited awards. The Company then adjusted for actual forfeitures at each vesting date. After the adoption of ASU 2016-09, forfeitures are accounted for as they occur. Stock-based compensation expense for awards subject to both performance and market conditions is determined based on the grant-date fair value and is recognized on a graded vesting basis over the term of the award once it is probable that the performance conditions will be met. The fair value of each time-based option grant is estimated on the date of the grant using the Black-Scholes option pricing model. For awards subject to performance and market conditions, the Company uses a Monte Carlo simulation model, which utilizes multiple inputs to estimate the probability that market conditions will be achieved. Both models require highly subjective assumptions as inputs, including the following: ● Risk-free rate : The risk-free interest rate is based on the implied yield currently available on U.S. Treasury securities with a remaining term commensurate with the estimated expected term. ● Expected term : For time-based awards, the estimated expected term of options granted is generally calculated as the vesting period plus the midpoint of the remaining contractual term, as the Company does not have sufficient historical information to develop reasonable expectations surrounding future exercise patterns and post-vesting employment termination behavior. For awards subject to market and performance conditions, the expected term represents the period of time that the options granted are expected to be outstanding. ● Dividend yield : The Company uses a dividend yield of zero, as it does not currently issue dividends and has no plans to issue dividends in the foreseeable future. ● Volatility : Since the Company does not have substantive trading history of its common stock, expected volatility is estimated based on the historical volatility of peer companies over the period commensurate with the estimated expected term. ● Fair value : Prior to the IPO, there was no public market for the Company’s common stock, so the fair value of the shares of common stock was established by the Board using various inputs, including an independent valuation. Following the IPO, the Company’s shares are traded in the public market, and accordingly the Company uses the applicable closing price of its common stock to determine fair value. The following assumptions were used for time-based options granted during the years ended December 31, 2019, 2018 and 2017: Year Ended December 31, 2019 2018 2017 Risk-free rate — 2.6 % - 3.0 % 2.0 % - 2.2 % Expected term — 6.1 years 6.1 years Dividend yield — — — Volatility — 39 % - 42 % 38 % - 42 % Weighted-average grant date fair value of options granted during period — $4.84 $3.43 The following assumptions were used for awards subject to performance and market conditions that were granted during the years ended December 31, 2019, 2018 and 2017: Year Ended December 31, 2019 2018 2017 Risk-free rate — 2.5 % - 2.8 % 1.5 % - 1.9 % Expected term — 1.7 - 3.3 years 3.8 - 4.5 years Dividend yield — — — Volatility — 45 % - 55 % 57 % - 62 % Weighted-average grant date fair value of options granted during period — $2.29 $2.29 The Company calculates the fair value for restricted stock units (“RSUs”) based on the estimated fair value of the Company’s common stock on the date of grant and records compensation expense over the vesting period using a straight-line method. Prior to the adoption of ASU 2016-09, the Company factored an estimated forfeiture rate in calculating compensation expense on RSUs and adjusted for actual forfeitures upon the vesting of each tranche of RSUs. After the adoption of ASU 2016-09, forfeitures are accounted for as they occur. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statement basis and the income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. The Company’s temporary differences result primarily from net operating losses, stock compensation, deferred revenue, intangible assets and accrued expenses. Deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to the years in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred income tax assets to the amounts expected to be realized. The Company evaluates the tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are more likely than not of being sustained by the applicable tax authority. Tax positions not deemed to meet the more likely than not threshold would not be recorded as a tax benefit or expense in the current year. Interest and penalties related to income tax liabilities are included in the benefit (provision) for income taxes. Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, plus the dilutive effects of RSUs and stock options. Dilutive shares of common stock are determined by applying the treasury stock method. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Leases In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement disclosures upon the issuance of ASU 2018-13 while delaying the adoption of the additional disclosures until their effective date. The Company will adopt ASU 2018-13 in the first quarter of 2020 and does not expect it to have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting fo |
