| Significant Accounting Policies | 2. Significant Accounting Policies Principles of Consolidation and Basis of Presentation Our consolidated financial statements are presented in accordance with accounting standards generally accepted in the United States of America, or U.S. GAAP, and include the accounts of Alteryx, Inc. and its wholly owned subsidiaries after elimination of intercompany transactions and balances. During the year ended December 31, 2023, management elected to change the presentation of our financial statements and accompanying footnote disclosures from thousands to millions. The change in presentation had no material impact on previously reported financial information, but certain amounts reported for prior periods may differ by insignificant amounts due to the nature of rounding relative to the change in presentation. In addition, historical percentages and per share amounts presented may not add to their respective totals or recalculate due to rounding. Use of Estimates 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, disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions. On an ongoing basis, our management evaluates these estimates and assumptions, including those related to determination of standalone selling prices of our products and services, income tax valuations, stock-based compensation, and goodwill and intangible assets valuations and recoverability. We base our estimates on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Concentration of Risk Financial instruments, which subject us to concentrations of credit risk, consist primarily of cash and cash equivalents, investments, and trade accounts receivable. We maintain our cash and cash equivalents and investments with three major financial institutions and a portion of such balances exceed or are not subject to Federal Deposit Insurance Corporation, or FDIC, insurance limits. We extend differing levels of credit to customers, do not require collateral deposits, and, when necessary, maintain reserves for potential credit losses based upon the expected collectability of accounts receivable. We manage credit risk related to our customers by following credit approval processes, establishing credit limits, performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures. No customers accounted for 10% or more of our accounts receivable balance or 10% or more of our revenue in any years presented. Fair Value of Financial Instruments We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active near the measurement date; 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 that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of our money market funds was determined based on “Level 1” inputs. The fair values of our certificates of deposit, commercial paper, U.S. Treasury and agency bonds, and corporate bonds were determined based on “Level 2” inputs. The valuation techniques used to measure the fair values of certificates of deposit and commercial paper included observable market-based inputs for similar assets, which primarily include yield curves and time-to-maturity factors. The valuation techniques used to measure the fair values of U.S. Treasury and agency bonds and corporate bonds included standard observable inputs, including reported trades, quoted market prices, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets or benchmark securities and data provided by third parties as many of the bonds are not actively traded. There were no marketable securities measured on a recurring basis in the “Level 3” category. We have not elected the fair value option as prescribed by ASC 825, The Fair Value Option for Financial Assets and Financial Liabilities , for our financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, Fair Value Measurements and Disclosures, or ASC 820, material financial assets and liabilities not carried at fair value, such as our Notes and accounts receivable and payable, are reported at their carrying values. Cash and Cash Equivalents and Restricted Cash We consider cash and cash equivalents to include short-term, highly liquid investments that are readily convertible to known amounts of cash and so near their maturity that they present an insignificant risk of changes in the value, including investments that mature within three months from the date of original purchase. We had restricted cash of $2 million and $5 million as of December 31, 2023 and 2022, respectively. This balance, presented in other assets on the consolidated balance sheet, relates to amounts required to be restricted as to use by our letters of credit associated with our leases and by our credit card processor. Investments in Marketable Securities Our investments consist of available-for-sale marketable securities, which are composed of fixed income securities, certificates of deposit, and money market funds. Our fixed income securities are predominantly high-grade corporate bonds, U.S. Treasury bonds, and U.S. Agency bonds. The classification of investments is determined at the time of purchase and reevaluated at each balance sheet date. Investments are stated at fair value and are classified as current or non-current based on the nature of the securities as well as their stated maturities. Unrealized gains and losses that are not associated with a credit loss are recognized in other comprehensive income (loss) in our consolidated balance sheets. At each balance sheet date, we assess available-for-sale securities in an unrealized loss position to assess whether a decline in the fair value below the amortized cost basis (i.e., impairment) of an available-for-sale debt security is due to credit-related factors or noncredit-related factors. If it is determined that the unrealized losses are credit-related, we record the credit-related impairment as an allowance on the balance sheet with a corresponding adjustment in our consolidated statement of operations and comprehensive income (loss). Credit losses are limited to the amount by which the security’s amortized cost basis exceeds its fair value and both the allowance and the adjustment to net income can be reversed if conditions change. If the unrealized loss is determined not to be credit-related, the corresponding adjustment is made in accumulated other comprehensive income (loss) in our consolidated balance sheets. Other Investments Our other investments include debt and equity investments in privately held companies. Our equity investments in which we do not have a controlling interest or significant influence do not have readily determinable fair values. We apply the measurement alternative under ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, for equity securities by measuring them at cost, less any impairment, and performing adjustments resulting from observable price changes. These investments are presented within other assets as of December 31, 2023, and within long-term investments as of December 31, 2022, on our consolidated balance sheets and are periodically analyzed to determine whether there are indicators of impairment. If measured at fair value in the consolidated balance sheets, these would generally be classified in Level 3 of the fair value hierarchy. Our debt investments in privately held companies are accounted for under ASC 320, Investments - Debt Securities , and are classified as available-for-sale securities. The investments are presented at fair value on the balance sheet and are classified as current or non-current based on their stated maturities. Unrealized gains or losses, if any, are recognized in other comprehensive income (loss) in our consolidated balance sheets. These investments are presented within prepaid expenses and other current assets and other assets as of December 31, 2023. We did not have any debt investments in privately held companies as of December 31, 2022. Accounts Receivable, Allowance for Doubtful Accounts, and Sales Reserves Our accounts receivable consists of amounts due from customers and are typically unsecured. Accounts receivable are recorded at the invoiced amount and are non-interest bearing. The allowance for doubtful accounts is estimated and established by assessing historical impairments, pooling the population by similar risk characteristics, considering historical loss rates, adjusted for asset-specific characteristics, current conditions, or forecasts, and applying a loss rate to the amortized cost of the asset. Additions to the allowance are charged to general and administrative expenses. Accounts receivables are written off against the allowance when an account balance is deemed uncollectible. We estimate a sales reserve based upon the historical adjustments made to customer billings. Such reserve is recorded as a reduction of revenue on our consolidated statement of operations and comprehensive income (loss) and a corresponding reduction to contract assets and accounts receivable in our consolidated balance sheet. Assets Recognized from the Costs to Obtain a Contract with a Customer We record an asset for the incremental costs of obtaining a contract with a customer, which primarily consists of sales commissions and partner referral fees that are earned upon execution of contracts. We pay commissions for new product sales as well as for renewals of existing contracts, and partner referral fees only for new product sales. For customer contracts in which the commissions paid on new business and renewals are commensurate, we generally amortize these costs over the contractual term of the contract, consistent with the pattern of revenue recognition for each performance obligation. For customer contracts in which the commissions paid on new business and renewals are not commensurate and for partner referral fees, we amortize the costs on new business over an expected period of benefit, which we have determined to be approximately four years. The expected period of benefit was determined by taking into consideration our customer contracts, the duration of our relationships with our customers and the useful life of our technology. In capitalizing and amortizing deferred commissions and partner referral fees, we have elected to apply a portfolio approach. We include amortization of this asset in sales and marketing expense in our consolidated statements of operations and comprehensive income (loss). Property and Equipment Property and equipment are stated at historical cost, less accumulated depreciation and amortization. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms. Useful lives by asset category are as follows: Computer equipment and software 3 years Furniture and fixtures 3 to 7 years Leasehold improvements Shorter of useful life or lease term Capitalized software development costs 4 years Repairs and maintenance costs are charged to expense as incurred. Upon the sale or retirement of property and equipment, the cost and the related accumulated depreciation or amortization are removed from the accounts, with any resulting gain or loss included in our consolidated statements of operations and comprehensive income (loss). Intangible Assets Intangible assets consist primarily of acquired developed technology. We determine the appropriate useful life of our intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets are amortized over their estimated useful lives of three Impairment of Long-Lived Assets We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be fully recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted cash flows attributable to such assets to their carrying value. If the carrying value of the assets exceeds the forecasted undiscounted cash flows, then the assets are written down to their fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. Impairment testing is performed at an asset group level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Business Combinations The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of the acquisition. We allocate the purchase price, including the fair value of any non-cash and contingent consideration, to the identifiable assets and liabilities of the relevant acquired business at their acquisition date fair values. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Contingent consideration payable in cash or a fixed dollar amount settleable in a variable number of shares is classified as a liability and recorded at fair value, with changes in fair value recorded in general and administrative expenses each period. Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expense in the consolidated statements of operations and comprehensive income (loss). We perform valuations of assets acquired, liabilities assumed, and contingent consideration and allocate the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired, liabilities assumed, and contingent consideration requires us to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, the probability of achievement of specified milestones, and selection of comparable companies. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired, liabilities assumed, and contingent consideration in a business combination. Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. We test goodwill for impairment in accordance with the provisions of ASC 350, Intangibles – Goodwill and Other, or ASC 350. Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, unanticipated competition, loss of key personnel, significant changes in the use of the acquired assets or our strategy, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. ASC 350 provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform an impairment test. The impairment test involves comparing the estimated fair value of a reporting unit with its book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, then an impairment loss is recognized in an amount equal to the amount that the book value of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. We have one reporting unit, and we test for goodwill impairment annually during the fourth quarter of each calendar year using a quantitative assessment. At each of December 31, 2023 and 2022, we determined our goodwill was not impaired as our fair value significantly exceeded the carrying value of our net assets. Revenue Recognition Our revenue is derived from the licensing of subscription-based software, data subscription services, and professional services, including training and consulting services. The subscription-based license generally includes access to hosted services and software and post-contract support, or PCS, which provides the customer the right to receive when-and-if-available unspecified future updates, upgrades and enhancements, and technical product support. The core principle of ASC 606, Revenue from Contracts with Customers , or ASC 606, is to recognize revenue upon the transfer of goods or services to our customers in an amount that reflects the consideration to which we expect to be entitled. In order to adhere to this core principle, we apply the following five-step approach: • identify the contract with a customer; • identify the performance obligations in the contract; • determine the transaction price; • allocate the transaction price to the performance obligations in the contract; and • recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for goods or services we transfer to the customer. Revenue is measured based on consideration specified in a contract with a customer, and excludes any taxes we collect concurrent with revenue-producing activities. Most of our contracts contain a fixed transaction price. Our subscription agreements typically range from one Our contracts with customers typically contain multiple performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Substantially all of our licenses are sold as subscription-based, on-premise licenses and are bundled with maintenance and support, or PCS. In addition to our on-premise licenses, we sell subscriptions to third-party syndicated data and provide professional service offerings primarily related to trainings for our customers. Our cloud-based products are typically hosted by us in the cloud and accessible to users via a web browser. We allocate the transaction price of the contract to each performance obligation using the relative standalone selling price, or SSP, of each distinct good or service in the contract. We determine estimates of SSP based on sales of goods and services sold on a standalone basis, our overall pricing strategies, market conditions, including the geographic locations in which the products are sold, the useful life of our products, and market data. We review the SSP for each of our performance obligations at least annually and update it when appropriate to ensure that the practices employed reflect our recent pricing experience and maximize the use of observable data. We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer. Revenue related to our subscription-based on-premise licenses is recognized at a point in time when the platform is first made available to the customer, or the beginning of the subscription term, if later. Revenue related to PCS, recurring premium support services, and data subscriptions is recognized ratably over the subscription terms. Non-recurring professional services revenue, such as training and providing educational services to customers and channel partners regarding the use of our technologies, is recognized when the services are provided to the customer, or when they expire. Our cloud offerings are treated as SaaS when hosted by us, with revenue recognized ratably over the contract term. Our first cloud-based offerings were released for general availability in 2022 and revenue related to cloud-based offerings was not material during each of the years ended December 31, 2023 and 2022. Contract Assets and Contract Liabilities Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. Contract assets primarily relate to unbilled amounts for contracts with customers for which the amount of revenue recognized exceeds the amount billed to the customer. Contract assets are transferred to accounts receivable when the right to invoice becomes unconditional. Contract assets are recorded as current if the invoice will be delivered to the customer within the succeeding 12-month period with the remaining recorded as long-term. Current contract assets are included in prepaid expenses and other current assets and long-term contract assets are included in other assets on our consolidated balance sheets. Contract liabilities, or deferred revenue, are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current if the performance obligation will be satisfied during the succeeding 12-month period and the remaining portion is recorded as non-current deferred revenue in our consolidated balance sheet. Cost of R evenue Cost of revenue is accounted for in accordance with ASC 705, Cost of Sales and Services , and consists of employee-related costs, including salaries and bonuses, stock-based compensation expense, and employee benefit costs associated with our customer support and professional services organizations, expenses related to hosting and operating our cloud infrastructure in third-party data centers, licenses of third-party syndicated data, amortization and impairment of acquired completed technology intangible assets, the amortization of capitalized software development costs, and related overhead expenses. Royalties We pay royalties associated with licensed third-party syndicated data sold with our platform and we recognize royalty expense to cost of revenue in our consolidated statements of operations and comprehensive income (loss) when incurred. For the years ended December 31, 2023, 2022, and 2021, we recognized royalty expense of approximately $15 million, $14 million, and $13 million, respectively. Research and Development Research and development expense consists primarily of employee-related costs, including salaries and bonuses, stock-based compensation expense, and employee benefits costs, depreciation of equipment used in research and development for our research and development employees, third-party contractor costs, and related allocated overhead costs. Product development expenses, other than software development costs qualifying for capitalization, are expensed as incurred. Software Development Costs Costs incurred in the development and enhancement of our software products to be sold, leased, or marketed are accounted for in accordance with ASC 985-20, Costs of Software to be Sold, Leased, or Marketed , or ASC 985-20. These costs are expensed as incurred until technological feasibility has been established. After technological feasibility is established, costs are capitalized in accordance with ASC 985-20. For our on-premise products, our process for developing software is completed concurrently with the establishment of technological feasibility. We account for costs to develop or obtain internal-use software and implementation costs incurred in hosting arrangements in accordance with ASC 350-40, Internal-Use Software, or ASC 350-40. We also account for costs of significant upgrades and enhancements resulting in additional functionality under ASC 350-40. These costs are primarily development costs (consisting of salaries, related payroll costs, and stock-based compensation) related to our hosted products, which are accessed by customers on a subscription basis, software purchased for internal use, purchased software licenses, and implementation costs. Costs incurred for maintenance, training, and minor modifications or enhancements are expensed as incurred. Capitalized software development costs are recorded as part of property and equipment, net on our consolidated balance sheets. These costs are recognized on a straight-line basis to cost of revenue over the estimated useful life of the software, which is generally four years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. Senior Unsecured Notes Our 2028 Notes (as defined in Note 10, Debt, of these notes to our consolidated financial statements) are recorded as a long-term liability on our consolidated balance sheet. The debt was initially measured at the amount of cash proceeds received, adjusted for debt issuance costs. The difference between the stated principal amount and the amount of cash proceeds received, net of debt issuance costs, was recorded as a discount. Total issuance costs will be recorded as a direct deduction from the related face value of the 2028 Notes in our consolidated balance sheet and amortized over the stated term of the 2028 Notes using the effective interest rate method in accordance with the authoritative guidance for imputation of interest (ASC 835-30, Interest - Imputation of Interest ). In the event that an event of default occurs, any unamortized debt issuance costs will be expensed immediately. Convertible Senior Notes Our 2024 & 2026 Notes (as defined in Note 10, Debt , of these notes to our consolidated financial statements) are accounted for in accordance with ASC 470‑20, Debt with Conversion and Other Options , or ASC 470-20. Prior to January 1, 2022, pursuant to ASC 470‑20, we accounted for the 2024 & 2026 Notes using the separate liability (debt) and equity (conversion option) components of the instrument. The carrying amount of the debt component for each series of our 2024 & 2026 Notes was calculated by estimating the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity component for each series of our 2024 & 2026 Notes was determined by deducting the fair value of the debt component from their respective principal amounts. The difference between the principal amount of each series of our 2024 & 2026 Notes and its respective fair value of debt component are amortized to interest expense over its respective terms using the effective interest method. The equity component, net of issuance costs and deferred tax effects, of each series of our 2024 & 2026 Notes is presented within additional paid-in-capital in our consolidated balance sheet. In accounting for the issuance costs related to our 2024 & 2026 Notes, the allocation of issuance costs incurred between the debt and equity components was based on their relative values. Effective January 1, 2022, we adopted ASU 2020-06 using the modified retrospective approach. As a result, the 2024 & 2026 Notes are accounted for as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives. Interest expense recognized in periods after adoption is reduced as a result of accounting for the convertible debt instruments as a single liability measured at their amortized cost. The 2023 Notes were settled on their maturity date of June 1, 2023. Leases Under ASC 842, we determine if an arrangement is a lease at contract inception. Operating leases are included in operating lease right-of-use assets, accrued expenses and other current liabilities and operating lease liabilities in our consolidated balance sheets. Operating lease charges are recorded in cost of revenue and operating expenses in our consolidated statements of operations and comprehensive income (loss). Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. We do not separate lease and non-lease components for all underlying asset classes. As most of our leases do not provide a readily determinable implicit rate, we estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We determine our incremental borrowing rate for each lease based primarily on the lease term and the economic environment of the applicable country or region. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives. The lease term includes options to extend or terminate when we are reasonably certain the option will be exercised. In general, we are not reasonably certain to exercise such options. We recognize lease expense for minimum lease payments on a straight-line basis over the lease term, while variable lease payments, such as common area maintenance, are recognized as incurred. We elected the practical expedient to not recognize operating lease right-of-use assets and operating lease liabilities that arise from short-term leases (i.e., leases with a term of 12 months or less). We review our operating leases for impairment on an ongoing basis. For right-of-use assets, circumstances that indicate that the carrying amount of such assets may not be fully recoverable may include the decision to leave a leased corporate office prior to the end of the minimum lease term or subleases from which estimated cash flows do not fully cover the costs of the associated lease. Impairments are recognized as a reduction of the carrying value of the right-of-use lease asset and related fixed assets. Lease impairment charges are recorded in operating expenses in the consolidated statements of operations and comprehensive income (loss). Advertising Costs Advertising costs are expensed as incurred. We incurred advertising costs of approximately $44 million, $38 million, and $30 million for the years ended December 31, 2023, 2022, and 2021, respectively. Such costs primarily relate to our annual user conferences, online, television, and print advertising, as well as sponsorship of public marketing and sporting events, and are reflected in sales and marketing expense in our consolidated statements of operations and comprehensive income (loss). Stock-Based Compensation We recognize stock-based compensation expense in accordance with the provisions of ASC 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors based on the grant date fair values of the awards. We use the Black-Scholes option-pricing method for valuing stock options and shares granted under |
