TABLEAU SOFTWARE INC, 10-Q filed on 5/8/2018
Quarterly Report
v3.8.0.1
Document and Entity Information Statement - shares
3 Months Ended
Mar. 31, 2018
May 02, 2018
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q1  
Entity Registrant Name TABLEAU SOFTWARE INC  
Entity Central Index Key 0001303652  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Class A common stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   67,911,962
Class B common stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   13,631,046
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Current liabilities    
Accounts payable $ 2,817 $ 4,448
Accrued compensation and employee-related benefits 81,268 96,390
Other accrued liabilities 41,935 37,722
Income taxes payable 4,467 4,743
Deferred revenue 314,698 419,426
Total current liabilities 445,185 562,729
Deferred revenue 21,687 28,058
Other long-term liabilities 53,911 54,385
Total liabilities 520,783 645,172
Commitments and contingencies (Note 9)
Stockholders' equity    
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; none issued 0 0
Additional paid-in capital 1,205,459 1,168,563
Accumulated other comprehensive loss (10,571) (11,991)
Accumulated deficit (285,023) (402,957)
Total stockholders' equity 909,873 753,623
Total liabilities and stockholders' equity 1,430,656 1,398,795
Current assets    
Cash and cash equivalents 623,994 627,878
Short-term investments 241,652 226,787
Accounts receivable, net of allowance for doubtful accounts of $972 and $1,003 132,611 203,366
Prepaid expenses and other current assets (98,461) (30,514)
Income taxes receivable 883 673
Total current assets 1,097,601 1,089,218
Long-term investments 157,497 148,364
Property and equipment, net 101,121 106,753
Goodwill 35,083 35,083
Deferred income taxes 4,215 5,287
Other long-term assets 35,139 14,090
Total assets 1,430,656 1,398,795
Common stock 8 8
Class B common stock    
Current assets    
Common stock 1 1
Class A common stock    
Current assets    
Common stock $ 7 $ 7
v3.8.0.1
Condensed Consolidated Balance Sheets Balance Sheet Parenthetical - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Allowance for doubtful accounts $ 972 $ 1,003
Preferred Stock, Par Value (in usd per share) $ 0.0001 $ 0.0001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 0 0
Class B common stock    
Common Stock, Par Value (in usd per share) $ 0.0001 $ 0.0001
Common Stock, Shares Authorized 75,000,000 75,000,000
Common Stock, Shares Issued 13,631,046 14,492,846
Common Stock, Shares Outstanding 13,631,046 14,492,846
Class A common stock    
Common Stock, Par Value (in usd per share) $ 0.0001 $ 0.0001
Common Stock, Shares Authorized 750,000,000 750,000,000
Common Stock, Shares Issued 67,904,088 65,969,499
Common Stock, Shares Outstanding 67,904,088 65,969,499
v3.8.0.1
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Revenues    
License $ 108,793 $ 97,244
Maintenance and services 137,414 102,662
Total revenues 246,207 199,906
Cost of revenues    
License 3,954 3,267
Maintenance and services 28,471 23,388
Total cost of revenues 32,425 26,655
Gross profit 213,782 173,251
Operating expenses    
Sales and marketing 138,406 118,018
Research and development 93,505 84,302
General and administrative 32,250 24,445
Total operating expenses 264,161 226,765
Operating loss (50,379) (53,514)
Other income, net 1,462 1,225
Loss before income tax expense (benefit) (48,917) (52,289)
Income tax expense (benefit) (2,445) 2,358
Net loss $ (46,472) $ (54,647)
Net loss per share:    
Basic $ (0.57) $ (0.71)
Diluted $ (0.57) $ (0.71)
Weighted average shares used to compute net loss per share:    
Basic (shares) 81,039 77,416
Diluted (shares) 81,039 77,416
v3.8.0.1
Condensed Consolidated Statements of Operations Parenthetical - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cost of revenues    
Stock-based Compensation Expense $ 2,987 $ 2,577
Sales and marketing    
Stock-based Compensation Expense 20,015 18,092
Research and development    
Stock-based Compensation Expense 25,157 23,515
General and administrative    
Stock-based Compensation Expense $ 7,604 $ 5,011
v3.8.0.1
Condensed Consolidated Statements of Comprehensive Loss Statement - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Statement of Comprehensive Income [Abstract]    
Net loss $ (46,472) $ (54,647)
Other comprehensive income (loss), net of tax:    
Foreign currency translation 586 (824)
Net unrealized loss on available-for-sale securities (849) 0
Comprehensive loss $ (46,735) $ (55,471)
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Operating activities    
Net loss $ (46,472) $ (54,647)
Adjustments to reconcile net loss to net cash provided by operating activities    
Depreciation and amortization expense 9,647 13,435
Amortization of premiums on investments, net 118 0
Stock-based compensation expense 55,763 49,195
Deferred income taxes (4,226) 128
Changes in operating assets and liabilities    
Accounts receivable, net 73,012 76,878
Prepaid expenses and other assets (22,891) 11,270
Income taxes receivable (194) 6
Deferred revenue (7,507) 4,008
Accounts payable and accrued liabilities (4,279) (16,620)
Income taxes payable (356) 842
Net cash provided by operating activities 52,615 84,495
Investing activities    
Purchases of property and equipment (5,251) (23,238)
Purchases of investments (102,450) 0
Maturities of investments 77,385 0
Sales of investments 99 0
Net cash used in investing activities (30,217) (23,238)
Financing activities    
Proceeds from issuance of common stock 2,492 4,309
Repurchases of common stock (30,007) (20,008)
Net cash used in financing activities (27,515) (15,699)
Effect of exchange rate changes on cash and cash equivalents 1,233 374
Net increase (decrease) in cash and cash equivalents (3,884) 45,932
Cash and cash equivalents    
Beginning of period 627,878 908,717
End of period 623,994 954,649
Non-cash activities    
Accrued purchases of property and equipment $ 4,192 $ 8,039
v3.8.0.1
Description of Business
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business
Description of Business
Tableau Software, Inc., a Delaware corporation, and its wholly-owned subsidiaries (the "Company," "we," "us" or "our") are headquartered in Seattle, Washington. Our software products put the power of data into the hands of everyday people, allowing a broad population of business users to engage with their data, ask questions, solve problems and create value. Based on innovative core technologies originally developed at Stanford University, our products dramatically reduce the complexity, inflexibility and expense associated with traditional business intelligence applications. We currently offer four key products: Tableau Desktop, a self-service, powerful analytics product for anyone with data; Tableau Server, a business intelligence platform for organizations; Tableau Online, a hosted software-as-a-service ("SaaS") version of Tableau Server; and Tableau Public, a free cloud-based platform for analyzing and sharing public data.
v3.8.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial information has been prepared in accordance with generally accepted accounting principles in the United States ("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 financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet data as of December 31, 2017 was derived from audited financial statements but does not include all disclosures required by GAAP. The condensed consolidated financial information 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, 2017 filed with the SEC on February 26, 2018.
In the opinion of management, the accompanying unaudited condensed consolidated financial information includes all normal recurring adjustments necessary for a fair statement of the Company's financial position, results of operations, comprehensive loss and cash flows for the interim periods, but is not necessarily indicative of the results that may be expected for the year ending December 31, 2018. All intercompany accounts and transactions have been eliminated in consolidation.
We adopted the new revenue recognition accounting standard Accounting Standards Codification (“ASC”) 606 effective January 1, 2018 on a modified retrospective basis (see Recently Adopted Accounting Pronouncements). Financial results for reporting periods during 2018 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to 2018 are presented in conformity with amounts previously disclosed under the prior revenue recognition standard ASC 605. These financial statements include additional information regarding the impacts from the adoption of the new revenue recognition standard on our financial results for the three months ended March 31, 2018. This includes the presentation of financial results during 2018 under ASC 605 for comparison to the prior year.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates include but are not limited to: the collectability of our receivables; the useful lives of our property and equipment and other lease-related assets, liabilities and costs; the benefit period for deferred commissions; the valuation of investments and the determination of other-than-temporary impairments; and the reported amounts of accrued liabilities. For revenue, we make estimates and assumptions related to the standalone selling prices of our products and services and the nature and timing of the delivery of performance obligations from our contracts with customers. We also use estimates in stock-based compensation, income taxes and business combinations. Actual results could differ from those estimates.
Risks and Uncertainties
Inherent in our business are various risks and uncertainties, including our limited history of operating our business at its current scale and development of advanced technologies in a rapidly changing industry. These risks include our ability to manage our growth and our ability to attract new customers and expand sales to existing customers, as well as other risks and uncertainties. In the event that we do not successfully implement our business plan, certain assets may not be recoverable, certain liabilities may not be paid and investments in our capital stock may not be recoverable. Our success depends upon the acceptance of our technology, development of sales and distribution channels and our ability to generate significant revenues from the sale of our technology.
Segments
We follow the authoritative literature that established annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products and services, geographic regions and major customers.
We operate our business as one operating segment. Our chief operating decision makers are our Chief Executive Officer and Interim Chief Financial Officer, who review financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
Revenue Recognition - ASC 606
We generate revenues primarily in the form of software license fees and related maintenance and services fees. Software license revenues include fees from the sales of perpetual, term and subscription licenses. Maintenance and services revenues primarily consist of fees for maintenance services (including support and unspecified upgrades and enhancements when and if they are available), training and professional services.
We recognize revenues related to our contracts with customers based on the following criteria:
the contract contains reasonable evidence of approval and both parties' commitment to perform their respective obligations;
the contract includes identifiable rights to goods and services to be transferred and payment terms related to the transfer of those goods and services;
the contract has commercial substance; and
collection of substantially all of the consideration we are entitled to under the contract is probable.
We identify performance obligations in our contracts with customers, which may include software licenses and/or related maintenance and services. We determine the transaction price based on the amount we expect to be entitled to in exchange for transferring the promised goods or services to the customer. We allocate the transaction price in the contract to each distinct performance obligation in an amount that depicts the relative amount of consideration we expect to receive in exchange for satisfying each performance obligation. Revenue is recognized when performance obligations are satisfied.
Our contract payment terms are typically net 30 days. We assess collectability based on a number of factors including collection history and creditworthiness of the customer, and we may mitigate exposures to credit risk by requiring payments in advance. If we determine that collectability related to a contract is not probable, we may not record revenue until collectability becomes probable at a later date.
Our revenues are recorded based on the transaction price excluding amounts collected on behalf of third parties such as sales taxes, which are collected on behalf of and remitted to governmental authorities.
Nature of Products and Services
Our on-premises software licenses are sold both perpetually and through term-based license agreements. These licensing arrangements provide customers with the same product functionality and differ mainly in the duration over which the customer benefits from the software. We deliver our software licenses electronically. Electronic delivery occurs when we provide the customer with access to the software and license key via a secure portal. Revenue from on-premises software licenses is generally recognized upfront at the point in time when the software is made available to the customer.
When purchasing an on-premises software license, a customer typically bundles with a maintenance services agreement and may also purchase training and/or professional services. Maintenance services agreements consist of fees for providing software updates on a when and if available basis and for providing technical support for software products for a specified term. We believe that our when and if available software updates and technical support each have the same pattern of transfer to the customer and are substantially the same. Therefore, we consider these to be a single distinct performance obligation. Revenues allocated to maintenance services are recognized ratably as the services are provided. Revenues related to training services are billed on a fixed fee basis and are recognized as the services are delivered. Payments received in advance of services performed are deferred and recognized when the related services are performed. Revenues related to professional services are billed on a time and materials basis and are recognized as the services are performed.
We also provide cloud-based subscriptions, which allow customers to access our software during a contractual period without taking possession of the software. We recognize revenue related to these cloud-based subscriptions ratably over the life of the subscription agreement beginning when the customer first has access to the software. Revenues from our cloud-based subscriptions are included in license revenues.
Judgments and Estimates
Our contracts with customers often include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately from one another sometimes requires judgment.
Judgment is required to determine standalone selling prices (“SSP”) for each distinct performance obligation. We typically have more than one SSP for each of our products and services based on customer stratification, which is based on the size of the customer, their geographic region and market segment. We use other comparable software license sales to determine SSPs for perpetual software licenses. For our cloud-based subscriptions and for maintenance services, training and professional services, SSPs are generally observable using standalone sales and/or renewals. Our on-premises term-based software licenses generally do not have directly observable inputs for determining SSP. Therefore, we determine SSP using other observable inputs including customer buying patterns, renewal rates, cumulative spend comparisons and other industry data.
We evaluate contracts that include options to purchase additional goods or services to determine whether or not the options give rise to a separate performance obligation that is material. If we determine the options are material, the revenue allocated to such options is not recognized until the option is exercised or the option expires.
Our revenue recognition accounting policy for ASC 605 is included in our Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 26, 2018. We applied the revenue recognition accounting policy for ASC 605 to our disclosures in Note 6, which include amounts presented for 2018. There were no changes to the ASC 605 policy during the first quarter of 2018.
Assets Recognized from the Costs to Obtain a Contract with a Customer
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain costs related to our sales incentive programs meet the requirements to be capitalized and deferred. Assets recorded are included in other current assets and other long-term assets. We amortize these deferred costs proportionate with related revenues over four years, which is generally longer than the term of the initial contract because of anticipated renewals as sales commissions for renewals are not commensurate with sales commissions related to our initial contracts.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable.
Our investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. Our cash and cash equivalents and investments are held and managed by recognized financial institutions that follow our investment policy. Our policy limits the amount of credit exposure to any one security issue or issuer.
We extend credit to customers based upon an evaluation of the customer's financial condition. As of March 31, 2018 and December 31, 2017, no individual customer accounted for 10% or more of total accounts receivable. For the three months ended March 31, 2018 and 2017, no individual customer represented 10% or more of our total revenues.
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 related to revenue recognition and later issued additional ASUs including ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-14, all of which clarified certain aspects of ASU 2014-09, and together with ASU 2014-09, which we refer to collectively as the new revenue recognition standard. The new revenue recognition standard changed the way we recognize revenue, including the identification of contractual performance obligations and the allocation of transaction price, to depict the transfer of promised goods or services to customers at the amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We adopted the new revenue recognition standard in the first quarter of 2018 on a modified retrospective basis and applied the new revenue recognition standard only to contracts that were not completed contracts prior to January 1, 2018. Upon adoption, we recorded an adjustment of $146.8 million to our accumulated deficit. The adjustment was offset by a $105.9 million reduction to deferred revenue, which was primarily related to on-premises term licenses, and the addition of a $40.9 million contract asset.
The new revenue recognition standard materially impacts the timing of revenue recognition related to our on-premises term license agreements. Prior to our adoption of the new revenue recognition standard, we historically recognized revenue related to on-premises term license agreements ratably over the term of the licensing agreement. Under the new revenue recognition standard, revenue allocable to the license portion of the arrangement is recognized upon delivery of the license. Maintenance revenue related to on-premises term license agreements continue to be recognized ratably over the term of the licensing agreement. Under the new revenue recognition standard, we allocate total transaction price to performance obligations based on estimated standalone selling prices, which impacts the timing of revenue recognition depending on when each performance obligation is recognized. These impacts to the timing of revenue recognition also affect our deferred revenue balances.
The new revenue recognition standard requires the capitalization of certain incremental costs of obtaining a contract, which impacts the period in which we record our sales commissions expense. Prior to our adoption of the new revenue recognition standard, we recognized sales commissions expense as incurred. Under the new revenue recognition standard, we are required to recognize these expenses over the period of benefit associated with these costs. This results in a deferral of sales commissions expense each period. Upon adoption, we reduced our accumulated deficit by $25.5 million and recognized an offsetting asset for deferred sales commissions related to contracts that were not completed contracts prior to January 1, 2018.
For further discussion regarding the impacts of adopting the new revenue recognition standard, see Note 6.
In October 2016, the FASB issued ASU 2016-16 related to the accounting for income tax effects on intra-entity asset transfers of assets other than inventory. The new guidance requires reporting entities to recognize tax expense from the sale of assets when the transfer occurs, even though the pre-tax effects of the transaction are eliminated in consolidation. We adopted the new standard in the first quarter of 2018 on a modified retrospective basis. The adoption resulted in the recognition of a U.S. deferred tax asset, which was fully offset by a corresponding increase to the valuation allowance on our U.S. federal and state deferred income tax assets, and therefore did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02 related to lease accounting. The new guidance will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases that do not meet the definition of a short-term lease. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018 and requires modified retrospective transition. Under the new standard we anticipate that our current real estate leases will continue to be classified as operating leases and a significant amount of our currently outstanding operating lease commitments will be recorded to the balance sheet as right-of-use assets with corresponding lease liabilities. Our evaluation of the new standard will extend into future periods and we will update our disclosures, including the expected impacts of the new standard, as we progress towards the required adoption date.
In June 2016, the FASB issued ASU 2016-13, related to credit losses. The new guidance replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements.
v3.8.0.1
Short-Term and Long-Term Investments
3 Months Ended
Mar. 31, 2018
Schedule of Available-for-sale Securities  
Short-term and Long-term Investments Disclosure
Short-Term and Long-Term Investments
The following tables represent our short-term and long-term investments in available-for-sale securities as of March 31, 2018 and December 31, 2017, based on contractual years to maturity:
 
March 31, 2018
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
U.S. treasury securities
$
158,727

 
$

 
$
(255
)
 
$
158,472

U.S. agency securities
21,407

 

 
(94
)
 
21,313

Corporate bonds
62,058

 

 
(191
)
 
61,867

Total short-term investments
242,192

 

 
(540
)
 
241,652

Long-term investments

 

 

 

U.S. treasury securities
99,562

 

 
(502
)
 
99,060

U.S. agency securities
8,576

 

 
(71
)
 
8,505

Corporate bonds
50,332

 

 
(400
)
 
49,932

Total long-term investments
158,470

 

 
(973
)
 
157,497

Total short-term and long-term investments
$
400,662

 
$

 
$
(1,513
)
 
$
399,149

 
December 31, 2017
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
Commercial paper
$
9,970


$


$


$
9,970

U.S. treasury securities
160,206

 

 
(121
)
 
160,085

U.S. agency securities
9,917

 

 
(24
)
 
9,893

Corporate bonds
46,901

 
3

 
(65
)
 
46,839

Total short-term investments
226,994

 
3

 
(210
)
 
226,787

Long-term investments
 
 
 
 
 
 
 
U.S. treasury securities
79,371

 

 
(202
)
 
79,169

U.S. agency securities
18,570

 

 
(102
)
 
18,468

Corporate bonds
50,880

 

 
(153
)
 
50,727

Total long-term investments
148,821

 

 
(457
)
 
148,364

Total short-term and long-term investments
$
375,815

 
$
3

 
$
(667
)
 
$
375,151


As of March 31, 2018 and December 31, 2017, there were no investments that had been in a net loss position for 12 months or greater. The unrealized losses on investments as of March 31, 2018 were primarily caused by increases in interest rates. None of the unrealized losses represent other-than-temporary impairments based on our evaluation of available evidence as of March 31, 2018.
v3.8.0.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
We categorize assets and liabilities recorded at fair value based upon the level of judgment associated with inputs used to measure their fair value. The levels of the fair value hierarchy are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3—Inputs are unobservable inputs based on our own assumptions and valuation techniques used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.
Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
We value our investments using quoted prices for identical instruments in active markets when available. If we are unable to obtain quoted prices for identical instruments in active markets, we value our investments using quoted market prices for comparable instruments. To date, all of our investments can be valued using one of these two methodologies.
The following tables present the fair value of our financial assets using the fair value hierarchy as of March 31, 2018 and December 31, 2017:


March 31, 2018


Level 1

Level 2

Level 3

Total


(in thousands)
Cash and cash equivalents

 
 
 
 
 
 
 
Money market funds

$
553,667


$


$


$
553,667

Short-term investments

 
 
 
 
 
 
 
U.S. treasury securities
 

 
158,472

 

 
158,472

U.S. agency securities
 

 
21,313

 

 
21,313

Corporate bonds
 

 
61,867

 

 
61,867

Long-term investments
 
 
 
 
 
 
 
 
U.S. treasury securities



99,060




99,060

U.S. agency securities



8,505




8,505

Corporate bonds
 

 
49,932

 

 
49,932

Total

$
553,667


$
399,149


$


$
952,816


 
 
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(in thousands)
Cash and cash equivalents
 
 
 
 
 
 
 
 
Money market funds
 
$
582,835

 
$

 
$

 
$
582,835

Commercial paper
 

 
8,984

 

 
8,984

Short-term investments
 
 
 
 
 
 
 
 
Commercial paper
 

 
9,970

 

 
9,970

U.S. treasury securities
 

 
160,085

 

 
160,085

U.S. agency securities
 

 
9,893

 

 
9,893

Corporate bonds
 

 
46,839

 

 
46,839

Long-term investments
 
 
 
 
 
 
 
 
U.S. treasury securities
 

 
79,169

 

 
79,169

U.S. agency securities
 

 
18,468

 

 
18,468

Corporate bonds
 

 
50,727

 

 
50,727

Total
 
$
582,835

 
$
384,135

 
$

 
$
966,970


We did not have any investments in prime money market funds as of March 31, 2018. We had no financial assets or liabilities measured using Level 3 inputs as of March 31, 2018 and December 31, 2017.
v3.8.0.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders' Equity
Stockholders' Equity
Common Stock
Our certificate of incorporation, as amended and restated, authorizes us to issue 75,000,000 shares of Class B common stock at $0.0001 par value per share, and 750,000,000 shares of Class A common stock at $0.0001 par value per share. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each holder of Class B common stock is entitled to ten votes per share and each holder of Class A common stock is entitled to one vote per share. Shares of Class B common stock may be converted into Class A common stock at any time at the option of the stockholder and are automatically converted upon sale or transfer to Class A common stock, subject to certain limited exceptions. At its discretion, the board of directors may declare dividends on shares of common stock, subject to the rights of our preferred stockholders, if any. Upon liquidation or dissolution, holders of common stock will receive distributions only after preferred stock preferences have been satisfied.
Preferred Stock
Our certificate of incorporation, as amended and restated, authorizes us to issue 10,000,000 shares of preferred stock at $0.0001 par value per share. Our board of directors has the authority to provide for the issuance of all the shares in one or more series. At its discretion, our board of directors may designate the voting rights and preferences of the preferred stock. As of March 31, 2018 and December 31, 2017, no shares of preferred stock were outstanding.
Stock Repurchase Program
On November 1, 2016, we announced that our board of directors approved a stock repurchase program, under which we were authorized to repurchase up to $200 million of our outstanding Class A common stock. The repurchase program has no expiration date and may be modified, suspended or discontinued at any time. Repurchases under the program may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in transactions structured through investment banking institutions or a combination of the foregoing, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934.
During the three months ended March 31, 2018, we repurchased 366,160 shares of our outstanding Class A common stock at an average price of $81.95 per share for $30.0 million. During the three months ended March 31, 2017, we repurchased 383,411 shares of our outstanding Class A common stock at an average price of $52.18 per share for $20.0 million. All repurchases were made in open market transactions using cash on hand, and all of the shares repurchased were retired. As of March 31, 2018, we were authorized to repurchase a remaining $70.0 million of our Class A common stock under our repurchase program.
On April 26, 2018, our board of directors authorized us to repurchase up to an additional $300 million of our Class A common stock under our previously announced stock repurchase program. Including the additional $300 million, we are authorized to repurchase up to a remaining $370.0 million of our Class A common stock under the existing stock repurchase program. As of March 31, 2018, we had repurchased and retired 2,077,105 shares of our Class A common stock, under the existing stock repurchase program, for a total purchase price of $130.0 million.
v3.8.0.1
Revenue Revenue
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue
Revenue
We adopted the new revenue recognition accounting standard ASC 606 effective January 1, 2018 on a modified retrospective basis and applied the new standard only to contracts that were not completed contracts prior to January 1, 2018. See Note 2 for a description of our ASC 606 revenue recognition accounting policy. Financial results for reporting periods during 2018 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to 2018 have not been retroactively restated and are presented in conformity with amounts previously disclosed under ASC 605. This note includes additional information regarding the impacts from the adoption of the new revenue recognition standard on our financial results for the three months ended March 31, 2018. This includes the presentation of financial results during 2018 under ASC 605 for comparison to the prior year. Our revenue recognition accounting policy for ASC 605 is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 26, 2018. There were no changes to our ASC 605 policy during the first quarter of 2018.
Condensed Consolidated Balance Sheets (Unaudited) - Reconciliation of the Impacts from the Adoption of the New Revenue Recognition Standard
The following schedule summarizes the impacts from the adoption of the new revenue recognition standard on our condensed consolidated balance sheets as of March 31, 2018:
 
March 31, 2018
 
December 31, 2017
 
As Reported
(ASC 606)

Impacts from Adoption

Without Adoption
(ASC 605)

As Reported
(ASC 605)
 
(in thousands)
Assets
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
623,994

 
$

 
$
623,994

 
$
627,878

Short-term investments
241,652

 

 
241,652

 
226,787

Accounts receivable, net
132,611

 

 
132,611

 
203,366

Prepaid expenses and other current assets
98,461

 
(68,249
)
 
30,212

 
30,514

Income taxes receivable
883

 

 
883

 
673

Total current assets
1,097,601

 
(68,249
)
 
1,029,352

 
1,089,218

Long-term investments
157,497

 

 
157,497

 
148,364

Property and equipment, net
101,121

 

 
101,121

 
106,753

Goodwill
35,083

 

 
35,083

 
35,083

Deferred income taxes
4,215

 
1,589

 
5,804

 
5,287

Other long-term assets
35,139

 
(21,264
)
 
13,875

 
14,090

Total assets
$
1,430,656

 
$
(87,924
)
 
$
1,342,732

 
$
1,398,795

Liabilities and stockholders' equity

 
 
 
 
 

Current liabilities

 

 
 
 

Accounts payable
$
2,817

 
$

 
$
2,817

 
$
4,448

Accrued compensation and employee-related benefits
81,268

 

 
81,268

 
96,390

Other accrued liabilities
41,935

 

 
41,935

 
37,722

Income taxes payable
4,467

 
1,826

 
6,293

 
4,743

Deferred revenue
314,698

 
104,407

 
419,105

 
419,426

Total current liabilities
445,185

 
106,233

 
551,418

 
562,729

Deferred revenue
21,687

 
5,521

 
27,208

 
28,058

Other long-term liabilities
53,911

 
(746
)
 
53,165

 
54,385

Total liabilities
520,783

 
111,008

 
631,791

 
645,172

Stockholders' equity
 
 
 
 
 
 
 
Common stock
8

 

 
8

 
8

Additional paid-in capital
1,205,459

 

 
1,205,459

 
1,168,563

Accumulated other comprehensive loss
(10,571
)
 
(1,972
)
 
(12,543
)
 
(11,991
)
Accumulated deficit
(285,023
)
 
(196,960
)
 
(481,983
)
 
(402,957
)
Total stockholders' equity
909,873

 
(198,932
)
 
710,941

 
753,623

Total liabilities and stockholders' equity
$
1,430,656

 
$
(87,924
)
 
$
1,342,732

 
$
1,398,795


Condensed Consolidated Statements of Operations (Unaudited) - Reconciliation of the Impacts from the Adoption of the New Revenue Recognition Standard
The following schedule summarizes the impacts from the adoption of the new revenue recognition standard on our condensed consolidated statement of operations for the three months ended March 31, 2018:
 
Three Months Ended March 31,
 
2018
 
2017
 
As Reported
(ASC 606)
 
Impacts from Adoption
 
Without Adoption
(ASC 605)
 
As Reported
(ASC 605)
 
(in thousands)
Revenues
 
 
 
 
 
 
 
License
$
108,793

 
$
(3,127
)
 
$
105,666

 
$
97,244

Maintenance and services
137,414

 
(19,036
)
 
118,378

 
102,662

Total revenues
246,207

 
(22,163
)
 
224,044

 
199,906

Cost of revenues

 
 
 
 
 

License
3,954

 
(52
)
 
3,902

 
3,267

Maintenance and services
28,471

 
61

 
28,532

 
23,388

Total cost of revenues
32,425

 
9

 
32,434

 
26,655

Gross profit
213,782

 
(22,172
)
 
191,610

 
173,251

Operating expenses

 
 
 
 
 

Sales and marketing
138,406

 
4,607

 
143,013

 
118,018

Research and development
93,505

 

 
93,505

 
84,302

General and administrative
32,250

 

 
32,250

 
24,445

Total operating expenses
264,161

 
4,607

 
268,768

 
226,765

Operating loss
(50,379
)
 
(26,779
)
 
(77,158
)
 
(53,514
)
Other income, net
1,462

 
(38
)
 
1,424

 
1,225

Loss before income tax expense (benefit)
(48,917
)
 
(26,817
)
 
(75,734
)
 
(52,289
)
Income tax expense (benefit)
(2,445
)
 
5,737

 
3,292

 
2,358

Net loss
$
(46,472
)
 
$
(32,554
)
 
$
(79,026
)
 
$
(54,647
)
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - Reconciliation of the Impacts from the Adoption of the New Revenue Recognition Standard
The following schedule summarizes the impacts from the adoption of the new revenue recognition standard on our condensed consolidated statement of comprehensive loss for the three months ended March 31, 2018:
 
Three Months Ended March 31,
 
2018
 
2017
 
As Reported
(ASC 606)

Impacts from Adoption

Without Adoption
(ASC 605)

As Reported
(ASC 605)
 
(in thousands)
Net loss
$
(46,472
)
 
$
(32,554
)
 
$
(79,026
)
 
$
(54,647
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation
586

 
(289
)
 
297

 
(824
)
Net unrealized loss on available-for-sale securities
(849
)
 

 
(849
)
 

Comprehensive loss
$
(46,735
)
 
$
(32,843
)
 
$
(79,578
)
 
$
(55,471
)
Condensed Consolidated Statements of Cash Flows (Unaudited) - Reconciliation of the Impacts from the Adoption of the New Revenue Recognition Standard
The following schedule summarizes the impacts from the adoption of the new revenue recognition standard on our condensed consolidated statement of cash flows for the three months ended March 31, 2018:
 
Three Months Ended March 31,
 
2018
 
2017
 
As Reported
(ASC 606)
 
Impacts from Adoption
 
Without Adoption
(ASC 605)
 
As Reported
(ASC 605)
 
(in thousands)
Operating activities
 
 
 
 
 
 
 
Net loss
$
(46,472
)
 
$
(32,554
)
 
$
(79,026
)
 
$
(54,647
)
Adjustments to reconcile net loss to net cash provided by operating activities
 
 
 
 
 
 
 
Depreciation and amortization expense
9,647

 

 
9,647

 
13,435

Amortization of premiums on investments, net
118

 

 
118

 

Stock-based compensation expense
55,763

 

 
55,763

 
49,195

Deferred income taxes
(4,226
)
 
3,869

 
(357
)
 
128

Changes in operating assets and liabilities

 

 
 
 

Accounts receivable, net
73,012

 

 
73,012

 
76,878

Prepaid expenses and other assets
(22,891
)
 
23,230

 
339

 
11,270

Income taxes receivable
(194
)
 

 
(194
)
 
6

Deferred revenue
(7,507
)
 
3,521

 
(3,986
)
 
4,008

Accounts payable and accrued liabilities
(4,279
)
 

 
(4,279
)
 
(16,620
)
Income taxes payable
(356
)
 
1,825

 
1,469

 
842

Net cash provided by operating activities 
52,615

 
(109
)
 
52,506

 
84,495

Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(5,251
)
 

 
(5,251
)
 
(23,238
)
Purchases of investments
(102,450
)
 

 
(102,450
)
 

Maturities of investments
77,385

 

 
77,385

 

Sales of investments
99

 

 
99

 

Net cash used in investing activities
(30,217
)
 

 
(30,217
)
 
(23,238
)
Financing activities
 
 
 
 
 
 
 
Proceeds from issuance of common stock
2,492

 

 
2,492

 
4,309

Repurchases of common stock
(30,007
)
 

 
(30,007
)
 
(20,008
)
Net cash used in financing activities
(27,515
)
 

 
(27,515
)
 
(15,699
)
Effect of exchange rate changes on cash and cash equivalents
1,233

 
109

 
1,342

 
374

Net increase (decrease) in cash and cash equivalents
(3,884
)
 

 
(3,884
)
 
45,932

Cash and cash equivalents
 
 
 
 
 
 
 
Beginning of period
627,878

 

 
627,878

 
908,717

End of period
$
623,994

 
$

 
$
623,994

 
$
954,649




Disclosures Related to our Contracts with Customers
Timing may differ between the satisfaction of performance obligations and the invoicing and collection of amounts related to our contracts with customers. We record assets for amounts related to performance obligations that are satisfied but not yet billed and/or collected. These assets are recorded as contract assets rather than receivables when receipt of the consideration is conditional on something other than the passage of time. Liabilities are recorded for amounts that are collected in advance of the satisfaction of performance obligations. These liabilities are classified as current and non-current deferred revenue.
Contract Assets and Contract Liabilities
A summary of the activity impacting our contract assets during the three months ended March 31, 2018 is presented below:
 
Contract Assets
 
(in thousands)
Balances at December 31, 2017
$

Adoption of ASC 606
40,854

Contract assets transferred to receivables
(1,315
)
Additions to contract assets
21,127

Balances at March 31, 2018
$
60,666

As of March 31, 2018, our contract assets are expected to be transferred to receivables within the next 12 months and therefore are included in other current assets. There were no impairments of contract assets during the three months ended March 31, 2018.
A summary of the activity impacting our deferred revenue balances during the three months ended March 31, 2018 is presented below:
 
Deferred Revenue
 
(in thousands)
Balances at December 31, 2017
$
447,484

Adoption of ASC 606
(105,933
)
Deferred revenue recognized
(120,820
)
Additional amounts deferred
115,654

Balances at March 31, 2018
$
336,385

Assets Recognized from the Costs to Obtain our Contracts with Customers
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We amortize these deferred costs proportionate with related revenues over four years.
A summary of the activity impacting our deferred contract costs during the three months ended March 31, 2018 is presented below:
 
Deferred Contract Costs
 
(in thousands)
Balances at December 31, 2017
$

Adoption of ASC 606
25,489

Additional contract costs deferred
6,736

Amortization of deferred contract costs
(2,048
)
Balances at March 31, 2018
$
30,177


As of March 31, 2018, $8.9 million of our deferred contract costs are expected to be amortized within the next 12 months and therefore are included in other current assets. The remaining amount of our deferred contract costs are included in other long-term assets. There were no impairments of assets related to deferred contract costs during the three months ended March 31, 2018. There were no assets recognized related to the costs to fulfill contracts during the three months ended March 31, 2018 as these costs were not material.
Remaining Performance Obligations
Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. These amounts include additional performance obligations that are not yet recorded in the consolidated balance sheets. As of March 31, 2018, amounts allocated to these additional contractual obligations are $114.5 million, of which we expect to recognize $93.1 million as revenue over the next 24 months with the remaining amount thereafter.
v3.8.0.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Stock-Based Compensation
Our 2004 Equity Incentive Plan (the "2004 Plan") authorized the granting of options to purchase shares of our Class B common stock, restricted stock units ("RSUs") and other stock-based awards to our employees, consultants, officers and directors. Our 2013 Equity Incentive Plan, as amended, (the "2013 Plan" and, together with the 2004 Plan, the "Plans"), which is the successor to our 2004 Plan, authorizes the granting of options to purchase shares of our Class A common stock, RSUs and other stock-based awards to our employees, consultants, officers and directors. Options granted under the Plans may be incentive or nonstatutory stock options. Incentive stock options may only be granted to employees. The term of each option is stated in the award agreement but shall be no more than ten years from the date of grant. The board of directors determines the period over which options and RSUs become vested. Currently, the vesting period for our options and RSUs is typically four years.
Our 2013 Employee Stock Purchase Plan ("2013 ESPP") allows eligible employees to purchase shares of our Class A common stock, at a discount, through payroll deductions of up to 15% of their eligible compensation, subject to plan limitations. The 2013 ESPP currently includes purchase periods approximately six months in duration starting on the first trading date on or after June 1st and December 1st of each year. Participants are able to purchase shares of our common stock at 85% of the lower of its fair market value on (i) the first day of the purchase period or on (ii) the purchase date, which is the last day of the purchase period.
A summary of the option activity during the three months ended March 31, 2018 follows:    
 
 
Options Outstanding
 
 
Shares
 
Weighted Average Exercise Price Per Share
 
Weighted Average Remaining Contractual Term
 
Aggregate Intrinsic Value
 
 
 
 
 
 
(in years)
 
(in thousands)
Balances at December 31, 2017
 
3,017,113

 
$
10.13

 
 
 
 
Options exercised
 
(216,308
)
 
11.52

 
 
 
 
Balances at March 31, 2018
 
2,800,805

 
$
10.03

 
4.09
 
$
198,276

Vested and expected to vest at March 31, 2018
 
2,800,805

 
$
10.03

 
4.09
 
$
198,276

Exercisable at March 31, 2018
 
2,753,930

 
$
9.26

 
4.01
 
$
197,059


The intrinsic value is the difference between the current fair value of the stock and the exercise price of the stock option.
A summary of the RSU activity during the three months ended March 31, 2018 follows:
 
 
Number of Shares Underlying Outstanding RSUs
 
Weighted-Average Grant-Date Fair Value per RSU
Non-Vested outstanding at December 31, 2017
 
7,178,015

 
$
62.79

RSUs granted
 
2,376,440

 
83.32

RSUs vested
 
(1,222,641
)
 
65.24

RSUs forfeited
 
(238,327
)
 
63.38

Non-Vested outstanding at March 31, 2018
 
8,093,487

 
$
68.43


An RSU award entitles the holder to receive shares of our Class A common stock as the award vests, which is generally based on length of service. Our non-vested RSUs do not have nonforfeitable rights to dividends or dividend equivalents. For awards subject to technology milestones, we recognize compensation cost over the estimated requisite service period if we believe it is probable that the associated technology milestone will be met. If our assessment of the probability of the technology milestone being met changes, we recognize the impact of the change in estimate in the period of the change.
Stock-based compensation expense is amortized using the straight-line method over the requisite service period. We account for forfeitures as they occur. As of March 31, 2018, total unrecognized compensation expense related to stock options and non-vested RSUs was $519.1 million, which is expected to be recognized over a weighted average period of 2.9 years.
The summary of shares available for issuance of equity-based awards (including stock options, RSUs and shares issuable under our 2013 ESPP) during the three months ended March 31, 2018 follows:
 
 
Shares Available for Grant
 
 
2013 Plan
 
2013 ESPP
Balances at December 31, 2017
 
7,207,291

 
3,666,392

Authorized
 
4,023,117

 
804,623

Granted
 
(2,376,440
)
 

Forfeited
 
238,327

 

Balances at March 31, 2018
 
9,092,295

 
4,471,015

v3.8.0.1
Income Taxes
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The income tax provision for interim periods is generally determined using an estimate of our annual effective tax rate, excluding jurisdictions for which no benefit can be recognized due to valuation allowance, and adjusted for discrete items, if any, in the relevant period. The impact of adjustments to our effective tax rate for discrete items and non-deductible expenses is greater in periods close to break-even. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
Our effective tax rate is impacted by and differs from the federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets, the effect of income or losses incurred in foreign jurisdictions where the statutory tax rate differs from the federal statutory rate and non-deductible stock-based compensation.
We recognized an income tax benefit of $2.4 million under ASC 606 for the three months ended March 31, 2018 compared to an income tax expense of $2.4 million for three months ended March 31, 2017. Our effective tax rate was 5.0% and (4.5)% for the three months ended March 31, 2018 and 2017, respectively. The difference in the effective tax rates between the three month periods is primarily attributable to additional income as a result of our adoption of ASC 606 combined with a year to date tax benefit in foreign jurisdictions, which was increased by the recognition of excess tax benefits of stock-based compensation during the period.
We recognized an income tax expense of $3.3 million under ASC 605 for the three months ended March 31, 2018 compared to an income tax expense of $2.4 million for the three months ended March 31, 2017. Our effective tax rate was (4.3)% and (4.5)% for the three months ended March 31, 2018 and 2017, respectively. The difference in the effective tax rates between the three month periods was related to an increase in taxes in foreign jurisdictions, offset by an income tax benefit from the recognition of excess tax benefits of stock-based compensation during the three months ended March 31, 2018. The difference in effective tax rates between ASC 606 and ASC 605 is primarily attributable to the differences in the amount of revenue recognized under ASC 606 as compared to ASC 605.
As a result of adopting ASC 606 in the first quarter of 2018, we recognized an immaterial amount of net deferred tax liabilities, which reduced our opening adjustment to stockholders' equity. During the first quarter of 2018, we also adopted ASU 2016-16 and recognized a U.S. deferred tax asset, which was fully offset by a corresponding increase to the valuation allowance on our U.S. federal and state deferred income tax assets.
We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative such as historic results, future reversals of existing deferred tax liabilities, projected future taxable income, as well as prudent and feasible tax-planning strategies. Generally, more weight is given to objectively verifiable evidence, such as the cumulative loss in recent years. As of March 31, 2018, we maintain a full valuation allowance on our U.S. federal and state deferred tax assets.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed with an effective date of January 1, 2018. The Act, which significantly revised U.S. tax law, included many important changes. On the same day, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to assist in addressing uncertainty in applying GAAP to the accounting and reporting of tax reform changes related to the Act. We considered these changes, including all available guidance, in determining our income tax provision for the period ending December 31, 2017. As of March 31, 2018, we have not yet completed our analysis of historical foreign earnings as well as potential correlative adjustments. As we complete the analysis, any subsequent adjustment to these amounts may be recorded to current income tax expense in that period. We expect to complete our analysis within the measurement period in accordance with SAB 118. No adjustments to the provisional amount have been made.
On July 27, 2015, the U.S. Tax Court issued an opinion related to litigation in Altera Corp v. Commissioner. This litigation relates to the treatment of stock-based compensation expense in an intercompany cost sharing arrangement with one of Altera's foreign subsidiaries. In its opinion, the U.S. Tax Court invalidated the portion of the Treasury regulations requiring the inclusion of stock-based compensation expense in such intercompany cost-sharing arrangements. On February 19, 2016, the IRS appealed the U.S. Tax Court's decision. As the final resolution of this litigation remains uncertain, we have not recorded potentially favorable benefits related to the current or prior periods. We will continue to monitor developments related to this case and the potential impact of those developments on our current and future financial statements.
v3.8.0.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Operating Lease Commitments and Expected Sublease Receipts    
As of March 31, 2018, our principal obligations consisted of obligations outstanding under non-cancellable operating leases that expire at various dates through 2029. The following table represents our non-cancellable minimum lease payments, net of future expected sublease payments to be received under non-cancellable subleases, remaining as of March 31, 2018 (in thousands):
Period Ending
 
Operating Lease Commitments
 
Expected Sublease Receipts
 
Net
Remainder of 2018
 
$
33,177

 
$
(6,793
)
 
$
26,384

2019
 
41,480

 
(10,606
)
 
30,874

2020
 
43,138

 
(7,113
)
 
36,025

2021
 
43,603

 
(1,180
)
 
42,423

2022
 
43,216

 
(597
)
 
42,619

Thereafter
 
176,759

 
(121
)
 
176,638

Total
 
$
381,373

 
$
(26,410
)
 
$
354,963


Contractual Commitments
Our contractual commitments are associated with agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions and the approximate timing of the transaction. Obligations under contracts that we can cancel without a significant penalty are not included. There have been no material changes in our contractual commitments compared to those discussed in Note 10 in our Annual Report on Form 10-K for the year ended December 31, 2017.
Legal Proceedings
We are subject to certain routine legal proceedings, as well as demands and claims that arise in the normal course of our business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter.
We are not aware of any pending legal proceedings that we believe, individually or in the aggregate, would be expected to have a material adverse effect on our business, operating results, or financial condition. We may, in the future, be party to litigation arising in the ordinary course of business, including claims that we allegedly infringe upon third party intellectual property rights. Such claims, even if not meritorious, could result in the expenditure of significant financial and management resources.
v3.8.0.1
Segments and Information about Revenues by Geographic Region
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
Segments and Information about Revenues by Geographic Area
Segments and Information about Revenues by Geographic Area
The following table presents our revenues by geographic region of end users who purchased products or services for the periods presented below:
 
Three Months Ended March 31,
 
2018
 
2017
 
As Reported
(ASC 606)
 
Impacts from Adoption
 
Without Adoption
(ASC 605)
 
As Reported
(ASC 605)
 
(dollars in thousands)
United States and Canada
$
167,799

 
$
(13,356
)
 
$
154,443

 
$
141,496

International
78,408

 
(8,807
)
 
69,601

 
58,410

Total revenues
$
246,207

 
$
(22,163
)
 
$
224,044

 
$
199,906


For the three months ended March 31, 2018 and 2017, no individual country other than the United States represented 10% or more of our total revenues. Revenues from Canada represented less than 5% of our total revenues.
v3.8.0.1
Net Loss Per Share
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
Net Loss Per Share
Net Loss Per Share
The following table presents the computation of basic and diluted net loss per share for the three months ended March 31, 2018 and 2017 and includes additional information regarding the impacts from the adoption of the new revenue recognition standard for the three months ended March 31, 2018:
 
Three Months Ended March 31,
 
2018
 
2017
 
As Reported
(ASC 606)
 
Impacts from Adoption
 
Without Adoption
(ASC 605)
 
As Reported
(ASC 605)
 
(in thousands, except per share amounts)
Net loss per share - basic and diluted
 
 
 
 
 
 
 
Net loss
$
(46,472
)
 
$
(32,554
)
 
$
(79,026
)
 
$
(54,647
)
Weighted average shares outstanding used to compute basic and diluted net loss per share
81,039

 


 
81,039

 
77,416

Net loss per share - basic and diluted
$
(0.57
)
 


 
$
(0.98
)
 
$
(0.71
)

The following shares were excluded from the computation of diluted net loss per share for the periods presented as their effect would have been antidilutive:
 
Three Months Ended March 31,
 
2018
 
2017
 
(in thousands)
Shares subject to outstanding common stock awards
11,193

 
12,658

v3.8.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Revenue Recognition
Revenue Recognition - ASC 606
We generate revenues primarily in the form of software license fees and related maintenance and services fees. Software license revenues include fees from the sales of perpetual, term and subscription licenses. Maintenance and services revenues primarily consist of fees for maintenance services (including support and unspecified upgrades and enhancements when and if they are available), training and professional services.
We recognize revenues related to our contracts with customers based on the following criteria:
the contract contains reasonable evidence of approval and both parties' commitment to perform their respective obligations;
the contract includes identifiable rights to goods and services to be transferred and payment terms related to the transfer of those goods and services;
the contract has commercial substance; and
collection of substantially all of the consideration we are entitled to under the contract is probable.
We identify performance obligations in our contracts with customers, which may include software licenses and/or related maintenance and services. We determine the transaction price based on the amount we expect to be entitled to in exchange for transferring the promised goods or services to the customer. We allocate the transaction price in the contract to each distinct performance obligation in an amount that depicts the relative amount of consideration we expect to receive in exchange for satisfying each performance obligation. Revenue is recognized when performance obligations are satisfied.
Our contract payment terms are typically net 30 days. We assess collectability based on a number of factors including collection history and creditworthiness of the customer, and we may mitigate exposures to credit risk by requiring payments in advance. If we determine that collectability related to a contract is not probable, we may not record revenue until collectability becomes probable at a later date.
Our revenues are recorded based on the transaction price excluding amounts collected on behalf of third parties such as sales taxes, which are collected on behalf of and remitted to governmental authorities.
Nature of Products and Services
Our on-premises software licenses are sold both perpetually and through term-based license agreements. These licensing arrangements provide customers with the same product functionality and differ mainly in the duration over which the customer benefits from the software. We deliver our software licenses electronically. Electronic delivery occurs when we provide the customer with access to the software and license key via a secure portal. Revenue from on-premises software licenses is generally recognized upfront at the point in time when the software is made available to the customer.
When purchasing an on-premises software license, a customer typically bundles with a maintenance services agreement and may also purchase training and/or professional services. Maintenance services agreements consist of fees for providing software updates on a when and if available basis and for providing technical support for software products for a specified term. We believe that our when and if available software updates and technical support each have the same pattern of transfer to the customer and are substantially the same. Therefore, we consider these to be a single distinct performance obligation. Revenues allocated to maintenance services are recognized ratably as the services are provided. Revenues related to training services are billed on a fixed fee basis and are recognized as the services are delivered. Payments received in advance of services performed are deferred and recognized when the related services are performed. Revenues related to professional services are billed on a time and materials basis and are recognized as the services are performed.
We also provide cloud-based subscriptions, which allow customers to access our software during a contractual period without taking possession of the software. We recognize revenue related to these cloud-based subscriptions ratably over the life of the subscription agreement beginning when the customer first has access to the software. Revenues from our cloud-based subscriptions are included in license revenues.
Judgments and Estimates
Our contracts with customers often include promises to transfer multiple products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately from one another sometimes requires judgment.
Judgment is required to determine standalone selling prices (“SSP”) for each distinct performance obligation. We typically have more than one SSP for each of our products and services based on customer stratification, which is based on the size of the customer, their geographic region and market segment. We use other comparable software license sales to determine SSPs for perpetual software licenses. For our cloud-based subscriptions and for maintenance services, training and professional services, SSPs are generally observable using standalone sales and/or renewals. Our on-premises term-based software licenses generally do not have directly observable inputs for determining SSP. Therefore, we determine SSP using other observable inputs including customer buying patterns, renewal rates, cumulative spend comparisons and other industry data.
We evaluate contracts that include options to purchase additional goods or services to determine whether or not the options give rise to a separate performance obligation that is material. If we determine the options are material, the revenue allocated to such options is not recognized until the option is exercised or the option expires.
Our revenue recognition accounting policy for ASC 605 is included in our Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 26, 2018. We applied the revenue recognition accounting policy for ASC 605 to our disclosures in Note 6, which include amounts presented for 2018. There were no changes to the ASC 605 policy during the first quarter of 2018.
Deferred Commissions
Assets Recognized from the Costs to Obtain a Contract with a Customer
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain costs related to our sales incentive programs meet the requirements to be capitalized and deferred. Assets recorded are included in other current assets and other long-term assets. We amortize these deferred costs proportionate with related revenues over four years, which is generally longer than the term of the initial contract because of anticipated renewals as sales commissions for renewals are not commensurate with sales commissions related to our initial contracts.
Basis of Presentation
Basis of Presentation
The accompanying unaudited condensed consolidated financial information has been prepared in accordance with generally accepted accounting principles in the United States ("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 financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet data as of December 31, 2017 was derived from audited financial statements but does not include all disclosures required by GAAP. The condensed consolidated financial information 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, 2017 filed with the SEC on February 26, 2018.
In the opinion of management, the accompanying unaudited condensed consolidated financial information includes all normal recurring adjustments necessary for a fair statement of the Company's financial position, results of operations, comprehensive loss and cash flows for the interim periods, but is not necessarily indicative of the results that may be expected for the year ending December 31, 2018. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates include but are not limited to: the collectability of our receivables; the useful lives of our property and equipment and other lease-related assets, liabilities and costs; the benefit period for deferred commissions; the valuation of investments and the determination of other-than-temporary impairments; and the reported amounts of accrued liabilities. For revenue, we make estimates and assumptions related to the standalone selling prices of our products and services and the nature and timing of the delivery of performance obligations from our contracts with customers. We also use estimates in stock-based compensation, income taxes and business combinations. Actual results could differ from those estimates.
Risk And Uncertainties
Risks and Uncertainties
Inherent in our business are various risks and uncertainties, including our limited history of operating our business at its current scale and development of advanced technologies in a rapidly changing industry. These risks include our ability to manage our growth and our ability to attract new customers and expand sales to existing customers, as well as other risks and uncertainties. In the event that we do not successfully implement our business plan, certain assets may not be recoverable, certain liabilities may not be paid and investments in our capital stock may not be recoverable. Our success depends upon the acceptance of our technology, development of sales and distribution channels and our ability to generate significant revenues from the sale of our technology.
Segments
Segments
We follow the authoritative literature that established annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products and services, geographic regions and major customers.
We operate our business as one operating segment. Our chief operating decision makers are our Chief Executive Officer and Interim Chief Financial Officer, who review financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.
Concentrations of Credit Risk
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable.
Our investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. Our cash and cash equivalents and investments are held and managed by recognized financial institutions that follow our investment policy. Our policy limits the amount of credit exposure to any one security issue or issuer.
We extend credit to customers based upon an evaluation of the customer's financial condition. As of March 31, 2018 and December 31, 2017, no individual customer accounted for 10% or more of total accounts receivable. For the three months ended March 31, 2018 and 2017, no individual customer represented 10% or more of our total revenues.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 related to revenue recognition and later issued additional ASUs including ASU 2016-08, ASU 2016-10, ASU 2016-12, ASU 2016-20 and ASU 2017-14, all of which clarified certain aspects of ASU 2014-09, and together with ASU 2014-09, which we refer to collectively as the new revenue recognition standard. The new revenue recognition standard changed the way we recognize revenue, including the identification of contractual performance obligations and the allocation of transaction price, to depict the transfer of promised goods or services to customers at the amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We adopted the new revenue recognition standard in the first quarter of 2018 on a modified retrospective basis and applied the new revenue recognition standard only to contracts that were not completed contracts prior to January 1, 2018. Upon adoption, we recorded an adjustment of $146.8 million to our accumulated deficit. The adjustment was offset by a $105.9 million reduction to deferred revenue, which was primarily related to on-premises term licenses, and the addition of a $40.9 million contract asset.
The new revenue recognition standard materially impacts the timing of revenue recognition related to our on-premises term license agreements. Prior to our adoption of the new revenue recognition standard, we historically recognized revenue related to on-premises term license agreements ratably over the term of the licensing agreement. Under the new revenue recognition standard, revenue allocable to the license portion of the arrangement is recognized upon delivery of the license. Maintenance revenue related to on-premises term license agreements continue to be recognized ratably over the term of the licensing agreement. Under the new revenue recognition standard, we allocate total transaction price to performance obligations based on estimated standalone selling prices, which impacts the timing of revenue recognition depending on when each performance obligation is recognized. These impacts to the timing of revenue recognition also affect our deferred revenue balances.
The new revenue recognition standard requires the capitalization of certain incremental costs of obtaining a contract, which impacts the period in which we record our sales commissions expense. Prior to our adoption of the new revenue recognition standard, we recognized sales commissions expense as incurred. Under the new revenue recognition standard, we are required to recognize these expenses over the period of benefit associated with these costs. This results in a deferral of sales commissions expense each period. Upon adoption, we reduced our accumulated deficit by $25.5 million and recognized an offsetting asset for deferred sales commissions related to contracts that were not completed contracts prior to January 1, 2018.
For further discussion regarding the impacts of adopting the new revenue recognition standard, see Note 6.
In October 2016, the FASB issued ASU 2016-16 related to the accounting for income tax effects on intra-entity asset transfers of assets other than inventory. The new guidance requires reporting entities to recognize tax expense from the sale of assets when the transfer occurs, even though the pre-tax effects of the transaction are eliminated in consolidation. We adopted the new standard in the first quarter of 2018 on a modified retrospective basis. The adoption resulted in the recognition of a U.S. deferred tax asset, which was fully offset by a corresponding increase to the valuation allowance on our U.S. federal and state deferred income tax assets, and therefore did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02 related to lease accounting. The new guidance will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for operating leases that do not meet the definition of a short-term lease. ASU 2016-02 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018 and requires modified retrospective transition. Under the new standard we anticipate that our current real estate leases will continue to be classified as operating leases and a significant amount of our currently outstanding operating lease commitments will be recorded to the balance sheet as right-of-use assets with corresponding lease liabilities. Our evaluation of the new standard will extend into future periods and we will update our disclosures, including the expected impacts of the new standard, as we progress towards the required adoption date.
In June 2016, the FASB issued ASU 2016-13, related to credit losses. The new guidance replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. ASU 2016-13 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact that this standard will have on our consolidated financial statements.
v3.8.0.1
Short-Term and Long-Term Investments (Tables)
3 Months Ended
Mar. 31, 2018
Investments, Debt and Equity Securities [Abstract]  
Short-term and Long-term Investments
The following tables represent our short-term and long-term investments in available-for-sale securities as of March 31, 2018 and December 31, 2017, based on contractual years to maturity:
 
March 31, 2018
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
(in thousands)
Short-term investments
 
 
 
 
 
 
 
U.S. treasury securities
$
158,727

 
$

 
$