TWILIO INC, S-1 filed on 10/7/2016
Securities Registration Statement
Document and Entity Information
6 Months Ended
Jun. 30, 2016
Document And Entity Information [Abstract]
 
Document Type
S-1 
Amendment Flag
false 
Document Period End Date
Jun. 30, 2016 
Entity Registrant Name
TWILIO INC 
Entity Central Index Key
0001447669 
Entity Filer Category
Non-accelerated Filer 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Current assets:
 
 
 
Cash and cash equivalents
$ 261,386 
$ 108,835 
$ 32,627 
Accounts receivable, net
22,981 
19,094 
9,264 
Prepaid expenses and other current assets
16,799 
8,546 
4,458 
Total current assets
301,166 
136,475 
46,349 
Restricted cash
8,611 
1,170 
1,170 
Property and equipment, net
20,544 
14,058 
6,751 
Intangible assets, net
2,604 
2,292 
510 
Goodwill
3,165 
3,165 
 
Other long-term assets
461 
356 
194 
Total assets
336,551 
157,516 
54,974 
Current liabilities:
 
 
 
Accounts payable
8,720 
2,299 
1,227 
Accrued expenses and other current liabilities
42,140 
31,998 
17,798 
Deferred revenue
8,707 
6,146 
4,173 
Total current liabilities
59,567 
40,443 
23,198 
Other long-term liabilities
9,751 
448 
582 
Total liabilities
69,318 
40,891 
23,780 
Commitments and contingencies (Note 11)
   
   
   
Stockholders' equity:
 
 
 
Convertible preferred stock, $0.001 par value per share, issuable in Series A, B, C, D, E and T: Authorized shares 47,495,880, 58,976,739 and none as of December 31, 2014 and 2015 and June 30, 2016 (unaudited); Issued and outstanding shares 42,482,490, 54,508,441 and none as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), actual; aggregate liquidation preference of $111.9 million, $241.6 million and none as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), actual
 
239,911 
111,691 
Common stock, $0.001 par value per share: Authorized shares 77,000,000, 102,000,000 and 1,100,000,000 as of December 31, 2014 and 2015 and June 30, 2016 (unaudited); Issued and outstanding shares 17,446,051, 17,324,003 and 84,526,093 as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), actual
85 
17 
17 
Additional paid-incapital
430,016 
22,103 
8,920 
Accumulated deficit
(162,868)
(145,406)
(89,434)
Total stockholders' equity
267,233 
116,625 
31,194 
Total liabilities and stockholders' equity
$ 336,551 
$ 157,516 
$ 54,974 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Common stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
Common stock, shares authorized
1,100,000,000 
102,000,000 
77,000,000 
Common stock, shares issued
84,526,093 
17,324,003 
17,446,051 
Common stock, shares outstanding
84,526,093 
17,324,003 
17,446,051 
Convertible Preferred Stock
 
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
58,976,739 
47,495,880 
Preferred stock, shares issued
54,508,441 
42,482,490 
Preferred stock, shares outstanding
54,508,441 
42,482,490 
Preferred stock, aggregate liquidation preference
$ 0 
$ 241,566 
$ 111,874 
Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Statement [Abstract]
 
 
 
 
 
Revenue
$ 123,850 
$ 71,319 
$ 166,919 
$ 88,846 
$ 49,920 
Cost of revenue
55,030 
32,372 
74,454 
41,423 
25,868 
Gross profit
68,820 
38,947 
92,465 
47,423 
24,052 
Operating expenses:
 
 
 
 
 
Research and development
32,233 
17,868 
42,559 
21,824 
13,959 
Sales and marketing
31,578 
24,033 
49,308 
33,322 
21,931 
General and administrative
22,228 
15,300 
35,991 
18,960 
15,012 
Total operating expenses
86,039 
57,201 
127,858 
74,106 
50,902 
Loss from operations
(17,219)
(18,254)
(35,393)
(26,683)
(26,850)
Other income (expenses), net
(46)
(30)
11 
(62)
(4)
Loss before (provision) benefit for income taxes
(17,265)
(18,284)
(35,382)
(26,745)
(26,854)
(Provision) benefit for income taxes
(197)
48 
(122)
(13)
 
Net loss
(17,462)
(18,236)
(35,504)
(26,758)
(26,854)
Deemed dividend to investors in relation to tender offer
 
 
(3,392)
 
 
Net loss attributable to common stockholders
$ (17,462)
$ (18,236)
$ (38,896)
$ (26,758)
$ (26,854)
Net loss per share attributable to common stockholders, basic and diluted
$ (0.84)
$ (1.01)
$ (2.19)
$ (1.58)
$ (1.59)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted
20,872,550 
18,070,932 
17,746,526 
16,900,124 
16,916,035 
Consolidated Statements of Stockholders' Equity (USD $)
In Thousands, except Share data
Total
USD ($)
Vested Stock Options
USD ($)
Founders
USD ($)
Additional Paid-in Capital
USD ($)
Additional Paid-in Capital
Vested Stock Options
USD ($)
Accumulated deficit
USD ($)
Accumulated deficit
Founders
USD ($)
Tender Offer
USD ($)
Tender Offer
Accumulated deficit
USD ($)
IPO
USD ($)
IPO
Additional Paid-in Capital
USD ($)
Series A Preferred Stock
USD ($)
Series A Preferred Stock
Tender Offer
USD ($)
Series A Preferred Stock
IPO
USD ($)
Series B Preferred Stock
USD ($)
Series B Preferred Stock
Tender Offer
USD ($)
Series B Preferred Stock
IPO
USD ($)
Series C Preferred Stock
USD ($)
Series C Preferred Stock
IPO
USD ($)
Series D Preferred Stock
USD ($)
Series D Preferred Stock
IPO
USD ($)
Series E Preferred Stock
USD ($)
Series E Preferred Stock
IPO
USD ($)
Series T Preferred Stock
USD ($)
Series T Preferred Stock
IPO
USD ($)
Common Class A
USD ($)
Common Class A
IPO
USD ($)
Common Class A
Class B Convert To Class A
Common Class B
USD ($)
Common Class B
Vested Stock Options
USD ($)
Common Class B
Unvested Stock Options
Common Class B
Founders
USD ($)
Common Class B
Tender Offer
USD ($)
Common Class B
IPO
USD ($)
Common Class B
Class B Convert To Class A
Beginning balance at Dec. 31, 2012
$ 12,078 
 
 
$ 1,065 
 
$ (30,766)
 
 
 
 
 
$ 4,624 
 
 
$ 11,941 
 
 
$ 25,196 
 
 
 
 
 
 
 
 
 
 
$ 18 
 
 
 
 
 
 
Beginning balance, shares at Dec. 31, 2012
 
 
 
 
 
 
 
 
 
 
 
13,173,240 
 
 
11,416,062 
 
 
8,452,864 
 
 
 
 
 
 
 
 
 
 
17,795,636 
 
 
 
 
 
 
Net income (loss)
(26,854)
 
 
 
 
(26,854)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options
 
337 
 
 
337 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting of early exercised stock options
166 
 
 
166 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
354,939 
350,524 
 
 
 
 
Repurchase of stock
 
 
(5,057)
 
 
 
(5,056)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
 
 
 
Repurchase of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(44,505)
(1,498,464)
 
 
 
Issuance of stock
69,930 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
69,930 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,440,324 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs related to issuance of stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(69)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
2,300 
 
 
2,300 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2013
52,900 
 
 
3,868 
 
(62,676)
 
 
 
 
 
4,624 
 
 
11,941 
 
 
25,196 
 
69,930 
 
 
 
 
 
 
 
 
17 
 
 
 
 
 
 
Ending balance, shares at Dec. 31, 2013
 
 
 
 
 
 
 
 
 
 
 
13,173,240 
 
 
11,416,062 
 
 
8,452,864 
 
9,440,324 
 
 
 
 
 
 
 
 
16,958,130 
 
 
 
 
 
 
Net income (loss)
(26,758)
 
 
 
 
(26,758)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options
 
590 
 
 
590 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting of early exercised stock options
191 
 
 
191 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
487,821 
6,850 
 
 
 
 
Repurchase of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(6,750)
 
 
 
 
Stock-based compensation
4,271 
 
 
4,271 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2014
31,194 
 
 
8,920 
 
(89,434)
 
 
 
 
 
4,624 
 
 
11,941 
 
 
25,196 
 
69,930 
 
 
 
 
 
 
 
 
17 
 
 
 
 
 
 
Ending balance, shares at Dec. 31, 2014
 
 
 
 
 
 
 
 
 
 
 
13,173,240 
 
 
11,416,062 
 
 
8,452,864 
 
9,440,324 
 
 
 
 
 
 
 
 
17,446,051 
 
 
 
 
 
 
Net income (loss)
(35,504)
 
 
 
 
(35,504)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options
 
3,128 
 
 
3,126 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend in relation to tender offer
(3,392)
 
 
 
 
(3,392)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting of early exercised stock options
201 
 
 
201 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,696,318 
70,874 
 
 
 
 
Issuance of Series T convertible preferred Stock in acquisition
3,087 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,087 
 
 
 
 
 
 
 
 
 
 
 
Repurchase of stock
 
 
 
 
 
 
 
(17,393)
(17,076)
 
 
 
(32)
 
 
(283)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2)
 
 
Issuance of Series T convertible preferred Stock in acquisition, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
897,618 
 
 
 
 
 
 
 
 
 
 
 
Repurchase of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
(96,749)
 
 
(269,167)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(20,084)
 
(1,869,156)
 
 
Issuance of stock
125,448 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
125,448 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,494,249 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs related to issuance of stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,600)
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
9,856 
 
 
9,856 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance at Dec. 31, 2015
116,625 
 
 
22,103 
 
(145,406)
 
 
 
 
 
4,592 
 
 
11,658 
 
 
25,196 
 
69,930 
 
125,448 
 
3,087 
 
 
 
 
17 
 
 
 
 
 
 
Ending balance, shares at Dec. 31, 2015
 
 
 
 
 
 
 
 
 
 
 
13,076,491 
 
 
11,146,895 
 
 
8,452,864 
 
9,440,324 
 
11,494,249 
 
897,618 
 
 
 
 
17,324,003 
 
 
 
 
 
 
Net income (loss)
(17,462)
 
 
 
 
(17,462)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options
 
3,569 
 
 
3,567 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting of early exercised stock options
177 
 
 
177 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise of stock options, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,061,003 
125,802 
 
 
 
 
Vesting of restricted stock units
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13,754 
 
 
 
 
 
 
Value of equity awards withheld for tax liability
(79)
 
 
(79)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repurchase of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,625)
 
 
 
 
Value of equity awards withheld for tax liability, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5,285)
 
 
 
 
 
 
Issuance of stock
 
 
 
 
 
 
 
 
 
160,426 
160,414 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 
 
 
 
 
 
 
 
 
Issuance of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,500,000 
 
 
 
 
 
 
 
 
Costs related to issuance of stock
 
 
 
 
 
 
 
 
 
(4,724)
(4,724)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of shares, value
 
 
 
 
 
 
 
 
 
 
239,857 
 
 
(4,592)
 
 
(11,658)
 
(25,196)
 
(69,930)
 
(125,448)
 
(3,087)
 
 
 
 
 
 
 
 
54 
 
Conversion of shares, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
(13,076,491)
 
 
(11,146,895)
 
(8,452,864)
 
(9,440,324)
 
(11,494,249)
 
(897,618)
 
 
147,711 
 
 
 
 
 
54,508,441 
(147,711)
Stock-based compensation
8,689 
 
 
8,689 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Excess income tax benefit from stock-based compensation (unaudited)
12 
 
 
12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance at Jun. 30, 2016
267,233 
 
 
430,016 
 
(162,868)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 
 
 
73 
 
 
 
 
 
 
Ending balance, shares at Jun. 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,647,711 
 
 
72,878,382 
 
 
 
 
 
 
Beginning balance at Jun. 08, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of stock, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,500,000 
 
 
 
 
 
 
 
 
Conversion of shares, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54,508,441 
 
 
 
 
 
 
Ending balance at Jun. 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 12 
 
 
$ 73 
 
 
 
 
 
 
Ending balance, shares at Jun. 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,647,711 
 
 
72,878,382 
 
 
 
 
 
 
Consolidated Statements of Stockholders' Equity (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Series D Preferred Stock
Dec. 31, 2015
Series E Preferred Stock
Costs related to issuance of stock
$ 69 
$ 4,600 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
Net loss
$ (17,462)
$ (18,236)
$ (35,504)
$ (26,758)
$ (26,854)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
Depreciation and amortization
3,285 
1,633 
4,226 
1,756 
610 
Stock-based compensation
8,001 
3,567 
8,877 
3,978 
2,157 
Provision for doubtful accounts
847 
368 
705 
261 
213 
Tax benefit related to acquisition
 
(108)
(108)
 
 
Tax benefit related to stock-based compensation
12 
 
 
 
 
Write-off of internal-use software
146 
87 
113 
Changes in operating assets and liabilities:
 
 
 
 
 
Accounts receivable
(4,733)
(4,969)
(10,506)
(4,300)
(3,239)
Prepaid expenses and other current assets
(10,212)
(1,815)
(2,128)
(2,857)
(491)
Other long-term assets
(108)
(86)
(162)
283 
(374)
Accounts payable
4,648 
(78)
658 
1,227 
(1,401)
Accrued expenses and other current liabilities
8,823 
6,660 
13,202 
7,332 
5,405 
Deferred revenue
2,561 
1,040 
1,974 
1,632 
1,014 
Other long-term liabilities
9,305 
(119)
(109)
86 
338 
Net cash provided by (used in) operating activities
5,113 
(12,056)
(18,762)
(17,360)
(22,622)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
Increase in restricted cash
(7,439)
 
 
(170)
 
Proceeds from sale of investments
 
 
 
 
3,000 
Capitalized software development costs
(5,390)
(3,775)
(8,409)
(3,604)
(2,291)
Purchases of property and equipment
(1,945)
(686)
(1,715)
(1,039)
(1,161)
Purchases of intangible assets
(310)
(113)
(494)
(527)
 
Acquisition, net of cash acquired
 
(1,761)
(1,761)
 
 
Net cash used in investing activities
(15,084)
(6,335)
(12,379)
(5,340)
(452)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
Proceeds from initial public offering net of underwriting discounts
160,426 
 
 
 
 
Payments of costs related to initial public offering
(2,099)
 
(694)
 
 
Net proceeds from issuance of convertible preferred stock
 
105,869 
125,448 
 
69,930 
Proceeds from exercises of vested options
3,569 
1,664 
3,128 
590 
337 
Proceeds from exercises of nonvested options
707 
66 
277 
26 
414 
Value of equity awards withheld for tax liabilities
(79)
 
 
 
 
Repurchases of common and preferred stock
(2)
(14)
(20,810)
(4)
(5,069)
Net cash provided by financing activities
162,522 
107,585 
107,349 
612 
65,612 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
152,551 
89,194 
76,208 
(22,088)
42,538 
CASH AND CASH EQUIVALENTS-Beginning of period
108,835 
32,627 
32,627 
54,715 
12,177 
CASH AND CASH EQUIVALENTS-End of period
261,386 
121,821 
108,835 
32,627 
54,715 
Cash paid for income taxes
96 
15 
46 
13 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
 
 
 
Purchases of property, equipment and intangible assets, accrued but not paid
2,049 
50 
97 
25 
158 
Stock-based compensation capitalized in software development costs
688 
372 
979 
293 
143 
Vesting of early exercised options
177 
121 
201 
191 
166 
Series E convertible preferred stock issuance costs acquired but not paid
 
400 
 
 
 
Series T convertible preferred stock issued as part of purchase price in the Authy acquisition
 
3,087 
3,087 
 
 
Costs related to initial public offering, accrued but not paid
$ 1,930 
 
$ 1,265 
 
 
Organization and Description of Business
Organization and Description of Business

1. Organization and Description of Business

Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. The Company provides a Cloud Communications Platform that enables developers to build, scale and operate communications within software applications through the cloud as a pay-as-you-go service. The Company’s product offerings fit three basic categories: Programmable Voice, Programmable Messaging and Programmable Video. The Company also provides use case products, such as a two-factor authentication solution.

The Company’s headquarters are located in San Francisco, California and the Company has subsidiaries in the United Kingdom, Estonia, Ireland, Colombia, Germany, Hong Kong, Singapore and Bermuda.

 

  Initial Public Offering

In June 2016, the Company completed an initial public offering (“IPO”) in which the Company sold 11,500,000 shares of its newly authorized Class A common stock, which included 1,500,000 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at the public offering price of $15.00 per share. The Company received net proceeds of $155.7 million, after deducting underwriting discounts and commissions and offering expenses paid and payable by the Company, from sales of its shares in the IPO. Immediately prior to the completion of the IPO, all shares of common stock then outstanding were reclassified as shares of Class B common stock and all shares of convertible preferred stock then outstanding were converted into 54,508,441 shares of common stock on a one-to-one basis, and then reclassified as shares of Class B common stock. See Note 12 for further discussion of Class A and B common stock.

As of June 30, 2016, 11,647,711 shares of the Company’s Class A common stock and 72,878,382 shares of the Company’s Class B common stock were outstanding.

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

 

  (a) Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

  (b) Reclassification

Certain reclassifications have been made to conform previously reported data to the current presentation. These reclassifications have no effect on the Company’s net loss, financial position or per share data, as previously reported.

 

  (c) Recently Adopted Accounting Standards

As of December 31, 2015, the Company early adopted the new accounting guidance issued by the Financial Accounting Standards Board (“FASB”), Accounting Standards Update (“ASU”) 2015-17,Income Taxes (Topic 70).” This guidance represents a change in accounting principle and requires that the deferred tax assets and liabilities in the Company’s balance sheet be classified as noncurrent and be offset and presented as a single amount. Prior to the issuance of this guidance, the deferred tax assets and liabilities were required to be offset and presented as a single amount within their respective current and noncurrent classifications on a jurisdiction-by-jurisdiction level.

 

In connection with this change in accounting principle, in its consolidated balance sheet as of December 31, 2014, the Company offset to zero the $1.0 million of noncurrent deferred tax assets and current deferred tax liabilities.

 

  (d) Principles of Consolidation

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

 

  (e) Use of Estimates

The preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and returns; valuation of the Company’s stock-based awards; recoverability of long-lived and intangible assets; the capitalization and useful life of the Company’s capitalized internal-use software; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments; therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.

 

  (f) Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable. The Company maintains cash, cash equivalents and restricted cash with financial institutions that management believes are financially sound and have minimal credit risk exposure.

The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any one of the large customers deteriorate substantially, operating results could be adversely affected. To reduce credit risk, management performs ongoing credit evaluations of the financial condition of significant customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. During the years ended December 31, 2013, 2014 and 2015 one customer organization represented approximately 11%, 13% and 17%, respectively, of the Company’s total revenue. In the six months ended June 30, 2015 (unaudited) one customer organization represented 18% of the Company’s total revenue, and in the six months ended June 30, 2016 (unaudited), two customer organizations represented 12% each of the Company’s total revenue.

As of December 31, 2014, two customer organizations represented 22% and 11% of the Company’s gross accounts receivable. As of December 31, 2015, two customer organizations represented approximately 11% each of the Company’s gross accounts receivable. As of June 30, 2016 (unaudited), one customer organization represented 12% of the Company’s gross accounts receivable.

 

  (g) Revenue Recognition

The Company derives its revenue primarily from usage-based fees earned from customers accessing the Company’s enterprise cloud computing services invoiced or paid monthly. The Company also earns subscription fees from certain term-based contracts. The Company provides services to its customers under pay-as-you-go contracts and term-based contracts ranging in duration from one month to 48 months. Customers that pay via credit card are either billed in advance or as they use service. Larger customers are billed in arrears via invoices for services used. Certain customers have contracts that provide for a minimum monthly commitment and some customers have contracts that provide for a commitment that may be of a quarterly, annual or other specific durations.

The Company recognizes revenue from these transactions when all of the following criteria are satisfied:

 

    there is persuasive evidence of an arrangement;

 

    the service has been or is being provided to the customer;

 

    the amount of the fees to be paid by the customer is fixed or determinable; and

 

    collectability of the fees is reasonably assured.

Term-based contracts revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that the service is made available to the customer, provided that all other revenue recognition criteria have been met. Usage-based fees are recognized as delivered.

The Company’s arrangements do not contain general rights of return. However, credits may be issued to customers on a case-by-case basis. The contracts do not provide customers with the right to take possession of the software supporting the applications. Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue, depending on whether the revenue recognition criteria have been met.

The reserve for sales credits was $0.3 million, $0.7 million and $0.7 million as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), respectively, and is included in accounts receivable, net in the accompanying consolidated balance sheets. The reserve for sales credits is calculated based on historical trends and any specific risks identified in processing transactions. Changes in the reserve are recorded against revenue.

 

  (h) Cost of Revenue

Cost of revenue consists primarily of costs of communications services purchased from network service providers. Cost of revenue also includes fees to support the Company’s cloud infrastructure, personnel costs, such as salaries and stock-based compensation for the customer care and support services employees, and non-personnel costs, such as amortization of capitalized internal-use software development costs.

 

  (i) Research and Development Expenses

Research and development expenses consist primarily of personnel costs, cloud infrastructure fees for staging and development, outsourced engineering services, amortization of capitalized internal-use software development costs and an allocation of general overhead expenses. The Company capitalizes the portion of its software development costs that meets the criteria for capitalization.

 

  (j) Internal-Use Software Development Costs

Certain costs of platform and other software applications developed for internal use are capitalized. The Company capitalizes qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality and expenses costs incurred for maintenance and minor upgrades and enhancements. Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.

Capitalized costs of platform and other software applications are included in property and equipment. These costs are amortized over the estimated useful life of the software on a straight-line basis over three years. Management evaluates the useful life 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. The amortization of costs related to the platform applications is included in cost of revenue, while the amortization of costs related to other software applications developed for internal use is included in research and development expenses.

 

  (k) Advertising Costs

Advertising costs are expensed as incurred and were $0.4 million, $1.0 million, $2.9 million, $1.4 million and $1.6 million in the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. Advertising costs are included in sales and marketing expenses in the accompanying consolidated statements of operations.

 

  (l) Stock-Based Compensation

All stock-based compensation to employees, including the purchase rights issued under the Company’s Employee Stock Purchase Plan (the “ESPP”), is measured on the grant date based on the fair value of the awards ultimately expected to vest. This cost, calculated as the grant date fair value net of estimated forfeitures, is recognized as an expense following the ratable attribution method, over the requisite service period, for stock options, and the straight-line attribution method, over the offering period, for the purchase rights issued under the ESPP. The Company uses the Black-Scholes option pricing model to measure the fair value of its stock options and the purchase rights issued under the ESPP. The fair value of the restricted stock units is determined using the fair value of the Company’s common stock on the date of grant.

Prior to the IPO, the fair value of the Company’s common stock was determined by the estimated fair value of the Company’s common stock at the time of grant. After the IPO, the Company uses the market closing price of its Class A common stock as reported on the New York Stock Exchange for the fair value.

Compensation expense for stock options granted to nonemployees is calculated using the Black-Scholes option pricing model and is recognized in expense over the service period. Compensation expense for nonemployee stock options subject to vesting is revalued at each reporting date until the stock options are vested.

The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. These assumptions include:

 

    Fair value of the common stock. Prior to the Company’s IPO, the board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting at which awards are approved. The factors included, but were not limited to: (i) contemporaneous valuations of the Company’s common stock by an unrelated third party; (ii) the prices at which the Company sold shares of its convertible preferred stock to outside investors in arms-length transactions; (iii) the rights, preferences and privileges of the Company’s convertible preferred stock relative to those of its common stock; (iv) the Company’s results of operations, financial position and capital resources; (v) current business conditions and projections; (vi) the lack of marketability of the Company’s common stock; (vii) the hiring of key personnel and the experience of management; (viii) the introduction of new products; (ix) the risk inherent in the development and expansion of the Company’s products; (x) the Company’s stage of development and material risks related to its business; (xi) the fact that the option grants involve illiquid securities in a private company; and (xii) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, in light of prevailing market conditions;

 

    Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The Company uses the simplified calculation of expected term, as the Company does not have sufficient historical data to use any other method to estimate expected term;

 

    Expected volatility. The expected volatility is derived from an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company, such as the size and operational and economic similarities to the Company’s principle business operations;

 

    Risk -free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal the expected term of the stock-based awards; and

 

    Expected dividend. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

In addition to the assumptions used in the Black-Scholes option-pricing model, management must estimate a forfeiture rate to calculate the stock-based compensation for the Company’s awards. The Company’s forfeiture rate is based on an analysis of its actual forfeitures. Management will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on the stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements.

 

If any of the assumptions used in the Black-Scholes model changes, stock-based compensation for future options may differ materially compared to that associated with previous grants.

 

  (m) Income Taxes

The Company accounts for income taxes in accordance with authoritative guidance which requires the use of the asset and liability approach. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carry-forwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized.

The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company records interest and penalties related to uncertain tax positions in the provision for income taxes in the consolidated statements of operations.

 

  (n) Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Accordingly, the subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the year. Remeasurement adjustments are recognized in the consolidated statements of operations as other income or expense in the year of occurrence. Foreign currency transaction gains and losses were insignificant for all periods presented.

 

  (o) Comprehensive Loss

During the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), the Company did not have any other comprehensive income or loss, and therefore, the net loss and comprehensive loss was the same for all periods presented.

 

  (p) Net Loss Per Share Attributable to Common Stockholders

The Company calculates its basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities. All series of convertible preferred stock are considered to be participating securities as the holders of the preferred stock are entitled to receive a non-cumulative dividend on a pro rata pari passu basis in the event that a dividend is declared or paid on common stock. Shares of common stock issued upon early exercise of stock options that are subject to repurchase are also considered to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is declared or paid on common stock. Under the two-class method, in periods when the Company has net income, net income attributable to common stockholders is determined by allocating undistributed earnings, calculated as net income less current period convertible preferred stock non-cumulative dividends, between common stock and the convertible preferred stock. In computing diluted net income attributable to common stockholders, undistributed earnings are re-allocated to reflect the potential impact of dilutive securities. The Company’s basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. The dilutive effect of these potential common shares is reflected in diluted earnings per share by application of the treasury stock method. For purposes of this calculation, convertible preferred stock, options to purchase common stock, unvested restricted stock units, common stock issued subject to future vesting, any shares of stock committed under the ESPP, any shares of stock held in escrow and any shares of stock reserved for future donations are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive.

Since the Company’s IPO, Class A and Class B common stock are the only outstanding equity of the Company. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes 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 into Class A common stock upon sale or transfer, subject to certain limited exceptions.

 

  (q) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of funds deposited into money market funds. All credit and debit card transactions that process as of the last day of each month and settle within the first few days of the subsequent month are also classified as cash and cash equivalents as of the end of the month in which they were processed.

 

  (r) Restricted Cash

Restricted cash consists of cash deposited into a savings account with a financial institution as collateral for the Company’s obligations under its facility leases of premises located in San Francisco, California. The facility leases expire in April 2018 and October 2024.

 

  (s) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded net of the allowance for doubtful accounts and the reserve for sales credits. The allowance for doubtful accounts is estimated based on the Company’s assessment of its ability to collect on customer accounts receivable. The Company regularly reviews the allowance by considering certain factors such as historical experience, credit quality, age of accounts receivable balances and other known conditions that may affect a customer’s ability to pay. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet their financial obligations, a specific allowance is recorded against amounts due from the customer which reduces the net recognized receivable to the amount the Company reasonably believe will be collected. The Company writes-off accounts receivable against the allowance when a determination is made that the balance is uncollectible and collection of the receivable is no longer being actively pursued. The allowance for doubtful accounts was $0.2 million, $0.5 million and $0.8 million as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), respectively.

 

  (t) Costs Related to the Initial Public Offering

Costs related to the initial public offering, which consist of direct incremental legal and accounting fees relating to the IPO, are capitalized. These costs were deferred until the completion of the Company’s IPO and were offset against IPO proceeds within the consolidated statement of stockholders’ equity upon the effectiveness of the IPO in June 2016. As of December 31, 2015, the Company had $2.0 million of deferred offering costs that were recorded as prepaid expenses and other current assets in the accompanying consolidated balance sheet.

 

  (u) Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. Maintenance and repairs are charged to expenses as incurred.

The useful lives of property and equipment are as follows:

 

Capitalized software development costs

     3 years   

Office equipment

     3 years   

Furniture and fixtures

     5 years   

Software

     3 years   

Leasehold improvements

    
 
 
 
Shorter of
5 years or
remaining
lease term
  
  
  
  

 

  (v) Intangible Assets

Intangible assets recorded by the Company are costs directly associated with securing legal registration of patents and trademarks and the fair value of identifiable intangible assets acquired in business combinations.

Intangible assets with determinable economic lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful life of each asset on a straight-line basis. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company’s long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions. Intangible assets without determinable economic lives are carried at cost, not amortized and reviewed for impairment at least annually.

 

The useful lives of the intangible assets are as follows:

 

Developed technology

     3 years   

Customer relationship

     5 years   

Trade names

     2 years   

Patents

     20 years   

Trademarks

     indefinite   

 

  (w) Goodwill

Goodwill represents excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that it operates as one reporting unit and has selected November 30 as the date to perform its annual impairment test. In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business. If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets. Management may first evaluate qualitative factors to assess if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine if a two-step impairment test is necessary. Management may choose to proceed directly to the two-step evaluation, bypassing the initial qualitative assessment. The first step of the impairment test involves comparing the fair value of the reporting unit to its net book value, including goodwill. If the net book value exceeds its fair value, then the Company would perform the second step of the goodwill impairment test to determine the amount of the impairment loss. The impairment loss would be calculated by comparing the implied fair value of the goodwill to its net book value. In calculating the implied fair value of goodwill, the fair value of the entity would be allocated to all of the other assets and liabilities based on their fair values. The excess of the fair value of the entity over the amount assigned to other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. No goodwill impairment charges have been recorded for any period presented.

 

  (x) Impairment of Long-Lived Assets

The Company evaluates long-lived assets, including property and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value. There was no impairment during the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited). The value of the internally-developed software written-off due to abandonment was $0.1 million, $87,000 and $0.1 million in the year ended December 31, 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. There were no write-offs in any other period presented.

 

  (y) Deferred Revenue

Deferred revenue consists of cash deposits from customers to be applied against future usage and customer billings in advance of revenues being recognized from the Company’s contracts. Deferred revenue is generally expected to be recognized during the succeeding 12-month period and is thus recorded as a current liability.

 

  (z) Commissions

Commissions consist of variable compensation earned by sales personnel. Sales commissions associated with the acquisition of new customer contracts are recognized as sales and marketing expense at the time the customer has entered into a binding agreement.

 

  (aa) Business Combinations

The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill is measured as the excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement. The authoritative guidance allows a measurement period of up to one year from the date of acquisition to make adjustments to the preliminary allocation of the purchase price. As a result, during the measurement period the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon conclusion of the measurement period or final determination of the values of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to the consolidated statement of operations.

 

  (bb) Segment Information

The Company’s Chief Executive Officer is the chief operating decision maker, who reviews the Company’s financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company’s financial performance. Accordingly, the Company has determined that it operates in a single reporting segment.

 

  (cc) Fair Value of Financial Instruments

The Company records certain of its financial assets at fair value on a recurring basis. The Company’s financial instruments, which include cash, cash equivalents, accounts receivable and accounts payable are recorded at their carrying amounts, which approximate their fair values due to their short-term nature. Restricted cash is long-term in nature. However, it consists of cash in a savings account, hence its carrying amount approximates its fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

 

    Level 1 Inputs:  Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

    Level 2 Inputs:  Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

    Level 3 Inputs:  Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

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

 

  (dd) Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2016-13, “Financial InstrumentsCredit Losses: Measurement of Credit Losses on Financial Instruments”, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09,CompensationStock Compensation (Topic 718): Improvements to Employee Share -Based Payment Accounting.” This standard is intended to simplify several areas of accounting for stock-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02,Leases.” The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. While the Company expects the adoption of this standard to result in an increase to its reported assets and liabilities, the Company has not yet determined the full impact that the adoption of this standard will have on its financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This new guidance will replace most existing U.S. GAAP guidance on this topic. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred, by one year, the effective date for the new revenue reporting standard for entities reporting under U.S. GAAP. In accordance with the deferral, this guidance will be effective for the Company beginning January 1, 2018 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted beginning January 1, 2017. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing”, clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients”, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The effective date and transition requirements for ASU 2016-08, ASU 2016-10 and ASU 2016-12 are the same as the effective date and transition requirements for ASU 2014-09. The Company is evaluating the impact that these ASUs will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

Fair Value Measurements
Fair Value Measurements

3. Fair Value Measurements

The following table provides the assets measured at fair value on a recurring basis as of December 31, 2014 and 2015 and June 30, 2016 (in thousands):

 

     Total Carrying
Value
     As of December 31, 2014  
        Level I      Level 2      Level 3      Total  

Financial Assets:

              

Money market funds (included in cash and cash equivalents)

   $ 32,587       $ 32,587       $       $       $ 32,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

   $ 32,587       $ 32,587       $       $       $ 32,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Total Carrying
Value
     As of December 31, 2015  
        Level 1      Level 2      Level 3      Total  

Financial Assets:

              

Money market funds (included in cash and cash equivalents)

   $ 80,886       $ 80,886       $       $       $ 80,886   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

   $ 80,886       $ 80,886       $       $       $ 80,886   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Total Carrying
Value
     As of June 30, 2016 (Unaudited)  
        Level 1      Level 2      Level 3      Total  

Financial Assets:

              

Money market funds (included in cash and cash equivalents)

   $ 246,315       $ 246,315       $       $       $ 246,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

   $ 246,315       $ 246,315       $       $       $ 246,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

There were no realized or unrealized losses for the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited). There were no other-than-temporary impairments for these instruments as of December 31, 2014 and 2015 and June 30, 2016 (unaudited).

Property and Equipment
Property and Equipment

4. Property and Equipment

Property and equipment consisted of the following (in thousands):

 

     As of
December 31,
    As of
June 30,
2016
 
     2014     2015    
                 (Unaudited)  

Capitalized software development costs

   $ 6,783      $ 16,030      $ 21,997   

Office equipment

     1,231        2,662        3,849   

Furniture and fixtures

     328        393        438   

Software

     653        755        865   

Leasehold improvements

     380        568        2,722   
  

 

 

   

 

 

   

 

 

 

Total property and equipment

     9,375        20,408        29,871   

Less: accumulated depreciation and amortization

     (2,624     (6,350     (9,327
  

 

 

   

 

 

   

 

 

 

Total property and equipment, net

   $ 6,751      $ 14,058      $ 20,544   
  

 

 

   

 

 

   

 

 

 

Depreciation and amortization expense was $0.6 million, $1.7 million, $3.7 million, $1.4 million, and $3.0 million for the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively.

 

The Company capitalized $2.4 million, $3.9 million, $9.4 million, $4.1 million, and $6.1 million in software development costs in the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively, of which $0.1 million, $0.3 million, $1.0 million, $0.4 million, and $0.7 million, respectively, was stock-based compensation expense. Amortization of capitalized software development costs was $0.3 million, $1.2 million, $2.8 million, $1.0 million, and $2.3 million in the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. The amortization expense was allocated as follows (in thousands):

 

     Year Ended
December 31,
     Six Months
Ended
June 30,
 
     2013      2014      2015      2015      2016  
                          (Unaudited)  

Cost of revenue

   $ 265       $ 783       $ 1,793       $ 686       $ 1,408   

Research and development

     84         415         1,045         347         884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 349       $ 1,198       $ 2,838       $ 1,033       $ 2,292   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Acquisition of Authy, Inc.
Acquisition of Authy, Inc.

5. Acquisition of Authy, Inc.

On February 23, 2015, the Company completed its acquisition of Authy, Inc. (“Authy”), a Delaware corporation with operations in Bogota, Colombia and San Francisco, California. Authy had developed a two-factor authentication online security solution. The Company’s purchase price of $6.1 million for all of the outstanding shares of capital stock of Authy consisted of $3.0 million in cash and $3.1 million representing the fair value of 389,733 shares of the Company’s Series T convertible preferred stock, of which 180,000 shares are held in escrow. This escrow was effective until the first anniversary of the closing date, and has continued beyond that date as a result of certain circumstances. As of June 30, 2016 (unaudited), the Company has not released any shares out of the escrow. Additionally, the Company issued 507,885 shares of its Series T convertible preferred stock, which converted into shares of Class B common stock immediately prior to the closing or the IPO, to a former shareholder of Authy that have a fair value of $4.0 million and are subject to graded vesting over a period of 3.6 years, as amended. Of the 507,885 shares, 127,054 shares are subject to additional performance conditions and can be relinquished, if the performance conditions are not met. As of June 30, 2016 (unaudited), 70,251 shares have vested.

The acquisition has been accounted for as a business combination and, accordingly, the total purchase price is allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the acquisition date. The cost of shares subject to vesting and performance conditions is accounted for as a post-acquisition compensation expense and recorded on a straight-line basis as the shares vest and conditions are satisfied. The Company recorded $0.6 million and $0.4 million of stock-based compensation expense related to these shares in the year ended December 31, 2015 and in the six months ended June 30, 2016 (unaudited), respectively. This expense is classified as research and development in the accompanying consolidated statements of operations.

Authy’s results of operations have been included in the consolidated financial statements of the Company from the date of acquisition.

 

This transaction is intended to qualify as a tax-free reorganization under Section 368(a) of the IRS Code.

The fair value of the Series T convertible preferred stock was determined by the board of directors of the Company with input from a third-party valuation consultant.

The following table presents the purchase price allocation recorded in the Company’s consolidated balance sheet on the acquisition date (in thousands):

 

     Total  

Net tangible assets(3)

   $ 1,217   

Goodwill(1)(3)

     3,113   

Intangible assets(2)

     1,760   
  

 

 

 

Total purchase price

   $ 6,090   
  

 

 

 

The Company acquired a net deferred tax liability of $0.1 million in this business combination.

 

(1)  Goodwill represents the excess of purchase price over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed. The goodwill in this transaction is primarily attributable to the future cash flows to be realized from the acquired technology platform, existing customer base and the future development initiatives of the assembled workforce. None of the goodwill is deductible for tax purposes.

 

(2)  Identifiable finite-lived intangible assets were comprised of the following:

 

     Total      Estimated
life
(in years)
 

Developed technology

   $ 1,300         3   

Customer relationships

     400         5   

Trade name

     60         2   
  

 

 

    

Total intangible assets acquired

   $ 1,760      
  

 

 

    
(3)  As part of net tangible assets, the Company acquired $66,000 in accounts receivable subject to dispute resolution with a customer. The matter was resolved later in 2015 and $52,000 was deemed uncollectible immediately prior to the date of acquisition. The Company’s adjustment of its initial purchase price allocation resulted in an increase to goodwill and decrease to net tangible assets of $52,000. After the adjustment, the purchase price allocation related to this acquisition became final. Goodwill balance as of June 30, 2016 was as follows:

 

     Total  

Balance as of December 31, 2014

   $   

Goodwill recorded in connection with Authy acquisition

     3,113   

Subsequent adjustment to purchase price allocation

     52   
  

 

 

 

Balance as of December 31, 2015

     3,165   

Adjustment to goodwill (unaudited)

       
  

 

 

 

Balance as of June 30, 2016 (unaudited)

   $ 3,165   
  

 

 

 

The estimated fair value of the intangible assets acquired was determined by the Company, and the Company considered or relied in part upon a valuation report of a third-party expert. The Company used an income approach to measure the fair values of the developed technology and trade names based on the relief-from-royalty method. The Company used an income approach to measure the fair value of the customer relationships based on the multi-period excess earnings method, whereby the fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate.

 

The Company incurred costs related to this acquisition of $1.5 million, of which $0.3 million and $1.2 million were incurred during the years ended December 31, 2014 and 2015, respectively. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in the accompanying consolidated statements of operations.

Pro forma results of operations for this acquisition have not been presented as the financial impact to the Company’s consolidated financial statements is immaterial.

Intangible Assets
Intangible Assets

6. Intangible Assets

Intangible assets consisted of the following (in thousands):

 

     As of December 31, 2014  
     Gross      Accumulated
Amortization
     Net  

Patents

   $   527       $   (17)       $   510   
  

 

 

    

 

 

    

 

 

 

Total

   $   527       $   (17)       $   510   
  

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2015  
     Gross      Accumulated
Amortization
     Net  

Developed technology

   $ 1,300       $ (370    $ 930   

Customer relationships

     400         (68      332   

Trade name

     60         (26      34   

Patent

     1,021         (25      996   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,781       $ (489    $ 2,292   
  

 

 

    

 

 

    

 

 

 

 

     As of June 30, 2016  
     Gross      Accumulated
Amortization
     Net  
     (Unaudited)  

Amortizable intangible assets:

        

Developed technology

   $ 1,300       $ (586    $ 714   

Customer relationships

     400         (108      292   

Trade name

     60         (41      19   

Patent

     1,351         (35      1,316   
  

 

 

    

 

 

    

 

 

 

Total amortizable intangible assets

     3,111         (770      2,341   
  

 

 

    

 

 

    

 

 

 

Non-amortizable intangible assets:

        

Trademark

     263                 263   
  

 

 

    

 

 

    

 

 

 

Total

   $ 3,374       $ (770    $ 2,604   
  

 

 

    

 

 

    

 

 

 

Amortization expense was $17,000, $0.5 million, $0.2 million, and $0.3 million for the years ended December 31, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively.

 

Total estimated future amortization expense was as follows (in thousands):

 

     As of
December 31,
2015
     As of
June 30,
2016
 
            (Unaudited)  

2016

   $ 553       $ 288   

2017

     527         549   

2018

     153         176   

2019

     89         112   

2020

     21         43   

Thereafter

     949         1,173   
  

 

 

    

 

 

 

Total

   $ 2,292       $ 2,341   
  

 

 

    

 

 

Accrued Expenses and Other Liabilities
Accrued Expenses and Other Liabilities

7. Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

     As of
December 31,
     As of
June 30,
2016
 
     2014      2015     
                   (Unaudited)  

Accrued payroll and related

   $ 809       $ 972       $ 2,790   

Accrued bonus and commission

     1,344         1,832         1,284   

Accrued cost of revenue

     2,736         6,496         7,527   

Sales and other taxes payable

     10,312         17,634         23,346   

Accrued other expense

     2,597         5,064         7,193   
  

 

 

    

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 17,798       $ 31,998       $ 42,140   
  

 

 

    

 

 

    

 

 

 

Other long-term liabilities consisted of the following (in thousands):

 

     As of
December 31,
     As of
June 30,
2016
 
     2014      2015     
                   (Unaudited)  

Deferred rent

   $ 523       $ 364       $ 9,515   

Accrued other expense

     59         84         236   
  

 

 

    

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 582       $ 448       $ 9,751   
  

 

 

    

 

 

    

 

 

 

Supplemental Balance Sheet Information
Supplemental Balance Sheet Information

8. Supplemental Balance Sheet Information

roll-forward of the Company’s reserves for the years ended December 31, 2013, 2014 and 2015 and six months ended June 30, 2015 and 2016 is as follows (in thousands):

 

  Allowance for doubtful accounts:

 

     Year Ended
December 31,
    Six Months
Ended
June 30,
 
     2013     2014     2015     2015     2016  
                       (Unaudited)  

Balance, beginning of period

   $      $ 98      $ 210      $ 210      $ 486   

Additions

     213        261        705        368        847   

Write-offs

     (115     (149     (429     (61     (538
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 98      $ 210      $ 486      $ 517      $ 795   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  Sales credit reserve:

 

     Year Ended
December 31,
    Six Months
Ended
June 30,
 
     2013      2014     2015     2015     2016  
                        (Unaudited)  

Balance, beginning of period

   $       $ 30      $ 312      $ 312      $ 714   

Additions

     30         683        1,210        529        843   

Deductions against reserve

             (401     (808     (289     (905
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 30       $ 312      $ 714      $ 552      $ 652   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
Revenue by Geographic Area
Revenue by Geographic Area

9. Revenue by Geographic Area

Revenue by geographic area is based on the IP address at the time of registration. The following table sets forth revenue by geographic area (in thousands):

 

     Year Ended
December 31,
    Six Months
Ended
June 30,
 
     2013     2014     2015     2015     2016  
                       (Unaudited)  

Revenue by geographic area:

          

United States

   $ 45,470      $ 78,251      $ 143,145      $ 60,847      $ 104,993   

International

     4,450        10,595        23,774        10,472        18,857   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 49,920      $ 88,846      $ 166,919      $ 71,319      $ 123,850   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Percentage of revenue by geographic area:

          

United States

     91     88     86     85     85

International

     9     12     14     15     15

Long-lived assets outside the United States were insignificant.

Credit Facility
Credit Facility

10. Credit Facility

The Company entered into a $5.0 million revolving line of credit on January 15, 2013, which expired in January 2015 and was not renewed. The Company did not borrow against this line of credit.

Effective January 2015, the Company entered into a $15.0 million revolving credit agreement. Under this agreement, amounts available to be borrowed are based on the Company’s prior month’s monthly recurring revenue. Advances on the line of credit bear interest payable monthly at Wall Street Journal prime rate plus 1%. Borrowings are secured by substantially all of the Company’s assets, with limited exceptions. If there are borrowings under the credit line, there are certain restrictive covenants with which the Company must comply. The credit facility expires in March 2017. As of December 31, 2015 and June 30, 2016 (unaudited), the total amount available to the Company to be borrowed was $15.0 million and the Company had no outstanding balance on this credit facility.

Commitments and Contingencies
Commitments and Contingencies

11. Commitments and Contingencies

 

  (a) Lease Commitments

The Company entered into various non-cancelable operating lease agreements for its facilities over the next eight years. Certain operating leases contain provisions under which monthly rent escalates over time. When lease agreements contain escalating rent clauses or free rent periods, the Company recognizes rent expense on a straight-line basis over the term of the lease.

On January 8, 2016, the Company entered into a lease agreement (“Lease”) for approximately 90,000 square feet of new office space at 375 Beale Street in San Francisco that will house its principal executive office. This office space will replace the Company’s existing principal office at 645 Harrison Street in San Francisco, for which the lease expires in April 2018. The term of the Lease is approximately 96 months following the anticipated commencement, as amended, in October 2016, and the future minimum lease payments range from $0.4 million per month in the first 60 months to $0.5 million per month thereafter. Additionally, the Lease included a tenant improvement allowance, which provided for the landlord to pay for tenant improvements on behalf of the Company for up to $8.3 million. This amount was recorded on the lease inception date into other current assets and current and long-term liabilities in the accompanying consolidated balances sheet. Based on the terms of this landlord incentive and involvement of the Company in the construction process, the leasehold improvements purchased under the landlord incentive were determined to be property of the Company. The Company secured its lease obligation with a $7.4 million letter of credit, which it designated as restricted cash on its balance sheet as of June 30, 2016 (unaudited). The Company began recording the minimum lease payments on a straight-line basis in the second quarter of 2016.

Rent expense was $1.5 million, $2.6 million, $4.1 million, $1.9 million and $3.0 million for the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively.

Additionally, the Company has contractual commitments with its cloud infrastructure provider, network service providers and other vendors that are non-cancellable and expire within one to four years.

 

Future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

 

Year Ending December 31:

   As of
December 31,
2015
     As of
June 30,
2016(1)
 
            (Unaudited)  

2016

   $ 3,793       $ 2,824   

2017

     3,498         8,596   

2018

     1,903         6,984   

2019

     513         5,673   

2020

     159         5,408   

Thereafter

             20,963   
  

 

 

    

 

 

 

Total minimum lease payments

   $ 9,866       $     50,448   
  

 

 

    

 

 

 

 

  (1)  The future minimum lease payments related to the 375 Beale Street lease do not include the $8.3 million of tenant improvement allowance available under the lease.

Future minimum payments under other existing noncancellable purchase obligations were as follows (in thousands). Unrecognized tax benefits are not included in these amounts because any amounts expected to be settled in cash are not material:

 

Year Ending December 31:

   As of
December 31,
2015
     As of
June 30,
2016
 
            (Unaudited)  

2016

   $ 18,853       $ 3,871   

2017

     2,001         3,061   

2018

             97   

2019

             15   
  

 

 

    

 

 

 

Total payments

   $ 20,854       $     7,044   
  

 

 

    

 

 

 

 

  (b) Legal Matters

On April 30, 2015, Telesign Corporation, or Telesign, filed a lawsuit against the Company in the United States District Court, Central District of California (“Telesign I”). Telesign alleges that the Company is infringing three U.S. patents that it holds: U.S. Patent No. 8,462,920, U.S. Patent No. 8,687,038 and U.S. Patent No. 7,945,034. The patent infringement allegations in the lawsuit relate to the Company’s Programmable Authentication products, its two-factor authentication use case and an API tool to find information about a phone number. The Company has petitioned the U.S. Patent and Trademark Office for inter partes review of the patents at issue. On March 9, 2016, the District Court stayed the court case pending the resolution of those proceedings. On June 28, 2016, the Patent and Trademark Office instituted the inter partes review of the ‘034 patent. Subsequently, on July 8, 2016, the Patent and Trademark Office denied the Company’s petition for inter partes review of the ‘920 and ‘038 patents. On July 20, 2016, Telesign applied to the court to lift the stay on Telesign I. The Company opposed the request, and on September 15, 2016, the court denied the request to lift the stay on Telesign I.

 

On March 28, 2016, Telesign filed a second lawsuit against the Company in the United States District Court, Central District of California (“Telesign II”), alleging infringement of U.S. Patent No. 9,300,792 held by Telesign. The ‘792 patent is in the same patent family as the ‘920 and ‘038 patents asserted in Telesign I, and the infringement allegations in Telesign II relate to the Company’s Programmable Authentication products and its two-factor authentication use case. On May 23, 2016, the Company moved to dismiss the complaint in Telesign II. On August 3, 2016, the United States District Court, Central District of California, issued an order granting Twilio’s motion to dismiss Telesign’s complaint with leave to amend. Telesign filed an amended complaint on September 2, 2016 and Twilio filed a motion to dismiss Telesign’s amended complaint on September 16, 2016. With respect to each of the patents asserted in Telesign I and Telesign II, the complaints seek, among other things, to enjoin the Company from allegedly infringing the patents, along with damages for lost profits.

On February 18, 2016, a putative class action complaint was filed in the Alameda County Superior Court in California, entitled Angela Flowers v. Twilio Inc. The complaint alleges that the Company’s products permit the interception, recording and disclosure of communications at a customer’s request and in violation of the California Invasion of Privacy Act. The complaint seeks injunctive relief as well as monetary damages. On May 27, 2016, the Company filed a demurrer to the complaint. On August 2, the court issued an order denying the demurrer. Following the denial of the demurrer, the plaintiffs were required to file an amended complaint by August 18, 2016 to address any claims under California’s Unfair Competition Law, which the plaintiffs declined to do. Discovery has already begun, and will continue until August 2017, when the plaintiff must file their motion for class certification.

The Company intends to vigorously defend these lawsuits and believes it has meritorious defenses to each. It is too early in these matters to reasonably predict the probability of the outcomes or to estimate ranges of possible losses.

In addition to the litigation discussed above, from time to time, the Company is a party to legal action and subject to claims that arise in the ordinary course of business. The claims are investigated as they arise and loss estimates are accrued, when probable and reasonably estimable. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that these legal proceedings will not have a material adverse effect on its financial position or results of operations.

 

  (c) Indemnification Agreements

The Company has signed indemnification agreements with all board members and executive officers. The agreements indemnify the board members and the executive officers from claims and expenses on actions brought against the individuals separately or jointly with the Company for Indemnifiable Events. Indemnifiable Events generally mean any event or occurrence related to the fact that the board member or the executive officer was or is acting in his or her capacity as a board member or an executive officer for the Company or was or is acting or representing the interests of the Company.

In the ordinary course of business, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s various products, or its acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments. The terms of such obligations may vary. As of December 31, 2014 and 2015 and June 30, 2016 (unaudited), no amounts had been accrued.

 

  (d) Other taxes

The Company conducts operations in many tax jurisdictions throughout the United States. In many of these jurisdictions, non-income-based taxes, such as sales and use and telecommunications taxes are assessed on the Company’s operations. Historically, the Company has not billed or collected these taxes and, in accordance with U.S. GAAP, has recorded a provision for its tax exposure in these jurisdictions when it is both probable that a liability has been incurred and the amount of the exposure can be reasonably estimated. As a result, the Company recorded a liability of $10.3 million, $17.6 million and $23.3 million as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), respectively. These estimates include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which its management believes it has nexus, and the sourcing of revenues to those jurisdictions. In the event these jurisdictions challenge management’s assumptions and analysis, the actual exposure could differ materially from the current estimates.

Stockholders' Equity
Stockholders' Equity

12. Stockholders’ Equity

 

  (a) Convertible Preferred Stock

As of December 31, 2014 and 2015, the Company had outstanding Series A, B, C, D, E and T convertible preferred stock (individually referred to as “Series A, B, C, D, E or T” or collectively “Preferred Stock”) as follows (in thousands, except share data):

 

    As of December 31, 2014  
    Shares
Authorized
    Shares Issued and
Outstanding
    Aggregate
Liquidation
preference
    Proceeds, Net
of Issuance
Costs
 

Series A

    13,173,240        13,173,240      $ 4,624      $ 4,624   

Series B

    11,416,062        11,416,062        12,000        11,941   

Series C

    8,466,254        8,452,864        25,250        25,196   

Series D

    9,440,324        9,440,324        70,000        69,930   

Series T

    5,000,000                        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

    47,495,880        42,482,490      $ 111,874      $ 111,691   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

    As of December 31, 2015  
    Shares
Authorized
    Shares Issued and
Outstanding
    Aggregate
Liquidation
preference
    Proceeds, Net
of Issuance
Costs
 

Series A

    13,173,240        13,076,491      $ 4,590      $ 4,592   

Series B

    11,416,062        11,146,895        11,717        11,658   

Series C

    8,452,864        8,452,864        25,250        25,196   

Series D

    9,440,324        9,440,324        70,000        69,930   

Series E

    11,494,249        11,494,249        130,000        125,448   

Series T

    5,000,000        897,618 (1)      9        (2) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

    58,976,739        54,508,441      $ 241,566      $ 236,824   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  The outstanding shares include 687,885 shares held in escrow as of December 31, 2015 related to the Authy acquisition. Of these shares, 507,885 shares are subject to graded vesting over a period of 3.6 years, as amended, and have a fair value of $4.0 million as of December 31, 2015. A total of 127,054 shares are subject to performance conditions and can be relinquished, if the performance conditions are not met.

 

(2)  389,733 shares were issued as part of the purchase price for Authy acquisition and had a fair value of $3.1 million on the acquisition closing date.

Immediately prior to the completion of the IPO, all shares of convertible preferred stock then outstanding were automatically converted into 54,508,441 shares of common stock on a one-to-one basis, and then reclassified as shares of Class B common stock.

The holders of the Company’s Preferred Stock had the following rights, preferences and privileges:

Conversion

At any time following the date of issuance, each share of Preferred Stock is convertible, at the option of its holder, into the number of shares of common stock which results from dividing the applicable original issue price per share for each series by the applicable conversion price per share for such series, on the date of conversion. As of December 31, 2014 and 2015, the initial conversion prices per share of all series of preferred stock were equal to the original issue prices of each series and therefore the conversion ratio was 1:1.

Each share of preferred stock shall be automatically converted into shares of common stock immediately upon the earlier of (i) the consummation of a firmly underwritten public offering pursuant to the Securities Act of 1933, as amended, the public offering price of which is not less than $50.0 million in aggregate; or (ii) the date specified by the written consent of holders of a majority of the outstanding shares of preferred stock, voting together as a class of shares on an as-converted basis. In addition, the conversion of each of the Series B, Series C, Series D and Series E preferred stock in connection with a Liquidation Event defined below requires the written consent of a majority of such series, if the proceeds payable to each of these series is less than the respective original issuance price.

A Liquidation Event includes (i) a sale, lease or other disposition of all or substantially all of the Company’s assets, (ii) a merger or consolidation of the Company into another entity (except where the merger results in the holders of the Company’s stock prior to merger continuing to hold at least 50% of the voting power of the capital stock of the Company or the surviving or acquiring entity), (iii) the transfer of the Company’s securities to a person, or a group of affiliated persons, if, after such a transfer, such person or group of persons holds 50% or more of the outstanding voting stock of the Company, (iv) the grant of an exclusive, irrecoverable license to all or substantially all of the Company’s intellectual property or (v) a liquidation, dissolution or winding up of the Company.

In the event the Company issues any additional stock, as defined in the Company’s Certificate of Incorporation, after the preferred stock original issue date, without consideration or for a consideration per share less than the conversion price applicable to a series of preferred stock in effect immediately prior to such issuance, the conversion price for such series in effect immediately prior to each such issuance shall be adjusted according to a formula set forth in the Company’s Certificate of Incorporation.

Voting

The holders of Preferred Stock and the holders of common stock vote together and not as separate classes, except in cases specifically provided for in the Certificate of Incorporation or as provided by law.

The holders of each share of Preferred Stock has the right to one vote for each share of common stock into which such Preferred Stock could be converted, and, with respect to such vote, holders of Preferred Stock have full voting rights and powers equal to the voting rights and powers of the holders of common stock, with the exception of voting for the election of directors referred to below.

As long as a majority of the shares of Series A preferred stock originally issued remain outstanding, the holders of such shares, voting as a separate class, shall be entitled to elect one director. As long as a majority of the shares of Series B preferred stock originally issued remain outstanding, the holders of such shares, voting as a separate class, shall be entitled to elect one director. As long as at least 2,000,000 shares of Series D preferred stock are outstanding, the holders of such shares, voting as a separate class, shall be entitled to elect one director. The holders of common stock, voting as a separate class, shall be entitled to elect two directors. The holders of shares of Preferred Stock and common stock, voting together as a single class on an as-converted basis, shall be entitled to elect the remaining directors of the Company.

Dividends

The holders of convertible preferred stock are entitled to receive, when and if declared by the board of directors, out of any assets legally available therefor, any dividends as may be declared from time to time by the board of directors. No dividend may be declared or paid on the common stock unless any and all such dividends are distributed among all holders of common stock and preferred stock on a pro rata pari passu basis in proportion to the number of shares of common stock that would be held by each such holder if all shares of preferred stock were converted to common stock at the effective conversion rate. The right to receive dividends on shares of preferred stock is non-cumulative. No dividends had been declared or paid by the Company as of December 31, 2014 and 2015 and June 30, 2016 (unaudited).

Liquidation Preference

In the event of any Liquidation Event of the Company, the holders of Series A, Series B, Series C, Series D and Series E preferred stock (“senior preferred stock”) shall be entitled to receive, in preference to any distribution of the proceeds to the holders of Series T preferred stock or common stock, an amount per share equal to the sum of the applicable original issue price for each series of preferred stock (as adjusted for stock splits and combinations as described in the Certificate of Incorporation), plus declared but unpaid dividends on such share. Upon completion of this distribution, the holders of Series T preferred stock shall be entitled to receive in preference to any distribution of the proceeds to the holders of common stock an amount per share equal to the sum of the applicable original issue price for Series T preferred stock, plus declared but unpaid dividends on such share. If the proceeds thus distributed among the holders of the preferred stock are insufficient to permit payment to such holders of the full preferential amounts, then the entire proceeds available for distribution shall be distributed ratably first among the holders of the senior preferred stock in proportion to the full preferential amount that each holder is otherwise entitled to. The original issue price per share of Series A, Series B, Series C, Series D, Series E and Series T convertible preferred stock is equal to $0.35, $1.05, $2.99, $7.42, $11.31 and $0.01, respectively.

Upon completion of the distribution referred to above, all the remaining proceeds available for distribution shall be distributed to the holders of the Company’s common stock pro rata based on the number of common stock held by each.

The Company classified the Preferred Stock within shareholders’ equity since the shares are not redeemable, and the holders of the Preferred Stock cannot effect a deemed liquidation of the Company outside of the Company control.

 

  (b) Preferred Stock

As of June 30, 2016 (unaudited), the Company had authorized 100,000,000 shares of undesignated preferred stock, par value $0.001, of which no shares were outstanding.

 

  (c) Common Stock

As of December 31, 2014 and 2015, there were 17,446,051 and 17,324,003 shares of common stock, respectively, issued and outstanding.

Immediately prior to the completion of the IPO, all shares of common stock then outstanding were reclassified as Class B common stock. Shares offered and sold in the IPO were the newly authorized shares of Class A common stock.

As of June 30, 2016, the Company had authorized 1,000,000,000 shares of Class A common stock and 100,000,000 shares of Class B common stock, each par value $0.001 per share, of which 11,647,711 shares and 72,878,382 shares of Class A and Class B common stock, respectively, were issued and outstanding. Holders of Class A and Class B common stock are entitled to one vote per share and 10 votes per share, respectively, and the shares of Class A common stock and Class B common stock are identical, except for voting and conversion rights. As of June 30, 2016 (unaudited), the outstanding Class B common stock included 617,634 shares related to the Authy acquisition that were held in escrow.

 

The Company had reserved shares of common stock for issuance as follows:

 

     As of December 31,     As of
June 30,

2016
 
     2014      2015    
                  (Unaudited)  

Convertible preferred stock outstanding

     42,482,490         54,508,441 (1)        

Stock options issued and outstanding

     13,141,311         16,883,837        16,918,789   

Nonvested restricted stock units issued and outstanding

             71,000        891,008   

Common stock reserved for Twilio.org

             888,022        780,397   

Stock-based awards available for grant under 2008 Plan

     575,554         14,920          

Stock-based awards available for grant under 2016 Plan

                    11,446,750   

Common stock reserved for issuance under 2016 ESPP

                    2,400,000   
  

 

 

    

 

 

   

 

 

 

Total

     56,199,355         72,366,220        32,436,944   
  

 

 

    

 

 

   

 

 

 

 

(1)  Includes 687,885 shares of Series T convertible preferred stock related to the Authy acquisition held in escrow as of December 31, 2015.

 

  (d) Stock Repurchases

Following the closing of the Series D convertible preferred stock financing, on May 20, 2013, the Company repurchased an aggregate of 1,498,464 shares of common stock from three founders for $10.0 million in cash, which transaction is referred to as the 2013 Repurchase. The 2013 Repurchase was conducted at a price in excess of the fair value of the Company’s common stock at the date of repurchase. No special rights or privileges were conveyed to the founders as part of this transaction. However, no other stockholders were given the opportunity to participate in the 2013 Repurchase. The Company recorded a compensation expense in the amount of $5.0 million, which represented the excess of the common stock repurchase price above the fair value of the common stock on the date of repurchase. Of this expense, $1.9 million and $3.1 million were classified as research and development and general and administrative expenses, respectively, in the accompanying consolidated statement of operations. The Company retired the shares repurchased from the founders as of May 20, 2013.

Following the closing of the Series E convertible preferred stock financing, on August 21, 2015, the Company repurchased an aggregate of 365,916 shares of Series A preferred stock and Series B preferred stock from certain preferred stockholders, and repurchased an aggregate of 1,869,156 shares of common stock from certain current and former employees for $22.8 million in cash, which transaction is referred to as the 2015 Repurchase. The 2015 Repurchase was conducted at a price in excess of the fair value of the Company’s common stock at the date of repurchase. No special rights or privileges were conveyed to the employees and former employees. However, not all employees were invited to participate in the 2015 Repurchase. The Company recorded a compensation expense in the amount of $2.0 million for the year ended December 31, 2015, which was the excess of the common stock repurchase price above the fair value of the common stock on the date of repurchase. Of this expense, $0.8 million, $0.1 million and $1.1 million were classified as research and development, sales and marketing and general and administrative expenses, respectively, in the accompanying consolidated statement of operations. The excess of the preferred stock repurchase price above the carrying value of the preferred stock was recorded as a deemed dividend in the year ended December 31, 2015. The Company retired the shares repurchased in the 2015 Repurchase as of August 21, 2015.

 

  (e) Stock Split

On July 9, 2014, the Company’s board of directors and stockholders approved and the Company effected, a 2-for-1 split of its common stock and Preferred Stock. In connection with the split, (i) every one share of issued and outstanding common stock and Preferred Stock was increased to two shares of common stock or Preferred Stock, as applicable, and (ii) the exercise price of each outstanding option to purchase common stock was proportionately decreased. The stock split has been reflected retrospectively throughout the consolidated financial statements.

 

  (f) Twilio.org

On September 2, 2015, the Company’s board of directors approved the establishment of Twilio.org as a donor-advised fund with 888,022 shares of the Company’s common stock, which represented 1% of the Company’s outstanding capital stock on as-converted basis, reserved to fund Twilio.org’s activities. Subsequently, on May 13, 2016, the Company’s board of directors authorized a reduction of 107,625 shares reserved to offset equity grants to Twilio.org employees. As of June 30, 2016 (unaudited), the total remaining shares reserved for Twilio.org was 780,397.

Twilio.org is a part of the Company and not a separate legal entity. The objective for Twilio.org is to further the philanthropic goals of the Company. As of December 31, 2015 and June 30, 2016 (unaudited), none of the reserved shares were issued and outstanding.

Stock Based Compensation
Stock Based Compensation

13. Stock-Based Compensation

2008 Stock Option Plan

The Company maintained a stock plan, the 2008 Stock Option Plan, as amended and restated (the “2008 Plan”), which allowed the Company to grant incentive (“ISO”), non-statutory (“NSO”) stock options and restricted stock units (“RSU”) to its employees, directors and consultants to participate in the Company’s future performance through stock-based awards at the discretion of the board of directors. Under the 2008 Plan, options to purchase the Company’s common stock could not be granted at a price less than fair value in the case of ISOs and NSOs. Fair value was determined by the board of directors, in good faith, with input from valuation consultants. On June 22, 2016, the plan was terminated in connection with the Company’s IPO. Accordingly, no shares are available for future issuance under this plan. The 2008 Plan continues to govern outstanding equity awards granted thereunder. Shares of common stock purchased under the 2008 Plan are subject to certain restrictions, including the right of first refusal by the Company for sale or transfer of shares to outside parties. The Company’s right of first refusal terminated upon completion of the IPO. Options granted may include provisions for early exercisability.

2016 Stock Option Plan

The Company’s 2016 Equity Incentive Plan (the “2016 Plan”) became effective on June 21, 2016. The 2016 Plan provides for the grant of ISOs, NSOs, restricted stock, RSUs, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to employees, directors and consultants of the Company. A total of 11,500,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2016 Plan. These available shares will automatically increase each January 1, beginning on January 1, 2017, by 5% of the number of shares of the Company’s Class A and Class B common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s compensation committee.

Under the 2016 Plan, the stock options are granted at a price per share not less than 100% of the fair market value per share of the underlying common stock on the date of grant. Under both plans, stock options generally expire 10 years from the date of grant and vest over periods determined by the board of directors. The vesting period is generally a four-year term from the date of grant, at a rate of 25% after one year, then monthly on a straight-line basis thereafter.

2016 Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“2016 ESPP”) became effective on June 21, 2016. A total of 2,400,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2016 Plan. These available shares will automatically increase each January 1, beginning on January 1, 2017, by the lesser of 1,800,000 shares of the common stock, 1% of the number of shares of the Company’s Class A and Class B common stock outstanding on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee.

The 2016 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan limitations. Except for the initial offering period, the 2016 ESPP provides for separate six-month offering periods beginning each November 16 and May 16 of each fiscal year.

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

For the six months ended June 30, 2016 (unaudited), no shares of common stock were purchased under the 2016 ESPP and 583,950 shares are expected to be purchased at the end of the initial offering period. As of June 30, 2016 (unaudited), total unrecognized compensation cost related to 2016 ESPP was $7.4 million, net of estimated forfeitures, which will be amortized over a weighted-average period of 0.87 years.

 

Stock options and restricted stock units activity under the 2008 Plan and 2016 Plan was as follows:

Stock Options

 

    Number of
options
outstanding
    Weighted-
average
exercise
price
(per share)
    Weighted-
average
remaining
contractual
term
(in years)
    Aggregate
intrinsic value
(in thousands)
 

Outstanding options as of
December 31, 2013

    8,616,443      $ 2.00        8.83      $ 16,077   

Granted

    6,844,749        4.44       

Exercised

    (494,673     1.25       

Forfeited and cancelled

    (1,825,208     2.32       
 

 

 

       

Outstanding options as of
December 31, 2014

    13,141,311        3.25        8.59        50,215   

Granted

    6,919,556        8.14       

Exercised

    (1,767,192     1.93       

Forfeited and cancelled

    (1,409,838     4.24       
 

 

 

       

Outstanding options as of
December 31, 2015

    16,883,837        5.31        8.30        80,758   

Granted (unaudited)

    1,894,850        10.73       

Exercised (unaudited)

    (1,186,805     3.60       

Forfeited and cancelled (unaudited)

    (673,093     5.92       
 

 

 

       

Outstanding options as of
June 30, 2016 (unaudited)

    16,918,789      $ 6.01        8.24      $ 515,848   
 

 

 

       

Options vested and exercisable as of
December 31, 2015

    5,106,728      $ 2.85        7.03      $ 36,976   
 

 

 

       

Options vested and expected to vest as of
December 31, 2015

    15,558,382      $ 5.17        8.24      $ 76,479   
 

 

 

       

Options vested and exercisable as of
June 30, 2016 (unaudited)

    5,903,943      $ 3.53        7.20      $ 194,670   
 

 

 

       

Options vested and expected to vest as of
June 30, 2016 (unaudited)

    15,910,560      $ 5.89        8.19      $ 487,073   
 

 

 

       

Aggregate intrinsic value represents the difference between the Company’s estimated fair value of its common stock and the exercise price of outstanding “in-the-money” options. The aggregate intrinsic value of stock options exercised was $0.5 million, $1.5 million, $10.1 million, $6.3 million and $11.3 million during the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively.

The total estimated grant date fair value of options vested was $1.8 million, $3.9 million, $8.2 million, $2.7 million, and $6.1 million during the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. The weighted-average grant-date fair value of options granted was $1.93, $2.88, $4.30, $3.82, and $5.52 during the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively.

As of December 31, 2015 and June 30, 2016 (unaudited), total unrecognized compensation cost related to nonvested stock options was $34.2 million and $36.2 million, respectively, net of estimated forfeitures, which will be amortized on a ratable basis over a weighted-average period of 2.81 years and 2.70 years, respectively.

No options were granted to nonemployees in the year ended December 31, 2014 and the six months ended June 30, 2016 (unaudited). An insignificant number of options were granted to nonemployees in the years ended December 31, 2013 and 2015 and in the six months ended June 30, 2016 (unaudited).

Restricted Stock Units

 

    Number of
options
outstanding
    Weighted-
average
grant date
fair value
(per share)
    Aggregate
intrinsic

value
(in thousands)
 

Nonvested RSUs as of December 31, 2014

         $      $   

Granted

    71,000        9.39     

Vested

               

Forfeited and cancelled

               
 

 

 

     

Nonvested RSUs as of December 31, 2015

    71,000        9.39        716   

Granted (unaudited)

    833,762        10.75     

Vested (unaudited)

    (13,754     10.09     

Forfeited and cancelled (unaudited)

               
 

 

 

     

Nonvested RSUs as of June 30, 2016 (unaudited)

    891,008      $ 10.65      $ 32,522   
 

 

 

     

In the year ended December 31, 2015 and the six months ended June 30, 2016 (unaudited), the Company granted RSUs to employees. Prior to June 22, 2016, the Company granted RSUs (“Pre-IPO RSUs”) under its 2008 Plan to its employees that vested upon the satisfaction of both a service condition and a liquidity condition. The service condition for the majority of these awards will be satisfied over four years. The liquidity condition was satisfied upon occurrence of the Company’s IPO in June 2016. As of March 31, 2016, the Company has deferred recognition of $0.3 million of cumulative stock-based compensation expense related to these RSUs for which the service condition was satisfied. This amount was recorded into the quarterly period ended June 30, 2016. RSUs granted on or after the completion of the Company’s IPO (“Post-IPO RSUs”) under the 2016 Plan are not subject to a liquidity condition in order to vest. The compensation expense related to these grants is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period, net of estimated forfeitures. The majority of Post-IPO RSUs are earned over a service period of two to four years.

As of December 31, 2015 and June 30, 2016 (unaudited), total unrecognized compensation cost related to non-vested RSUs was $0.5 million and $7.6 million, respectively, net of estimated forfeitures, which will be amortized over a weighted-average period of 3.94 years and 3.33 years, respectively.

 

Early Exercise of Nonvested Options

Employees have an option to exercise their stock options prior to vesting. The Company has the right to repurchase, at the original issuance price, any unvested (but issued) common shares upon termination of service of an employee, either voluntarily or involuntarily. The consideration received for an early exercise of a stock option is considered to be a deposit of the exercise price and the related amount is recorded as a liability. The liability is reclassified into stockholders’ equity as the stock options vest. As of December 31, 2014 and 2015 and the six months ended June 30, 2016 (unaudited), the Company recorded a liability of $0.2 million, $0.2 million and $0.7 million for 127,316, 52,407 and 130,749 unvested shares, respectively, that were early exercised by employees and were subject to repurchase at the respective period end. These amounts are reflected in current and non-current liabilities on the Company’s consolidated balance sheets.

Valuation Assumptions

The fair value of employee stock options was estimated on the date of grant using the following assumptions in the Black-Scholes option pricing model:

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2013     2014     2015     2015     2016  
                      (Unaudited)  

Employee Stock Options

         

Fair value of common stock

    $2.50 - 3.73        $3.99 - 6.69        $7.07 - 10.09        $7.07 - 7.78        $10.09 - $15.00   

Expected term (in years)

    5.77 - 6.08        5.27 - 6.57        6.08        6.08        6.08   

Expected volatility

    54.4%        54.4%        47.8% - 54.9%        52.0% - 54.9%        51.4% - 53.0%   

Risk-free interest rate

    0.9% - 1.9%        1.7% - 2.0%        1.4% - 2.0%        1.4% - 1.9%        1.3% - 1.5%   

Dividend rate

    0%        0%        0%        0%        0%   

Employee Stock Purchase Plan

         

Expected term (in years)

                                0.90   

Expected volatility

                                52%   

Risk-free interest rate

                                0.6%   

Dividend rate

                                0%   

 

Stock-Based Compensation Expense

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

 

     Year Ended
December 31,
     Six Months
Ended
June 30,
 
     2013      2014      2015      2015      2016  
                          (Unaudited)  

Cost of revenue

   $ 27       $ 39       $ 65       $ 28       $ 51   

Research and development

     810         1,577         4,046         1,459         3,895   

Sales and marketing

     753         1,335         2,389         933         1,850   

General and administrative

     567         1,027         2,377         1,147         2,205   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,157       $ 3,978       $ 8,877       $ 3,567       $ 8,001   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net Loss per Share Attributable to Common Stockholders
Net Loss per Share Attributable to Common Stockholders

14. Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2013     2014     2015     2015     2016  
                      (Unaudited)  

Net loss attributable to common stockholders

  $ (26,854   $ (26,758   $ (38,896   $ (18,236   $ (17,462
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

    16,916,035        16,900,124        17,746,526        18,070,932        20,872,550   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

  $ (1.59   $ (1.58   $ (2.19   $ (1.01   $ (0.84
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive:

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2013     2014     2015     2015     2016  
                      (Unaudited)  

Convertible preferred stock outstanding

    42,482,490        42,482,490        54,508,441 (1)      53,106,011 (1)        

Stock options issued and outstanding

    8,616,443        13,141,311        16,883,837        14,404,793        16,918,789   

Nonvested restricted stock units issued and outstanding

                  71,000               891,008   

Common stock reserved for Twilio.org

                  888,022               780,397   

Shares committed under 2016 ESPP

                                583,950   

Unvested shares subject to repurchase

    320,900        127,316        52,407        49,323        130,749   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    51,419,833        55,751,117        72,403,707        67,560,127        19,304,893   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Includes 687,885 shares as of December 31, 2015 and June 30, 2015 (unaudited) of Series T convertible preferred stock related to the Authy acquisition held in escrow.
Income Taxes
Income Taxes

15. Income Taxes

The following table presents domestic and foreign components of loss before income taxes for the periods presented (in thousands):

 

    Year Ended
December 31,
 
    2013     2014     2015  

United States

  $ (26,928   $ (26,837   $ (23,962

International

    74        92        (11,420
 

 

 

   

 

 

   

 

 

 

Total net loss before provision for income taxes

  $ (26,854   $ (26,745   $ (35,382
 

 

 

   

 

 

   

 

 

 

 

Provision for income taxes consists of the following (in thousands):

 

     Year Ended
December 31,
 
     2013      2014      2015  

Current:

        

Federal

   $       $       $   

State

                     45   

Foreign

             13         213   
  

 

 

    

 

 

    

 

 

 

Total

             13         258   

Deferred:

        

Federal

                     (109

State

                       

Foreign

                     (27
  

 

 

    

 

 

    

 

 

 

Total

                     (136
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

   $       $ 13       $ 122   
  

 

 

    

 

 

    

 

 

 

As a result of the acquisition of Authy in February 2015, the Company recorded a tax benefit of $0.1 million in the year ended December 31, 2015. This tax benefit is a result of a partial release of the Company’s existing valuation allowance immediately prior to the acquisition since the acquired deferred tax liabilities from Authy will provide a source of income for the Company to realize a portion of its deferred tax assets, for which a valuation allowance is no longer needed.

The following table presents a reconciliation of the statutory federal tax rate and the Company’s effective tax rate for the years ended December 31, 2013, 2014 and 2015:

 

     Year Ended
December 31,
 
     2013     2014     2015  

Tax benefit at federal statutory rate

     34     34     34

State tax, net of federal benefit

     6        7        (3

Stock-based compensation

     (9     (4     (8

Credits

           1              2              4   

Foreign rate differential

                   (11

Other

                   (2

Change in valuation allowance

     (32     (39     (14
  

 

 

   

 

 

   

 

 

 

Effective tax rate

            
  

 

 

   

 

 

   

 

 

 

 

The following table presents the significant components of the Company’s deferred tax assets and liabilities (in thousands):

 

     As of
December 31,
 
     2013      2014      2015  

Deferred tax assets:

        

Net operating loss carry forwards

   $ 16,310       $ 24,402       $ 27,401   

Accrued and prepaid expenses

     2,815         5,573         7,603   

Stock-based compensation

     200         423         1,433   

Research and development credits

     2,330         3,918         6,022   
  

 

 

    

 

 

    

 

 

 

Gross deferred tax assets

     21,655         34,316         42,459   

Valuation allowance

     (20,194      (30,559      (35,613
  

 

 

    

 

 

    

 

 

 

Net deferred tax assets

     1,461         3,757         6,846   

Deferred tax liabilities:

        

Capitalized software

     (886      (2,019      (4,084

Prepaid expenses

     (538      (1,607      (2,035

Acquired intangibles

                     (460

Property and equipment

     (37      (131      (240
  

 

 

    

 

 

    

 

 

 

Net deferred tax assets

   $       $       $ 27   
  

 

 

    

 

 

    

 

 

 

As of December 31, 2015, the Company had approximately $80.1 million in federal net operating loss carryforwards and $4.8 million in federal tax credits. If not utilized, the federal net operating loss and tax credit carryforwards will expire at various dates beginning in 2028 and 2029, respectively.

As of December 31, 2015, the Company had approximately $35.6 million in state net operating loss carryforwards and $3.9 million in state tax credits. If not utilized, the state net operating loss carryforwards will expire at various dates beginning in 2027. The state tax credits can be carried forward indefinitely.

Pursuant to authoritative guidance, the benefit of stock option deductions will only be recorded to stockholders’ equity when cash taxes payable is reduced. As of December 31, 2015, the portion of net operating loss carryforwards and credit carryforwards related to stock options is approximately $1.9 million net of tax. This amount will be credited to stockholders’ equity when it is realized on the tax return.

A limitation may apply to the use of the net operating loss and credit carryforwards, under provisions of the Internal Revenue Code of 1986, as amended, and similar state tax provisions that are applicable if the Company experiences an “ownership change.” An ownership change may occur, for example, as a result of issuance of new equity. Should these limitations apply, the carryforwards would be subject to an annual limitation, resulting in a potential reduction in the gross deferred tax assets before considering the valuation allowance.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does not believe that it is more likely than not that the net deferred tax assets will be realized, accordingly, a full valuation allowance has been established. The valuation allowance increased by approximately $10.4 million and $5.1 million during the years ended December 31, 2014 and 2015, respectively.

The Company attributes net revenue, costs and expenses to domestic and foreign components based on the terms of its agreements with its subsidiaries. The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries, as such earnings are to be reinvested offshore indefinitely. The income tax liability would be insignificant if these earnings were to be repatriated.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

     Year Ended
December 31,
 
     2013      2014      2015  

Unrecognized tax benefit, beginning of year

   $ 318       $ 592       $ 1,024   

Gross increases for tax provisions of current years

     274         432         655   
  

 

 

    

 

 

    

 

 

 

Unrecognized tax benefit, end of year

   $ 592       $ 1,024       $ 1,679   
  

 

 

    

 

 

    

 

 

 

If the $1.7 million of unrecognized tax benefit is recognized, there would be an inconsequential impact on the effective tax rate.

The Company had not incurred any material tax interest or penalties with respect to income taxes in the years ended December 31, 2013, 2014 and 2015.

The Company does not anticipate any significant change within 12 months of December 31, 2015 in its uncertain tax positions, which are not material in relation to the consolidated financial statements taken as a whole because nearly all of the unrecognized tax benefit has been offset by a deferred tax asset, which has been reduced by a valuation allowance.

The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states and foreign jurisdictions. The tax years 2008 to 2014 remain open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.

Employee Benefit Plan
Employee Benefit Plan

16. Employee Benefit Plan

The Company sponsors a 401(k) defined contribution plan covering all employees. There were no employer contributions to the plan in the years ended December 31, 2013, 2014 and 2015. The employer contribution to the plan in the six months ended June 30, 2016 (unaudited) was $0.7 million.

Related Party Transactions
Related Party Transactions

17. Related Party Transactions

In 2015, two of the Company’s vendors participated in the Company’s Series E convertible preferred stock financing and owned approximately 2.5% and 1.2%, respectively, of the Company’s capital stock, on as-if converted basis, as of December 31, 2015 and 2.1% and 1.1%, respectively, of the Company’s outstanding capital stock as of June 30, 2016 (unaudited). During the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), the amounts of software services the Company purchased from the first vendor were $4.7 million, $8.0 million, $11.1 million, $5.7 million and $6.5 million, respectively. The amounts due to this vendor that were accrued as of December 31, 2014 and 2015 were insignificant. The net amount due to this vendor as of June 30, 2016 (unaudited) was $2.5 million. In September 2015, the Company entered into a one-year agreement with this vendor for an aggregate purchase commitment amount of $13.0 million over the term of the agreement. The amount of services the Company purchased from the second vendor was $0.1 million, $0.5 million, $0.5 million, $0.2 million and $0.2 million for the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. The amounts due to this vendor that were accrued as of December 31, 2014 and 2015 and June 30, 2016 (unaudited) were insignificant.

Events (Unaudited) Subsequent to the Date of the Report of Independent Registered Public Accounting Firm
Events (Unaudited) Subsequent to the Date of the Report of Independent Registered Public Accounting Firm

18. Events (Unaudited) Subsequent to the Date of the Report of Independent Registered Public Accounting Firm

In September 2016, the Company entered into a definitive purchase agreement which provides that, on the terms and conditions set forth therein, the Company will acquire the proprietary WebRTC media processing technologies built by the team behind the Kurento Open Source Project. The proposed transaction is expected to close in the fourth quarter of 2016.

Summary of Significant Accounting Policies (Policies)
(a) Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(b) Reclassification

Certain reclassifications have been made to conform previously reported data to the current presentation. These reclassifications have no effect on the Company’s net loss, financial position or per share data, as previously reported.

(c) Recently Adopted Accounting Standards

As of December 31, 2015, the Company early adopted the new accounting guidance issued by the Financial Accounting Standards Board (“FASB”), Accounting Standards Update (“ASU”) 2015-17, “Income Taxes (Topic 70).” This guidance represents a change in accounting principle and requires that the deferred tax assets and liabilities in the Company’s balance sheet be classified as noncurrent and be offset and presented as a single amount. Prior to the issuance of this guidance, the deferred tax assets and liabilities were required to be offset and presented as a single amount within their respective current and noncurrent classifications on a jurisdiction-by-jurisdiction level.

 

In connection with this change in accounting principle, in its consolidated balance sheet as of December 31, 2014, the Company offset to zero the $1.0 million of noncurrent deferred tax assets and current deferred tax liabilities.

(d) Principles of Consolidation

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

(e) Use of Estimates

The preparation of financial statements in conformity with U.S.GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and returns; valuation of the Company’s stock-based awards; recoverability of long-lived and intangible assets; the capitalization and useful life of the Company’s capitalized internal-use software; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments; therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.

(f) Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and accounts receivable. The Company maintains cash, cash equivalents and restricted cash with financial institutions that management believes are financially sound and have minimal credit risk exposure.

The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any one of the large customers deteriorate substantially, operating results could be adversely affected. To reduce credit risk, management performs ongoing credit evaluations of the financial condition of significant customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. During the years ended December 31, 2013, 2014 and 2015 one customer organization represented approximately 11%, 13% and 17%, respectively, of the Company’s total revenue. In the six months ended June 30, 2015 (unaudited) one customer organization represented 18% of the Company’s total revenue, and in the six months ended June 30, 2016 (unaudited), two customer organizations represented 12% each of the Company’s total revenue.

As of December 31, 2014, two customer organizations represented 22% and 11% of the Company’s gross accounts receivable. As of December 31, 2015, two customer organizations represented approximately 11% each of the Company’s gross accounts receivable. As of June 30, 2016 (unaudited), one customer organization represented 12% of the Company’s gross accounts receivable.


  (g) Revenue Recognition

The Company derives its revenue primarily from usage-based fees earned from customers accessing the Company’s enterprise cloud computing services invoiced or paid monthly. The Company also earns subscription fees from certain term-based contracts. The Company provides services to its customers under pay-as-you-go contracts and term-based contracts ranging in duration from one month to 48 months. Customers that pay via credit card are either billed in advance or as they use service. Larger customers are billed in arrears via invoices for services used. Certain customers have contracts that provide for a minimum monthly commitment and some customers have contracts that provide for a commitment that may be of a quarterly, annual or other specific durations.

The Company recognizes revenue from these transactions when all of the following criteria are satisfied:

 

    there is persuasive evidence of an arrangement;

 

    the service has been or is being provided to the customer;

 

    the amount of the fees to be paid by the customer is fixed or determinable; and

 

    collectability of the fees is reasonably assured.

Term-based contracts revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that the service is made available to the customer, provided that all other revenue recognition criteria have been met. Usage-based fees are recognized as delivered.

The Company’s arrangements do not contain general rights of return. However, credits may be issued to customers on a case-by-case basis. The contracts do not provide customers with the right to take possession of the software supporting the applications. Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue, depending on whether the revenue recognition criteria have been met.

The reserve for sales credits was $0.3 million, $0.7 million and $0.7 million as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), respectively, and is included in accounts receivable, net in the accompanying consolidated balance sheets. The reserve for sales credits is calculated based on historical trends and any specific risks identified in processing transactions. Changes in the reserve are recorded against revenue.


  (h) Cost of Revenue

Cost of revenue consists primarily of costs of communications services purchased from network service providers. Cost of revenue also includes fees to support the Company’s cloud infrastructure, personnel costs, such as salaries and stock-based compensation for the customer care and support services employees, and non-personnel costs, such as amortization of capitalized internal-use software development costs.


  (i) Research and Development Expenses

Research and development expenses consist primarily of personnel costs, cloud infrastructure fees for staging and development, outsourced engineering services, amortization of capitalized internal-use software development costs and an allocation of general overhead expenses. The Company capitalizes the portion of its software development costs that meets the criteria for capitalization.


  (j) Internal-Use Software Development Costs

Certain costs of platform and other software applications developed for internal use are capitalized. The Company capitalizes qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality and expenses costs incurred for maintenance and minor upgrades and enhancements. Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.

Capitalized costs of platform and other software applications are included in property and equipment. These costs are amortized over the estimated useful life of the software on a straight-line basis over three years. Management evaluates the useful life 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. The amortization of costs related to the platform applications is included in cost of revenue, while the amortization of costs related to other software applications developed for internal use is included in research and development expenses.


  (k) Advertising Costs

Advertising costs are expensed as incurred and were $0.4 million, $1.0 million, $2.9 million, $1.4 million and $1.6 million in the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. Advertising costs are included in sales and marketing expenses in the accompanying consolidated statements of operations.


  (l) Stock-Based Compensation

All stock-based compensation to employees, including the purchase rights issued under the Company’s Employee Stock Purchase Plan (the “ESPP”), is measured on the grant date based on the fair value of the awards ultimately expected to vest. This cost, calculated as the grant date fair value net of estimated forfeitures, is recognized as an expense following the ratable attribution method, over the requisite service period, for stock options, and the straight-line attribution method, over the offering period, for the purchase rights issued under the ESPP. The Company uses the Black-Scholes option pricing model to measure the fair value of its stock options and the purchase rights issued under the ESPP. The fair value of the restricted stock units is determined using the fair value of the Company’s common stock on the date of grant.

Prior to the IPO, the fair value of the Company’s common stock was determined by the estimated fair value of the Company’s common stock at the time of grant. After the IPO, the Company uses the market closing price of its Class A common stock as reported on the New York Stock Exchange for the fair value.

Compensation expense for stock options granted to nonemployees is calculated using the Black-Scholes option pricing model and is recognized in expense over the service period. Compensation expense for nonemployee stock options subject to vesting is revalued at each reporting date until the stock options are vested.

The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. These assumptions include:

 

    Fair value of the common stock. Prior to the Company’s IPO, the board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting at which awards are approved. The factors included, but were not limited to: (i) contemporaneous valuations of the Company’s common stock by an unrelated third party; (ii) the prices at which the Company sold shares of its convertible preferred stock to outside investors in arms-length transactions; (iii) the rights, preferences and privileges of the Company’s convertible preferred stock relative to those of its common stock; (iv) the Company’s results of operations, financial position and capital resources; (v) current business conditions and projections; (vi) the lack of marketability of the Company’s common stock; (vii) the hiring of key personnel and the experience of management; (viii) the introduction of new products; (ix) the risk inherent in the development and expansion of the Company’s products; (x) the Company’s stage of development and material risks related to its business; (xi) the fact that the option grants involve illiquid securities in a private company; and (xii) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, in light of prevailing market conditions;

 

    Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The Company uses the simplified calculation of expected term, as the Company does not have sufficient historical data to use any other method to estimate expected term;

 

    Expected volatility. The expected volatility is derived from an average of the historical volatilities of the common stock of several entities with characteristics similar to those of the Company, such as the size and operational and economic similarities to the Company’s principle business operations;

 

    Risk -free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal the expected term of thestock-based awards; and

 

    Expected dividend. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

In addition to the assumptions used in the Black-Scholes option-pricing model, management must estimate a forfeiture rate to calculate the stock-based compensation for the Company’s awards. The Company’s forfeiture rate is based on an analysis of its actual forfeitures. Management will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on the stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in the financial statements.

 

If any of the assumptions used in the Black-Scholes model changes, stock-based compensation for future options may differ materially compared to that associated with previous grants.


  (m) Income Taxes

The Company accounts for income taxes in accordance with authoritative guidance which requires the use of the asset and liability approach. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carry-forwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized.

The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

The Company records interest and penalties related to uncertain tax positions in the provision for income taxes in the consolidated statements of operations.


  (n) Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Accordingly, the subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the year. Remeasurement adjustments are recognized in the consolidated statements of operations as other income or expense in the year of occurrence. Foreign currency transaction gains and losses were insignificant for all periods presented.

  (o) Comprehensive Loss

During the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited), the Company did not have any other comprehensive income or loss, and therefore, the net loss and comprehensive loss was the same for all periods presented.

  (p) Net Loss Per Share Attributable to Common Stockholders

The Company calculates its basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities. All series of convertible preferred stock are considered to be participating securities as the holders of the preferred stock are entitled to receive a non-cumulative dividend on a pro rata pari passu basis in the event that a dividend is declared or paid on common stock. Shares of common stock issued upon early exercise of stock options that are subject to repurchase are also considered to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is declared or paid on common stock. Under the two-class method, in periods when the Company has net income, net income attributable to common stockholders is determined by allocating undistributed earnings, calculated as net income less current period convertible preferred stock non-cumulative dividends, between common stock and the convertible preferred stock. In computing diluted net income attributable to common stockholders, undistributed earnings are re-allocated to reflect the potential impact of dilutive securities. The Company’s basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The diluted net loss per share attributable to common stockholders is computed by giving effect to all potential dilutive common stock equivalents outstanding for the period. The dilutive effect of these potential common shares is reflected in diluted earnings per share by application of the treasury stock method. For purposes of this calculation, convertible preferred stock, options to purchase common stock, unvested restricted stock units, common stock issued subject to future vesting, any shares of stock committed under the ESPP, any shares of stock held in escrow and any shares of stock reserved for future donations are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive.

Since the Company’s IPO, Class A and Class B common stock are the only outstanding equity of the Company. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes 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 into Class A common stock upon sale or transfer, subject to certain limited exceptions.

  (q) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of funds deposited into money market funds. All credit and debit card transactions that process as of the last day of each month and settle within the first few days of the subsequent month are also classified as cash and cash equivalents as of the end of the month in which they were processed.

(r) Restricted Cash

Restricted cash consists of cash deposited into a savings account with a financial institution as collateral for the Company’s obligations under its facility leases of premises located in San Francisco, California. The facility leases expire in April 2018 and October 2024.

(s) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded net of the allowance for doubtful accounts and the reserve for sales credits. The allowance for doubtful accounts is estimated based on the Company’s assessment of its ability to collect on customer accounts receivable. The Company regularly reviews the allowance by considering certain factors such as historical experience, credit quality, age of accounts receivable balances and other known conditions that may affect a customer’s ability to pay. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet their financial obligations, a specific allowance is recorded against amounts due from the customer which reduces the net recognized receivable to the amount the Company reasonably believe will be collected. The Company writes-off accounts receivable against the allowance when a determination is made that the balance is uncollectible and collection of the receivable is no longer being actively pursued. The allowance for doubtful accounts was $0.2 million, $0.5 million and $0.8 million as of December 31, 2014 and 2015 and June 30, 2016 (unaudited), respectively.

(t) Costs Related to the Initial Public Offering

Costs related to the initial public offering, which consist of direct incremental legal and accounting fees relating to the IPO, are capitalized. These costs were deferred until the completion of the Company’s IPO and were offset against IPO proceeds within the consolidated statement of stockholders’ equity upon the effectiveness of the IPO in June 2016. As of December 31, 2015, the Company had $2.0 million of deferred offering costs that were recorded as prepaid expenses and other current assets in the accompanying consolidated balance sheet.

(u) Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. Maintenance and repairs are charged to expenses as incurred.

The useful lives of property and equipment are as follows:

 

Capitalized software development costs

     3 years   

Office equipment

     3 years   

Furniture and fixtures

     5 years   

Software

     3 years   

Leasehold improvements

    
 
 
 
Shorter of
5 years or
remaining
lease term
  
  
  
  


  (v) Intangible Assets

Intangible assets recorded by the Company are costs directly associated with securing legal registration of patents and trademarks and the fair value of identifiable intangible assets acquired in business combinations.

Intangible assets with determinable economic lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful life of each asset on a straight-line basis. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company’s long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions. Intangible assets without determinable economic lives are carried at cost, not amortized and reviewed for impairment at least annually.

 

The useful lives of the intangible assets are as follows:

 

Developed technology

     3 years   

Customer relationship

     5 years   

Trade names

     2 years   

Patents

     20 years   

Trademarks

     indefinite   


  (w) Goodwill

Goodwill represents excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company has determined that it operates as one reporting unit and has selected November 30 as the date to perform its annual impairment test. In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the Company’s business. If these estimates or their related assumptions change in the future, the Company may be required to record impairment for these assets. Management may first evaluate qualitative factors to assess if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine if a two-stepimpairment test is necessary. Management may choose to proceed directly to the two-step evaluation, bypassing the initial qualitative assessment. The first step of the impairment test involves comparing the fair value of the reporting unit to its net book value, including goodwill. If the net book value exceeds its fair value, then the Company would perform the second step of the goodwill impairment test to determine the amount of the impairment loss. The impairment loss would be calculated by comparing the implied fair value of the goodwill to its net book value. In calculating the implied fair value of goodwill, the fair value of the entity would be allocated to all of the other assets and liabilities based on their fair values. The excess of the fair value of the entity over the amount assigned to other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. No goodwill impairment charges have been recorded for any period presented.

(x) Impairment of Long-Lived Assets

The Company evaluates long-lived assets, including property and equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value. There was no impairment during the years ended December 31, 2013, 2014 and 2015 and the six months ended June 30, 2015 and 2016 (unaudited). The value of the internally-developed software written-off due to abandonment was $0.1 million, $87,000 and $0.1 million in the year ended December 31, 2015 and the six months ended June 30, 2015 and 2016 (unaudited), respectively. There were no write-offs in any other period presented.

(y) Deferred Revenue

Deferred revenue consists of cash deposits from customers to be applied against future usage and customer billings in advance of revenues being recognized from the Company’s contracts. Deferred revenue is generally expected to be recognized during the succeeding 12-month period and is thus recorded as a current liability.

(z) Commissions

Commissions consist of variable compensation earned by sales personnel. Sales commissions associated with the acquisition of new customer contracts are recognized as sales and marketing expense at the time the customer has entered into a binding agreement.

(aa) Business Combinations

The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair values. Goodwill is measured as the excess of the consideration transferred over the fair value of assets acquired and liabilities assumed on the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement. The authoritative guidance allows a measurement period of up to one year from the date of acquisition to make adjustments to the preliminary allocation of the purchase price. As a result, during the measurement period the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon conclusion of the measurement period or final determination of the values of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to the consolidated statement of operations.

(bb) Segment Information

The Company’s Chief Executive Officer is the chief operating decision maker, who reviews the Company’s financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company’s financial performance. Accordingly, the Company has determined that it operates in a single reporting segment.

(cc) Fair Value of Financial Instruments

The Company records certain of its financial assets at fair value on a recurring basis. The Company’s financial instruments, which include cash, cash equivalents, accounts receivable and accounts payable are recorded at their carrying amounts, which approximate their fair values due to their short-term nature. Restricted cash is long-term in nature. However, it consists of cash in a savings account, hence its carrying amount approximates its fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

 

    Level 1 Inputs:  Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

    Level 2 Inputs:  Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

    Level 3 Inputs:  Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

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

(dd) Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2016-13, “Financial InstrumentsCredit Losses: Measurement of Credit Losses on Financial Instruments”, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, “CompensationStock Compensation (Topic 718): Improvements to Employee Share -Based Payment Accounting.” This standard is intended to simplify several areas of accounting for stock-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-termleases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. While the Company expects the adoption of this standard to result in an increase to its reported assets and liabilities, the Company has not yet determined the full impact that the adoption of this standard will have on its financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This new guidance will replace most existing U.S. GAAP guidance on this topic. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 which deferred, by one year, the effective date for the new revenue reporting standard for entities reporting under U.S. GAAP. In accordance with the deferral, this guidance will be effective for the Company beginning January 1, 2018 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted beginning January 1, 2017. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing”, clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients”, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The effective date and transition requirements for ASU 2016-08, ASU 2016-10 and ASU 2016-12 are the same as the effective date and transition requirements for ASU 2014-09. The Company is evaluating the impact that these ASUs will have on its consolidated financial statements and related disclosures and has not yet selected a transition method.

Summary of Significant Accounting Policies (Tables)

The useful lives of property and equipment are as follows:

 

Capitalized software development costs

     3 years   

Office equipment

     3 years   

Furniture and fixtures

     5 years   

Software

     3 years   

Leasehold improvements

    
 
 
 
Shorter of
5 years or
remaining
lease term
  
  
  
  

The useful lives of the intangible assets are as follows:

 

Developed technology

     3 years   

Customer relationship

     5 years   

Trade names

     2 years   

Patents

     20 years   

Trademarks

     indefinite   

Fair Value Measurements (Tables)
Schedule of assets measured at fair value on a recurring basis

The following table provides the assets measured at fair value on a recurring basis as of December 31, 2014 and 2015 and June 30, 2016 (in thousands):

 

     Total Carrying
Value
     As of December 31, 2014  
        Level I      Level 2      Level 3      Total  

Financial Assets:

              

Money market funds (included in cash and cash equivalents)

   $ 32,587       $ 32,587       $       $       $ 32,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

   $ 32,587       $ 32,587       $       $       $ 32,587   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Total Carrying
Value
     As of December 31, 2015  
        Level 1      Level 2      Level 3      Total  

Financial Assets:

              

Money market funds (included in cash and cash equivalents)

   $ 80,886       $ 80,886       $       $       $ 80,886   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

   $ 80,886       $ 80,886       $       $       $ 80,886   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Total Carrying
Value
     As of June 30, 2016 (Unaudited)  
        Level 1      Level 2      Level 3      Total  

Financial Assets:

              

Money market funds (included in cash and cash equivalents)

   $ 246,315       $ 246,315       $       $       $ 246,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total financial assets

   $ 246,315       $ 246,315       $       $       $ 246,315   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

Property and Equipment (Tables)

Property and equipment consisted of the following (in thousands):

 

     As of
December 31,
    As of
June 30,
2016
 
     2014     2015    
                 (Unaudited)  

Capitalized software development costs

   $ 6,783      $ 16,030      $ 21,997   

Office equipment

     1,231        2,662        3,849   

Furniture and fixtures

     328        393        438   

Software

     653        755        865   

Leasehold improvements

     380        568        2,722   
  

 

 

   

 

 

   

 

 

 

Total property and equipment

     9,375        20,408        29,871   

Less: accumulated depreciation and amortization

     (2,624     (6,350     (9,327
  

 

 

   

 

 

   

 

 

 

Total property and equipment, net

   $ 6,751      $ 14,058      $ 20,544   
  

 

 

   

 

 

   

 

 

 

The amortization expense was allocated as follows (in thousands):

 

     Year Ended
December 31,
     Six Months
Ended
June 30,
 
     2013      2014      2015      2015      2016  
                          (Unaudited)  

Cost of revenue

   $ 265       $ 783       $ 1,793       $ 686       $ 1,408   

Research and development

     84         415         1,045         347         884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 349       $ 1,198       $ 2,838       $ 1,033       $ 2,292   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Acquisition of Authy, Inc. (Tables)

The following table presents the purchase price allocation recorded in the Company’s consolidated balance sheet on the acquisition date (in thousands):

 

     Total  

Net tangible assets(3)

   $ 1,217   

Goodwill(1)(3)

     3,113   

Intangible assets(2)

     1,760   
  

 

 

 

Total purchase price

   $ 6,090   
  

 

 

 

The Company acquired a net deferred tax liability of $0.1 million in this business combination.

 

(1)  Goodwill represents the excess of purchase price over the fair value of identifiable tangible and intangible assets acquired and liabilities assumed. The goodwill in this transaction is primarily attributable to the future cash flows to be realized from the acquired technology platform, existing customer base and the future development initiatives of the assembled workforce. None of the goodwill is deductible for tax purposes.
(2)  Identifiable finite-lived intangible assets were comprised of the following:

 

     Total      Estimated
life
(in years)
 

Developed technology

   $ 1,300         3   

Customer relationships

     400         5   

Trade name

     60         2   
  

 

 

    

Total intangible assets acquired

   $ 1,760      
  

 

 

    
(3)  As part of net tangible assets, the Company acquired $66,000 in accounts receivable subject to dispute resolution with a customer. The matter was resolved later in 2015 and $52,000 was deemed uncollectible immediately prior to the date of acquisition. The Company’s adjustment of its initial purchase price allocation resulted in an increase to goodwill and decrease to net tangible assets of $52,000. After the adjustment, the purchase price allocation related to this acquisition became final. Goodwill balance as of June 30, 2016 was as follows:

 

     Total  

Balance as of December 31, 2014

   $   

Goodwill recorded in connection with Authy acquisition

     3,113   

Subsequent adjustment to purchase price allocation

     52   
  

 

 

 

Balance as of December 31, 2015

     3,165   

Adjustment to goodwill (unaudited)

       
  

 

 

 

Balance as of June 30, 2016 (unaudited)

   $ 3,165   
  

 

 

 
Intangible Assets (Tables)

Intangible assets consisted of the following (in thousands):

 

     As of December 31, 2014  
     Gross      Accumulated
Amortization
     Net  

Patents

   $   527       $   (17)       $   510   
  

 

 

    

 

 

    

 

 

 

Total

   $   527       $   (17)       $   510   
  

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2015  
     Gross      Accumulated
Amortization
     Net  

Developed technology

   $ 1,300       $ (370    $ 930   

Customer relationships

     400         (68      332   

Trade name

     60         (26      34   

Patent

     1,021         (25      996   
  

 

 

    

 

 

    

 

 

 

Total

   $ 2,781       $ (489    $ 2,292   
  

 

 

    

 

 

    

 

 

 

 

     As of June 30, 2016  
     Gross      Accumulated
Amortization
     Net  
     (Unaudited)  

Amortizable intangible assets:

        

Developed technology

   $ 1,300       $ (586    $ 714   

Customer relationships

     400         (108      292   

Trade name

     60         (41      19   

Patent

     1,351         (35      1,316   
  

 

 

    

 

 

    

 

 

 

Total amortizable intangible assets

     3,111         (770      2,341   
  

 

 

    

 

 

    

 

 

 

Non-amortizable intangible assets:

        

Trademark

     263                 263   
  

 

 

    

 

 

    

 

 

 

Total

   $ 3,374       $ (770    $ 2,604   
  

 

 

    

 

 

    

 

 

 

Total estimated future amortization expense was as follows (in thousands):

 

     As of
December 31,
2015
     As of
June 30,
2016
 
            (Unaudited)  

2016

   $ 553       $ 288   

2017

     527         549   

2018

     153         176   

2019

     89         112   

2020

     21         43   

Thereafter

     949         1,173   
  

 

 

    

 

 

 

Total

   $ 2,292       $ 2,341   
  

 

 

    

 

 

 
Accrued Expenses and Other Liabilities (Tables)

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

     As of
December 31,
     As of
June 30,
 
     2014      2015      2016  
                   (Unaudited)  

Accrued payroll and related

   $ 809       $ 972       $ 2,790   

Accrued bonus and commission

     1,344         1,832         1,284   

Accrued cost of revenue

     2,736         6,496         7,527   

Sales and other taxes payable

     10,312         17,634         23,346   

Accrued other expense

     2,597         5,064         7,193   
  

 

 

    

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 17,798       $ 31,998       $ 42,140   
  

 

 

    

 

 

    

 

 

 

Other long-term liabilities consisted of the following (in thousands):

 

     As of
December 31,
     As of
June 30,
2016
 
     2014      2015     
                   (Unaudited)  

Deferred rent

   $ 523       $ 364       $ 9,515   

Accrued other expense

     59         84         236   
  

 

 

    

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 582       $ 448       $ 9,751   
  

 

 

    

 

 

    

 

 

 

 

Supplemental Balance Sheet Information (Tables)
Allowance for doubtful accounts:

 

     Year Ended
December 31,
    Six Months
Ended
June 30,
 
     2013     2014     2015     2015     2016  
                       (Unaudited)  

Balance, beginning of period

   $      $ 98      $ 210      $ 210      $ 486   

Additions

     213        261        705        368        847   

Write-offs

     (115     (149     (429     (61     (538
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 98      $ 210      $ 486      $ 517      $ 795   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Sales credit reserve:

 

     Year Ended
December 31,
    Six Months
Ended
June 30,
 
     2013      2014     2015     2015     2016  
                        (Unaudited)  

Balance, beginning of period

   $       $ 30      $ 312      $ 312      $ 714   

Additions

     30         683        1,210        529        843   

Deductions against reserve

             (401     (808     (289     (905
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 30       $ 312      $ 714      $ 552      $ 652   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
Revenue by Geographic Area (Tables)
Schedule of revenue by geographic area

The following table sets forth revenue by geographic area (in thousands):

 

     Year Ended
December 31,
    Six Months
Ended
June 30,
 
     2013     2014     2015     2015     2016  
                       (Unaudited)  

Revenue by geographic area:

          

United States

   $ 45,470      $ 78,251      $ 143,145      $ 60,847      $ 104,993   

International

     4,450        10,595        23,774        10,472        18,857   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 49,920      $ 88,846      $ 166,919      $ 71,319      $ 123,850   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Percentage of revenue by geographic area:

          

United States

     91     88     86     85     85

International

     9     12     14     15     15

Commitments and Contingencies (Tables)

Future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

 

Year Ending December 31:

   As of
December 31,
2015
     As of
June 30,
2016(1)
 
            (Unaudited)  

2016

   $ 3,793       $ 2,824   

2017

     3,498         8,596   

2018

     1,903         6,984   

2019

     513         5,673   

2020

     159         5,408   

Thereafter

             20,963   
  

 

 

    

 

 

 

Total minimum lease payments

   $ 9,866       $     50,448   
  

 

 

    

 

 

 

 

  (1)  The future minimum lease payments related to the 375 Beale Street lease do not include the $8.3 million of tenant improvement allowance available under the lease.

Future minimum payments under other existing noncancellable purchase obligations were as follows (in thousands). Unrecognized tax benefits are not included in these amounts because any amounts expected to be settled in cash are not material:

 

Year Ending December 31:

   As of
December 31,
2015
     As of
June 30,
2016
 
            (Unaudited)  

2016

   $ 18,853       $ 3,871   

2017

     2,001         3,061   

2018

             97   

2019

             15   
  

 

 

    

 

 

 

Total payments

   $ 20,854       $     7,044   
  

 

 

    

 

 

 

 

Stockholders' Equity (Tables)

As of December 31, 2014 and 2015, the Company had outstanding Series A, B, C, D, E and T convertible preferred stock (individually referred to as “Series A, B, C, D, E or T” or collectively “Preferred Stock”) as follows (in thousands, except share data):

 

    As of December 31, 2014  
    Shares
Authorized
    Shares Issued and
Outstanding
    Aggregate
Liquidation
preference
    Proceeds, Net
of Issuance
Costs
 

Series A

    13,173,240        13,173,240      $ 4,624      $ 4,624   

Series B

    11,416,062        11,416,062        12,000        11,941   

Series C

    8,466,254        8,452,864        25,250        25,196   

Series D

    9,440,324        9,440,324        70,000        69,930   

Series T

    5,000,000                        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

    47,495,880        42,482,490      $ 111,874      $ 111,691   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

    As of December 31, 2015  
    Shares
Authorized
    Shares Issued and
Outstanding
    Aggregate
Liquidation
preference
    Proceeds, Net
of Issuance
Costs
 

Series A

    13,173,240        13,076,491      $ 4,590      $ 4,592   

Series B

    11,416,062        11,146,895        11,717        11,658   

Series C

    8,452,864        8,452,864        25,250        25,196   

Series D

    9,440,324        9,440,324        70,000        69,930   

Series E

    11,494,249        11,494,249        130,000        125,448   

Series T

    5,000,000        897,618 (1)      9        (2) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

    58,976,739        54,508,441      $ 241,566      $ 236,824   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  The outstanding shares include 687,885 shares held in escrow as of December 31, 2015 related to the Authy acquisition. Of these shares, 507,885 shares are subject to graded vesting over a period of 3.6 years, as amended, and have a fair value of $4.0 million as of December 31, 2015. A total of 127,054 shares are subject to performance conditions and can be relinquished, if the performance conditions are not met.

 

(2)  389,733 shares were issued as part of the purchase price for Authy acquisition and had a fair value of $3.1 million on the acquisition closing date.

The Company had reserved shares of common stock for issuance as follows:

 

     As of December 31,     As of
June 30,

2016
 
     2014      2015    
                  (Unaudited)  

Convertible preferred stock outstanding

     42,482,490         54,508,441 (1)        

Stock options issued and outstanding

     13,141,311         16,883,837        16,918,789   

Nonvested restricted stock units issued and outstanding

             71,000        891,008   

Common stock reserved for Twilio.org

             888,022        780,397   

Stock-based awards available for grant under 2008 Plan

     575,554         14,920          

Stock-based awards available for grant under 2016 Plan

                    11,446,750   

Common stock reserved for issuance under 2016 ESPP

                    2,400,000   
  

 

 

    

 

 

   

 

 

 

Total

     56,199,355         72,366,220        32,436,944   
  

 

 

    

 

 

   

 

 

 

 

(1)  Includes 687,885 shares of Series T convertible preferred stock related to the Authy acquisition held in escrow as of December 31, 2015.
Stock Based Compensation (Tables)

Stock options and restricted stock units activity under the 2008 Plan and 2016 Plan was as follows:

Stock Options

 

    Number of
options
outstanding
    Weighted-
average
exercise
price
(per share)
    Weighted-
average
remaining
contractual
term
(in years)
    Aggregate
intrinsic value
(in thousands)
 

Outstanding options as of
December 31, 2013

    8,616,443      $ 2.00        8.83      $ 16,077   

Granted

    6,844,749        4.44       

Exercised

    (494,673     1.25       

Forfeited and cancelled

    (1,825,208     2.32       
 

 

 

       

Outstanding options as of
December 31, 2014

    13,141,311        3.25        8.59        50,215   

Granted

    6,919,556        8.14       

Exercised

    (1,767,192     1.93       

Forfeited and cancelled

    (1,409,838     4.24       
 

 

 

       

Outstanding options as of
December 31, 2015

    16,883,837        5.31        8.30        80,758   

Granted (unaudited)

    1,894,850        10.73       

Exercised (unaudited)

    (1,186,805     3.60       

Forfeited and cancelled (unaudited)

    (673,093     5.92       
 

 

 

       

Outstanding options as of
June 30, 2016 (unaudited)

    16,918,789      $ 6.01        8.24      $ 515,848   
 

 

 

       

Options vested and exercisable as of
December 31, 2015

    5,106,728      $ 2.85        7.03      $ 36,976   
 

 

 

       

Options vested and expected to vest as of
December 31, 2015

    15,558,382      $ 5.17        8.24      $ 76,479   
 

 

 

       

Options vested and exercisable as of
June 30, 2016 (unaudited)

    5,903,943      $ 3.53        7.20      $ 194,670   
 

 

 

       

Options vested and expected to vest as of
June 30, 2016 (unaudited)

    15,910,560      $ 5.89        8.19      $ 487,073   
 

 

 

       

Restricted Stock Units

 


    Number of
options
outstanding
    Weighted-
average
grant date
fair value
(per share)
    Aggregate
intrinsic

value
(in thousands)
 

Nonvested RSUs as of December 31, 2014

         $      $   

Granted

    71,000        9.39     

Vested

               

Forfeited and cancelled

               
 

 

 

     

Nonvested RSUs as of December 31, 2015

    71,000        9.39        716   

Granted (unaudited)

    833,762        10.75     

Vested (unaudited)

    (13,754     10.09     

Forfeited and cancelled (unaudited)

               
 

 

 

     

Nonvested RSUs as of June 30, 2016 (unaudited)

    891,008      $ 10.65      $ 32,522   
 

 

 

     

Valuation Assumptions

The fair value of employee stock options was estimated on the date of grant using the following assumptions in the Black-Scholes option pricing model:

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2013     2014     2015     2015     2016  
                      (Unaudited)  

Employee Stock Options

         

Fair value of common stock

    $2.50 - 3.73        $3.99 - 6.69        $7.07 - 10.09        $7.07 - 7.78        $10.09 - $15.00   

Expected term (in years)

    5.77 - 6.08        5.27 - 6.57        6.08        6.08        6.08   

Expected volatility

    54.4%        54.4%        47.8% - 54.9%        52.0% - 54.9%        51.4% - 53.0%   

Risk-free interest rate

    0.9% - 1.9%        1.7% - 2.0%        1.4% - 2.0%        1.4% - 1.9%        1.3% - 1.5%   

Dividend rate

    0%        0%        0%        0%        0%   

Employee Stock Purchase Plan

         

Expected term (in years)

                                0.90   

Expected volatility

                                52%   

Risk-free interest rate

                                0.6%   

Dividend rate

                                0%   

 

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

 

     Year Ended
December 31,
     Six Months
Ended
June 30,
 
     2013      2014      2015      2015      2016  
                          (Unaudited)  

Cost of revenue

   $ 27       $ 39       $ 65       $ 28       $ 51   

Research and development

     810         1,577         4,046         1,459         3,895   

Sales and marketing

     753         1,335         2,389         933         1,850   

General and administrative

     567         1,027         2,377         1,147         2,205   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,157       $ 3,978       $ 8,877       $ 3,567       $ 8,001   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Net Loss per Share Attributable to Common Stockholders (Tables)

The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2013     2014     2015     2015     2016  
                      (Unaudited)  

Net loss attributable to common stockholders

  $ (26,854   $ (26,758   $ (38,896   $ (18,236   $ (17,462
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted

    16,916,035        16,900,124        17,746,526        18,070,932        20,872,550   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

  $ (1.59   $ (1.58   $ (2.19   $ (1.01   $ (0.84
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stockholders for the periods presented because their effect would have been anti-dilutive:

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2013     2014     2015     2015     2016  
                      (Unaudited)  

Convertible preferred stock outstanding

    42,482,490        42,482,490        54,508,441 (1)      53,106,011 (1)        

Stock options issued and outstanding

    8,616,443        13,141,311        16,883,837        14,404,793        16,918,789   

Nonvested restricted stock units issued and outstanding

                  71,000               891,008   

Common stock reserved for Twilio.org

                  888,022               780,397   

Shares committed under 2016 ESPP

                                583,950   

Unvested shares subject to repurchase

    320,900        127,316        52,407        49,323        130,749   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    51,419,833        55,751,117        72,403,707        67,560,127        19,304,893   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Includes 687,885 shares as of December 31, 2015 and June 30, 2015 (unaudited) of Series T convertible preferred stock related to the Authy acquisition held in escrow.
Income Taxes (Tables)

The following table presents domestic and foreign components of loss before income taxes for the periods presented (in thousands):

 

    Year Ended
December 31,
 
    2013     2014     2015  

United States

  $ (26,928   $ (26,837   $ (23,962

International

    74        92        (11,420
 

 

 

   

 

 

   

 

 

 

Total net loss before provision for income taxes

  $ (26,854   $ (26,745   $ (35,382
 

 

 

   

 

 

   

 

 

 

 

Provision for income taxes consists of the following (in thousands):

 

     Year Ended
December 31,
 
     2013      2014      2015  

Current:

        

Federal

   $       $       $   

State

                     45   

Foreign

             13         213   
  

 

 

    

 

 

    

 

 

 

Total

             13         258   

Deferred:

        

Federal

                     (109

State

                       

Foreign

                     (27
  

 

 

    

 

 

    

 

 

 

Total

                     (136
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

   $       $ 13       $ 122   
  

 

 

    

 

 

    

 

 

 

The following table presents a reconciliation of the statutory federal tax rate and the Company’s effective tax rate for the years ended December 31, 2013, 2014 and 2015:

 

     Year Ended
December 31,
 
     2013     2014     2015  

Tax benefit at federal statutory rate

     34     34     34

State tax, net of federal benefit

     6        7        (3

Stock-based compensation

     (9     (4     (8

Credits

           1              2              4   

Foreign rate differential

                   (11

Other

                   (2

Change in valuation allowance

     (32     (39     (14
  

 

 

   

 

 

   

 

 

 

Effective tax rate

            
  

 

 

   

 

 

   

 

 

 

 

The following table presents the significant components of the Company’s deferred tax assets and liabilities (in thousands):

 

     As of
December 31,
 
     2013      2014      2015  

Deferred tax assets:

        

Net operating loss carry forwards

   $ 16,310       $ 24,402       $ 27,401   

Accrued and prepaid expenses

     2,815         5,573         7,603   

Stock-based compensation

     200         423         1,433   

Research and development credits

     2,330         3,918         6,022   
  

 

 

    

 

 

    

 

 

 

Gross deferred tax assets

     21,655         34,316         42,459   

Valuation allowance

     (20,194      (30,559      (35,613
  

 

 

    

 

 

    

 

 

 

Net deferred tax assets

     1,461         3,757         6,846   

Deferred tax liabilities:

        

Capitalized software

     (886      (2,019      (4,084

Prepaid expenses

     (538      (1,607      (2,035

Acquired intangibles

                     (460

Property and equipment

     (37      (131      (240
  

 

 

    

 

 

    

 

 

 

Net deferred tax assets

   $       $       $ 27   
  

 

 

    

 

 

    

 

 

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

     Year Ended
December 31,
 
     2013      2014      2015  

Unrecognized tax benefit, beginning of year

   $ 318       $ 592       $ 1,024   

Gross increases for tax provisions of current years

     274         432         655   
  

 

 

    

 

 

    

 

 

 

Unrecognized tax benefit, end of year

   $ 592       $ 1,024       $ 1,679   
  

 

 

    

 

 

    

 

 

 
Organization and Description of Business - Organization and Description of Business (Detail)
Jun. 30, 2016
Product
Organization and Description of Business
 
Number of basic categories of product offerings
Organization and Description of Business - Initial Public Offering (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
1 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Jun. 30, 2016
Common Class A
Jun. 30, 2016
Common Class A
IPO
Jun. 30, 2016
Common Class A
IPO
Jun. 30, 2016
Common Class A
Over-Allotment Option
Jun. 30, 2016
Common Class B
Jun. 30, 2016
Common Class B
IPO
Initial Public Offering
 
 
 
 
 
 
 
 
 
Net proceeds received
 
 
 
$ 155.7 
 
 
 
 
 
Shares upon automatic conversion (in shares)
 
 
 
 
 
 
 
54,508,441 
54,508,441 
Conversion ratio
 
 
 
 
 
 
 
 
Shares sold (in shares)
 
 
 
 
11,500,000 
11,500,000 
1,500,000 
 
 
Share price (in dollars per share)
 
 
 
 
$ 15.00 
$ 15.00 
 
 
 
Common stock, outstanding (in shares)
84,526,093 
17,324,003 
17,446,051 
11,647,711 
 
 
 
72,878,382 
 
Summary of Significant Accounting Policies - Recently Adopted Accounting Standards (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Noncurrent deferred tax assets
$ 0 
Current Deferred tax liabilities
Previously Reported
 
Noncurrent deferred tax assets
1.0 
Current Deferred tax liabilities
$ 1.0 
Summary of Significant Accounting Policies - Concentration of Credit Risk (Detail) (Customer Concentration Risk)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Customer
Jun. 30, 2015
Customer
Dec. 31, 2015
Customer
Dec. 31, 2014
Customer
Dec. 31, 2013
Customer
Revenue
 
 
 
 
 
Concentration of Credit Risk
 
 
 
 
 
Number of customers
Concentration risk (as a percent)
 
18.00% 
17.00% 
13.00% 
11.00% 
Revenue |
Customer One
 
 
 
 
 
Concentration of Credit Risk
 
 
 
 
 
Concentration risk (as a percent)
12.00% 
 
 
 
 
Revenue |
Customer Two
 
 
 
 
 
Concentration of Credit Risk
 
 
 
 
 
Concentration risk (as a percent)
12.00% 
 
 
 
 
Accounts Receivable
 
 
 
 
 
Concentration of Credit Risk
 
 
 
 
 
Number of customers
 
 
Concentration risk (as a percent)
12.00% 
 
 
 
 
Accounts Receivable |
Customer One
 
 
 
 
 
Concentration of Credit Risk
 
 
 
 
 
Concentration risk (as a percent)
 
 
11.00% 
22.00% 
 
Accounts Receivable |
Customer Two
 
 
 
 
 
Concentration of Credit Risk
 
 
 
 
 
Concentration risk (as a percent)
 
 
11.00% 
11.00% 
 
Summary of Significant Accounting Policies - Revenue Recognition (Detail) (Reserve for Sales Credits, USD $)
In Millions, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Reserve for Sales Credits
 
 
 
Reserve for Sales Credits
$ 0.7 
$ 0.7 
$ 0.3 
Summary of Significant Accounting Policies - Internal-Use Software Development Costs (Detail) (Software and Software Development Costs)
6 Months Ended
Jun. 30, 2016
Software and Software Development Costs
 
Estimated life (in years)
3 years 
Summary of Significant Accounting Policies - Advertising Costs (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Marketing and Advertising Expense [Abstract]
 
 
 
 
 
Advertising expense
$ 1.6 
$ 1.4 
$ 2.9 
$ 1.0 
$ 0.4 
Summary of Significant Accounting Policies - Comprehensive Loss (Detail) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Comprehensive Income Loss [Abstract]
 
 
 
 
 
Other comprehensive income (loss)
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
Summary of Significant Accounting Policies - Net Loss Per Share Attributable to Common Stockholders (Detail)
6 Months Ended
Jun. 30, 2016
Net Loss Per Share Attributable To Common Stockholders Abstract
 
Common stock entitled, number of vote per share
Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share. 
Summary of Significant Accounting Policies - Accounts Receivable and Allowance for Doubtful Accounts (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Jun. 30, 2015
Dec. 31, 2014
Dec. 31, 2013
Receivables [Abstract]
 
 
 
 
 
Allowance for doubtful accounts
$ 795 
$ 486 
$ 517 
$ 210 
$ 98 
Summary of Significant Accounting Policies - Property Plant and Equipment Estimated Useful Lives (Detail)
6 Months Ended
Jun. 30, 2016
Capitalized Software Development Costs
 
Property, Plant and Equipment [Line Items]
 
Property, Plant and Equipment, Estimated Useful Lives
3 years 
Office Equipment
 
Property, Plant and Equipment [Line Items]
 
Property, Plant and Equipment, Estimated Useful Lives
3 years 
Furniture and Fixtures
 
Property, Plant and Equipment [Line Items]
 
Property, Plant and Equipment, Estimated Useful Lives
5 years 
Software
 
Property, Plant and Equipment [Line Items]
 
Property, Plant and Equipment, Estimated Useful Lives
3 years 
Leasehold Improvements
 
Property, Plant and Equipment [Line Items]
 
Leasehold improvements, Estimated Useful Life
Shorter of 5 years or remaining lease term 
Summary of Significant Accounting Policies - Useful Lives of Intangible Assets (Detail)
6 Months Ended
Jun. 30, 2016
Trademarks
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Estimated useful life, Trade Marks
indefinite 
Developed Technology
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Estimated life (in years)
3 years 
Customer Relationships
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Estimated life (in years)
5 years 
Trade Name
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Estimated life (in years)
2 years 
Patent
 
Acquired Finite-Lived Intangible Assets [Line Items]
 
Estimated life (in years)
20 years 
Summary of Significant Accounting Policies - Goodwill (Detail)
6 Months Ended
Jun. 30, 2016
Reporting_Unit
Goodwill [Abstract]
 
Number of reporting unit
Summary of Significant Accounting Policies - Impairment of Long Lived Assets (Detail) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Accounting Policies [Abstract]
 
 
 
 
 
Long-lived assets, including property and equipment and intangible assets, impairment loss
$ 0 
 
$ 0 
$ 0 
$ 0 
Value of internally-developed software written-off due to abandonment
$ 146,000 
$ 87,000 
$ 113,000 
$ 0 
$ 0 
Fair Value Measurements - Assets Measured at Fair Value on a Recurring Basis (Detail) (Recurring, USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Level 1
 
 
 
Fair Value Measurements
 
 
 
Total financial assets
$ 246,315 
$ 80,886 
$ 32,587 
Money Market Funds |
Level 1
 
 
 
Fair Value Measurements
 
 
 
Money market funds (included in cash and cash equivalents)
246,315 
80,886 
32,587 
Carrying Value
 
 
 
Fair Value Measurements
 
 
 
Total financial assets
246,315 
80,886 
32,587 
Carrying Value |
Money Market Funds
 
 
 
Fair Value Measurements
 
 
 
Money market funds (included in cash and cash equivalents)
246,315 
80,886 
32,587 
Fair Value
 
 
 
Fair Value Measurements
 
 
 
Total financial assets
246,315 
80,886 
32,587 
Fair Value |
Money Market Funds
 
 
 
Fair Value Measurements
 
 
 
Money market funds (included in cash and cash equivalents)
$ 246,315 
$ 80,886 
$ 32,587 
Fair Value Measurements - Additional Disclosures (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Fair Value Disclosures [Abstract]
 
 
 
 
 
Realized gains (losses)
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
Unrealized gains (losses)
Other-than-temporary impairments
$ 0 
$ 0 
$ 0 
$ 0 
$ 0 
Property and Equipment - Property and Equipment, Net (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Property and Equipment
 
 
 
Total property and equipment
$ 29,871 
$ 20,408 
$ 9,375 
Less: accumulated depreciation and amortization
(9,327)
(6,350)
(2,624)
Total property and equipment, net
20,544 
14,058 
6,751 
Capitalized Software Development Costs
 
 
 
Property and Equipment
 
 
 
Total property and equipment
21,997 
16,030 
6,783 
Office Equipment
 
 
 
Property and Equipment
 
 
 
Total property and equipment
3,849 
2,662 
1,231 
Furniture and Fixtures
 
 
 
Property and Equipment
 
 
 
Total property and equipment
438 
393 
328 
Software
 
 
 
Property and Equipment
 
 
 
Total property and equipment
865 
755 
653 
Leasehold Improvements
 
 
 
Property and Equipment
 
 
 
Total property and equipment
$ 2,722 
$ 568 
$ 380 
Property and Equipment - Depreciation and Amortization Expense (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Property, Plant and Equipment [Abstract]
 
 
 
 
 
Depreciation and amortization
$ 3.0 
$ 1.4 
$ 3.7 
$ 1.7 
$ 0.6 
Property and Equipment - Capitalized Stock-Based Compensation Expense (Detail) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Property and Equipment
 
 
 
 
 
Capitalized software development costs
$ 6,100,000 
$ 4,100,000 
$ 9,400,000 
$ 3,900,000 
$ 2,400,000 
Stock based compensation capitalized in software development costs
688,000 
372,000 
979,000 
293,000 
143,000 
Capitalized software amortization expense
$ 2,292,000 
$ 1,033,000 
$ 2,838,000 
$ 1,198,000 
$ 349,000 
Schedule of Amortization Expense (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Capitalized software amortization expense
$ 2,292 
$ 1,033 
$ 2,838 
$ 1,198 
$ 349 
Cost of Revenues
 
 
 
 
 
Capitalized software amortization expense
1,408 
686 
1,793 
783 
265 
Research and Development
 
 
 
 
 
Capitalized software amortization expense
$ 884 
$ 347 
$ 1,045 
$ 415 
$ 84 
Acquisition of Authy, Inc. - Consideration (Detail) (USD $)
6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 0 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Jun. 30, 2016
Research and Development Expense
Jun. 30, 2015
Research and Development Expense
Dec. 31, 2015
Research and Development Expense
Dec. 31, 2014
Research and Development Expense
Dec. 31, 2013
Research and Development Expense
Feb. 23, 2015
Authy, Inc.
Jun. 30, 2016
Authy, Inc.
Research and Development Expense
Dec. 31, 2015
Authy, Inc.
Research and Development Expense
Acquisition of Authy, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase price
 
 
 
 
 
 
 
 
 
 
$ 6,100,000 
 
 
Purchase price, cash
 
 
 
 
 
 
 
 
 
 
3,000,000 
 
 
Purchase price, fair value of shares of Series T convertible preferred stock
 
3,087,000 
3,087,000 
 
 
 
 
 
 
 
3,100,000 
 
 
Stock-based compensation expense
$ 8,001,000 
$ 3,567,000 
$ 8,877,000 
$ 3,978,000 
$ 2,157,000 
$ 3,895,000 
$ 1,459,000 
$ 4,046,000 
$ 1,577,000 
$ 810,000 
 
$ 400,000 
$ 600,000 
Acquisition of Authy, Inc. - Consideration - Shares of Stock (Detail) (Authy, Inc., Preferred Stock, Series T Preferred Stock, USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended
Feb. 23, 2015
Jun. 30, 2016
Dec. 31, 2015
Jun. 30, 2015
Feb. 23, 2015
Acquisition of Authy, Inc.
 
 
 
 
 
Shares issued (in shares)
389,733 
 
 
 
 
Shares held in escrow (in shares)
 
617,634 
687,885 
687,885 
180,000 
Shares released from escrow (in shares)
 
 
 
 
Fair value
 
 
 
 
$ 3.1 
Former Shareholder of Acquiree
 
 
 
 
 
Acquisition of Authy, Inc.
 
 
 
 
 
Shares issued (in shares)
507,885 
 
 
 
 
Fair value
 
 
 
 
$ 4.0 
Graded vesting period (in years)
3 years 7 months 6 days 
 
 
 
 
Shares subject to additional performance conditions (in shares)
127,054 
 
 
 
 
Shares vested (in shares)
 
70,251 
 
 
 
Acquisition of Authy, Inc. - Purchase Price Allocation (Detail) (USD $)
Jun. 30, 2016
Dec. 31, 2015
Feb. 23, 2015
Authy, Inc.
Feb. 23, 2015
Authy, Inc.
Previously Reported
Acquisition of Authy, Inc.
 
 
 
 
Net tangible assets
 
 
 
$ 1,217,000 
Goodwill
3,165,000 
3,165,000 
 
3,113,000 
Intangible assets
 
 
1,760,000 
1,760,000 
Total purchase price
 
 
 
6,090,000 
Net deferred tax liability
 
 
100,000 
 
Goodwill deductible for tax purposes
 
 
$ 0 
 
Acquisition of Authy, Inc. - Identifiable Finite-lived Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Jun. 30, 2016
Developed Technology
Jun. 30, 2016
Customer Relationships
Jun. 30, 2016
Trade Name
Feb. 23, 2015
Authy, Inc.
Feb. 23, 2015
Authy, Inc.
Developed Technology
Feb. 23, 2015
Authy, Inc.
Developed Technology
Feb. 23, 2015
Authy, Inc.
Customer Relationships
Feb. 23, 2015
Authy, Inc.
Customer Relationships
Feb. 23, 2015
Authy, Inc.
Trade Name
Feb. 23, 2015
Authy, Inc.
Trade Name
Acquisition of Authy, Inc.
 
 
 
 
 
 
 
 
 
 
Intangible assets
 
 
 
$ 1,760 
 
$ 1,300 
 
$ 400 
 
$ 60 
Estimated life (in years)
3 years 
5 years 
2 years 
 
3 years 
 
5 years 
 
2 years 
 
Acquisition of Authy, Inc. - Purchase Price Allocation Adjustment (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Feb. 23, 2015
Authy, Inc.
Dec. 31, 2015
Authy, Inc.
Adjustment
Acquisition of Authy, Inc.
 
 
 
 
Accounts receivable subject to dispute
 
 
$ 66 
 
Accounts receivable subject to dispute, deemed uncollectable
 
 
52 
 
Goodwill
3,165 
3,165 
 
52 
Net tangible assets
 
 
 
$ (52)
Acquisition of Authy, Inc. - Goodwill (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Goodwill
 
 
Balance at the beginning of the period
$ 3,165 
 
Adjustment to goodwill
 
Goodwill recorded in connection with Authy acquisition
 
3,113 
Subsequent adjustment to purchase price allocation
 
52 
Balance at the end of the period
$ 3,165 
$ 3,165 
Acquisition of Authy, Inc. - Acquisition Costs (Detail) (Authy, Inc., General and Administrative Expense, USD $)
In Millions, unless otherwise specified
12 Months Ended 24 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2015
Authy, Inc. |
General and Administrative Expense
 
 
 
Acquisition of Authy, Inc.
 
 
 
Acquisition related costs
$ 1.2 
$ 0.3 
$ 1.5 
Intangible Assets - Amortizable Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Intangible Assets
 
 
 
Gross
$ 3,111 
$ 2,781 
$ 527 
Accumulated Amortization
(770)
(489)
(17)
Net
2,341 
2,292 
510 
Developed Technology
 
 
 
Intangible Assets
 
 
 
Gross
1,300 
1,300 
 
Accumulated Amortization
(586)
(370)
 
Net
714 
930 
 
Customer Relationships
 
 
 
Intangible Assets
 
 
 
Gross
400 
400 
 
Accumulated Amortization
(108)
(68)
 
Net
292 
332 
 
Trade Name
 
 
 
Intangible Assets
 
 
 
Gross
60 
60 
 
Accumulated Amortization
(41)
(26)
 
Net
19 
34 
 
Patent
 
 
 
Intangible Assets
 
 
 
Gross
1,351 
1,021 
527 
Accumulated Amortization
(35)
(25)
(17)
Net
$ 1,316 
$ 996 
$ 510 
Intangible Assets - Total Intangible Assets, Gross (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Intangible Assets
 
 
 
Amortizable intangible assets, gross
$ 3,111 
$ 2,781 
$ 527 
Trademark
263 
 
 
Total
$ 3,374 
$ 2,781 
$ 527 
Intangible Assets - Total Intangible Assets, Net (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Intangible Assets
 
 
 
Amortizable intangible assets, net
$ 2,341 
$ 2,292 
$ 510 
Trademark
263 
 
 
Total
$ 2,604 
$ 2,292 
$ 510 
Intangible Assets - Total Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Intangible Assets
 
 
 
Gross
$ 3,374 
$ 2,781 
$ 527 
Accumulated Amortization
(770)
(489)
(17)
Net
$ 2,604 
$ 2,292 
$ 510 
Intangible Assets - Amortization Expense (Detail) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Intangible Assets
 
 
 
 
Amortization expense
$ 300,000 
$ 200,000 
$ 500,000 
$ 17,000.0 
Intangible Assets - Total Estimated Future Amortization Expense (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Intangible Assets
 
 
 
2016
 
$ 553 
 
2016 (remaining six months)
288 
 
 
2017
549 
527 
 
2018
176 
153 
 
2019
112 
89 
 
2020
43 
21 
 
Thereafter
1,173 
949 
 
Net
$ 2,341 
$ 2,292 
$ 510 
Accrued Expenses and Other Liabilities - Accrued Expenses and Other Current Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Accrued Expenses and Other Liabilities
 
 
 
Accrued payroll and related
$ 2,790 
$ 972 
$ 809 
Accrued bonus and commission
1,284 
1,832 
1,344 
Accrued cost of revenue
7,527 
6,496 
2,736 
Sales and other taxes payable
23,346 
17,634 
10,312 
Accrued other expense
7,193 
5,064 
2,597 
Total accrued expenses and other current liabilities
$ 42,140 
$ 31,998 
$ 17,798 
Accrued Expenses and Other Liabilities - Other Long Term Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Liabilities, Other than Long-term Debt, Noncurrent
 
 
 
Deferred rent
$ 9,515 
$ 364 
$ 523 
Accrued other expense
236 
84 
59 
Total accrued expenses and other liabilities
$ 9,751 
$ 448 
$ 582 
Supplemental Balance Sheet Information - Allowance for Doubtful Accounts (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Allowance for doubtful accounts
 
 
 
 
 
Balance, beginning of period
$ 486 
$ 210 
$ 210 
$ 98 
 
Additions
847 
368 
705 
261 
213 
Write-offs
(538)
(61)
(429)
(149)
(115)
Balance, end of period
$ 795 
$ 517 
$ 486 
$ 210 
$ 98 
Supplemental Balance Sheet Information - Sales Credit Reserve (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Sales credit reserve
 
 
 
 
 
Balance, beginning of period
$ 714 
$ 312 
$ 312 
$ 30 
 
Additions
843 
529 
1,210 
683 
30 
Deductions against reserve
(905)
(289)
(808)
(401)
 
Balance, end of period
$ 652 
$ 552 
$ 714 
$ 312 
$ 30 
Revenue by Geographic Area - Revenue by Geographic Area (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Revenue by Geographic Area
 
 
 
 
 
Revenue
$ 123,850 
$ 71,319 
$ 166,919 
$ 88,846 
$ 49,920 
United States
 
 
 
 
 
Revenue by Geographic Area
 
 
 
 
 
Revenue
104,993 
60,847 
143,145 
78,251 
45,470 
International
 
 
 
 
 
Revenue by Geographic Area
 
 
 
 
 
Revenue
$ 18,857 
$ 10,472 
$ 23,774 
$ 10,595 
$ 4,450 
Revenue by Geographic Area - Percentage of Revenue by Geographic Area (Detail) (Geographic Concentration Risk, Revenue)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
United States
 
 
 
 
 
Percentage of revenue by geographic area
 
 
 
 
 
Percentage of revenue (as a percent)
85.00% 
85.00% 
86.00% 
88.00% 
91.00% 
International
 
 
 
 
 
Percentage of revenue by geographic area
 
 
 
 
 
Percentage of revenue (as a percent)
15.00% 
15.00% 
14.00% 
12.00% 
9.00% 
Credit Facility (Detail) (Line of Credit, Revolving Credit Facility, USD $)
In Millions, unless otherwise specified
1 Months Ended
Jan. 31, 2013
January, 2013 Revolving Line of Credit
Jun. 30, 2016
Revolving credit agreement
Dec. 31, 2015
Revolving credit agreement
Jan. 31, 2015
Revolving credit agreement
Jan. 31, 2015
Revolving credit agreement
Prime Rate
Credit Facility
 
 
 
 
 
Maximum borrowing capacity
$ 5.0 
 
 
$ 15.0 
 
Amount available
 
15.0 
15.0 
 
 
Outstanding balance
 
$ 0 
$ 0 
 
 
Basis spread on variable rate (as a percent)
 
 
 
 
1.00% 
Commitments and Contingencies - Leases (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 6 Months Ended
Jan. 8, 2016
sqft
Jun. 30, 2016
Jan. 8, 2016
Commitments and Contingencies
 
 
 
Lease agreements term (in years)
 
8 years 
 
Tenant improvements allowance
 
$ 8.3 
 
New office space
90,000 
 
 
Future minimum lease payments per month in first 60 months
 
 
0.4 
Future minimum lease payments per month in after 60 months
 
 
0.5 
Letter of credit
 
$ 7.4 
$ 7.4 
375 Beale Street in San Francisco [Member]
 
 
 
Commitments and Contingencies
 
 
 
Lease agreements term (in years)
96 months 
96 months 
 
Commitments and Contingencies - Rent Expense (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Commitments and Contingencies
 
 
 
 
 
Rent expense
$ 3.0 
$ 1.9 
$ 4.1 
$ 2.6 
$ 1.5 
Commitments and Contingencies - Other Commitments (Detail)
6 Months Ended
Jun. 30, 2016
Minimum
 
Non-cancellable contractual commitments
 
Expiration period (in years)
1 year 
Maximum
 
Non-cancellable contractual commitments
 
Expiration period (in years)
4 years 
Commitments and Contingencies - Future Minimum Lease Payments (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Future minimum lease payments
 
 
2016
 
$ 3,793 
2016 (remaining six months)
2,824 
 
2017
8,596 
3,498 
2018
6,984 
1,903 
2019
5,673 
513 
2020
5,408 
159 
Thereafter
20,963 
 
Total minimum lease payments
$ 50,448 
$ 9,866 
Commitments and Contingencies - Tenant Improvement Allowance (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2016
Commitments and Contingencies
 
Tenant improvements allowance
$ 8.3 
Commitments and Contingencies - Future Minimum Payments under Other Existing Noncancellable Purchase Obligations (Detail) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Future minimum payments under other existing noncancellable purchase obligations
 
 
2016
 
$ 18,853 
2016 (remaining six months)
3,871 
 
2017
3,061 
2,001 
2018
97 
 
2019
15 
 
Total payments
$ 7,044 
$ 20,854 
Commitments and Contingencies - Indemnification Agreements (Detail) (Indemnification Agreement, USD $)
In Thousands, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Indemnification Agreement
 
 
 
Indemnification Agreements
 
 
 
Amount accrued
$ 0 
$ 0 
$ 0 
Commitments and Contingencies - Other Taxes (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Commitments and Contingencies
 
 
 
Liability for uncertain tax positions
$ 23.3 
$ 17.6 
$ 10.3 
Stockholders' Equity - Outstanding Convertible Preferred Stock (Detail) (Convertible Preferred Stock, USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Jun. 30, 2016
Class of Stock [Line Items]
 
 
 
Shares Authorized
58,976,739 
47,495,880 
Shares Issued
54,508,441 
42,482,490 
Shares Outstanding
54,508,441 
42,482,490 
Aggregate Liquidation preference
$ 241,566 
$ 111,874 
$ 0 
Proceeds, Net of Issuance Costs
236,824 
111,691 
 
Series A Preferred Stock
 
 
 
Class of Stock [Line Items]
 
 
 
Shares Authorized
13,173,240 
13,173,240 
 
Shares Issued
13,076,491 
13,173,240 
 
Shares Outstanding
13,076,491 
13,173,240 
 
Aggregate Liquidation preference
4,590 
4,624 
 
Proceeds, Net of Issuance Costs
4,592 
4,624 
 
Series B Preferred Stock
 
 
 
Class of Stock [Line Items]
 
 
 
Shares Authorized
11,416,062 
11,416,062 
 
Shares Issued
11,146,895 
11,416,062 
 
Shares Outstanding
11,146,895 
11,416,062 
 
Aggregate Liquidation preference
11,717 
12,000 
 
Proceeds, Net of Issuance Costs
11,658 
11,941 
 
Series C Preferred Stock
 
 
 
Class of Stock [Line Items]
 
 
 
Shares Authorized
8,452,864 
8,466,254 
 
Shares Issued
8,452,864 
8,452,864 
 
Shares Outstanding
8,452,864 
8,452,864 
 
Aggregate Liquidation preference
25,250 
25,250 
 
Proceeds, Net of Issuance Costs
25,196 
25,196 
 
Series D Preferred Stock
 
 
 
Class of Stock [Line Items]
 
 
 
Shares Authorized
9,440,324 
9,440,324 
 
Shares Issued
9,440,324 
9,440,324 
 
Shares Outstanding
9,440,324 
9,440,324 
 
Aggregate Liquidation preference
70,000 
70,000 
 
Proceeds, Net of Issuance Costs
69,930 
69,930 
 
Series E Preferred Stock
 
 
 
Class of Stock [Line Items]
 
 
 
Shares Authorized
11,494,249 
 
 
Shares Issued
11,494,249 
 
 
Shares Outstanding
11,494,249 
 
 
Aggregate Liquidation preference
130,000 
 
 
Proceeds, Net of Issuance Costs
125,448 
 
 
Series T Preferred Stock
 
 
 
Class of Stock [Line Items]
 
 
 
Shares Authorized
5,000,000 
5,000,000 
 
Shares Issued
897,618 
 
 
Shares Outstanding
897,618 
 
 
Aggregate Liquidation preference
$ 9 
 
 
Stockholders' Equity - Outstanding Convertible Preferred Stock (Parenthetical) (Detail) (Authy, Inc., Preferred Stock, Series T Preferred Stock, USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended 12 Months Ended
Feb. 23, 2015
Jun. 30, 2016
Dec. 31, 2015
Jun. 30, 2015
Feb. 23, 2015
Dec. 31, 2015
Subject to graded vesting.
Dec. 31, 2015
Subject to performance conditions.
Class of Stock [Line Items]
 
 
 
 
 
 
 
Shares held in escrow (in shares)
 
617,634 
687,885 
687,885 
180,000 
507,885 
127,054 
Vesting period
 
 
 
 
 
3 years 7 months 6 days 
 
Shares held in escrow, fair value
 
 
 
 
 
$ 4.0 
 
Shares issued as part of purchase price for acquisition
389,733 
 
 
 
 
 
 
Shares issued as part of purchase price for acquisition, fair value
 
 
 
 
$ 3.1 
 
 
Stockholders' Equity - Convertible Preferred Stock (Detail) (USD $)
6 Months Ended 1 Months Ended
Jun. 30, 2016
Jun. 30, 2016
Common Class B
Jun. 30, 2016
Series A Preferred Stock
Jun. 30, 2016
Series B Preferred Stock
Jun. 30, 2016
Series C Preferred Stock
Jun. 30, 2016
Series D Preferred Stock
Jun. 30, 2016
Series E Preferred Stock
Jun. 30, 2016
Series T Preferred Stock
Convertible Preferred Stock
 
 
 
 
 
 
 
 
Shares upon automatic conversion (in shares)
 
54,508,441 
 
 
 
 
 
 
Conversion ratio
 
 
 
 
 
 
 
Minimum IPO price for conversion
$ 50.0 
 
 
 
 
 
 
 
Stock conversion description
Each share of preferred stock shall be automatically converted into shares of common stock immediately upon the earlier of (i) the consummation of a firmly underwritten public offering pursuant to the Securities Act of 1933, as amended, the public offering price of which is not less than $50.0 million in aggregate; or (ii) the date specified by the written consent of holders of a majority of the outstanding shares of preferred stock, voting together as a class of shares on an as-converted basis. 
 
 
 
 
 
 
 
Conversion basis
Preferred Stock has the right to one vote for each share of common stock 
 
 
 
 
 
 
 
Minimum number of share required for voting
2,000,000 
 
 
 
 
 
 
 
Voting description
As long as a majority of the shares of Series A preferred stock originally issued remain outstanding, the holders of such shares, voting as a separate class, shall be entitled to elect one director. As long as a majority of the shares of Series B preferred stock originally issued remain outstanding, the holders of such shares, voting as a separate class, shall be entitled to elect one director. As long as at least 2,000,000 shares of Series D preferred stock are outstanding, the holders of such shares, voting as a separate class, shall be entitled to elect one director. The holders of common stock, voting as a separate class, shall be entitled to elect two directors. The holders of shares of Preferred Stock and common stock, voting together as a single class on an as-converted basis, shall be entitled to elect the remaining directors of the Company. 
 
 
 
 
 
 
 
Original issue price per share
 
 
$ 0.35 
$ 1.05 
$ 2.99 
$ 7.42 
$ 11.31 
$ 0.01 
Stockholders' Equity - Preferred Stock (Detail) (Undesignated Preferred Stock, USD $)
Jun. 30, 2016
Undesignated Preferred Stock
 
Preferred Stock
 
Preferred stock, authorized (in shares)
100,000,000 
Preferred stock, par value (in dollars per share)
$ 0.001 
Preferred stock, outstanding (in shares)
Stockholders' Equity - Common Stock (Detail) (USD $)
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Jun. 30, 2016
Common Class A
Vote
Jun. 30, 2016
Common Class B
Vote
Jun. 30, 2016
Preferred Stock
Authy, Inc.
Series T Preferred Stock
Dec. 31, 2015
Preferred Stock
Authy, Inc.
Series T Preferred Stock
Jun. 30, 2015
Preferred Stock
Authy, Inc.
Series T Preferred Stock
Feb. 23, 2015
Preferred Stock
Authy, Inc.
Series T Preferred Stock
Stockholders' Equity
 
 
 
 
 
 
 
 
 
Common stock, issued (in shares)
84,526,093 
17,324,003 
17,446,051 
11,647,711 
72,878,382 
 
 
 
 
Common stock, outstanding (in shares)
84,526,093 
17,324,003 
17,446,051 
11,647,711 
72,878,382 
 
 
 
 
Common stock, authorized (in shares)
1,100,000,000 
102,000,000 
77,000,000 
1,000,000,000 
100,000,000 
 
 
 
 
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
$ 0.001 
$ 0.001 
$ 0.001 
 
 
 
 
Votes per share
 
 
 
10 
 
 
 
 
Shares held in escrow (in shares)
 
 
 
 
 
617,634 
687,885 
687,885 
180,000 
Stockholders' Equity - Common Stock Shares Reserved (Detail)
Jun. 30, 2016
Dec. 31, 2015
Sep. 2, 2015
Dec. 31, 2014
Jun. 30, 2016
2016 Equity Incentive Plan
Jun. 30, 2016
Employee and Nonemployee Stock Options
Dec. 31, 2015
Employee and Nonemployee Stock Options
Dec. 31, 2014
Employee and Nonemployee Stock Options
Dec. 31, 2013
Employee and Nonemployee Stock Options
Dec. 31, 2015
Employee and Nonemployee Stock Options
2008 Stock Option Plan
Dec. 31, 2014
Employee and Nonemployee Stock Options
2008 Stock Option Plan
Jun. 30, 2016
Restricted Stock Units (RSUs)
Dec. 31, 2015
Restricted Stock Units (RSUs)
Jun. 21, 2016
Common Class A
Employee and Nonemployee Stock Options
2016 Equity Incentive Plan
Jun. 30, 2016
Common Class A
Employee Stock
Jun. 21, 2016
Common Class A
Employee Stock
Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of convertible preferred stock outstanding (in shares)
 
54,508,441 
 
42,482,490 
 
 
 
 
 
 
 
 
 
 
 
 
Stock options issued and outstanding (in shares)
 
 
 
 
 
16,918,789 
16,883,837 
13,141,311 
8,616,443 
 
 
 
 
 
 
 
Nonvested restricted stock units issued and outstanding (in shares)
 
 
 
 
 
 
 
 
 
 
 
891,008 
71,000 
 
 
 
Common stock reserved for Twilio.org (in shares)
780,397 
888,022 
888,022 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock based awards available for grant (in shares)
 
 
 
 
11,446,750 
 
 
 
 
14,920 
575,554 
 
 
 
 
 
Reserved shares of common stock (in shares)
32,436,944 
72,366,220 
 
56,199,355 
 
 
 
 
 
 
 
 
 
11,500,000 
2,400,000 
2,400,000 
Stockholders' Equity - Shares Held in Escrow (Detail) (Series T Preferred Stock, Preferred Stock, Authy, Inc.)
Jun. 30, 2016
Dec. 31, 2015
Jun. 30, 2015
Feb. 23, 2015
Series T Preferred Stock |
Preferred Stock |
Authy, Inc.
 
 
 
 
Shares held in escrow
 
 
 
 
Shares held in escrow (in shares)
617,634 
687,885 
687,885 
180,000 
Stockholders' Equity - Stock Repurchases (Detail) (USD $)
6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended 12 Months Ended 4 Months Ended 12 Months Ended 7 Months Ended 4 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Jun. 30, 2016
Research and Development Expense
Jun. 30, 2015
Research and Development Expense
Dec. 31, 2015
Research and Development Expense
Dec. 31, 2014
Research and Development Expense
Dec. 31, 2013
Research and Development Expense
Jun. 30, 2016
General and Administrative Expense
Jun. 30, 2015
General and Administrative Expense
Dec. 31, 2015
General and Administrative Expense
Dec. 31, 2014
General and Administrative Expense
Dec. 31, 2013
General and Administrative Expense
Jun. 30, 2016
Selling and Marketing Expense
Jun. 30, 2015
Selling and Marketing Expense
Dec. 31, 2015
Selling and Marketing Expense
Dec. 31, 2014
Selling and Marketing Expense
Dec. 31, 2013
Selling and Marketing Expense
Dec. 31, 2013
2013 Repurchase
Dec. 31, 2013
2013 Repurchase
Research and Development Expense
Dec. 31, 2013
2013 Repurchase
General and Administrative Expense
Dec. 31, 2015
2015 Repurchase
Dec. 31, 2015
2015 Repurchase
Dec. 31, 2015
2015 Repurchase
Research and Development Expense
Dec. 31, 2015
2015 Repurchase
General and Administrative Expense
Dec. 31, 2015
2015 Repurchase
Selling and Marketing Expense
Dec. 31, 2013
Common Class B
2013 Repurchase
Dec. 31, 2015
Common Class B
2015 Repurchase
Dec. 31, 2015
Series A preferred stock and Series B preferred stock
2015 Repurchase
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Repurchase of stock (in shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,498,464 
1,869,156 
365,916 
Payments for repurchase of common stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 10,000,000 
 
 
Compensation expense
8,001,000 
3,567,000 
8,877,000 
3,978,000 
2,157,000 
3,895,000 
1,459,000 
4,046,000 
1,577,000 
810,000 
2,205,000 
1,147,000 
2,377,000 
1,027,000 
567,000 
1,850,000 
933,000 
2,389,000 
1,335,000 
753,000 
5,000,000 
1,900,000 
3,100,000 
 
2,000,000 
800,000 
1,100,000 
100,000 
 
 
 
Payments for repurchase of common stock and preferred stock
$ 2,000 
$ 14,000 
$ 20,810,000 
$ 4,000 
$ 5,069,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 22,800,000 
 
 
 
 
 
 
 
Stockholders' Equity - Stock Split (Detail)
0 Months Ended
Jul. 9, 2014
Equity [Abstract]
 
Stock split ratio of common stock and Preferred Stock
Stockholders' Equity - Twilio.org (Detail)
0 Months Ended
May 13, 2016
Jun. 30, 2016
Dec. 31, 2015
Sep. 2, 2015
Equity [Abstract]
 
 
 
 
Common stock reserved for Twilio.org (in shares)
 
780,397 
888,022 
888,022 
Twilio.org, percentage of outstanding capital stock (as a percent)
 
 
 
1.00% 
Twilio.org, authorized reduction in shares reserved (in shares)
107,625 
 
 
 
Twilio.org, reserved shares, issued (in shares)
 
 
Twilio.org, reserved shares, outstanding (in shares)
 
 
Stock Based Compensation - 2016 Stock Option Plan (Detail)
6 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Jun. 30, 2016
2016 Equity Incentive Plan
Jun. 30, 2016
2016 Equity Incentive Plan
Vesting Period
Jun. 21, 2016
2016 Equity Incentive Plan
Employee and Nonemployee Stock Options
Jun. 21, 2016
2016 Equity Incentive Plan
Employee and Nonemployee Stock Options
Common Class A
Stock Based Compensation
 
 
 
 
 
 
 
Shares reserved for issuance (in shares)
32,436,944 
72,366,220 
56,199,355 
 
 
 
11,500,000 
Automatic increase percentage (as a percent)
 
 
 
 
 
5.00% 
 
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent
 
 
 
100.00% 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period
 
 
 
10 years 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period
 
 
 
4 years 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage
 
 
 
 
25.00% 
 
 
Stock Based Compensation - 2016 Employee Stock Purchase Plan (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
6 Months Ended 0 Months Ended 6 Months Ended 10 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Jun. 30, 2016
Employee Stock
Jun. 21, 2016
Employee Stock
Jun. 21, 2016
Common Class A
Employee Stock
Jun. 30, 2016
Common Class A
Employee Stock
Jun. 21, 2016
Common Class A
Employee Stock
May 15, 2017
Common Class A
Employee Stock
Forecast
Stock Based Compensation
 
 
 
 
 
 
 
 
 
Shares reserved for issuance (in shares)
32,436,944 
72,366,220 
56,199,355 
 
 
 
2,400,000 
2,400,000 
 
Annual increase amount (in shares)
 
 
 
 
 
 
 
1,800,000 
 
Automatic increase percentage (as a percent)
 
 
 
 
1.00% 
 
 
 
 
Purchase price discount (as a percent)
 
 
 
 
 
15.00% 
 
 
 
Purchase price(as a percent)
 
 
 
 
 
85.00% 
 
 
 
Shares purchased (in shares)
 
 
 
 
 
 
 
583,950 
Unrecognized compensation cost, other than options
 
 
 
$ 7.4 
 
 
 
 
 
Weighted-average period (in years)
 
 
 
10 months 13 days 
 
 
 
 
 
Stock Based Compensation - Stock Option Activity (Detail) (Employee and Nonemployee Stock Options, USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Employee and Nonemployee Stock Options
 
 
 
 
Number of options outstanding
 
 
 
 
Outstanding options as of the beginning of the period (in shares)
16,883,837 
13,141,311 
8,616,443 
 
Granted (in shares)
1,894,850 
6,919,556 
6,844,749 
 
Exercised (in shares)
(1,186,805)
(1,767,192)
(494,673)
 
Forfeited and cancelled (in shares)
(673,093)
(1,409,838)
(1,825,208)
 
Outstanding options as of the end of the period (in shares)
16,918,789 
16,883,837 
13,141,311 
8,616,443 
Weighted-average exercise price (per share)
 
 
 
 
Outstanding options as of the beginning of the period (in dollars per share)
$ 5.31 
$ 3.25 
$ 2.00 
 
Granted (in dollars per share)
$ 10.73 
$ 8.14 
$ 4.44 
 
Exercised (in dollars per share)
$ 3.60 
$ 1.93 
$ 1.25 
 
Forfeited and cancelled (in dollars per share)
$ 5.92 
$ 4.24 
$ 2.32 
 
Outstanding options as of the end of the period (in dollars per share)
$ 6.01 
$ 5.31 
$ 3.25 
$ 2.00 
Weighted-average remaining contractual term and aggregate intrinsic value
 
 
 
 
Weighted-average remaining contractual term (in years)
8 years 2 months 27 days 
8 years 3 months 18 days 
8 years 7 months 2 days 
8 years 9 months 29 days 
Aggregate intrinsic value
$ 515,848 
$ 80,758 
$ 50,215 
$ 16,077 
Options vested and exercisable and options vested and expected to vest
 
 
 
 
Options vested and exercisable - number of options outstanding (in shares)
5,903,943 
5,106,728 
 
 
Options vested and expected to vest - number of options outstanding (in shares)
15,910,560 
15,558,382 
 
 
Options vested and exercisable - weighted-average exercise price (in dollars per share)
$ 3.53 
$ 2.85 
 
 
Options vested and expected to vest - weighted-average exercise price (in dollars per share)
$ 5.89 
$ 5.17 
 
 
Options vested and exercisable - weighted-average remaining contractual term (in years)
7 years 2 months 12 days 
7 years 11 days 
 
 
Options vested and expected to vest - weighted-average remaining contractual term (in years)
8 years 2 months 9 days 
8 years 2 months 27 days 
 
 
Options vested and exercisable - aggregate intrinsic value
194,670 
36,976 
 
 
Options vested and expected to vest - aggregate intrinsic value
$ 487,073 
$ 76,479 
 
 
Stock Based Compensation - Stock Options - Additional Information (Detail) (Employee and Nonemployee Stock Options, USD $)
In Millions, except Per Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Employee and Nonemployee Stock Options
 
 
 
 
 
Stock Based Compensation
 
 
 
 
 
Aggregate intrinsic value of stock options exercised
$ 11.3 
$ 6.3 
$ 10.1 
$ 1.5 
$ 0.5 
Grant date fair value of options vested
$ 6.1 
$ 2.7 
$ 8.2 
$ 3.9 
$ 1.8 
Weighted-average grant date fair value of options granted (in dollars per share)
$ 5.52 
$ 3.82 
$ 4.30 
$ 2.88 
$ 1.93 
Stock Based Compensation - Stock Options - Unrecognized Compensation Cost (Detail) (Employee and Nonemployee Stock Options, USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Employee and Nonemployee Stock Options
 
 
Stock Based Compensation
 
 
Unrecognized compensation cost, options
$ 36.2 
$ 34.2 
Weighted-average period (in years)
2 years 8 months 12 days 
2 years 9 months 22 days 
Stock Based Compensation - Options Granted to Nonemployees (Detail) (Nonemployee Stock Option)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Nonemployee Stock Option
 
 
 
 
 
Stock Based Compensation
 
 
 
 
 
Granted (in shares)
Stock Based Compensation - Restricted Stock Units Activity (Detail) (Restricted Stock Units (RSUs), USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Restricted Stock Units (RSUs)
 
 
Number of units outstanding
 
 
Nonvested RSUs at the beginning of the period (in shares)
71,000 
 
Granted (in shares)
833,762 
71,000 
Vested (in shares)
(13,754)
 
Nonvested RSUs at the end of the period (in shares)
891,008 
71,000 
Weighted-average grant date fair value (per share)
 
 
Nonvested RSUs at the beginning of the period (in dollars per share)
$ 9.39 
 
Granted (in dollars per share)
$ 10.75 
$ 9.39 
Vested (in dollars per share)
$ 10.09 
 
Nonvested RSUs at the end of the period (in dollars per share)
$ 10.65 
$ 9.39 
Aggregate intrinsic value
 
 
Aggregate intrinsic value
$ 32,522 
$ 716 
Stock Based Compensation - Restricted Stock Units - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2016
Jun. 30, 2016
Restricted Stock Units (RSUs), Pre-IPO
 
 
Stock Based Compensation
 
 
Service condition period (in years)
 
4 years 
Share-based compensation expense, service condition satisfied
$ 0.3 
 
Restricted Stock Units (RSUs), Post-IPO |
Minimum
 
 
Stock Based Compensation
 
 
Service condition period (in years)
 
2 years 
Restricted Stock Units (RSUs), Post-IPO |
Maximum
 
 
Stock Based Compensation
 
 
Service condition period (in years)
 
4 years 
Stock Based Compensation - Restricted Stock Units - Unrecognized Compensation Cost (Detail) (Restricted Stock Units (RSUs), USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Restricted Stock Units (RSUs)
 
 
Stock Based Compensation
 
 
Unrecognized compensation cost, other than options
$ 7.6 
$ 0.5 
Weighted-average period (in years)
3 years 3 months 29 days 
3 years 11 months 9 days 
Stock Based Compensation - Early Exercises of Nonvested Options (Detail) (Employee Stock Option, USD $)
In Millions, except Share data, unless otherwise specified
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Employee Stock Option
 
 
 
Stock Based Compensation
 
 
 
Liability for unvested shares
$ 0.7 
$ 0.2 
$ 0.2 
Unvested shares that were early exercised (in shares)
130,749 
52,407 
127,316 
Stock Based Compensation - Valuation Assumptions (Detail)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Employee Stock Option
 
 
 
 
 
Valuation Assumptions
 
 
 
 
 
Expected term (in years)
6 years 29 days 
6 years 26 days 
6 years 29 days 
 
 
Expected volatility (as a percent)
 
 
 
54.40% 
54.40% 
Dividend rate (as a percent)
0.00% 
0.00% 
0.00% 
0.00% 
0.00% 
Expected volatility, low end of range (as a percent)
51.40% 
52.00% 
47.80% 
 
 
Expected volatility, high end of range (as a percent)
53.00% 
54.90% 
54.90% 
 
 
Risk-free interest rate, low end of range (as a percent)
1.30% 
1.40% 
1.40% 
1.70% 
0.90% 
Risk-free interest rate, high end of range (as a percent)
1.50% 
1.90% 
2.00% 
2.00% 
1.90% 
Employee Stock
 
 
 
 
 
Valuation Assumptions
 
 
 
 
 
Expected term (in years)
10 months 24 days 
 
 
 
 
Expected volatility (as a percent)
52.00% 
 
 
 
 
Risk-free interest rate (as a percent)
0.60% 
 
 
 
 
Dividend rate (as a percent)
0.00% 
 
 
 
 
Minimum |
Employee Stock Option
 
 
 
 
 
Valuation Assumptions
 
 
 
 
 
Expected term (in years)
 
 
 
5 years 3 months 7 days 
5 years 9 months 7 days 
Fair value of common stock (in dollars per share)
$ 10.09 
$ 7.07 
$ 7.07 
$ 3.99 
$ 2.50 
Maximum |
Employee Stock Option
 
 
 
 
 
Valuation Assumptions
 
 
 
 
 
Expected term (in years)
 
 
 
6 years 6 months 26 days 
6 years 29 days 
Fair value of common stock (in dollars per share)
$ 15.00 
$ 7.78 
$ 10.09 
$ 6.69 
$ 3.73 
Stock Based Compensation - Stock-Based Compensation Expense (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Stock-Based Compensation Expense
 
 
 
 
 
Stock-based compensation expense
$ 8,001 
$ 3,567 
$ 8,877 
$ 3,978 
$ 2,157 
Cost of Revenue
 
 
 
 
 
Stock-Based Compensation Expense
 
 
 
 
 
Stock-based compensation expense
51 
28 
65 
39 
27 
Research and Development Expense
 
 
 
 
 
Stock-Based Compensation Expense
 
 
 
 
 
Stock-based compensation expense
3,895 
1,459 
4,046 
1,577 
810 
Selling and Marketing Expense
 
 
 
 
 
Stock-Based Compensation Expense
 
 
 
 
 
Stock-based compensation expense
1,850 
933 
2,389 
1,335 
753 
General and Administrative Expense
 
 
 
 
 
Stock-Based Compensation Expense
 
 
 
 
 
Stock-based compensation expense
$ 2,205 
$ 1,147 
$ 2,377 
$ 1,027 
$ 567 
Net Loss per Share Attributable to Common Stockholders - Basic and Diluted Net Loss per Share Attributable to Common Stockholders (Detail) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Net Loss Per Share Attributable to Common Stockholders
 
 
 
 
 
Net loss attributable to common stockholders
$ (17,462)
$ (18,236)
$ (38,896)
$ (26,758)
$ (26,854)
Weighted average shares used to compute basic and diluted net loss per share attributable to common stockholders
20,872,550 
18,070,932 
17,746,526 
16,900,124 
16,916,035 
Net loss per share attributable to common stockholders, basic and diluted
$ (0.84)
$ (1.01)
$ (2.19)
$ (1.58)
$ (1.59)
Net Loss per Share Attributable to Common Stockholders - Anti-Dilutive Securities (Detail)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Anti-dilutive securities
 
 
 
 
 
Total
19,304,893 
67,560,127 
72,403,707 
55,751,117 
51,419,833 
Convertible Preferred Stock
 
 
 
 
 
Anti-dilutive securities
 
 
 
 
 
Total
 
53,106,011 
54,508,441 
42,482,490 
42,482,490 
Employee and Nonemployee Stock Options
 
 
 
 
 
Anti-dilutive securities
 
 
 
 
 
Total
16,918,789 
14,404,793 
16,883,837 
13,141,311 
8,616,443 
Restricted Stock Units (RSUs)
 
 
 
 
 
Anti-dilutive securities
 
 
 
 
 
Total
891,008 
 
71,000 
 
 
Donor-advised Fund
 
 
 
 
 
Anti-dilutive securities
 
 
 
 
 
Total
780,397 
 
888,022 
 
 
Employee Stock
 
 
 
 
 
Anti-dilutive securities
 
 
 
 
 
Total
583,950 
 
 
 
 
Unvested Shares Subject to Repurchase
 
 
 
 
 
Anti-dilutive securities
 
 
 
 
 
Total
130,749 
49,323 
52,407 
127,316 
320,900 
Net Loss per Share Attributable to Common Stockholders - Shares Held in Escrow (Detail) (Authy, Inc., Preferred Stock, Series T Preferred Stock)
Jun. 30, 2016
Dec. 31, 2015
Jun. 30, 2015
Feb. 23, 2015
Authy, Inc. |
Preferred Stock |
Series T Preferred Stock
 
 
 
 
Shares held in escrow
 
 
 
 
Shares held in escrow (in shares)
617,634 
687,885 
687,885 
180,000 
Income Taxes - Domestic And Foreign Components of Loss Before Income Taxes (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Tax Expense (Benefit), Continuing Operations, by Jurisdiction [Abstract]
 
 
 
 
 
United States
 
 
$ (23,962)
$ (26,837)
$ (26,928)
International
 
 
(11,420)
92 
74 
Loss before (provision) benefit for income taxes
$ (17,265)
$ (18,284)
$ (35,382)
$ (26,745)
$ (26,854)
Income Taxes - Provision For Income Taxes (Detail) (USD $)
In Thousands, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Current:
 
 
 
 
 
Federal
 
 
$ 0 
$ 0 
$ 0 
State
 
 
45 
 
 
Foreign
 
 
213 
13 
 
Total
 
 
258 
13 
 
Deferred:
 
 
 
 
 
Federal
 
 
(109)
 
 
State
 
 
Foreign
 
 
(27)
 
 
Total
 
 
(136)
 
 
Provision for income taxes
$ 197 
$ (48)
$ 122 
$ 13 
 
Income Taxes - Additional Information (Detail) (USD $)
6 Months Ended 12 Months Ended
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Income Taxes Disclosure [Line Items]
 
 
 
 
Income tax benefit
$ 197,000 
$ (48,000)
$ 122,000 
$ 13,000 
Net operating loss carryforwards and credit carryforwards related to stock options
 
 
1,900,000 
 
Increase in valuation allowance
 
 
5,100,000 
10,400,000 
Unrecognized tax benefit that would impact effective tax rate if recognized
 
 
1,700,000 
 
Federal
 
 
 
 
Income Taxes Disclosure [Line Items]
 
 
 
 
Net operating loss carryforwards
 
 
80,100,000 
 
Tax credits
 
 
4,800,000 
 
State
 
 
 
 
Income Taxes Disclosure [Line Items]
 
 
 
 
Net operating loss carryforwards
 
 
35,600,000 
 
Tax credits
 
 
3,900,000 
 
Acquisition of Authy
 
 
 
 
Income Taxes Disclosure [Line Items]
 
 
 
 
Income tax benefit
 
 
$ (100,000)
 
Income Taxes - Reconciliation Of The Statutory Federal Tax Rate And The Company's Effective Tax Rate (Detail)
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]
 
 
 
Tax benefit at federal statutory rate
34.00% 
34.00% 
34.00% 
State tax, net of federal benefit
(3.00%)
7.00% 
6.00% 
Stock-basedcompensation
(8.00%)
(4.00%)
(9.00%)
Credits
4.00% 
2.00% 
1.00% 
Foreign rate differential
(11.00%)
 
 
Other
(2.00%)
 
 
Change in valuation allowance
(14.00%)
(39.00%)
(32.00%)
Effective tax rate
0.00% 
0.00% 
0.00% 
Income Taxes - Significant Components Deferred Tax Assets And Liabilities (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
 
Net operating loss carry forwards
$ 27,401 
$ 24,402 
$ 16,310 
Accrued and prepaid expenses
7,603 
5,573 
2,815 
Stock-basedcompensation
1,433 
423 
200 
Research and development credits
6,022 
3,918 
2,330 
Gross deferred tax assets
42,459 
34,316 
21,655 
Valuation allowance
(35,613)
(30,559)
(20,194)
Net deferred tax assets
6,846 
3,757 
1,461 
Deferred tax liabilities:
 
 
 
Capitalized software
(4,084)
(2,019)
(886)
Prepaid expenses
(2,035)
(1,607)
(538)
Acquired intangibles
(460)
 
 
Property and equipment
(240)
(131)
(37)
Net deferred tax assets
$ 27 
 
 
Income Taxes - Reconciliation Beginning And Ending Amount Of Unrecognized Tax Benefits (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]
 
 
 
Unrecognized tax benefit, beginning of year
$ 1,024 
$ 592 
$ 318 
Gross increases for tax provisions of current years
655 
432 
274 
Unrecognized tax benefit, end of year
$ 1,679 
$ 1,024 
$ 592 
Employee Benefit Plan (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Employee benefit plan
 
 
 
 
Defined benefit plan, employer contribution
$ 0.7 
$ 0 
$ 0 
$ 0 
Related Party Transactions (Detail) (Investor, USD $)
In Millions, unless otherwise specified
0 Months Ended 6 Months Ended 12 Months Ended
Sep. 30, 2015
Jun. 30, 2016
Jun. 30, 2015
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2013
Related Party Transactions
 
 
 
 
 
 
Vendors, number
 
 
 
 
 
Vendor 1
 
 
 
 
 
 
Related Party Transactions
 
 
 
 
 
 
Ownership percentage (as a percent)
 
2.10% 
 
2.50% 
 
 
Purchases from vendor
 
$ 6.5 
$ 5.7 
$ 11.1 
$ 8.0 
$ 4.7 
Due to vendor
 
2.5 
 
 
 
 
Vendor 2
 
 
 
 
 
 
Related Party Transactions
 
 
 
 
 
 
Ownership percentage (as a percent)
 
1.10% 
 
1.20% 
 
 
Purchases from vendor
 
0.2 
0.2 
0.5 
0.5 
0.1 
Purchase commitment
$ 13.0