ZENDESK, INC., 10-Q filed on 8/3/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Jul. 31, 2018
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q2  
Trading Symbol ZEN  
Entity Registrant Name Zendesk, Inc.  
Entity Central Index Key 0001463172  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   105,958,810
v3.10.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
[1]
Current assets:    
Cash and cash equivalents $ 492,752 $ 109,370
Marketable securities 191,503 137,576
Accounts receivable, net of allowance for doubtful accounts of $2,478 and $1,252 as of June 30, 2018 and December 31, 2017, respectively 69,419 57,096
Deferred costs 19,335 15,771
Prepaid expenses and other current assets 31,170 24,165
Total current assets 804,179 343,978
Marketable securities, noncurrent 188,770 97,447
Property and equipment, net 69,426 59,157
Deferred costs, noncurrent 20,250 15,395
Goodwill and intangible assets, net 65,647 67,034
Other assets 10,813 8,359
Total assets 1,159,085 591,370
Current liabilities:    
Accounts payable 14,229 5,307
Accrued liabilities 39,481 21,876
Accrued compensation and related benefits 33,612 29,017
Deferred revenue 206,456 173,147
Total current liabilities 293,778 229,347
Convertible senior notes, net 446,060 0
Deferred revenue, noncurrent 1,504 1,213
Other liabilities 12,877 6,626
Total liabilities 754,219 237,186
Commitments and contingencies (Note 8)
Stockholders’ equity:    
Preferred stock 0 0
Common stock 1,056 1,031
Additional paid-in capital 871,343 753,568
Accumulated other comprehensive loss (5,799) (2,372)
Accumulated deficit (461,734) (398,043)
Total stockholders’ equity 404,866 354,184
Total liabilities and stockholders’ equity $ 1,159,085 $ 591,370
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 2,478 $ 1,252
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
[1]
Jun. 30, 2018
Jun. 30, 2017
[1]
Income Statement [Abstract]        
Revenue $ 141,882 $ 102,096 $ 271,673 $ 195,984
Cost of revenue [2] 44,160 30,663 83,216 58,770
Gross profit 97,722 71,433 188,457 137,214
Operating expenses:        
Research and development [2] 37,624 28,698 74,708 55,154
Sales and marketing [2] 69,450 50,412 134,508 96,681
General and administrative [2] 24,245 19,788 46,452 38,105
Total operating expenses [2] 131,319 98,898 255,668 189,940
Operating loss (33,597) (27,465) (67,211) (52,726)
Other income (expense), net        
Interest income 3,826 827 5,344 1,540
Interest expense (6,289) 0 (7,053) 0
Total other income (expense), net 27 (319) 272 (814)
Total other income (expense), net (2,436) 508 (1,437) 726
Loss before benefit from income taxes (36,033) (26,957) (68,648) (52,000)
Benefit from income taxes (1,667) (690) (4,957) (652)
Net loss $ (34,366) $ (26,267) [3] $ (63,691) $ (51,348) [3]
Net loss per share, basic and diluted (usd per share) $ (0.33) $ (0.26) $ (0.61) $ (0.52)
Weighted-average shares used to compute net loss per share, basic and diluted (in shares) 105,000 99,506 104,350 98,545
[1] See Note 1 for a summary of adjustments.
[2] Includes share-based compensation expense as follows: Three Months EndedJune 30, Six Months EndedJune 30,2018 2017 2018 2017 * As adjusted * As adjustedCost of revenue$3,474 $2,156 $6,572 $4,260Research and development9,529 7,584 19,758 14,498Sales and marketing9,178 5,884 17,186 11,408General and administrative5,967 5,321 11,619 9,883
[3] See Note 1 for a summary of adjustments.
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
[2]
Jun. 30, 2018
Jun. 30, 2017
Share-based compensation     $ 55,135 $ 40,049 [1]
Cost of revenue        
Share-based compensation $ 3,474 $ 2,156 6,572 4,260 [2]
Research and development        
Share-based compensation 9,529 7,584 19,758 14,498 [2]
Sales and marketing        
Share-based compensation 9,178 5,884 17,186 11,408 [2]
General and administrative        
Share-based compensation $ 5,967 $ 5,321 $ 11,619 $ 9,883 [2]
[1] See Note 1 for a summary of adjustments.
[2] See Note 1 for a summary of adjustments.
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net loss $ (34,366) $ (26,267) [1],[2] $ (63,691) $ (51,348) [1],[2]
Other comprehensive gain (loss), before tax:        
Net unrealized gain (loss) on available-for-sale investments 13 13 [3] (623) 132 [3]
Foreign currency translation gain (loss) 0 249 [3] (12) 824 [3]
Net unrealized gain (loss) on derivative instruments (3,132) 1,822 [3] (3,874) 3,348 [3]
Other comprehensive gain (loss), before tax (3,119) 2,084 [3] (4,509) 4,304 [3]
Tax effect 1,082 (766) [3] 1,082 (1,582) [3]
Other comprehensive gain (loss), net of tax (2,037) 1,318 [3] (3,427) 2,722 [3]
Comprehensive loss $ (36,403) $ (24,949) [3] $ (67,118) $ (48,626) [3]
[1] See Note 1 for a summary of adjustments.
[2] See Note 1 for a summary of adjustments.
[3] See Note 1 for a summary of adjustments.
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
[2]
Cash flows from operating activities    
Net loss $ (63,691) $ (51,348) [1]
Adjustments to reconcile net loss to net cash provided by operating activities    
Depreciation and amortization 18,663 16,132
Share-based compensation 55,135 40,049
Amortization of deferred costs 9,530 6,598
Amortization of debt discount and issuance costs 6,650 0
Other 2,299 359
Changes in operating assets and liabilities:    
Accounts receivable (13,896) (4,619)
Prepaid expenses and other current assets (7,425) (2,853)
Deferred costs (17,579) (9,609)
Other assets and liabilities (9,311) (3,404)
Accounts payable 10,266 3,809
Accrued liabilities 11,576 4,188
Accrued compensation and related benefits 4,120 1,394
Deferred revenue 33,601 16,881
Net cash provided by operating activities 39,938 17,577
Cash flows from investing activities    
Purchases of property and equipment (20,036) (9,276)
Internal-use software development costs (4,161) (3,315)
Purchases of marketable securities (249,011) (82,325)
Proceeds from maturities of marketable securities 94,580 61,686
Proceeds from sales of marketable securities 8,848 20,743
Cash paid for the acquisition of Outbound, net of cash acquired 0 (16,470)
Net cash used in investing activities (169,780) (28,957)
Cash flows from financing activities    
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $13,506 561,493 0
Purchase of capped call related to convertible senior notes (63,940) 0
Proceeds from exercises of employee stock options 9,747 15,175
Proceeds from employee stock purchase plan 9,949 7,139
Other (3,862) (1,763)
Net cash provided by financing activities 513,387 20,551
Effect of exchange rate changes on cash, cash equivalents and restricted cash (36) 279
Net increase in cash, cash equivalents and restricted cash 383,509 9,450
Cash, cash equivalents and restricted cash at beginning of period 110,888 95,062
Cash, cash equivalents and restricted cash at end of period 494,397 104,512
Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets    
Total cash, cash equivalents and restricted cash 110,888 95,062
Supplemental cash flow data    
Cash paid for income taxes and interest 1,545 756
Non-cash investing and financing activities    
Balance of property and equipment in accounts payable and accrued expenses 4,921 3,036
Property and equipment acquired through tenant improvement allowances 4,261 0
Share-based compensation capitalized in internal-use software development costs 1,499 1,306
Estimated convertible senior notes offering costs incurred but not yet paid 55 0
Vesting of early exercised stock options $ 0 $ 224
[1] See Note 1 for a summary of adjustments.
[2] See Note 1 for a summary of adjustments.
v3.10.0.1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (PARENTHETICAL) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Statement of Cash Flows [Abstract]    
Payments of debt issuance costs $ 13,506 $ 0 [1]
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
Overview and Basis of Presentation
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Overview and Basis of Presentation
Overview and Basis of Presentation
Company and Background
Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April 2009.
We are a software development company that provides software as a service, or SaaS, products that are intended to help organizations and their customers build better relationships. With our origins in customer service, we have evolved our offerings over time to a family of products that work together to help organizations understand their customers, improve communications, and engage where and when it’s needed most. Our product family is built upon a modern architecture that enables us and our customers to rapidly innovate, adapt our technology in novel ways, and easily integrate with other products and applications.
References to Zendesk, the “Company,” “our,” or “we” in these notes refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 22, 2018. There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.
Effective January 1, 2018, we adopted the requirements of Accounting Standards Update, or ASU, 2014-09, “Revenue from Contracts with Customers” regarding Accounting Standards Codification, or ASC, Topic 606 and ASU 2016-18, “Statement of Cash Flows, Restricted Cash,” as discussed below. All amounts and disclosures set forth in this Form 10-Q have been updated to comply with the new standards, as indicated by “as adjusted.”
The unaudited consolidated balance sheet as of December 31, 2017 included herein was derived from the audited financial statements as of that date, giving effect to the adoption of ASC 606, as discussed below. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive loss, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2018.
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, 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, as well as the reported amounts of revenue and expenses during the reported periods.
Significant items subject to such estimates and assumptions include the fair value of share-based awards, acquired intangible assets, and goodwill as well as unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of capitalized costs to obtain customer contracts and capitalized internal-use software, variable consideration related to revenue recognition, and financial forecasts used in currency hedging.
These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Concentrations of Risk
As of June 30, 2018, no customers represented 10% or greater of our total accounts receivable balance. There were no customers that individually exceeded 10% of our revenue during the three and six months ended June 30, 2018 or 2017.
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-02, regarding ASC Topic 842 “Leases,” including subsequent amendments. This new guidance requires lessees to recognize most leases on their balance sheets as right-of-use assets with corresponding lease liabilities and eliminates certain real estate-specific provisions. The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We have completed our process to identify our population of lease arrangements and we are applying the new guidance to each arrangement. While the adoption remains in progress, we expect that adoption will result in the recognition of right-of-use assets and lease liabilities that were not previously recognized, which will increase total assets and liabilities on our consolidated balance sheet.
In August 2017, the FASB issued ASU 2017-12, regarding ASC Topic 815 “Derivatives and Hedging. This amendment simplifies various aspects of hedge accounting, including measurement and presentation of hedge ineffectiveness and certain documentation and assessment requirements. The amendment also makes more hedging strategies eligible for hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income,” which provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act, or Tax Act. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, regarding ASC Topic 718 “Compensation - Stock Compensation,” which largely aligns the accounting for share-based compensation for non-employees with employees. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-08, regarding ASC Topic 958 “Not-for-Profit Entities,” which clarified the guidance on how entities determine whether to account for a transfer of assets as an exchange transaction or a contribution. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued new revenue guidance under ASU 2014-09 that provides principles for recognizing revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the promised goods or services provided to customers. ASC 606 and ASC 340-40 also require the deferral of incremental costs of obtaining contracts with customers and subsequent amortization of those costs over the period of anticipated benefit. Collectively, we refer to this guidance as “ASC 606.”
We adopted ASC 606 on January 1, 2018, utilizing the full retrospective method of transition. The adoption resulted in changes to our accounting policies for revenue recognition and incremental costs to acquire contracts, as described below. We applied ASC 606 using the following practical expedients:
consideration allocated to the remaining performance obligations and an explanation of when we expect to recognize that amount as revenue is not disclosed for comparative periods prior to the adoption date;
completed contracts that included variable consideration utilize the final transaction price rather than an estimation of variable consideration for comparative periods prior to the adoption date; and
costs of obtaining contracts with customers are expensed when the amortization period would have been one year or less.
The effect of adopting ASC 606 on our 2017 and 2016 revenues was not material. The primary effect relates to the deferral of sales commissions and other incremental costs to acquire contracts, which we historically expensed as incurred. The impact of adoption is summarized in the tables below. Under ASC 606, all incremental costs to acquire contracts are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have determined to be three years.

In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “Statement of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We adopted this standard in the first quarter of 2018. The adoption did not have an effect on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows - Restricted Cash,” which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. We adopted this standard in the first quarter of 2018 on a retrospective basis, resulting in an immaterial change to our previously reported statement of cash flows for the six months ended June 30, 2017, which is summarized in the table below.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations - Clarifying the Definition of a Business,” which clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. We adopted this standard in the first quarter of 2018. The adoption did not have an effect on our consolidated financial statements.
In March 2018, the FASB issued ASU 2018-05, which amends ASC Topic 740 “Income Taxes” to conform with SEC Staff Accounting Bulletin 118, issued in December 2017. The guidance was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The standard is effective upon issuance. Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities and our historical foreign earnings as well as potential correlative adjustments. We are continuing our analysis and expect to finalize our assessment by the fourth quarter of 2018.

We adjusted our condensed consolidated financial statements from amounts previously reported due to the adoption of ASC 606 and ASU 2016-18. Select unaudited condensed consolidated balance sheet line items, which reflect the adoption of ASC 606 are as follows (in thousands):
 
December 31, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Assets
 
 
 
 
 
Deferred costs
$

 
$
15,771

 
$
15,771

Deferred costs, noncurrent

 
15,395

 
15,395

Liabilities and stockholders’ equity
 
 
 
 
 
Deferred revenue
$
174,524

 
$
(1,377
)
 
$
173,147

Accumulated deficit
$
(430,586
)
 
$
32,543

 
$
(398,043
)
Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of ASC 606 are as follows (in thousands, except per share data):
 
Three Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
101,273

 
$
823

 
$
102,096

Operating expenses:
 
 
 
 
 
Sales and marketing
52,628

 
(2,216
)
 
50,412

Operating loss
(30,504
)
 
3,039

 
(27,465
)
Net loss
$
(29,306
)
 
$
3,039

 
$
(26,267
)
Net loss per share, basic and diluted
$
(0.29
)
 
$
0.03

 
$
(0.26
)
 
Six Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
194,280

 
$
1,704

 
$
195,984

Operating expenses:
 
 
 
 
 
Sales and marketing
99,929

 
(3,248
)
 
96,681

Operating loss
(57,678
)
 
4,952

 
(52,726
)
Net loss
$
(56,300
)
 
$
4,952

 
$
(51,348
)
Net loss per share, basic and diluted
$
(0.57
)
 
$
0.05

 
$
(0.52
)
Select unaudited condensed consolidated statement of cash flows line items, which reflect the adoption of ASC 606 and ASU 2016-18 are as follows (in thousands):
 
Six Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Cash flow from operating activities
 
 
 
 
 
Net loss
$
(56,300
)
 
$
4,952

 
$
(51,348
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Share-based compensation
40,287

 
(238
)
 
40,049

Amortization of deferred costs

 
6,598

 
6,598

Changes in operating assets and liabilities:

 

 
 
Prepaid expenses and other current assets
(3,015
)
 
162

 
(2,853
)
Deferred costs

 
(9,609
)
 
(9,609
)
Other assets and liabilities
(3,594
)
 
190

 
(3,404
)
Deferred revenue
18,584

 
(1,703
)
 
16,881

Net cash provided by operating activities
17,225

 
352

 
17,577

Net increase in cash, cash equivalents and restricted cash
9,098

 
352

 
9,450

Cash, cash equivalents and restricted cash at beginning of period
93,677

 
1,385

 
95,062

Cash, cash equivalents and restricted cash at end of period
$
102,775

 
$
1,737

 
$
104,512


We have also updated our significant accounting policies in connection with the adoption of ASC 606:

Revenue Recognition
We generate substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts on Zendesk Support and, to a lesser extent, Chat, Talk, Guide, and Connect. In addition, we generate revenue by providing additional features to certain of our subscription plans for a fee that is incremental to the base subscription rate for such plans. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales or excise taxes.

We also derive revenue from implementation, Talk usage, and training services, for which we recognize revenue upon completion.

Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the performance obligation is satisfied
Subscription revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Payments received in advance of services being rendered are recorded as deferred revenue.
In limited circumstances, certain customers have arrangements that provide for a maximum number of users over the subscription term, with usage measured monthly. Incremental fees are incurred when the maximum number of users is exceeded. In determining the transaction price for these arrangements, we evaluate the expected usage pattern to estimate any incremental fees that we are entitled to throughout the subscription term and recognize revenue ratably over the subscription term. In making these assessments, we constrain our estimates based on factors that could lead to a probable reversal of revenue.
Certain of our product offerings include service-level agreements warranting defined levels of uptime reliability and performance and permitting those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in the accompanying consolidated financial statements as a result of these service-level agreements.
Costs to Obtain Customer Contracts
Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have estimated to be three years. We determined the period of benefit by taking into consideration the length of our customer contracts, our technology lifecycle, and other factors. Amortization expense is recorded in sales and marketing expense within our consolidated statement of operations.
Deferred Revenue
We invoice customers for subscriptions to our products in monthly, quarterly, or annual installments. Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied and revenue being recognized, and includes an immaterial amount of billings for subscriptions with cancellation rights. The term between invoicing and when payment is due is not significant and we do not provide financing arrangements to customers. Deferred revenue associated with performance obligations that are anticipated to be satisfied, and thus revenue recognized, during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue. Deferred revenue associated with implementation, Talk usage, and training services was immaterial as of December 31, 2017 and June 30, 2018.
We invoice customers based on billing schedules established in our contracts. Accounts receivable are recorded when the right to consideration becomes unconditional.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified. The balance of accounts receivable also includes contract assets, which are recorded when revenue is recognized in advance of invoicing.
v3.10.0.1
Business Combination
6 Months Ended
Jun. 30, 2018
Business Combinations [Abstract]  
Business Combination
Business Combination
On April 27, 2017, we completed the acquisition of Outbound Solutions, Inc., or Outbound, a provider of software that enables companies to deliver intelligent, behavior-based messages across multiple channels. We acquired Outbound for purchase consideration of $16.6 million in cash.
The total purchase consideration was allocated to the assets acquired and liabilities assumed as set forth below (in thousands). The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected growth from the expansion of the scope of and market opportunity for our products. Goodwill is not deductible for income tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.
Net tangible assets acquired
$
96

Net deferred tax liability recognized
(492
)
Identifiable intangible assets:
 
Developed technology
3,200

Customer relationships
410

Goodwill
13,350

Total purchase price
$
16,564



The developed technology and customer relationship intangible assets were assigned useful lives of 6.5 and 3.5 years, respectively.
From the date of the acquisition, the results of operations of Outbound have been included in and are immaterial to our consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results of Outbound are not material to our consolidated financial statements in any period presented.
v3.10.0.1
Financial Instruments
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Financial Instruments
Financial Instruments

Investments
The following tables present information about our financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
 
 
Fair Value Measurement at
June 30, 2018
Level 1
 
Level 2
 
Total
Description
 
 
 
 
 
Money market funds
$
368,547

 
$

 
$
368,547

Corporate bonds

 
248,611

 
248,611

Asset-backed securities

 
70,016

 
70,016

Commercial paper

 
69,940

 
69,940

U.S. treasury securities

 
34,247

 
34,247

Agency securities

 
26,438

 
26,438

Total
$
368,547

 
$
449,252

 
$
817,799

Included in cash and cash equivalents
 
 
 
 
$
437,526

Included in marketable securities
 
 
 
 
$
380,273

 
Fair Value Measurement at
December 31, 2017
Level 1
 
Level 2
 
Total
Description
 
 
 
 
 
Corporate bonds
$

 
$
149,069

 
$
149,069

Money market funds
32,832

 

 
32,832

U.S. treasury securities

 
28,382

 
28,382

Asset-backed securities

 
27,738

 
27,738

Commercial paper

 
19,622

 
19,622

Agency securities

 
14,911

 
14,911

Total
$
32,832

 
$
239,722

 
$
272,554

Included in cash and cash equivalents
 
 
 
 
$
37,531

Included in marketable securities
 
 
 
 
$
235,023


 
As of June 30, 2018 and December 31, 2017, there were no securities within Level 3 of the fair value hierarchy. There were no transfers between fair value measurement levels during the three and six months ended June 30, 2018. Gross unrealized gains and losses for cash equivalents and marketable securities as of June 30, 2018 and December 31, 2017 were not material. Unrealized losses for securities that have been in an unrealized loss position for more than 12 months as of June 30, 2018 and December 31, 2017 were not material.
The following table classifies our marketable securities by contractual maturity (in thousands):
 
 
June 30,
2018
 
December 31,
2017
Due in one year or less
$
191,503

 
$
137,576

Due after one year
188,770

 
97,447

Total
$
380,273

 
$
235,023


 
For our other financial instruments, including accounts receivable, accounts payable, and other current liabilities, the carrying amounts approximate their fair values due to the relatively short maturity of these balances.
Derivative Instruments and Hedging
Our foreign currency exposures typically arise from expenditures associated with foreign operations and sales in foreign currencies of our products. To mitigate the effect of foreign currency fluctuations on our future cash flows and earnings, we enter into foreign currency forward contracts with certain financial institutions and designate those contracts as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less. As of June 30, 2018, the balance of accumulated other comprehensive loss included an unrecognized net loss of $3.0 million related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges. We expect to reclassify a net loss of $3.3 million into earnings over the next 12 months associated with our cash flow hedges.
The following tables present information about our derivative instruments on our consolidated balance sheets (in thousands):
 
 
June 30, 2018
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
Balance Sheet Location
 
Fair Value
(Level 2)
 
Balance Sheet Location
 
Fair Value
(Level 2)
Foreign currency forward contracts
Other current assets
 
$
1,791

 
Accrued liabilities
 
$
4,460

Total
 
 
$
1,791

 
 
 
$
4,460

 
December 31, 2017
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
Balance Sheet Location
 
Fair Value
(Level 2)
 
Balance Sheet Location
 
Fair Value
(Level 2)
Foreign currency forward contracts
Other current assets
 
$
2,359

 
Accrued liabilities
 
$
1,220

Total
 
 
$
2,359

 
 
 
$
1,220


 
Our foreign currency forward contracts had a total notional value of $170.4 million and $139.7 million as of June 30, 2018 and December 31, 2017, respectively. We have master netting arrangements with each of our counterparties, which permit net settlement of multiple, separate derivative contracts with a single payment. We may also be required to exchange cash collateral with certain of our counterparties on a regular basis. ASC 815 permits companies to present the fair value of derivative instruments on a net basis according to master netting arrangements. We have elected to present our derivative instruments on a gross basis in our consolidated financial statements. As of June 30, 2018 and December 31, 2017, there was no cash collateral posted with counterparties.
The following table presents information about our derivative instruments on our condensed consolidated statements of operations (in thousands):
 
 
 
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
Hedging Instrument
Location of Gain Reclassified into Earnings
 
Loss Recognized in AOCI
 
Gain Reclassified from AOCI into Earnings
 
Loss Recognized in AOCI
 
Gain Reclassified from AOCI into Earnings
Foreign currency forward contracts
Revenue, cost of revenue, operating expenses
 
$
(3,118
)
 
$
14

 
$
(2,799
)
 
$
1,075

Total
 
 
$
(3,118
)
 
$
14

 
$
(2,799
)
 
$
1,075



 
 
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2017
Hedging Instrument
Location of Loss Reclassified into Earnings
 
Gain Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
 
Gain Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts
Revenue, cost of revenue, operating expenses
 
$
1,495

 
$
(327
)
 
$
2,488

 
$
(860
)
Total
 
 
$

 
$

 
$
2,488

 
$
(860
)
All derivatives have been designated as hedging instruments. Amounts recognized in earnings related to excluded time value and hedge ineffectiveness for the three and six months ended June 30, 2018 and 2017 were not material.
Convertible Senior Notes
As of June 30, 2018, the fair value of our convertible senior notes was $618.6 million. The fair value was determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy.
v3.10.0.1
Costs to Obtain Customer Contracts
6 Months Ended
Jun. 30, 2018
Revenue from Contract with Customer [Abstract]  
Costs to Obtain Customer Contracts
Costs to Obtain Customer Contracts
The balances of deferred costs to obtain customer contracts were $39.6 million and $31.2 million as of June 30, 2018 and December 31, 2017, respectively. Amortization expense for these deferred costs was $5.0 million and $3.4 million for the three months ended June 30, 2018 and 2017, respectively, and $9.5 million and $6.6 million for the six months ended June 30, 2018 and 2017, respectively. There were no impairment losses related to these deferred costs for the periods presented.
Deferred Revenue and Performance Obligations
During the three months ended June 30, 2018 and 2017, $93.4 million and $69.3 million of revenue was recognized that was included in the deferred revenue balances at the beginning of each period, respectively. During the six months ended June 30, 2018 and 2017, $139.3 million and $102.7 million of revenue was recognized that was included in the deferred revenue balances at the beginning of each period, respectively.
The aggregate balance of unsatisfied performance obligations as of June 30, 2018 was $326.2 million. We expect to recognize $265.9 million of the balance as revenue in the next 12 months and the remainder thereafter. The aggregate balance of unsatisfied performance obligations represents contracted revenue that has not yet been recognized and does not include contract amounts which are cancelable by the customer and amounts associated with optional renewal periods.
v3.10.0.1
Property and Equipment
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment
Property and Equipment
Property and equipment, net consists of the following (in thousands): 
 
June 30,
2018
 
December 31,
2017
Leasehold improvements
$
42,330

 
$
28,113

Capitalized internal-use software
37,028

 
31,593

Hosting equipment
36,416

 
37,222

Computer equipment and licensed software and patents
19,932

 
16,316

Construction in progress
12,520

 
11,220

Furniture and fixtures
10,506

 
9,581

Total
158,732

 
134,045

Less: accumulated depreciation and amortization
(89,306
)
 
(74,888
)
Property and equipment, net
$
69,426

 
$
59,157


 
Depreciation expense was $6.5 million and $5.1 million for the three months ended June 30, 2018 and 2017, respectively, and $12.8 million and $9.8 million for the six months ended June 30, 2018 and 2017, respectively.
Amortization expense of capitalized internal-use software was $1.4 million and $2.1 million for the three months ended June 30, 2018 and 2017, respectively, and $3.0 million and $4.2 million for the six months ended June 30, 2018 and 2017, respectively. We recorded impairment losses of $0.2 million and $2.0 million to construction in progress during the three and six months ended June 30, 2018, which were included within research and development expenses on our consolidated statements of operations. The carrying value of capitalized internal-use software at June 30, 2018 and December 31, 2017 was $18.4 million and $17.7 million, respectively, including $7.0 million and $8.7 million in construction in progress, respectively.
v3.10.0.1
Goodwill and Acquired Intangible Assets
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
The balance of goodwill as of June 30, 2018 was $59.1 million and there were no changes in the carrying amount of goodwill for the six months ended June 30, 2018.
 
Acquired intangible assets subject to amortization consist of the following (in thousands):
 
 
As of June 30, 2018
Cost
 
Accumulated
Amortization
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
(In years)
Developed technology
$
12,000

 
$
(5,951
)
 
$
6,049

 
3.3
Customer relationships
910

 
(443
)
 
467

 
2.1
 
$
12,910

 
$
(6,394
)
 
$
6,516

 
 
 
 
As of December 31, 2017
Cost
 
Accumulated
Amortization
 
Foreign
Currency Translation Adjustments
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
 
(In years)
Developed technology
$
17,200

 
$
(9,835
)
 
$
(93
)
 
$
7,272

 
3.7
Customer relationships
2,210

 
(1,549
)
 
(30
)
 
631

 
2.4
 
$
19,410

 
$
(11,384
)
 
$
(123
)
 
$
7,903

 
 

 
During the second quarter of 2018, we removed developed technology and customer relationship intangible assets from our consolidated balance sheet, which had become fully amortized. Amortization expense of acquired intangible assets was $0.7 million and $1.0 million for the three months ended June 30, 2018 and 2017, respectively, and $1.4 million and $2.0 million for the six months ended June 30, 2018 and 2017, respectively.
Estimated future amortization expense as of June 30, 2018 is as follows (in thousands):
Remainder of 2018
$
1,348

2019
2,673

2020
1,101

2021
492

2022
492

2023
410

 
$
6,516

v3.10.0.1
0.25% Convertible Senior Notes and Capped Call
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
0.25% Convertible Senior Notes and Capped Call
0.25% Convertible Senior Notes and Capped Call

In March 2018, we issued $500.0 million aggregate principal amount of 0.25% convertible senior notes due March 15, 2023 in a private offering and an additional $75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the initial purchasers, collectively the “Notes.” The Notes are unsecured obligations and bear interest at a fixed rate of 0.25% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2018. The total net proceeds from the offering, after deducting initial purchase discounts and estimated debt issuance costs, are approximately $561.4 million.

Each $1,000 principal amount of the Notes will initially be convertible into 15.8554 shares of our common stock, the “Conversion Option,” which is equivalent to an initial conversion price of approximately $63.07 per share, subject to adjustment upon the occurrence of specified events. The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 15, 2022, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2018 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period, the “Measurement Period,” in which the trading price per $1,000 principal amount of notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events (as set forth in the indenture). On or after December 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their Notes at any time, regardless of the foregoing circumstances. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. If certain specified fundamental changes occur (as set forth in the indenture) prior to the maturity date, holders of the Notes may require us to repurchase for cash all or any portion of their notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if specific corporate events occur prior to the applicable maturity date, we will increase the conversion rate for a holder who elects to convert their notes in connection with such a corporate event in certain circumstances. It is our current intent and policy to settle conversions through combination settlement with a specified dollar amount of $1,000 per $1,000 principal amount of Notes. During the three and six months ended June 30, 2018, the conditions allowing holders of the Notes to convert have not been met. The Notes are therefore not convertible during the three and six months ended June 30, 2018 and are classified as long-term debt.

In accounting for the transaction, the Notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the Conversion Option was $125.0 million and was determined by deducting the fair value of the liability component from the par value of the Notes. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount, the “Debt Discount,” is amortized to interest expense over the contractual term of the Notes at an effective interest rate of 5.26%.

In accounting for the debt issuance costs of $13.6 million related to the Notes, we allocated the total amount incurred to the liability and equity components of the Notes based on their relative values. Issuance costs attributable to the liability component were $10.6 million and will be amortized to interest expense using the effective interest method over the contractual term of the Notes. Issuance costs attributable to the equity component were netted with the equity component in additional paid-in capital.

The net carrying amount of the liability component of the Notes is as follows (in thousands):
 
June 30,
2018
 
December 31,
2017
Principal
$
575,000

 
$

Unamortized Debt Discount
(118,774
)
 

Unamortized issuance costs
(10,166
)
 

Net carrying amount
$
446,060

 
$


The net carrying amount of the equity component of the Notes is as follows (in thousands):
 
June 30,
2018
 
December 31,
2017
Debt Discount for Conversion Option
$
124,976

 
$

Issuance costs
(2,948
)
 

Net carrying amount
$
122,028

 
$



Interest expense related to the Notes is as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Contractual interest expense
$
359

 
$

 
$
403

 
$

Amortization of Debt Discount
5,531

 

 
6,202

 

Amortization of issuance costs
399

 

 
448

 

Total interest expense
$
6,289

 
$

 
$
7,053

 
$



In connection with the pricing of the Notes, we entered into privately negotiated capped call transactions with certain counterparties, the “Capped Calls.” The Capped Calls each have an initial strike price of approximately $63.07 per share, subject to certain adjustments, which correspond to the initial conversion price of the Notes. The Capped Calls have initial cap prices of $95.20 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, approximately 9.1 million shares of our common stock. Conditions that cause adjustments to the initial strike price of the Capped Calls mirror conditions that result in corresponding adjustments for the Notes. The Capped Calls are generally intended to reduce or offset the potential dilution to our common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The cost of $63.9 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.
 
The difference between the Debt Discount and the total cost of the Capped Call, and the difference between the calculation of the book and tax allocation of debt issuance costs between the liability and equity components of the Notes, resulted in a difference between the carrying amount and tax basis of the Notes. This taxable temporary difference resulted in the recognition of a $13.8 million net deferred tax liability which was recorded as an adjustment to additional paid-in capital. The creation of the deferred tax liability represents a source of future taxable income which supports realization of a portion of the income tax benefit associated with our loss from operations. Therefore, applying the guidance in ASC 740 to interim reporting periods, we recorded a net income tax benefit of $1.4 million in our consolidated statement of operations and an income tax benefit of $1.1 million in our consolidated statement of comprehensive loss for the three months ended June 30, 2018. This represents applying an estimated effective tax rate resulting from the recognition of the deferred tax asset to the pre-tax loss for the quarter.
 
The net impact to our stockholders' equity, included in additional paid-in capital, of the above components of the Notes is as follows (in thousands):

Conversion Option
 
$
124,976

Purchase of Capped Calls
 
(63,940
)
Issuance costs
 
(2,948
)
Net deferred tax liability
 
(13,784
)
Total
 
$
44,304

v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Contractual Obligations
We lease office space under noncancelable operating leases with various expiration dates. Certain of the office space lease agreements contain rent holidays or rent escalation provisions. Rent holiday and rent escalation provisions are considered in determining the straight-line expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Rent expense was $4.4 million and $2.8 million for the three months ended June 30, 2018 and 2017, respectively, and $8.8 million and $5.5 million for the six months ended June 30, 2018 and 2017, respectively.

There were no material changes in our commitments under contractual obligations, as disclosed in our audited consolidated financial statements for the year ended December 31, 2017.
Litigation and Loss Contingencies
We accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. From time to time, we may become a party to litigation and subject to claims that arise in the ordinary course of business, including intellectual property claims, labor and employment claims, threatened claims, breach of contract claims, tax, and other matters. We currently have no material pending litigation.
We are not currently aware of any litigation matters or loss contingencies that would be expected to have a material adverse effect on our business, consolidated balance sheets, results of operations, comprehensive loss, or cash flows.
Indemnifications
In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to customers, 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 our products or our 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, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary. To date, we have not incurred any material costs, and we have not accrued any liabilities in our consolidated financial statements, as a result of these obligations.
Certain of our product offerings include service-level agreements warranting defined levels of uptime reliability and performance, which permit those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in our consolidated financial statements as a result of these service-level agreements.
v3.10.0.1
Common Stock and Stockholders' Equity
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
Common Stock and Stockholders' Equity
Common Stock and Stockholders’ Equity
Common Stock
As of June 30, 2018 and December 31, 2017, there were 400 million shares of common stock authorized for issuance with a par value of $0.01 per share and 105.7 million and 103.1 million shares were issued and outstanding, respectively.
Preferred Stock
As of each of June 30, 2018 and December 31, 2017, there were 10 million shares of preferred stock authorized for issuance with a par value of $0.01 per share and no shares of preferred stock were issued or outstanding.
Employee Equity Plans
Employee Stock Purchase Plan
Under our Employee Stock Purchase Plan, or ESPP, eligible employees are granted options to purchase shares of our common stock through payroll deductions. The ESPP provides for 18-month offering periods, which include three six-month purchase periods. At the end of each purchase period, employees are able to purchase shares at 85% of the lower of the fair market value of our common stock at the beginning of an offering period or the fair market value of our common stock at the end of the purchase period. For both the three and six months ended June 30, 2018, 0.4 million shares of common stock were purchased under the ESPP. Pursuant to the terms of the ESPP, the number of shares reserved under the ESPP increased by 1.0 million shares on January 1, 2018. As of June 30, 2018, 4.2 million shares of common stock were available for issuance under the ESPP.
Stock Option and Grant Plans
Our board of directors adopted the 2009 Stock Option and Grant Plan, or the 2009 Plan, in July 2009. The 2009 Plan was terminated in connection with our initial public offering in May 2014, and accordingly, no shares are available for issuance under this plan. The 2009 Plan continues to govern outstanding awards granted thereunder.
Our 2014 Stock Option and Incentive Plan, or the 2014 Plan, serves as the successor to our 2009 Plan. Pursuant to the terms of the 2014 Plan, the number of shares reserved for issuance under the 2014 Plan increased by 5.2 million shares on January 1, 2018. As of June 30, 2018, we had 9.3 million shares of common stock available for future grants under the 2014 Plan.
On May 6, 2016, the compensation committee of our board of directors granted equity awards representing 1.2 million shares. These awards were granted outside of the 2014 Plan pursuant to an exemption provided for “employment inducement awards” within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual and accordingly did not require approval from our stockholders.
A summary of our stock option and restricted stock unit, or RSU, activity for the six months ended June 30, 2018 is as follows (in thousands, except per share information):
 
 
 
 
Options Outstanding
 
RSUs Outstanding
Shares
Available
for Grant
 
Number of
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
 
Outstanding
RSUs
 
Weighted
Average
Grant Date
Fair Value
 
 
 
 
 
 
(In years)
 
 
 
 
 
 
Outstanding — January 1, 2018
8,001

 
6,239

 
$
17.31

 
7.11
 
$
103,380

 
5,827

 
$
25.00

Increase in authorized shares
5,156

 
 
 
 
 
 
 
 
 
 
 
 
Stock options granted
(756
)
 
756

 
42.08

 
 
 
 
 
 
 
 
RSUs granted
(3,643
)
 
 
 
 
 
 
 
 
 
3,643

 
39.43

Stock options exercised
 
 
(674
)
 
14.46

 
 
 
 
 
 
 
 
RSUs vested
 
 
 
 
 
 
 
 
 
 
(1,498
)
 
25.69

Stock options forfeited or canceled
68

 
(68
)
 
28.61

 
 
 
 
 
 
 
 
RSUs forfeited or canceled
487

 
 
 
 
 
 
 
 
 
(487
)
 
28.43

RSUs forfeited or canceled and unavailable for grant
 
 
 
 
 
 
 
 
 
 
(13
)
 
23.44

Outstanding — June 30, 2018
9,313

 
6,253

 
$
20.49

 
7.05
 
$
212,871

 
7,472

 
$
31.68


 
The RSUs forfeited or canceled and unavailable for grant relate to our employment inducement awards. The aggregate intrinsic value for options outstanding represents the difference between the closing market price of our common stock and the exercise price of outstanding, in-the-money options.
As of June 30, 2018, we had a total of $262.1 million in future share-based compensation expense related to all equity awards to be recognized over a weighted average period of 2.9 years.
v3.10.0.1
Deferred Revenue and Performance Obligations
6 Months Ended
Jun. 30, 2018
Revenue from Contract with Customer [Abstract]  
Deferred Revenue and Performance Obligations
Costs to Obtain Customer Contracts
The balances of deferred costs to obtain customer contracts were $39.6 million and $31.2 million as of June 30, 2018 and December 31, 2017, respectively. Amortization expense for these deferred costs was $5.0 million and $3.4 million for the three months ended June 30, 2018 and 2017, respectively, and $9.5 million and $6.6 million for the six months ended June 30, 2018 and 2017, respectively. There were no impairment losses related to these deferred costs for the periods presented.
Deferred Revenue and Performance Obligations
During the three months ended June 30, 2018 and 2017, $93.4 million and $69.3 million of revenue was recognized that was included in the deferred revenue balances at the beginning of each period, respectively. During the six months ended June 30, 2018 and 2017, $139.3 million and $102.7 million of revenue was recognized that was included in the deferred revenue balances at the beginning of each period, respectively.
The aggregate balance of unsatisfied performance obligations as of June 30, 2018 was $326.2 million. We expect to recognize $265.9 million of the balance as revenue in the next 12 months and the remainder thereafter. The aggregate balance of unsatisfied performance obligations represents contracted revenue that has not yet been recognized and does not include contract amounts which are cancelable by the customer and amounts associated with optional renewal periods.
v3.10.0.1
Net Loss Per Share
6 Months Ended
Jun. 30, 2018
Earnings Per Share [Abstract]  
Net Loss Per Share
Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including those related to outstanding share-based awards and our convertible senior notes, to the extent dilutive. Basic and diluted net loss per share were the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive.
The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
2018
 
2017
 
2018
 
2017
 
 
* As adjusted
 
 
* As adjusted
Net loss
$
(34,366
)
 
$
(26,267
)
 
$
(63,691
)
 
$
(51,348
)
Weighted-average shares used to compute basic and diluted net loss per share
105,000


99,506


104,350


98,545

Net loss per share, basic and diluted
$
(0.33
)
 
$
(0.26
)
 
$
(0.61
)
 
$
(0.52
)

*Adjusted to reflect the adoption of ASC 606 (see Note 1).
 
The anti-dilutive securities related to share-based compensation excluded from the shares used to calculate diluted net loss per share are as follows (in thousands):
 
As of June 30,
2018
 
2017
Shares subject to outstanding common stock options and employee stock purchase plan
6,358

 
7,448

Restricted stock units
7,472

 
6,801

 
13,830

 
14,249

 

Additionally, the 9.1 million shares underlying the conversion option in the convertible senior notes are not considered in the calculation of diluted net loss per share as the effect would be anti-dilutive. Additionally, the convertible senior notes are not convertible as of June 30, 2018. We expect to settle the principal amount of the convertible senior notes in cash and therefore use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share when the average market price of our common stock for a given period exceeds the initial conversion price of $63.07 per share for the convertible senior notes. During the three and six months ended June 30, 2018, the average market price of our common stock did not exceed the conversion price.
v3.10.0.1
Income Taxes
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
We reported a benefit from income taxes of $1.7 million and $5.0 million in the three and six months ended June 30, 2018, respectively, primarily due to the recognition of a net income tax benefit of $1.4 million related to taxable temporary differences of the convertible senior notes and the capped call. We reported a benefit from income taxes of $0.7 million for each of the three and six months ended June 30, 2017. The effective tax rate for each period differs from the statutory rate primarily as a result of not recognizing a deferred tax asset for U.S. losses due to having a full valuation allowance against U.S. deferred tax assets.
v3.10.0.1
Geographic Information
6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Geographic Information
Geographic Information
Our chief operating decision maker reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single reporting segment.
Revenue
The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
2018
 
2017
 
2018
 
2017
 
 
*As adjusted
 
 
* As adjusted
United States
$
73,019

 
$
54,733

 
$
141,373

 
$
105,432

EMEA
41,765

 
29,057

 
79,637

 
55,346

APAC
16,111

 
10,874

 
30,107

 
20,745

Other
10,987

 
7,432

 
20,556

 
14,461

Total
$
141,882

 
$
102,096

 
$
271,673

 
$
195,984


*Adjusted to reflect the adoption of ASC 606 (see Note 1).
Long-Lived Assets
The following table presents our long-lived assets by geographic area (in thousands):
 
 
As of
June 30, 2018
 
As of
December 31, 2017
United States
$
23,006

 
$
23,609

EMEA:
 
 
 
Republic of Ireland
16,449

 
5,019

Other EMEA
3,328

 
5,007

  Total EMEA
19,777

 
10,026

APAC
8,137

 
7,734

Total
$
50,920

 
$
41,369


 
The carrying values of capitalized internal-use software and intangible assets are excluded from the balance of long-lived assets presented in the table above.
v3.10.0.1
Overview and Basis of Presentation (Policies)
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 22, 2018. There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.
Effective January 1, 2018, we adopted the requirements of Accounting Standards Update, or ASU, 2014-09, “Revenue from Contracts with Customers” regarding Accounting Standards Codification, or ASC, Topic 606 and ASU 2016-18, “Statement of Cash Flows, Restricted Cash,” as discussed below. All amounts and disclosures set forth in this Form 10-Q have been updated to comply with the new standards, as indicated by “as adjusted.”
The unaudited consolidated balance sheet as of December 31, 2017 included herein was derived from the audited financial statements as of that date, giving effect to the adoption of ASC 606, as discussed below. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive loss, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2018.
Use of Estimates
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, 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, as well as the reported amounts of revenue and expenses during the reported periods.
Significant items subject to such estimates and assumptions include the fair value of share-based awards, acquired intangible assets, and goodwill as well as unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of capitalized costs to obtain customer contracts and capitalized internal-use software, variable consideration related to revenue recognition, and financial forecasts used in currency hedging.
These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Recently Issued and Adopted Accounting Pronouncements
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-02, regarding ASC Topic 842 “Leases,” including subsequent amendments. This new guidance requires lessees to recognize most leases on their balance sheets as right-of-use assets with corresponding lease liabilities and eliminates certain real estate-specific provisions. The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We have completed our process to identify our population of lease arrangements and we are applying the new guidance to each arrangement. While the adoption remains in progress, we expect that adoption will result in the recognition of right-of-use assets and lease liabilities that were not previously recognized, which will increase total assets and liabilities on our consolidated balance sheet.
In August 2017, the FASB issued ASU 2017-12, regarding ASC Topic 815 “Derivatives and Hedging. This amendment simplifies various aspects of hedge accounting, including measurement and presentation of hedge ineffectiveness and certain documentation and assessment requirements. The amendment also makes more hedging strategies eligible for hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income,” which provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act, or Tax Act. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, regarding ASC Topic 718 “Compensation - Stock Compensation,” which largely aligns the accounting for share-based compensation for non-employees with employees. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-08, regarding ASC Topic 958 “Not-for-Profit Entities,” which clarified the guidance on how entities determine whether to account for a transfer of assets as an exchange transaction or a contribution. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued new revenue guidance under ASU 2014-09 that provides principles for recognizing revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for the promised goods or services provided to customers. ASC 606 and ASC 340-40 also require the deferral of incremental costs of obtaining contracts with customers and subsequent amortization of those costs over the period of anticipated benefit. Collectively, we refer to this guidance as “ASC 606.”
We adopted ASC 606 on January 1, 2018, utilizing the full retrospective method of transition. The adoption resulted in changes to our accounting policies for revenue recognition and incremental costs to acquire contracts, as described below. We applied ASC 606 using the following practical expedients:
consideration allocated to the remaining performance obligations and an explanation of when we expect to recognize that amount as revenue is not disclosed for comparative periods prior to the adoption date;
completed contracts that included variable consideration utilize the final transaction price rather than an estimation of variable consideration for comparative periods prior to the adoption date; and
costs of obtaining contracts with customers are expensed when the amortization period would have been one year or less.
The effect of adopting ASC 606 on our 2017 and 2016 revenues was not material. The primary effect relates to the deferral of sales commissions and other incremental costs to acquire contracts, which we historically expensed as incurred. The impact of adoption is summarized in the tables below. Under ASC 606, all incremental costs to acquire contracts are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have determined to be three years.

In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “Statement of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We adopted this standard in the first quarter of 2018. The adoption did not have an effect on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows - Restricted Cash,” which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. We adopted this standard in the first quarter of 2018 on a retrospective basis, resulting in an immaterial change to our previously reported statement of cash flows for the six months ended June 30, 2017, which is summarized in the table below.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations - Clarifying the Definition of a Business,” which clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. We adopted this standard in the first quarter of 2018. The adoption did not have an effect on our consolidated financial statements.
In March 2018, the FASB issued ASU 2018-05, which amends ASC Topic 740 “Income Taxes” to conform with SEC Staff Accounting Bulletin 118, issued in December 2017. The guidance was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The standard is effective upon issuance. Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities and our historical foreign earnings as well as potential correlative adjustments. We are continuing our analysis and expect to finalize our assessment by the fourth quarter of 2018.

Revenue Recognition, Costs to Obtain Customer Contracts, Deferred Revenue, Accounts Receivable and Allowance for Doubtful Accounts
Revenue Recognition
We generate substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts on Zendesk Support and, to a lesser extent, Chat, Talk, Guide, and Connect. In addition, we generate revenue by providing additional features to certain of our subscription plans for a fee that is incremental to the base subscription rate for such plans. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales or excise taxes.

We also derive revenue from implementation, Talk usage, and training services, for which we recognize revenue upon completion.

Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, the performance obligation is satisfied
Subscription revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Payments received in advance of services being rendered are recorded as deferred revenue.
In limited circumstances, certain customers have arrangements that provide for a maximum number of users over the subscription term, with usage measured monthly. Incremental fees are incurred when the maximum number of users is exceeded. In determining the transaction price for these arrangements, we evaluate the expected usage pattern to estimate any incremental fees that we are entitled to throughout the subscription term and recognize revenue ratably over the subscription term. In making these assessments, we constrain our estimates based on factors that could lead to a probable reversal of revenue.
Certain of our product offerings include service-level agreements warranting defined levels of uptime reliability and performance and permitting those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in the accompanying consolidated financial statements as a result of these service-level agreements.
Costs to Obtain Customer Contracts
Sales commissions and related expenses are considered incremental and recoverable costs of acquiring customer contracts. These costs are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have estimated to be three years. We determined the period of benefit by taking into consideration the length of our customer contracts, our technology lifecycle, and other factors. Amortization expense is recorded in sales and marketing expense within our consolidated statement of operations.
Deferred Revenue
We invoice customers for subscriptions to our products in monthly, quarterly, or annual installments. Deferred revenue consists primarily of customer billings made in advance of performance obligations being satisfied and revenue being recognized, and includes an immaterial amount of billings for subscriptions with cancellation rights. The term between invoicing and when payment is due is not significant and we do not provide financing arrangements to customers. Deferred revenue associated with performance obligations that are anticipated to be satisfied, and thus revenue recognized, during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue. Deferred revenue associated with implementation, Talk usage, and training services was immaterial as of December 31, 2017 and June 30, 2018.
We invoice customers based on billing schedules established in our contracts. Accounts receivable are recorded when the right to consideration becomes unconditional.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified. The balance of accounts receivable also includes contract assets, which are recorded when revenue is recognized in advance of invoicing.
v3.10.0.1
Overview and Basis of Presentation (Tables)
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Impact of New Accounting Pronouncements
Select unaudited condensed consolidated balance sheet line items, which reflect the adoption of ASC 606 are as follows (in thousands):
 
December 31, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Assets
 
 
 
 
 
Deferred costs
$

 
$
15,771

 
$
15,771

Deferred costs, noncurrent

 
15,395

 
15,395

Liabilities and stockholders’ equity
 
 
 
 
 
Deferred revenue
$
174,524

 
$
(1,377
)
 
$
173,147

Accumulated deficit
$
(430,586
)
 
$
32,543

 
$
(398,043
)
Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of ASC 606 are as follows (in thousands, except per share data):
 
Three Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
101,273

 
$
823

 
$
102,096

Operating expenses:
 
 
 
 
 
Sales and marketing
52,628

 
(2,216
)
 
50,412

Operating loss
(30,504
)
 
3,039

 
(27,465
)
Net loss
$
(29,306
)
 
$
3,039

 
$
(26,267
)
Net loss per share, basic and diluted
$
(0.29
)
 
$
0.03

 
$
(0.26
)
 
Six Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
194,280

 
$
1,704

 
$
195,984

Operating expenses:
 
 
 
 
 
Sales and marketing
99,929

 
(3,248
)
 
96,681

Operating loss
(57,678
)
 
4,952

 
(52,726
)
Net loss
$
(56,300
)
 
$
4,952

 
$
(51,348
)
Net loss per share, basic and diluted
$
(0.57
)
 
$
0.05

 
$
(0.52
)
Select unaudited condensed consolidated statement of cash flows line items, which reflect the adoption of ASC 606 and ASU 2016-18 are as follows (in thousands):
 
Six Months Ended June 30, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Cash flow from operating activities
 
 
 
 
 
Net loss
$
(56,300
)
 
$
4,952

 
$
(51,348
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Share-based compensation
40,287

 
(238
)
 
40,049

Amortization of deferred costs

 
6,598

 
6,598

Changes in operating assets and liabilities:

 

 
 
Prepaid expenses and other current assets
(3,015
)
 
162

 
(2,853
)
Deferred costs

 
(9,609
)
 
(9,609
)
Other assets and liabilities
(3,594
)
 
190

 
(3,404
)
Deferred revenue
18,584

 
(1,703
)
 
16,881

Net cash provided by operating activities
17,225

 
352

 
17,577

Net increase in cash, cash equivalents and restricted cash
9,098

 
352

 
9,450

Cash, cash equivalents and restricted cash at beginning of period
93,677

 
1,385

 
95,062

Cash, cash equivalents and restricted cash at end of period
$
102,775

 
$
1,737

 
$
104,512

v3.10.0.1
Business Combination (Tables)
6 Months Ended
Jun. 30, 2018
Business Combinations [Abstract]  
Summary of Assets Acquired and Liabilities Assumed
Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.
Net tangible assets acquired
$
96

Net deferred tax liability recognized
(492
)
Identifiable intangible assets:
 
Developed technology
3,200

Customer relationships
410

Goodwill
13,350

Total purchase price
$
16,564

v3.10.0.1
Financial Instruments (Tables)
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Assets Measured at Fair Value on Recurring Basis
The following tables present information about our financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
 
 
Fair Value Measurement at
June 30, 2018
Level 1
 
Level 2
 
Total
Description
 
 
 
 
 
Money market funds
$
368,547

 
$

 
$
368,547

Corporate bonds

 
248,611

 
248,611

Asset-backed securities

 
70,016

 
70,016

Commercial paper

 
69,940

 
69,940

U.S. treasury securities

 
34,247

 
34,247

Agency securities

 
26,438

 
26,438

Total
$
368,547

 
$
449,252

 
$
817,799

Included in cash and cash equivalents
 
 
 
 
$
437,526

Included in marketable securities
 
 
 
 
$
380,273

 
Fair Value Measurement at
December 31, 2017
Level 1
 
Level 2
 
Total
Description
 
 
 
 
 
Corporate bonds
$

 
$
149,069

 
$
149,069

Money market funds
32,832

 

 
32,832

U.S. treasury securities

 
28,382

 
28,382

Asset-backed securities

 
27,738

 
27,738

Commercial paper

 
19,622

 
19,622

Agency securities

 
14,911

 
14,911

Total
$
32,832

 
$
239,722

 
$
272,554

Included in cash and cash equivalents
 
 
 
 
$
37,531

Included in marketable securities
 
 
 
 
$
235,023

Schedule of Marketable Securities Classified by Contractual Maturity
The following table classifies our marketable securities by contractual maturity (in thousands):
 
 
June 30,
2018
 
December 31,
2017
Due in one year or less
$
191,503

 
$
137,576

Due after one year
188,770

 
97,447

Total
$
380,273

 
$
235,023

Schedule of Derivative Instruments on Consolidated Balance Sheets
The following tables present information about our derivative instruments on our consolidated balance sheets (in thousands):
 
 
June 30, 2018
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
Balance Sheet Location
 
Fair Value
(Level 2)
 
Balance Sheet Location
 
Fair Value
(Level 2)
Foreign currency forward contracts
Other current assets
 
$
1,791

 
Accrued liabilities
 
$
4,460

Total
 
 
$
1,791

 
 
 
$
4,460

 
December 31, 2017
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
Balance Sheet Location
 
Fair Value
(Level 2)
 
Balance Sheet Location
 
Fair Value
(Level 2)
Foreign currency forward contracts
Other current assets
 
$
2,359

 
Accrued liabilities
 
$
1,220

Total
 
 
$
2,359

 
 
 
$
1,220

Schedule of Derivative Instruments on Statement of Operations
The following table presents information about our derivative instruments on our condensed consolidated statements of operations (in thousands):
 
 
 
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
Hedging Instrument
Location of Gain Reclassified into Earnings
 
Loss Recognized in AOCI
 
Gain Reclassified from AOCI into Earnings
 
Loss Recognized in AOCI
 
Gain Reclassified from AOCI into Earnings
Foreign currency forward contracts
Revenue, cost of revenue, operating expenses
 
$
(3,118
)
 
$
14

 
$
(2,799
)
 
$
1,075

Total
 
 
$
(3,118
)
 
$
14

 
$
(2,799
)
 
$
1,075



 
 
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2017
Hedging Instrument
Location of Loss Reclassified into Earnings
 
Gain Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
 
Gain Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts
Revenue, cost of revenue, operating expenses
 
$
1,495

 
$
(327
)
 
$
2,488

 
$
(860
)
Total
 
 
$

 
$

 
$
2,488

 
$
(860
)
v3.10.0.1
Property and Equipment (Tables)
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Components of Property and Equipment
Property and equipment, net consists of the following (in thousands): 
 
June 30,
2018
 
December 31,
2017
Leasehold improvements
$
42,330

 
$
28,113

Capitalized internal-use software
37,028

 
31,593

Hosting equipment
36,416

 
37,222

Computer equipment and licensed software and patents
19,932

 
16,316

Construction in progress
12,520

 
11,220

Furniture and fixtures
10,506

 
9,581

Total
158,732

 
134,045

Less: accumulated depreciation and amortization
(89,306
)
 
(74,888
)
Property and equipment, net
$
69,426

 
$
59,157

v3.10.0.1
Goodwill and Acquired Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of Intangible Assets Acquired
Acquired intangible assets subject to amortization consist of the following (in thousands):
 
 
As of June 30, 2018
Cost
 
Accumulated
Amortization
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
(In years)
Developed technology
$
12,000

 
$
(5,951
)
 
$
6,049

 
3.3
Customer relationships
910

 
(443
)
 
467

 
2.1
 
$
12,910

 
$
(6,394
)
 
$
6,516

 
 
 
 
As of December 31, 2017
Cost
 
Accumulated
Amortization
 
Foreign
Currency Translation Adjustments
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
 
(In years)
Developed technology
$
17,200

 
$
(9,835
)
 
$
(93
)
 
$
7,272

 
3.7
Customer relationships
2,210

 
(1,549
)
 
(30
)
 
631

 
2.4
 
$
19,410

 
$
(11,384
)
 
$
(123
)
 
$
7,903

 
 
Summary of Estimated Future Amortization Expense
Estimated future amortization expense as of June 30, 2018 is as follows (in thousands):
Remainder of 2018
$
1,348

2019
2,673

2020
1,101

2021
492

2022
492

2023
410

 
$
6,516

v3.10.0.1
0.25% Convertible Senior Notes and Capped Call (Tables)
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Schedule of Net Carrying Amount of Liability and Equity Component of Convertible Notes
The net carrying amount of the liability component of the Notes is as follows (in thousands):
 
June 30,
2018
 
December 31,
2017
Principal
$
575,000

 
$

Unamortized Debt Discount
(118,774
)
 

Unamortized issuance costs
(10,166
)
 

Net carrying amount
$
446,060

 
$


The net carrying amount of the equity component of the Notes is as follows (in thousands):
 
June 30,
2018
 
December 31,
2017
Debt Discount for Conversion Option
$
124,976

 
$

Issuance costs
(2,948
)
 

Net carrying amount
$
122,028

 
$

The net impact to our stockholders' equity, included in additional paid-in capital, of the above components of the Notes is as follows (in thousands):

Conversion Option
 
$
124,976

Purchase of Capped Calls
 
(63,940
)
Issuance costs
 
(2,948
)
Net deferred tax liability
 
(13,784
)
Total
 
$
44,304

Schedule of Interest Expense
Interest expense related to the Notes is as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Contractual interest expense
$
359

 
$

 
$
403

 
$

Amortization of Debt Discount
5,531

 

 
6,202

 

Amortization of issuance costs
399

 

 
448

 

Total interest expense
$
6,289

 
$

 
$
7,053

 
$

v3.10.0.1
Common Stock and Stockholders' Equity (Tables)
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
Summary of Stock Option and RSU Award Activity
A summary of our stock option and restricted stock unit, or RSU, activity for the six months ended June 30, 2018 is as follows (in thousands, except per share information):
 
 
 
 
Options Outstanding
 
RSUs Outstanding
Shares
Available
for Grant
 
Number of
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
 
Outstanding
RSUs
 
Weighted
Average
Grant Date
Fair Value
 
 
 
 
 
 
(In years)
 
 
 
 
 
 
Outstanding — January 1, 2018
8,001

 
6,239

 
$
17.31

 
7.11
 
$
103,380

 
5,827

 
$
25.00

Increase in authorized shares
5,156

 
 
 
 
 
 
 
 
 
 
 
 
Stock options granted
(756
)
 
756

 
42.08

 
 
 
 
 
 
 
 
RSUs granted
(3,643
)
 
 
 
 
 
 
 
 
 
3,643

 
39.43

Stock options exercised
 
 
(674
)
 
14.46

 
 
 
 
 
 
 
 
RSUs vested
 
 
 
 
 
 
 
 
 
 
(1,498
)
 
25.69

Stock options forfeited or canceled
68

 
(68
)
 
28.61

 
 
 
 
 
 
 
 
RSUs forfeited or canceled
487

 
 
 
 
 
 
 
 
 
(487
)
 
28.43

RSUs forfeited or canceled and unavailable for grant
 
 
 
 
 
 
 
 
 
 
(13
)
 
23.44

Outstanding — June 30, 2018
9,313

 
6,253

 
$
20.49

 
7.05
 
$
212,871

 
7,472

 
$
31.68

v3.10.0.1
Net Loss Per Share (Tables)
6 Months Ended
Jun. 30, 2018
Earnings Per Share [Abstract]  
Schedule of Computation of Basic and Diluted Net Loss per Share
The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
2018
 
2017
 
2018
 
2017
 
 
* As adjusted
 
 
* As adjusted
Net loss
$
(34,366
)
 
$
(26,267
)
 
$
(63,691
)
 
$
(51,348
)
Weighted-average shares used to compute basic and diluted net loss per share
105,000


99,506


104,350


98,545

Net loss per share, basic and diluted
$
(0.33
)
 
$
(0.26
)
 
$
(0.61
)
 
$
(0.52
)

*Adjusted to reflect the adoption of ASC 606 (see Note 1).
Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation
The anti-dilutive securities related to share-based compensation excluded from the shares used to calculate diluted net loss per share are as follows (in thousands):
 
As of June 30,
2018
 
2017
Shares subject to outstanding common stock options and employee stock purchase plan
6,358

 
7,448

Restricted stock units
7,472

 
6,801

 
13,830

 
14,249

v3.10.0.1
Geographic Information (Tables)
6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Schedule of Revenue by Geographic Areas
The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
2018
 
2017
 
2018
 
2017
 
 
*As adjusted
 
 
* As adjusted
United States
$
73,019

 
$
54,733

 
$
141,373

 
$
105,432

EMEA
41,765

 
29,057

 
79,637

 
55,346

APAC
16,111

 
10,874

 
30,107

 
20,745

Other
10,987

 
7,432

 
20,556

 
14,461

Total
$
141,882

 
$
102,096

 
$
271,673

 
$
195,984


*Adjusted to reflect the adoption of ASC 606 (see Note 1).
Schedule of Long-Lived Assets by Geographic Areas
The following table presents our long-lived assets by geographic area (in thousands):
 
 
As of
June 30, 2018
 
As of
December 31, 2017
United States
$
23,006

 
$
23,609

EMEA:
 
 
 
Republic of Ireland
16,449

 
5,019

Other EMEA
3,328

 
5,007

  Total EMEA
19,777

 
10,026

APAC
8,137

 
7,734

Total
$
50,920

 
$
41,369

v3.10.0.1
Overview and Basis of Presentation - Additional Information (Details)
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Amortization period of capitalized contract cost 3 years
v3.10.0.1
Overview and Basis of Presentation - Schedule of Cumulative Effects of New Revenue Standard on Balance Sheet (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Assets    
Deferred costs $ 19,335 $ 15,771 [1]
Deferred costs, noncurrent 20,250 15,395 [1]
Liabilities and stockholders’ equity    
Deferred revenue 206,456 173,147 [1]
Accumulated deficit $ (461,734) (398,043) [1]
As Previously Reported    
Assets    
Deferred costs   0
Deferred costs, noncurrent   0
Liabilities and stockholders’ equity    
Deferred revenue   174,524
Accumulated deficit   (430,586)
Adjustments | Accounting Standards Update 2014-09    
Assets    
Deferred costs   15,771
Deferred costs, noncurrent   15,395
Liabilities and stockholders’ equity    
Deferred revenue   (1,377)
Accumulated deficit   $ 32,543
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
Overview and Basis of Presentation - Schedule of Cumulative Effects of New Revenue Standard on Income Statement (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]        
Revenue $ 141,882 $ 102,096 [1] $ 271,673 $ 195,984 [1]
Operating expenses:        
Sales and marketing [2] 69,450 50,412 [1] 134,508 96,681 [1]
Operating loss (33,597) (27,465) [1] (67,211) (52,726) [1]
Net loss $ (34,366) $ (26,267) [1],[3] $ (63,691) $ (51,348) [1],[3]
Net loss per share, basic and diluted (usd per share) $ (0.33) $ (0.26) [1] $ (0.61) $ (0.52) [1]
As Previously Reported        
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]        
Revenue   $ 101,273   $ 194,280
Operating expenses:        
Sales and marketing   52,628   99,929
Operating loss   (30,504)   (57,678)
Net loss   $ (29,306)   $ (56,300)
Net loss per share, basic and diluted (usd per share)   $ (0.29)   $ (0.57)
Adjustments | Accounting Standards Update 2014-09        
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]        
Revenue   $ 823   $ 1,704
Operating expenses:        
Sales and marketing   (2,216)   (3,248)
Operating loss   3,039   4,952
Net loss   $ 3,039   $ 4,952
Net loss per share, basic and diluted (usd per share)   $ 0.03   $ 0.05
[1] See Note 1 for a summary of adjustments.
[2] Includes share-based compensation expense as follows: Three Months EndedJune 30, Six Months EndedJune 30,2018 2017 2018 2017 * As adjusted * As adjustedCost of revenue$3,474 $2,156 $6,572 $4,260Research and development9,529 7,584 19,758 14,498Sales and marketing9,178 5,884 17,186 11,408General and administrative5,967 5,321 11,619 9,883
[3] See Note 1 for a summary of adjustments.
v3.10.0.1
Overview and Basis of Presentation - Schedule of Cumulative Effects of New Revenue Standard on Cash Flows Statement (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Cash flows from operating activities        
Net loss $ (34,366) $ (26,267) [1],[2] $ (63,691) $ (51,348) [1],[2]
Adjustments to reconcile net loss to net cash provided by operating activities        
Share-based compensation     55,135 40,049 [2]
Amortization of deferred costs 5,000 3,400 9,530 6,598 [2]
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets     (7,425) (2,853) [2]
Deferred costs     (17,579) (9,609) [2]
Other assets and liabilities     (9,311) (3,404) [2]
Deferred revenue     33,601 16,881 [2]
Net cash provided by operating activities     39,938 17,577 [2]
Net increase in cash, cash equivalents and restricted cash     383,509 9,450 [2]
Cash, cash equivalents and restricted cash at beginning of period     110,888 95,062 [2]
Cash, cash equivalents and restricted cash at end of period $ 494,397 104,512 [2] $ 494,397 104,512 [2]
As Previously Reported        
Cash flows from operating activities        
Net loss   (29,306)   (56,300)
Adjustments to reconcile net loss to net cash provided by operating activities        
Share-based compensation       40,287
Amortization of deferred costs       0
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets       (3,015)
Deferred costs       0
Other assets and liabilities       (3,594)
Deferred revenue       18,584
Net cash provided by operating activities       17,225
Net increase in cash, cash equivalents and restricted cash       9,098
Cash, cash equivalents and restricted cash at beginning of period       93,677
Cash, cash equivalents and restricted cash at end of period   102,775   102,775
Accounting Standards Update 2014-09 | Adjustments        
Cash flows from operating activities        
Net loss   3,039   4,952
Adjustments to reconcile net loss to net cash provided by operating activities        
Share-based compensation       (238)
Amortization of deferred costs       6,598
Changes in operating assets and liabilities:        
Prepaid expenses and other current assets       162
Deferred costs       (9,609)
Other assets and liabilities       190
Deferred revenue       (1,703)
Net cash provided by operating activities       352
Net increase in cash, cash equivalents and restricted cash       352
Cash, cash equivalents and restricted cash at beginning of period       1,385
Cash, cash equivalents and restricted cash at end of period   $ 1,737   $ 1,737
[1] See Note 1 for a summary of adjustments.
[2] See Note 1 for a summary of adjustments.
v3.10.0.1
Business Combination - Narrative (Details) - Outbound Solutions Inc
Apr. 27, 2017
USD ($)
Business Acquisition [Line Items]  
Cash consideration $ 16,600,000
Goodwill expected to be tax deductible $ 0
Developed technology  
Business Acquisition [Line Items]  
Acquired intangible assets weighted average useful life 6 years 6 months
Customer relationships  
Business Acquisition [Line Items]  
Acquired intangible assets weighted average useful life 3 years 6 months
v3.10.0.1
Business Combination - Summary of Assets Acquired and Liabilities Assumed (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Apr. 27, 2017
Business Acquisition [Line Items]    
Goodwill $ 59,100  
Outbound Solutions Inc    
Business Acquisition [Line Items]    
Net tangible assets acquired   $ 96
Net deferred tax liability recognized   (492)
Goodwill   13,350
Total purchase price   16,564
Developed technology | Outbound Solutions Inc    
Business Acquisition [Line Items]    
Identifiable intangible assets:   3,200
Customer relationships | Outbound Solutions Inc    
Business Acquisition [Line Items]    
Identifiable intangible assets:   $ 410
v3.10.0.1
Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Included in marketable securities $ 380,273 $ 235,023
Fair Value Measurements, Recurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 817,799 272,554
Included in cash and cash equivalents 437,526 37,531
Included in marketable securities 380,273 235,023
Fair Value Measurements, Recurring | Money market funds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 368,547 32,832
Fair Value Measurements, Recurring | Corporate bonds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 248,611 149,069
Fair Value Measurements, Recurring | Asset-backed securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 70,016 27,738
Fair Value Measurements, Recurring | Commercial paper    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 69,940 19,622
Fair Value Measurements, Recurring | U.S. treasury securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 34,247 28,382
Fair Value Measurements, Recurring | Agency securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 26,438 14,911
Fair Value Measurements, Recurring | Level 1    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 368,547 32,832
Fair Value Measurements, Recurring | Level 1 | Money market funds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 368,547 32,832
Fair Value Measurements, Recurring | Level 1 | Corporate bonds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0 0
Fair Value Measurements, Recurring | Level 1 | Asset-backed securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0 0
Fair Value Measurements, Recurring | Level 1 | Commercial paper    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0 0
Fair Value Measurements, Recurring | Level 1 | U.S. treasury securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0 0
Fair Value Measurements, Recurring | Level 1 | Agency securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0 0
Fair Value Measurements, Recurring | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 449,252 239,722
Fair Value Measurements, Recurring | Level 2 | Money market funds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0 0
Fair Value Measurements, Recurring | Level 2 | Corporate bonds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 248,611 149,069
Fair Value Measurements, Recurring | Level 2 | Asset-backed securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 70,016 27,738
Fair Value Measurements, Recurring | Level 2 | Commercial paper    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 69,940 19,622
Fair Value Measurements, Recurring | Level 2 | U.S. treasury securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 34,247 28,382
Fair Value Measurements, Recurring | Level 2 | Agency securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets $ 26,438 $ 14,911
v3.10.0.1
Financial Instruments - Additional Information (Details) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Gross unrealized gain (loss) $ 0 $ 0
Unrealized losses recognized by securities in continuous loss position for twelve months or longer 0  
Cash collateral posted 0 0
Foreign currency forward contracts    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unrealized loss in accumulated other comprehensive loss (3,000,000)  
Reclassification from accumulated other comprehensive income into earnings over next 12 month 3,300,000  
Notional value $ 170,400,000 $ 139,700,000
Maximum | Foreign currency forward contracts    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Derivative, maturity 15 months  
Convertible Senior Notes Due 2023 | Convertible Debt | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value $ 618,600,000  
v3.10.0.1
Financial Instruments - Marketable Securities by Contractual Maturity (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Fair Value Disclosures [Abstract]    
Due in one year or less $ 191,503 $ 137,576 [1]
Due after one year 188,770 97,447 [1]
Total $ 380,273 $ 235,023
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
Financial Instruments - Schedule of Derivative Instruments on Consolidated Balance Sheets (Details) - Designated as Hedging Instrument - Level 2 - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Derivatives Fair Value [Line Items]    
Asset Derivatives $ 1,791 $ 2,359
Liability Derivatives 4,460 1,220
Foreign currency forward contracts | Other current assets    
Derivatives Fair Value [Line Items]    
Asset Derivatives 1,791 2,359
Foreign currency forward contracts | Accrued liabilities    
Derivatives Fair Value [Line Items]    
Liability Derivatives $ 4,460 $ 1,220
v3.10.0.1
Financial Instruments - Schedule of Derivative Instruments on Statement of Operations (Details) - Designated as Hedging Instrument - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Derivative Instruments Gain Loss [Line Items]        
Gain (Loss) Recognized in AOCI $ (3,118) $ 0 $ (2,799) $ 2,488
Gain (Loss) Reclassified from AOCI into Earnings 14 0 1,075 (860)
Revenue, cost of revenue, operating expenses | Foreign currency forward contracts        
Derivative Instruments Gain Loss [Line Items]        
Gain (Loss) Recognized in AOCI (3,118) 1,495 (2,799) 2,488
Gain (Loss) Reclassified from AOCI into Earnings $ 14 $ (327) $ 1,075 $ (860)
v3.10.0.1
Costs to Obtain Customer Contracts (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Revenue from Contract with Customer [Abstract]          
Deferred costs to obtain customer contracts $ 39,600,000   $ 39,600,000   $ 31,200,000
Amortization of deferred costs 5,000,000 $ 3,400,000 9,530,000 $ 6,598,000 [1]  
Impairment related to deferred costs $ 0 $ 0 $ 0 $ 0  
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
Property and Equipment - Components of Property and Equipment (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Property Plant And Equipment [Line Items]    
Total $ 158,732 $ 134,045
Less: accumulated depreciation and amortization (89,306) (74,888)
Property and equipment, net 69,426 59,157 [1]
Leasehold improvements    
Property Plant And Equipment [Line Items]    
Total 42,330 28,113
Capitalized internal-use software    
Property Plant And Equipment [Line Items]    
Total 37,028 31,593
Hosting equipment    
Property Plant And Equipment [Line Items]    
Total 36,416 37,222
Computer equipment and licensed software and patents    
Property Plant And Equipment [Line Items]    
Total 19,932 16,316
Construction in progress    
Property Plant And Equipment [Line Items]    
Total 12,520 11,220
Furniture and fixtures    
Property Plant And Equipment [Line Items]    
Total $ 10,506 $ 9,581
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
Property and Equipment - Additional Information (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Property, Plant and Equipment [Abstract]          
Depreciation expense $ 6.5 $ 5.1 $ 12.8 $ 9.8  
Amortization expense of capitalized internal-use software 1.4 $ 2.1 3.0 $ 4.2  
Impairment loss related to internal-use software 0.2   2.0    
Carrying value of capitalized internal-use software 18.4   18.4   $ 17.7
Capitalized internal-use software included in construction in progress $ 7.0   $ 7.0   $ 8.7
v3.10.0.1
Goodwill and Acquired Intangible Assets - Additional Information (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]        
Goodwill $ 59.1   $ 59.1  
Amortization expense $ 0.7 $ 1.0 $ 1.4 $ 2.0
v3.10.0.1
Goodwill and Acquired Intangible Assets - Acquired Intangible Assets Subject to Amortization (Details) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Finite Lived Intangible Assets [Line Items]    
Cost $ 12,910 $ 19,410
Accumulated Amortization (6,394) (11,384)
Foreign Currency Translation Adjustments   (123)
Net 6,516 7,903
Developed technology    
Finite Lived Intangible Assets [Line Items]    
Cost 12,000 17,200
Accumulated Amortization (5,951) (9,835)
Foreign Currency Translation Adjustments   (93)
Net $ 6,049 $ 7,272
Weighted Average Remaining Useful Life 3 years 3 months 18 days 3 years 8 months 12 days
Customer relationships    
Finite Lived Intangible Assets [Line Items]    
Cost $ 910 $ 2,210
Accumulated Amortization (443) (1,549)
Foreign Currency Translation Adjustments   (30)
Net $ 467 $ 631
Weighted Average Remaining Useful Life 2 years 1 month 6 days 2 years 4 months 24 days
v3.10.0.1
Goodwill and Acquired Intangible Assets - Estimated Future Amortization Expense (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
Remainder of 2018 $ 1,348  
2019 2,673  
2020 1,101  
2021 492  
2022 492  
2023 410  
Net $ 6,516 $ 7,903
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Additional Information (Details)
$ / shares in Units, shares in Millions
3 Months Ended 6 Months Ended
Mar. 15, 2018
USD ($)
day
$ / shares
shares
Jun. 30, 2018
USD ($)
Jun. 30, 2017
USD ($)
[2]
Jun. 30, 2018
USD ($)
Jun. 30, 2017
USD ($)
Dec. 31, 2017
USD ($)
Debt Instrument [Line Items]            
Proceeds from issuance of convertible senior notes, net of issuance costs       $ 561,493,000 $ 0 [1]  
Income tax benefit related to temporary differences   $ 1,400,000   1,400,000    
Income tax benefit related to estimated effective tax rate   1,082,000 $ (766,000) $ 1,082,000 $ (1,582,000) [2]  
Convertible Debt | Convertible Senior Notes Due 2023            
Debt Instrument [Line Items]            
Aggregate principal amount $ 500,000,000          
Interest rate 0.25%          
Additional aggregate principal amount $ 75,000,000          
Proceeds from issuance of convertible senior notes, net of issuance costs $ 561,400,000          
Initial conversion rate of common stock       0.0158554    
Conversion price (usd per share) | $ / shares $ 63.07          
Limitation on sale of common stock, sale price threshold, number of trading days | day 20          
Limitation on sale of common stock, sale price threshold, trading period | day 30          
Threshold percentage of stock price trigger 130.00%          
Number of consecutive business days 5 days          
Percentage of closing sale price in excess of convertible notes 98.00%          
Redemption price percentage 100.00%          
Conversion Option $ 125,000,000 $ 124,976,000   $ 124,976,000   $ 0
Effective interest rate   5.26%   5.26%    
Debt issuance costs, gross   $ 13,600,000   $ 13,600,000    
Issuance costs attributable to the liability component $ 10,600,000 10,166,000   10,166,000   $ 0
Capped calls, initial cap price (in usd per share) | $ / shares $ 95.20          
Number of shares covered by cap call (in shares) | shares 9.1          
Cost incurred related to capped calls $ (63,900,000)     (44,304,000)    
Net deferred tax liability related to cap call $ 13,800,000 $ 13,784,000   $ 13,784,000    
[1] See Note 1 for a summary of adjustments.
[2] See Note 1 for a summary of adjustments.
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Schedule of Net Carrying Amount of Liability and Equity Component of Convertible Notes (Details) - Convertible Debt - Convertible Senior Notes Due 2023 - USD ($)
$ in Thousands
Jun. 30, 2018
Mar. 15, 2018
Dec. 31, 2017
Net Carrying Amount of Liability Component of Convertible Notes [Abstract]      
Principal $ 575,000   $ 0
Unamortized Debt Discount (118,774)   0
Unamortized issuance costs (10,166) $ (10,600) 0
Net carrying amount 446,060   0
Net Carrying Amount of Equity Component of Convertible Notes [Abstract]      
Debt Discount for Conversion Option 124,976 $ 125,000 0
Issuance costs (2,948)   0
Net carrying amount $ 122,028   $ 0
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Schedule of Interest Expense (Details) - Convertible Debt - Convertible Senior Notes Due 2023 - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Debt Instrument [Line Items]        
Contractual interest expense $ 359 $ 0 $ 403 $ 0
Amortization of Debt Discount 5,531 0 6,202 0
Amortization of issuance costs 399 0 448 0
Total interest expense $ 6,289 $ 0 $ 7,053 $ 0
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Summary of Impact to Stockholder's Equity (Details) - Convertible Debt - Convertible Senior Notes Due 2023 - USD ($)
$ in Thousands
6 Months Ended
Mar. 15, 2018
Jun. 30, 2018
Dec. 31, 2017
Debt Instrument [Line Items]      
Conversion Option $ 125,000 $ 124,976 $ 0
Purchase of Capped Calls   (63,940)  
Issuance costs   (2,948) $ 0
Net deferred tax liability (13,800) (13,784)  
Net impact to stockholder's equity $ 63,900 $ 44,304  
v3.10.0.1
Commitments and Contingencies - Additional Information (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]        
Rent expense $ 4.4 $ 2.8 $ 8.8 $ 5.5
v3.10.0.1
Common Stock and Stockholders' Equity - Additional Information (Details)
$ / shares in Units, $ in Millions
3 Months Ended 6 Months Ended
Jan. 01, 2018
shares
May 06, 2016
shares
Jun. 30, 2018
USD ($)
$ / shares
shares
Jun. 30, 2018
USD ($)
offering_period
$ / shares
shares
Dec. 31, 2017
$ / shares
shares
Class Of Stock [Line Items]          
Common stock, shares authorized (in shares)     400,000,000 400,000,000 400,000,000
Common stock, par value (usd per share) | $ / shares     $ 0.01 $ 0.01 $ 0.01
Common stock, shares issued (in shares)     105,700,000 105,700,000 105,700,000
Common stock, shares outstanding (in shares)     103,100,000 103,100,000 103,100,000
Preferred stock, shares authorized (in shares)     10,000,000 10,000,000 10,000,000
Preferred stock, par value (usd per share) | $ / shares     $ 0.01 $ 0.01 $ 0.01
Preferred stock, shares issued (in shares)     0 0 0
Preferred stock, shares outstanding (in shares)     0 0 0
Increase in authorized shares (in shares)       5,156,000  
Shares of common stock available for issuance (in shares)     9,313,000 9,313,000 8,001,000
Stock options granted (in shares)   1,200,000   756,000  
Future period share-based compensation expense | $     $ 262.1 $ 262.1  
Future period share-based compensation expense, period to recognized       2 years 10 months 24 days  
Employee Stock Option          
Class Of Stock [Line Items]          
Offering period       18 months  
Number of offering periods | offering_period       3  
Length of purchase period       6 months  
2009 Stock Option and Grant Plan          
Class Of Stock [Line Items]          
Shares of common stock available for issuance (in shares)     0 0  
2014 Plan | Employee Stock Option          
Class Of Stock [Line Items]          
Increase in authorized shares (in shares) 5,200,000.0        
Shares of common stock available for issuance (in shares)     9,300,000 9,300,000  
Employee Stock Purchase Plan          
Class Of Stock [Line Items]          
Percentage of purchase price of shares lower of the fair market value of common stock employees are able to purchase shares       85.00%  
Common shares purchased (in shares)     400,000 400,000  
Increase in authorized shares (in shares) 1,000,000.0        
Shares of common stock available for issuance (in shares)     4,200,000 4,200,000  
v3.10.0.1
Common Stock and Stockholders' Equity - Summary of Stock Option and RSU Award Activity (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
6 Months Ended 12 Months Ended
May 06, 2016
Jun. 30, 2018
Dec. 31, 2017
Shares Available for Grant      
Outstanding — January 1, 2018 (in shares)   8,001  
Increase in authorized shares (in shares)   5,156  
Stock options granted (in shares)   (756)  
RSUs granted (in shares)   (3,643)  
Stock options forfeited or canceled (in shares)   68  
RSUs forfeited or canceled (in shares)   487  
Outstanding — March 31, 2018 (in shares)   9,313 8,001
Number of Shares      
Balance at the beginning of the period (in shares)   6,239  
Stock options granted (in shares) 1,200 756  
Stock options exercised (in shares)   (674)  
Stock options forfeited or canceled (in shares)   (68)  
Balance at the end of the period (in shares)   6,253 6,239
Weighted-Average Exercise Price      
Balance at the beginning of the period (usd per share)   $ 17.31  
Stock options granted (usd per share)   42.08  
Stock options exercised (usd per share)   14.46  
Stock options forfeited or canceled (usd per share)   28.61  
Balance at the end of the period (usd per share)   $ 20.49 $ 17.31
Weighted Average Remaining Contractual Term      
Weighted Average Remaining Contractual Term   7 years 18 days 7 years 1 month 9 days
Aggregate Intrinsic Value      
Aggregate Intrinsic Value   $ 212,871 $ 103,380
RSUs Outstanding      
Outstanding RSUs      
Balance at the beginning of the period (in shares)   5,827  
RSUs granted (in shares)   3,643  
RSUs vested (in shares)   (1,498)  
RSUs forfeited or canceled (in shares)   (487)  
RSUs forfeited and unavailable for grant (in shares)   (13)  
Balance at the end of the period (in shares)   7,472 5,827
Weighted-Average Grant Date Fair Value      
Balance at the beginning of the period (usd per share)   $ 25.00  
Weighted average grant date fair value, RSUs granted (usd per share)   39.43  
Weighted average grant date fair value, RSUs vested (usd per share)   25.69  
Weighted average grant date fair value, RSUs forfeited or canceled (usd per share)   28.43  
Weighted average grant date fair value, forfeited and unavailable for grant (usd per share)   23.44  
Balance at the end of the period (usd per share)   $ 31.68 $ 25.00
v3.10.0.1
Deferred Revenue and Performance Obligations - Deferred Revenue (Details) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Revenue from Contract with Customer [Abstract]        
Revenue recognized and included in deferred revenue $ 93.4 $ 69.3 $ 139.3 $ 102.7
v3.10.0.1
Deferred Revenue and Performance Obligations - Performance Obligations (Details)
$ in Millions
Jun. 30, 2018
USD ($)
Revenue from Contract with Customer [Abstract]  
Performance obligations expected to be satisfied $ 326.2
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-07-01  
Revenue from Contract with Customer [Abstract]  
Performance obligations expected to be satisfied $ 265.9
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]  
Performance obligations expected to be satisfied, expected timing 1 year
v3.10.0.1
Net Loss Per Share - Computation of Basic and Diluted Net Loss per Share of Common Stock (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
[1]
Jun. 30, 2018
Jun. 30, 2017
[1]
Earnings Per Share [Abstract]        
Net loss $ (34,366) $ (26,267) [2] $ (63,691) $ (51,348) [2]
Weighted-average shares used to compute basic and diluted net loss per share 105,000 99,506 104,350 98,545
Net loss per share, basic and diluted (usd per share) $ (0.33) $ (0.26) $ (0.61) $ (0.52)
[1] See Note 1 for a summary of adjustments.
[2] See Note 1 for a summary of adjustments.
v3.10.0.1
Net Loss Per Share - Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation (Details) - shares
shares in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share amount (in shares) 13,830 14,249
Shares subject to outstanding common stock options and employee stock purchase plan    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share amount (in shares) 6,358 7,448
Restricted stock units    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share amount (in shares) 7,472 6,801
v3.10.0.1
Net Loss Per Share - Additional Information (Details) - Convertible Debt - Convertible Senior Notes Due 2023
shares in Millions
Mar. 15, 2018
$ / shares
shares
Debt Instrument [Line Items]  
Number of shares covered by cap call (in shares) | shares 9.1
Conversion price (usd per share) | $ / shares $ 63.07
v3.10.0.1
Income Taxes - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
[1]
Jun. 30, 2018
Jun. 30, 2017
[1]
Income Tax Disclosure [Abstract]        
Provision for (benefit from) income taxes $ 1,667 $ 690 $ 4,957 $ 652
Income tax benefit related to temporary differences $ 1,400   $ 1,400  
[1] See Note 1 for a summary of adjustments.
v3.10.0.1
Geographic Information - Additional Information (Details)
6 Months Ended
Jun. 30, 2018
segment
Segment Reporting [Abstract]  
Number of reportable segments 1
v3.10.0.1
Geographic Information - Schedule of Revenue by Geographic Areas (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Revenues From External Customers And Long Lived Assets [Line Items]        
Revenue $ 141,882 $ 102,096 $ 271,673 $ 195,984
United States        
Revenues From External Customers And Long Lived Assets [Line Items]        
Revenue 73,019 54,733 141,373 105,432
EMEA        
Revenues From External Customers And Long Lived Assets [Line Items]        
Revenue 41,765 29,057 79,637 55,346
APAC        
Revenues From External Customers And Long Lived Assets [Line Items]        
Revenue 16,111 10,874 30,107 20,745
Other        
Revenues From External Customers And Long Lived Assets [Line Items]        
Revenue $ 10,987 $ 7,432 $ 20,556 $ 14,461
v3.10.0.1
Geographic Information - Schedule of Long-Lived Assets by Geographic Areas (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets $ 50,920 $ 41,369
United States    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 23,006 23,609
Republic of Ireland    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 16,449 5,019
Other EMEA    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 3,328 5,007
EMEA    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 19,777 10,026
APAC    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets $ 8,137 $ 7,734
v3.10.0.1
Label Element Value
Restricted Cash, Noncurrent us-gaap_RestrictedCashNoncurrent $ 637,000 [1]
Restricted Cash, Noncurrent us-gaap_RestrictedCashNoncurrent 624,000
Restricted Cash, Current us-gaap_RestrictedCashCurrent 1,100,000 [1]
Restricted Cash, Current us-gaap_RestrictedCashCurrent $ 1,021,000
[1] See Note 1 for a summary of adjustments.