ALTERYX, INC., 10-Q filed on 11/8/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Nov. 01, 2018
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Entity Emerging Growth Company true  
Entity Small Business false  
Entity Ex Transition Period false  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Trading Symbol AYX  
Entity Registrant Name Alteryx, Inc.  
Entity Central Index Key 0001689923  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Class A Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   37,630,900
Class B Common Stock    
Document Information [Line Items]    
Entity Common Stock, Shares Outstanding   23,752,318
v3.10.0.1
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Revenue $ 54,179 $ 34,155 $ 143,796 $ 93,019
Cost of revenue 5,810 5,425 16,083 15,545
Gross profit 48,369 28,730 127,713 77,474
Operating expenses:        
Research and development 10,530 7,774 31,479 20,943
Sales and marketing 26,290 15,514 77,727 48,731
General and administrative 11,920 8,005 33,653 24,115
Total operating expenses 48,740 31,293 142,859 93,789
Loss from operations (371) (2,563) (15,146) (16,315)
Interest expense (2,970) 0 (4,370) 0
Other income (expense), net 1,754 (711) 1,690 (277)
Loss before benefit from income taxes (1,587) (3,274) (17,826) (16,592)
Provision for (benefit from) income taxes (1,343) 25 (7,101) (632)
Net loss (244) (3,299) (10,725) (15,960)
Less: Accretion of Series A redeemable convertible preferred stock 0 0 0 (1,983)
Net loss attributable to common stockholders $ (244) $ (3,299) $ (10,725) $ (17,943)
Net loss per share attributable to common stockholders, basic and diluted (in dollars per share) $ 0.00 $ (0.06) $ (0.18) $ (0.35)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted (in shares) 61,103 58,942 60,618 50,864
Other comprehensive loss, net of tax:        
Net unrealized holding loss on investments, net of tax $ (70) $ (15) $ (192) $ (101)
Foreign currency translation adjustments, net of tax (26) (40) (168) (148)
Other comprehensive loss, net of tax (96) (55) (360) (249)
Total comprehensive loss $ (340) $ (3,354) $ (11,085) $ (16,209)
v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 85,324 $ 119,716
Short-term investments 242,734 54,386
Accounts receivable, net of allowance for doubtful accounts and sales reserves of $1,780 and $1,714 as of September 30, 2018 and December 31, 2017, respectively 51,228 49,797
Deferred commissions 14,159 11,213
Prepaid expenses and other current assets 13,810 7,227
Total current assets 407,255 242,339
Property and equipment, net 11,731 7,492
Long-term investments 86,023 19,964
Goodwill 9,652 8,750
Intangible assets, net 9,610 7,995
Other assets 1,607 4,263
Deferred incomes taxes, net 612 613
Total assets 526,490 291,416
Current liabilities:    
Accounts payable 7,337 522
Accrued payroll and payroll related liabilities 13,502 11,835
Accrued expenses and other current liabilities 8,970 8,270
Deferred revenue 124,235 110,213
Total current liabilities 154,044 130,840
Convertible senior notes, net 170,927 0
Deferred revenue 3,218 3,545
Other liabilities 3,358 3,313
Deferred income tax, net 219 214
Total liabilities 331,766 137,912
Stockholders’ equity:    
Preferred stock, $0.0001 par value: 10,000 shares authorized as of September 30, 2018 and December 31, 2017, respectively; no shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively 0 0
Common stock, $0.0001 par value: 500,000 Class A shares authorized, 37,607 and 26,687 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively; 500,000 Class B shares authorized, 23,766 and 32,948 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively 6 5
Additional paid-in capital 311,282 257,399
Accumulated deficit (115,850) (103,546)
Accumulated other comprehensive loss (714) (354)
Total stockholders’ equity 194,724 153,504
Total liabilities and stockholders’ equity $ 526,490 $ 291,416
v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Allowance for doubtful accounts and sales reserves $ 1,780 $ 1,714
Preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Class A Common Stock    
Common stock, par value per share (in dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 37,607,000 26,687,000
Common stock, shares outstanding (in shares) 37,607,000 26,687,000
Class B Common Stock    
Common stock, par value per share (in dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized (in shares) 500,000,000 500,000,000
Common stock, shares issued (in shares) 23,766,000 32,948,000
Common stock, shares outstanding (in shares) 23,766,000 32,948,000
v3.10.0.1
Condensed Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Price Risk Derivative
Common Stock
Additional Paid-in Capital
Additional Paid-in Capital
Price Risk Derivative
Accumulated Deficit
Accumulated Other Comprehensive Loss
Cumulative effect of adoption of accounting standards $ (1,438)     $ 141   $ (1,579)  
Beginning Balance at Dec. 31, 2017 153,504   $ 5 257,399   (103,546) $ (354)
Beginning Balance (in shares) at Dec. 31, 2017     59,635,000        
Shares issued pursuant to stock awards 12,347   $ 1 12,346      
Shares issued pursuant to stock awards (in shares)     1,719,000        
Stock-based compensation 12,065     12,065      
Equity component of convertible senior notes, net of issuance costs and tax 47,788     47,788      
Purchase of capped calls   $ (19,113)     $ (19,113)    
Equity-settled contingent consideration $ 656     656      
Equity settled contingent consideration (in shares) 18,869   19,000        
Cumulative translation adjustment $ (168)           (168)
Unrealized loss on investments (192)           (192)
Net loss (10,725)         (10,725) 0
Ending Balance at Sep. 30, 2018 $ 194,724   $ 6 $ 311,282   $ (115,850) $ (714)
Ending Balance (in shares) at Sep. 30, 2018     61,373,000        
v3.10.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Cash flows from operating activities:    
Net loss $ (10,725) $ (15,960)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 3,244 2,670
Stock-based compensation 12,065 6,454
Amortization of debt discount and issuance costs 3,933 0
Deferred income taxes (7,906) (1,138)
Provision for doubtful accounts, net of recoveries 14 770
Impairment of long-lived assets 0 1,050
Change in fair value of contingent consideration 455 190
Loss on disposal of assets 9 32
Changes in operating assets and liabilities, net of effect of business acquisitions:    
Accounts receivable (1,303) 3,892
Deferred commissions (3,096) 827
Prepaid expenses and other current assets and other assets (5,486) (2,229)
Accounts payable 5,987 1,720
Accrued payroll and payroll related liabilities 1,697 (1,667)
Accrued expenses and other current liabilities (1,768) 1,470
Deferred revenue 14,269 8,071
Other liabilities 276 288
Net cash provided by operating activities 11,665 6,440
Cash flows from investing activities:    
Purchases of property and equipment (5,929) (2,303)
Cash paid in business acquisitions, net of cash acquired (3,537) (9,097)
Purchases of investments (342,851) (87,551)
Maturities of investments 88,919 21,768
Net cash used in investing activities (263,398) (77,183)
Cash flows from financing activities:    
Proceeds from issuance of convertible senior notes, net of issuance costs 224,708 0
Purchase of capped calls (19,113) 0
Proceeds from initial public offering, net of underwriting commissions and discounts 0 134,757
Payment of initial public offering costs 0 (1,867)
Payment of holdback funds from acquisition (250) 0
Principal payments on capital lease obligations (245) (247)
Proceeds from exercise of stock options 12,496 2,562
Minimum tax withholding paid on behalf of employees for restricted stock units (149) 0
Net cash provided by financing activities 217,447 135,205
Effect of exchange rate changes on cash and cash equivalents (106) 8
Net increase (decrease) in cash and cash equivalents (34,392) 64,470
Cash and cash equivalents—beginning of period 119,716 31,306
Cash and cash equivalents—end of period 85,324 95,776
Supplemental disclosure of noncash investing and financing activities:    
Property and equipment recorded in accounts payable 614 26
Consideration for business acquisition initially included in accrued expenses and other current liabilities and other liabilities 1,200 1,660
Consideration for business acquisition from issuance of common stock 0 5,285
Contingent consideration settled through issuance of common stock 656 375
Accretion of Series A redeemable convertible preferred stock 0 1,983
Deferred initial public offering costs recorded in accounts payable and accrued expenses 0 529
Debt issuance costs recorded in accounts payable and accrued expenses and other current liabilities 462 0
Series A Redeemable Convertible Preferred Stock    
Supplemental disclosure of noncash investing and financing activities:    
Accretion of Series A redeemable convertible preferred stock 0 1,983
Conversion of Series A redeemable convertible preferred stock to common shares $ 0 $ 101,165
v3.10.0.1
Business
9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business
Business
Our Company
Alteryx, Inc. and its subsidiaries, or we, our, or us, are improving business through data science and analytics. Our end-to-end software platform enables users in an organization to improve business outcomes and the productivity of their business analysts and data scientists. Our subscription-based platform allows organizations to easily discover, prepare, blend, and analyze data from a multitude of sources and deliver data-driven decisions. The ease-of-use, speed, and sophistication that our platform provides is enhanced through intuitive and highly repeatable visual workflows.
Basis of Presentation
Our unaudited interim condensed consolidated financial statements are presented in accordance with accounting standards generally accepted in the United States of America, or U.S. GAAP, for interim financial information. Certain information and disclosures normally included in consolidated financial statements presented in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission, or SEC, on March 8, 2018. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and reflect all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.
The operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results expected for the full year ending December 31, 2018.
v3.10.0.1
Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Significant Accounting Policies
Significant Accounting Policies
There have been no changes to our accounting policies disclosed in our audited consolidated financial statements and the related notes for the year ended December 31, 2017 other than, during the three months ended March 31, 2018, we adopted new accounting guidance related to stock-based compensation and to income tax effects of intra-entity transfers of assets other than inventory. See “Recently Adopted Accounting Pronouncements” below.. In addition, during the three months ended June 30, 2018, we adopted accounting policies relating to our convertible senior notes that were issued in May and June 2018 (see Note 6).
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.
On an ongoing basis, our management evaluates estimates and assumptions based on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities.
Convertible Senior Notes
Convertible senior notes are accounted for in accordance with the provisions of Accounting Standards Codification, or ASC, 470‑20, Debt with Conversion and Other Options. Convertible debt instruments that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to be separated into liability and equity components of the instrument. The carrying amount of the liability component of the instrument is computed by estimating the fair value of a similar liability without the conversion option. The carrying amount of the equity component, representing the conversion option, is then calculated by deducting the fair value of the liability component from the principal amount of the instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the respective term of the convertible debt instrument using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. Issuance costs incurred related to the issuance of convertible debt instruments are allocated to the liability and equity components based on their relative fair values.
Variable Interest Entities
In accordance with ASC 810, Consolidation, the applicable accounting guidance for the consolidation of variable interest entities, or VIEs, we analyze our interests to determine if such interests are variable interests. If variable interests are identified, then the related entity is assessed to determine if it is a VIE. VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). If we determine that the entity is a VIE, we then assess if we must consolidate the VIE. We deem ourselves to be the primary beneficiary if we have both (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (ii) an obligation to absorb losses of the entity that could potentially be significant to the VIE, or a right to receive benefits from the entity that could be significant to the VIE.
As of December 31, 2017 and September 30, 2018, we determined that two and one of our distributors were VIEs under the guidance of ASC 810, Consolidation, respectively. These determinations were due to (i) our participation in the design of the distributor’s legal entity, (ii) our having a variable interest in the distributor, and (iii) our having the right to residual returns. We determined that we were not the primary beneficiary of these VIEs because we did not have (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant. Therefore, we did not consolidate any assets or liabilities of these VIE’s in our consolidated balance sheets or record the results of these distributors in our consolidated statements of operations and comprehensive loss. Transactions with the VIEs were accounted for in the same manner as our other distributors and resellers. As of September 30, 2018 and December 31, 2017, we had no exposure to losses from the contractual relationships with these VIEs or commitments to fund these VIEs. During the three months ended March 31, 2018, we acquired 100% of the outstanding equity of one of our VIEs. Our condensed consolidated financial statements include the assets and liabilities and the results of operations of the acquired company commencing as of the acquisition date. See Note 3 for additional information.
Recently Adopted Accounting Pronouncements
Under the Jumpstart our Business Startups Act, or the JOBS Act, we qualify as an emerging growth company, or EGC. However, we will no longer qualify as an EGC after December 31, 2018. While we maintain EGC status, we have elected to use the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.
In October 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. This guidance removes the prohibition in ASC 740, Income Taxes, or ASC 740, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This guidance is intended to reduce the complexity of U.S. GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. The impact of adoption is recorded using the modified retrospective transition basis through a cumulative-effect adjustment to accumulated deficit as of the beginning of the period of adoption. We early adopted ASU 2016-16 on January 1, 2018, resulting in the elimination of $1.4 million of deferred tax charges included in other assets in our consolidated balance sheet at December 31, 2017. We recorded the elimination of the deferred charge to accumulated deficit as of January 1, 2018.
In March 2016, the FASB issued ASU 2016-9, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or ASU 2016-9, which simplifies several aspects of the accounting for share-based payment transactions and related tax impacts, the classification of excess tax benefits on the statement of cash flows, statutory tax withholding requirements, and other stock-based compensation classification matters. We adopted ASU 2016-9 on January 1, 2018. Upon adoption, we recognized $2.4 million of previously unrecognized excess tax benefits related to stock awards using the modified retrospective transition method. We recorded the recognized excess tax benefits as a deferred tax asset, which was then fully offset by our U.S. federal and state deferred tax asset valuation allowance resulting in no impact to our accumulated deficit. Immediately prior to adoption, we had no unrecognized excess tax benefits related to stock awards in jurisdictions outside the United States. All future excess tax benefits resulting from the settlement of stock awards will be recorded to income tax expense. Additionally, upon adoption, we changed our accounting policy to account for forfeitures when they occur rather than estimate a forfeiture rate, the result of which was recorded using the modified retrospective transition basis through a cumulative-effect adjustment to accumulated deficit and additional paid-in-capital of $0.1 million as of January 1, 2018.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software. This guidance will be effective for us for annual reporting periods beginning after December 15, 2019 and for interim periods within those annual periods, and can be applied either retrospectively or prospectively to all implementation costs after the date of adoption. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This guidance will be effective for us for annual or any interim goodwill impairment test in annual reporting periods beginning after December 15, 2019. Early adoption is permitted and will be applied to any acquisitions after adoption on a prospective basis. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which narrows the application of when an integrated set of assets and activities is considered a business and provides a framework to assist entities in evaluating whether both an input and a substantive process are present to be considered a business. It is expected that the new guidance will reduce the number of transactions that would need to be further evaluated and accounted for as a business. This guidance will be effective for us for the annual reporting period for the year ending December 31, 2018, and for interim and annual reporting periods thereafter. Early adoption is permitted and will be applied on a prospective basis. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown on the statement of cash flows. This guidance will be effective for us for the year ending December 31, 2018, and for interim and annual reporting periods thereafter, and should be applied using a retrospective transition method to each period presented. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We have not yet determined the timing of adoption. We currently present changes in restricted cash within investing activities and so the adoption of this guidance will result in changes in net cash flows from investing activities and to certain beginning and ending cash and cash equivalent totals shown on our consolidated statement of cash flows.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including presentation of cash flows relating to contingent consideration payments, proceeds from the settlement of insurance claims, and debt prepayment or debt extinguishment costs, among other matters. This guidance will be effective for us for the annual reporting period for the year ending December 31, 2018, and for interim and annual reporting periods thereafter. Early adoption is permitted, including adoption in an interim period. If adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of this guidance is required to be applied using a retrospective transition method to each period presented, unless impracticable to do so. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, creating Topic 842, which requires lessees to record the assets and liabilities arising from all leases in the statement of financial position. Under ASU 2016-2, lessees will recognize a liability for lease payments and a right-of-use asset. When measuring assets and liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. For leases with a term of 12 months or less, lessees are permitted to make an accounting policy election to not recognize lease assets and liabilities. This guidance retains the distinction between finance leases and operating leases and the classification criteria remains similar. For financing leases, a lessee will recognize the interest on a lease liability separate from amortization of the right-of-use asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. This guidance will be effective for us for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods, and is required to be applied using a modified retrospective approach with an option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings on the date of adoption. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This guidance replaces most existing revenue recognition guidance. It provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-9 by one year. During 2016 and 2017, the FASB continued to issue additional amendments to this new revenue guidance. This guidance will be effective for us for the annual reporting period for the year ending December 31, 2018, and for interim and annual reporting periods thereafter. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.
v3.10.0.1
Business Combinations
9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Business Combinations
Business Combinations
In February 2018, we acquired 100% of the outstanding equity of Alteryx ANZ Pty Limited, or ANZ, in Sydney, Australia, our exclusive master distributor in Australia and New Zealand. The total purchase consideration for the acquisition was approximately $4.8 million consisting of (i) $3.3 million in cash consideration, (ii) $1.2 million in contingent consideration payable in cash, and (iii) $0.3 million for the settlement of preexisting relationships.
The condensed consolidated financial statements include the results of operations of the acquired company commencing as of the acquisition date. The allocation of the total purchase price for this acquisition was $0.3 million of net tangible assets, $3.5 million of identifiable intangible assets, consisting of customer contracts and relationships, and $1.0 million of residual goodwill, which was not tax deductible.
We determined the fair value of the customer contracts and relationships acquired in the acquisition using the multiple period excess earnings model. This model utilizes certain unobservable inputs, including discounted cash flows, historical and projected financial information, and customer attrition rates, classified as Level 3 measurements as defined by ASC 820, Fair Value Measurements and Disclosures, or ASC 820. Based on the valuation models, we determined the fair value of the customer contracts and relationships to be $3.5 million with a weighted-average amortization period of seven years.
A portion of the consideration for the acquisition is subject to earn-out provisions. Additional contingent earn-out consideration of up to $1.5 million may be paid out to the former shareholder of ANZ over two years upon the achievement of specified milestones. We utilized a probability weighted scenario-based model to determine the fair value of the contingent consideration. Based on this valuation model, we determined the fair value of the contingent consideration to be $1.2 million as of the acquisition date. See Note 4 for additional information on contingent earn-out consideration.
In January 2017, we acquired 100% of the outstanding equity of Semanta, s.r.o., or Semanta. The total purchase consideration was approximately $5.6 million and consisted primarily of $3.1 million of completed technology intangible assets, $2.9 million of goodwill, and $0.4 million of net liabilities assumed.
In May 2017, we acquired 100% of the outstanding equity of Yhat Inc., or Yhat. The total purchase consideration was approximately $10.8 million and consisted of primarily $6.1 million of completed technology intangible assets, $5.8 million of goodwill, and $1.1 million of net liabilities assumed.
Pro forma information and revenue and operating results of the acquired companies have not been presented for these acquisitions as the impact is not material to our condensed consolidated financial statements.
v3.10.0.1
Fair Value Measurements
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
 
        
Level 1
  
Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
 
 
 
 
Level 2
  
Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active near the measurement date; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
 
 
 
Level 3
  
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of our money market funds was determined based on “Level 1” inputs.

The fair value of certificates of deposit, U.S. Treasury and agency bonds, and corporate bonds were determined based on “Level 2” inputs. The valuation techniques used to measure the fair value of commercial paper and certificates of deposit included observable market-based inputs for similar assets, which primarily include yield curves and time-to-maturity factors. The valuation techniques used to measure the fair value of U.S. Treasury and agency bonds and corporate bonds included standard observable inputs, including reported trades, quoted market prices, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets or benchmark securities and data provided by third parties as many of the bonds are not actively traded.
There were no marketable securities measured on a recurring basis in the “Level 3” category.
We have not elected the fair value option as prescribed by ASC 825, The Fair Value Option for Financial Assets and Financial Liabilities, for our financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, such as our convertible senior notes and accounts receivable and payables, are reported at their carrying values.
Instruments Measured at Fair Value on a Recurring Basis. The following tables present our cash and cash equivalents and investments’ costs, gross unrealized losses, and fair value by major security type recorded as cash and cash equivalents or short-term or long-term investments as of September 30, 2018 and December 31, 2017 (in thousands):
 
 
As of September 30, 2018
 
Cost
 
Gross
Unrealized
Losses
 
Fair Value
 
Cash and
Cash
Equivalents
 
Short-term
Investments
 
Long-term
Investments
Cash
$
68,375

 
$

 
$
68,375

 
$
68,375

 
$

 
$

Level 1:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
16,949

 

 
16,949

 
16,949

 

 

Subtotal
16,949

 

 
16,949

 
16,949

 

 

Level 2:
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit
5,153

 

 
5,153

 

 
4,403

 
750

U.S. Treasury and agency bonds
216,948

 
(357
)
 
216,591

 

 
157,970

 
58,621

Corporate bonds
107,075

 
(62
)
 
107,013

 

 
80,361

 
26,652

Subtotal
329,176

 
(419
)
 
328,757

 

 
242,734

 
86,023

Level 3

 

 

 

 

 

Total
$
414,500

 
$
(419
)
 
$
414,081

 
$
85,324

 
$
242,734

 
$
86,023

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
 
Cost
 
Gross
Unrealized
Losses
 
Fair Value
 
Cash and
Cash
Equivalents
 
Short-term
Investments
 
Long-term
Investments
Cash
$
100,651

 
$

 
$
100,651

 
$
100,651

 
$

 
$

Level 1:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
19,065

 

 
19,065

 
19,065

 

 

Subtotal
19,065

 

 
19,065

 
19,065

 

 

Level 2:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency bonds
44,968

 
(176
)
 
44,792

 

 
25,923

 
18,869

Corporate bonds
29,608

 
(50
)
 
29,558

 

 
28,463

 
1,095

Subtotal
74,576

 
(226
)
 
74,350

 

 
54,386

 
19,964

Level 3

 

 

 

 

 

Total
$
194,292

 
$
(226
)
 
$
194,066

 
$
119,716

 
$
54,386

 
$
19,964


There were no transfers between Level 1, Level 2, or Level 3 securities during the nine months ended September 30, 2018. We review our marketable securities on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. We consider factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and our intent to sell, and whether it is more likely than not we will be required to sell the investment before recovery of the investment’s amortized cost basis.  We have determined the gross unrealized losses of $0.4 million as of September 30, 2018 were due to changes in market rates, and are temporary in nature.
All the long-term investments had maturities of between one and two years in duration as of September 30, 2018. Cash and cash equivalents, restricted cash, and investments as of September 30, 2018 and December 31, 2017 held domestically were approximately $406.3 million and $181.3 million, respectively.
Contingent Consideration. Contingent consideration in connection with acquisitions is measured at fair value each reporting period based on significant unobservable inputs, classified as Level 3 measurement. See Note 3 for additional information on the valuation of the contingent consideration as of the acquisition date. The contingent earn-out consideration has been recorded in accrued expenses and other current liabilities and other liabilities in our accompanying condensed consolidated balance sheet with any changes in fair value each reporting period recorded in general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. Changes in fair value depend on several factors including estimates of the timing and ability to achieve the milestones.
The following table presents a reconciliation of the beginning and ending balances of acquisition-related accrued contingent consideration using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Beginning balance
$
1,974

 
$
1,318

 
$
975

 
$

Obligations assumed

 

 
1,200

 
1,160

Change in fair value

 
32

 
455

 
190

Settlement

 
(375
)
 
(656
)
 
(375
)
Ending balance
$
1,974

 
$
975

 
$
1,974

 
$
975


Upon the achievement of certain milestones in connection with our acquisition of Semanta, we released 18,869 shares of Class A common stock to the former shareholders of Semanta in the three months ended March 31, 2018. In addition, 5,381 shares were earned, but held back for customary indemnification matters in accordance with the acquisition agreement, and the value of the shares is presented within additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2018. Subject to any indemnification claims that may arise during the indemnification period, these shares will be issued to the former shareholders upon the completion of the indemnification period.
Instruments Not Recorded at Fair Value on a Recurring Basis. We measure the fair value of our convertible senior notes carried at face value less unamortized discount and issuance costs quarterly for disclosure purposes. The estimated fair value of our convertible senior notes is determined by Level 2 inputs and is based on observable market data including prices for similar instruments. As of September 30, 2018, the fair value of our convertible senior notes was $326.4 million. The carrying amounts of our cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate their current fair value because of their nature and relatively short maturity dates or durations.
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis. The fair value of assets acquired and liabilities assumed in a business acquisition are measured at the date of acquisition, and goodwill and other long-lived assets when they are held for sale or determined to be impaired. See Note 3 for fair value measurements of certain assets and liabilities recorded at fair value on a non-recurring basis.
v3.10.0.1
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
Goodwill and Intangible Assets
The change in carrying amount of goodwill for the nine months ended September 30, 2018 was as follows (in thousands):
 
 
 
Goodwill as of December 31, 2017
$
8,750

Goodwill recorded in connection with acquisition
994

Effects of foreign currency translation
(92
)
Goodwill as of September 30, 2018
$
9,652


Intangible assets consisted of the following (in thousands, except years):
 
 
As of September 30, 2018
 
Weighted
Average Useful
Life in Years
 
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Customer Relationships
7.0
 
$
3,314

 
$
(318
)
 
$
2,996

Completed Technology
5.7
 
9,180

 
(2,566
)
 
6,614

 
 
 
$
12,494

 
$
(2,884
)
 
$
9,610

 
As of December 31, 2017
 
Weighted
Average Useful
Life in Years
 
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Customer Relationships
2.0
 
$
40

 
$
(12
)
 
$
28

Completed Technology
5.7
 
9,180

 
(1,213
)
 
7,967

 
 
 
$
9,220

 
$
(1,225
)
 
$
7,995


We classified intangible asset amortization expense in the accompanying consolidated statements of operations and comprehensive loss as follows (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Cost of revenue
$
456

 
$
456

 
$
1,353

 
$
757

Sales and marketing
125

 
5

 
316

 
7

Total
$
581

 
$
461

 
$
1,669

 
$
764


The following table presents our estimates of remaining amortization expense for finite-lived intangible assets at September 30, 2018 (in thousands):
 
 
 
Remainder of 2018
$
579

2019
2,284

2020
1,971

2021
1,760

2022
1,214

Thereafter
1,802

Total amortization expense
$
9,610

v3.10.0.1
Convertible Senior Notes
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Convertible Senior Notes
Convertible Senior Notes
In May and June 2018, we offered and sold $230.0 million aggregate principal amount of our 0.50% Convertible Senior Notes due 2023, or the convertible senior notes, including the initial purchasers’ exercise in full of their option to purchase an additional $30.0 million of the convertible senior notes, in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act of 1933, as amended, or the Act. The convertible senior notes were issued in accordance with an indenture, or the Indenture, between us and U.S. Bank National Association, as trustee. The net proceeds from the issuance of the convertible senior notes were $224.2 million after deducting issuance costs.
The convertible senior notes are our senior, unsecured obligations, and interest of 0.50% per year is payable semi-annually in arrears on June 1 and December 1 of each year beginning December 1, 2018. The convertible senior notes will mature on June 1, 2023, unless repurchased or converted in accordance with their terms prior to such date. Prior to the close of business on the business day immediately preceding March 1, 2023, the convertible senior notes are convertible at the option of holders only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The convertible senior notes have an initial conversion rate of 22.5572 shares of our Class A common stock per $1,000 principal amount of convertible senior notes, which is equivalent to an initial conversion price of approximately $44.33 per share of Class A common stock. The conversion rate is subject to customary adjustments for certain events as described in the Indenture. Upon conversion, the convertible senior notes may be settled in shares of our Class A common stock, cash or a combination of cash and shares of our Class A common stock, at our election. It is our current intent to settle the principal amount of the convertible senior notes with cash.
Prior to the close of business on the business day immediately preceding March 1, 2023, the convertible senior notes are convertible at the option of the holders under the following circumstances:
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 the Class A 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 of the convertible senior notes on each applicable trading day;
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of convertible senior notes for each day of that ten day consecutive trading day period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate of the convertible senior notes on such trading day; or
upon the occurrence of specified corporate events described in the Indenture.
We may not redeem the convertible senior notes prior to the maturity date. Holders of the convertible senior notes have the right to require us to repurchase for cash all or a portion of their convertible senior notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change as defined in the Indenture. We are also required to increase the conversion rate for holders who convert their convertible senior notes in connection with certain corporate events occurring prior to the maturity date.
The convertible senior notes will be our senior unsecured obligations and will rank senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the convertible senior notes and equal in right of payment to all of our existing and future liabilities that are not subordinated. The convertible senior notes are effectively junior to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally junior to all indebtedness and other liabilities (including trade payables) of our current or future subsidiaries.
In accounting for the issuance of the convertible senior notes, we separated the convertible senior notes into liability and equity components. The carrying amount of the liability component was calculated by estimating the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the principal amount of the convertible senior notes. The difference between the principal amount of the convertible senior notes and the liability component is amortized to interest expense over the term of the convertible senior notes using the effective interest method. The equity component, net of issuance costs, is presented within additional paid-in-capital in our condensed consolidated balance sheet, and will not be remeasured as long as it continues to meet the requirements for equity classification.
The convertible senior notes consisted of the following (in thousands):
 
As of September 30, 2018
Liability:
 
Principal
$
230,000

Less: debt discount, net of amortization
(59,073
)
Net carrying amount
$
170,927

 
 
Equity, net of issuance costs
$
57,251


The following table sets forth interest expense recognized related to the convertible senior notes (in thousands, except effective interest rate):
 
Nine Months Ended
 
September 30, 2018
Contractual interest expense
$
425

Amortization of debt issuance costs and discount
3,933

Total
$
4,358

Effective interest rate of the liability component
7.00
%

Capped Call
In connection with the pricing of the convertible senior notes, we entered into privately negotiated capped call transactions with an affiliate of one of the initial purchasers of the convertible senior notes and other financial institutions. The capped call transactions are expected generally to reduce or offset potential dilution to holders of our common stock and/or offset the potential cash payments that we could be required to make in excess of the principal amount upon any conversion of the convertible senior notes under certain circumstances, with such reduction and/or offset subject to a cap based on the cap price. Under the capped call transactions, we purchased capped call options that in the aggregate relate to the total number of shares of our Class A common stock underlying the convertible senior notes, with an initial strike price of approximately $44.33 per share, which corresponds to the initial conversion price of the convertible senior notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the convertible senior notes, and have a cap price of $62.22 per share. The cost of the purchased capped calls of $19.1 million was recorded as a reduction to additional paid-in-capital in our condensed consolidated balance sheet.
v3.10.0.1
Equity Awards
9 Months Ended
Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Equity Awards
Equity Awards
Stock Options
Stock option activity during the nine months ended September 30, 2018 consisted of the following (in thousands, except weighted-average information):
 
 
Options
Outstanding
 
Weighted-
Average
Exercise
Price
Options outstanding at December 31, 2017
5,196

 
$
8.70

Granted
673

 
28.28

Exercised
(1,496
)
 
6.36

Canceled/forfeited
(169
)
 
12.62

Options outstanding at September 30, 2018
4,204

 
$
12.50


As of September 30, 2018, there was $14.9 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.7 years.
Restricted Stock Units
RSU activity during the nine months ended September 30, 2018 consisted of the following (in thousands, except weighted-average information):
 
 
Awards
Outstanding
 
Weighted-
Average
Grant Date
Fair Value
RSUs outstanding at December 31, 2017
464

 
$
16.81

Granted
961

 
33.89

Vested
(89
)
 
16.43

Canceled/forfeited
(56
)
 
26.58

RSUs outstanding at September 30, 2018
1,280

 
$
29.23


As of September 30, 2018, total unrecognized compensation expense related to unvested RSUs was approximately $30.4 million, which is expected to be recognized over a weighted-average period of 3.3 years.
We classified stock-based compensation expense in the accompanying consolidated statements of operations and comprehensive loss as follows (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Cost of revenue
$
226

 
$
123

 
$
571

 
$
368

Research and development
828

 
458

 
2,782

 
1,157

Sales and marketing
1,641

 
459

 
4,411

 
1,642

General and administrative
1,687

 
1,239

 
4,301

 
3,342

Total
$
4,382

 
$
2,279

 
$
12,065

 
$
6,509

v3.10.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Leases
We have various non-cancelable operating leases for our offices. These leases expire at various times through 2025. Certain lease agreements contain renewal options, rent abatement, and escalation clauses.
Indemnification
In the ordinary course of business, we enter into agreements in which we may agree to indemnify other parties with respect to certain matters, including losses resulting from claims of intellectual property infringement, damages to property or persons, business losses, or other liabilities. In addition, we have entered into indemnification agreements with our directors, executive officers, and certain other employees that will require us to indemnify them against liabilities that may arise by reason of their status or service as directors, officers, or employees. The term of these indemnification agreements with our directors, executive officers, and other employees, are generally perpetual after execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited; however, we maintain insurance that reduces our exposure and enables us to recover a portion of any future amounts paid. As of September 30, 2018 and December 31, 2017, we have not accrued a liability for these indemnification provisions because the likelihood of incurring a payment obligation, if any, in connection with these arrangements is not probable or reasonably estimable.
Litigation
From time to time, we may be involved in lawsuits, claims, investigations, and proceedings, consisting of intellectual property, commercial, employment, and other matters, which arise in the ordinary course of business. Other than the matters described below, we are not currently party to any material legal proceedings or claims, nor are we aware of any pending or threatened legal proceedings or claims that could have a material adverse effect on our business, operating results, cash flows, or financial condition should such legal proceedings or claims be resolved unfavorably.
On December 19, 2017, we disclosed that individuals with an Amazon Web Services, or AWS, login could have had access to a third-party marketing dataset that provided consumer marketing information intended to help marketing professionals advertise and sell their products, or the AWS Matter. This dataset is commercially available and provides some location information, contact information and other estimated information that is used for marketing purposes. It does not include names, credit card numbers, social security numbers, bank account information or passwords.
Four putative consumer class action lawsuits have been filed against us in U.S. federal courts relating to the AWS Matter: (1) Kacur v. Alteryx, Inc., Case No. 8:17-cv-2222 (C.D. Cal) (asserting claims for putative national class and Ohio subclass); (2) Jackson v. Alteryx, Inc., Case No. 3:17-cv-02021 (D. Or.) (asserting claims for putative Oregon class); (3) Foskaris v. Alteryx, Inc., Case No. 2:17-cv-03088 (D. Nev.), (asserting claims for putative national class and Nevada subclass); and (4) Ruderman et al. v. Alteryx, Inc., Case No. 8:18-cv-00022 (C.D. Cal.) (asserting claims for putative national class and Florida, New Jersey, and New York subclasses). Three actions were filed on December 20, 2017 (Kacur, Jackson, Foskaris), and the fourth was filed on January 8, 2018 (Ruderman). The plaintiffs in these cases, who purported to represent various classes of individuals whose information was contained within the dataset, claimed to have been harmed or to be facing harm as a result of the exposure of their personal information. The complaints assert claims for violation of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq. and state consumer-protection statutes, as well as claims for common-law negligence. Additional actions alleging similar claims could be brought in the future.  The Jackson action was dismissed with prejudice on April 30, 2018. On February 9, 2018, the Ruderman and Kacur actions were consolidated into a single action pending at Case No. 8:17-cv-2222 (C.D. Cal.)  On June 5, 2018, the Foskaris action was transferred from the District of Nevada to the Central District of California at Case No. 8:18-cv-00963.  On September 19, 2018, the Kacur, Ruderman, and Foskaris actions were dismissed with prejudice.
v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The following table presents details of the benefit from income taxes and our effective tax rates (in thousands, except percentages):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Provision for (benefit from) income taxes
$
(1,343
)
 
$
25

 
$
(7,101
)
 
$
(632
)
Effective tax rate
(84.6
)%
 
0.8
%
 
(39.8
)%
 
(3.8
)%

We account for income taxes according to ASC 740, which, among other things, requires that we estimate our annual effective income tax rate for the full year and apply it to pre-tax income (loss) to each interim period, taking into account year-to-date amounts and projected results for the full year.  We account for the tax effects of discrete events in the interim period they occur. The provision for income taxes consists of federal, foreign, state, and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, differing tax rates imposed on income earned in foreign jurisdictions and in the United States, losses in foreign jurisdictions, certain nondeductible expenses, excess tax deductions and tax shortfalls related to the settlement of stock-based awards, and the changes in valuation allowances against our deferred tax assets. Our effective tax rate could change significantly from quarter to quarter because of recurring and nonrecurring factors. On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Tax Act, became law. As of December 31, 2017, we completed our accounting for the income tax effects of the Tax Act, including our election of accounting policy that recognizes the deferred tax effects of future inclusions of global intangible low-taxed income, or GILTI, in the period we become subject to GILTI.
The issuance of the convertible senior notes during the three months ended June 30, 2018 resulted in a temporary difference between the carrying amount and tax basis of the convertible senior notes. This taxable temporary difference resulted in the recognition of a $9.5 million deferred tax liability, which was recorded as an offset to additional paid-in-capital. In accordance with ASC 740-20, Intraperiod Tax Allocation, the deferred tax liability provided an additional source of income to realize the benefit from the current year loss from continuing operations, which resulted in the recognition of a $1.9 million and $7.9 million income tax benefit during the three and nine months ended September 30, 2018, respectively.
We evaluate whether to record a valuation allowance against our deferred tax assets by considering all available positive and negative evidence, using a “more likely than not” realization standard, including our cumulative losses, and the amount and timing of future taxable income. Based on our review, we will continue to maintain a full valuation allowance against our U.S. deferred tax assets.
On July 24, 2018, the Ninth Circuit Court of Appeals issued an opinion in Altera Corp. v. Commissioner requiring related parties in an intercompany cost-sharing arrangement to share expenses related to share-based compensation. This opinion reversed the prior decision of the United States Tax Court. On August 7, 2018 the Ninth Circuit Court of Appeals subsequently withdrew its opinion. The opinion and subsequent withdrawal did not have a material impact to our financial statements.
Neither we nor any of our subsidiaries are currently under examination from tax authorities in the jurisdictions in which we do business.
v3.10.0.1
Basic and Diluted Net Loss Per Share
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Basic and Diluted Net Loss Per Share
Basic and Diluted Net Loss Per Share
Diluted net loss per share attributable to common stockholders adjusts basic net loss per share for the potentially dilutive impact of stock options and convertible preferred stock. As we have reported losses attributable to common stockholders for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share. Basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.
The following weighted-average equivalent shares of common stock were excluded from the diluted net loss per share calculation because their inclusion would have been anti-dilutive (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Options to purchase common stock
4,503

 
5,890

 
4,962

 
6,029

Unvested restricted stock units
1,258

 
418

 
1,072

 
411

Conversion of convertible preferred stock

 

 

 
4,399

Contingently issuable shares
10

 
12

 
14

 
4

Total shares excluded from net loss per share
5,771

 
6,320

 
6,048

 
10,843


It is our current intent to settle the principal amount of the convertible senior notes with cash, and therefore, we use the treasury stock method for calculating any potential dilutive effect of the conversion option on diluted net loss per share. The conversion option may have a dilutive impact on net income per share of common stock when the average market price per share of our Class A common stock for a given period exceeds the conversion price of the convertible senior notes of $44.33 per share. During the three months ended September 30, 2018, the weighted average price per share of our Class A common stock exceeded the conversion price of the convertible senior notes; however, since we are in a net loss position there was no dilutive effect during any period presented.
v3.10.0.1
Segment and Geographic Information
9 Months Ended
Sep. 30, 2018
Segment Reporting [Abstract]  
Segment and Geographic Information
Segment and Geographic Information
Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, or CODM, who is our chief executive officer, in deciding how to allocate resources and assess our financial and operational performance. Our CODM evaluates our financial information and resources and assesses the performance of these resources on a consolidated and aggregated basis. As a result, we have determined that our business operates in a single operating segment.
Our operations outside the United States include sales offices in Australia, Canada, Czech Republic, France, Germany, Japan, Singapore, the United Arab Emirates, and the United Kingdom and a research and development center in Ukraine. Revenue by location is determined by the billing address of the customer. The following sets forth our revenue by geographic region (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
United States
$
38,527

 
$
26,290

 
$
103,477

 
$
72,582

International
15,652

 
7,865

 
40,319

 
20,437

Total
$
54,179

 
$
34,155

 
$
143,796

 
$
93,019


Revenue attributable to the United Kingdom comprised 10.6% and 10.8% of total revenue for the three and nine months ended September 30, 2018, respectively, and 9.7% and 9.2% of total revenue for the three and nine months ended September 30, 2017, respectively. Other than the United Kingdom, no other countries outside the United States comprised more than 10% of revenue for any of the periods presented.
v3.10.0.1
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
Our unaudited interim condensed consolidated financial statements are presented in accordance with accounting standards generally accepted in the United States of America, or U.S. GAAP, for interim financial information. Certain information and disclosures normally included in consolidated financial statements presented in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission, or SEC, on March 8, 2018. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and reflect all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates and assumptions.
On an ongoing basis, our management evaluates estimates and assumptions based on historical data and experience, as well as various other factors that our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities.
Convertible Senior Notes
Convertible Senior Notes
Convertible senior notes are accounted for in accordance with the provisions of Accounting Standards Codification, or ASC, 470‑20, Debt with Conversion and Other Options. Convertible debt instruments that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to be separated into liability and equity components of the instrument. The carrying amount of the liability component of the instrument is computed by estimating the fair value of a similar liability without the conversion option. The carrying amount of the equity component, representing the conversion option, is then calculated by deducting the fair value of the liability component from the principal amount of the instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the respective term of the convertible debt instrument using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. Issuance costs incurred related to the issuance of convertible debt instruments are allocated to the liability and equity components based on their relative fair values.
Variable Interest Entities
Variable Interest Entities
In accordance with ASC 810, Consolidation, the applicable accounting guidance for the consolidation of variable interest entities, or VIEs, we analyze our interests to determine if such interests are variable interests. If variable interests are identified, then the related entity is assessed to determine if it is a VIE. VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). If we determine that the entity is a VIE, we then assess if we must consolidate the VIE. We deem ourselves to be the primary beneficiary if we have both (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (ii) an obligation to absorb losses of the entity that could potentially be significant to the VIE, or a right to receive benefits from the entity that could be significant to the VIE.
As of December 31, 2017 and September 30, 2018, we determined that two and one of our distributors were VIEs under the guidance of ASC 810, Consolidation, respectively. These determinations were due to (i) our participation in the design of the distributor’s legal entity, (ii) our having a variable interest in the distributor, and (iii) our having the right to residual returns. We determined that we were not the primary beneficiary of these VIEs because we did not have (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant. Therefore, we did not consolidate any assets or liabilities of these VIE’s in our consolidated balance sheets or record the results of these distributors in our consolidated statements of operations and comprehensive loss. Transactions with the VIEs were accounted for in the same manner as our other distributors and resellers. As of September 30, 2018 and December 31, 2017, we had no exposure to losses from the contractual relationships with these VIEs or commitments to fund these VIEs. During the three months ended March 31, 2018, we acquired 100% of the outstanding equity of one of our VIEs. Our condensed consolidated financial statements include the assets and liabilities and the results of operations of the acquired company commencing as of the acquisition date. See Note 3 for additional information.
Recently Adopted and Recently Issued Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Under the Jumpstart our Business Startups Act, or the JOBS Act, we qualify as an emerging growth company, or EGC. However, we will no longer qualify as an EGC after December 31, 2018. While we maintain EGC status, we have elected to use the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.
In October 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. This guidance removes the prohibition in ASC 740, Income Taxes, or ASC 740, against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This guidance is intended to reduce the complexity of U.S. GAAP and diversity in practice related to the tax consequences of certain types of intra-entity asset transfers, particularly those involving intellectual property. The impact of adoption is recorded using the modified retrospective transition basis through a cumulative-effect adjustment to accumulated deficit as of the beginning of the period of adoption. We early adopted ASU 2016-16 on January 1, 2018, resulting in the elimination of $1.4 million of deferred tax charges included in other assets in our consolidated balance sheet at December 31, 2017. We recorded the elimination of the deferred charge to accumulated deficit as of January 1, 2018.
In March 2016, the FASB issued ASU 2016-9, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, or ASU 2016-9, which simplifies several aspects of the accounting for share-based payment transactions and related tax impacts, the classification of excess tax benefits on the statement of cash flows, statutory tax withholding requirements, and other stock-based compensation classification matters. We adopted ASU 2016-9 on January 1, 2018. Upon adoption, we recognized $2.4 million of previously unrecognized excess tax benefits related to stock awards using the modified retrospective transition method. We recorded the recognized excess tax benefits as a deferred tax asset, which was then fully offset by our U.S. federal and state deferred tax asset valuation allowance resulting in no impact to our accumulated deficit. Immediately prior to adoption, we had no unrecognized excess tax benefits related to stock awards in jurisdictions outside the United States. All future excess tax benefits resulting from the settlement of stock awards will be recorded to income tax expense. Additionally, upon adoption, we changed our accounting policy to account for forfeitures when they occur rather than estimate a forfeiture rate, the result of which was recorded using the modified retrospective transition basis through a cumulative-effect adjustment to accumulated deficit and additional paid-in-capital of $0.1 million as of January 1, 2018.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software. This guidance will be effective for us for annual reporting periods beginning after December 15, 2019 and for interim periods within those annual periods, and can be applied either retrospectively or prospectively to all implementation costs after the date of adoption. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This guidance will be effective for us for annual or any interim goodwill impairment test in annual reporting periods beginning after December 15, 2019. Early adoption is permitted and will be applied to any acquisitions after adoption on a prospective basis. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which narrows the application of when an integrated set of assets and activities is considered a business and provides a framework to assist entities in evaluating whether both an input and a substantive process are present to be considered a business. It is expected that the new guidance will reduce the number of transactions that would need to be further evaluated and accounted for as a business. This guidance will be effective for us for the annual reporting period for the year ending December 31, 2018, and for interim and annual reporting periods thereafter. Early adoption is permitted and will be applied on a prospective basis. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, which requires that restricted cash be included with cash and cash equivalents when reconciling the beginning and ending total amounts shown on the statement of cash flows. This guidance will be effective for us for the year ending December 31, 2018, and for interim and annual reporting periods thereafter, and should be applied using a retrospective transition method to each period presented. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We have not yet determined the timing of adoption. We currently present changes in restricted cash within investing activities and so the adoption of this guidance will result in changes in net cash flows from investing activities and to certain beginning and ending cash and cash equivalent totals shown on our consolidated statement of cash flows.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice, including presentation of cash flows relating to contingent consideration payments, proceeds from the settlement of insurance claims, and debt prepayment or debt extinguishment costs, among other matters. This guidance will be effective for us for the annual reporting period for the year ending December 31, 2018, and for interim and annual reporting periods thereafter. Early adoption is permitted, including adoption in an interim period. If adopted in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of this guidance is required to be applied using a retrospective transition method to each period presented, unless impracticable to do so. While we continue to assess the potential impact of the adoption of this guidance, we do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, creating Topic 842, which requires lessees to record the assets and liabilities arising from all leases in the statement of financial position. Under ASU 2016-2, lessees will recognize a liability for lease payments and a right-of-use asset. When measuring assets and liabilities, a lessee should include amounts related to option terms, such as the option of extending or terminating the lease or purchasing the underlying asset, that are reasonably certain to be exercised. For leases with a term of 12 months or less, lessees are permitted to make an accounting policy election to not recognize lease assets and liabilities. This guidance retains the distinction between finance leases and operating leases and the classification criteria remains similar. For financing leases, a lessee will recognize the interest on a lease liability separate from amortization of the right-of-use asset. In addition, repayments of principal will be presented within financing activities, and interest payments will be presented within operating activities in the statement of cash flows. For operating leases, a lessee will recognize a single lease cost on a straight-line basis and classify all cash payments within operating activities in the statement of cash flows. This guidance will be effective for us for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods, and is required to be applied using a modified retrospective approach with an option to recognize the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings on the date of adoption. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This guidance replaces most existing revenue recognition guidance. It provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-9 by one year. During 2016 and 2017, the FASB continued to issue additional amendments to this new revenue guidance. This guidance will be effective for us for the annual reporting period for the year ending December 31, 2018, and for interim and annual reporting periods thereafter. Early adoption is permitted. We are evaluating the potential impact of this guidance on our consolidated financial statements.
Fair Value Measurements
Fair Value Measurements
We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
 
        
Level 1
  
Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
 
 
 
 
Level 2
  
Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active near the measurement date; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
 
 
 
Level 3
  
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of our money market funds was determined based on “Level 1” inputs.

The fair value of certificates of deposit, U.S. Treasury and agency bonds, and corporate bonds were determined based on “Level 2” inputs. The valuation techniques used to measure the fair value of commercial paper and certificates of deposit included observable market-based inputs for similar assets, which primarily include yield curves and time-to-maturity factors. The valuation techniques used to measure the fair value of U.S. Treasury and agency bonds and corporate bonds included standard observable inputs, including reported trades, quoted market prices, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets or benchmark securities and data provided by third parties as many of the bonds are not actively traded.
There were no marketable securities measured on a recurring basis in the “Level 3” category.
We have not elected the fair value option as prescribed by ASC 825, The Fair Value Option for Financial Assets and Financial Liabilities, for our financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, such as our convertible senior notes and accounts receivable and payables, are reported at their carrying values.
Income Taxes
We account for income taxes according to ASC 740, which, among other things, requires that we estimate our annual effective income tax rate for the full year and apply it to pre-tax income (loss) to each interim period, taking into account year-to-date amounts and projected results for the full year.  We account for the tax effects of discrete events in the interim period they occur. The provision for income taxes consists of federal, foreign, state, and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, differing tax rates imposed on income earned in foreign jurisdictions and in the United States, losses in foreign jurisdictions, certain nondeductible expenses, excess tax deductions and tax shortfalls related to the settlement of stock-based awards, and the changes in valuation allowances against our deferred tax assets. Our effective tax rate could change significantly from quarter to quarter because of recurring and nonrecurring factors. On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Tax Act, became law. As of December 31, 2017, we completed our accounting for the income tax effects of the Tax Act, including our election of accounting policy that recognizes the deferred tax effects of future inclusions of global intangible low-taxed income, or GILTI, in the period we become subject to GILTI.
The issuance of the convertible senior notes during the three months ended June 30, 2018 resulted in a temporary difference between the carrying amount and tax basis of the convertible senior notes. This taxable temporary difference resulted in the recognition of a $9.5 million deferred tax liability, which was recorded as an offset to additional paid-in-capital. In accordance with ASC 740-20, Intraperiod Tax Allocation, the deferred tax liability provided an additional source of income to realize the benefit from the current year loss from continuing operations, which resulted in the recognition of a $1.9 million and $7.9 million income tax benefit during the three and nine months ended September 30, 2018, respectively.
We evaluate whether to record a valuation allowance against our deferred tax assets by considering all available positive and negative evidence, using a “more likely than not” realization standard, including our cumulative losses, and the amount and timing of future taxable income. Based on our review, we will continue to maintain a full valuation allowance against our U.S. deferred tax assets.
Segment and Geographic Information
Segment and Geographic Information
Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker, or CODM, who is our chief executive officer, in deciding how to allocate resources and assess our financial and operational performance. Our CODM evaluates our financial information and resources and assesses the performance of these resources on a consolidated and aggregated basis. As a result, we have determined that our business operates in a single operating segment.
v3.10.0.1
Fair Value Measurements (Tables)
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
Summary of Cash and Cash Equivalents and Investments' Costs, Gross Unrealized Gains (Losses), and Fair Value by Major Security Type Recorded as Cash and Cash Equivalents or Short-Term or Long-Term Investments
The following tables present our cash and cash equivalents and investments’ costs, gross unrealized losses, and fair value by major security type recorded as cash and cash equivalents or short-term or long-term investments as of September 30, 2018 and December 31, 2017 (in thousands):
 
 
As of September 30, 2018
 
Cost
 
Gross
Unrealized
Losses
 
Fair Value
 
Cash and
Cash
Equivalents
 
Short-term
Investments
 
Long-term
Investments
Cash
$
68,375

 
$

 
$
68,375

 
$
68,375

 
$

 
$

Level 1:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
16,949

 

 
16,949

 
16,949

 

 

Subtotal
16,949

 

 
16,949

 
16,949

 

 

Level 2:
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit
5,153

 

 
5,153

 

 
4,403

 
750

U.S. Treasury and agency bonds
216,948

 
(357
)
 
216,591

 

 
157,970

 
58,621

Corporate bonds
107,075

 
(62
)
 
107,013

 

 
80,361

 
26,652

Subtotal
329,176

 
(419
)
 
328,757

 

 
242,734

 
86,023

Level 3

 

 

 

 

 

Total
$
414,500

 
$
(419
)
 
$
414,081

 
$
85,324

 
$
242,734

 
$
86,023

 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
 
Cost
 
Gross
Unrealized
Losses
 
Fair Value
 
Cash and
Cash
Equivalents
 
Short-term
Investments
 
Long-term
Investments
Cash
$
100,651

 
$

 
$
100,651

 
$
100,651

 
$

 
$

Level 1:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
19,065

 

 
19,065

 
19,065

 

 

Subtotal
19,065

 

 
19,065

 
19,065

 

 

Level 2:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency bonds
44,968

 
(176
)
 
44,792

 

 
25,923

 
18,869

Corporate bonds
29,608

 
(50
)
 
29,558

 

 
28,463

 
1,095

Subtotal
74,576

 
(226
)
 
74,350

 

 
54,386

 
19,964

Level 3

 

 

 

 

 

Total
$
194,292

 
$
(226
)
 
$
194,066

 
$
119,716

 
$
54,386

 
$
19,964

Reconciliation of Beginning and Ending Balances of Acquisition-Related Accrued Contingent Consideration
The following table presents a reconciliation of the beginning and ending balances of acquisition-related accrued contingent consideration using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Beginning balance
$
1,974

 
$
1,318

 
$
975

 
$

Obligations assumed

 

 
1,200

 
1,160

Change in fair value

 
32

 
455

 
190

Settlement

 
(375
)
 
(656
)
 
(375
)
Ending balance
$
1,974

 
$
975

 
$
1,974

 
$
975

v3.10.0.1
Goodwill and Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Change in Carrying Amount of Goodwill
The change in carrying amount of goodwill for the nine months ended September 30, 2018 was as follows (in thousands):
 
 
 
Goodwill as of December 31, 2017
$
8,750

Goodwill recorded in connection with acquisition
994

Effects of foreign currency translation
(92
)
Goodwill as of September 30, 2018
$
9,652

Schedule of Intangible Assets
Intangible assets consisted of the following (in thousands, except years):
 
 
As of September 30, 2018
 
Weighted
Average Useful
Life in Years
 
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Customer Relationships
7.0
 
$
3,314

 
$
(318
)
 
$
2,996

Completed Technology
5.7
 
9,180

 
(2,566
)
 
6,614

 
 
 
$
12,494

 
$
(2,884
)
 
$
9,610

 
As of December 31, 2017
 
Weighted
Average Useful
Life in Years
 
Gross Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Customer Relationships
2.0
 
$
40

 
$
(12
)
 
$
28

Completed Technology
5.7
 
9,180

 
(1,213
)
 
7,967

 
 
 
$
9,220

 
$
(1,225
)
 
$
7,995

Schedule of Intangible Asset Amortization Expense
We classified intangible asset amortization expense in the accompanying consolidated statements of operations and comprehensive loss as follows (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Cost of revenue
$
456

 
$
456

 
$
1,353

 
$
757

Sales and marketing
125

 
5

 
316

 
7

Total
$
581

 
$
461

 
$
1,669

 
$
764

Schedule of Finite-Lived Intangible Assets Estimated Remaining Amortization Expense
The following table presents our estimates of remaining amortization expense for finite-lived intangible assets at September 30, 2018 (in thousands):
 
 
 
Remainder of 2018
$
579

2019
2,284

2020
1,971

2021
1,760

2022
1,214

Thereafter
1,802

Total amortization expense
$
9,610