ZENDESK, INC., 10-K filed on 2/14/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
$ in Billions
 12 Months Ended
Dec. 31, 2018
Jan. 31, 2019
Jun. 30, 2018
Document And Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
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    
Emerging Growth Company false    
Smaller Reporting Company false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   108,358,875  
Entity Well-known Seasoned Issuer Yes    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Public Float     $ 3.7
v3.10.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
 [1]
Current assets:    
Cash and cash equivalents $ 126,518 $ 109,370 [2]
Marketable securities 300,213 137,576
Accounts receivable, net of allowance for doubtful accounts of $2,571 and $1,252 as of December 31, 2018 and 2017, respectively 85,280 57,096
Deferred costs 24,712 15,771
Prepaid expenses and other current assets 35,873 24,165
Total current assets 572,596 343,978
Marketable securities, noncurrent 393,671 97,447
Property and equipment, net 75,654 59,157
Deferred costs, noncurrent 26,914 15,395
Goodwill and intangible assets, net 146,327 67,034
Other assets 22,717 8,359
Total assets 1,237,879 591,370
Current liabilities:    
Accounts payable 16,820 5,307
Accrued liabilities 34,097 21,876
Accrued compensation and related benefits 46,603 29,017
Deferred revenue 245,243 173,147
Total current liabilities 342,763 229,347
Convertible senior notes, net 458,176 0
Deferred revenue, noncurrent 2,719 1,213
Other liabilities 17,300 6,626
Total liabilities 820,958 237,186
Commitments and contingencies (Note 9)
Stockholders’ equity:    
Preferred stock, par value $0.01 per share: no shares issued or outstanding; 10.0 million shares authorized as of December 31, 2018 and 2017 0 0
Common stock, par value $0.01 per share: 400.0 million shares authorized; 108.0 million and 103.1 million shares issued and outstanding as of December 31, 2018 and 2017, respectively 1,080 1,031
Additional paid-in capital 950,693 753,568
Accumulated other comprehensive loss (5,724) (2,372)
Accumulated deficit (529,128) (398,043)
Total stockholders’ equity [3] 416,921 354,184
Total liabilities and stockholders’ equity $ 1,237,879 $ 591,370
[1] See Note 2 for a summary of adjustments
[2] See Note 2 for a summary of adjustments.
[3] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
v3.10.0.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts $ 2,571 $ 1,252
Preferred stock, par value (usd per share) $ 0.01 $ 0.01
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Common stock, par value (usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 400,000,000 400,000,000
Common stock, shares issued (in shares) 108,000,000 103,100,000
Common stock, shares outstanding (in shares) 108,000,000 103,100,000
Treasury stock, shares (in shares) 0 0
v3.10.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
 [1]
Dec. 31, 2016
 [1]
Income Statement [Abstract]      
Revenue $ 598,746 $ 430,165 $ 312,844
Cost of revenue 181,255 127,422 93,900
Gross profit 417,491 302,743 218,944
Operating expenses:      
Research and development [2] 160,260 115,291 91,067
Sales and marketing [2] 291,668 211,918 161,653
General and administrative [2] 103,491 81,680 64,371
Total operating expenses [2] 555,419 408,889 317,091
Operating loss (137,928) (106,146) (98,147)
Other income (expense), net      
Interest income 15,086 3,542 1,821
Interest expense (19,882) 0 (148)
Other expense, net (467) (1,055) (153)
Total other income (expense), net (5,263) 2,487 1,520
Loss before provision for (benefit from) income taxes (143,191) (103,659) (96,627)
Provision for (benefit from) income taxes (12,107) (1,518) 993
Net loss [3] $ (131,084) $ (102,141) [4],[5] $ (97,620) [4],[5]
Net loss per share, basic and diluted (usd per share) $ (1.24) $ (1.02) $ (1.05)
Weighted-average shares used to compute net loss per share, basic and diluted (in shares) 105,567 99,918 93,161
[1] See Note 2 for a summary of adjustments
[2] Includes share-based compensation expense as follows:
[3] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[4] See Note 2 for a summary of adjustments
[5] See Note 2 for a summary of adjustments.
v3.10.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS (PARENTHETICAL) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Share-based compensation $ 119,483 $ 84,553 [1] $ 73,429 [1]
Cost of revenue      
Share-based compensation 14,835 9,040 [2] 7,045 [2]
Research and development      
Share-based compensation 41,365 29,970 [2] 27,083 [2]
Sales and marketing      
Share-based compensation 37,882 24,279 [2] 22,693 [2]
General and administrative      
Share-based compensation $ 25,401 $ 21,263 [2] $ 16,608 [2]
[1] See Note 2 for a summary of adjustments.
[2] See Note 2 for a summary of adjustments
v3.10.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
 [3]
Dec. 31, 2016
 [3]
Statement of Comprehensive Income [Abstract]      
Net loss [1] $ (131,084) $ (102,141) [2],[4] $ (97,620) [2],[4]
Other comprehensive gain (loss), before tax:      
Net unrealized loss on available-for-sale investments (620) (247) (213)
Foreign currency translation gain (loss) 0 824 (488)
Net unrealized gain (loss) on derivative instruments (2,732) 3,888 (2,271)
Other comprehensive gain (loss), before tax (3,352) 4,465 (2,972)
Tax effect 0 (1,640) 0
Other comprehensive gain (loss), net of tax (3,352) 2,825 (2,972)
Comprehensive loss $ (134,436) $ (99,316) $ (100,592)
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[2] See Note 2 for a summary of adjustments
[3] See Note 2 for a summary of adjustments
[4] See Note 2 for a summary of adjustments.
v3.10.0.1
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Additional Paid-In Capital
Treasury Stock
Accumulated Other Comprehensive Loss
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Cumulative-effect adjustment resulting from the adoption of ASUs | Accounting Standards Update 2016-09 [1]           $ 17,900
Beginning balance (in shares) at Dec. 31, 2015   90,861   (535)    
Beginning balance at Dec. 31, 2015 $ 311,157 [1] $ 905 $ 511,183 $ (652) $ (2,225) (198,055) [1]
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuance of common stock upon exercise of stock options (in shares)   2,924        
Issuance of common stock upon exercise of stock options 25,435 [1] $ 29 25,406      
Issuance of common stock for settlement of RSUs (in shares)   2,894        
Issuance of common stock for settlement of RSUs (803) [1] $ 29 (832)      
Vesting of early exercised stock options 629 [1] $ 1 628      
Issuance of common stock in connection with employee stock purchase plan (in shares)   554        
Issuance of common stock in connection with employee stock purchase plan 10,892 [1] $ 7 10,885      
Repurchase of common stock (in shares)   (38)        
Share-based compensation 76,419 [1]   76,419      
Tax benefit from share-based award activity 337 [1]   337      
Other comprehensive loss, net of income taxes (2,972) [1]       (2,972)  
Net loss [1] (97,620) [2],[3],[4]         (97,620)
Ending balance (in shares) at Dec. 31, 2016   97,195   (535)    
Ending balance at Dec. 31, 2016 323,474 [1] $ 971 624,026 $ (652) (5,197) (295,675) [1]
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuance of common stock upon exercise of stock options (in shares)   2,664        
Issuance of common stock upon exercise of stock options 31,882 [1] $ 27 31,855      
Issuance of common stock for settlement of RSUs (in shares)   3,145        
Issuance of common stock for settlement of RSUs (2,989) [1] $ 31 (3,020)      
Vesting of early exercised stock options $ 412 [1] $ 1 411      
Issuance of common stock in connection with employee stock purchase plan (in shares) 700 652        
Issuance of common stock in connection with employee stock purchase plan $ 12,910 [1] $ 6 12,904      
Share-based compensation 87,546 [1]   87,546      
Retirement of treasury stock (in shares)   (535)   535    
Retirement of treasury stock   $ (5) (647) $ 652    
Other comprehensive loss, net of income taxes 2,825 [1]       2,825  
Net loss [1] (102,141) [2],[3],[4]         (102,141)
Ending balance (in shares) at Dec. 31, 2017   103,121   0    
Ending balance at Dec. 31, 2017 354,184 [1],[5] $ 1,031 753,568 $ 0 (2,372) (398,044) [1]
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Cumulative-effect adjustment resulting from the adoption of ASUs | Accounting Standards Update 2016-09     493     (493) [1]
Cumulative-effect adjustment resulting from the adoption of ASUs | Accounting Standards Update 2016-16 [1] $ 265         265
Issuance of common stock upon exercise of stock options (in shares) 1,024 1,024        
Issuance of common stock upon exercise of stock options $ 16,150 [1] $ 10 16,140      
Issuance of common stock for settlement of RSUs (in shares)   3,165        
Issuance of common stock for settlement of RSUs $ (5,213) [1] $ 32 (5,245)      
Issuance of common stock in connection with employee stock purchase plan (in shares) 700 728        
Issuance of common stock in connection with employee stock purchase plan $ 19,773 [1] $ 7 19,766      
Share-based compensation 122,160 [1]   122,160      
Equity component of convertible senior notes 44,304 [1]   44,304      
Other comprehensive loss, net of income taxes (3,352) [1]       (3,352)  
Net loss [1] (131,084)         (131,084)
Ending balance (in shares) at Dec. 31, 2018   108,038   0    
Ending balance at Dec. 31, 2018 $ 416,921 [1] $ 1,080 $ 950,693 $ 0 $ (5,724) $ (529,128) [1]
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[2] See Note 2 for a summary of adjustments
[3] See Note 2 for a summary of adjustments
[4] See Note 2 for a summary of adjustments.
[5] See Note 2 for a summary of adjustments
v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities      
Net loss [1] $ (131,084) $ (102,141) [2],[3],[4] $ (97,620) [2],[3],[4]
Adjustments to reconcile net loss to net cash provided by operating activities      
Depreciation and amortization 36,520 31,931 [4] 27,506 [4]
Share-based compensation 119,483 84,553 [4] 73,429 [4]
Amortization of deferred costs 21,304 14,434 [4] 10,293 [4]
Amortization of debt discount and issuance costs 18,766 0 [4] 0 [4]
Income tax benefit related to convertible senior notes (13,784) 0 [4] 0 [4]
Excess tax benefit from share-based award activity 0 0 [4] (337) [4]
Other 2,848 603 [4] 3,106 [4]
Changes in operating assets and liabilities:      
Accounts receivable (30,007) (21,201) [4] (11,808) [4]
Prepaid expenses and other current assets (10,620) (5,112) [4] (6,248) [4]
Deferred costs (40,898) (22,762) [4] (15,277) [4]
Other assets and liabilities 6,635 (5,765) [4] (3,887) [4]
Accounts payable 7,534 1,839 [4] (3,486) [4]
Accrued liabilities 3,844 6,919 [4] 5,261 [4]
Accrued compensation and related benefits 15,026 7,399 [4] 6,055 [4]
Deferred revenue 73,053 51,531 [4] 37,573 [4]
Net cash provided by operating activities 78,620 42,228 [4] 24,560 [4]
Cash flows from investing activities      
Purchases of property and equipment (35,323) (16,396) [4] (20,647) [4]
Internal-use software development costs (7,005) (7,521) [4] (6,310) [4]
Purchases of marketable securities (700,226) (177,309) [4] (249,048) [4]
Proceeds from maturities of marketable securities 170,882 116,735 [4] 39,690 [4]
Proceeds from sales of marketable securities 71,359 31,090 [4] 53,951 [4]
Cash paid for acquisitions, net of cash acquired (79,363) (16,470) [4] 0 [4]
Purchase of strategic investment (10,000) 0 [4] 0 [4]
Net cash used in investing activities (589,676) (69,871) [4] (182,364) [4]
Cash flows from financing activities      
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $13,561 561,439 0 [4] 0 [4]
Purchase of capped call related to convertible senior notes (63,940) 0 [4] 0 [4]
Proceeds from exercises of employee stock options 16,150 31,882 [4] 25,412 [4]
Proceeds from employee stock purchase plan 21,440 14,248 [4] 11,004 [4]
Taxes paid related to net share settlement of share-based awards (5,213) (2,989) [4] (803) [4]
Excess tax benefit from share-based award activity 0 0 [4] 337 [4]
Other (813) 0 [4] (323) [4]
Net cash provided by financing activities 529,063 43,141 [4] 35,627 [4]
Effect of exchange rate changes on cash, cash equivalents and restricted cash (19) 328 [4] (334) [4]
Net increase (decrease) in cash, cash equivalents and restricted cash 17,988 15,826 [4] (122,511) [4]
Cash, cash equivalents and restricted cash at beginning of period [4] 110,888 95,062 217,573
Cash, cash equivalents and restricted cash at end of period 128,876 110,888 [4] 95,062 [4]
Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets      
Total cash, cash equivalents and restricted cash [4] 110,888 95,062 217,573
Supplemental cash flow data      
Cash paid for interest 699   148 [4]
Cash paid for taxes [4]     1,530
Non-cash investing and financing activities      
Share-based compensation capitalized in internal-use software development costs 2,414 2,704 [4] 2,365 [4]
Balance of property and equipment in accounts payable and accrued expenses 5,582 1,837 [4] 3,610 [4]
Property and equipment acquired through tenant improvement allowances 5,640 647 [4] 237 [4]
Share-based compensation capitalized in deferred costs 866 497 [4] 350 [4]
Vesting of early exercised stock options $ 0 $ 411 [4] $ 628 [4]
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[2] See Note 2 for a summary of adjustments
[3] See Note 2 for a summary of adjustments
[4] See Note 2 for a summary of adjustments.
v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Cash Flows [Abstract]      
Issuance costs paid $ 13,561 $ 0 [1] $ 0 [1]
[1] See Note 2 for a summary of adjustments.
v3.10.0.1
Organization
 12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization
Organization
Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April 2009.
We are a software development company that provides SaaS products that are intended to help organizations and their customers build better experiences. 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. With our origins in customer service, we have evolved our offerings over time to a family of products and platform that work together to help organizations understand the broader customer journey, improve communications across all channels, and engage where and when it’s needed most.
References to Zendesk, the “Company,” “our,” or “we” in these notes refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.
v3.10.0.1
Summary of Significant Accounting Policies
 12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles, or GAAP. The consolidated financial statements include the accounts of Zendesk, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had an immaterial effect on our reported results of operations.
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, goodwill, and our convertible senior notes, as well as unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of costs to obtain customer contracts and internal-use software, variable consideration related to revenue recognition, financial forecasts used in currency hedging, and impairment of strategic investments.
These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Segment 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 operating segment.
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, Explore, Sell, 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 and training services, for which we recognize revenue based on proportional performance, and Talk usage, for which we recognize revenue based on usage.

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; and
•Recognition of revenue when, or as, the performance obligations are 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 and 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 significant reversal of cumulative revenue recognized.

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 material liabilities in our consolidated financial statements as a result of these service-level agreements.
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 customer 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, 2018 and 2017.

We invoice customers based on billing schedules established in our contracts. Accounts receivable are recorded when the right to consideration becomes unconditional.
Cost of Revenue
Cost of revenue consists primarily of personnel costs (including salaries, share-based compensation, and benefits) for employees associated with our infrastructure, product support, and professional service organizations, and expenses for hosting capabilities, primarily for third-party managed hosting services and depreciation from our self-managed colocation data centers. Cost of revenue also includes third-party license fees, payment processing fees, amortization expense associated with capitalized internal-use software, amortization expense associated with acquired intangible assets, and allocated shared costs, primarily including facilities, information technology, and security costs.
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at fair value and consist primarily of bank deposits and money market funds.
As of December 31, 2018, our restricted cash balance was $2.4 million, consisting of $1.6 million pledged for charitable donation and $0.7 million related to deposits for leased office spaces. As of December 31, 2017, our restricted cash balance was $1.5 million, consisting of $0.9 million pledged for charitable donation and $0.6 million related to a deposit for leased office space. Restricted cash is included within prepaid expenses and other current assets and other assets on our consolidated balance sheets.
Marketable Securities
Marketable securities consist of corporate bonds, asset-backed securities, U.S. Treasury securities, money market funds, commercial paper, agency securities, certificates of deposit, and time deposits. We classify marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. All marketable securities are recorded at their estimated fair values. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive gain (loss). We evaluate our investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value determined to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.
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.
Our allowance for doubtful accounts consists of the following activity (in thousands):
 
Year Ended December 31,
2018
 
2017
Allowance for doubtful accounts, beginning balance
$
1,252

 
$
1,269

Additions
2,667

 
3,400

Write-offs
(1,348
)
 
(3,417
)
Allowance for doubtful accounts, ending balance
$
2,571

 
$
1,252


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. Sales commissions paid for contract renewals are not material.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Maintenance and repair costs are charged to expense as incurred. The estimated useful lives of our property and equipment are as follows:
 
Furniture and fixtures
5 years
Hosting equipment
3 years
Computer equipment and licensed software and patents
3 to 5 years
Leasehold improvements
Shorter of the lease term or estimated useful life

Derivative Instruments and Hedging

We enter into foreign currency forward contracts with certain financial institutions to mitigate the impact of foreign currency fluctuations on our future cash flows and earnings. All of our foreign currency forward contracts are designated as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less.

We recognize all forward contracts on our balance sheet at fair value as either assets or liabilities. The effective portion of the gain or loss on each forward contract is reported as a component of accumulated other comprehensive loss and reclassified into earnings, into revenue, cost of revenue or operating expense in the same period, or periods, during which the hedged transaction affects earnings. The ineffective portion of the gains or losses, if any, is recorded immediately in other income (expense), net. The change in time value related to our cash flow hedges is excluded from the assessment of hedge effectiveness and is recorded immediately in other income (expense), net. We evaluate the effectiveness of our cash flow hedges on a quarterly basis.

We have a master netting agreement with each of our counterparties, which permits 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. As of December 31, 2018, we have no restricted cash associated with cash collateral exchanged. GAAP 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. We do not enter into any derivative contracts for trading or speculative purposes.
Fair Value Measurements
We measure certain financial instruments at fair value using a fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
Our marketable securities are classified within either Level 1 or Level 2, and our foreign currency forward contracts and convertible senior notes are classified within Level 2. We have no financial assets or liabilities measured using Level 3 inputs. The fair value of our Level 1 marketable securities is based on quoted market prices of identical underlying securities. The fair value of our Level 2 marketable securities is based on indirect or directly observable market data, including readily available pricing sources for identical underlying securities that may not be actively traded. The fair value of our foreign currency forward contracts is based on quoted prices and market observable data of similar instruments in active markets, such as currency spot rates, forward rates, and LIBOR. The fair value of our convertible senior notes is determined based on the quoted price of the convertible senior notes in an inactive market.
For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
Capitalized Internal-Use Software Costs
We capitalize certain development costs incurred in connection with software development for our platform and software used in operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred.
Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life and recorded in cost of revenue within the accompanying consolidated statements of operations. The weighted-average remaining useful life of our capitalized internal-use software was 3.7 years as of December 31, 2018.
Business Combinations
When we acquire businesses, we allocate the purchase price to the net tangible and identifiable intangible assets. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable.
Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets
Goodwill. Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually in the third quarter, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. No impairment charges were recorded during the years ended December 31, 2018, 2017, or 2016.
Acquired Intangible Assets. Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisitions. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.
Impairment of Long-Lived Assets. The carrying amounts of our long-lived assets, including property and equipment, capitalized internal-use software, costs to obtain customer contracts, and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful lives are shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life. There were no material impairments for the years ended December 31, 2018, 2017, and 2016, other than those disclosed in Note 6.
Strategic Investments
Strategic investments consist of non-controlling equity investments in privately-held companies. We have elected to apply the measurement alternative for these investments as they do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recorded when events or circumstances indicate a decline in value has occurred. We include strategic investments in other assets in our consolidated balance sheets.
Share-Based Compensation
Share-based compensation expense to employees is measured based on the fair value of the awards on the grant date and recognized in our consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award, which is typically four years). The contractual term of our stock options is typically ten years. We estimate the fair value of stock options granted using the Black-Scholes option valuation model. We measure the fair value of Restricted Stock Units, or RSUs, based on the fair value of the underlying shares on the date of grant. Compensation expense for awards with only service conditions is recognized over the vesting period of the applicable award using the straight-line method. We record share-based compensation expense for performance-based equity awards using the accelerated attribution method.
As of December 31, 2018, we had a total of $265.4 million in future period share-based compensation expense related to all equity awards to be recognized over a weighted average period of 2.7 years.
Advertising Expense
Advertising is expensed as incurred. For the years ended December 31, 2018, 2017, and 2016, advertising expense was $48.2 million, $36.8 million, and $23.9 million, respectively.
Government Grants
We have obtained government grants in certain jurisdictions where we operate. We receive the grant funds as we meet certain commitments, including targeted levels of employment and/or spending within the local jurisdictions. If we fail to maintain these commitments, we may be required to repay grant funds received or be ineligible to receive future funding. We recognize grant proceeds to offset costs to which the grants relate on a straight-line basis when it is reasonably assured that the applicable commitments have been met. For each of the years ended December 31, 2018 and 2017, we recognized grant proceeds of $2.0 million and in 2016 we recognized grant proceeds of $1.2 million in our consolidated statements of operations.

Income Taxes

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.
We recognize tax benefits from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and results of operations.
We have elected to record interest accrued and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of provision for income taxes.
Foreign Currency
The functional currency of our foreign subsidiaries is the U.S. dollar. Accordingly, monetary balance sheet accounts are remeasured using exchange rates in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Expenses are generally remeasured at the average exchange rates for the period. Foreign currency remeasurement and transaction gains and losses are included in other income (expense), net and were not material for the years ended December 31, 2018, 2017, and 2016, respectively.
Concentrations of Risk
Financial instruments potentially exposing us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities, accounts receivable and derivative instruments. We place our cash and cash equivalents with high-credit-quality financial institutions. However, we maintain balances in excess of the FDIC insurance limits. We do not require our customers to provide collateral to support accounts receivable and maintain an allowance for doubtful accounts receivable balances. We seek to mitigate counterparty credit risk related to our derivative instruments by transacting with major financial institutions with high credit ratings.
At December 31, 2018 and 2017, there were no customers that represented 10% or greater of our accounts receivable balance. There were no customers that individually exceeded 10% of our revenue in any of the periods presented.
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 completed our evaluation of each arrangement under the guidance, including application of elected practical expedients. We are also finalizing the incremental borrowing rate for each arrangement. We plan to adopt utilizing the modified retrospective method of transition. 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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments,” which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. The standard is effective for annual reporting periods beginning after December 15, 2019, 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 January 2017, the FASB issued ASU 2017-04, regarding ASC Topic 350 “Simplifying the Test for Goodwill Impairment,” which simplifies the required methodology to calculate an impairment charge for goodwill. The standard is effective for fiscal years beginning after December 15, 2019, however early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.

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 the 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 do not expect the adoption of this standard to have a material effect 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 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 2018-07, 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.

In August 2018, the FASB issued ASU 2018-13, regarding ASC Topic 820 “Fair Value Measurement,” which modifies the disclosure requirements for fair value measurements for certain types of investments. The guidance is effective for annual reporting periods beginning after December 15, 2019, 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 August 2018, the FASB issued ASU 2018-15, regarding ASC Topic 350-40 “Intangibles - Internal-Use Software,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. We plan to early adopt this standard in the first quarter of 2019 on a prospective basis. We do not expect adoption to have a material effect on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, regarding ASC Topic 718 “Compensation - Stock Compensation.” This amendment changes certain aspects of accounting for share-based awards to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. We adopted the standard in the first quarter of 2017.
As required by the new standard, we now recognize excess tax effects from share-based awards as a component of provision for income taxes in our statement of operations when awards vest or are settled. Upon adoption, we recorded a deferred tax asset of $52.8 million to reflect, on a modified retrospective basis, the previously unrecognized excess tax benefits; however, the deferred tax asset was fully offset by a valuation allowance, resulting in no impact to our consolidated financial statements. In our statement of cash flows, we no longer classify excess tax benefits as a reduction from operating cash flows. This change was made prospectively beginning with the quarter ended March 31, 2017.
We also elected to account for forfeitures as they occur, therefore share-based compensation expense for the years ended December 31, 2018 and 2017 have been calculated based on actual forfeitures in our consolidated statement of operations, rather than our previous approach which was net of estimated forfeitures. The cumulative-effect adjustment of this change on a modified retrospective basis was not material. Share-based compensation expense for the year ended December 31, 2016 was recorded net of estimated forfeitures.
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 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 statements of cash flows for the years ended December 31, 2017 and 2016, 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. We finalized our assessment of the Tax Act in the fourth quarter of 2018 and determined that changes to our initial assessments of and its effects on our income taxes are not material.

We adjusted our consolidated financial statements from amounts previously reported due to the adoption of ASC 606 and ASU 2016-18. Select 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 audited consolidated statement of operations line items, which reflect the adoption of ASC 606 are as follows (in thousands, except per share data):

 
Year Ended December 31, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
430,492

 
$
(327
)
 
$
430,165

Operating expenses:
 
 
 
 
 
Sales and marketing
220,742

 
(8,824
)
 
211,918

Operating loss
(114,643
)
 
8,497

 
(106,146
)
Net loss
$
(110,638
)
 
$
8,497

 
$
(102,141
)
Net loss per share, basic and diluted
$
(1.11
)
 
$
0.09

 
$
(1.02
)

 
Year Ended December 31, 2016
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
311,999

 
$
845

 
$
312,844

Operating expenses:
 
 
 
 
 
Sales and marketing
166,987

 
(5,334
)
 
161,653

Operating loss
(104,326
)
 
6,179

 
(98,147
)
Net loss
$
(103,799
)
 
$
6,179

 
$
(97,620
)
Net loss per share, basic and diluted
$
(1.11
)
 
$
0.06

 
$
(1.05
)

Select audited consolidated statement of cash flows line items, which reflect the adoption of ASC 606 and ASU 2016-18 are as follows (in thousands):

 
Year Ended December 31, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Cash flows from operating activities
 
 
 
 
 
Net loss
$
(110,638
)
 
$
8,497

 
$
(102,141
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Share-based compensation
85,049

 
(496
)
 
84,553

Amortization of deferred costs
—

 
14,434

 
14,434

Changes in operating assets and liabilities:
 
 
 
 
 
Prepaid expenses and other current assets
(5,055
)
 
(57
)
 
(5,112
)
Deferred costs
—

 
(22,762
)
 
(22,762
)
Other assets and liabilities
(5,955
)
 
190

 
(5,765
)
Deferred revenue
51,204

 
327

 
51,531

Net cash provided by operating activities
42,095

 
133

 
42,228

Net increase in cash, cash equivalents and restricted cash
15,693

 
133

 
15,826

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
$
109,370

 
$
1,518

 
$
110,888


 
Year Ended December 31, 2016
 
As Previously Reported
 
Adjustments
 
As Adjusted
Cash flows from operating activities
 
 
 
 
 
Net loss
$
(103,799
)
 
$
6,179

 
$
(97,620
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Share-based compensation
73,779

 
(350
)
 
73,429

Amortization of deferred costs
—

 
10,293

 
10,293

Changes in operating assets and liabilities:
 
 
 
 
 
Prepaid expenses and other current assets
(6,286
)
 
38

 
(6,248
)
Deferred costs
—

 
(15,277
)
 
(15,277
)
Deferred revenue
38,418

 
(845
)
 
37,573

Net cash provided by operating activities
24,522

 
38

 
24,560

Net increase in cash, cash equivalents and restricted cash
(122,549
)
 
38

 
(122,511
)
Cash, cash equivalents and restricted cash at beginning of period
216,226

 
1,347

 
217,573

Cash, cash equivalents and restricted cash at end of period
$
93,677

 
$
1,385

 
$
95,062
v3.10.0.1
Business Combinations
 12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Business Combinations
Business Combinations
FutureSimple Inc.
On September 10, 2018, we completed the acquisition of FutureSimple Inc., or FutureSimple, the developer of Base, a sales force automation software product. We acquired FutureSimple for purchase consideration of $81.0 million in cash. We incurred transaction costs of $1.6 million in connection with the acquisition, which were included within general and administrative expenses.

The fair value of assets acquired and liabilities assumed was based on a preliminary valuation, and our estimates and assumptions are subject to change within the measurement period. The primary area that remains preliminary relates to the evaluation of certain tax-related items. The total purchase consideration was allocated to the assets acquired and liabilities assumed as set forth below (in thousands). During the three months ended December 31, 2018, we made adjustments to the preliminary purchase price allocation, primarily related to the fair value of the customer relationships and backlog intangible assets, resulting in a decrease to goodwill of $0.6 million. The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to assembled workforce and 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 liabilities acquired
$
(3,030
)
Identifiable intangible assets:
 
Developed technology
19,000

Customer relationships
10,400

Backlog
2,200

Goodwill
52,453

Total purchase consideration
$
81,023



The developed technology, customer relationships, and backlog intangible assets were assigned useful lives of 6.5, 5.0, and 2.0 years, respectively.

In connection with the acquisition, we granted cash and share-based retention awards to certain employees of FutureSimple. The cash awards vest over a required service period and the share-based awards vest upon fulfillment of certain service and performance conditions. Each retention award will be recorded as expense based on the fulfillment of such service and performance conditions, as applicable, and is not included in the total purchase consideration.
From the date of the acquisition, the results of operations of FutureSimple 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 FutureSimple are not material to our consolidated financial statements in any period presented.
Outbound Solutions, Inc.
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 consideration
$
16,564



The developed technology and customer relationships 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
 12 Months Ended
Dec. 31, 2018
Financial Instruments, Owned, at Fair Value [Abstract]  
Financial Instruments
Financial Instruments
Investments
The following tables present information about our financial assets measured at fair value on a recurring basis as of December 31, 2018 and 2017 based on the three-tier fair value hierarchy (in thousands):
 
Fair Value Measurement at
December 31, 2018
Level 1
 
Level 2
 
Total
Description
 

 
 

 
 

Corporate bonds
$
—

 
$
460,210

 
$
460,210

Asset-backed securities
—

 
127,078

 
127,078

U.S. Treasury securities
—

 
58,039

 
58,039

Money market funds
57,758

 
—

 
57,758

Commercial paper
—

 
38,900

 
38,900

Agency securities
—

 
11,256

 
11,256

Certificates of deposit and time deposits
—

 
3,200

 
3,200

Total
$
57,758

 
$
698,683

 
$
756,441

Included in cash and cash equivalents
 

 
 

 
$
62,557

Included in marketable securities
 

 
 

 
$
693,884


 
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


There were no transfers between fair value measurement levels during the years ended December 31, 2018 or 2017.
Gross unrealized gains and losses for cash equivalents and marketable securities as of December 31, 2018 and 2017 were not material. As of December 31, 2018 and 2017, there were no securities that were in an unrealized loss position for more than twelve months.
The following table classifies our marketable securities by contractual maturity as of December 31, 2018 and 2017 (in thousands):
 
December 31,
2018
 
December 31,
2017
Due in one year or less
$
300,213

 
$
137,576

Due after one year and within five years
393,671

 
97,447

Total
$
693,884

 
$
235,023


 
As of December 31, 2018 and 2017, the balance of strategic investments without readily determinable fair values was $10.0 million and none, respectively. There have been no adjustments to the carrying value of strategic investments resulting from impairments or observable price changes.

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
 
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. As of December 31, 2018, the balance of accumulated other comprehensive loss included an unrecognized net loss of $1.8 million related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges. As of December 31, 2018, we have no cash collateral related to our cash flow hedges. We expect to reclassify a net loss of $2.0 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 sheet as of December 31, 2018 and 2017 (in thousands):

 
December 31, 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
 
$
2,047

 
Accrued liabilities
 
$
4,862

Total
 
 
$
2,047

 
 
 
$
4,862



 
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 $200.3 million and $139.7 million as of December 31, 2018 and 2017, respectively.
 
The following table presents information about our derivative instruments on our statements of operations for the years ended December 31, 2018 and 2017 (in thousands):
 
 
 
Year Ended December 31, 2018
 
Year Ended December 31, 2017
Derivative Instrument
Location of Loss Reclassified into Earnings
 
Loss 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
 
$
(4,050
)
 
$
(1,318
)
 
$
3,663

 
$
(225
)
Total
 
 
$
(4,050
)
 
$
(1,318
)
 
$
3,663

 
$
(225
)


Amounts recognized in earnings related to excluded time value and hedge ineffectiveness for the years ended December 31, 2018 and 2017 were not material.
Convertible Senior Notes
As of December 31, 2018, the fair value of our convertible senior notes was $645.3 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
 12 Months Ended
Dec. 31, 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 $51.6 million and $31.2 million as of December 31, 2018 and 2017, respectively. Amortization expense for these deferred costs was $21.3 million, $14.4 million, and $10.3 million for years ended December 31, 2018, 2017, and 2016, respectively. There were no impairment losses related to these deferred costs for the periods presented.
Deferred Revenue and Performance Obligations
During the years ended December 31, 2018, 2017, and 2016, $172.7 million, $120.1 million, and $85.5 million of revenue was recognized that was included in the deferred revenue balances at the beginning of each period, respectively.
The aggregate balance of remaining performance obligations as of December 31, 2018 was $406.9 million. We expect to recognize $328.7 million of the balance as revenue in the next 12 months and the remainder thereafter. The aggregate balance of remaining 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
 12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment
Property and Equipment
Property and equipment, net consists of the following (in thousands):
 
December 31, 2018
 
December 31, 2017
Leasehold improvements
51,832

 
28,113

Capitalized internal-use software
36,444

 
31,593

Hosting equipment
34,105

 
37,222

Computer equipment and licensed software and patents
21,100

 
16,316

Furniture and fixtures
11,550

 
9,581

Construction in progress
10,538

 
11,220

Total
165,569

 
134,045

Less accumulated depreciation and amortization
(89,915
)
 
(74,888
)
Property and equipment, net
$
75,654

 
$
59,157



Depreciation expense was $23.9 million, $20.3 million, and $16.2 million for the years ended December 31, 2018, 2017, and 2016, respectively.
Amortization expense of capitalized internal-use software was $5.9 million, $7.7 million, and $7.4 million during the years ended December 31, 2018, 2017, and 2016, respectively. We recorded impairment losses of $2.2 million to construction in progress during the year ended December 31, 2018, which were included within research and development expenses on our consolidated statements of operations. The carrying value of capitalized internal-use software at December 31, 2018 and 2017 was $19.2 million and $17.7 million, respectively, including $2.7 million and $8.7 million in construction in progress, respectively.
v3.10.0.1
Goodwill and Acquired Intangible Assets
 12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
The changes in the carrying amount of goodwill for the two years ended December 31, 2018 are as follows (in thousands):
Balance as of December 31, 2016
$
45,347

Goodwill acquired
13,350

Foreign currency translation adjustments
434

Balance as of December 31, 2017
59,131

Goodwill acquired
52,453

Balance as of December 31, 2018
$
111,584


The following tables present information about our acquired intangible assets subject to amortization as of December 31, 2018 and 2017 (in thousands):
 
As of December 31, 2018
Cost
 
Accumulated
Amortization
 
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
(In years)
Developed technology
$
31,000

 
$
(8,151
)
 
 
$
22,849

 
5.5
Customer relationships
11,310

 
(1,249
)
 
 
10,061

 
4.6
Backlog
2,200

 
(367
)
 
 
1,833

 
1.7
 
$
44,510

 
$
(9,767
)
 
 
$
34,743

 
 

 
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 relationships intangible assets from our consolidated balance sheet, which had become fully amortized. Amortization expense of acquired intangible assets for the years ended December 31, 2018 and 2017 was $4.8 million and $3.8 million, respectively.
Estimated future amortization expense as of December 31, 2018 is as follows (in thousands): 
2019
$
8,780

2020
6,839

2021
5,494

2022
5,494

2023
4,722

Thereafter
3,414

 
$
34,743
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call
 12 Months Ended
Dec. 31, 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 $575.0 million aggregate principal amount of 0.25% convertible senior notes due March 15, 2023 in a private offering (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, were 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 governing the Notes) 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 twelve months ended December 31, 2018, the conditions allowing holders of the Notes to convert have not been met. The Notes are therefore not convertible during the three and twelve months ended December 31, 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 conversion 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 are 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):
 
December 31, 2018
 
December 31, 2017
Principal
$
575,000

 
$
—

Unamortized Debt Discount
(107,494
)
 
—

Unamortized issuance costs
(9,330
)
 
—

Net carrying amount
$
458,176

 
$
—


The net carrying amount of the equity component of the Notes is as follows (in thousands):
 
December 31, 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):
 
Year Ended December 31,
 
2018
 
2017
Contractual interest expense
$
1,116

 
$
—

Amortization of Debt Discount
17,482

 
—

Amortization of issuance costs
1,284

 
—

Total interest expense
$
19,882

 
$
—



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, we recorded a net income tax benefit of $13.8 million in our consolidated statement of operations for the year ended December 31, 2018.
 
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
 12 Months Ended
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

As of December 31, 2018, our contractual obligations are as follows for the years ending December 31 (in thousands):
 
Lease Obligations (1)
 
Purchase Commitments (2)
 
Convertible Senior Notes (3)
 
Total
2019
$
24,848

 
$
63,200

 
$
1,438

 
$
89,486

2020
24,188

 
58,201

 
1,438

 
$
83,827

2021
22,220

 
55,174

 
1,438

 
$
78,832

2022
20,683

 
55,001

 
1,438

 
$
77,122

2023
15,575

 
55,001

 
575,299

 
$
645,875

Thereafter
30,786

 
—

 
—

 
$
30,786

Total
$
138,300

 
$
286,577

 
$
581,051

 
$
1,005,928

(1) Represents obligations to make payments under non-cancellable lease agreements for our corporate headquarters and worldwide offices.
(2) Primarily relates to third-party managed hosting services.
(3) Consists of principal and interest payments. The $575.0 million in principal is due March 2023.

Leases
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. For the years ended December 31, 2018, 2017, and 2016, rent expense was $19.3 million, $12.3 million, and $9.9 million, respectively. Deferred rent of $14.2 million and $6.4 million as of December 31, 2018 and 2017 respectively, is included in other liabilities.

As of December 31, 2018, we are the sublessor for certain of our office space for which the remaining amount of rent to be received over the noncancelable terms of the subleases is approximately $6.4 million.

In January 2019, we renewed an existing operating lease agreement for which the remaining anticipated amount of rent to be paid over the noncancelable term of the lease is approximately $10.0 million.
Letters of Credit
As of December 31, 2018 and 2017, we had a total of $1.0 million and $2.0 million, respectively in unsecured letters of credit outstanding primarily related to leased office space in San Francisco. These letters of credit renew annually and mature at various dates through October 31, 2022.
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 material liabilities in our consolidated financial statements as a result of these service-level agreements.
v3.10.0.1
Common Stock and Stockholders' Equity
 12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Common Stock and Stockholders' Equity
Common Stock and Stockholders’ Equity
Common Stock
As of December 31, 2018 and 2017, 400 million shares of common stock were authorized for issuance with a par value of $0.01 per share. There were 108.0 million and 103.1 million shares of common stock issued and outstanding as of December 31, 2018 and 2017, respectively.
Preferred Stock
As of December 31, 2018 and 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 the 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.
In each year ended December 31, 2018 and 2017, 0.7 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 1.1 million and 1.0 million shares on January 1, 2019 and 2018, respectively. As of December 31, 2018, 3.9 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 5.4 million and 5.2 million shares on January 1, 2019 and 2018, respectively. As of December 31, 2018, we had 8.2 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 of common stock. 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 shared-based award activity for the year ended December 31, 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
 
Aggregate
Intrinsic
Value
 
 
 
 
 
 
(In years)
 
 
 
 
 
 
 
 
Outstanding — January 1, 2018
8,001

 
6,239

 
$
17.31

 
7.11
 
$
103,308

 
5,827

 
$
25.00

 
$
197,186

Increase in authorized shares
5,156

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Stock options granted
(791
)
 
791

 
42.89

 
 
 
 

 
 

 
 

 
 
RSUs granted
(4,898
)
 
 

 
 

 
 
 
 

 
4,898

 
44.35

 
 
Stock options exercised
 

 
(1,024
)
 
15.77

 
 
 
 

 
 

 
 

 
 
RSUs vested
 

 
 

 
 

 
 
 
 

 
(3,165
)
 
26.79

 
 
Stock options forfeited or canceled
68

 
(68
)
 
28.61

 
 
 
 

 
 

 
 

 
 
RSUs forfeited or canceled
918

 
 

 
 

 
 
 
 

 
(918
)
 
30.18

 
 
RSUs forfeited or canceled and unavailable for grant
—

 
 
 
 
 
 
 
 
 
(31
)
 
23.44

 
 
PRSUs granted
(222
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding — December 31, 2018
8,232

 
5,938

 
$
20.85

 
6.58
 
$
222,959

 
6,611

 
$
37.77

 
$
385,891

Options vested and expected to vest as of December 31, 2018
 
 
5,710

 
$
20.31

 
6.51
 
$
217,370

 
 
 
 
 
 
Options vested and exercisable as of December 31, 2018
 
 
3,855

 
$
15.73

 
5.79
 
$
164,395

 
 
 
 
 
 
RSUs expected to vest as of December 31, 2018
 
 
 
 
 
 
 
 
 
 
5,222

 
 
 
$
304,815



The restricted stock units, or 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 on the last trading day of the reporting period and the exercise price of outstanding, in-the-money options.
The aggregate intrinsic value for options outstanding represents the difference between the closing stock price of our common stock on the last trading day of the reporting period and the exercise price of outstanding, in-the-money options.
The total intrinsic value of stock options exercised during the years ended December 31, 2018, 2017 and 2016 was $36.8 million, $47.1 million and $49.2 million, respectively. The intrinsic value for options exercised represents the difference between the exercise price and the market value on the date of exercise. The weighted-average grant date fair value of stock options granted during the years ended December 31, 2018, 2017, and 2016 was $17.87, $13.07, and $11.34, respectively.
The total intrinsic value of RSUs vested during the years ended December 31, 2018, 2017 and 2016 was $176.0 million, $90.1 million and $70.6 million, respectively. The intrinsic value for RSUs vested represents market value on the vesting date. The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2018, 2017, and 2016 was $44.35, $28.09, and $21.05, respectively.
Share-Based Compensation Expense
All share-based awards to employees and members of our board of directors are measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award, which is typically four years). The contractual term of our stock options is typically ten years. We record share-based compensation expense for service-based equity awards using the straight-line attribution method. We record share-based compensation expense for performance-based equity awards using the accelerated attribution method.
We estimate the fair value of stock options granted using the Black-Scholes option valuation model, which requires inputs, including the fair value of our underlying common stock, expected term, expected volatility, risk-free interest rate and dividend yield of our common stock. These inputs involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our share-based compensation expense could be materially different in the future.
The inputs are as follows:
•
Expected Term. We determine the expected term based on the historical exercise activity of our employees. We applied this methodology beginning in 2018, after having obtained sufficient historical exercise information. Previously, we determined the expected term based on the average period the stock options were expected to remain outstanding, generally calculated as the midpoint of the vesting term and the contractual expiration period.
•
Expected Volatility. We determine expected volatility based on the historical volatility of our own common stock. We applied this methodology beginning in 2017, after having obtained sufficient historical information regarding the volatility of our own common stock. Previously, we determined the expected volatility using a combination of the historical volatility of our publicly traded industry peers and our own common stock.
•
Risk-Free Interest Rate. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term of the stock options for each stock option group.
•
Dividend Yield. We have not paid and do not anticipate paying any cash dividends in the foreseeable future and, therefore, use an expected dividend yield of zero.
The assumptions used to estimate the fair value of stock options are as follows:
 
Year Ended December 31,
2018
 
2017
 
2016
Expected volatility
44% - 45%
 
44% - 48%
 
47% - 49%
Dividend yield
0%
 
0%
 
0%
Risk-free interest rate
2.3% - 3.0%
 
1.9% - 2.2%
 
1.1% - 2.0%
Expected term (in years)
4.9
 
6.0 - 6.1
 
6.0 - 6.1

 
The assumptions used to estimate the fair value of ESPP awards are as follows:
 
Year Ended December 31,
 
2018
 
2017
 
2016
Expected volatility
35% - 41%
 
37% - 44%
 
42% - 48%
Dividend yield
0%
 
0%
 
0%
Risk-free interest rate
2.1% - 2.8%
 
1.0% - 1.6%
 
0.4% - 0.9%
Expected term (in years)
0.5 -1.5
 
0.5 -1.5
 
0.5 - 1.5

 
In the first quarter of 2017, we changed our accounting policy for share-based compensation to recognize forfeitures as they occur, as permitted by ASU 2016-09. Refer to Note 2 for additional information regarding the adoption of this standard.
There were no material share-based award modifications in the year ended December 31, 2018. In the years ended December 31, 2017 and 2016, we recorded $1.5 million and $0.7 million of share-based compensation expense related to accelerated vesting of share-based awards for terminated employees, respectively.
Performance Restricted Stock Units
During the three months ended September 30, 2018, the compensation committee of our board of directors granted performance-based restricted stock units, or PRSUs, representing 0.2 million shares of common stock, the substantial majority of which were granted in connection with our acquisition of FutureSimple. The PRSUs vest in four semi-annual tranches, generally through March 2021. The PRSUs include a service condition and a performance condition related to the attainment of semi-annual performance targets approved and communicated in advance of each performance period. During the year ended December 31, 2018, we recorded $0.5 million of share-based compensation expense related to the PRSUs and no PRSUs were vested. The total future expense related to the PRSUs will be based on the fair value of the underlying shares on the grant date for each performance tranche.
v3.10.0.1
Deferred Revenue and Performance Obligations
 12 Months Ended
Dec. 31, 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 $51.6 million and $31.2 million as of December 31, 2018 and 2017, respectively. Amortization expense for these deferred costs was $21.3 million, $14.4 million, and $10.3 million for years ended December 31, 2018, 2017, and 2016, respectively. There were no impairment losses related to these deferred costs for the periods presented.
Deferred Revenue and Performance Obligations
During the years ended December 31, 2018, 2017, and 2016, $172.7 million, $120.1 million, and $85.5 million of revenue was recognized that was included in the deferred revenue balances at the beginning of each period, respectively.
The aggregate balance of remaining performance obligations as of December 31, 2018 was $406.9 million. We expect to recognize $328.7 million of the balance as revenue in the next 12 months and the remainder thereafter. The aggregate balance of remaining 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
 12 Months Ended
Dec. 31, 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):
 
Year Ended
December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
Net loss
$
(131,084
)
 
$
(102,141
)
 
$
(97,620
)
Weighted-average shares used to compute basic and diluted net loss per share
105,567

 
99,918

 
93,161

Net loss per share, basic and diluted
(1.24
)
 
(1.02
)
 
(1.05
)

*Adjusted to reflect the adoption of ASC 606 (see Note 2).
The anti-dilutive securities excluded from the shares used to calculate diluted net loss per share are as follows (in thousands):
 
As of December 31,
2018
 
2017
 
2016
Shares subject to outstanding common stock options and employee stock purchase plan
6,041

 
6,343

 
8,556

Restricted stock units
6,611

 
5,827

 
6,936

 
12,652

 
12,170

 
15,492



We expect to settle the principal amount of our 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. Based on the initial conversion price, potential dilution related to the convertible senior notes is approximately 9.1 million shares. The convertible senior notes are not convertible as of December 31, 2018.
v3.10.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The components of loss before provision for income taxes are as follows (in thousands):
 
Year Ended December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
U.S.
$
(151,547
)
 
$
(107,177
)
 
$
(101,506
)
Foreign
8,356

 
3,518

 
4,879

Total
$
(143,191
)
 
$
(103,659
)
 
$
(96,627
)

*Adjusted to reflect the adoption of ASC 606 (see Note 2).

 
The income tax provision is composed of the following (in thousands):
 
Year Ended December 31,
2018
 
2017
 
2016
Current tax provision:
 

 
 

 
 

Federal
$
—

 
$
(2,636
)
 
$
—

State
80

 
104

 
74

Foreign
3,372

 
1,476

 
3,096

 
3,452

 
(1,056
)
 
3,170

Deferred tax provision:
 

 
 

 
 

Federal
(13,785
)
 
—

 
(49
)
State
—

 
—

 
—

Foreign
(1,774
)
 
(462
)
 
(2,128
)
Total provision for (benefit from) income taxes
$
(12,107
)
 
$
(1,518
)
 
$
993


 
Significant components of deferred tax assets are as follows (in thousands):
 
As of December 31,
2018
 
2017
 
 
*As adjusted
Deferred tax assets:
 

 
 

Tax credit carryforward
$
884

 
$
733

Net operating loss carryforward
170,447

 
115,237

Share-based compensation
10,316

 
6,072

Accrued liabilities and reserves
7,734

 
3,639

Property and equipment
3,340

 
1,983

Other
7,066

 
5,086

Total deferred tax assets
199,787

 
132,750

Less: valuation allowance
(158,778
)
 
(118,549
)
Deferred tax assets, net of valuation allowance
41,009

 
14,201

Deferred tax liabilities:
 

 
 

Deferred commissions
(13,075
)
 
(7,443
)
Convertible debt transaction
(12,872
)
 
—

Intangible assets
(11,305
)
 
(5,036
)
Total deferred tax liabilities
(37,252
)
 
(12,479
)
Net deferred tax assets
$
3,757

 
$
1,722


*Adjusted to reflect the adoption of ASC 606 (see Note 2).

The following is a reconciliation of the statutory federal income tax rate and the effective tax rates:
 
Year Ended December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
Tax at federal statutory rate
21.0
 %
 
34.0
 %
 
34.0
 %
Tax reform rate change impact
—

 
(64.7
)
 
—

Excess tax benefit from share-based compensation
—

 
46.5

 
—

Valuation allowance
(20.1
)
 
(19.5
)
 
(22.6
)
Share-based compensation
8.5

 
7.0

 
(6.5
)
Officer's compensation
(1.1
)
 
—

 
—

Other
0.1

 
(3.4
)
 
0.4

Benefit from other comprehensive gain
—

 
1.6

 
—

Intercompany dividend
—

 
—

 
(6.3
)
Effective tax rate
8.4
 %
 
1.5
 %
 
(1.0
)%

*Adjusted to reflect the adoption of ASC 606 (see Note 2).
 
We have not provided income taxes for the possible tax consequences of repatriating undistributed earnings of foreign subsidiaries as of December 31, 2018 because we intend to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31, 2018, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $0.6 million. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
As of December 31, 2018, we had net operating loss carryforwards of approximately $695.9 million for federal income taxes and $302.9 million for state income taxes. If not utilized, the federal carryforwards will begin to expire in 2029 and some are indefinitely carried forward. The state carryforwards will begin to expire in 2031. As of December 31, 2018, we had research and development credit carryforwards of approximately $10.4 million and $11.2 million for federal and state income taxes, respectively. If not utilized, the federal carryforwards will begin to expire in 2029. The state tax credit can be carried forward indefinitely. Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. In the event that we had a change of ownership, utilization of the net operating loss and tax credit carryforwards may be restricted. In addition, we have $14.6 million of net operating loss carryforwards in France, of which approximately $3.0 million were obtained as part of our acquisition of We Are Cloud SAS. These carryforward losses do not expire, however, utilization of these carryforwards may be subject to annual limitations. In addition, the right to the carryforward losses could be challenged if the French tax authorities determined that a significant change in the company’s actual business has occurred.
We account for income taxes under an asset and liability approach. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain. We regularly assess the need for a valuation allowance against our deferred tax assets by considering both positive and negative evidence to determine whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. We recorded a valuation allowance to fully offset our U.S. deferred tax assets, as we consider our cumulative loss in recent years to be strong negative evidence for retaining the valuation allowance. The valuation allowance increased by $40.2 million during the twelve months ended December 31, 2018. We will continue to assess the future realization of our deferred tax assets in each applicable jurisdiction and adjust the valuation allowance accordingly.
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) for the two years ending December 31, 2018 is as follows (in thousands):
 
Balance at December 31, 2016
$
11,786

Additions from tax positions related to the current year
4,141

Lapse of statutes of limitations
(283
)
Balance at December 31, 2017
15,644

Additions from tax positions related to the current year
5,887

Balance at December 31, 2018
$
21,531


As of December 31, 2018, we had no accrued interest and penalties related to the uncertain tax positions. We have elected to record interest and penalties in the financial statements as a component of provision for income taxes. Included in the balance of unrecognized tax benefits at December 31, 2018 and 2017 are no potential benefits, which if recognized, would affect the effective tax rate. Included in the balance of unrecognized tax benefits at December 31, 2016 are potential benefits of $0.4 million, which if recognized, would affect the effective tax rate.
We are currently unaware of any uncertain tax positions that could result in significant additional payments, accruals, or other material deviation in this estimate over the next 12 months.
We are subject to taxation in the United States and foreign jurisdictions. Our tax years 2009 to 2017 remain subject to examination in most jurisdictions.
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. The Tax Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits, or E&P, through the year ended December 31, 2017. We have concluded that we are not subject to the deemed mandatory repatriation because we have negative net undistributed foreign E&P.
While the Tax Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income, or GILTI, provisions and the base-erosion and anti-abuse tax, or BEAT, provisions.
The GILTI provisions require us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Based on our calculations, we are not subject to incremental U.S. tax on GILTI income. We have elected to account for GILTI tax in the period in which it is incurred, and therefore have not provided any deferred tax impacts of GILTI in our consolidated financial statements for the year ended December 31, 2018.
The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. We are currently beneath the revenue threshold in which this tax applies and therefore have not included any tax impacts of BEAT in our consolidated financial statements for the year ended December 31, 2018.
v3.10.0.1
Geographic Information
 12 Months Ended
Dec. 31, 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):
 
Year Ended December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
United States
$
309,879

 
$
229,667

 
$
170,402

EMEA
174,874

 
122,365

 
89,173

APAC
68,272

 
46,564

 
29,285

Other
45,721

 
31,569

 
23,984

Total
$
598,746

 
$
430,165

 
$
312,844


*Adjusted to reflect the adoption of ASC 606 (see Note 2).
Long-Lived Assets
The following table presents our long-lived assets by geographic area (in thousands):
 
As of December 31,
 
2018
 
2017
United States
$
32,351

 
$
23,609

EMEA:
 
 
 
Republic of Ireland
14,698

 
5,019

Other EMEA
2,450

 
5,007

Total EMEA
17,148

 
10,026

APAC
6,889

 
7,734

Total
$
56,388

 
$
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
Retirement Plans
 12 Months Ended
Dec. 31, 2018
Postemployment Benefits [Abstract]  
Retirement Plans
Retirement Plans
We have a 401(k) retirement and savings plan made available to all United States employees. The 401(k) plan allows each participant to contribute up to an amount not to exceed an annual statutory maximum. We began contributing to the 401(k) plan in 2017. For the years ended December 31, 2018 and 2017, we made matching contributions of $1.3 million and $1.1 million, respectively.
v3.10.0.1
Summary of Significant Accounting Policies (Policies)
 12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles, or GAAP. The consolidated financial statements include the accounts of Zendesk, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Reclassification
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had an immaterial effect on our reported results of operations.
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, goodwill, and our convertible senior notes, as well as unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of costs to obtain customer contracts and internal-use software, variable consideration related to revenue recognition, financial forecasts used in currency hedging, and impairment of strategic investments.
These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Segment Information
Segment 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 operating segment.
Revenue Recognition, Deferred Revenue and Cost of Revenue
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, Explore, Sell, 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 and training services, for which we recognize revenue based on proportional performance, and Talk usage, for which we recognize revenue based on usage.

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; and
•Recognition of revenue when, or as, the performance obligations are 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 and 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 significant reversal of cumulative revenue recognized.

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 material liabilities in our consolidated financial statements as a result of these service-level agreements.
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 customer 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, 2018 and 2017.

We invoice customers based on billing schedules established in our contracts. Accounts receivable are recorded when the right to consideration becomes unconditional.
Cost of Revenue
Cost of revenue consists primarily of personnel costs (including salaries, share-based compensation, and benefits) for employees associated with our infrastructure, product support, and professional service organizations, and expenses for hosting capabilities, primarily for third-party managed hosting services and depreciation from our self-managed colocation data centers. Cost of revenue also includes third-party license fees, payment processing fees, amortization expense associated with capitalized internal-use software, amortization expense associated with acquired intangible assets, and allocated shared costs, primarily including facilities, information technology, and security costs.
Cash, Cash Equivalents, and Restricted Cash
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at fair value and consist primarily of bank deposits and money market funds.
Marketable Securities
Marketable Securities
Marketable securities consist of corporate bonds, asset-backed securities, U.S. Treasury securities, money market funds, commercial paper, agency securities, certificates of deposit, and time deposits. We classify marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. All marketable securities are recorded at their estimated fair values. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive gain (loss). We evaluate our investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value determined to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.
Accounts Receivable and Allowance for Doubtful Accounts
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.
Property and Equipment
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Maintenance and repair costs are charged to expense as incurred. The estimated useful lives of our property and equipment are as follows:
 
Furniture and fixtures
5 years
Hosting equipment
3 years
Computer equipment and licensed software and patents
3 to 5 years
Leasehold improvements
Shorter of the lease term or estimated useful life
Derivative Instruments and Hedging
Derivative Instruments and Hedging

We enter into foreign currency forward contracts with certain financial institutions to mitigate the impact of foreign currency fluctuations on our future cash flows and earnings. All of our foreign currency forward contracts are designated as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less.

We recognize all forward contracts on our balance sheet at fair value as either assets or liabilities. The effective portion of the gain or loss on each forward contract is reported as a component of accumulated other comprehensive loss and reclassified into earnings, into revenue, cost of revenue or operating expense in the same period, or periods, during which the hedged transaction affects earnings. The ineffective portion of the gains or losses, if any, is recorded immediately in other income (expense), net. The change in time value related to our cash flow hedges is excluded from the assessment of hedge effectiveness and is recorded immediately in other income (expense), net. We evaluate the effectiveness of our cash flow hedges on a quarterly basis.

We have a master netting agreement with each of our counterparties, which permits 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. As of December 31, 2018, we have no restricted cash associated with cash collateral exchanged. GAAP 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. We do not enter into any derivative contracts for trading or speculative purposes.
Fair Value Measurements
Fair Value Measurements
We measure certain financial instruments at fair value using a fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
Our marketable securities are classified within either Level 1 or Level 2, and our foreign currency forward contracts and convertible senior notes are classified within Level 2. We have no financial assets or liabilities measured using Level 3 inputs. The fair value of our Level 1 marketable securities is based on quoted market prices of identical underlying securities. The fair value of our Level 2 marketable securities is based on indirect or directly observable market data, including readily available pricing sources for identical underlying securities that may not be actively traded. The fair value of our foreign currency forward contracts is based on quoted prices and market observable data of similar instruments in active markets, such as currency spot rates, forward rates, and LIBOR. The fair value of our convertible senior notes is determined based on the quoted price of the convertible senior notes in an inactive market.
For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
Capitalized Internal-Use Software Costs
Capitalized Internal-Use Software Costs
We capitalize certain development costs incurred in connection with software development for our platform and software used in operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred.
Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life and recorded in cost of revenue within the accompanying consolidated statements of operations.
Business Combinations
Business Combinations
When we acquire businesses, we allocate the purchase price to the net tangible and identifiable intangible assets. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable.
Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets
Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets
Goodwill. Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually in the third quarter, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. No impairment charges were recorded during the years ended December 31, 2018, 2017, or 2016.
Acquired Intangible Assets. Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisitions. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.
Impairment of Long-Lived Assets. The carrying amounts of our long-lived assets, including property and equipment, capitalized internal-use software, costs to obtain customer contracts, and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful lives are shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life.
Strategic Investments
Strategic Investments
Strategic investments consist of non-controlling equity investments in privately-held companies. We have elected to apply the measurement alternative for these investments as they do not have readily determinable fair values, measuring them at cost, less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recorded when events or circumstances indicate a decline in value has occurred. We include strategic investments in other assets in our consolidated balance sheets.
Share-Based Compensation
Share-Based Compensation
Share-based compensation expense to employees is measured based on the fair value of the awards on the grant date and recognized in our consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award, which is typically four years). The contractual term of our stock options is typically ten years. We estimate the fair value of stock options granted using the Black-Scholes option valuation model. We measure the fair value of Restricted Stock Units, or RSUs, based on the fair value of the underlying shares on the date of grant. Compensation expense for awards with only service conditions is recognized over the vesting period of the applicable award using the straight-line method. We record share-based compensation expense for performance-based equity awards using the accelerated attribution method.
Advertising Expense
Advertising Expense
Advertising is expensed as incurred.
Government Grants
Government Grants
We have obtained government grants in certain jurisdictions where we operate. We receive the grant funds as we meet certain commitments, including targeted levels of employment and/or spending within the local jurisdictions. If we fail to maintain these commitments, we may be required to repay grant funds received or be ineligible to receive future funding. We recognize grant proceeds to offset costs to which the grants relate on a straight-line basis when it is reasonably assured that the applicable commitments have been met.
Income Taxes
Income Taxes

We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.
We recognize tax benefits from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and results of operations.
We have elected to record interest accrued and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of provision for income taxes.
Foreign Currency
Foreign Currency
The functional currency of our foreign subsidiaries is the U.S. dollar. Accordingly, monetary balance sheet accounts are remeasured using exchange rates in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Expenses are generally remeasured at the average exchange rates for the period. Foreign currency remeasurement and transaction gains and losses are included in other income (expense), net and were not material for the years ended December 31, 2018, 2017, and 2016, respectively.
Concentrations of Risk
Concentrations of Risk
Financial instruments potentially exposing us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities, accounts receivable and derivative instruments. We place our cash and cash equivalents with high-credit-quality financial institutions. However, we maintain balances in excess of the FDIC insurance limits. We do not require our customers to provide collateral to support accounts receivable and maintain an allowance for doubtful accounts receivable balances. We seek to mitigate counterparty credit risk related to our derivative instruments by transacting with major financial institutions with high credit ratings.
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 completed our evaluation of each arrangement under the guidance, including application of elected practical expedients. We are also finalizing the incremental borrowing rate for each arrangement. We plan to adopt utilizing the modified retrospective method of transition. 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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments,” which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. The standard is effective for annual reporting periods beginning after December 15, 2019, 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 January 2017, the FASB issued ASU 2017-04, regarding ASC Topic 350 “Simplifying the Test for Goodwill Impairment,” which simplifies the required methodology to calculate an impairment charge for goodwill. The standard is effective for fiscal years beginning after December 15, 2019, however early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.

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 the 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 do not expect the adoption of this standard to have a material effect 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 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 2018-07, 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.

In August 2018, the FASB issued ASU 2018-13, regarding ASC Topic 820 “Fair Value Measurement,” which modifies the disclosure requirements for fair value measurements for certain types of investments. The guidance is effective for annual reporting periods beginning after December 15, 2019, 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 August 2018, the FASB issued ASU 2018-15, regarding ASC Topic 350-40 “Intangibles - Internal-Use Software,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. We plan to early adopt this standard in the first quarter of 2019 on a prospective basis. We do not expect adoption to have a material effect on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, regarding ASC Topic 718 “Compensation - Stock Compensation.” This amendment changes certain aspects of accounting for share-based awards to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. We adopted the standard in the first quarter of 2017.
As required by the new standard, we now recognize excess tax effects from share-based awards as a component of provision for income taxes in our statement of operations when awards vest or are settled. Upon adoption, we recorded a deferred tax asset of $52.8 million to reflect, on a modified retrospective basis, the previously unrecognized excess tax benefits; however, the deferred tax asset was fully offset by a valuation allowance, resulting in no impact to our consolidated financial statements. In our statement of cash flows, we no longer classify excess tax benefits as a reduction from operating cash flows. This change was made prospectively beginning with the quarter ended March 31, 2017.
We also elected to account for forfeitures as they occur, therefore share-based compensation expense for the years ended December 31, 2018 and 2017 have been calculated based on actual forfeitures in our consolidated statement of operations, rather than our previous approach which was net of estimated forfeitures. The cumulative-effect adjustment of this change on a modified retrospective basis was not material. Share-based compensation expense for the year ended December 31, 2016 was recorded net of estimated forfeitures.
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 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 statements of cash flows for the years ended December 31, 2017 and 2016, 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. We finalized our assessment of the Tax Act in the fourth quarter of 2018 and determined that changes to our initial assessments of and its effects on our income taxes are not material.
v3.10.0.1
Summary of Significant Accounting Policies (Tables)
 12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Schedule of Allowance for Doubtful Accounts
Our allowance for doubtful accounts consists of the following activity (in thousands):
 
Year Ended December 31,
2018
 
2017
Allowance for doubtful accounts, beginning balance
$
1,252

 
$
1,269

Additions
2,667

 
3,400

Write-offs
(1,348
)
 
(3,417
)
Allowance for doubtful accounts, ending balance
$
2,571

 
$
1,252
Schedule of Estimated Useful Lives of Property and Equipment
The estimated useful lives of our property and equipment are as follows:
 
Furniture and fixtures
5 years
Hosting equipment
3 years
Computer equipment and licensed software and patents
3 to 5 years
Leasehold improvements
Shorter of the lease term or estimated useful life
Schedule of Impact of New Accounting Pronouncements
We adjusted our consolidated financial statements from amounts previously reported due to the adoption of ASC 606 and ASU 2016-18. Select 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 audited consolidated statement of operations line items, which reflect the adoption of ASC 606 are as follows (in thousands, except per share data):

 
Year Ended December 31, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
430,492

 
$
(327
)
 
$
430,165

Operating expenses:
 
 
 
 
 
Sales and marketing
220,742

 
(8,824
)
 
211,918

Operating loss
(114,643
)
 
8,497

 
(106,146
)
Net loss
$
(110,638
)
 
$
8,497

 
$
(102,141
)
Net loss per share, basic and diluted
$
(1.11
)
 
$
0.09

 
$
(1.02
)

 
Year Ended December 31, 2016
 
As Previously Reported
 
Adjustments
 
As Adjusted
Revenue
$
311,999

 
$
845

 
$
312,844

Operating expenses:
 
 
 
 
 
Sales and marketing
166,987

 
(5,334
)
 
161,653

Operating loss
(104,326
)
 
6,179

 
(98,147
)
Net loss
$
(103,799
)
 
$
6,179

 
$
(97,620
)
Net loss per share, basic and diluted
$
(1.11
)
 
$
0.06

 
$
(1.05
)

Select audited consolidated statement of cash flows line items, which reflect the adoption of ASC 606 and ASU 2016-18 are as follows (in thousands):

 
Year Ended December 31, 2017
 
As Previously Reported
 
Adjustments
 
As Adjusted
Cash flows from operating activities
 
 
 
 
 
Net loss
$
(110,638
)
 
$
8,497

 
$
(102,141
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Share-based compensation
85,049

 
(496
)
 
84,553

Amortization of deferred costs
—

 
14,434

 
14,434

Changes in operating assets and liabilities:
 
 
 
 
 
Prepaid expenses and other current assets
(5,055
)
 
(57
)
 
(5,112
)
Deferred costs
—

 
(22,762
)
 
(22,762
)
Other assets and liabilities
(5,955
)
 
190

 
(5,765
)
Deferred revenue
51,204

 
327

 
51,531

Net cash provided by operating activities
42,095

 
133

 
42,228

Net increase in cash, cash equivalents and restricted cash
15,693

 
133

 
15,826

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
$
109,370

 
$
1,518

 
$
110,888


 
Year Ended December 31, 2016
 
As Previously Reported
 
Adjustments
 
As Adjusted
Cash flows from operating activities
 
 
 
 
 
Net loss
$
(103,799
)
 
$
6,179

 
$
(97,620
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Share-based compensation
73,779

 
(350
)
 
73,429

Amortization of deferred costs
—

 
10,293

 
10,293

Changes in operating assets and liabilities:
 
 
 
 
 
Prepaid expenses and other current assets
(6,286
)
 
38

 
(6,248
)
Deferred costs
—

 
(15,277
)
 
(15,277
)
Deferred revenue
38,418

 
(845
)
 
37,573

Net cash provided by operating activities
24,522

 
38

 
24,560

Net increase in cash, cash equivalents and restricted cash
(122,549
)
 
38

 
(122,511
)
Cash, cash equivalents and restricted cash at beginning of period
216,226

 
1,347

 
217,573

Cash, cash equivalents and restricted cash at end of period
$
93,677

 
$
1,385

 
$
95,062
v3.10.0.1
Business Combinations (Tables)
 12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Schedule of Purchase Price Allocation for Acquisitions
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 consideration
$
16,564

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 liabilities acquired
$
(3,030
)
Identifiable intangible assets:
 
Developed technology
19,000

Customer relationships
10,400

Backlog
2,200

Goodwill
52,453

Total purchase consideration
$
81,023
v3.10.0.1
Financial Instruments (Tables)
 12 Months Ended
Dec. 31, 2018
Financial Instruments, Owned, at Fair Value [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 as of December 31, 2018 and 2017 based on the three-tier fair value hierarchy (in thousands):
 
Fair Value Measurement at
December 31, 2018
Level 1
 
Level 2
 
Total
Description
 

 
 

 
 

Corporate bonds
$
—

 
$
460,210

 
$
460,210

Asset-backed securities
—

 
127,078

 
127,078

U.S. Treasury securities
—

 
58,039

 
58,039

Money market funds
57,758

 
—

 
57,758

Commercial paper
—

 
38,900

 
38,900

Agency securities
—

 
11,256

 
11,256

Certificates of deposit and time deposits
—

 
3,200

 
3,200

Total
$
57,758

 
$
698,683

 
$
756,441

Included in cash and cash equivalents
 

 
 

 
$
62,557

Included in marketable securities
 

 
 

 
$
693,884


 
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 Maturities
The following table classifies our marketable securities by contractual maturity as of December 31, 2018 and 2017 (in thousands):
 
December 31,
2018
 
December 31,
2017
Due in one year or less
$
300,213

 
$
137,576

Due after one year and within five years
393,671

 
97,447

Total
$
693,884

 
$
235,023
Schedule of Derivative Instruments on Consolidated Balance Sheet
The following tables present information about our derivative instruments on our consolidated balance sheet as of December 31, 2018 and 2017 (in thousands):

 
December 31, 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
 
$
2,047

 
Accrued liabilities
 
$
4,862

Total
 
 
$
2,047

 
 
 
$
4,862



 
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 statements of operations for the years ended December 31, 2018 and 2017 (in thousands):
 
 
 
Year Ended December 31, 2018
 
Year Ended December 31, 2017
Derivative Instrument
Location of Loss Reclassified into Earnings
 
Loss 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
 
$
(4,050
)
 
$
(1,318
)
 
$
3,663

 
$
(225
)
Total
 
 
$
(4,050
)
 
$
(1,318
)
 
$
3,663

 
$
(225
)
v3.10.0.1
Property and Equipment (Tables)
 12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Components of Property and Equipment
Property and equipment, net consists of the following (in thousands):
 
December 31, 2018
 
December 31, 2017
Leasehold improvements
51,832

 
28,113

Capitalized internal-use software
36,444

 
31,593

Hosting equipment
34,105

 
37,222

Computer equipment and licensed software and patents
21,100

 
16,316

Furniture and fixtures
11,550

 
9,581

Construction in progress
10,538

 
11,220

Total
165,569

 
134,045

Less accumulated depreciation and amortization
(89,915
)
 
(74,888
)
Property and equipment, net
$
75,654

 
$
59,157
v3.10.0.1
Goodwill and Acquired Intangible Assets (Tables)
 12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Summary of Changes in Carrying Amount of Goodwill
The changes in the carrying amount of goodwill for the two years ended December 31, 2018 are as follows (in thousands):
Balance as of December 31, 2016
$
45,347

Goodwill acquired
13,350

Foreign currency translation adjustments
434

Balance as of December 31, 2017
59,131

Goodwill acquired
52,453

Balance as of December 31, 2018
$
111,584
Summary of Intangible Assets Acquired
The following tables present information about our acquired intangible assets subject to amortization as of December 31, 2018 and 2017 (in thousands):
 
As of December 31, 2018
Cost
 
Accumulated
Amortization
 
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
(In years)
Developed technology
$
31,000

 
$
(8,151
)
 
 
$
22,849

 
5.5
Customer relationships
11,310

 
(1,249
)
 
 
10,061

 
4.6
Backlog
2,200

 
(367
)
 
 
1,833

 
1.7
 
$
44,510

 
$
(9,767
)
 
 
$
34,743

 
 

 
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 December 31, 2018 is as follows (in thousands): 
2019
$
8,780

2020
6,839

2021
5,494

2022
5,494

2023
4,722

Thereafter
3,414

 
$
34,743
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call (Tables)
 12 Months Ended
Dec. 31, 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):
 
December 31, 2018
 
December 31, 2017
Principal
$
575,000

 
$
—

Unamortized Debt Discount
(107,494
)
 
—

Unamortized issuance costs
(9,330
)
 
—

Net carrying amount
$
458,176

 
$
—


The net carrying amount of the equity component of the Notes is as follows (in thousands):
 
December 31, 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):
 
Year Ended December 31,
 
2018
 
2017
Contractual interest expense
$
1,116

 
$
—

Amortization of Debt Discount
17,482

 
—

Amortization of issuance costs
1,284

 
—

Total interest expense
$
19,882

 
$
—
v3.10.0.1
Commitments and Contingencies (Tables)
 12 Months Ended
Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Summary of Contractual Obligations and Commitments
 
Lease Obligations (1)
 
Purchase Commitments (2)
 
Convertible Senior Notes (3)
 
Total
2019
$
24,848

 
$
63,200

 
$
1,438

 
$
89,486

2020
24,188

 
58,201

 
1,438

 
$
83,827

2021
22,220

 
55,174

 
1,438

 
$
78,832

2022
20,683

 
55,001

 
1,438

 
$
77,122

2023
15,575

 
55,001

 
575,299

 
$
645,875

Thereafter
30,786

 
—

 
—

 
$
30,786

Total
$
138,300

 
$
286,577

 
$
581,051

 
$
1,005,928

(1) Represents obligations to make payments under non-cancellable lease agreements for our corporate headquarters and worldwide offices.
(2) Primarily relates to third-party managed hosting services.
(3) Consists of principal and interest payments. The $575.0 million in principal is due March 2023.
v3.10.0.1
Common Stock and Stockholders' Equity (Tables)
 12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Summary of Stock Option and RSU Activity
A summary of our shared-based award activity for the year ended December 31, 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
 
Aggregate
Intrinsic
Value
 
 
 
 
 
 
(In years)
 
 
 
 
 
 
 
 
Outstanding — January 1, 2018
8,001

 
6,239

 
$
17.31

 
7.11
 
$
103,308

 
5,827

 
$
25.00

 
$
197,186

Increase in authorized shares
5,156

 
 

 
 

 
 
 
 

 
 

 
 

 
 
Stock options granted
(791
)
 
791

 
42.89

 
 
 
 

 
 

 
 

 
 
RSUs granted
(4,898
)
 
 

 
 

 
 
 
 

 
4,898

 
44.35

 
 
Stock options exercised
 

 
(1,024
)
 
15.77

 
 
 
 

 
 

 
 

 
 
RSUs vested
 

 
 

 
 

 
 
 
 

 
(3,165
)
 
26.79

 
 
Stock options forfeited or canceled
68

 
(68
)
 
28.61

 
 
 
 

 
 

 
 

 
 
RSUs forfeited or canceled
918

 
 

 
 

 
 
 
 

 
(918
)
 
30.18

 
 
RSUs forfeited or canceled and unavailable for grant
—

 
 
 
 
 
 
 
 
 
(31
)
 
23.44

 
 
PRSUs granted
(222
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding — December 31, 2018
8,232

 
5,938

 
$
20.85

 
6.58
 
$
222,959

 
6,611

 
$
37.77

 
$
385,891

Options vested and expected to vest as of December 31, 2018
 
 
5,710

 
$
20.31

 
6.51
 
$
217,370

 
 
 
 
 
 
Options vested and exercisable as of December 31, 2018
 
 
3,855

 
$
15.73

 
5.79
 
$
164,395

 
 
 
 
 
 
RSUs expected to vest as of December 31, 2018
 
 
 
 
 
 
 
 
 
 
5,222

 
 
 
$
304,815
Assumptions Used to Estimate Fair Value of Stock Options Granted to Employees
The assumptions used to estimate the fair value of stock options are as follows:
 
Year Ended December 31,
2018
 
2017
 
2016
Expected volatility
44% - 45%
 
44% - 48%
 
47% - 49%
Dividend yield
0%
 
0%
 
0%
Risk-free interest rate
2.3% - 3.0%
 
1.9% - 2.2%
 
1.1% - 2.0%
Expected term (in years)
4.9
 
6.0 - 6.1
 
6.0 - 6.1
Assumptions Used to Estimate Fair Value of ESPP Awards
The assumptions used to estimate the fair value of ESPP awards are as follows:
 
Year Ended December 31,
 
2018
 
2017
 
2016
Expected volatility
35% - 41%
 
37% - 44%
 
42% - 48%
Dividend yield
0%
 
0%
 
0%
Risk-free interest rate
2.1% - 2.8%
 
1.0% - 1.6%
 
0.4% - 0.9%
Expected term (in years)
0.5 -1.5
 
0.5 -1.5
 
0.5 - 1.5
v3.10.0.1
Net Loss Per Share (Tables)
 12 Months Ended
Dec. 31, 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):
 
Year Ended
December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
Net loss
$
(131,084
)
 
$
(102,141
)
 
$
(97,620
)
Weighted-average shares used to compute basic and diluted net loss per share
105,567

 
99,918

 
93,161

Net loss per share, basic and diluted
(1.24
)
 
(1.02
)
 
(1.05
)

*Adjusted to reflect the adoption of ASC 606 (see Note 2).
Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation
The anti-dilutive securities excluded from the shares used to calculate diluted net loss per share are as follows (in thousands):
 
As of December 31,
2018
 
2017
 
2016
Shares subject to outstanding common stock options and employee stock purchase plan
6,041

 
6,343

 
8,556

Restricted stock units
6,611

 
5,827

 
6,936

 
12,652

 
12,170

 
15,492
v3.10.0.1
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Components of Loss Before Provision for Income Taxes
The components of loss before provision for income taxes are as follows (in thousands):
 
Year Ended December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
U.S.
$
(151,547
)
 
$
(107,177
)
 
$
(101,506
)
Foreign
8,356

 
3,518

 
4,879

Total
$
(143,191
)
 
$
(103,659
)
 
$
(96,627
)

*Adjusted to reflect the adoption of ASC 606
Schedule of Income Tax Provision
The income tax provision is composed of the following (in thousands):
 
Year Ended December 31,
2018
 
2017
 
2016
Current tax provision:
 

 
 

 
 

Federal
$
—

 
$
(2,636
)
 
$
—

State
80

 
104

 
74

Foreign
3,372

 
1,476

 
3,096

 
3,452

 
(1,056
)
 
3,170

Deferred tax provision:
 

 
 

 
 

Federal
(13,785
)
 
—

 
(49
)
State
—

 
—

 
—

Foreign
(1,774
)
 
(462
)
 
(2,128
)
Total provision for (benefit from) income taxes
$
(12,107
)
 
$
(1,518
)
 
$
993
Schedule of Significant Components of Deferred Tax Assets
Significant components of deferred tax assets are as follows (in thousands):
 
As of December 31,
2018
 
2017
 
 
*As adjusted
Deferred tax assets:
 

 
 

Tax credit carryforward
$
884

 
$
733

Net operating loss carryforward
170,447

 
115,237

Share-based compensation
10,316

 
6,072

Accrued liabilities and reserves
7,734

 
3,639

Property and equipment
3,340

 
1,983

Other
7,066

 
5,086

Total deferred tax assets
199,787

 
132,750

Less: valuation allowance
(158,778
)
 
(118,549
)
Deferred tax assets, net of valuation allowance
41,009

 
14,201

Deferred tax liabilities:
 

 
 

Deferred commissions
(13,075
)
 
(7,443
)
Convertible debt transaction
(12,872
)
 
—

Intangible assets
(11,305
)
 
(5,036
)
Total deferred tax liabilities
(37,252
)
 
(12,479
)
Net deferred tax assets
$
3,757

 
$
1,722


*Adjusted to reflect the adoption of ASC 606 (see Note 2).
Schedule of Reconciliation of the Statutory Federal Income Tax Rate and the Effective Tax Rates
The following is a reconciliation of the statutory federal income tax rate and the effective tax rates:
 
Year Ended December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
Tax at federal statutory rate
21.0
 %
 
34.0
 %
 
34.0
 %
Tax reform rate change impact
—

 
(64.7
)
 
—

Excess tax benefit from share-based compensation
—

 
46.5

 
—

Valuation allowance
(20.1
)
 
(19.5
)
 
(22.6
)
Share-based compensation
8.5

 
7.0

 
(6.5
)
Officer's compensation
(1.1
)
 
—

 
—

Other
0.1

 
(3.4
)
 
0.4

Benefit from other comprehensive gain
—

 
1.6

 
—

Intercompany dividend
—

 
—

 
(6.3
)
Effective tax rate
8.4
 %
 
1.5
 %
 
(1.0
)%

*Adjusted to reflect the adoption of ASC 606 (see Note 2).
Schedule of Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) for the two years ending December 31, 2018 is as follows (in thousands):
 
Balance at December 31, 2016
$
11,786

Additions from tax positions related to the current year
4,141

Lapse of statutes of limitations
(283
)
Balance at December 31, 2017
15,644

Additions from tax positions related to the current year
5,887

Balance at December 31, 2018
$
21,531
v3.10.0.1
Geographic Information (Tables)
 12 Months Ended
Dec. 31, 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):
 
Year Ended December 31,
2018
 
2017
 
2016
 
 
*As adjusted
 
*As adjusted
United States
$
309,879

 
$
229,667

 
$
170,402

EMEA
174,874

 
122,365

 
89,173

APAC
68,272

 
46,564

 
29,285

Other
45,721

 
31,569

 
23,984

Total
$
598,746

 
$
430,165

 
$
312,844


*Adjusted to reflect the adoption of ASC 606 (see Note 2).
Schedule of Long-Lived Assets by Geographic Areas
The following table presents our long-lived assets by geographic area (in thousands):
 
As of December 31,
 
2018
 
2017
United States
$
32,351

 
$
23,609

EMEA:
 
 
 
Republic of Ireland
14,698

 
5,019

Other EMEA
2,450

 
5,007

Total EMEA
17,148

 
10,026

APAC
6,889

 
7,734

Total
$
56,388

 
$
41,369
v3.10.0.1
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Summary Of Significant Accounting Policies [Line Items]        
Restricted cash $ 2,400,000 $ 1,500,000    
Weighted average useful life of capitalized internal use software 3 years 8 months 12 days      
Impairment of goodwill $ 0 0 $ 0  
Impairment of long lived asset $ 0 0 0  
Vesting period 4 years      
Contractual term of stock options 10 years      
Future period share-based compensation expense $ 265,400,000      
Future period share-based compensation expense, recognition period 2 years 8 months 12 days      
Advertising expense $ 48,200,000 36,800,000 23,900,000  
Proceeds from government grants 2,000,000 2,000,000 $ 1,200,000  
Deferred tax asset 199,787,000 132,750,000    
Deferred tax asset valuation allowance $ 158,778,000 118,549,000    
Accounting Standards Update 2016-09        
Summary Of Significant Accounting Policies [Line Items]        
Deferred tax asset       $ 52,800,000
Deferred tax asset valuation allowance       $ 52,800,000
Maximum | Foreign currency forward contracts        
Summary Of Significant Accounting Policies [Line Items]        
Foreign currency forward contract maturity 15 months      
Charitable Donation        
Summary Of Significant Accounting Policies [Line Items]        
Restricted cash $ 1,600,000 900,000    
Leased Building        
Summary Of Significant Accounting Policies [Line Items]        
Restricted cash $ 700,000 $ 600,000    
v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Allowance for Doubtful Accounts - (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Allowance for Doubtful Accounts Receivable [Roll Forward]    
Allowance for doubtful accounts, beginning balance $ 1,252 $ 1,269
Additions 2,667 3,400
Write-offs (1,348) (3,417)
Allowance for doubtful accounts, ending balance $ 2,571 $ 1,252
v3.10.0.1
Summary of Significant Accounting Policies - Estimated Useful Lives of Property and Equipment - (Details)
 12 Months Ended
Dec. 31, 2018
Property Plant And Equipment [Line Items]  
Estimated useful lives of property and equipment 3 years 8 months 12 days
Furniture and fixtures  
Property Plant And Equipment [Line Items]  
Estimated useful lives of property and equipment 5 years
Hosting equipment  
Property Plant And Equipment [Line Items]  
Estimated useful lives of property and equipment 3 years
Minimum | Computer equipment and licensed software and patents  
Property Plant And Equipment [Line Items]  
Estimated useful lives of property and equipment 3 years
Maximum | Computer equipment and licensed software and patents  
Property Plant And Equipment [Line Items]  
Estimated useful lives of property and equipment 5 years
v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Cumulative Effects of New Revenue Standard on Balance Sheet (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Assets    
Deferred costs $ 24,712 $ 15,771 [1]
Deferred costs, noncurrent 26,914 15,395 [1]
Liabilities and stockholders’ equity    
Deferred revenue 245,243 173,147 [1]
Accumulated deficit $ (529,128) (398,043) [1]
As Previously Reported    
Assets    
Deferred costs [1]   0
Deferred costs, noncurrent [1]   0
Liabilities and stockholders’ equity    
Deferred revenue [1]   174,524
Accumulated deficit [1]   (430,586)
Adjustments | Accounting Standards Update 2014-09    
Assets    
Deferred costs [1]   15,771
Deferred costs, noncurrent [1]   15,395
Liabilities and stockholders’ equity    
Deferred revenue [1]   (1,377)
Accumulated deficit [1]   $ 32,543
[1] See Note 2 for a summary of adjustments
v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Cumulative Effects of New Revenue Standard on Income Statement (Details) - USD ($)
$ / shares in Units, $ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
New Accounting Pronouncements or Change in Accounting Principle [Line Items]      
Revenue $ 598,746 $ 430,165 [1] $ 312,844 [1]
Operating expenses:      
Sales and marketing [2] 291,668 211,918 [1] 161,653 [1]
Operating loss (137,928) (106,146) [1] (98,147) [1]
Net loss [3] $ (131,084) $ (102,141) [1],[4],[5] $ (97,620) [1],[4],[5]
Net loss per share, basic and diluted (usd per share) $ (1.24) $ (1.02) [1] $ (1.05) [1]
As Previously Reported      
New Accounting Pronouncements or Change in Accounting Principle [Line Items]      
Revenue [1]   $ 430,492 $ 311,999
Operating expenses:      
Sales and marketing [1],[2]   220,742 166,987
Operating loss   (114,643) (104,326)
Net loss [4],[5]   $ (110,638) $ (103,799)
Net loss per share, basic and diluted (usd per share)   $ (1.11) $ (1.11)
Adjustments | Accounting Standards Update 2014-09      
New Accounting Pronouncements or Change in Accounting Principle [Line Items]      
Revenue [1]   $ (327) $ 845
Operating expenses:      
Sales and marketing [1],[2]   (8,824) (5,334)
Operating loss   8,497 6,179
Net loss [4],[5]   $ 8,497 $ 6,179
Net loss per share, basic and diluted (usd per share)   $ 0.09 $ 0.06
[1] See Note 2 for a summary of adjustments
[2] Includes share-based compensation expense as follows:
[3] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[4] See Note 2 for a summary of adjustments
[5] See Note 2 for a summary of adjustments.
v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Cumulative Effects of New Revenue Standard on Cash Flows Statement (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities      
Net loss [1] $ (131,084) $ (102,141) [2],[3],[4] $ (97,620) [2],[3],[4]
Adjustments to reconcile net loss to net cash provided by operating activities      
Share-based compensation 119,483 84,553 [4] 73,429 [4]
Amortization of deferred costs 21,304 14,434 [4] 10,293 [4]
Changes in operating assets and liabilities:      
Prepaid expenses and other current assets (10,620) (5,112) [4] (6,248) [4]
Deferred costs (40,898) (22,762) [4] (15,277) [4]
Other assets and liabilities 6,635 (5,765) [4] (3,887) [4]
Deferred revenue 73,053 51,531 [4] 37,573 [4]
Net cash provided by operating activities 78,620 42,228 [4] 24,560 [4]
Net increase (decrease) in cash, cash equivalents and restricted cash 17,988 15,826 [4] (122,511) [4]
Cash, cash equivalents and restricted cash at beginning of period [4] 110,888 95,062 217,573
Cash, cash equivalents and restricted cash at end of period 128,876 110,888 [4] 95,062 [4]
As Previously Reported      
Cash flows from operating activities      
Net loss [3],[4]   (110,638) (103,799)
Adjustments to reconcile net loss to net cash provided by operating activities      
Share-based compensation   85,049 73,779
Amortization of deferred costs   0 0
Changes in operating assets and liabilities:      
Prepaid expenses and other current assets   (5,055) (6,286)
Deferred costs   0 0
Other assets and liabilities   (5,955)  
Deferred revenue   51,204 38,418
Net cash provided by operating activities   42,095 24,522
Net increase (decrease) in cash, cash equivalents and restricted cash   15,693 (122,549)
Cash, cash equivalents and restricted cash at beginning of period 109,370 93,677 216,226
Cash, cash equivalents and restricted cash at end of period   109,370 93,677
Adjustments | Accounting Standards Update 2014-09      
Cash flows from operating activities      
Net loss [3],[4]   8,497 6,179
Adjustments to reconcile net loss to net cash provided by operating activities      
Share-based compensation   (496) (350)
Amortization of deferred costs   14,434 10,293
Changes in operating assets and liabilities:      
Prepaid expenses and other current assets   (57) 38
Deferred costs   (22,762) (15,277)
Other assets and liabilities   190  
Deferred revenue   327 (845)
Net cash provided by operating activities   133 38
Net increase (decrease) in cash, cash equivalents and restricted cash   133 38
Cash, cash equivalents and restricted cash at beginning of period $ 1,518 1,385 1,347
Cash, cash equivalents and restricted cash at end of period   $ 1,518 $ 1,385
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[2] See Note 2 for a summary of adjustments
[3] See Note 2 for a summary of adjustments
[4] See Note 2 for a summary of adjustments.
v3.10.0.1
Business Combinations - Additional Information (Details) - USD ($)
Sep. 10, 2018
Apr. 27, 2017
FutureSimple Inc.    
Business Acquisition [Line Items]    
Business acquisition, fair value of consideration transferred, cash $ 81,000,000  
Transaction costs associated with acquisition 1,600,000  
Adjustments to preliminary purchase price allocation 600,000  
Goodwill expected to be tax deductible $ 0  
FutureSimple Inc. | Developed technology    
Business Acquisition [Line Items]    
Acquired intangible assets, useful lives 6 years 6 months  
FutureSimple Inc. | Customer relationships    
Business Acquisition [Line Items]    
Acquired intangible assets, useful lives 5 years  
FutureSimple Inc. | Backlog    
Business Acquisition [Line Items]    
Acquired intangible assets, useful lives 2 years  
Outbound Solutions Inc    
Business Acquisition [Line Items]    
Business acquisition, fair value of consideration transferred, cash   $ 16,600,000
Goodwill expected to be tax deductible   $ 0
Outbound Solutions Inc | Developed technology    
Business Acquisition [Line Items]    
Acquired intangible assets, useful lives   6 years 6 months
Outbound Solutions Inc | Customer relationships    
Business Acquisition [Line Items]    
Acquired intangible assets, useful lives   3 years 6 months
v3.10.0.1
Business Combinations - Schedule of Purchase Price Allocation for Acquisitions (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Sep. 10, 2018
Dec. 31, 2017
Apr. 27, 2017
Dec. 31, 2016
Business Acquisition [Line Items]          
Goodwill $ 111,584   $ 59,131   $ 45,347
FutureSimple Inc.          
Business Acquisition [Line Items]          
Net tangible liabilities acquired   $ (3,030)      
Goodwill   52,453      
Total purchase price   81,023      
FutureSimple Inc. | Developed technology          
Business Acquisition [Line Items]          
Intangible assets   19,000      
FutureSimple Inc. | Customer relationships          
Business Acquisition [Line Items]          
Intangible assets   10,400      
FutureSimple Inc. | Backlog          
Business Acquisition [Line Items]          
Intangible assets   $ 2,200      
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  
Outbound Solutions Inc | Developed technology          
Business Acquisition [Line Items]          
Intangible assets       3,200  
Outbound Solutions Inc | Customer relationships          
Business Acquisition [Line Items]          
Intangible assets       $ 410  
v3.10.0.1
Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Included in marketable securities $ 693,884 $ 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 756,441 272,554
Included in cash and cash equivalents 62,557 37,531
Included in marketable securities 693,884 235,023
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 57,758 32,832
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 698,683 239,722
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 460,210 149,069
Fair Value Measurements, Recurring | Corporate bonds | Level 1    
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 | Corporate bonds | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 460,210 149,069
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 127,078 27,738
Fair Value Measurements, Recurring | Asset-backed securities | Level 1    
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 | Asset-backed securities | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 127,078 27,738
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 58,039 28,382
Fair Value Measurements, Recurring | U.S. Treasury securities | Level 1    
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 | U.S. Treasury securities | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 58,039 28,382
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 57,758 32,832
Fair Value Measurements, Recurring | Money market funds | Level 1    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 57,758 32,832
Fair Value Measurements, Recurring | Money market funds | Level 2    
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 | Commercial paper    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 38,900 19,622
Fair Value Measurements, Recurring | Commercial paper | Level 1    
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 | Commercial paper | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 38,900 19,622
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 11,256 14,911
Fair Value Measurements, Recurring | Agency securities | Level 1    
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 | Agency securities | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 11,256 $ 14,911
Fair Value Measurements, Recurring | Certificates of deposit and time deposits    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 3,200  
Fair Value Measurements, Recurring | Certificates of deposit and time deposits | Level 1    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets 0  
Fair Value Measurements, Recurring | Certificates of deposit and time deposits | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Total fair value of financial assets $ 3,200  
v3.10.0.1
Financial Instruments - Additional Information (Details) - USD ($)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Gross unrealized gains or losses for cash equivalent and marketable securities $ 0 $ 0
Securities that were in an unrealized loss position for more than 12 months. 0 0
Balance of strategic investments without readily determinable fair values 10,000,000 0
Adjustment to strategic investments 0  
Convertible Debt | Convertible Senior Notes Due 2023 | Level 2    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value of debt 645,300,000  
Foreign currency forward contracts    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unrecognized loss related to effective portion of changes in fair value of foreign currency forward contracts 1,800,000  
Reclassification of net loss into earnings over next 12 months 2,000,000  
Notional value $ 200,300,000 $ 139,700,000
v3.10.0.1
Financial Instruments - Marketable Securities by Contractual Maturities (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Financial Instruments, Owned, at Fair Value [Abstract]    
Due in one year or less $ 300,213 $ 137,576 [1]
Due after one year and within five years 393,671 97,447 [1]
Total $ 693,884 $ 235,023
[1] See Note 2 for a summary of adjustments
v3.10.0.1
Financial Instruments - Schedule of Derivative Instruments on Consolidated Balance Sheet (Details) - Designated as Hedging Instrument - Level 2 - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Derivatives Fair Value [Line Items]    
Asset Derivatives $ 2,047 $ 2,359
Liability Derivatives 4,862 1,220
Foreign currency forward contracts | Other current assets    
Derivatives Fair Value [Line Items]    
Asset Derivatives 2,047 2,359
Foreign currency forward contracts | Accrued liabilities    
Derivatives Fair Value [Line Items]    
Liability Derivatives $ 4,862 $ 1,220
v3.10.0.1
Financial Instruments - Schedule of Derivative Instruments on Statement of Operations (Details) - Designated as Hedging Instrument - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Derivative Instruments Gain Loss [Line Items]    
(Loss) Gain Recognized in AOCI $ (4,050) $ 3,663
Loss Reclassified from AOCI into Earnings (1,318) (225)
Revenue, cost of revenue, operating expenses | Foreign currency forward contracts    
Derivative Instruments Gain Loss [Line Items]    
(Loss) Gain Recognized in AOCI (4,050) 3,663
Loss Reclassified from AOCI into Earnings $ (1,318) $ (225)
v3.10.0.1
Costs to Obtain Customer Contracts (Details) - USD ($)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenue from Contract with Customer [Abstract]      
Deferred costs to obtain customer contracts $ 51,600,000 $ 31,200,000  
Amortization of deferred costs 21,304,000 14,434,000 [1] $ 10,293,000 [1]
Impairment related to deferred costs $ 0 $ 0 $ 0
[1] See Note 2 for a summary of adjustments.
v3.10.0.1
Property and Equipment - Components of Property and Equipment (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Property Plant And Equipment [Line Items]    
Property and equipment, gross $ 165,569 $ 134,045
Less accumulated depreciation and amortization (89,915) (74,888)
Property and equipment, net 75,654 59,157 [1]
Hosting equipment    
Property Plant And Equipment [Line Items]    
Property and equipment, gross 51,832 28,113
Capitalized internal-use software    
Property Plant And Equipment [Line Items]    
Property and equipment, gross 36,444 31,593
Hosting equipment    
Property Plant And Equipment [Line Items]    
Property and equipment, gross 34,105 37,222
Computer equipment and licensed software and patents    
Property Plant And Equipment [Line Items]    
Property and equipment, gross 21,100 16,316
Furniture and fixtures    
Property Plant And Equipment [Line Items]    
Property and equipment, gross 11,550 9,581
Construction in progress    
Property Plant And Equipment [Line Items]    
Property and equipment, gross $ 10,538 $ 11,220
[1] See Note 2 for a summary of adjustments
v3.10.0.1
Property and Equipment - Additional Information (Details) - USD ($)
$ in Millions
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Property, Plant and Equipment [Abstract]      
Depreciation expense $ 23.9 $ 20.3 $ 16.2
Amortization expense of capitalized internal-use software 5.9 7.7 $ 7.4
Impairment losses related to construction in progress 2.2    
Carrying value of capitalized internal-use software 19.2 17.7  
Capitalized internal-use software included in construction in progress $ 2.7 $ 8.7  
v3.10.0.1
Goodwill and Acquired Intangible Assets - Changes in Carrying Amount of Goodwill (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Goodwill [Roll Forward]    
Beginning balance $ 59,131 $ 45,347
Goodwill acquired   13,350
Foreign currency translation adjustments   434
Goodwill acquired 52,453  
Ending balance $ 111,584 $ 59,131
v3.10.0.1
Goodwill and Acquired Intangible Assets - Acquired Intangible Assets Subject to Amortization (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Finite Lived Intangible Assets [Line Items]    
Cost $ 44,510 $ 19,410
Accumulated Amortization (9,767) (11,384)
Foreign Currency Translation Adjustments   (123)
Net 34,743 7,903
Developed technology    
Finite Lived Intangible Assets [Line Items]    
Cost 31,000 17,200
Accumulated Amortization (8,151) (9,835)
Foreign Currency Translation Adjustments   (93)
Net $ 22,849 $ 7,272
Weighted Average Remaining Useful Life 5 years 6 months 3 years 8 months 12 days
Customer relationships    
Finite Lived Intangible Assets [Line Items]    
Cost $ 11,310 $ 2,210
Accumulated Amortization (1,249) (1,549)
Foreign Currency Translation Adjustments   (30)
Net $ 10,061 $ 631
Weighted Average Remaining Useful Life 4 years 7 months 6 days 2 years 4 months 24 days
Backlog    
Finite Lived Intangible Assets [Line Items]    
Cost $ 2,200  
Accumulated Amortization (367)  
Net $ 1,833  
Weighted Average Remaining Useful Life 1 year 8 months 12 days  
v3.10.0.1
Goodwill and Acquired Intangible Assets - Additional Information (Details) - USD ($)
$ in Millions
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization expense $ 4.8 $ 3.8
v3.10.0.1
Goodwill and Acquired Intangible Assets - Estimated Future Amortization Expense (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
2019 $ 8,780  
2020 6,839  
2021 5,494  
2022 5,494  
2023 4,722  
Thereafter 3,414  
Net $ 34,743 $ 7,903
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Additional Information (Details)
$ / shares in Units, shares in Millions
 1 Months Ended 12 Months Ended
Mar. 31, 2018
USD ($)
day
$ / shares
shares
Dec. 31, 2018
USD ($)
Dec. 31, 2017
USD ($)
Debt Instrument [Line Items]      
Equity component of convertible senior notes [1]   $ 44,304,000  
Income tax benefit related to temporary differences   $ 13,800,000  
Convertible Debt | Convertible Senior Notes Due 2023      
Debt Instrument [Line Items]      
Aggregate principal amount $ 575,000,000.0    
Interest rate 0.25%    
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 $ 0
Effective interest rate   5.26%  
Debt issuance costs, gross   $ 13,600,000  
Issuance costs attributable to the liability component $ 10,600,000 9,330,000 $ 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    
Equity component of convertible senior notes $ 63,900,000 44,304,000  
Net deferred tax liability related to cap call $ 13,800,000 $ 13,784,000  
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Schedule of Net Carrying Amount of Liability and Equity Component of Convertible Notes (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Mar. 31, 2018
Dec. 31, 2017
Net Carrying Amount of Liability Component of Convertible Notes [Abstract]      
Long-Term Debt $ 581,051    
Convertible Debt | Convertible Senior Notes Due 2023      
Net Carrying Amount of Liability Component of Convertible Notes [Abstract]      
Principal 575,000   $ 0
Unamortized Debt Discount (107,494)   0
Unamortized issuance costs (9,330) $ (10,600) 0
Long-Term Debt 458,176   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
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]    
Contractual interest expense $ 1,116 $ 0
Amortization of Debt Discount 17,482 0
Amortization of issuance costs 1,284 0
Total interest expense $ 19,882 $ 0
v3.10.0.1
0.25% Convertible Senior Notes and Capped Call - Summary of Impact to Stockholder's Equity (Details) - USD ($)
$ in Thousands
 1 Months Ended 12 Months Ended
Mar. 31, 2018
Dec. 31, 2018
Dec. 31, 2017
Debt Instrument [Line Items]      
Net impact to stockholder's equity [1]   $ 44,304  
Convertible Debt | Convertible Senior Notes Due 2023      
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  
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
v3.10.0.1
Commitments and Contingencies - Schedule of Contractual Obligations and Commitments (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
Lease Obligations Due 2019 $ 24,848
Lease Obligations Due 2020 24,188
Lease Obligations Due 2021 22,220
Lease Obligations Due 2022 20,683
Lease Obligations Due 2023 15,575
Lease Obligations Due Thereafter 30,786
Total Lease Obligations 138,300
Purchase Commitments Due 2019 63,200
Purchase Commitments Due 2020 58,201
Purchase Commitments Due 2021 55,174
Purchase Commitments Due 2022 55,001
Purchase Commitments Due 2023 55,001
Purchase Commitments Due Thereafter 0
Purchase Commitments 286,577
Long-Term Debt Due 2019 1,438
Long-Term Debt Due 2020 1,438
Long-Term Debt Due 2021 1,438
Long-Term Debt Due 2022 1,438
Long-Term Debt Due 2023 575,299
Long-Term Debt Due Thereafter 0
Long-Term Debt 581,051
Total Contractual Obligations Due 2019 89,486
Total Contractual Obligations Due 2020 83,827
Total Contractual Obligations Due 2021 78,832
Total Contractual Obligations Due 2022 77,122
Total Contractual Obligations Due 2023 645,875
Total Contractual Obligations Due Thereafter 30,786
Total Contractual Obligations $ 1,005,928
v3.10.0.1
Commitments and Contingencies - Additional Information (Details) - USD ($)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Jan. 31, 2019
Mar. 31, 2018
Operating Leased Assets [Line Items]          
Rent expense $ 19,300,000 $ 12,300,000 $ 9,900,000    
Deferred rent 14,200,000 6,400,000      
Remaining amount to be received under leases 6,400,000        
Remaining rent due under operating leases 138,300,000        
Letters of credit outstanding amount $ 1,000,000 $ 2,000,000      
Subsequent Event          
Operating Leased Assets [Line Items]          
Remaining rent due under operating leases       $ 10,000,000  
Convertible Debt | Convertible Senior Notes Due 2023          
Operating Leased Assets [Line Items]          
Aggregate principal amount         $ 575,000,000.0
v3.10.0.1
Common Stock and Stockholders' Equity - Additional Information (Details)
$ / shares in Units, $ in Millions
 3 Months Ended 12 Months Ended
Jan. 01, 2019
shares
Jan. 01, 2018
shares
May 06, 2016
shares
Sep. 30, 2018
shares
Dec. 31, 2018
USD ($)
offering_period
$ / shares
shares
Dec. 31, 2017
USD ($)
$ / shares
shares
Dec. 31, 2016
USD ($)
$ / shares
Class Of Stock [Line Items]              
Common stock, shares authorized (in shares)         400,000,000 400,000,000  
Common stock, par value (usd per share) | $ / shares         $ 0.01 $ 0.01  
Common stock, shares issued (in shares)         108,000,000 103,100,000  
Common stock, shares outstanding (in shares)         108,000,000 103,100,000  
Preferred stock, shares authorized (in shares)         10,000,000 10,000,000  
Preferred stock, par value (usd per share) | $ / shares         $ 0.01 $ 0.01  
Preferred stock, shares issued (in shares)         0 0  
Preferred stock, shares outstanding (in shares)         0 0  
Common shares purchased (in shares)         700,000 700,000  
Increase in authorized shares (in shares)         5,156,000    
Shares of common stock available for future grants (in shares)         8,232,000 8,001,000  
Stock options granted (in shares)     1,200,000   791,000    
Intrinsic value of options exercised | $         $ 36.8 $ 47.1 $ 49.2
Weighted-average grant date fair value of stock options (usd per share) | $ / shares         $ 17.87 $ 13.07 $ 11.34
Vesting period         4 years    
Contractual term of stock options         10 years    
2009 Stock Option and Grant Plan              
Class Of Stock [Line Items]              
Shares of common stock available for future grants (in shares)         0    
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%    
Increase in authorized shares (in shares)   1,000,000          
Shares of common stock available for future grants (in shares)         3,900,000    
Employee Stock Purchase Plan | Subsequent Event              
Class Of Stock [Line Items]              
Increase in authorized shares (in shares) 1,100,000            
Employee Stock Option              
Class Of Stock [Line Items]              
ESPP offering period         18 months    
Number of offering periods | offering_period         3    
Length of purchase period         6 months    
Share based compensation related to accelerated vesting | $           $ 1.5 $ 0.7
Employee Stock Option | 2014 Plan              
Class Of Stock [Line Items]              
Increase in authorized shares (in shares)   5,200,000.0          
Shares of common stock available for future grants (in shares)         8,200,000    
Employee Stock Option | Subsequent Event | 2014 Plan              
Class Of Stock [Line Items]              
Increase in authorized shares (in shares) 5,400,000            
RSUs Outstanding              
Class Of Stock [Line Items]              
Intrinsic value of shares vested | $         $ 176.0 $ 90.1 $ 70.6
Weighted average grant date fair value (usd per share) | $ / shares         $ 44.35 $ 28.09 $ 21.05
Number of shares granted (in shares)         4,898,000    
Number of shares vested (in shares)         3,165,000    
Performance Awards              
Class Of Stock [Line Items]              
Number of vesting periods         4    
Performance Awards | PSU Retention Plan              
Class Of Stock [Line Items]              
Number of shares granted (in shares)       200,000      
Share-based compensation expense | $         $ 0.5    
Number of shares vested (in shares)         0    
v3.10.0.1
Common Stock and Stockholders' Equity - Summary of Stock Option and RSU Activity (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
 12 Months Ended
May 06, 2016
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2018
Shares Available for Grant          
Balance at the beginning of the period (in shares)   8,001      
Increase in authorized shares (in shares)   5,156      
Stock options and PRSUs granted (in shares)   (791)      
RSUs granted (in shares)   (4,898)      
Stock options forfeited or canceled (in shares)   68      
RSUs forfeited or cancelled (in shares)   918      
Balance at the end of the period (in shares)   8,232 8,001    
Number of Shares          
Balance at the beginning of the period (in shares)   6,239      
Stock options granted (in shares) 1,200 791      
Stock options exercised (in shares)   (1,024)      
Stock options forfeited or canceled (in shares)   (68)      
Balance at the end of the period (in shares)   5,938 6,239    
Options vested and expected to vest at the end of the period (in shares)         5,710
Options vested and exercisable at the end of the period (in shares)         3,855
Weighted Average Exercise Price          
Balance at the beginning of the period (usd per share)   $ 17.31      
Stock options granted (usd per share)   42.89      
Stock options exercised (usd per share)   15.77      
Stock options forfeited or canceled (usd per share)   28.61      
Balance at the end of the period (usd per share)   $ 20.85 $ 17.31    
Options vested and expected to vest at the end of the period (usd per share)         $ 20.31
Options vested and exercisable at the end of the period (usd per share)         $ 15.73
Weighted Average Remaining Contractual Term          
Options outstanding, weighted-average remaining contractual term   6 years 6 months 29 days 7 years 1 month 9 days    
Options vested and expected to vest, weighted-average remaining contractual term   6 years 6 months 3 days      
Options vested and exercisable, weighted-average remaining contractual term   5 years 9 months 14 days      
Aggregate Intrinsic Value          
Options outstanding at beginning of period, aggregate intrinsic value   $ 222,959 $ 103,308   $ 222,959
Options outstanding at end of period, aggregate intrinsic value   222,959 103,308    
Options vested and expected to vest, aggregate intrinsic value         217,370
Options vested and exercisable, aggregate intrinsic value         164,395
Shares outstanding at beginning of period, aggregate intrinsic value   197,186      
Shares outstanding at end of period, aggregate intrinsic value   $ 385,891 $ 197,186    
Shares expected to vest at end of period, aggregate intrinsic value         $ 304,815
Outstanding RSUs          
RSUs expected to vest at end of period (in shares)         5,222
RSUs Outstanding          
Outstanding RSUs          
Balance at the beginning of the period (in shares)   5,827      
RSUs granted (in shares)   4,898      
RSUs vested (in shares)   (3,165)      
RSUs forfeited or cancelled (in shares)   (918)      
RSUs forfeited or canceled and unavailable for grant (in shares)   (31)      
Balance at the end of the period (in shares)   6,611 5,827    
Weighted Average Grant Date Fair Value          
Balance at the beginning of the period (usd per share)   $ 25.00      
RSUs granted (usd per share)   44.35 $ 28.09 $ 21.05  
RSUs vested (usd per share)   26.79      
RSUs forfeited or cancelled (usd per share)   30.18      
RSUs forfeited or canceled and unavailable for grant (usd per share)   23.44      
Balance at the end of the period (usd per share)   $ 37.77 $ 25.00    
PSRUs          
Shares Available for Grant          
Stock options and PRSUs granted (in shares)   (222)      
v3.10.0.1
Common Stock and Stockholders' Equity - Assumptions Used to Estimate Fair Value of Stock Options and ESPP Awards (Details)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Stock Options      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Dividend yield 0.00% 0.00% 0.00%
Expected term (in years) 4 years 10 months 24 days    
Stock Options | Minimum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected volatility 44.00% 44.00% 47.00%
Risk-free interest rate 2.30% 1.90% 1.10%
Expected term (in years)   6 years 6 years
Stock Options | Maximum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected volatility 45.00% 48.00% 49.00%
Risk-free interest rate 3.00% 2.20% 2.00%
Expected term (in years)   6 years 1 month 6 days 6 years 1 month 6 days
ESPP Awards      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Dividend yield   0.00% 0.00%
ESPP Awards | Minimum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected volatility   37.00% 42.00%
Risk-free interest rate   1.00% 0.40%
Expected term (in years)   6 months 6 months
ESPP Awards | Maximum      
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]      
Expected volatility   44.00% 48.00%
Risk-free interest rate   1.60% 0.90%
Expected term (in years)   1 year 6 months 1 year 6 months
v3.10.0.1
Deferred Revenue and Performance Obligations - Deferred Revenue (Details) - USD ($)
$ in Millions
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenue from Contract with Customer [Abstract]      
Revenue recognized and included in deferred revenue $ 172.7 $ 120.1 $ 85.5
v3.10.0.1
Deferred Revenue and Performance Obligations - Performance Obligations (Details)
$ in Millions
Dec. 31, 2018
USD ($)
Revenue from Contract with Customer [Abstract]  
Performance obligations expected to be satisfied $ 406.9
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01  
Revenue from Contract with Customer [Abstract]  
Performance obligations expected to be satisfied $ 328.7
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
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
 [2]
Dec. 31, 2016
 [2]
Earnings Per Share [Abstract]      
Net loss [1] $ (131,084) $ (102,141) [3],[4] $ (97,620) [3],[4]
Weighted-average shares used to compute basic and diluted net loss per share (in shares) 105,567 99,918 93,161
Net loss per share, basic and diluted (usd per share) $ (1.24) $ (1.02) $ (1.05)
[1] See Note 2 for a summary of adjustments. The cumulative-effect reduction to accumulated deficit related to the adoption of ASU 2014-09 as of December 31, 2015 was $17.9 million.
[2] See Note 2 for a summary of adjustments
[3] See Note 2 for a summary of adjustments
[4] See Note 2 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
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]      
Antidilutive securities excluded from computation of earnings per share amount (in shares) 12,652 12,170 15,492
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) 6,041 6,343 8,556
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) 6,611 5,827 6,936
v3.10.0.1
Net Loss Per Share Net Loss Per Share - Additional Information (Details) - $ / shares
shares in Millions
 12 Months Ended
Dec. 31, 2018
Mar. 31, 2018
Debt Instrument [Line Items]    
Potential dilution based on initial conversion price (in shares) 9.1  
Convertible Debt | Convertible Senior Notes Due 2023    
Debt Instrument [Line Items]    
Conversion price (usd per share)   $ 63.07
v3.10.0.1
Income Taxes - Components of Loss Before Provision for Income Taxes (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]      
U.S. $ (151,547) $ (107,177) $ (101,506)
Foreign 8,356 3,518 4,879
Loss before provision for (benefit from) income taxes $ (143,191) $ (103,659) [1] $ (96,627) [1]
[1] See Note 2 for a summary of adjustments
v3.10.0.1
Income Taxes - Schedule of Income Tax Provision (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Current tax provision:      
Federal $ 0 $ (2,636) $ 0
State 80 104 74
Foreign 3,372 1,476 3,096
Total current tax provision 3,452 (1,056) 3,170
Deferred tax provision:      
Federal (13,785) 0 (49)
State 0 0 0
Foreign (1,774) (462) (2,128)
Total provision for (benefit from) income taxes $ (12,107) $ (1,518) [1] $ 993 [1]
[1] See Note 2 for a summary of adjustments
v3.10.0.1
Income Taxes - Schedule of Significant Components of Deferred Tax Assets (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Deferred tax assets:    
Tax credit carryforward $ 884 $ 733
Net operating loss carryforward 170,447 115,237
Share-based compensation 10,316 6,072
Accrued liabilities and reserves 7,734 3,639
Property and equipment 3,340 1,983
Other 7,066 5,086
Total deferred tax assets 199,787 132,750
Less: valuation allowance (158,778) (118,549)
Deferred tax assets, net of valuation allowance 41,009 14,201
Deferred tax liabilities:    
Deferred commissions (13,075) (7,443)
Convertible debt transaction (12,872) 0
Intangible assets (11,305) (5,036)
Total deferred tax liabilities (37,252) (12,479)
Net deferred tax assets $ 3,757 $ 1,722
v3.10.0.1
Income Taxes - Schedule of Reconciliation of the Statutory Federal Income Tax Rate and the Effective Tax Rates (Details)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Income Tax Disclosure [Abstract]      
Tax at federal statutory rate 21.00% 34.00% 34.00%
Tax reform rate change impact 0.00% (64.70%) 0.00%
Excess tax benefit from share-based compensation 0.00% 46.50% 0.00%
Valuation allowance (20.10%) (19.50%) (22.60%)
Share-based compensation 8.50% 7.00% (6.50%)
Officer's compensation (1.10%) (0.00%) (0.00%)
Other 0.10% (3.40%) 0.40%
Benefit from other comprehensive gain 0.00% 1.60% 0.00%
Intercompany dividend (0.00%) (0.00%) (6.30%)
Effective tax rate 8.40% 1.50% (1.00%)
v3.10.0.1
Income Taxes - Additional Information (Details) - USD ($)
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Income Tax Examination [Line Items]      
Cumulative amount of earnings $ 600,000    
Increase in valuation allowance 40,200,000    
Interest and penalties related to uncertain tax positions 0    
Potential benefits, which if recognized, would affect the effective tax rate. 0 $ 0 $ 400,000
We Are Cloud, Inc      
Income Tax Examination [Line Items]      
Net operating loss carryforwards 3,000,000    
FRANCE      
Income Tax Examination [Line Items]      
Net operating loss carryforwards 14,600,000    
Domestic Tax Authority      
Income Tax Examination [Line Items]      
Net operating loss carryforwards 695,900,000    
Research and development credit carryforwards 10,400,000    
State and Local Jurisdiction      
Income Tax Examination [Line Items]      
Net operating loss carryforwards 302,900,000    
Research and development credit carryforwards $ 11,200,000    
v3.10.0.1
Income Taxes - Schedule of Unrecognized Tax Benefits (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]    
Unrecognized tax benefits, beginning balance $ 15,644 $ 11,786
Additions from tax positions related to the current year 5,887 4,141
Lapse of statutes of limitations   (283)
Unrecognized tax benefits, ending balance $ 21,531 $ 15,644
v3.10.0.1
Geographic Information - Schedule of Revenue by Geographic Areas (Details) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenues From External Customers And Long Lived Assets [Line Items]      
Revenue $ 598,746 $ 430,165 [1] $ 312,844 [1]
United States      
Revenues From External Customers And Long Lived Assets [Line Items]      
Revenue 309,879 229,667 170,402
EMEA      
Revenues From External Customers And Long Lived Assets [Line Items]      
Revenue 174,874 122,365 89,173
APAC      
Revenues From External Customers And Long Lived Assets [Line Items]      
Revenue 68,272 46,564 29,285
Other      
Revenues From External Customers And Long Lived Assets [Line Items]      
Revenue $ 45,721 $ 31,569 $ 23,984
[1] See Note 2 for a summary of adjustments
v3.10.0.1
Geographic Information - Schedule of Long-Lived Assets by Geographic Areas (Details) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets $ 56,388 $ 41,369
United States    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 32,351 23,609
EMEA    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 17,148 10,026
Republic of Ireland    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 14,698 5,019
Other EMEA    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets 2,450 5,007
APAC    
Revenues From External Customers And Long Lived Assets [Line Items]    
Long-lived assets $ 6,889 $ 7,734
v3.10.0.1
Retirement Plans - Additional Information (Details) - USD ($)
$ in Millions
 12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Retirement Benefits [Abstract]    
Employer matching contributions $ 1.3 $ 1.1
v3.10.0.1
Label Element Value
Restricted Cash, Noncurrent us-gaap_RestrictedCashNoncurrent $ 418,000 [1]
Restricted Cash, Noncurrent us-gaap_RestrictedCashNoncurrent 646,000 [1]
Restricted Cash, Noncurrent us-gaap_RestrictedCashNoncurrent 715,000
Restricted Cash, Current us-gaap_RestrictedCashCurrent 967,000 [1]
Restricted Cash, Current us-gaap_RestrictedCashCurrent 872,000 [1]
Restricted Cash, Current us-gaap_RestrictedCashCurrent $ 1,643,000
[1] See Note 2 for a summary of adjustments.