Cover Page - shares	9 Months Ended
Cover Page - shares	Sep. 30, 2019	Oct. 30, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	001-36456
Entity Registrant Name	ZENDESK, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-4411091
Entity Address, Address Line One	1019 Market Street
Entity Address, City or Town	San Francisco
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94103
City Area Code	415
Local Phone Number	418-7506
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	ZEN
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Smaller Reporting Company	false
Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		112,175,267
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001463172
Current Fiscal Year End Date	--12-31

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 190,892	$ 126,518
Marketable securities	243,846	300,213
Accounts receivable, net of allowance for doubtful accounts of $2,715 and $2,571 as of September 30, 2019 and December 31, 2018, respectively	101,440	85,280
Deferred costs	32,406	24,712
Prepaid expenses and other current assets	48,124	35,873
Total current assets	616,708	572,596
Marketable securities, noncurrent	384,527	393,671
Property and equipment, net	94,851	75,654
Deferred costs, noncurrent	32,516	26,914
Lease right-of-use assets	95,098
Goodwill and intangible assets, net	209,516	146,327
Other assets	26,242	22,717
Total assets	1,459,458	1,237,879
Current liabilities:
Accounts payable	43,206	16,820
Accrued liabilities	36,531	34,097
Accrued compensation and related benefits	58,544	46,603
Deferred revenue	290,285	245,243
Lease liabilities	21,398
Total current liabilities	449,964	342,763
Convertible senior notes, net	477,007	458,176
Deferred revenue, noncurrent	2,662	2,719
Lease liabilities, noncurrent	87,926
Other liabilities	4,710	17,300
Total liabilities	1,022,269	820,958
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock	0	0
Common stock	1,119	1,080
Additional paid-in capital	1,099,730	950,693
Accumulated other comprehensive loss	(1,047)	(5,724)
Accumulated deficit	(662,613)	(529,128)
Total stockholders’ equity	437,189	416,921
Total liabilities and stockholders’ equity	$ 1,459,458	$ 1,237,879

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 2,715	$ 2,571

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2019

Sep. 30, 2018

Sep. 30, 2019

Sep. 30, 2018

Income Statement [Abstract]

Revenue

$ 210,477

$ 154,828

$ 586,545

$ 426,501

Cost of revenue

^[1]

59,210

46,992

172,534

130,207

Gross profit

151,267

107,836

414,011

296,294

Operating expenses:

Research and development

^[1]

54,528

40,410

151,829

115,118

Sales and marketing

^[1]

99,303

74,270

285,750

208,778

General and administrative

^[1]

32,864

27,357

107,135

73,809

Total operating expenses

^[1]

186,695

142,037

544,714

397,705

Operating loss

(35,428)

(34,201)

(130,703)

(101,411)

Other income (expense), net:

Interest income

4,986

4,561

15,752

9,906

Interest expense

(6,727)

(6,375)

(19,885)

(13,427)

Other income (expense), net

2,581

(463)

2,012

(194)

Total other income (expense), net

840

(2,277)

(2,121)

(3,715)

Loss before provision for (benefit from) income taxes

(34,588)

(36,478)

(132,824)

(105,126)

Provision for (benefit from) income taxes

(364)

(2,334)

661

(7,291)

Net loss

$ (34,224)

$ (34,144)

$ (133,485)

$ (97,835)

Net loss per share, basic and diluted (usd per share)

$ (0.31)

$ (0.32)

$ (1.21)

$ (0.93)

Weighted-average shares used to compute net loss per share, basic and diluted (in shares)

111,261

106,143

109,969

104,954

[1]

Includes share-based compensation expense as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Cost of revenue	$	5,397	$	3,929	$	15,580	$	10,500
Research and development	12,169		10,677		35,717		30,436
Sales and marketing	13,839		10,261		39,813		27,447
General and administrative	7,244		6,579		27,948		18,198

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based compensation			$ 119,058	$ 86,581
Cost of revenue
Share-based compensation	$ 5,397	$ 3,929	15,580	10,500
Research and development
Share-based compensation	12,169	10,677	35,717	30,436
Sales and marketing
Share-based compensation	13,839	10,261	39,813	27,447
General and administrative
Share-based compensation	$ 7,244	$ 6,579	$ 27,948	$ 18,198

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (34,224)	$ (34,144)	$ (133,485)	$ (97,835)
Other comprehensive gain (loss), before tax:
Net unrealized gain (loss) on available-for-sale investments	161	(50)	5,794	(673)
Foreign currency translation loss	0	0	0	(12)
Net unrealized gain (loss) on derivative instruments	(2,216)	418	360	(3,456)
Other comprehensive gain (loss), before tax	(2,055)	368	6,154	(4,141)
Tax effect	236	(366)	(1,477)	716
Other comprehensive gain (loss), net of tax	(1,819)	2	4,677	(3,425)
Comprehensive loss	$ (36,043)	$ (34,142)	$ (128,808)	$ (101,260)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Gain (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2017		103,121
Beginning balance at Dec. 31, 2017	$ 354,184	$ 1,031	$ 753,568	$ (2,372)	$ (398,043)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options (in shares)		861
Issuance of common stock upon exercise of stock options	13,255	$ 9	13,246
Issuance of common stock for settlement of RSUs and PRSUs (in shares)		2,255
Issuance of common stock for settlement of RSUs and PRSUs	(3,766)	$ 22	(3,788)
Issuance of common stock in connection with employee stock purchase plan (in shares)		390
Issuance of common stock in connection with employee stock purchase plan	9,473	$ 4	9,469
Share-based compensation	88,604		88,604
Equity component of convertible senior notes	44,304		44,304
Other comprehensive gain (loss), net of tax	(3,425)			(3,425)
Net loss	(97,835)				(97,835)
Other	(17)		(17)
Ending balance (in shares) at Sep. 30, 2018		106,627
Ending balance at Sep. 30, 2018	404,777	$ 1,066	905,386	(5,797)	(495,878)
Beginning balance (in shares) at Jun. 30, 2018		105,683
Beginning balance at Jun. 30, 2018	404,866	$ 1,056	871,343	(5,799)	(461,734)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options (in shares)		187
Issuance of common stock upon exercise of stock options	3,508	$ 2	3,506
Issuance of common stock for settlement of RSUs and PRSUs (in shares)		757
Issuance of common stock for settlement of RSUs and PRSUs	(1,619)	$ 8	(1,627)
Share-based compensation	32,164		32,164
Other comprehensive gain (loss), net of tax	2			2
Net loss	(34,144)				(34,144)
Ending balance (in shares) at Sep. 30, 2018		106,627
Ending balance at Sep. 30, 2018	404,777	$ 1,066	905,386	(5,797)	(495,878)
Beginning balance (in shares) at Dec. 31, 2018		108,037
Beginning balance at Dec. 31, 2018	$ 416,921	$ 1,080	950,693	(5,724)	(529,128)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options (in shares)	1,060	1,060
Issuance of common stock upon exercise of stock options	$ 21,977	$ 11	21,966
Issuance of common stock for settlement of RSUs and PRSUs (in shares)		2,446
Issuance of common stock for settlement of RSUs and PRSUs	(7,402)	$ 24	(7,426)
Issuance of common stock in connection with employee stock purchase plan (in shares)		374
Issuance of common stock in connection with employee stock purchase plan	15,312	$ 4	15,308
Share-based compensation	119,189		119,189
Equity component of convertible senior notes	0
Other comprehensive gain (loss), net of tax	4,677			4,677
Net loss	(133,485)				(133,485)
Other	0
Ending balance (in shares) at Sep. 30, 2019		111,917
Ending balance at Sep. 30, 2019	437,189	$ 1,119	1,099,730	(1,047)	(662,613)
Beginning balance (in shares) at Jun. 30, 2019		110,698
Beginning balance at Jun. 30, 2019	426,977	$ 1,106	1,053,488	772	(628,389)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options (in shares)		433
Issuance of common stock upon exercise of stock options	8,767	$ 4	8,763
Issuance of common stock for settlement of RSUs and PRSUs (in shares)		786
Issuance of common stock for settlement of RSUs and PRSUs	(2,321)	$ 9	(2,330)
Share-based compensation	39,809		39,809
Other comprehensive gain (loss), net of tax	(1,819)			(1,819)
Net loss	(34,224)				(34,224)
Ending balance (in shares) at Sep. 30, 2019		111,917
Ending balance at Sep. 30, 2019	$ 437,189	$ 1,119	$ 1,099,730	$ (1,047)	$ (662,613)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities
Net loss	$ (133,485)	$ (97,835)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	27,792	27,193
Share-based compensation	119,058	86,581
Amortization of deferred costs	22,983	15,124
Amortization of debt discount and issuance costs	18,831	12,665
Other	958	2,865
Changes in operating assets and liabilities:
Accounts receivable	(19,832)	(26,721)
Prepaid expenses and other current assets	(10,997)	(10,167)
Deferred costs	(35,257)	(26,716)
Lease right-of-use assets	14,022
Other assets and liabilities	(4,141)	(8,026)
Accounts payable	22,591	20,607
Accrued liabilities	520	7,073
Accrued compensation and related benefits	3,349	2,487
Deferred revenue	45,683	50,552
Lease liabilities	(15,025)
Net cash provided by operating activities	57,050	55,682
Cash flows from investing activities
Purchases of property and equipment	(25,628)	(27,132)
Internal-use software development costs	(5,007)	(5,550)
Purchases of marketable securities	(374,706)	(591,426)
Proceeds from maturities of marketable securities	146,171	131,819
Proceeds from sales of marketable securities	300,632	40,775
Business combinations, net of cash acquired	(70,794)	(79,363)
Purchase of strategic investment	(500)	0
Net cash used in investing activities	(29,832)	(530,877)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $13,561	0	561,439
Purchase of capped call related to convertible senior notes	0	(63,940)
Proceeds from exercises of employee stock options	21,977	13,254
Proceeds from employee stock purchase plan	23,057	15,999
Taxes paid related to net share settlement of share-based awards	(7,402)	(3,766)
Other	0	(41)
Net cash provided by financing activities	37,632	522,945
Effect of exchange rate changes on cash, cash equivalents and restricted cash	85	(55)
Net increase in cash, cash equivalents and restricted cash	64,935	47,695
Cash, cash equivalents and restricted cash at beginning of period	128,876	110,888
Cash, cash equivalents and restricted cash at end of period	193,811	158,583
Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets
Total cash, cash equivalents and restricted cash	128,876	110,888
Supplemental cash flow data
Cash paid for interest	1,438	699
Cash paid for taxes	4,013	2,769
Non-cash investing and financing activities
Balance of property and equipment in accounts payable and accrued expenses	12,467	5,680
Asset retirement obligations incurred	1,196	0
Property and equipment acquired through tenant improvement allowances	414	5,435
Internal-Use Software Development Costs
Non-cash investing and financing activities
Share-based compensation capitalized in deferred costs and in internal-use software development costs	1,379	1,986
Deferred Costs
Non-cash investing and financing activities
Share-based compensation capitalized in deferred costs and in internal-use software development costs	$ 1,023	$ 602

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (PARENTHETICAL) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Statement of Cash Flows [Abstract]
Payments of debt issuance costs	$ 0	$ 13,561

Overview and Basis of Presentation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Overview and Basis of Presentation

Company and Background

Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April 2009.

We are a software development company that provides software as a service, or SaaS, products that are intended to help organizations and their customers build better 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.

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K, for the year ended December 31, 2018, filed with the SEC on February 14, 2019. There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.

The consolidated balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive loss, stockholders' equity, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2019.

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 estimate of variable consideration related to revenue recognition;

•the recoverability of accounts receivable;

•the fair value and useful lives of acquired intangible assets;

•the capitalization and useful life of capitalized costs to obtain customer contracts;

•the valuation of strategic investments;

•the useful lives of property and equipment;

•the capitalization and useful lives of internal-use software;

•the lease term and incremental borrowing rate for lease liabilities;

•the fair value of our convertible senior notes;

•the fair value of asset retirement obligations;

•the fair value and expense recognition for certain share-based awards;

•the preparation of financial forecasts used in currency hedging; and

•the recognition of tax benefits.

These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Concentrations of Risk

As of September 30, 2019 and December 31, 2018, no customers represented 10% or greater of our total accounts receivable balance. There were no customers that individually exceeded 10% of our revenue during the three and nine months ended September 30, 2019 or 2018.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-13, including subsequent amendments, regarding ASC Topic 326 “Measurement of Credit Losses on Financial Instruments,” which modifies the accounting methodology for most financial instruments. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Additionally, any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. This guidance 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 impact of the adoption 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 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.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, regarding ASC Topic 842 “Leases,” including subsequent amendments. We refer to the new guidance as “ASC 842.” This new guidance requires lessees to recognize most leases on their balance sheets as lease 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.

We adopted ASC 842 in the first quarter of 2019 and applied the following practical expedients:


•	comparative periods prior to the adoption date are not adjusted to reflect the new guidance (the modified retrospective method of transition); and


•	the historical determination as to the existence and classification of leases is carried forward for existing contracts as of the adoption date.

The effect of adopting ASC 842 resulted in the recognition of lease right-of-use assets and corresponding lease liabilities on our condensed consolidated balance sheets. As of March 31, 2019, the first quarter of adoption, the aggregate balance of lease right-of-use assets and lease liabilities was $99 million and $114 million, respectively. The standard did not affect our consolidated statement of operations or cash flows.

In August 2017, the FASB issued ASU 2017-12, regarding ASC Topic 815 “Derivatives and Hedging.” This guidance simplifies various aspects of hedge accounting, including the measurement and presentation of hedge ineffectiveness and

certain documentation and assessment requirements. The guidance also makes more hedging strategies eligible for hedge accounting. We adopted this standard in the first quarter of 2019. Upon adoption, we no longer recognize hedge ineffectiveness immediately in our consolidated statements of operations, but we instead recognize the entire change in the fair value of the hedge contract in other comprehensive income. The cumulative-effect adjustment to eliminate ineffectiveness was not material. The presentation and disclosures have been modified on a prospective basis, as required by the guidance.

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. We adopted this standard in the first quarter of 2019. We have elected not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings, therefore the adoption did not have an 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. We adopted this standard in the first quarter of 2019. The adoption did not have an 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. We adopted the standard in the first quarter of 2019. The adoption did not have an 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 early adopted the standard in the first quarter of 2019. The adoption did not have an effect on our consolidated financial statements.

Business Combinations

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Business Combinations

Smooch Technologies Holdings ULC

On May 14, 2019, we completed the acquisition of Smooch Technologies Holdings ULC, or Smooch, a developer of messaging technology. We acquired Smooch for purchase consideration of $72 million in cash. In connection with the acquisition, we incurred transaction costs of $3 million within general and administrative expenses and share-based compensation expense of $5 million, primarily within general and administrative expenses, resulting from the accelerated vesting of certain unvested Smooch stock options because post-combination service requirements were eliminated.

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 September 30, 2019, we made certain immaterial adjustments to the preliminary purchase price allocation, which are reflected in the table below.

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 will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present. As a result of the structure of the transaction, the balance of goodwill is deductible in the U.S. over 15 years for income tax purposes.



Net tangible assets	$	2,036
Net deferred tax liability	(1,194		)
Identifiable intangible assets:
Developed technology	8,000
Customer relationships	3,900
Backlog	1,000
Goodwill	58,130
Total purchase consideration	$	71,872

The developed technology, customer relationships, and backlog intangible assets were assigned useful lives of 5.5, 8.0, and 2.0 years, respectively.

In connection with the acquisition, we granted cash-based retention awards to certain employees of Smooch, which vest over a required service period. The awards will be recorded as expense and were not included in the total purchase consideration.

From the date of the acquisition, the results of operations of Smooch 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 Smooch are not material to our consolidated financial statements in any period presented.

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 million in cash. We incurred transaction costs of $2 million in connection with the acquisition, which were included within general and administrative expenses.

As of September 30, 2019, we finalized our purchase accounting for the acquisition. 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 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	$	(2,791	)
Identifiable intangible assets:
Developed technology	19,000
Customer relationships	10,400
Backlog	2,200
Goodwill	52,214
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.

Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Financial Instruments

Investments

The following tables present information about our financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):



	Fair Value Measurement at September 30, 2019
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	428,148	$	428,148
Asset-backed securities	—		120,514		120,514
U.S. Treasury securities	—		75,826		75,826
Money market funds	65,836		—		65,836
Commercial paper	—		7,961		7,961
Agency securities	—		221		221
Total	$	65,836	$	632,670	$	698,506
Included in cash and cash equivalents					$	70,133
Included in marketable securities					$	628,373



	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

As of September 30, 2019 and December 31, 2018, there were no securities within Level 3 of the fair value hierarchy. There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2019. Gross unrealized gains and losses for cash equivalents and marketable securities as of September 30, 2019 were $5 million and not material, respectively. The aggregate amortized cost basis for cash equivalents and marketable securities as of September 30, 2019 was $694 million. Gross unrealized gains and losses for cash equivalents and marketable securities as of December 31, 2018 were not material. Unrealized losses for securities that have been in an unrealized loss position for more than 12 months as of September 30, 2019 and December 31, 2018 were not material.

The following table classifies our marketable securities by contractual maturity (in thousands):



	September 30, 2019		December 31, 2018
Due in one year or less	$	243,846	$	300,213
Due after one year and within five years	384,527		393,671
Total	$	628,373	$	693,884

As of September 30, 2019 and December 31, 2018, the balance of strategic investments without readily determinable fair values was $11 million and $10 million, respectively. There have been no adjustments to the carrying values 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

Our foreign currency exposures typically arise from expenditures associated with foreign operations and sales in foreign currencies of our products. To mitigate the effect of foreign currency fluctuations on our future cash flows and earnings, we enter into foreign currency forward contracts with certain financial institutions and designate those contracts as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less.

Upon the adoption of ASU 2017-12 in the first quarter of 2019, we include time value related to our cash flow hedges for effectiveness testing purposes and the entire change in the unrecognized value of our hedge contracts is recorded in accumulated other comprehensive income (loss), or AOCI. Prior to adoption, we excluded time value for effectiveness testing purposes and we recognized changes in time value immediately in other income (expense), net.

As of September 30, 2019, the balance of AOCI included an unrecognized net loss of $1 million related to the changes in the fair value of foreign currency forward contracts designated as cash flow hedges. We expect to reclassify a net loss of $2 million into earnings over the next 12 months associated with our cash flow hedges.

The following tables present information about our derivative instruments on our consolidated balance sheets (in thousands):



	September 30, 2019
	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	$	2,502	Accrued liabilities	$	5,129
Total		$	2,502		$	5,129



	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

Our foreign currency forward contracts had a total notional value of $228 million and $200 million as of September 30, 2019 and December 31, 2018, respectively. We have a master netting arrangement with each of our counterparties, which permit net settlement of multiple, separate derivative contracts with a single payment. 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. As of September 30, 2019 and December 31, 2018, there was no cash collateral posted with counterparties. All derivatives have been designated as hedging instruments.

The following table presents information about our foreign currency forward contracts on our condensed consolidated statements of operations for the three and nine months ended September 30, 2019 (in thousands):



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Classification	Gain (Loss) Reclassified from AOCI into Earnings			Gain (Loss) Reclassified from AOCI into Earnings
Revenue	$	652		$	1,684
Cost of revenue	(274		)	(1,141		)
Research and development	(280		)	(1,045		)
Sales and marketing	(519		)	(1,939		)
General and administrative	(226		)	(723		)
Total	$	(647	)	$	(3,164	)

The loss recognized in AOCI related to foreign currency forward contracts was $3 million for both the three and nine months ended September 30, 2019.

The loss recognized in AOCI related to foreign currency forward contracts was $1 million and $4 million for the three and nine months ended September 30, 2018, respectively. The loss reclassified from AOCI into earnings related to foreign currency forward contracts was $1 million and not material for the three and nine months ended September 30, 2018, respectively, which was included within revenue, cost of revenue and operating expenses on our consolidated statements of operations.

The cash flow effects related to foreign currency forward contracts are included within operating activities on our consolidated statements of cash flows.

Convertible Senior Notes

As of September 30, 2019, the fair value of our convertible senior notes was $757 million. The fair value was determined based on the quoted price of the convertible senior notes in an inactive market on the last traded day of the quarter and has been classified as Level 2 in the fair value hierarchy. Based on the closing price of our common stock of $72.88 on the last trading day of the quarter, the if-converted value of our convertible senior notes exceeded the principal amount of $575 million as of September 30, 2019.

Costs to Obtain Customer Contracts

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Costs to Obtain Customer Contracts

The balances of deferred costs to obtain customer contracts were $65 million and $52 million as of September 30, 2019 and December 31, 2018, respectively. Amortization expense for these deferred costs was $8 million and $6 million for the three months ended September 30, 2019 and 2018, respectively, and $23 million and $15 million for the nine months ended September 30, 2019 and 2018, respectively. There were no impairment losses related to these deferred costs for the periods presented.

Deferred Revenue and Performance Obligations

The changes in the balances of deferred revenue are as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	287,349		$	207,960		$	247,962		$	174,360
Billings	216,075			172,355			631,530			477,628
Subscription services revenue	(201,498		)	(148,100		)	(559,911		)	(409,673		)
Other revenue*	(8,979		)	(6,728		)	(26,634		)	(16,828		)
Balance, end of period	$	292,947		$	225,487		$	292,947		$	225,487

*Other revenue primarily includes implementation and training services, Talk usage, and amounts from contract assets.

For the three months ended September 30, 2019 and 2018, the majority of revenue recognized was from the deferred revenue balances at the beginning of each period. For the nine months ended September 30, 2019 and 2018, less than half of revenue recognized was from the deferred revenue balances at the beginning of each period.

The aggregate balance of remaining performance obligations as of September 30, 2019 was $558 million. We expect to recognize $404 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.

Property and Equipment

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and equipment, net consists of the following (in thousands):



	September 30, 2019			December 31, 2018
Leasehold improvements	$	76,338		$	51,832
Capitalized internal-use software	38,979			36,444
Computer equipment and licensed software and patents	26,347			21,100
Furniture and fixtures	15,071			11,550
Construction in progress	7,431			10,538
Hosting equipment	—			34,105
Total	164,166			165,569
Less: accumulated depreciation and amortization	(69,315		)	(89,915		)
Property and equipment, net	$	94,851		$	75,654

Depreciation expense was $5 million and $6 million for the three months ended September 30, 2019 and 2018, respectively, and $15 million and $19 million for the nine months ended September 30, 2019 and 2018, respectively.

Amortization expense of capitalized internal-use software was $2 million for each of the three months ended September 30, 2019 and 2018, and $5 million and $4 million for the nine months ended September 30, 2019 and 2018, respectively. The carrying values of capitalized internal-use software as of September 30, 2019 and December 31, 2018 were $20 million and $19 million, respectively, including $5 million and $3 million in construction in progress, respectively.

During the first quarter of 2019, we completed the transition from our self-managed colocation data centers to third-party managed hosting services, at which time, we concluded that these assets met the criteria to be classified as held for sale. Accordingly, these assets were written down to their estimated salvage value and reclassified from property and equipment to other current assets, with $34 million and $33 million being reclassified from hosting equipment and accumulated depreciation respectively, for a net amount of $1 million. In the third quarter of 2019, we received cash for substantially all of the estimated salvage value.

Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

We lease office space under noncancelable operating leases with various expiration dates. Additionally, we are the sublessor for certain office space. All of our office leases are classified as operating leases with lease expense recognized on a straight-line basis over the lease term.

Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease right-of-use assets also include any lease payments made and exclude lease incentives such as tenant improvement allowances. Options to extend the lease term are included in the lease term when it is reasonably certain that we will exercise the extension option.

Our operating leases typically include non-lease components such as common-area maintenance costs. We have elected to include non-lease components with lease payments for the purpose of calculating lease right-of-use assets and liabilities, to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments.

Leases with a term of one year or less are not recognized on our consolidated balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The following tables present information about leases on our consolidated balance sheet (in thousands):



	September 30, 2019
Assets
Lease right-of-use assets	$	95,098
Liabilities
Lease liabilities	21,398
Lease liabilities, noncurrent	87,926

As of September 30, 2019, the weighted average remaining lease term was 5.9 years and the weighted average discount rate was 5.3%.

The following table presents information about leases on our consolidated statement of operations (in thousands):



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease expense	$	6,382	$	17,221
Short-term lease expense	168		2,037
Variable lease expense	1,607		4,835
Sublease income	560		1,353

The following table presents supplemental cash flow information about our leases (in thousands):



	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	15,197
Operating lease assets obtained in exchange for new lease liabilities	27,559

As of September 30, 2019, remaining maturities of lease liabilities are as follows:



Remainder of 2019	$	5,323
2020	27,390
2021	24,493
2022	22,568
2023	15,962
Thereafter	31,198
Total lease payments	126,934
Less imputed interest	17,610
Total	$	109,324

The table above excludes future payments of $4 million related to signed leases that have not yet commenced.

Goodwill and Acquired Intangible Assets

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Acquired Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2019 are as follows (in thousands):



Balance as of December 31, 2018	$	111,584
Goodwill acquired	58,245
Goodwill adjustments	(355		)
Balance as of September 30, 2019	$	169,474

Acquired intangible assets subject to amortization consist of the following (in thousands):



	As of September 30, 2019
	Cost		Accumulated Amortization			Net		Weighted Average Remaining Useful Life
								(In years)
Developed technology	$	39,000	$	(12,785	)	$	26,215	5.1
Customer relationships	15,210		(3,183		)	12,027		5.0
Backlog	3,200		(1,400		)	1,800		1.2
	$	57,410	$	(17,368	)	$	40,042



	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

Amortization expense of acquired intangible assets was $3 million and $1 million for the three months ended September 30, 2019 and 2018, respectively, and $8 million and $3 million for the nine months ended September 30, 2019 and 2018, respectively.

Estimated future amortization expense as of September 30, 2019 is as follows (in thousands):



Remainder of 2019	$	2,826
2020	9,275
2021	7,599
2022	7,433
2023	6,661
Thereafter	6,248
	$	40,042

0.25% Convertible Senior Notes and Capped Call

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

0.25% Convertible Senior Notes and Capped Call

In March 2018, we issued $575 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 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.

As of the quarter ended June 30, 2019, the conditions allowing holders of the Notes to convert were met. As a result, the Notes became convertible at the option of the holders during the quarter ended September 30, 2019. During the quarter ended September 30, 2019, the conditions allowing holders of the Notes to convert were not met. The Notes are therefore not convertible during the quarter ending December 31, 2019 and are classified as a noncurrent liability as of September 30, 2019. As of the date of this filing, we have received one request for conversion for an immaterial amount of Notes.

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 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 $14 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 $11 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):



	September 30, 2019			December 31, 2018
Principal	$	575,000		$	575,000
Unamortized Debt Discount	(90,015		)	(107,494		)
Unamortized issuance costs	(7,978		)	(9,330		)
Net carrying amount	$	477,007		$	458,176

The net carrying amount of the equity component of the Notes is as follows (in thousands):



	September 30, 2019			December 31, 2018
Debt Discount for Conversion Option	$	124,976		$	124,976
Issuance costs	(2,948		)	(2,948		)
Net carrying amount	$	122,028		$	122,028

Interest expense related to the Notes is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Contractual interest expense	$	359	$	360	$	1,078	$	762
Amortization of Debt Discount	5,902		5,603		17,479		11,806
Amortization of issuance costs	464		412		1,352		859
Total interest expense	$	6,725	$	6,375	$	19,909	$	13,427

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 $64 million incurred in connection with the Capped Calls was recorded as a reduction to additional paid-in capital.

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

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Commitments As of September 30, 2019, there were no material changes in our commitments under contractual obligations, as disclosed in our audited consolidated financial statements for the year ended December 31, 2018. Litigation and Loss Contingencies We accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. These estimates are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. On October 24, 2019, a purported stockholder of the Company filed a putative class action complaint in the United States District Court for the Northern District of California, entitled Charles Reidinger v. Zendesk, Inc., et al., 3:19-cv-06968-CRB, against the Company and certain of the Company’s executive officers. The complaint alleges violations of Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), purportedly on behalf of all persons who purchased Zendesk, Inc. common stock between February 6, 2019 and October 1, 2019, inclusive. The claims are based upon allegations that defendants misrepresented and/or omitted material information in certain of our prior public filings. To this point, no discovery has occurred in this case. The class action is still in the preliminary stages, and it is not possible for the Company to quantify the extent of potential liability to the individual defendants, if any. Management believes that the lawsuit lacks merit and intends to vigorously defend the actions. We cannot predict the outcome of or estimate the possible loss or range of loss from the above described matter. From time to time, we may be subject to other legal proceedings, claims, investigations, and government inquiries in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights, labor and employment rights, defamation, privacy, and contractual rights. In general, the resolution of a legal matter could prevent the Company from offering its service to others, could be material to the Company’s financial condition or cash flows, or both, or could otherwise adversely affect the Company’s operating results. The outcomes of legal proceedings and other contingencies are inherently unpredictable and subject to significant uncertainties. As a result, the Company is not able to reasonably estimate the amount or range of possible losses in excess of any amounts accrued, including losses that could arise as a result of application of non-monetary remedies, with respect to the contingencies it faces. In management’s opinion, resolution of all current matters is not expected to have a material adverse impact on business, consolidated balance sheets, results of operations, comprehensive loss, or cash flows. Indemnifications In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to customers, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from our products or our acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary. To date, we have not incurred any material costs, and we have not accrued any liabilities in our consolidated financial statements, as a result of these obligations. Certain of our product offerings include service-level agreements warranting defined levels of uptime reliability and performance, which permit those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in our consolidated financial statements as a result of these service-level agreements.

Common Stock and Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Common Stock and Stockholders' Equity

Common Stock and Stockholders’ Equity

Common Stock

As of September 30, 2019 and December 31, 2018, there were 400 million shares of common stock authorized for issuance with a par value of $0.01 per share and 111.9 million and 108.0 million shares were issued and outstanding, respectively.

Preferred Stock

As of each of September 30, 2019 and December 31, 2018, there were 10 million shares of preferred stock authorized for issuance with a par value of $0.01 per share and no shares of preferred stock were issued or outstanding.

Employee Equity Plans

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan, or ESPP, eligible employees are granted options to purchase shares of our common stock through payroll deductions. The ESPP provides for 18-month offering periods, which include three six-month purchase periods. At the end of each purchase period, employees are able to purchase shares at 85% of the lower of the fair market value of our common stock at the beginning of an offering period or the fair market value of our common stock at the end of the purchase period. During the three and nine months ended September 30, 2019, none and 0.4 million shares of common stock were purchased under the ESPP, respectively. Pursuant to the terms of the ESPP, the number of shares reserved under the ESPP increased by 1.1 million shares on January 1, 2019. As of September 30, 2019, 4.6 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 shares on January 1, 2019. As of September 30, 2019, we had 11.7 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 share-based award activity for the nine months ended September 30, 2019 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, 2019	8,232		5,938		$	20.85	6.58	$	222,959	6,611		$	37.77	$	385,891
Increase in authorized shares	5,402
Stock options granted	(336	)	336		73.27
RSUs granted	(2,511	)								2,511		74.39
Stock options exercised			(1,060	)	20.74
RSUs vested										(2,398	)	37.21
Stock options forfeited or canceled	101		(101	)	43.94
RSUs forfeited or canceled	792									(792	)	43.44
RSUs forfeited or canceled and unavailable for grant										(24	)	23.44
PRSUs forfeited	30
Outstanding — September 30, 2019	11,710		5,113		$	23.86	6.08	$	250,894	5,908		$	52.86	$	430,362

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 total intrinsic value of stock options exercised during the nine months ended September 30, 2019 and 2018 was $63 million and $30 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 nine months ended September 30, 2019 and 2018 was $28.65 and $17.53, respectively.

The total fair value of RSUs vested during the nine months ended September 30, 2019 and 2018 was $191 million and $123 million, respectively. The fair value of RSUs vested represents market value on the vesting date. The weighted-average grant date fair value of RSUs granted during the nine months ended September 30, 2019 and 2018 was $74.39, and $42.32, respectively.

As of September 30, 2019, we had a total of $325 million in future expense related to our stock options and RSUs to be recognized over a weighted average period of 2.8 years.

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 the acquisition of FutureSimple. The PRSUs vest in four semi-annual tranches 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. For the three and nine months

ended September 30, 2019, we recorded $2 million and $6 million of share-based compensation expense, respectively, related to the PRSUs, including a one-time charge related to accelerated retention compensation during the nine months ended September 30, 2019. For the three and nine months ended September 30, 2019, 48 thousand 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.

Deferred Revenue and Performance Obligations

9 Months Ended

Sep. 30, 2019

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 $65 million and $52 million as of September 30, 2019 and December 31, 2018, respectively. Amortization expense for these deferred costs was $8 million and $6 million for the three months ended September 30, 2019 and 2018, respectively, and $23 million and $15 million for the nine months ended September 30, 2019 and 2018, respectively. There were no impairment losses related to these deferred costs for the periods presented.

Deferred Revenue and Performance Obligations

The changes in the balances of deferred revenue are as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	287,349		$	207,960		$	247,962		$	174,360
Billings	216,075			172,355			631,530			477,628
Subscription services revenue	(201,498		)	(148,100		)	(559,911		)	(409,673		)
Other revenue*	(8,979		)	(6,728		)	(26,634		)	(16,828		)
Balance, end of period	$	292,947		$	225,487		$	292,947		$	225,487

*Other revenue primarily includes implementation and training services, Talk usage, and amounts from contract assets.

For the three months ended September 30, 2019 and 2018, the majority of revenue recognized was from the deferred revenue balances at the beginning of each period. For the nine months ended September 30, 2019 and 2018, less than half of revenue recognized was from the deferred revenue balances at the beginning of each period.

The aggregate balance of remaining performance obligations as of September 30, 2019 was $558 million. We expect to recognize $404 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.

Net Loss Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including those related to outstanding share-based awards and our convertible senior notes, to the extent dilutive. Basic and diluted net loss per share were the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive.

The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(34,224	)	$	(34,144	)	$	(133,485	)	$	(97,835	)
Weighted-average shares used to compute basic and diluted net loss per share	111,261			106,143			109,969			104,954
Net loss per share, basic and diluted	$	(0.31	)	$	(0.32	)	$	(1.21	)	$	(0.93	)

The anti-dilutive securities excluded from the shares used to calculate diluted net loss per share are as follows (in thousands):



	As of September 30,
	2019	2018
Shares subject to outstanding common stock options and employee stock purchase plan	5,323	6,344
Restricted stock units	5,908	7,151
Shares related to convertible senior notes	2,138	111
	13,369	13,606

The shares related to convertible senior notes in the table above are calculated based on the average market price of our common stock for the three months ended September 30, 2019 and 2018, respectively.

We expect to settle the principal amount of the convertible senior notes in cash and therefore use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The

conversion spread has a dilutive impact on diluted net income per share when the average market price of our common stock for a given reporting 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 will not be convertible during the three months ending December 31, 2019.

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes We reported an income tax benefit that was not material for the three months ended September 30, 2019 and income tax expense of $1 million for the nine months ended September 30, 2019. We reported income tax benefits of $2 million and $7 million for the three and nine months ended September 30, 2018, respectively, primarily due to the recognition of an income tax benefit related to taxable temporary differences of the convertible senior notes and the capped call. The effective tax rate for each period differs from the statutory rate primarily as a result of not recognizing a deferred tax asset for U.S. losses due to having a full valuation allowance against U.S. deferred tax assets.

Geographic Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Geographic Information

Our chief operating decision maker reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single reporting segment.

Revenue

The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
United States	$	110,964	$	78,848	$	306,880	$	220,221
EMEA	59,196		45,927		166,728		125,564
APAC	22,981		18,107		63,715		48,214
Other	17,336		11,946		49,222		32,502
Total	$	210,477	$	154,828	$	586,545	$	426,501

Long-Lived Assets

The following table presents our long-lived assets by geographic area (in thousands):



	As of September 30, 2019		As of December 31, 2018
United States	$	87,315	$	32,351
EMEA:
Republic of Ireland	43,668		14,698
Other EMEA	4,275		2,450
Total EMEA	47,943		17,148
APAC:
Singapore	27,889		1,117
Other APAC	6,317		5,772
Total APAC	34,206		6,889
Total	$	169,464	$	56,388

The table above includes property and equipment and lease right-of-use assets and excludes capitalized internal-use software and intangible assets.

Overview and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K, for the year ended December 31, 2018, filed with the SEC on February 14, 2019. There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes, except as described below.

The consolidated balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive loss, stockholders' equity, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2019.

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 estimate of variable consideration related to revenue recognition;

•the recoverability of accounts receivable;

•the fair value and useful lives of acquired intangible assets;

•the capitalization and useful life of capitalized costs to obtain customer contracts;

•the valuation of strategic investments;

•the useful lives of property and equipment;

•the capitalization and useful lives of internal-use software;

•the lease term and incremental borrowing rate for lease liabilities;

•the fair value of our convertible senior notes;

•the fair value of asset retirement obligations;

•the fair value and expense recognition for certain share-based awards;

•the preparation of financial forecasts used in currency hedging; and

•the recognition of tax benefits.

These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates

Concentrations of Risk

As of September 30, 2019 and December 31, 2018, no customers represented 10% or greater of our total accounts receivable balance. There were no customers that individually exceeded 10% of our revenue during the three and nine months ended September 30, 2019 or 2018.

Recently Issued and Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued ASU 2016-13, including subsequent amendments, regarding ASC Topic 326 “Measurement of Credit Losses on Financial Instruments,” which modifies the accounting methodology for most financial instruments. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information. Additionally, any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. This guidance 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 impact of the adoption 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 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.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, regarding ASC Topic 842 “Leases,” including subsequent amendments. We refer to the new guidance as “ASC 842.” This new guidance requires lessees to recognize most leases on their balance sheets as lease 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.

We adopted ASC 842 in the first quarter of 2019 and applied the following practical expedients:


•	comparative periods prior to the adoption date are not adjusted to reflect the new guidance (the modified retrospective method of transition); and


•	the historical determination as to the existence and classification of leases is carried forward for existing contracts as of the adoption date.

The effect of adopting ASC 842 resulted in the recognition of lease right-of-use assets and corresponding lease liabilities on our condensed consolidated balance sheets. As of March 31, 2019, the first quarter of adoption, the aggregate balance of lease right-of-use assets and lease liabilities was $99 million and $114 million, respectively. The standard did not affect our consolidated statement of operations or cash flows.

In August 2017, the FASB issued ASU 2017-12, regarding ASC Topic 815 “Derivatives and Hedging.” This guidance simplifies various aspects of hedge accounting, including the measurement and presentation of hedge ineffectiveness and

certain documentation and assessment requirements. The guidance also makes more hedging strategies eligible for hedge accounting. We adopted this standard in the first quarter of 2019. Upon adoption, we no longer recognize hedge ineffectiveness immediately in our consolidated statements of operations, but we instead recognize the entire change in the fair value of the hedge contract in other comprehensive income. The cumulative-effect adjustment to eliminate ineffectiveness was not material. The presentation and disclosures have been modified on a prospective basis, as required by the guidance.

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. We adopted this standard in the first quarter of 2019. We have elected not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings, therefore the adoption did not have an 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. We adopted this standard in the first quarter of 2019. The adoption did not have an 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. We adopted the standard in the first quarter of 2019. The adoption did not have an 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 early adopted the standard in the first quarter of 2019. The adoption did not have an effect on our consolidated financial statements.

Leases

Lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease right-of-use assets also include any lease payments made and exclude lease incentives such as tenant improvement allowances. Options to extend the lease term are included in the lease term when it is reasonably certain that we will exercise the extension option.

Business Combinations (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Summary of Assets Acquired and Liabilities Assumed

Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.



Net tangible liabilities	$	(2,791	)
Identifiable intangible assets:
Developed technology	19,000
Customer relationships	10,400
Backlog	2,200
Goodwill	52,214
Total purchase consideration	$	81,023

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. As a result of the structure of the transaction, the balance of goodwill is deductible in the U.S. over 15 years for income tax purposes.



Net tangible assets	$	2,036
Net deferred tax liability	(1,194		)
Identifiable intangible assets:
Developed technology	8,000
Customer relationships	3,900
Backlog	1,000
Goodwill	58,130
Total purchase consideration	$	71,872

Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Assets Measured at Fair Value on Recurring Basis

The following tables present information about our financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):



	Fair Value Measurement at September 30, 2019
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	428,148	$	428,148
Asset-backed securities	—		120,514		120,514
U.S. Treasury securities	—		75,826		75,826
Money market funds	65,836		—		65,836
Commercial paper	—		7,961		7,961
Agency securities	—		221		221
Total	$	65,836	$	632,670	$	698,506
Included in cash and cash equivalents					$	70,133
Included in marketable securities					$	628,373



	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

Schedule of Marketable Securities Classified by Contractual Maturity

The following table classifies our marketable securities by contractual maturity (in thousands):



	September 30, 2019		December 31, 2018
Due in one year or less	$	243,846	$	300,213
Due after one year and within five years	384,527		393,671
Total	$	628,373	$	693,884

Schedule of Derivative Instruments on Consolidated Balance Sheets

The following tables present information about our derivative instruments on our consolidated balance sheets (in thousands):



	September 30, 2019
	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	$	2,502	Accrued liabilities	$	5,129
Total		$	2,502		$	5,129



	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

Schedule of Derivative Instruments on Statement of Operations

The following table presents information about our foreign currency forward contracts on our condensed consolidated statements of operations for the three and nine months ended September 30, 2019 (in thousands):



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Classification	Gain (Loss) Reclassified from AOCI into Earnings			Gain (Loss) Reclassified from AOCI into Earnings
Revenue	$	652		$	1,684
Cost of revenue	(274		)	(1,141		)
Research and development	(280		)	(1,045		)
Sales and marketing	(519		)	(1,939		)
General and administrative	(226		)	(723		)
Total	$	(647	)	$	(3,164	)

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Components of Property and Equipment

Property and equipment, net consists of the following (in thousands):



	September 30, 2019			December 31, 2018
Leasehold improvements	$	76,338		$	51,832
Capitalized internal-use software	38,979			36,444
Computer equipment and licensed software and patents	26,347			21,100
Furniture and fixtures	15,071			11,550
Construction in progress	7,431			10,538
Hosting equipment	—			34,105
Total	164,166			165,569
Less: accumulated depreciation and amortization	(69,315		)	(89,915		)
Property and equipment, net	$	94,851		$	75,654

Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Lease Impact on Balance Sheet

The following tables present information about leases on our consolidated balance sheet (in thousands):



	September 30, 2019
Assets
Lease right-of-use assets	$	95,098
Liabilities
Lease liabilities	21,398
Lease liabilities, noncurrent	87,926

Schedule of Lease Cost and Supplemental Cash Flow Information

The following table presents supplemental cash flow information about our leases (in thousands):



	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities	$	15,197
Operating lease assets obtained in exchange for new lease liabilities	27,559

The following table presents information about leases on our consolidated statement of operations (in thousands):



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease expense	$	6,382	$	17,221
Short-term lease expense	168		2,037
Variable lease expense	1,607		4,835
Sublease income	560		1,353

Schedule of Maturities of Leases

As of September 30, 2019, remaining maturities of lease liabilities are as follows:



Remainder of 2019	$	5,323
2020	27,390
2021	24,493
2022	22,568
2023	15,962
Thereafter	31,198
Total lease payments	126,934
Less imputed interest	17,610
Total	$	109,324

Goodwill and Acquired Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2019 are as follows (in thousands):



Balance as of December 31, 2018	$	111,584
Goodwill acquired	58,245
Goodwill adjustments	(355		)
Balance as of September 30, 2019	$	169,474

Summary of Intangible Assets Acquired

Acquired intangible assets subject to amortization consist of the following (in thousands):



	As of September 30, 2019
	Cost		Accumulated Amortization			Net		Weighted Average Remaining Useful Life
								(In years)
Developed technology	$	39,000	$	(12,785	)	$	26,215	5.1
Customer relationships	15,210		(3,183		)	12,027		5.0
Backlog	3,200		(1,400		)	1,800		1.2
	$	57,410	$	(17,368	)	$	40,042



	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

Summary of Estimated Future Amortization Expense

Estimated future amortization expense as of September 30, 2019 is as follows (in thousands):



Remainder of 2019	$	2,826
2020	9,275
2021	7,599
2022	7,433
2023	6,661
Thereafter	6,248
	$	40,042

0.25% Convertible Senior Notes and Capped Call (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Net Carrying Amount of Liability and Equity Component of Convertible Notes

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

The net carrying amount of the liability component of the Notes is as follows (in thousands):



	September 30, 2019			December 31, 2018
Principal	$	575,000		$	575,000
Unamortized Debt Discount	(90,015		)	(107,494		)
Unamortized issuance costs	(7,978		)	(9,330		)
Net carrying amount	$	477,007		$	458,176

The net carrying amount of the equity component of the Notes is as follows (in thousands):



	September 30, 2019			December 31, 2018
Debt Discount for Conversion Option	$	124,976		$	124,976
Issuance costs	(2,948		)	(2,948		)
Net carrying amount	$	122,028		$	122,028

Schedule of Interest Expense

Interest expense related to the Notes is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Contractual interest expense	$	359	$	360	$	1,078	$	762
Amortization of Debt Discount	5,902		5,603		17,479		11,806
Amortization of issuance costs	464		412		1,352		859
Total interest expense	$	6,725	$	6,375	$	19,909	$	13,427

Common Stock and Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Summary of Stock Option and RSU Award Activity

A summary of our share-based award activity for the nine months ended September 30, 2019 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, 2019	8,232		5,938		$	20.85	6.58	$	222,959	6,611		$	37.77	$	385,891
Increase in authorized shares	5,402
Stock options granted	(336	)	336		73.27
RSUs granted	(2,511	)								2,511		74.39
Stock options exercised			(1,060	)	20.74
RSUs vested										(2,398	)	37.21
Stock options forfeited or canceled	101		(101	)	43.94
RSUs forfeited or canceled	792									(792	)	43.44
RSUs forfeited or canceled and unavailable for grant										(24	)	23.44
PRSUs forfeited	30
Outstanding — September 30, 2019	11,710		5,113		$	23.86	6.08	$	250,894	5,908		$	52.86	$	430,362

Deferred Revenue and Performance Obligations (Tables)

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Changes in Balance of Deferred Revenue

The changes in the balances of deferred revenue are as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	287,349		$	207,960		$	247,962		$	174,360
Billings	216,075			172,355			631,530			477,628
Subscription services revenue	(201,498		)	(148,100		)	(559,911		)	(409,673		)
Other revenue*	(8,979		)	(6,728		)	(26,634		)	(16,828		)
Balance, end of period	$	292,947		$	225,487		$	292,947		$	225,487

*Other revenue primarily includes implementation and training services, Talk usage, and amounts from contract assets.

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of Computation of Basic and Diluted Net Loss per Share

The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(34,224	)	$	(34,144	)	$	(133,485	)	$	(97,835	)
Weighted-average shares used to compute basic and diluted net loss per share	111,261			106,143			109,969			104,954
Net loss per share, basic and diluted	$	(0.31	)	$	(0.32	)	$	(1.21	)	$	(0.93	)

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 September 30,
	2019	2018
Shares subject to outstanding common stock options and employee stock purchase plan	5,323	6,344
Restricted stock units	5,908	7,151
Shares related to convertible senior notes	2,138	111
	13,369	13,606

Geographic Information (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Revenue by Geographic Areas

The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
United States	$	110,964	$	78,848	$	306,880	$	220,221
EMEA	59,196		45,927		166,728		125,564
APAC	22,981		18,107		63,715		48,214
Other	17,336		11,946		49,222		32,502
Total	$	210,477	$	154,828	$	586,545	$	426,501

Schedule of Long-Lived Assets by Geographic Areas

The following table presents our long-lived assets by geographic area (in thousands):



	As of September 30, 2019		As of December 31, 2018
United States	$	87,315	$	32,351
EMEA:
Republic of Ireland	43,668		14,698
Other EMEA	4,275		2,450
Total EMEA	47,943		17,148
APAC:
Singapore	27,889		1,117
Other APAC	6,317		5,772
Total APAC	34,206		6,889
Total	$	169,464	$	56,388

Overview and Basis of Presentation - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Lease right-of-use assets	$ 95,098	$ 99,000
Operating lease liabilities	$ 109,324	$ 114,000

Business Combinations - Narrative (Details) - USD ($) $ in Millions	May 14, 2019	Sep. 10, 2018
Smooch Technologies Holding ULC
Business Acquisition [Line Items]
Cash consideration	$ 72
Transaction costs associated with transaction	3
Share based compensation expense as a result of acquisition	$ 5
Amortization period for goodwill acquired and eligible for income tax deductions	15 years
Smooch Technologies Holding ULC \| Developed technology
Business Acquisition [Line Items]
Acquired intangible assets weighted average useful life	5 years 6 months
Smooch Technologies Holding ULC \| Customer relationships
Business Acquisition [Line Items]
Acquired intangible assets weighted average useful life	8 years
Smooch Technologies Holding ULC \| Backlog
Business Acquisition [Line Items]
Acquired intangible assets weighted average useful life	2 years
FutureSimple Inc.
Business Acquisition [Line Items]
Cash consideration		$ 81
Transaction costs associated with transaction		$ 2
FutureSimple Inc. \| Developed technology
Business Acquisition [Line Items]
Acquired intangible assets weighted average useful life		6 years 6 months
FutureSimple Inc. \| Customer relationships
Business Acquisition [Line Items]
Acquired intangible assets weighted average useful life		5 years
FutureSimple Inc. \| Backlog
Business Acquisition [Line Items]
Acquired intangible assets weighted average useful life		2 years

Business Combinations - Summary of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Sep. 30, 2019	May 14, 2019	Dec. 31, 2018	Sep. 10, 2018
Business Acquisition [Line Items]
Goodwill	$ 169,474		$ 111,584
Smooch Technologies Holding ULC
Business Acquisition [Line Items]
Net tangible assets		$ 2,036
Net deferred tax liability		(1,194)
Goodwill		58,130
Total purchase price		71,872
FutureSimple Inc.
Business Acquisition [Line Items]
Net tangible liabilities				$ (2,791)
Goodwill				52,214
Total purchase price				81,023
Developed technology \| Smooch Technologies Holding ULC
Business Acquisition [Line Items]
Identifiable intangible assets:		8,000
Developed technology \| FutureSimple Inc.
Business Acquisition [Line Items]
Identifiable intangible assets:				19,000
Customer relationships \| Smooch Technologies Holding ULC
Business Acquisition [Line Items]
Identifiable intangible assets:		3,900
Customer relationships \| FutureSimple Inc.
Business Acquisition [Line Items]
Identifiable intangible assets:				10,400
Backlog \| Smooch Technologies Holding ULC
Business Acquisition [Line Items]
Identifiable intangible assets:		$ 1,000
Backlog \| FutureSimple Inc.
Business Acquisition [Line Items]
Identifiable intangible assets:				$ 2,200

Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Included in marketable securities	$ 628,373	$ 693,884
Fair Value Measurements, Recurring
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	698,506	756,441
Included in cash and cash equivalents	70,133	62,557
Included in marketable securities	628,373	693,884
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	428,148	460,210
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	120,514	127,078
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	75,826	58,039
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	65,836	57,758
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	7,961	38,900
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	221	11,256
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 \| Level 1
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	65,836	57,758
Fair Value Measurements, Recurring \| Level 1 \| Corporate bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	0	0
Fair Value Measurements, Recurring \| Level 1 \| Asset-backed securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	0	0
Fair Value Measurements, Recurring \| Level 1 \| U.S. Treasury securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	0	0
Fair Value Measurements, Recurring \| Level 1 \| Money market funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	65,836	57,758
Fair Value Measurements, Recurring \| Level 1 \| Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	0	0
Fair Value Measurements, Recurring \| Level 1 \| Agency securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	0	0
Fair Value Measurements, Recurring \| Level 1 \| 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		0
Fair Value Measurements, Recurring \| Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	632,670	698,683
Fair Value Measurements, Recurring \| Level 2 \| Corporate bonds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	428,148	460,210
Fair Value Measurements, Recurring \| Level 2 \| Asset-backed securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	120,514	127,078
Fair Value Measurements, Recurring \| Level 2 \| U.S. Treasury securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	75,826	58,039
Fair Value Measurements, Recurring \| Level 2 \| Money market funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	0	0
Fair Value Measurements, Recurring \| Level 2 \| Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	7,961	38,900
Fair Value Measurements, Recurring \| Level 2 \| Agency securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Total fair value of financial assets	$ 221	11,256
Fair Value Measurements, Recurring \| Level 2 \| 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

Financial Instruments - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
Financial Instruments - Narrative (Details) - USD ($)	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2017
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Gross unrealized gain (loss)			$ 5,000,000		$ 0
Amortized cost of cash equivalents and marketable securities	$ 694,000,000		694,000,000
Unrealized losses recognized by securities in continuous loss position for twelve months or longer	0		0		0
Balance of strategic investment	11,000,000		11,000,000		10,000,000
Adjustments to carrying value of strategic investments			0
Unrealized loss in accumulated other comprehensive loss	(437,189,000)	$ (404,777,000)	(437,189,000)	$ (404,777,000)	(416,921,000)	$ (426,977,000)	$ (404,866,000)	$ (354,184,000)
Cash collateral posted	$ 0		$ 0		0
Closing price of common stock (usd per share)	$ 72.88		$ 72.88
Level 3
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value of financial assets	$ 0		$ 0		0
Shares related to convertible senior notes \| Convertible Debt
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Convertible debt, if-convertible value in excess of principal amount			575,000,000
Shares related to convertible senior notes \| Convertible Debt \| Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Fair value	757,000,000		757,000,000
Foreign Currency Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Reclassification of net loss	2,000,000		2,000,000
Notional value	228,000,000		228,000,000		$ 200,000,000
Gain (loss) recognized in AOCI	(3,000,000)	(1,000,000)	$ (4,000,000)	(4,000,000)
Gain (loss) reclassified from accumulated other comprehensive income into earnings before adoption		$ (1,000,000)		$ 0
Foreign Currency Forward Contracts \| Maximum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Derivative, maturity			15 months
AOCI, Derivative Qualifying as Hedge, Excluded Component, Parent \| Foreign Currency Forward Contracts
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Unrealized loss in accumulated other comprehensive loss	$ 1,000,000		$ 1,000,000

Financial Instruments - Marketable Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Due in one year or less	$ 243,846	$ 300,213
Due after one year and within five years	384,527	393,671
Total	$ 628,373	$ 693,884

Financial Instruments - Schedule of Derivative Instruments on Consolidated Balance Sheets (Details) - Designated as Hedging Instrument - Level 2 - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Derivatives Fair Value [Line Items]
Asset Derivatives	$ 2,502	$ 2,047
Liability Derivatives	5,129	4,862
Foreign Currency Forward Contracts \| Other current assets
Derivatives Fair Value [Line Items]
Asset Derivatives	2,502	2,047
Foreign Currency Forward Contracts \| Accrued liabilities
Derivatives Fair Value [Line Items]
Liability Derivatives	$ 5,129	$ 4,862

Financial Instruments - Schedule of Derivative Instruments on Statement of Operations (Details) - Foreign Currency Forward Contracts - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Derivative Instruments Gain Loss [Line Items]
Gain (Loss) Reclassified from AOCI into Earnings	$ (647)	$ (3,164)
Revenue
Derivative Instruments Gain Loss [Line Items]
Gain (Loss) Reclassified from AOCI into Earnings	652	1,684
Cost of revenue
Derivative Instruments Gain Loss [Line Items]
Gain (Loss) Reclassified from AOCI into Earnings	(274)	(1,141)
Research and development
Derivative Instruments Gain Loss [Line Items]
Gain (Loss) Reclassified from AOCI into Earnings	(280)	(1,045)
Sales and marketing
Derivative Instruments Gain Loss [Line Items]
Gain (Loss) Reclassified from AOCI into Earnings	(519)	(1,939)
General and administrative
Derivative Instruments Gain Loss [Line Items]
Gain (Loss) Reclassified from AOCI into Earnings	$ (226)	$ (723)

Costs to Obtain Customer Contracts (Details) - USD ($)	3 Months Ended		9 Months Ended
Costs to Obtain Customer Contracts (Details) - USD ($)	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Revenue from Contract with Customer [Abstract]
Deferred costs to obtain customer contracts	$ 65,000,000		$ 65,000,000		$ 52,000,000
Amortization of deferred costs	8,000,000	$ 6,000,000	22,983,000	$ 15,124,000
Impairment related to deferred costs	$ 0	$ 0	$ 0	$ 0

Property and Equipment - Components of Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Total	$ 164,166	$ 165,569
Less: accumulated depreciation and amortization	(69,315)	(89,915)
Property and equipment, net	94,851	75,654
Leasehold improvements
Property, Plant and Equipment [Line Items]
Total	76,338	51,832
Capitalized internal-use software
Property, Plant and Equipment [Line Items]
Total	38,979	36,444
Computer equipment and licensed software and patents
Property, Plant and Equipment [Line Items]
Total	26,347	21,100
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Total	15,071	11,550
Construction in progress
Property, Plant and Equipment [Line Items]
Total	7,431	10,538
Hosting equipment
Property, Plant and Equipment [Line Items]
Total	$ 0	$ 34,105

Property and Equipment - Narrative (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 5		$ 6	$ 15	$ 19
Amortization expense of capitalized internal-use software	2		$ 2	5	$ 4
Carrying value of capitalized internal-use software	20			20		$ 19
Capitalized internal-use software included in construction in progress	$ 3			$ 3		$ 5
Hosting equipment
Property, Plant and Equipment [Line Items]
Reclassification from property and equipment, gross		$ 34
Reclassification of accumulated depreciations associated with property and equipment		33
Reclassification from property and equipment, net of accumulated depreciation		$ 1

Leases - Schedule of Lease Impact on Balance Sheet (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Assets
Lease right-of-use assets	$ 95,098	$ 99,000
Liabilities
Lease liabilities	21,398
Lease liabilities, noncurrent	$ 87,926

Leases - Narrative (Details) $ in Millions	Sep. 30, 2019 USD ($)
Leases [Abstract]
Weighted average remaining lease term	5 years 10 months 24 days
Weighted average discount rate	5.30%
Operating lease payments for leases that have not yet commenced	$ 4

Leases - Schedule of Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Operating lease expense	$ 6,382	$ 17,221
Short-term lease expense	168	2,037
Variable lease expense	1,607	4,835
Sublease income	$ 560	$ 1,353

Leases - Schedule of Supplemental Cash Flow Information (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 15,197
Operating lease assets obtained in exchange for new lease liabilities	$ 27,559

Leases - Schedule of Maturities of Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Mar. 31, 2019
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
Remainder of 2019	$ 5,323
2020	27,390
2021	24,493
2022	22,568
2023	15,962
Thereafter	31,198
Total lease payments	126,934
Less imputed interest	17,610
Total	$ 109,324	$ 114,000

Goodwill and Acquired Intangible Assets - Schedule of Carrying Amount of Goodwill (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Goodwill [Roll Forward]
Balance as of December 31, 2018	$ 111,584
Goodwill acquired	58,245
Goodwill adjustments	(355)
Balance as of September 30, 2019	$ 169,474

Goodwill and Acquired Intangible Assets - Acquired Intangible Assets Subject to Amortization (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Finite Lived Intangible Assets [Line Items]
Cost	$ 57,410	$ 44,510
Accumulated Amortization	(17,368)	(9,767)
Net	40,042	34,743
Developed technology
Finite Lived Intangible Assets [Line Items]
Cost	39,000	31,000
Accumulated Amortization	(12,785)	(8,151)
Net	$ 26,215	$ 22,849
Weighted Average Remaining Useful Life	5 years 1 month 6 days	5 years 6 months
Customer relationships
Finite Lived Intangible Assets [Line Items]
Cost	$ 15,210	$ 11,310
Accumulated Amortization	(3,183)	(1,249)
Net	$ 12,027	$ 10,061
Weighted Average Remaining Useful Life	5 years	4 years 7 months 6 days
Backlog
Finite Lived Intangible Assets [Line Items]
Cost	$ 3,200	$ 2,200
Accumulated Amortization	(1,400)	(367)
Net	$ 1,800	$ 1,833
Weighted Average Remaining Useful Life	1 year 2 months 12 days	1 year 8 months 12 days

Goodwill and Acquired Intangible Assets - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 3	$ 1	$ 8	$ 3

Goodwill and Acquired Intangible Assets - Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2019	$ 2,826
2020	9,275
2021	7,599
2022	7,433
2023	6,661
Thereafter	6,248
Total estimated future amortization expense	$ 40,042	$ 34,743

0.25% Convertible Senior Notes and Capped Call - Narrative (Details) $ / shares in Units, shares in Millions		9 Months Ended
	Mar. 15, 2018 USD ($) day $ / shares shares	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Proceeds from issuance of convertible senior notes, net of issuance costs		$ 0	$ 561,439,000
Cost incurred related to capped calls		$ 0	$ (44,304,000)
Convertible Debt \| Shares related to convertible senior notes
Debt Instrument [Line Items]
Aggregate principal amount	$ 575,000,000
Interest rate	0.25%
Proceeds from issuance of convertible senior notes, net of issuance costs	$ 561,000,000
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
Number of consecutive business days	5 days
Percentage of closing sale price in excess of convertible notes	98.00%
Redemption price percentage	100.00%
Conversion Option	$ 125,000,000	$ 124,976,000		$ 124,976,000
Effective interest rate		5.26%
Debt issuance costs, gross		$ 14,000,000
Issuance costs attributable to the liability component	$ 11,000,000	7,978,000		$ 9,330,000
Capped calls, initial cap price (in usd per share) \| $ / shares	$ 95.20
Number of shares covered by cap call (in shares) \| shares	9.1
Cost incurred related to capped calls	$ (64,000,000)	(44,304,000)
Net deferred tax liability related to cap call		$ 13,784,000

0.25% Convertible Senior Notes and Capped Call - Schedule of Net Carrying Amount of Liability and Equity Component of Convertible Notes (Details) - Convertible Debt - Shares related to convertible senior notes - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Mar. 15, 2018
Net Carrying Amount of Liability Component of Convertible Notes [Abstract]
Principal	$ 575,000	$ 575,000
Unamortized Debt Discount	(90,015)	(107,494)
Unamortized issuance costs	(7,978)	(9,330)	$ (11,000)
Net carrying amount	477,007	458,176
Net Carrying Amount of Equity Component of Convertible Notes [Abstract]
Debt Discount for Conversion Option	124,976	124,976	$ 125,000
Issuance costs	(2,948)	(2,948)
Net carrying amount	$ 122,028	$ 122,028

0.25% Convertible Senior Notes and Capped Call - Schedule of Interest Expense (Details) - Convertible Debt - Shares related to convertible senior notes - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Debt Instrument [Line Items]
Contractual interest expense	$ 359	$ 360	$ 1,078	$ 762
Amortization of Debt Discount	5,902	5,603	17,479	11,806
Amortization of issuance costs	464	412	1,352	859
Total interest expense	$ 6,725	$ 6,375	$ 19,909	$ 13,427

0.25% Convertible Senior Notes and Capped Call - Summary of Impact to Stockholder's Equity (Details) - USD ($) $ in Thousands		9 Months Ended
	Mar. 15, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Debt Instrument [Line Items]
Net impact to stockholder's equity		$ 0	$ 44,304
Convertible Debt \| Shares related to convertible senior notes
Debt Instrument [Line Items]
Conversion Option	$ 125,000	124,976		$ 124,976
Purchase of Capped Calls		(63,940)
Issuance costs		(2,948)		$ (2,948)
Net deferred tax liability		(13,784)
Net impact to stockholder's equity	$ 64,000	$ 44,304

Common Stock and Stockholders' Equity - Narrative (Details) $ / shares in Units, $ in Millions				3 Months Ended		9 Months Ended
	Jan. 01, 2019 shares	Jan. 01, 2018 shares	May 06, 2016 shares	Sep. 30, 2019 USD ($) number_of_semi_annual_tranches $ / shares shares	Sep. 30, 2018 shares	Sep. 30, 2019 USD ($) offering_period $ / shares shares	Sep. 30, 2018 USD ($) $ / shares	Dec. 31, 2018 $ / shares shares
Class Of Stock [Line Items]
Common stock, shares authorized (in shares)				400,000,000		400,000,000		400,000,000
Common stock, par value (usd per share) \| $ / shares				$ 0.01		$ 0.01		$ 0.01
Common stock, shares issued (in shares)				111,900,000		111,900,000		110,700,000
Common stock, shares outstanding (in shares)				108,000,000.0		108,000,000.0		108,000,000
Preferred stock, shares authorized (in shares)				10,000,000		10,000,000		10,000,000
Preferred stock, par value (usd per share) \| $ / shares				$ 0.01		$ 0.01		$ 0.01
Preferred stock, shares issued (in shares)				0		0		0
Preferred stock, shares outstanding (in shares)				0		0		0
Increase in authorized shares (in shares)						5,402,000
Shares of common stock available for issuance (in shares)				11,710,000		11,710,000		8,232,000
Stock options granted (in shares)			1,200,000			336,000
Intrinsic value of options exercised (usd per share) \| $						$ 63	$ 30
Weighted-average grant date fair value of stock options (usd per share) \| $ / shares						$ 28.65	$ 17.53
Future period share-based compensation expense \| $				$ 325		$ 325
Future period share-based compensation expense, period to recognized						2 years 9 months 18 days
Employee Stock Option
Class Of Stock [Line Items]
Offering period						18 months
Number of offering periods \| offering_period						3,000
Length of purchase period						6 months
Restricted Stock Units
Class Of Stock [Line Items]
Intrinsic value of shares vested \| $						$ 191	$ 123
Weighted average grant date fair value (usd per share) \| $ / shares						$ 74.39	$ 42.32
Shares granted (in shares)						2,511,000
Number of shares vested (in shares)						2,398,000
Performance Restricted Stock Units
Class Of Stock [Line Items]
Number of vesting periods \| number_of_semi_annual_tranches				4
2009 Stock Option and Grant Plan
Class Of Stock [Line Items]
Shares of common stock available for issuance (in shares)				0		0
2014 Plan \| Employee Stock Option
Class Of Stock [Line Items]
Increase in authorized shares (in shares)		5,400,000
Shares of common stock available for issuance (in shares)				11,700,000		11,700,000
PSU Retention Plan \| Performance Restricted Stock Units
Class Of Stock [Line Items]
Shares granted (in shares)					200,000
Share-based compensation expense \| $				$ 2		$ 6
Number of shares vested (in shares)				48,000		48,000
Employee Stock Purchase Plan
Class Of Stock [Line Items]
Percentage of purchase price of shares lower of the fair market value of common stock employees are able to purchase shares						85.00%
Common shares purchased (in shares)				400,000
Increase in authorized shares (in shares)	1,100,000
Shares of common stock available for issuance (in shares)				4,600,000		4,600,000

Common Stock and Stockholders' Equity - Summary of Stock Option and RSU Award Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		9 Months Ended		12 Months Ended
	May 06, 2016	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Shares Available for Grant
Outstanding at beginning of period (in shares)		8,232
Increase in authorized shares (in shares)		5,402
Stock options granted (in shares)		(336)
Granted (in shares)		(2,511)
Stock options forfeited or canceled (in shares)		101
Forfeited or canceled (in shares)		792
Outstanding at end of period (in shares)		11,710		8,232
Number of Shares
Balance at the beginning of the period (in shares)		5,938
Stock options granted (in shares)	1,200	336
Stock options exercised (in shares)		(1,060)
Stock options forfeited or canceled (in shares)		(101)
Balance at the end of the period (in shares)		5,113		5,938
Weighted Average Exercise Price
Balance at the beginning of the period (usd per share)		$ 20.85
Stock options granted (usd per share)		73.27
Stock options exercised (usd per share)		20.74
Stock options forfeited or canceled (usd per share)		43.94
Balance at the end of the period (usd per share)		$ 23.86		$ 20.85
Weighted Average Remaining Contractual Term
Weighted average remaining contractual term		6 years 29 days		6 years 6 months 29 days
Aggregate Intrinsic Value
Aggregate intrinsic value, options		$ 250,894		$ 222,959
Aggregate intrinsic value, restricted stock units		$ 430,362		$ 385,891
Restricted Stock Units
Outstanding RSUs
Balance at the beginning of the period (in shares)		6,611
RSUs granted (in shares)		2,511
RSUs vested (in shares)		(2,398)
RSUs forfeited or canceled (in shares)		(792)
RSUs forfeited and unavailable for grant (in shares)		(24)
Balance at the end of the period (in shares)		5,908		6,611
Weighted Average Grant Date Fair Value
Balance at the beginning of the period (usd per share)		$ 37.77
Weighted average grant date fair value, RSUs granted (usd per share)		74.39	$ 42.32
Weighted average grant date fair value, RSUs vested (usd per share)		37.21
Weighted average grant date fair value, RSUs forfeited or canceled (usd per share)		43.44
Weighted average grant date fair value, forfeited and unavailable for grant (usd per share)		23.44
Balance at the end of the period (usd per share)		$ 52.86		$ 37.77
Performance Restricted Stock Units
Shares Available for Grant
Forfeited or canceled (in shares)		30

Deferred Revenue and Performance Obligations - Schedule of Changes in Balance of Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Change in Contract with Customer, Liability [Abstract]
Balance, beginning of period	$ 287,349	$ 207,960	$ 247,962	$ 174,360
Billings	216,075	172,355	631,530	477,628
Subscription services revenue	(201,498)	(148,100)	(559,911)	(409,673)
Other revenue	(8,979)	(6,728)	(26,634)	(16,828)
Balance, end of period	$ 292,947	$ 225,487	$ 292,947	$ 225,487

Deferred Revenue and Performance Obligations - Performance Obligations (Details) $ in Millions	Sep. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 558
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01
Revenue from Contract with Customer [Abstract]
Performance obligations expected to be satisfied	$ 404
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligations expected to be satisfied, expected timing	1 year

Net Loss Per Share - Computation of Basic and Diluted Net Loss per Share of Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Net loss	$ (34,224)	$ (34,144)	$ (133,485)	$ (97,835)
Weighted-average shares used to compute basic and diluted net loss per share	111,261	106,143	109,969	104,954
Net loss per share, basic and diluted (usd per share)	$ (0.31)	$ (0.32)	$ (1.21)	$ (0.93)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Net Loss Per Share - Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	13,369	13,606
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)	5,323	6,344
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)	5,908	7,151
Shares related to convertible senior notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	2,138	111

Net Loss Per Share - Narrative (Details) - $ / shares shares in Millions	9 Months Ended
	Sep. 30, 2019	Mar. 15, 2018
Debt Instrument [Line Items]
Potential dilution based on initial conversion price (in shares)	9.1
Convertible Debt \| Shares related to convertible senior notes
Debt Instrument [Line Items]
Conversion price (usd per share)		$ 63.07

Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Income Taxes - Narrative (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ (364)	$ (2,334)	$ 661	$ (7,291)

Geographic Information - Narrative (Details)	9 Months Ended
Geographic Information - Narrative (Details)	Sep. 30, 2019 segment
Segment Reporting [Abstract]
Number of reportable segments	1

Geographic Information - Schedule of Revenue by Geographic Areas (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 210,477	$ 154,828	$ 586,545	$ 426,501
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	110,964	78,848	306,880	220,221
EMEA
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	59,196	45,927	166,728	125,564
APAC
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	22,981	18,107	63,715	48,214
Other
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 17,336	$ 11,946	$ 49,222	$ 32,502

Geographic Information - Schedule of Long-Lived Assets by Geographic Areas (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	$ 169,464	$ 56,388
United States
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	87,315	32,351
Republic of Ireland
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	43,668	14,698
Other EMEA
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	4,275	2,450
EMEA
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	47,943	17,148
Singapore
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	27,889	1,117
Other APAC
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	6,317	5,772
APAC
Revenues From External Customers And Long Lived Assets [Line Items]
Long-lived assets	$ 34,206	$ 6,889

Label	Element	Value
Restricted Cash, Noncurrent	us-gaap_RestrictedCashNoncurrent	$ 722,000
Restricted Cash, Noncurrent	us-gaap_RestrictedCashNoncurrent	599,000
Restricted Cash, Current	us-gaap_RestrictedCashCurrent	2,197,000
Restricted Cash, Current	us-gaap_RestrictedCashCurrent	$ 826,000