ZENDESK, INC., 10-K filed on 2/22/2018
Annual Report
Document and Entity Information (USD $)
In Billions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Jan. 31, 2018
Jun. 30, 2017
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
ZEN 
 
 
Entity Registrant Name
Zendesk, Inc. 
 
 
Entity Central Index Key
0001463172  
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
103,381,373 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Public Float
 
 
$ 1.8 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 109,370 
$ 93,677 
Marketable securities
137,576 
131,190 
Accounts receivable, net of allowance for doubtful accounts of $1,252 and $1,269 as of December 31, 2017 and 2016, respectively
57,096 
37,343 
Prepaid expenses and other current assets
24,165 
17,608 
Total current assets
328,207 
279,818 
Marketable securities, noncurrent
97,447 
75,168 
Property and equipment, net
59,157 
62,731 
Goodwill and intangible assets, net
67,034 
53,296 
Other assets
8,359 
4,272 
Total assets
560,204 
475,285 
Current liabilities:
 
 
Accounts payable
5,307 
4,555 
Accrued liabilities
21,876 
19,106 
Accrued compensation and related benefits
29,017 
20,281 
Deferred revenue
174,524 
123,276 
Total current liabilities
230,724 
167,218 
Deferred revenue, noncurrent
1,213 
1,257 
Other liabilities
6,626 
7,382 
Total liabilities
238,563 
175,857 
Commitments and contingencies (Note 7)
   
   
Stockholders’ equity:
 
 
Preferred stock, par value $0.01 per share: no shares issued or outstanding; 10.0 million shares authorized as of December 31, 2017 and 2016
0 
0 
Common stock, par value $0.01 per share: 400.0 million shares authorized; 103.1 million and 97.2 million shares issued; 103.1 million and 96.7 million shares outstanding as of December 31, 2017 and 2016, respectively
1,031 
971 
Additional paid-in capital
753,568 
624,026 
Accumulated other comprehensive loss
(2,372)
(5,197)
Accumulated deficit
(430,586)
(319,720)
Treasury stock, at cost; none and 0.5 million shares as of December 31, 2017 and 2016, respectively
0 
(652)
Total stockholders’ equity
321,641 
299,428 
Total liabilities and stockholders’ equity
$ 560,204 
$ 475,285 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 1,252 
$ 1,269 
Preferred stock, par value (usd per share)
$ 0.01 
$ 0.01 
Preferred stock, shares issued (in shares)
0 
0 
Preferred stock, shares outstanding (in shares)
0 
0 
Preferred stock, shares authorized (in shares)
10,000,000 
10,000,000 
Common stock, par value (usd per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized (in shares)
400,000,000 
400,000,000 
Common stock, shares issued (in shares)
103,100,000 
97,200,000 
Common stock, shares outstanding (in shares)
103,100,000 
96,700,000 
Treasury stock, shares (in shares)
0 
500,000 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Statement [Abstract]
 
 
 
Revenue
$ 430,492 
$ 311,999 
$ 208,768 
Cost of revenue
127,422 1
93,900 1
67,184 1
Gross profit
303,070 
218,099 
141,584 
Operating expenses:
 
 
 
Research and development
115,291 1
91,067 1
62,615 1
Sales and marketing
220,742 1
166,987 1
114,052 1
General and administrative
81,680 1
64,371 1
47,902 1
Total operating expenses
417,713 1
322,425 1
224,569 1
Operating loss
(114,643)
(104,326)
(82,985)
Other income (expense), net
2,487 
1,520 
(729)
Loss before provision for (benefit from) income taxes
(112,156)
(102,806)
(83,714)
Provision for (benefit from) income taxes
(1,518)
993 
338 
Net loss
$ (110,638)
$ (103,799)
$ (84,052)
Net loss per, basic and diluted (usd per share)
$ (1.11)
$ (1.11)
$ (0.99)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted (in shares)
99,918 
93,161 
84,926 
CONSOLIDATED STATEMENTS OF OPERATIONS (PARENTHETICAL) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based compensation
$ 85,049 
$ 73,779 
$ 52,556 
Cost of revenue
 
 
 
Share-based compensation
9,040 
7,045 
4,541 
Research and development
 
 
 
Share-based compensation
29,970 
27,083 
19,414 
Sales and marketing
 
 
 
Share-based compensation
24,776 
23,043 
14,759 
General and administrative
 
 
 
Share-based compensation
$ 21,263 
$ 16,608 
$ 13,842 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
Net loss
$ (110,638)
$ (103,799)
$ (84,052)
Other comprehensive gain (loss), before tax:
 
 
 
Net unrealized loss on available-for-sale investments
(247)
(213)
(44)
Foreign currency translation gain (loss)
824 
(488)
(942)
Net unrealized gain (loss) on derivative instruments
3,888 
(2,271)
(711)
Other comprehensive gain (loss), before tax
4,465 
(2,972)
(1,697)
Tax effect
(1,640)
0 
0 
Other comprehensive gain (loss), net of tax
2,825 
(2,972)
(1,697)
Comprehensive loss
$ (107,813)
$ (106,771)
$ (85,749)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Additional Paid-In Capital
Treasury Stock
Accumulated Other Comprehensive Loss
Accumulated Deficit
Beginning balance at Dec. 31, 2014
$ 113,706 
$ 755 
$ 246,000 
$ (652)
$ (528)
$ (131,869)
Beginning balance (in shares) at Dec. 31, 2014
 
76,134,000 
 
(535,000)
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Issuance of common stock from follow-on public offering, net of issuance costs (in shares)
 
8,780,000 
 
 
 
 
Issuance of common stock from follow-on public offering, net of issuance costs
190,096 
88 
190,008 
 
 
 
Issuance of common stock upon exercise of stock options (in shares)
 
3,275,000 
 
 
 
 
Issuance of common stock upon exercise of stock options
10,613 
33 
10,580 
 
 
 
Issuance of common stock for settlement of restricted stock units (RSUs) (in shares)
 
1,655,000 
 
 
 
 
Issuance of common stock for settlement of RSUs
(609)
17 
(626)
 
 
 
Vesting of early exercised stock options
1,046 
 
1,046 
 
 
 
Issuance of common stock in connection with employee stock purchase plan (in shares)
 
1,019,000 
 
 
 
 
Issuance of common stock in connection with employee stock purchase plan
9,375 
12 
9,363 
 
 
 
Repurchase of common stock (in shares)
 
(2,000)
 
 
 
 
Share-based compensation
54,363 
 
54,363 
 
 
 
Tax benefit from share-based award activity
449 
 
449 
 
 
 
Other comprehensive (loss) gain, net of income taxes
(1,697)
 
 
 
(1,697)
 
Retirement of treasury stock
0 
 
 
 
 
 
Net loss
(84,052)
 
 
 
 
(84,052)
Ending balance at Dec. 31, 2015
293,290 
905 
511,183 
(652)
(2,225)
(215,921)
Ending balance (in shares) at Dec. 31, 2015
 
90,861,000 
 
(535,000)
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Issuance of common stock upon exercise of stock options (in shares)
 
2,924,000 
 
 
 
 
Issuance of common stock upon exercise of stock options
25,435 
29 
25,406 
 
 
 
Issuance of common stock for settlement of restricted stock units (RSUs) (in shares)
 
2,894,000 
 
 
 
 
Issuance of common stock for settlement of RSUs
(803)
29 
(832)
 
 
 
Vesting of early exercised stock options
629 
1 
628 
 
 
 
Issuance of common stock in connection with employee stock purchase plan (in shares)
600,000 
554,000 
 
 
 
 
Issuance of common stock in connection with employee stock purchase plan
10,892 
7 
10,885 
 
 
 
Repurchase of common stock (in shares)
 
(38,000)
 
 
 
 
Share-based compensation
76,419 
 
76,419 
 
 
 
Tax benefit from share-based award activity
337 
 
337 
 
 
 
Other comprehensive (loss) gain, net of income taxes
(2,972)
 
 
 
(2,972)
 
Retirement of treasury stock
0 
 
 
 
 
 
Cumulative-effect adjustment resulting from the adoption of new accounting policies (Accounting Standards Update 2016-09)
0 
 
493 
 
 
(493)
Cumulative-effect adjustment resulting from the adoption of new accounting policies (Accounting Standards Update 2016-16)
265 
 
 
 
 
265 
Net loss
(103,799)
 
 
 
 
(103,799)
Ending balance at Dec. 31, 2016
299,428 
971 
624,026 
(652)
(5,197)
(319,720)
Ending balance (in shares) at Dec. 31, 2016
 
97,195,000 
 
(535,000)
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Issuance of common stock upon exercise of stock options (in shares)
2,664,000 
2,664,000 
 
 
 
 
Issuance of common stock upon exercise of stock options
31,882 
27 
31,855 
 
 
 
Issuance of common stock for settlement of restricted stock units (RSUs) (in shares)
 
3,145,000 
 
 
 
 
Issuance of common stock for settlement of RSUs
(2,989)
31 
(3,020)
 
 
 
Vesting of early exercised stock options
412 
1 
411 
 
 
 
Issuance of common stock in connection with employee stock purchase plan (in shares)
700,000 
652,000 
 
 
 
 
Issuance of common stock in connection with employee stock purchase plan
12,910 
6 
12,904 
 
 
 
Share-based compensation
87,546 
 
87,546 
 
 
 
Other comprehensive (loss) gain, net of income taxes
2,825 
 
 
 
2,825 
 
Retirement of treasury stock (in shares)
 
(535,000)
 
(535,000)
 
 
Retirement of treasury stock
0 
5 
647 
652 
 
 
Net loss
(110,638)
 
 
 
 
(110,638)
Ending balance at Dec. 31, 2017
$ 321,641 
$ 1,031 
$ 753,568 
$ 0 
$ (2,372)
$ (430,586)
Ending balance (in shares) at Dec. 31, 2017
 
103,121,000 
 
0 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities
 
 
 
Net loss
$ (110,638)
$ (103,799)
$ (84,052)
Adjustments to reconcile net loss to net cash provided by operating activities
 
 
 
Depreciation and amortization
31,931 
27,506 
19,744 
Share-based compensation
85,049 
73,779 
52,556 
Excess tax benefit from share-based award activity
0 
(337)
(449)
Other
603 
3,106 
1,457 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(21,201)
(11,808)
(14,989)
Prepaid expenses and other current assets
(5,055)
(6,286)
(5,510)
Other assets and liabilities
(5,955)
(3,887)
(3,204)
Accounts payable
1,839 
(3,486)
2,017 
Accrued liabilities
6,919 
5,261 
2,204 
Accrued compensation and related benefits
7,399 
6,055 
1,706 
Deferred revenue
51,204 
38,418 
33,853 
Net cash provided by operating activities
42,095 
24,522 
5,333 
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(16,396)
(20,647)
(22,989)
Internal-use software development costs
(7,521)
(6,310)
(4,705)
Purchases of marketable securities
(177,309)
(249,048)
(70,303)
Proceeds from maturities of marketable securities
116,735 
39,690 
36,982 
Proceeds from sale of marketable securities
31,090 
53,951 
32,152 
Cash paid for acquisitions, net of cash acquired
(16,470)
0 
(43,858)
Net cash used in investing activities
(69,871)
(182,364)
(72,721)
Cash flows from financing activities
 
 
 
Proceeds from follow-on public offering, net of issuance costs
0 
0 
190,094 
Proceeds from exercises of employee stock options
31,882 
25,412 
10,609 
Proceeds from employee stock purchase plan
14,248 
11,004 
9,526 
Taxes paid related to net share settlement of share-based awards
(2,989)
(803)
(609)
Excess tax benefit from share-based award activity
0 
337 
449 
Principal payments on debt and capital lease obligations
0 
(323)
(6,962)
Net cash provided by financing activities
43,141 
35,627 
203,107 
Effect of exchange rate changes on cash and cash equivalents
328 
(334)
242 
Net increase (decrease) in cash and cash equivalents
15,693 
(122,549)
135,961 
Cash and cash equivalents at the beginning of period
93,677 
216,226 
80,265 
Cash and cash equivalents at the end of period
109,370 
93,677 
216,226 
Supplemental cash flow data:
 
 
 
Cash paid for interest and income taxes
1,766 
1,678 
793 
Non-cash investing and financing activities:
 
 
 
Share-based compensation capitalized in internal-use software development costs
2,704 
2,365 
2,085 
Balance of property and equipment in accounts payable and accrued expenses
1,837 
3,610 
3,179 
Property and equipment acquired through tenant improvement allowances
647 
237 
174 
Vesting of early exercised stock options
$ 411 
$ 628 
$ 1,048 
Organization
Organization
Organization
Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April, 2009.
We are a software development company that provides SaaS products that are intended to help organizations and their customers build better relationships. With our origins in customer service, we have evolved our offerings over time to a family of products that work together to help organizations understand their customers, improve communications, and engage where and when it’s needed most. Our product family is built upon a modern architecture that enables us and our customers to rapidly innovate, adapt our technology in novel ways, and easily integrate with other products and applications.
References to Zendesk, the “Company”, “our”, or “we” in these notes refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles, or GAAP. The consolidated financial statements include the accounts of Zendesk, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
Initial Public Offering
In May 2014, we completed our initial public offering, or IPO, in which we issued and sold 12.8 million shares of common stock at a public offering price of $9.00 per share. We received net proceeds of $103.1 million after deducting underwriting discounts and commissions of $8.1 million and other offering expenses of $3.8 million. Upon the closing of the IPO, all shares of our then-outstanding redeemable convertible preferred stock automatically converted into an aggregate of 34.3 million shares of common stock.
Follow-On Public Offering
In March 2015, we completed a follow-on public offering, in which we issued and sold 8.8 million shares of our common stock at a public offering price of $22.75 per share. We received net proceeds of $190.1 million after deducting underwriting discounts and commissions of $8.7 million and other offering expenses of $0.9 million.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had an immaterial effect on the reported results of operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods.
Significant items subject to such estimates and assumptions include the fair value of share-based awards, acquired intangible assets, and goodwill as well as unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of our capitalized internal-use software, and financial forecasts used in currency hedging.
These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Segment Information
Our chief operating decision maker reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single operating segment.
Revenue Recognition
We generate substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts on Zendesk Support and, to a lesser extent, Chat and Talk. In addition, we generate revenue by providing additional features to certain of our subscription plans for a fee that is incremental to the base subscription rate for such plan. Arrangements with customers do not provide the customer with the right to take possession of the software supporting our products at any time, and are therefore accounted for as service contracts. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales and excise taxes.
We commence revenue recognition when all of the following conditions are met:
•
There is persuasive evidence of an arrangement;
•
The service has been or is being provided to the customer;
•
The collection of the fees is reasonably assured; and
•
The amount of fees to be paid by the customer is fixed or determinable.
Subscription revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that our service is made available to the customer. Payments received in advance of services being rendered are recorded as deferred revenue and recognized on a straight-line basis over the requisite service period.
Certain customers have arrangements that provide for a maximum number of users over the contract term, with usage measured monthly. Revenue for these arrangements is recognized ratably over the contract terms until such time as a better pattern of recognition is evident. Incremental fees are incurred when the maximum number of users is exceeded, and any incremental fees are recognized as revenue ratably over the remaining contractual term.
We derive an immaterial amount of revenue from implementation and training services, for which we recognize revenue upon completion. We also derive an immaterial amount of revenue from Talk, for which we recognize revenue based on usage.
Deferred Revenue
Deferred revenue consists primarily of customer billings in advance of revenue being recognized. We invoice customers for subscriptions to our products in monthly, quarterly, or annual installments. Deferred revenue that is anticipated to be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue. Deferred revenue associated with implementation and training services and Talk usage was immaterial as of December 31, 2017 and 2016.
Cost of Revenue
Cost of revenue consists primarily of personnel costs (including salaries, share-based compensation, and benefits) for employees associated with our infrastructure, product support, and professional service organizations, and expenses for hosting capabilities, including third-party managed hosting services and depreciation from our self-managed colocation data centers. Cost of revenue also includes third-party license fees, amortization expense associated with capitalized internal-use software, payment processing fees, amortization expense associated with acquired intangible assets, and allocated shared costs, primarily including facilities, information technology, and security costs.
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at fair value and consist primarily of bank deposits and money market funds.
As of December 31, 2017, our restricted cash balance was $1.5 million, consisting of $0.9 million pledged for charitable donation and $0.6 million related to a deposit for leased office space. As of December 31, 2016, our restricted cash balance was $2.5 million, consisting of $1.1 million cash collateral related to cash flow hedges, $1.0 million pledged for charitable donation, and $0.4 million related to a deposit for leased office space. Restricted cash is included within other assets on our consolidated balance sheet.
Marketable Securities
Marketable securities consist of corporate bonds, money market funds, U.S. Treasury securities, asset-backed securities, commercial paper, and agency securities. We classify marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. All marketable securities are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive loss. We evaluate our investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value determined to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified.
Our allowance for doubtful accounts consists of the following activity (in thousands):
 
Year Ended December 31,
2017
 
2016
Allowance for doubtful accounts, beginning balance
$
1,269

 
$
763

Additions
3,400

 
2,029

Write-offs
(3,417
)
 
(1,523
)
Allowance for doubtful accounts, ending balance
$
1,252

 
$
1,269


Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of assets. Maintenance and repair costs are charged to expense as incurred. The estimated useful lives of our property and equipment are as follows:
 
Furniture and fixtures
5 years
Hosting equipment
3 years
Computer equipment and licensed software and patents
3 to 5 years
Leasehold improvements
Shorter of the lease term or estimated useful life

Derivative Instruments and Hedging

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

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

We have a master netting agreement with each of our counterparties, which permits net settlement of multiple, separate derivative contracts with a single payment. We may also be required to exchange cash collateral with certain of our counterparties on a regular basis. As of December 31, 2017, we have no restricted cash associated with cash collateral exchanged. GAAP permits companies to present the fair value of derivative instruments on a net basis according to master netting arrangements. We have elected to present our derivative instruments on a gross basis in our consolidated financial statements. We do not enter into any derivative contracts for trading or speculative purposes.
Fair Value Measurements
We measure certain financial instruments at fair value using a fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
Our marketable securities are classified within either Level 1 or Level 2 and our foreign currency forward contracts are classified within Level 2. We have no financial assets or liabilities measured using Level 3 inputs. The fair value of our Level 1 marketable securities is based on quoted market prices of identical underlying securities. The fair value of our Level 2 marketable securities is based on indirect or directly observable market data, including readily available pricing sources for identical underlying securities that may not be actively traded. The fair value of our foreign currency forward contracts is based on quoted prices and market observable data of similar instruments in active markets, such as currency spot rates, forward rates, and LIBOR.
For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
Capitalized Internal-Use Software Costs
We capitalize certain development costs incurred in connection with software development for our platform and software used in operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred.
Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life and recorded in cost of revenue within the accompanying consolidated statements of operations. The weighted-average remaining useful life of our capitalized internal-use software was 2.4 years as of December 31, 2017.
Business Combinations
When we acquire businesses, we allocate the purchase price to the net tangible and identifiable intangible assets. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable.
Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets
Goodwill. Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually in the third quarter, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. No impairment charges were recorded during the years ended December 31, 2017, 2016, or 2015.
Acquired Intangible Assets. Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisitions. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.
Impairment of Long-Lived Assets. The carrying amounts of our long-lived assets, including property and equipment, capitalized internal-use software, and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life. There were no material impairments for the years ended December 31, 2017, 2016, and 2015.
Share-Based Compensation
Share-based compensation expense to employees is measured based on the fair value of the awards on the grant date and recognized in our consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award, which is typically four years). We estimate the fair value of stock options granted using the Black-Scholes option valuation model. We measure the fair value of Restricted Stock Units, or RSUs, based on the fair value of the underlying shares on the date of grant. Compensation expense for awards with only service conditions is recognized over the vesting period of the applicable award using the straight-line method.
Prior to our IPO, we granted certain awards to our employees that vest upon the satisfaction of both a service condition and a performance condition. We recognized share-based compensation expense, using the accelerated attribution method, related to these awards of $0.4 million, $2.8 million, and $6.1 million for the years ended December 31, 2017, 2016, and 2015, respectively.
As of December 31, 2017, we had a total of $174.0 million in future period share-based compensation expense related to all equity awards to be recognized over a weighted average period of 2.6 years.
Advertising Expense
Advertising is expensed as incurred. For the years ended December 31, 2017, 2016, and 2015, advertising expense was $36.8 million, $23.9 million, and $16.5 million, respectively.
Government Grants
We have obtained government grants in certain jurisdictions where we operate. We receive the grant funds as we meet certain commitments, including targeted levels of employment and/or spending within the local jurisdictions. If we fail to maintain these commitments, we may be required to repay grant funds received or be ineligible to receive future funding. We recognize grant proceeds to offset costs to which the grants relate on a straight-line basis when it is reasonably assured that the applicable commitments have been met. For the years ended December 31, 2017 and 2016, we recognized grant proceeds of $2.0 million and $1.2 million in our consolidated statements of operations, respectively. We did not recognize grant proceeds in 2015.

Income Taxes
We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.
We recognize tax benefits from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and results of operations.
We have elected to record interest accrued and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of provision for income taxes.
Foreign Currency
The functional currency of our foreign subsidiaries is the U.S. dollar. Accordingly, monetary balance sheet accounts are remeasured using exchange rates in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Expenses are generally remeasured at the average exchange rates for the period. Foreign currency remeasurement and transaction gains and losses are included in other income (expense), net and were not material for the years ended December 31, 2017, 2016, and 2015, respectively.
Concentrations of Risk
Financial instruments potentially exposing us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities, accounts receivable and derivative instruments. We place our cash and cash equivalents with high-credit-quality financial institutions. However, we maintain balances in excess of the FDIC insurance limits. We do not require our customers to provide collateral to support accounts receivable and maintain an allowance for doubtful accounts receivable balances. We seek to mitigate counterparty credit risk related to our derivative instruments by transacting with major financial institutions with high credit ratings.
At December 31, 2017 and 2016, there were no customers that represented 10% or greater of our accounts receivable balance. There were no customers that individually exceeded 10% of our revenue in any of the periods presented.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board, or the FASB, issued new revenue guidance that provides principles for recognizing revenue to which an entity expects to be entitled for the transfer of promised goods or services to customers. The guidance also requires the deferral of incremental costs to acquire contracts with customers. As currently issued and amended, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, though early adoption is permitted for annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively to each prior period presented (full retrospective method), or with the cumulative effect recognized as of the date of initial adoption (modified retrospective method).

In the fourth quarter of 2017, we substantially completed our assessment of the new standard, including the effects of adoption on our existing revenue arrangements and the treatment of sales commissions and other incremental costs to acquire contracts. We plan to adopt using the full retrospective method.

The impact of adopting the new standard on our 2017 and 2016 revenues is not material. The primary impact relates to the deferral of sales commissions and other incremental costs to acquire contracts, which we historically expensed as incurred. Under the new standard, all incremental costs to acquire contracts are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have determined to be three years.

Selected consolidated statement of operations line items, which have been restated to reflect the adoption of the new standard, are as follows (in thousands):

 
Year ended December 31,
 
2017
 
2016
Revenue
430,165

 
312,844

Operating expenses:

 

Sales and marketing
211,918

 
161,653

Operating loss
(106,146
)
 
(98,147
)
Net loss
(102,141
)
 
(97,620
)


Selected consolidated balance sheet line items, which have been restated to reflect the adoption of the new standard, are as follows (in thousands):

 
December 31, 2017
Assets
 
Deferred costs
15,771

Deferred costs, noncurrent
15,395

Liabilities and stockholders’ equity
 
Deferred revenue
173,147

Deferred revenue, noncurrent
1,213

Accumulated deficit
(398,043
)

In February 2016, the FASB issued Accounting Standards Update, or ASU, 2016-02, regarding Accounting Standards Codification, or ASC, Topic 842 “Leases.” This new standard requires lessees to recognize most leases on their balance sheets as right-of-use assets with corresponding lease liabilities and eliminates certain real estate-specific provisions. The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. While we continue to evaluate the effect of adoption on our consolidated financial statements, we expect the adoption will result in the recognition of right-of-use assets and lease liabilities that were not previously recognized, which will increase total assets and liabilities on our consolidated balance sheets.

In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “Statement of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows - Restricted Cash,” which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. The new standard must be adopted retrospectively. We do not expect the adoption of this standard to have a material effect on our consolidated statements of cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations - Clarifying the Definition of a Business,” which clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, 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 January 2017, the FASB issued ASU 2017-04, regarding ASC Topic 350 “Simplifying the Test for Goodwill Impairment,” which simplifies the required methodology to calculate an impairment charge for goodwill. The standard is effective for fiscal years beginning after December 15, 2019, however early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, regarding ASC Topic 815 “Derivatives and Hedging.” This amendment simplifies various aspects of hedge accounting, including measurement and presentation of hedge ineffectiveness and certain documentation and assessment requirements. The amendment also makes more hedging strategies eligible for hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income,” which provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act, or Tax Act. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, regarding ASC Topic 718 “Compensation - Stock Compensation.” This amendment changes certain aspects of accounting for share-based awards to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. We adopted the standard in the first quarter of 2017.
As required by the new standard, we now recognize excess tax effects from share-based awards as a component of provision for income taxes in our statement of operations when awards vest or are settled. Upon adoption, we recorded a deferred tax asset of $52.8 million to reflect, on a modified retrospective basis, the previously unrecognized excess tax benefits; however, the deferred tax asset was fully offset by a valuation allowance, resulting in no impact to our consolidated financial statements. In our statement of cash flows, we no longer classify excess tax benefits as a reduction from operating cash flows. This change was made prospectively beginning with the quarter ended March 31, 2017.
We also elected to account for forfeitures as they occur, therefore share-based compensation expense for the year ended December 31, 2017 has been calculated based on actual forfeitures in our consolidated statement of operations, rather than our previous approach which was net of estimated forfeitures. The cumulative-effect adjustment of this change on a modified retrospective basis was not material. Share-based compensation expense for the years ended December 31, 2016 and 2015 was recorded net of estimated forfeitures.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory,” which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual reporting period. The new standard must be adopted using a modified retrospective basis, with the cumulative effect recognized as of the date of adoption. We early adopted this standard in the first quarter of 2017. Upon adoption, we recorded a deferred tax asset of $6.2 million to reflect the previously unrecognized tax benefits, however the deferred tax asset was fully offset by a valuation allowance, resulting in no impact to our consolidated financial statements. We also recorded a cumulative-effect adjustment on a modified retrospective basis, which was not material.
In May 2017, the FASB issued ASU 2017-09, regarding ASC Topic 718 “Compensation - Stock Compensation: Scope of Modification Accounting.” This amendment clarified what changes to terms or conditions of share-based awards require an entity to apply modification accounting. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We early adopted this standard in the second quarter of 2017 on a prospective basis, as permitted by the standard. The adoption did not have and is not expected to have a material effect on our consolidated financial statements.
Business Combinations
Business Combinations
Business Combinations
Outbound Solutions
On April 27, 2017, we completed the acquisition of Outbound Solutions, Inc., or Outbound, a provider of software that enables companies to deliver intelligent, behavior-based messages across multiple channels. We acquired Outbound for purchase consideration of $16.6 million in cash.
As of September 30, 2017, 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 expected growth from the expansion of the scope of and market opportunity for our products. Goodwill is not deductible for income tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.
Net tangible assets acquired
$
96

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

Customer relationships
410

Goodwill
13,350

Total purchase price
$
16,564



The developed technology and customer relationship intangible assets were assigned useful lives of 6.5 and 3.5 years, respectively.
From the date of the acquisition, the results of operations of Outbound have been included in and are immaterial to our consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results of Outbound are not material to our consolidated financial statements in any period presented.
We Are Cloud SAS
On October 13, 2015, we completed the acquisition of We Are Cloud SAS, or WAC, the maker of BIME Analytics software. We acquired 100 percent of the outstanding shares of WAC in exchange for purchase consideration of $46.4 million in cash, including working capital adjustments. The total purchase price was allocated to the assets acquired and liabilities assumed as set forth below (in thousands). The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected synergies, including cost savings from integrating the analytics technology with our infrastructure and the opportunity to sell the analytics software alongside our existing products. Goodwill is not deductible for income tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.
Net tangible assets acquired
$
2,140

Net deferred tax liability recognized
(1,979
)
Identifiable intangible assets:
 

Developed technology
8,800

Customer relationships
500

Goodwill
36,896

Total purchase price
$
46,357


 
The developed technology and customer relationship intangible assets were each assigned useful lives of 4.5 years.
In connection with the acquisition, we entered into retention arrangements with certain employees of WAC, pursuant to which we issued RSUs for approximately 0.5 million shares of our common stock, most of which vest in three annual installments from the date of acquisition. The expense related to the RSUs is recognized as share-based compensation expense over the required service periods and was not included in the purchase consideration.
The results of operations of WAC have been included in our consolidated financial statements from the date of the acquisition.
Financial Instruments
Financial Instruments
Financial Instruments
Investments
The following tables present information about our financial assets measured at fair value on a recurring basis as of December 31, 2017 and 2016 based on the three-tier fair value hierarchy (in thousands):
 
Fair Value Measurement at
December 31, 2017
Level 1
 
Level 2
 
Total
Description
 

 
 

 
 

Corporate bonds
$
—

 
149,069

 
$
149,069

Money market funds
32,832

 
—

 
32,832

U.S. Treasury securities
—

 
28,382

 
28,382

Asset-backed securities
—

 
27,738

 
27,738

Commercial paper
—

 
19,622

 
19,622

Agency securities
—

 
14,911

 
14,911

Total
$
32,832

 
$
239,722

 
$
272,554

Included in cash and cash equivalents
 

 
 

 
$
37,531

Included in marketable securities
 

 
 

 
$
235,023


 
Fair Value Measurement at
December 31, 2016
Level 1
 
Level 2
 
Total
Description
 
 
 
 
 
Corporate bonds
$
—

 
$
124,930

 
$
124,930

Asset-backed securities
—

 
32,567

 
32,567

U.S. Treasury securities
—

 
30,585

 
30,585

Commercial paper
—

 
9,787

 
9,787

Agency securities
$
—

 
$
8,489

 
$
8,489

Money market funds
$
3,545

 
$
—

 
$
3,545

Total
$
3,545

 
$
206,358

 
$
209,903

Included in cash and cash equivalents
 
 
 
 
$
3,545

Included in marketable securities
 
 
 
 
$
206,358


There were no transfers between fair value measurement levels during the years ended December 31, 2017 or 2016.
Gross unrealized gains or losses for cash equivalents and marketable securities as of December 31, 2017 and 2016 were not material. As of December 31, 2017 and 2016, there were no securities that were in an unrealized loss position for more than twelve months.
The following table classifies our marketable securities by contractual maturity as of December 31, 2017 and 2016 (in thousands):
 
December 31,
2017
 
December 31,
2016
Due in one year or less
$
137,576

 
$
131,190

Due after one year
97,447

 
75,168

Total
$
235,023

 
$
206,358


 
Derivative Instruments and Hedging
 
Our foreign currency exposures typically arise from expenditures associated with foreign operations and sales in foreign currencies of our products. To mitigate the effect of foreign currency fluctuations on our future cash flows and earnings, we enter into foreign currency forward contracts with certain financial institutions and designate those contracts as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less. As of December 31, 2017, the balance of accumulated other comprehensive loss included an unrecognized net gain of $0.9 million related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges. As of December 31, 2017, we have no cash collateral related to our cash flow hedges. We expect to reclassify a net gain of $1.0 million into earnings over the next 12 months associated with our cash flow hedges.
 
The following table presents information about our derivative instruments on the consolidated balance sheet as of December 31, 2017 and 2016 (in thousands):

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

 
Accrued liabilities
 
$
1,220

Total
 
 
$
2,359

 
 
 
$
1,220



 
December 31, 2016
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
 
$
868

 
Accrued liabilities
 
$
4,280

Total
 
 
$
868

 
 
 
$
4,280



Our foreign currency forward contracts had a total notional value of $139.7 million and $79.6 million as of December 31, 2017 and 2016, respectively.
 
The following table presents information about our derivative instruments on the statement of operations for the years ended December 31, 2017 and 2016 (in thousands):
 
 
 
Year Ended December 31, 2017
 
Year Ended December 31, 2016
Derivative Instrument
Location of Loss Reclassified into Earnings
 
Gain Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
 
Loss Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts
Revenue, cost of revenue, operating expenses
 
$
3,663

 
$
(225
)
 
$
(3,174
)
 
$
(903
)
Total
 
 
$
3,663

 
$
(225
)
 
$
(3,174
)
 
$
(903
)


All derivatives have been designated as hedging instruments. Amounts recognized in earnings related to excluded time value and hedge ineffectiveness were not material for the years ended December 31, 2017 and 2016.
Property and Equipment
Property and Equipment
Property and Equipment
Property and equipment consists of the following (in thousands):
 
December 31, 2017
 
December 31, 2016
Hosting equipment
$
37,222

 
$
35,018

Capitalized internal-use software
31,593

 
25,773

Leasehold improvements
28,113

 
25,396

Computer equipment and licensed software and patents
16,316

 
11,879

Furniture and fixtures
9,581

 
8,014

Construction in progress
11,220

 
7,993

Total
134,045

 
114,073

Less accumulated depreciation and amortization
(74,888
)
 
(51,342
)
Property and equipment, net
$
59,157

 
$
62,731


Depreciation expense was $20.3 million, $16.2 million, and $11.2 million for the years ended December 31, 2017, 2016, and 2015, respectively.
Amortization expense of capitalized internal-use software was $7.7 million, $7.4 million, and $6.2 million during the years ended December 31, 2017, 2016, and 2015, respectively. The carrying value of capitalized internal-use software at December 31, 2017 and 2016 was $17.7 million and $15.4 million, respectively, including $8.7 million and $5.4 million in construction in progress, respectively.
Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
Goodwill and Acquired Intangible Assets
The changes in the carrying amount of goodwill for the two years ended December 31, 2017 are as follows (in thousands):
Balance as of December 31, 2015
$
45,346

Goodwill adjustments
166

Foreign currency translation adjustments
(165
)
Balance as of December 31, 2016
45,347

Goodwill acquired
13,350

Foreign currency translation adjustments
434

Balance as of December 31, 2017
$
59,131


The following tables present information about our acquired intangible assets subject to amortization as of December 31, 2017 and 2016 (in thousands):
 
As of December 31, 2017
Cost
 
Accumulated
Amortization
 
Foreign Currency Translation Adjustments
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
 
(In years)
Developed technology
$
17,200

 
$
(9,835
)
 
$
(93
)
 
$
7,272

 
3.7
Customer relationships
2,210

 
(1,549
)
 
(30
)
 
631

 
2.4
 
$
19,410

 
$
(11,384
)
 
$
(123
)
 
$
7,903

 
 

 
As of December 31, 2016
Cost
 
Accumulated
Amortization
 
Foreign Currency Translation Adjustments
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
 
(In years)
Developed technology
$
14,000

 
$
(6,584
)
 
$
(169
)
 
$
7,247

 
2.9
Customer relationships
1,800

 
(1,044
)
 
(53
)
 
703

 
2.3
 
$
15,800

 
$
(7,628
)
 
$
(222
)
 
$
7,950

 
 

Amortization expense of acquired intangible assets for the years ended December 31, 2017 and 2016 was $3.8 million and $3.9 million, respectively.
Estimated future amortization expense as of December 31, 2017 is as follows (in thousands): 
2018
$
2,727

2019
2,678

2020
1,103

2021
492

2022
492

Thereafter
411

 
$
7,903

Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Contractual Obligations
Leases
We lease office space under noncancelable operating leases with various expiration dates. Certain of the office space lease agreements contain rent holidays or rent escalation provisions. Rent holiday and rent escalation provisions are considered in determining the straight-line expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. For the years ended December 31, 2017, 2016, and 2015, rent expense was $12.3 million, $9.9 million, and $7.5 million, respectively. Deferred rent of $6.4 million and $6.5 million as of December 31, 2017 and 2016, respectively, is included in other liabilities.
We leased computer equipment from various parties under capital lease agreements that expired in March 2015.
As of December 31, 2017, the future minimum lease payments by year under noncancelable operating leases are as follows for the years ending December 31 (in thousands):
2018
$
14,934

2019
18,938

2020
16,675

2021
14,927

2022
13,005

Thereafter
40,055

Total minimum lease payments
$
118,534


Purchase obligations
As of December 31, 2017, our contractual purchase obligations, primarily related to hosting infrastructure providers, are as follows for the years ending December 31 (in thousands):
2018
38,559

2019
28,530

2020
29,270

Total purchase obligations
$
96,359


Letters of Credit
As of December 31, 2017 and 2016, we had a total of $2.0 million and $2.7 million, respectively in unsecured letters of credit outstanding primarily related to our leased office space in San Francisco. These letters of credit renew annually and mature at various dates through October 31, 2022.
Litigation and Loss Contingencies
We accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. From time to time, we may become a party to litigation and subject to claims that arise in the ordinary course of business, including intellectual property claims, labor and employment claims, and threatened claims, breach of contract claims, tax, and other matters. We currently have no material pending litigation.
We are not currently aware of any litigation matters or loss contingencies that would be expected to have a material adverse effect on our business, consolidated balance sheets, results of operations, comprehensive loss, or cash flows.
Indemnifications
In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to customers, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from our products, or our acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary. To date, we have not incurred any material costs, and we have not accrued any liabilities in the accompanying 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 and permitting those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in the accompanying consolidated financial statements as a result of these service-level agreements.
Common Stock and Stockholders' Equity
Common Stock and Stockholders' Equity
Common Stock and Stockholders’ Equity
Common Stock
As of December 31, 2017 and 2016, 400 million shares of common stock were authorized for issuance with a par value of $0.01 per share. There were 103.1 million and 97.2 million shares of common stock issued and 103.1 million and 96.7 million shares outstanding as of December 31, 2017 and 2016, respectively. Included within the number of shares issued and outstanding were approximately three thousand and 0.1 million shares of common stock subject to repurchase, respectively.
Preferred Stock
As of December 31, 2017 and 2016, 10 million shares of preferred stock were authorized for issuance with a par value of $0.01 per share and no shares of preferred stock were issued or outstanding.
Employee Equity Plans
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan, or ESPP, eligible employees are granted options to purchase shares of our common stock through payroll deductions. The ESPP provides for eighteen month offering periods, which include three six-month purchase periods. At the end of each purchase period, employees are able to purchase shares at 85% of the lower of the fair market value of our common stock at the beginning of an offering period or the fair market value of our common stock at the end of the purchase period.
For the years ended December 31, 2017 and 2016, 0.7 million and 0.6 million shares of common stock were purchased under the ESPP. Pursuant to the terms of the ESPP, the number of shares reserved under the ESPP increased by 1.0 million shares on both January 1, 2018 and 2017. As of December 31, 2017, 3.6 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 IPO, and accordingly, no shares are available for issuance under this plan. The 2009 Plan continues to govern outstanding awards granted thereunder.
Our 2014 Stock Option and Incentive Plan, or the 2014 Plan, serves as the successor to our 2009 Plan. Pursuant to the terms of the 2014 Plan, the number of shares reserved for issuance under the 2014 Plan increased by 5.2 million and 4.8 million shares on January 1, 2018 and 2017, respectively. As of December 31, 2017, we had 8.0 million shares of common stock available for future grants under the 2014 Plan.
On May 6, 2016, the compensation committee of our board of directors granted equity awards representing 1.2 million shares. These awards were granted outside of the 2014 Plan pursuant to an exemption provided for “employment inducement awards” within the meaning of Section 303A.08 of the New York Stock Exchange Listed Company Manual and accordingly did not require approval from our stockholders.
A summary of our stock option and RSU activity for the year ended December 31, 2017 is as follows (in thousands, except per share information):
 
 
Options Outstanding
 
RSUs Outstanding
Shares
Available
for Grant
 
Number of
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
 
Outstanding
RSUs
 
Weighted
Average
Grant Date
Fair Value
 
 
 
 
 
 
(In years)
 
 
 
 
 
 
Outstanding — January 1, 2017
6,039

 
8,479

 
$
14.52

 
7.49
 
$
66,449

 
6,936

 
$
20.81

Increase in authorized shares
4,833

 
 

 
 

 
 
 
 

 
 

 
 

Stock options granted
(1,203
)
 
1,203

 
28.14

 
 
 
 

 
 

 
 

RSUs granted
(3,647
)
 
 

 
 

 
 
 
 

 
3,647

 
28.09

Stock options exercised
 

 
(2,664
)
 
11.97

 
 
 
 

 
 

 
 

RSUs vested
 

 
 

 
 

 
 
 
 

 
(3,145
)
 
20.62

Stock options forfeited or canceled
579

 
(579
)
 
21.49

 
 
 
 

 
 

 
 

Stock options forfeited or canceled and unavailable for grant
—

 
(200
)
 
23.44

 
 
 
 
 
 
 
 
RSUs forfeited or canceled
1,400

 
 

 
 

 
 
 
 

 
(1,400
)
 
22.39

RSUs forfeited or canceled and unavailable for grant
—

 
 
 
 
 
 
 
 
 
(211
)
 
23.44

Outstanding — December 31, 2017
8,001

 
6,239

 
$
17.31

 
7.11
 
$
103,380

 
5,827

 
$
25.00

Options vested and expected to vest as of December 31, 2017
 
 
5,910

 
$
16.95

 
7.04
 
$
99,958

 
 
 
 
Options vested and exercisable as of December 31, 2017
 
 
3,243

 
$
14.01

 
6.40
 
$
64,311

 
 
 
 

The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 was $47.1 million, $49.2 million and $66.2 million, respectively. The intrinsic value for options exercised represents the difference between the exercise price and the market value on the date of exercise. The weighted-average grant date fair value of stock options granted during the years ended December 31, 2017, 2016, and 2015 was $13.07, $11.34, and $12.44, respectively.
The intrinsic value for options outstanding represents the difference between the closing stock price of our common stock and the exercise price of outstanding, in-the-money options.
Share-Based Compensation Expense
All share-based awards to employees and members of our board of directors are measured based on the grant date fair value of the awards and recognized in the consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award, which is typically four years). We record share-based compensation expense for service-based equity awards using the straight-line attribution method. We record share-based compensation expense for performance-based equity awards using the accelerated attribution method.
We estimate the fair value of stock options granted using the Black-Scholes option valuation model, which requires assumptions, including the fair value of our underlying common stock, expected term, expected volatility, risk-free interest rate and dividend yield of our common stock. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our share-based compensation expense could be materially different in the future.
These assumptions are estimated as follows:
•
Expected Term. We determine the expected term based on the average period the stock options are expected to remain outstanding, generally calculated as the midpoint of the vesting term and the contractual expiration period, as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.
•
Expected Volatility. We determine expected volatility based on the historical volatility of our own common stock. We applied this methodology beginning in 2017, after having obtained sufficient historical information regarding the volatility of our own common stock. In 2016 and 2015, we determined the expected volatility using a combination of the historical volatility of our publicly traded industry peers and our own common stock.
•
Risk-Free Interest Rate. We base the risk-free interest rate used in the Black-Scholes valuation model on the yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term of the stock options for each stock option group.
•
Dividend Yield. We have not paid and do not anticipate paying any cash dividends in the foreseeable future and, therefore, use an expected dividend yield of zero.
The assumptions used to estimate the fair value of stock options granted to employees are as follows:
 
Year Ended December 31,
2017
 
2016
 
2015
Expected volatility
44% - 48%
 
47% - 49%
 
49% - 54%
Dividend rate
0%
 
0%
 
0%
Risk-free interest rate
1.9% - 2.2%
 
1.1% - 2.0%
 
1.4% - 2.0%
Expected term (in years)
6.02 - 6.08
 
6.02 - 6.08
 
6.02 - 6.08

 
The assumptions used to estimate the fair value of ESPP awards are as follows:
 
Year Ended December 31,
 
2017
 
2016
Expected volatility
37% - 44%
 
42% - 48%
Dividend rate
0%
 
0%
Risk-free interest rate
1.02% - 1.62%
 
0.38% - 0.90%
Expected term (in years)
0.50 -1.50
 
0.50 -1.50

 
In the first quarter of 2017, we changed our accounting policy for share-based compensation to recognize forfeitures as they occur, as permitted by ASU 2016-09. Refer to Note 2 for additional information regarding the adoption of this standard.
In the years ended December 31, 2017, 2016 and 2015, we recorded $1.5 million, $0.7 million and none of share-based compensation expense related to accelerated vesting of share-based awards for terminated employees, respectively.
Net Loss Per Share
Net Loss Per Share
Net Loss Per Share
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders 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 outstanding share-based awards, to the extent dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive.
The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):
 
Year Ended
December 31,
2017
 
2016
 
2015
Net loss
$
(110,638
)
 
$
(103,799
)
 
$
(84,052
)
Weighted-average shares used to compute basic and diluted net loss per share
99,918

 
93,161

 
84,926

Net loss per share, basic and diluted
(1.11
)
 
(1.11
)
 
(0.99
)

The anti-dilutive securities excluded from the shares used to calculate the diluted net loss per share are as follows (in thousands):
 
As of December 31,
2017
 
2016
 
2015
Shares subject to outstanding common stock options and employee stock purchase plan
6,343

 
8,556

 
10,844

Restricted stock units
5,827

 
6,936

 
6,417

 
12,170

 
15,492

 
17,260

Income Taxes
Income Taxes
Income Taxes
The components of loss before provision for income taxes are as follows (in thousands):
 
Year Ended December 31,
2017
 
2016
 
2015
U.S.
$
(115,674
)
 
$
(107,685
)
 
$
(85,928
)
Foreign
3,518

 
4,879

 
2,214

Total
$
(112,156
)
 
$
(102,806
)
 
$
(83,714
)

 
The income tax provision is composed of the following (in thousands):
 
Year Ended December 31,
2017
 
2016
 
2015
Current tax provision:
 

 
 

 
 

Federal
$
(2,636
)
 
$
—

 
$
1

State
104

 
74

 
(3
)
Foreign
1,476

 
3,096

 
1,693

 
(1,056
)
 
3,170

 
1,691

Deferred tax provision:
 

 
 

 
 

Federal
—

 
(49
)
 
(16
)
State
—

 
—

 
—

Foreign
(462
)
 
(2,128
)
 
(1,337
)
Total provision for (benefit from) income taxes
$
(1,518
)
 
$
993

 
$
338


 
Significant components of deferred tax assets are as follows (in thousands):
 
As of December 31,
2017
 
2016
Deferred tax assets:
 

 
 

Tax credit carryforward
$
733

 
$
762

Net operating loss carryforward
115,237

 
73,611

Share-based compensation
6,072

 
13,306

Accrued liabilities and reserves
3,968

 
4,877

Other
5,086

 
5,325

Total deferred tax assets
131,096

 
97,881

Less: valuation allowance
(126,321
)
 
(92,125
)
Deferred tax assets, net of valuation allowance
4,775

 
5,756

Deferred tax liabilities:
 

 
 

Depreciation and amortization
(3,053
)
 
(4,474
)
Net deferred tax assets
$
1,722

 
$
1,282



The following is a reconciliation of the statutory federal income tax rate and the effective tax rates:
 
Year Ended December 31,
2017
 
2016
 
2015
Tax at federal statutory rate
34.0
 %
 
34.0
 %
 
34.0
 %
Tax reform rate change impact
(58.2
)
 
—

 
—

Excess tax benefit from share-based compensation
42.8

 
—

 
—

Valuation allowance
(20.7
)
 
(23.3
)
 
(29.2
)
Share-based compensation
6.4

 
(6.1
)
 
(5.5
)
Other
(4.4
)
 
0.3

 
0.3

Benefit from other comprehensive gain
1.5

 
—

 
—

Intercompany dividend
—

 
(5.9
)
 
—

Effective tax rate
1.4
 %
 
(1.0
)%
 
(0.4
)%

 
We have not provided income taxes on foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of December 31, 2017 because we intend to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31, 2017, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $0.4 million. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
As of December 31, 2017, we had net operating loss carryforwards of approximately $464.5 million for federal income taxes and $218.4 million for state income taxes. If not utilized, these carryforwards will begin to expire in 2029 for federal purposes and 2031 for state purposes. As of December 31, 2017, we had research and development credit carryforwards of approximately $7.4 million and $8.3 million for federal and state income taxes, respectively. If not utilized, the federal carryforwards will begin to expire in 2029. The state tax credit can be carried forward indefinitely. Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. In the event that we had a change of ownership, utilization of the net operating loss and tax credit carryforwards may be restricted. In addition, we have $9.7 million of net operating loss carryforwards in France, of which approximately $3.0 million were obtained as part of our acquisition of WAC. These carryforward losses do not expire, however, utilization of these carryforwards may be subject to annual limitations. In addition, the right to the carryforward losses could be challenged if the French tax authorities determined that a significant change in the company’s actual business has occurred.
We account for income taxes under an asset and liability approach. Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain. We regularly assess the need for a valuation allowance against our deferred tax assets by considering both positive and negative evidence to determine whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. We recorded a valuation allowance to fully offset our U.S. deferred tax assets, as we consider our cumulative loss in recent years to be strong negative evidence for retaining the valuation allowance. The valuation allowance increased by $34.2 million during the twelve months ended December 31, 2017. We will continue to assess the future realization of our deferred tax assets in each applicable jurisdiction and adjust the valuation allowance accordingly.
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) for the two years ending December 31, 2017 is as follows (in thousands):
 
Balance at December 31, 2014
$
5,955

Decrease from tax positions related to the prior year
(57
)
Additions from tax positions related to the current year
2,605

Lapse of statutes of limitations
—

Balance at December 31, 2015
$
8,503

Additions from tax positions related to the prior year
279

Additions from tax positions related to the current year
3,639

Decrease related to settlements with taxing authorities
(621
)
Lapse of statutes of limitations
(14
)
Balance at December 31, 2016
11,786

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

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


As of December 31, 2017, we had no interest and penalties related to the uncertain tax positions. We have elected to record interest and penalties in the financial statements as a component of provision for income taxes. Included in the balance of unrecognized tax benefits at December 31, 2017, 2016 and 2015 are potential benefits of none, $0.4 million and $0.1 million, respectively, which if recognized, would affect the effective tax rate.
We are currently unaware of any uncertain tax positions that could result in significant additional payments, accruals, or other material deviation in this estimate over the next 12 months.
We are subject to taxation in the United States and foreign jurisdictions. Our tax years 2009 to 2016 remain subject to examination in most jurisdictions.
On December 22, 2017, the Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21%, effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the Tax Act, we revalued our ending net deferred tax assets at December 31, 2017, which were fully offset by a valuation allowance.
The Tax Act provided for a one-time deemed mandatory repatriation of post-1986 undistributed foreign subsidiary earnings and profits, or E&P, through the year ended December 31, 2017. Our preliminary calculations show that we had negative net undistributed foreign E&P and are not subject to the deemed mandatory repatriation for the year ended December 31, 2017.
While the Tax Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income, or GILTI, provisions and the base-erosion and anti-abuse tax, or BEAT, provisions.
The GILTI provisions require us to include in our U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. Based on our preliminary calculations, we do not expect that we will be subject to incremental U.S. tax on GILTI income. We have elected to account for GILTI tax in the period in which it is incurred, and therefore have not provided any deferred tax impacts of GILTI in our consolidated financial statements for the year ended December 31, 2017.
The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. We are currently beneath the revenue threshold in which this tax applies and therefore have not included any tax impacts of BEAT in our consolidated financial statements for the year ended December 31, 2017.
On December 22, 2017, Staff Accounting Bulletin No. 118, or SAB 118, was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities and our historical foreign earnings as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete.
Geographic Information
Geographic Information
Geographic Information
Revenue
The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):
 
Year Ended December 31,
2017
 
2016
 
2015
United States
$
229,663

 
$
168,479

 
$
116,220

EMEA
123,036

 
87,360

 
59,047

Other
77,793

 
56,160

 
33,501

Total
$
430,492

 
$
311,999

 
$
208,768


Long-Lived Assets
The following table presents our long-lived assets by geographic area (in thousands):
 
As of December 31,
 
2017
 
2016
United States
$
23,609

 
$
26,372

EMEA:
 
 
 
Republic of Ireland
5,019

 
5,703

Other EMEA
5,007

 
6,834

Total EMEA
10,026

 
12,537

APAC
7,734

 
8,357

Total
$
41,369

 
$
47,266


 
The carrying values of capitalized internal-use software and intangible assets are excluded from the balance of long-lived assets presented in the table above.
Retirement Plans
Retirement Plans
Retirement Plans
We have a 401(k) retirement and savings plan made available to all United States employees. The 401(k) plan allows each participant to contribute up to an amount not to exceed an annual statutory maximum. We began contributing to the 401(k) plan in 2017. For the year ended December 31, 2017, we made matching contributions of $1.1 million.
Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
The consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles, or GAAP. The consolidated financial statements include the accounts of Zendesk, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
Reclassification 
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had an immaterial effect on the reported results of operations.
Use of Estimates 
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods.
Significant items subject to such estimates and assumptions include the fair value of share-based awards, acquired intangible assets, and goodwill as well as unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of our capitalized internal-use software, and financial forecasts used in currency hedging.
These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.
Segment Information 
Segment Information
Our chief operating decision maker reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single operating segment.
Revenue Recognition 
Revenue Recognition
We generate substantially all of our revenue from subscription services, which are comprised of subscription fees from customer accounts on Zendesk Support and, to a lesser extent, Chat and Talk. In addition, we generate revenue by providing additional features to certain of our subscription plans for a fee that is incremental to the base subscription rate for such plan. Arrangements with customers do not provide the customer with the right to take possession of the software supporting our products at any time, and are therefore accounted for as service contracts. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales and excise taxes.
We commence revenue recognition when all of the following conditions are met:
•
There is persuasive evidence of an arrangement;
•
The service has been or is being provided to the customer;
•
The collection of the fees is reasonably assured; and
•
The amount of fees to be paid by the customer is fixed or determinable.
Subscription revenue is recognized on a straight-line basis over the contractual term of the arrangement beginning on the date that our service is made available to the customer. Payments received in advance of services being rendered are recorded as deferred revenue and recognized on a straight-line basis over the requisite service period.
Certain customers have arrangements that provide for a maximum number of users over the contract term, with usage measured monthly. Revenue for these arrangements is recognized ratably over the contract terms until such time as a better pattern of recognition is evident. Incremental fees are incurred when the maximum number of users is exceeded, and any incremental fees are recognized as revenue ratably over the remaining contractual term.
We derive an immaterial amount of revenue from implementation and training services, for which we recognize revenue upon completion. We also derive an immaterial amount of revenue from Talk, for which we recognize revenue based on usage.
Deferred Revenue 
Deferred Revenue
Deferred revenue consists primarily of customer billings in advance of revenue being recognized. We invoice customers for subscriptions to our products in monthly, quarterly, or annual installments. Deferred revenue that is anticipated to be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue.
Cost of Revenue 
Cost of Revenue
Cost of revenue consists primarily of personnel costs (including salaries, share-based compensation, and benefits) for employees associated with our infrastructure, product support, and professional service organizations, and expenses for hosting capabilities, including third-party managed hosting services and depreciation from our self-managed colocation data centers. Cost of revenue also includes third-party license fees, amortization expense associated with capitalized internal-use software, payment processing fees, amortization expense associated with acquired intangible assets, and allocated shared costs, primarily including facilities, information technology, and security costs.
Cash, Cash Equivalents, and Restricted Cash 
Cash, Cash Equivalents, and Restricted Cash
We consider all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at fair value and consist primarily of bank deposits and money market funds.
Marketable Securities 
Marketable Securities
Marketable securities consist of corporate bonds, money market funds, U.S. Treasury securities, asset-backed securities, commercial paper, and agency securities. We classify marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. All marketable securities are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive loss. We evaluate our investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value determined to be other than temporary are determined based on the specific identification method and are reported in other income (expense), net in the consolidated statements of operations.
Accounts Receivable and Allowance for Doubtful Accounts 
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified.
Property and Equipment 
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of assets. Maintenance and repair costs are charged to expense as incurred. The estimated useful lives of our property and equipment are as follows:
 
Furniture and fixtures
5 years
Hosting equipment
3 years
Computer equipment and licensed software and patents
3 to 5 years
Leasehold improvements
Shorter of the lease term or estimated useful life

Derivative Instruments and Hedging 
Derivative Instruments and Hedging

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

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

We have a master netting agreement with each of our counterparties, which permits net settlement of multiple, separate derivative contracts with a single payment. We may also be required to exchange cash collateral with certain of our counterparties on a regular basis. As of December 31, 2017, we have no restricted cash associated with cash collateral exchanged. GAAP permits companies to present the fair value of derivative instruments on a net basis according to master netting arrangements. We have elected to present our derivative instruments on a gross basis in our consolidated financial statements. We do not enter into any derivative contracts for trading or speculative purposes.
Fair Value Measurements 
Fair Value Measurements
We measure certain financial instruments at fair value using a fair value hierarchy. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
Our marketable securities are classified within either Level 1 or Level 2 and our foreign currency forward contracts are classified within Level 2. We have no financial assets or liabilities measured using Level 3 inputs. The fair value of our Level 1 marketable securities is based on quoted market prices of identical underlying securities. The fair value of our Level 2 marketable securities is based on indirect or directly observable market data, including readily available pricing sources for identical underlying securities that may not be actively traded. The fair value of our foreign currency forward contracts is based on quoted prices and market observable data of similar instruments in active markets, such as currency spot rates, forward rates, and LIBOR.
For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
Capitalized Internal-Use Software Costs 
Capitalized Internal-Use Software Costs
We capitalize certain development costs incurred in connection with software development for our platform and software used in operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once software has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred.
Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life and recorded in cost of revenue within the accompanying consolidated statements of operations.
Business Combinations 
Business Combinations
When we acquire businesses, we allocate the purchase price to the net tangible and identifiable intangible assets. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable.
Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets 
Goodwill, Acquired Intangible Assets, and Impairment Assessment of Long-Lived Assets
Goodwill. Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually in the third quarter, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. No impairment charges were recorded during the years ended December 31, 2017, 2016, or 2015.
Acquired Intangible Assets. Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisitions. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.
Impairment of Long-Lived Assets. The carrying amounts of our long-lived assets, including property and equipment, capitalized internal-use software, and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, we amortize the remaining carrying value over the new shorter useful life.
Share Based Compensation 
Share-Based Compensation
Share-based compensation expense to employees is measured based on the fair value of the awards on the grant date and recognized in our consolidated statements of operations over the period during which the employee is required to perform services in exchange for the award (generally the vesting period of the award, which is typically four years). We estimate the fair value of stock options granted using the Black-Scholes option valuation model. We measure the fair value of Restricted Stock Units, or RSUs, based on the fair value of the underlying shares on the date of grant. Compensation expense for awards with only service conditions is recognized over the vesting period of the applicable award using the straight-line method.
Advertising Expense 
Advertising Expense
Advertising is expensed as incurred.
Government Grants 
Government Grants
We have obtained government grants in certain jurisdictions where we operate. We receive the grant funds as we meet certain commitments, including targeted levels of employment and/or spending within the local jurisdictions. If we fail to maintain these commitments, we may be required to repay grant funds received or be ineligible to receive future funding. We recognize grant proceeds to offset costs to which the grants relate on a straight-line basis when it is reasonably assured that the applicable commitments have been met.
Income Taxes 
Income Taxes
We record income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized.
We recognize tax benefits from uncertain tax positions if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. Although we believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance that the final tax outcome of these matters will not be materially different. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on our financial condition and results of operations.
We have elected to record interest accrued and penalties related to unrecognized tax benefits in our consolidated financial statements as a component of provision for income taxes.
Foreign Currency 
Foreign Currency
The functional currency of our foreign subsidiaries is the U.S. dollar. Accordingly, monetary balance sheet accounts are remeasured using exchange rates in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Expenses are generally remeasured at the average exchange rates for the period. Foreign currency remeasurement and transaction gains and losses are included in other income (expense), net and were not material for the years ended December 31, 2017, 2016, and 2015, respectively.
Concentrations of Risk 
Concentrations of Risk
Financial instruments potentially exposing us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities, accounts receivable and derivative instruments. We place our cash and cash equivalents with high-credit-quality financial institutions. However, we maintain balances in excess of the FDIC insurance limits. We do not require our customers to provide collateral to support accounts receivable and maintain an allowance for doubtful accounts receivable balances. We seek to mitigate counterparty credit risk related to our derivative instruments by transacting with major financial institutions with high credit ratings.
Recently Issued and Adopted Accounting Pronouncements 
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board, or the FASB, issued new revenue guidance that provides principles for recognizing revenue to which an entity expects to be entitled for the transfer of promised goods or services to customers. The guidance also requires the deferral of incremental costs to acquire contracts with customers. As currently issued and amended, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, though early adoption is permitted for annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively to each prior period presented (full retrospective method), or with the cumulative effect recognized as of the date of initial adoption (modified retrospective method).

In the fourth quarter of 2017, we substantially completed our assessment of the new standard, including the effects of adoption on our existing revenue arrangements and the treatment of sales commissions and other incremental costs to acquire contracts. We plan to adopt using the full retrospective method.

The impact of adopting the new standard on our 2017 and 2016 revenues is not material. The primary impact relates to the deferral of sales commissions and other incremental costs to acquire contracts, which we historically expensed as incurred. Under the new standard, all incremental costs to acquire contracts are capitalized and amortized on a straight-line basis over the anticipated period of benefit, which we have determined to be three years.

Selected consolidated statement of operations line items, which have been restated to reflect the adoption of the new standard, are as follows (in thousands):

 
Year ended December 31,
 
2017
 
2016
Revenue
430,165

 
312,844

Operating expenses:

 

Sales and marketing
211,918

 
161,653

Operating loss
(106,146
)
 
(98,147
)
Net loss
(102,141
)
 
(97,620
)


Selected consolidated balance sheet line items, which have been restated to reflect the adoption of the new standard, are as follows (in thousands):

 
December 31, 2017
Assets
 
Deferred costs
15,771

Deferred costs, noncurrent
15,395

Liabilities and stockholders’ equity
 
Deferred revenue
173,147

Deferred revenue, noncurrent
1,213

Accumulated deficit
(398,043
)

In February 2016, the FASB issued Accounting Standards Update, or ASU, 2016-02, regarding Accounting Standards Codification, or ASC, Topic 842 “Leases.” This new standard requires lessees to recognize most leases on their balance sheets as right-of-use assets with corresponding lease liabilities and eliminates certain real estate-specific provisions. The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. While we continue to evaluate the effect of adoption on our consolidated financial statements, we expect the adoption will result in the recognition of right-of-use assets and lease liabilities that were not previously recognized, which will increase total assets and liabilities on our consolidated balance sheets.

In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 “Statement of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows - Restricted Cash,” which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. The new standard must be adopted retrospectively. We do not expect the adoption of this standard to have a material effect on our consolidated statements of cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations - Clarifying the Definition of a Business,” which clarifies the definition of a business when evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, 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 January 2017, the FASB issued ASU 2017-04, regarding ASC Topic 350 “Simplifying the Test for Goodwill Impairment,” which simplifies the required methodology to calculate an impairment charge for goodwill. The standard is effective for fiscal years beginning after December 15, 2019, however early adoption is permitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, regarding ASC Topic 815 “Derivatives and Hedging.” This amendment simplifies various aspects of hedge accounting, including measurement and presentation of hedge ineffectiveness and certain documentation and assessment requirements. The amendment also makes more hedging strategies eligible for hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income,” which provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income to retained earnings resulting from the Tax Cuts and Jobs Act, or Tax Act. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09, regarding ASC Topic 718 “Compensation - Stock Compensation.” This amendment changes certain aspects of accounting for share-based awards to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. We adopted the standard in the first quarter of 2017.
As required by the new standard, we now recognize excess tax effects from share-based awards as a component of provision for income taxes in our statement of operations when awards vest or are settled. Upon adoption, we recorded a deferred tax asset of $52.8 million to reflect, on a modified retrospective basis, the previously unrecognized excess tax benefits; however, the deferred tax asset was fully offset by a valuation allowance, resulting in no impact to our consolidated financial statements. In our statement of cash flows, we no longer classify excess tax benefits as a reduction from operating cash flows. This change was made prospectively beginning with the quarter ended March 31, 2017.
We also elected to account for forfeitures as they occur, therefore share-based compensation expense for the year ended December 31, 2017 has been calculated based on actual forfeitures in our consolidated statement of operations, rather than our previous approach which was net of estimated forfeitures. The cumulative-effect adjustment of this change on a modified retrospective basis was not material. Share-based compensation expense for the years ended December 31, 2016 and 2015 was recorded net of estimated forfeitures.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory,” which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The new guidance is effective for annual reporting periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual reporting period. The new standard must be adopted using a modified retrospective basis, with the cumulative effect recognized as of the date of adoption. We early adopted this standard in the first quarter of 2017. Upon adoption, we recorded a deferred tax asset of $6.2 million to reflect the previously unrecognized tax benefits, however the deferred tax asset was fully offset by a valuation allowance, resulting in no impact to our consolidated financial statements. We also recorded a cumulative-effect adjustment on a modified retrospective basis, which was not material.
In May 2017, the FASB issued ASU 2017-09, regarding ASC Topic 718 “Compensation - Stock Compensation: Scope of Modification Accounting.” This amendment clarified what changes to terms or conditions of share-based awards require an entity to apply modification accounting. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We early adopted this standard in the second quarter of 2017 on a prospective basis, as permitted by the standard. The adoption did not have and is not expected to have a material effect on our consolidated financial statements.
Summary of Significant Accounting Policies (Tables)
Schedule of Allowance for Doubtful Accounts 
allowance for doubtful accounts consists of the following activity (in thousands):
 
Year Ended December 31,
2017
 
2016
Allowance for doubtful accounts, beginning balance
$
1,269

 
$
763

Additions
3,400

 
2,029

Write-offs
(3,417
)
 
(1,523
)
Allowance for doubtful accounts, ending balance
$
1,252

 
$
1,269

Schedule of Property Plant and Equipment Estimated Useful Lives Table [Table Text Block] 
The estimated useful lives of our property and equipment are as follows:
 
Furniture and fixtures
5 years
Hosting equipment
3 years
Computer equipment and licensed software and patents
3 to 5 years
Leasehold improvements
Shorter of the lease term or estimated useful life
Summary of Income Statement Balance Sheet Items, After Adoption Of New Accounting Standards [Table Text Block] 
Selected consolidated statement of operations line items, which have been restated to reflect the adoption of the new standard, are as follows (in thousands):

 
Year ended December 31,
 
2017
 
2016
Revenue
430,165

 
312,844

Operating expenses:

 

Sales and marketing
211,918

 
161,653

Operating loss
(106,146
)
 
(98,147
)
Net loss
(102,141
)
 
(97,620
)


Selected consolidated balance sheet line items, which have been restated to reflect the adoption of the new standard, are as follows (in thousands):

 
December 31, 2017
Assets
 
Deferred costs
15,771

Deferred costs, noncurrent
15,395

Liabilities and stockholders’ equity
 
Deferred revenue
173,147

Deferred revenue, noncurrent
1,213

Accumulated deficit
(398,043
)
Business Combinations (Tables)
Schedule of Purchase Price Allocation for Acquisitions
Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.
Net tangible assets acquired
$
96

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

Customer relationships
410

Goodwill
13,350

Total purchase price
$
16,564

The total purchase price was allocated to the assets acquired and liabilities assumed as set forth below (in thousands). The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected synergies, including cost savings from integrating the analytics technology with our infrastructure and the opportunity to sell the analytics software alongside our existing products. Goodwill is not deductible for income tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.
Net tangible assets acquired
$
2,140

Net deferred tax liability recognized
(1,979
)
Identifiable intangible assets:
 

Developed technology
8,800

Customer relationships
500

Goodwill
36,896

Total purchase price
$
46,357

Financial Instruments (Tables)
Assets Measured at Fair Value on Recurring Basis 
The following tables present information about our financial assets measured at fair value on a recurring basis as of December 31, 2017 and 2016 based on the three-tier fair value hierarchy (in thousands):
 
Fair Value Measurement at
December 31, 2017
Level 1
 
Level 2
 
Total
Description
 

 
 

 
 

Corporate bonds
$
—

 
149,069

 
$
149,069

Money market funds
32,832

 
—

 
32,832

U.S. Treasury securities
—

 
28,382

 
28,382

Asset-backed securities
—

 
27,738

 
27,738

Commercial paper
—

 
19,622

 
19,622

Agency securities
—

 
14,911

 
14,911

Total
$
32,832

 
$
239,722

 
$
272,554

Included in cash and cash equivalents
 

 
 

 
$
37,531

Included in marketable securities
 

 
 

 
$
235,023


 
Fair Value Measurement at
December 31, 2016
Level 1
 
Level 2
 
Total
Description
 
 
 
 
 
Corporate bonds
$
—

 
$
124,930

 
$
124,930

Asset-backed securities
—

 
32,567

 
32,567

U.S. Treasury securities
—

 
30,585

 
30,585

Commercial paper
—

 
9,787

 
9,787

Agency securities
$
—

 
$
8,489

 
$
8,489

Money market funds
$
3,545

 
$
—

 
$
3,545

Total
$
3,545

 
$
206,358

 
$
209,903

Included in cash and cash equivalents
 
 
 
 
$
3,545

Included in marketable securities
 
 
 
 
$
206,358

Schedule of Marketable Securities Classified by Contractual Maturities 
The following table classifies our marketable securities by contractual maturity as of December 31, 2017 and 2016 (in thousands):
 
December 31,
2017
 
December 31,
2016
Due in one year or less
$
137,576

 
$
131,190

Due after one year
97,447

 
75,168

Total
$
235,023

 
$
206,358

Schedule of Derivative Instruments on Consolidated Balance Sheet 
The following table presents information about our derivative instruments on the consolidated balance sheet as of December 31, 2017 and 2016 (in thousands):

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

 
Accrued liabilities
 
$
1,220

Total
 
 
$
2,359

 
 
 
$
1,220



 
December 31, 2016
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
 
$
868

 
Accrued liabilities
 
$
4,280

Total
 
 
$
868

 
 
 
$
4,280

Schedule of Derivative Instruments on Statement of Operations 
The following table presents information about our derivative instruments on the statement of operations for the years ended December 31, 2017 and 2016 (in thousands):
 
 
 
Year Ended December 31, 2017
 
Year Ended December 31, 2016
Derivative Instrument
Location of Loss Reclassified into Earnings
 
Gain Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
 
Loss Recognized in AOCI
 
Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts
Revenue, cost of revenue, operating expenses
 
$
3,663

 
$
(225
)
 
$
(3,174
)
 
$
(903
)
Total
 
 
$
3,663

 
$
(225
)
 
$
(3,174
)
 
$
(903
)
Property and Equipment (Tables)
Components of Property and Equipment
Property and equipment consists of the following (in thousands):
 
December 31, 2017
 
December 31, 2016
Hosting equipment
$
37,222

 
$
35,018

Capitalized internal-use software
31,593

 
25,773

Leasehold improvements
28,113

 
25,396

Computer equipment and licensed software and patents
16,316

 
11,879

Furniture and fixtures
9,581

 
8,014

Construction in progress
11,220

 
7,993

Total
134,045

 
114,073

Less accumulated depreciation and amortization
(74,888
)
 
(51,342
)
Property and equipment, net
$
59,157

 
$
62,731

Goodwill and Acquired Intangible Assets (Tables)
Summary of Changes in Carrying Amount of Goodwill 
The changes in the carrying amount of goodwill for the two years ended December 31, 2017 are as follows (in thousands):
Balance as of December 31, 2015
$
45,346

Goodwill adjustments
166

Foreign currency translation adjustments
(165
)
Balance as of December 31, 2016
45,347

Goodwill acquired
13,350

Foreign currency translation adjustments
434

Balance as of December 31, 2017
$
59,131

Summary of Intangible Assets Acquired 
The following tables present information about our acquired intangible assets subject to amortization as of December 31, 2017 and 2016 (in thousands):
 
As of December 31, 2017
Cost
 
Accumulated
Amortization
 
Foreign Currency Translation Adjustments
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
 
(In years)
Developed technology
$
17,200

 
$
(9,835
)
 
$
(93
)
 
$
7,272

 
3.7
Customer relationships
2,210

 
(1,549
)
 
(30
)
 
631

 
2.4
 
$
19,410

 
$
(11,384
)
 
$
(123
)
 
$
7,903

 
 

 
As of December 31, 2016
Cost
 
Accumulated
Amortization
 
Foreign Currency Translation Adjustments
 
Net
 
Weighted Average Remaining Useful Life
 
 
 
 
 
 
 
 
(In years)
Developed technology
$
14,000

 
$
(6,584
)
 
$
(169
)
 
$
7,247

 
2.9
Customer relationships
1,800

 
(1,044
)
 
(53
)
 
703

 
2.3
 
$
15,800

 
$
(7,628
)
 
$
(222
)
 
$
7,950

 
 
Summary of Estimated Future Amortization Expense 
Estimated future amortization expense as of December 31, 2017 is as follows (in thousands): 
2018
$
2,727

2019
2,678

2020
1,103

2021
492

2022
492

Thereafter
411

 
$
7,903

Commitments and Contingencies (Tables)
Schedule of Future Minimum Lease Payments by Year under Noncancelable Operating Leases 
As of December 31, 2017, the future minimum lease payments by year under noncancelable operating leases are as follows for the years ending December 31 (in thousands):
2018
$
14,934

2019
18,938

2020
16,675

2021
14,927

2022
13,005

Thereafter
40,055

Total minimum lease payments
$
118,534

Summary of Future Payments Under Noncancelable Purchase Obligations 
As of December 31, 2017, our contractual purchase obligations, primarily related to hosting infrastructure providers, are as follows for the years ending December 31 (in thousands):
2018
38,559

2019
28,530

2020
29,270

Total purchase obligations
$
96,359

Common Stock and Stockholders' Equity (Tables)
Summary of Stock Option and RSU Activity 
A summary of our stock option and RSU activity for the year ended December 31, 2017 is as follows (in thousands, except per share information):
 
 
Options Outstanding
 
RSUs Outstanding
Shares
Available
for Grant
 
Number of
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
 
Outstanding
RSUs
 
Weighted
Average
Grant Date
Fair Value
 
 
 
 
 
 
(In years)
 
 
 
 
 
 
Outstanding — January 1, 2017
6,039

 
8,479

 
$
14.52

 
7.49
 
$
66,449

 
6,936

 
$
20.81

Increase in authorized shares
4,833

 
 

 
 

 
 
 
 

 
 

 
 

Stock options granted
(1,203
)
 
1,203

 
28.14

 
 
 
 

 
 

 
 

RSUs granted
(3,647
)
 
 

 
 

 
 
 
 

 
3,647

 
28.09

Stock options exercised
 

 
(2,664
)
 
11.97

 
 
 
 

 
 

 
 

RSUs vested
 

 
 

 
 

 
 
 
 

 
(3,145
)
 
20.62

Stock options forfeited or canceled
579

 
(579
)
 
21.49

 
 
 
 

 
 

 
 

Stock options forfeited or canceled and unavailable for grant
—

 
(200
)
 
23.44

 
 
 
 
 
 
 
 
RSUs forfeited or canceled
1,400

 
 

 
 

 
 
 
 

 
(1,400
)
 
22.39

RSUs forfeited or canceled and unavailable for grant
—

 
 
 
 
 
 
 
 
 
(211
)
 
23.44

Outstanding — December 31, 2017
8,001

 
6,239

 
$
17.31

 
7.11
 
$
103,380

 
5,827

 
$
25.00

Options vested and expected to vest as of December 31, 2017
 
 
5,910

 
$
16.95

 
7.04
 
$
99,958

 
 
 
 
Options vested and exercisable as of December 31, 2017
 
 
3,243

 
$
14.01

 
6.40
 
$
64,311

 
 
 
 
Assumptions Used to Estimate Fair Value of Stock Options Granted to Employees 
The assumptions used to estimate the fair value of stock options granted to employees are as follows:
 
Year Ended December 31,
2017
 
2016
 
2015
Expected volatility
44% - 48%
 
47% - 49%
 
49% - 54%
Dividend rate
0%
 
0%
 
0%
Risk-free interest rate
1.9% - 2.2%
 
1.1% - 2.0%
 
1.4% - 2.0%
Expected term (in years)
6.02 - 6.08
 
6.02 - 6.08
 
6.02 - 6.08
Assumptions Used to Estimate Fair Value of ESPP Awards 
The assumptions used to estimate the fair value of ESPP awards are as follows:
 
Year Ended December 31,
 
2017
 
2016
Expected volatility
37% - 44%
 
42% - 48%
Dividend rate
0%
 
0%
Risk-free interest rate
1.02% - 1.62%
 
0.38% - 0.90%
Expected term (in years)
0.50 -1.50
 
0.50 -1.50
Net Loss Per Share (Tables)
Schedule of Computation of Basic and Diluted Net Loss per Share 
The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):
 
Year Ended
December 31,
2017
 
2016
 
2015
Net loss
$
(110,638
)
 
$
(103,799
)
 
$
(84,052
)
Weighted-average shares used to compute basic and diluted net loss per share
99,918

 
93,161

 
84,926

Net loss per share, basic and diluted
(1.11
)
 
(1.11
)
 
(0.99
)
Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation 
The anti-dilutive securities excluded from the shares used to calculate the diluted net loss per share are as follows (in thousands):
 
As of December 31,
2017
 
2016
 
2015
Shares subject to outstanding common stock options and employee stock purchase plan
6,343

 
8,556

 
10,844

Restricted stock units
5,827

 
6,936

 
6,417

 
12,170

 
15,492

 
17,260

Income Taxes (Tables)
Components of Loss Before Provision for Income Taxes 
The components of loss before provision for income taxes are as follows (in thousands):
 
Year Ended December 31,
2017
 
2016
 
2015
U.S.
$
(115,674
)
 
$
(107,685
)
 
$
(85,928
)
Foreign
3,518

 
4,879

 
2,214

Total
$
(112,156
)
 
$
(102,806
)
 
$
(83,714
)
Schedule of Income Tax Provision 
The income tax provision is composed of the following (in thousands):
 
Year Ended December 31,
2017
 
2016
 
2015
Current tax provision:
 

 
 

 
 

Federal
$
(2,636
)
 
$
—

 
$
1

State
104

 
74

 
(3
)
Foreign
1,476

 
3,096

 
1,693

 
(1,056
)
 
3,170

 
1,691

Deferred tax provision:
 

 
 

 
 

Federal
—

 
(49
)
 
(16
)
State
—

 
—

 
—

Foreign
(462
)
 
(2,128
)
 
(1,337
)
Total provision for (benefit from) income taxes
$
(1,518
)
 
$
993

 
$
338

Schedule of Significant Components of Deferred Tax Assets 
Significant components of deferred tax assets are as follows (in thousands):
 
As of December 31,
2017
 
2016
Deferred tax assets:
 

 
 

Tax credit carryforward
$
733

 
$
762

Net operating loss carryforward
115,237

 
73,611

Share-based compensation
6,072

 
13,306

Accrued liabilities and reserves
3,968

 
4,877

Other
5,086

 
5,325

Total deferred tax assets
131,096

 
97,881

Less: valuation allowance
(126,321
)
 
(92,125
)
Deferred tax assets, net of valuation allowance
4,775

 
5,756

Deferred tax liabilities:
 

 
 

Depreciation and amortization
(3,053
)
 
(4,474
)
Net deferred tax assets
$
1,722

 
$
1,282

Schedule of Reconciliation of the Statutory Federal Income Tax Rate and the Effective Tax Rates 
The following is a reconciliation of the statutory federal income tax rate and the effective tax rates:
 
Year Ended December 31,
2017
 
2016
 
2015
Tax at federal statutory rate
34.0
 %
 
34.0
 %
 
34.0
 %
Tax reform rate change impact
(58.2
)
 
—

 
—

Excess tax benefit from share-based compensation
42.8

 
—

 
—

Valuation allowance
(20.7
)
 
(23.3
)
 
(29.2
)
Share-based compensation
6.4

 
(6.1
)
 
(5.5
)
Other
(4.4
)
 
0.3

 
0.3

Benefit from other comprehensive gain
1.5

 
—

 
—

Intercompany dividend
—

 
(5.9
)
 
—

Effective tax rate
1.4
 %
 
(1.0
)%
 
(0.4
)%
Schedule of Unrecognized Tax Benefits 
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) for the two years ending December 31, 2017 is as follows (in thousands):
 
Balance at December 31, 2014
$
5,955

Decrease from tax positions related to the prior year
(57
)
Additions from tax positions related to the current year
2,605

Lapse of statutes of limitations
—

Balance at December 31, 2015
$
8,503

Additions from tax positions related to the prior year
279

Additions from tax positions related to the current year
3,639

Decrease related to settlements with taxing authorities
(621
)
Lapse of statutes of limitations
(14
)
Balance at December 31, 2016
11,786

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

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

Geographic Information (Tables)
Schedule of Revenue by Geographic Areas 
The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):
 
Year Ended December 31,
2017
 
2016
 
2015
United States
$
229,663

 
$
168,479

 
$
116,220

EMEA
123,036

 
87,360

 
59,047

Other
77,793

 
56,160

 
33,501

Total
$
430,492

 
$
311,999

 
$
208,768

Schedule of Long-Lived Assets by Geographic Areas 
The following table presents our long-lived assets by geographic area (in thousands):
 
As of December 31,
 
2017
 
2016
United States
$
23,609

 
$
26,372

EMEA:
 
 
 
Republic of Ireland
5,019

 
5,703

Other EMEA
5,007

 
6,834

Total EMEA
10,026

 
12,537

APAC
7,734

 
8,357

Total
$
41,369

 
$
47,266

Summary of Significant Accounting Policies - Additional Information (Details) (USD $)
12 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2017
Performance Awards
Dec. 31, 2016
Performance Awards
Dec. 31, 2015
Performance Awards
Dec. 31, 2017
Charitable Donation
Dec. 31, 2016
Charitable Donation
Dec. 31, 2017
Leased Building
Dec. 31, 2016
Leased Building
May 31, 2014
IPO
Mar. 31, 2015
Follow On Public Offering
Mar. 31, 2016
Follow On Public Offering
Dec. 31, 2017
Accounting Standards Update 2014-09
Mar. 31, 2017
Accounting Standards Update 2016-09
Mar. 31, 2017
Accounting Standards Update 2016-16
Dec. 31, 2017
Foreign currency forward contracts
Maximum
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares of common stock sold in initial public offering (in shares)
 
 
 
 
 
 
 
 
 
 
12,800,000.0 
8,800,000.0 
 
 
 
 
 
Share price (usd per share)
 
 
 
 
 
 
 
 
 
 
$ 9.00 
 
$ 22.75 
 
 
 
 
Proceeds from initial public offering, net of underwriting discounts and commissions and other offering expenses
 
 
 
 
 
 
 
 
 
 
$ 103,100,000 
 
 
 
 
 
 
Underwriting discounts and commission on IPO
 
 
 
 
 
 
 
 
 
 
8,100,000 
8,700,000 
 
 
 
 
 
Offering expenses
 
 
 
 
 
 
 
 
 
 
3,800,000 
 
900,000 
 
 
 
 
Number of shares of common stock issued upon automatic conversion of convertible preferred stock (in shares)
 
 
 
 
 
 
 
 
 
 
34,300,000.0 
 
 
 
 
 
 
Proceeds from follow-on public offering, net of issuance costs
0 
0 
190,094,000 
 
 
 
 
 
 
 
 
190,100,000 
 
 
 
 
 
Restricted cash
1,500,000 
2,500,000 
 
 
 
 
900,000 
1,000,000 
600,000 
400,000 
 
 
 
 
 
 
 
Cash collateral
 
1,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forward contract maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0 years 15 months 
Weighted average useful life of capitalized internal use software
2 years 4 months 24 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment of goodwill
0 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impairment of long lived asset
0 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting period
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation expense
 
 
 
400,000 
2,800,000 
6,100,000 
 
 
 
 
 
 
 
 
 
 
 
Future period share-based compensation expense
174,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future period share-based compensation expense, period to recognized
2 years 7 months 6 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising expense
36,800,000 
23,900,000 
16,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grant proceeds
2,000,000 
1,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization period for incremental costs to acquire contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
 
 
 
Deferred tax asset, stock-based compensation
131,096,000 
97,881,000 
 
 
 
 
 
 
 
 
 
 
 
 
52,800,000 
6,200,000 
 
Deferred tax asset, valuation allowance
$ 126,321,000 
$ 92,125,000 
 
 
 
 
 
 
 
 
 
 
 
 
$ 52,800,000 
$ 6,200,000 
 
Summary of Significant Accounting Policies - Schedule of Allowance for Doubtful Accounts - (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Allowance for Doubtful Accounts Receivable [Roll Forward]
 
 
Allowance for doubtful accounts, beginning balance
$ 1,269 
$ 763 
Additions
3,400 
2,029 
Write-offs
(3,417)
(1,523)
Allowance for doubtful accounts, ending balance
$ 1,252 
$ 1,269 
Summary of Significant Accounting Policies - Estimated Useful Lives of Property and Equipment - (Details)
12 Months Ended
Dec. 31, 2017
Property Plant And Equipment [Line Items]
 
Estimated useful lives of property and equipment
2 years 4 months 24 days 
Furniture and fixtures
 
Property Plant And Equipment [Line Items]
 
Estimated useful lives of property and equipment
5 years 
Hosting equipment
 
Property Plant And Equipment [Line Items]
 
Estimated useful lives of property and equipment
3 years 
Minimum |
Computer equipment and licensed software and patents
 
Property Plant And Equipment [Line Items]
 
Estimated useful lives of property and equipment
3 years 
Maximum |
Computer equipment and licensed software and patents
 
Property Plant And Equipment [Line Items]
 
Estimated useful lives of property and equipment
5 years 
Summary of Significant Accounting Policies - Summary of Income Statement Items After Adoption of New Accounting Standards (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Revenue
$ 430,492 
$ 311,999 
$ 208,768 
Operating expenses:
 
 
 
Sales and marketing
220,742 1
166,987 1
114,052 1
Operating loss
(114,643)
(104,326)
(82,985)
Net loss
(110,638)
(103,799)
(84,052)
Pro Forma |
Accounting Standards Update 2014-09
 
 
 
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
 
Revenue
430,165 
312,844 
 
Operating expenses:
 
 
 
Sales and marketing
211,918 
161,653 
 
Operating loss
(106,146)
(98,147)
 
Net loss
$ (102,141)
$ (97,620)
 
Summary of Significant Accounting Policies - Summary of Balance Sheet Items After Adoption of New Accounting Standards (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Liabilities and stockholders’ equity
 
 
Deferred revenue
$ 174,524 
$ 123,276 
Deferred revenue, noncurrent
1,213 
1,257 
Accumulated deficit
(430,586)
(319,720)
Pro Forma |
Accounting Standards Update 2014-09
 
 
Assets
 
 
Deferred costs
15,771 
 
Deferred costs, noncurrent
15,395 
 
Liabilities and stockholders’ equity
 
 
Deferred revenue
173,147 
 
Deferred revenue, noncurrent
1,213 
 
Accumulated deficit
$ (398,043)
 
Business Combinations - Additional Information (Details) (USD $)
Share data in Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 0 Months Ended
Dec. 31, 2017
Apr. 27, 2017
Outbound Solutions Inc
Apr. 27, 2017
Outbound Solutions Inc
Apr. 27, 2017
Outbound Solutions Inc
Developed technology
Apr. 27, 2017
Outbound Solutions Inc
Customer relationships
Oct. 13, 2015
We Are Cloud, Inc
Oct. 13, 2015
We Are Cloud, Inc
Restricted Stock Units
Oct. 13, 2015
We Are Cloud, Inc
Developed technology
Oct. 13, 2015
We Are Cloud, Inc
Customer relationships
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
Business acquisition, fair value of consideration transferred, cash
 
$ 16,600,000 
 
 
 
$ 46,400,000 
 
 
 
Goodwill expected to be tax deductible
 
 
$ 0 
 
 
 
 
 
 
Acquired intangible assets, useful lives
 
 
 
6 years 6 months 
3 years 6 months 
 
 
4 years 6 months 
4 years 6 months 
Percent of outstanding shares acquired
 
 
 
 
 
100.00% 
 
 
 
RSUs issued pursuant to retention plan, in connection with the acquisition (in shares)
3,647 
 
 
 
 
 
500 
 
 
Vesting period
4 years 
 
 
 
 
 
3 years 
 
 
Business Combinations - Schedule of Purchase Price Allocation for Acquisitions (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Apr. 27, 2017
Outbound Solutions Inc
Apr. 27, 2017
Outbound Solutions Inc
Developed technology
Apr. 27, 2017
Outbound Solutions Inc
Customer relationships
Oct. 13, 2015
We Are Cloud, Inc
Oct. 13, 2015
We Are Cloud, Inc
Developed technology
Oct. 13, 2015
We Are Cloud, Inc
Customer relationships
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
Net tangible assets acquired
 
 
 
$ 96 
 
 
 
 
 
Net tangible assets acquired
 
 
 
 
 
 
2,140 
 
 
Net deferred tax liability recognized
 
 
 
(492)
 
 
(1,979)
 
 
Intangible assets
 
 
 
 
3,200 
410 
 
8,800 
500 
Goodwill
59,131 
45,347 
45,346 
13,350 
 
 
36,896 
 
 
Total purchase price
 
 
 
$ 16,564 
 
 
$ 46,357 
 
 
Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Included in marketable securities
$ 235,023 
$ 206,358 
Fair Value Measurements, Recurring
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
272,554 
209,903 
Included in cash and cash equivalents
37,531 
3,545 
Included in marketable securities
235,023 
206,358 
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
32,832 
3,545 
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
239,722 
206,358 
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
149,069 
124,930 
Fair Value Measurements, Recurring |
Corporate bonds |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
0 
0 
Fair Value Measurements, Recurring |
Corporate bonds |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
149,069 
124,930 
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
32,832 
3,545 
Fair Value Measurements, Recurring |
Money market funds |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
32,832 
3,545 
Fair Value Measurements, Recurring |
Money market funds |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
0 
0 
Fair Value Measurements, Recurring |
U.S. Treasury securities
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
28,382 
30,585 
Fair Value Measurements, Recurring |
U.S. Treasury securities |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
0 
0 
Fair Value Measurements, Recurring |
U.S. Treasury securities |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
28,382 
30,585 
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
27,738 
32,567 
Fair Value Measurements, Recurring |
Asset-backed securities |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
0 
0 
Fair Value Measurements, Recurring |
Asset-backed securities |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
27,738 
32,567 
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
19,622 
9,787 
Fair Value Measurements, Recurring |
Commercial paper |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
0 
0 
Fair Value Measurements, Recurring |
Commercial paper |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
19,622 
9,787 
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
14,911 
8,489 
Fair Value Measurements, Recurring |
Agency securities |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
0 
0 
Fair Value Measurements, Recurring |
Agency securities |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
$ 14,911 
$ 8,489 
Financial Instruments - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Gross unrealized gains or losses for cash equivalent and marketable securities
$ 0 
$ 0 
Securities that were in an unrealized loss position for more than 12 months.
0 
0 
Foreign currency forward contracts
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Unrealized losses related to effective portion of changes in fair value of foreign currency forward contracts
900,000 
 
Reclassification from accumulated other comprehensive loss into earnings over next 12 month
1,000,000 
 
Notional value
$ 139,700,000 
$ 79,600,000 
Maximum |
Foreign currency forward contracts
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Foreign currency forward contract maturity
0 years 15 months 
 
Financial Instruments - Marketable Securities by Contractual Maturities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Financial Instruments, Owned, at Fair Value [Abstract]
 
 
Due in one year or less
$ 137,576 
$ 131,190 
Due after one year
97,447 
75,168 
Total
$ 235,023 
$ 206,358 
Financial Instruments - Schedule of Derivative Instruments on Consolidated Balance Sheet (Details) (Level 2, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Derivatives Fair Value [Line Items]
 
 
Asset Derivatives
$ 2,359 
$ 868 
Liability Derivatives
1,220 
4,280 
Foreign currency forward contracts |
Other current assets
 
 
Derivatives Fair Value [Line Items]
 
 
Asset Derivatives
2,359 
868 
Foreign currency forward contracts |
Accrued liabilities
 
 
Derivatives Fair Value [Line Items]
 
 
Liability Derivatives
$ 1,220 
$ 4,280 
Financial Instruments - Schedule of Derivative Instruments on Statement of Operations (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Derivative Instruments Gain Loss [Line Items]
 
 
Gain Recognized in AOCI
$ 3,663 
$ (3,174)
Loss Reclassified from AOCI into Earnings
(225)
(903)
Foreign currency forward contracts
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
Gain Recognized in AOCI
3,663 
 
Loss Reclassified from AOCI into Earnings
$ (225)
$ (903)
Property and Equipment - Components of Property and Equipment (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
$ 134,045 
$ 114,073 
Less accumulated depreciation and amortization
(74,888)
(51,342)
Property and equipment, net
59,157 
62,731 
Hosting equipment
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
37,222 
35,018 
Capitalized internal-use software
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
31,593 
25,773 
Leasehold improvements
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
28,113 
25,396 
Computer equipment and licensed software and patents
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
16,316 
11,879 
Furniture and fixtures
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
9,581 
8,014 
Construction in progress
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
$ 11,220 
$ 7,993 
Property and Equipment - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Property, Plant and Equipment [Abstract]
 
 
 
Depreciation expense
$ 20.3 
$ 16.2 
$ 11.2 
Amortization expense of capitalized internal-use software
7.7 
7.4 
6.2 
Carrying value of capitalized internal-use software
17.7 
15.4 
 
Capitalized internal-use software included in construction in progress
$ 8.7 
$ 5.4 
 
Goodwill and Acquired Intangible Assets - Changes in Carrying Amount of Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Goodwill [Roll Forward]
 
 
Beginning balance
$ 45,347 
$ 45,346 
Goodwill adjustments
 
166 
Goodwill acquired
13,350 
 
Foreign currency translation adjustments
434 
(165)
Ending balance
$ 59,131 
$ 45,347 
Goodwill and Acquired Intangible Assets - Acquired Intangible Assets Subject to Amortization (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Finite Lived Intangible Assets [Line Items]
 
 
Cost
$ 19,410 
$ 15,800 
Accumulated Amortization
(11,384)
(7,628)
Foreign Currency Translation Adjustments
(123)
(222)
Net
7,903 
7,950 
Developed technology
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Cost
17,200 
14,000 
Accumulated Amortization
(9,835)
(6,584)
Foreign Currency Translation Adjustments
(93)
(169)
Net
7,272 
7,247 
Weighted Average Remaining Useful Life
3 years 8 months 12 days 
2 years 10 months 24 days 
Customer relationships
 
 
Finite Lived Intangible Assets [Line Items]
 
 
Cost
2,210 
1,800 
Accumulated Amortization
(1,549)
(1,044)
Foreign Currency Translation Adjustments
(30)
(53)
Net
$ 631 
$ 703 
Weighted Average Remaining Useful Life
2 years 4 months 24 days 
2 years 3 months 2 days 
Goodwill and Acquired Intangible Assets - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
Amortization expense
$ 3.8 
$ 3.9 
Goodwill and Acquired Intangible Assets - Estimated Future Amortization Expense (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
2018
$ 2,727 
 
2019
2,678 
 
2020
1,103 
 
2021
492 
 
2022
492 
 
Thereafter
411 
 
Net
$ 7,903 
$ 7,950 
Commitments and Contingencies - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Rent expense
$ 12.3 
$ 9.9 
$ 7.5 
Deferred rent
6.4 
6.5 
 
Letters of credit outstanding amount
$ 2.0 
$ 2.7 
 
Commitments and Contingencies - Schedule of Future Minimum Lease Payments by Year under Noncancelable Operating Leases (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
 
2018
$ 14,934 
2019
18,938 
2020
16,675 
2021
14,927 
2022
13,005 
Thereafter
40,055 
Total minimum lease payments
$ 118,534 
Commitments and Contingencies - Schedule of Noncancelable Purchase Commitments (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
 
2018
$ 38,559 
2019
28,530 
2020
29,270 
Total purchase obligations
$ 96,359 
Common Stock and Stockholders' Equity - Additional Information (Details) (USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended
May 6, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2017
Employee Stock Option
offering_period
Dec. 31, 2016
Employee Stock Option
Dec. 31, 2015
Employee Stock Option
Dec. 31, 2017
2009 Stock Option and Grant Plan
Jan. 1, 2017
2014 Plan
Employee Stock Option
Dec. 31, 2017
2014 Plan
Employee Stock Option
Jan. 1, 2018
Subsequent Event
2014 Plan
Employee Stock Option
Jan. 1, 2017
Employee Stock Purchase Plan
Dec. 31, 2017
Employee Stock Purchase Plan
Jan. 1, 2018
Employee Stock Purchase Plan
Subsequent Event
Class Of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized (in shares)
 
400,000,000 
400,000,000 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value (usd per share)
 
$ 0.01 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares issued (in shares)
 
103,100,000 
97,200,000 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding (in shares)
 
103,100,000 
96,700,000 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares repurchased (in shares)
 
3,000 
100,000 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares authorized (in shares)
 
10,000,000 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, par value (usd per share)
 
$ 0.01 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, shares issued (in shares)
 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
ESPP offering period
 
 
 
 
18 months 
 
 
 
 
 
 
 
 
 
Number of offering periods
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
Length of purchase period
 
 
 
 
6 months 
 
 
 
 
 
 
 
 
 
Preferred stock, shares outstanding (in shares)
 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
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)
 
700,000 
600,000 
 
 
 
 
 
 
 
 
 
 
 
Increase in authorized shares (in shares)
 
4,833,000 
 
 
 
 
 
 
4,800,000 
 
5,200,000 
1,000,000 
 
1,000,000 
Shares of common stock available for issuance (in shares)
 
8,001,000 
6,039,000 
 
 
 
 
0 
 
8,000,000 
 
 
3,600,000 
 
Stock options granted (in shares)
1,200,000 
1,203,000 
 
 
 
 
 
 
 
 
 
 
 
 
Intrinsic value of options exercised
 
$ 47.1 
$ 49.2 
$ 66.2 
 
 
 
 
 
 
 
 
 
 
Vesting period
 
4 years 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value of stock options (usd per share)
 
$ 13.07 
$ 11.34 
$ 12.44 
 
 
 
 
 
 
 
 
 
 
Share based compensation related to accelerated vesting
 
 
 
 
$ 1.5 
$ 0.7 
$ 0 
 
 
 
 
 
 
 
Common Stock and Stockholders' Equity - Summary of Stock Option and RSU Activity (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
0 Months Ended 12 Months Ended
May 6, 2016
Dec. 31, 2017
Dec. 31, 2016
Shares Available for Grant
 
 
 
Balance at the beginning of the period (in shares)
 
6,039 
 
Increase in authorized shares (in shares)
 
4,833 
 
Stock options granted (in shares)
 
(1,203)
 
RSUs granted (in shares)
 
(3,647)
 
Stock options forfeited or canceled (in shares)
 
579 
 
RSUs forfeited or cancelled (in shares)
 
1,400 
 
Balance at the end of the period (in shares)
 
8,001 
6,039 
Number of Shares
 
 
 
Balance at the beginning of the period (in shares)
 
8,479 
 
Stock options granted (in shares)
1,200 
1,203 
 
Stock options exercised (in shares)
 
(2,664)
 
Stock options forfeited or canceled (in shares)
 
(579)
 
Stock options forfeited or canceled and unavailable for grant (in shares)
 
(200)
 
Balance at the end of the period (in shares)
 
6,239 
8,479 
Options vested and expected to vest at the end of the period (in shares)
 
5,910 
 
Options vested and exercisable at the end of the period (in shares)
 
3,243 
 
Weighted-Average Exercise Price
 
 
 
Balance at the beginning of the period (usd per share)
 
$ 14.52 
 
Stock options granted (usd per share)
 
$ 28.14 
 
Stock options exercised (usd per share)
 
$ 11.97 
 
Stock options forfeited or canceled (usd per share)
 
$ 21.49 
 
Stock options forfeited or canceled and unavailable for grant (usd per share)
 
$ 23.44 
 
Balance at the end of the period (usd per share)
 
$ 17.31 
$ 14.52 
Options vested and expected to vest at the end of the period (usd per share)
 
$ 16.95 
 
Options vested and exercisable at the end of the period (usd per share)
 
$ 14.01 
 
Weighted Average Remaining Contractual Term
 
 
 
Options outstanding, weighted-average remaining contractual term
 
7 years 1 month 9 days 
7 years 5 months 26 days 
Options vested and expected to vest, weighted-average remaining contractual term
 
7 years 0 months 14 days 
 
Options vested and exercisable, weighted-average remaining contractual term
 
6 years 4 months 24 days 
 
Aggregate Intrinsic Value
 
 
 
Options outstanding, aggregate intrinsic value
 
$ 103,380 
$ 66,449 
Options vested and expected to vest, aggregate intrinsic value
 
99,958 
 
Options vested and exercisable, aggregate intrinsic value
 
$ 64,311 
 
Outstanding RSUs
 
 
 
Balance at the beginning of the period (in shares)
 
6,936 
 
RSUs issued pursuant to retention plan, in connection with the acquisition (in shares)
 
3,647 
 
RSUs vested (in shares)
 
(3,145)
 
RSUs forfeited or cancelled (in shares)
 
(1,400)
 
RSUs forfeited or canceled and unavailable for grant (in shares)
 
(211)
 
Balance at the end of the period (in shares)
 
5,827 
6,936 
Weighted-Average Grant Date Fair Value
 
 
 
Balance at the beginning of the period (usd per share)
 
$ 20.81 
 
RSUs granted (usd per share)
 
$ 28.09 
 
RSUs vested (usd per share)
 
$ 20.62 
 
RSUs forfeited or cancelled (usd per share)
 
$ 22.39 
 
RSUs forfeited or canceled and unavailable for grant (usd per share)
 
$ 23.44 
 
Balance at the end of the period (usd per share)
 
$ 25.00 
$ 20.81 
Common Stock and Stockholders' Equity - Assumptions Used to Estimate Fair Value of Stock Options Granted to Employees (Details) (Stock Options)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Dividend rate
0.00% 
0.00% 
0.00% 
Minimum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility
44.00% 
47.00% 
49.00% 
Risk-free interest rate
1.90% 
1.10% 
1.40% 
Expected term (in years)
6 years 7 days 
6 years 7 days 
6 years 7 days 
Maximum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility
48.00% 
49.00% 
54.00% 
Risk-free interest rate
2.20% 
2.00% 
2.00% 
Expected term (in years)
6 years 29 days 
6 years 29 days 
6 years 29 days 
Common Stock and Stockholders' Equity - Assumptions Used to Estimate Fair Value of ESPP Awards (Details) (ESPP Awards)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
Dividend rate
0.00% 
0.00% 
Minimum
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
Expected volatility
37.00% 
42.00% 
Risk-free interest rate
1.02% 
0.38% 
Expected term (in years)
0 years 6 months 
0 years 6 months 
Maximum
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
Expected volatility
44.00% 
48.00% 
Risk-free interest rate
1.62% 
0.90% 
Expected term (in years)
1 year 6 months 
1 year 6 months 
Net Loss per Share - Computation of Basic and Diluted Net Loss per Share of Common Stock (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Earnings Per Share [Abstract]
 
 
 
Net loss
$ (110,638)
$ (103,799)
$ (84,052)
Weighted-average shares used to compute basic and diluted net loss per share (in shares)
99,918 
93,161 
84,926 
Net loss per, basic and diluted (usd per share)
$ (1.11)
$ (1.11)
$ (0.99)
Net Loss per Share - Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation (Details)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per share amount (in shares)
12,170 
15,492 
17,260 
Shares subject to outstanding common stock options and employee stock purchase plan
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per share amount (in shares)
6,343 
8,556 
10,844 
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)
5,827 
6,936 
6,417 
Income Taxes - Components of Loss Before Provision for Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Tax Disclosure [Abstract]
 
 
 
U.S.
$ (115,674)
$ (107,685)
$ (85,928)
Foreign
3,518 
4,879 
2,214 
Loss before provision for (benefit from) income taxes
$ (112,156)
$ (102,806)
$ (83,714)
Income Taxes - Schedule of Income Tax Provision (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Current tax provision:
 
 
 
Federal
$ (2,636)
$ 0 
$ 1 
State
104 
74 
(3)
Foreign
1,476 
3,096 
1,693 
Total current tax provision
(1,056)
3,170 
1,691 
Deferred tax provision:
 
 
 
Federal
0 
(49)
(16)
State
0 
0 
0 
Foreign
(462)
(2,128)
(1,337)
Total provision for (benefit from) income taxes
$ (1,518)
$ 993 
$ 338 
Income Taxes - Schedule of Significant Components of Deferred Tax Assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Deferred tax assets:
 
 
Tax credit carryforward
$ 733 
$ 762 
Net operating loss carryforward
115,237 
73,611 
Share-based compensation
6,072 
13,306 
Accrued liabilities and reserves
3,968 
4,877 
Other
5,086 
5,325 
Total deferred tax assets
131,096 
97,881 
Less: valuation allowance
(126,321)
(92,125)
Deferred tax assets, net of valuation allowance
4,775 
5,756 
Deferred tax liabilities:
 
 
Depreciation and amortization
(3,053)
(4,474)
Net deferred tax assets
$ 1,722 
$ 1,282 
Income Taxes - Schedule of Reconciliation of the Statutory Federal Income Tax Rate and the Effective Tax Rates (Details)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Tax Disclosure [Abstract]
 
 
 
Tax at federal statutory rate
34.00% 
34.00% 
34.00% 
Tax reform rate change impact
(58.20%)
0.00% 
0.00% 
Excess tax benefit from share-based compensation
42.80% 
0.00% 
0.00% 
Valuation allowance
(20.70%)
(23.30%)
(29.20%)
Share-based compensation
6.40% 
(6.10%)
(5.50%)
Other
(4.40%)
0.30% 
0.30% 
Benefit from other comprehensive gain
1.50% 
0.00% 
0.00% 
Intercompany dividend
0.00% 
(5.90%)
0.00% 
Effective tax rate
1.40% 
(1.00%)
(0.40%)
Income Taxes - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income Tax Examination [Line Items]
 
 
 
Cumulative amount of earnings
$ 400,000 
 
 
Valuation allowance, deferred tax asset, Increase (Decrease), amount
34,200,000 
 
 
Interest and penalties related to uncertain tax positions
0.0 
 
 
Potential benefits, which if recognized, would affect the effective tax rate.
0 
400,000 
100,000 
We Are Cloud, Inc
 
 
 
Income Tax Examination [Line Items]
 
 
 
Net operating loss carryforwards
3,000,000 
 
 
FRANCE
 
 
 
Income Tax Examination [Line Items]
 
 
 
Net operating loss carryforwards
9,700,000 
 
 
Domestic Tax Authority
 
 
 
Income Tax Examination [Line Items]
 
 
 
Net operating loss carryforwards
464,500,000 
 
 
Research and development credit carryforwards
7,400,000 
 
 
State and Local Jurisdiction
 
 
 
Income Tax Examination [Line Items]
 
 
 
Net operating loss carryforwards
218,400,000 
 
 
Research and development credit carryforwards
$ 8,300,000 
 
 
Income Taxes - Schedule of Unrecognized Tax Benefits (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
 
Unrecognized tax benefits, beginning balance
$ 11,786 
$ 8,503 
$ 5,955 
Decrease from tax positions related to the prior year
 
 
(57)
Additions from tax positions related to the prior year
 
279 
 
Additions from tax positions related to the current year
4,141 
3,639 
2,605 
Decrease related to settlements with taxing authorities
 
(621)
 
Lapse of statutes of limitations
(283)
(14)
0 
Unrecognized tax benefits, ending balance
$ 15,644 
$ 11,786 
$ 8,503 
Geographic Information - Schedule of Revenue by Geographic Areas (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
$ 430,492 
$ 311,999 
$ 208,768 
United States
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
229,663 
168,479 
116,220 
EMEA
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
123,036 
87,360 
59,047 
Other
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
$ 77,793 
$ 56,160 
$ 33,501 
Geographic Information - Schedule of Long-Lived Assets by Geographic Areas (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
$ 41,369 
$ 47,266 
United States
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
23,609 
26,372 
EMEA
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
10,026 
12,537 
Republic of Ireland
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
5,019 
5,703 
Other EMEA
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
5,007 
6,834 
APAC
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
$ 7,734 
$ 8,357 
Retirement Plans - Additional Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Retirement Benefits [Abstract]
 
Employer matching contributions
$ 1.1