SEC Filing | Five9, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

fivn-20220930

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36383

Five9, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						94-3394123
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

3001 Bishop Drive, Suite 350

San Ramon, CA 94583

(Address of Principal Executive Offices) (Zip Code)

(925) 201-2000

(Registrant’s Telephone Number, Including Area Code)

_______________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, par value $0.001 per share	FIVN	The NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated filer

☐

(Do not check if a smaller reporting Company)

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes: ☐ No: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No: ☒

As of November 1, 2022, there were 70,505,394 shares of the Registrant’s common stock, par value $0.001 per share, outstanding.

Table of Contents

FIVE9, INC.

FORM 10-Q

TABLE OF CONTENTS


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS						2

PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements						4
Condensed Consolidated Balance Sheets (Unaudited)						4
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)						5
Condensed Consolidated Statements of Stockholder’ Equity (Unaudited)						6
Condensed Consolidated Statements of Cash Flows (Unaudited)						8
Notes to Condensed Consolidated Financial Statements (Unaudited)						9
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						30
Overview						30
Key Operating and Financial Performance Metrics						31
Key Components of Our Results of Operations						33
Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021						34
Liquidity and Capital Resources						37
Critical Accounting Policies and Estimates						39
Recent Accounting Pronouncements						39

Contractual and Other Obligations						39
ITEM 3. Quantitative and Qualitative Disclosure about Market Risk						41
ITEM 4. Controls and Procedures						42

PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings						43
ITEM 1A. Risk Factors						43
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds						46
ITEM 3. Defaults Upon Senior Securities						46
ITEM 4. Mine Safety Disclosures						46
ITEM 5. Other Information						46
ITEM 6. Exhibits						47

SIGNATURES						48

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve substantial risks and uncertainties. These statements reflect the current views of our senior management with respect to future events and our financial performance. These forward-looking statements include statements with respect to our business, expenses, strategies, losses, growth plans, product and client initiatives, market growth projections, and our industry. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise.

Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. These factors include the information under the caption "Risk Factors" set forth in Part 1, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and Part II, Item 1A, of this Quarterly Report, which we encourage you to carefully read, and include the following:

•our quarterly and annual results may fluctuate significantly, including as a result of the timing and success of new product and feature introductions by us, and may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock;

•adverse economic conditions, including the impact of macroeconomic deterioration, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, and other factors, may continue to harm our business;

•if we are unable to attract new clients or sell additional services and functionality to our existing clients, our revenue and revenue growth will be harmed;

•if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we might expect, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base;

•our recent rapid growth may not be indicative of our future growth, and even if we continue to grow rapidly, we may fail to manage our growth effectively;

•our recent Chief Executive Officer transition could disrupt our operations, result in additional executive and personnel transitions and make it more difficult for us to hire and retain employees;

•failure to adequately retain and expand our sales force will impede our growth;

•if we fail to manage our technical operations infrastructure, our existing clients may experience service outages, our new clients may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages;

•our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business;

•we have established, and are continuing to increase, our network of master agents and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues;

•the markets in which we participate involve a high number of competitors that is continuing to increase, and if we do not compete effectively, our operating results could be harmed;

•we continue to expand our international operations, which exposes us to significant macroeconomic and other risks;

•security breaches and improper access to or disclosure of our data or our clients’ data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and our business;

•we may acquire other companies, or technologies or be the target of strategic transactions, or be impacted by transactions by other companies, which could divert our management’s attention, result in additional dilution to our stockholders or use a significant amount of our cash resources and otherwise disrupt our operations and harm our operating results;

•we sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results;

Table of Contents

•because a significant percentage of our revenue is derived from existing clients, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern;

•we rely on third-party telecommunications and internet service providers to provide our clients and their customers with telecommunication services and connectivity to our cloud contact center software and any failure by these service providers to provide reliable services could cause us to lose clients and subject us to claims for credits or damages, among other things;

•we have a history of losses and we may be unable to achieve or sustain profitability;

•the contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new solutions in order to maintain and grow our business;

•the effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which it will impact our future results of operations and overall financial performance remain uncertain;

•our stock price is volatile;

•we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs;

•failure to comply with laws and regulations could harm our business and our reputation; and

•we may not have sufficient cash to service our convertible senior notes and repay such notes, if required.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in, or incorporated into, this report. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may differ materially from what we anticipate. You should not place undue reliance on our forward-looking statements. Any forward-looking statements you read in this report reflect our views only as of the date of this report with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)



	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	129,492	$	90,878
Marketable investments	447,612		378,980
Accounts receivable, net	88,225		83,731
Prepaid expenses and other current assets	32,600		30,342
Deferred contract acquisition costs, net	43,587		33,295
Total current assets	741,516		617,226
Property and equipment, net	101,969		77,785
Operating lease right-of-use assets	44,941		48,703
Intangible assets, net	31,081		39,897
Goodwill	165,420		165,420
Marketable investments	1,961		147,377
Other assets	11,963		11,871
Deferred contract acquisition costs, net — less current portion	107,961		84,663
Total assets	$	1,206,812	$	1,192,942

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	21,153	$	20,510
Accrued and other current liabilities	63,122		78,577
Operating lease liabilities	10,201		9,826
Accrued federal fees	439		2,282
Sales tax liabilities	2,485		2,660

Deferred revenue	53,834		43,720
Convertible senior notes	176		—
Total current liabilities	151,410		157,575
Convertible senior notes — less current portion	737,429		768,599
Sales tax liabilities — less current portion	894		877
Operating lease liabilities — less current portion	42,487		47,088

Other long-term liabilities	5,147		7,671
Total liabilities	937,367		981,810
Commitments and contingencies (Note 10)
Stockholders’ equity:

Common stock	71		68
Additional paid-in capital	582,908		439,787

Accumulated other comprehensive loss	(4,101)		(287)
Accumulated deficit	(309,433)		(228,436)
Total stockholders’ equity	269,445		211,132
Total liabilities and stockholders’ equity	$	1,206,812	$	1,192,942

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited, in thousands, except per share data)



	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenue	$	198,342	$	154,328	$	570,501	$	435,992
Cost of revenue	94,111		67,137		271,207		191,335
Gross profit	104,231		87,191		299,294		244,657
Operating expenses:
Research and development	34,113		29,680		104,929		76,449
Sales and marketing	67,353		49,712		196,062		140,535
General and administrative	24,496		26,790		72,634		71,944
Total operating expenses	125,962		106,182		373,625		288,928
Loss from operations	(21,731)		(18,991)		(74,331)		(44,271)
Other (expense) income, net:
Interest expense	(1,879)		(1,947)		(5,606)		(6,003)

Interest income and other	982		213		2,107		35
Total other (expense) income, net	(897)		(1,734)		(3,499)		(5,968)
Loss before income taxes	(22,628)		(20,725)		(77,830)		(50,239)
Provision for (benefit from) income taxes	579		(188)		3,167		(840)
Net loss	$	(23,207)	$	(20,537)	$	(80,997)	$	(49,399)
Net loss per share:
Basic and diluted	$	(0.33)	$	(0.30)	$	(1.16)	$	(0.73)


Shares used in computing net loss per share:
Basic and diluted	70,232		67,800		69,656		67,278


Comprehensive Loss:
Net loss	$	(23,207)	$	(20,537)	$	(80,997)	$	(49,399)
Other comprehensive income (loss)	433		(74)		(3,814)		(110)
Comprehensive loss	$	(22,774)	$	(20,611)	$	(84,811)	$	(49,509)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)


	Common Stock		Additional Paid-In Capital					Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total Stockholders’ Equity
		Shares					Amount
Balance as of June 30, 2021		67,684	$	68	$	366,637				$	299	$	(204,298)	$	162,706


Issuance of common stock upon partial conversion of the 2023 convertible senior notes		24	—		(12)					—		—		(12)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes		(4)	—		—					—		—		—
Issuance of common stock upon exercise of stock options		87	—		1,592					—		—		1,592
Issuance of common stock upon vesting of restricted stock units		243	—		—					—		—		—

Stock-based compensation		—	—		27,395					—		—		27,395
Other comprehensive loss		—	—		—					(74)		—		(74)
Net loss		—	—		—					—		(20,537)		(20,537)
Balance as of September 30, 2021		68,034	$	68	$	395,612				$	225	$	(224,835)	$	171,070

Balance as of June 30, 2022		70,090	$	70	$	535,592				$	(4,534)	$	(286,226)	$	244,902
Issuance of common stock upon partial conversion of the 2023 convertible senior notes		—	—		(16)					—		—		(16)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes		—	—		5					—		—		5
Issuance of common stock upon exercise of stock options		68	—		2,353					—		—		2,353
Issuance of common stock upon vesting of restricted stock units		345	1		—					—		—		1

Stock-based compensation		—	—		44,974					—		—		44,974
Other comprehensive income		—	—		—					433		—		433
Net loss		—	—		—					—		(23,207)		(23,207)
Balance as of September 30, 2022		70,503	$	71	$	582,908				$	(4,101)	$	(309,433)	$	269,445

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)


	Common Stock		Additional Paid-In Capital					Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total Stockholders’ Equity
		Shares					Amount
Balance as of December 31, 2020		66,496	$	67	$	476,941				$	335	$	(198,179)	$	279,164
Cumulative effect adjustment due to adoption of ASU 2020-06(1)		—	—		(168,412)					—		22,743		(145,669)
Issuance of common stock upon partial conversion of the 2023 convertible senior notes		348	—		(285)					—		—		(285)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes		(50)	—		7					—		—		7
Issuance of common stock upon exercise of stock options		333	—		6,029					—		—		6,029
Issuance of common stock upon vesting of restricted stock units		839	1		—					—		—		1
Issuance of common stock under ESPP		68	—		8,128					—		—		8,128
Stock-based compensation		—	—		73,204					—		—		73,204

Other comprehensive loss		—	—		—					(110)		—		(110)
Net loss		—	—		—					—		(49,399)		(49,399)
Balance as of September 30, 2021		68,034	$	68	$	395,612				$	225	$	(224,835)	$	171,070

Balance as of December 30, 2021		68,488	$	68	$	439,787				$	(287)	$	(228,436)	$	211,132
Issuance of common stock upon partial conversion of the 2023 convertible senior notes		574	—		(275)					—		—		(275)
Partial unwind of capped calls and retirement of common stock related to the 2023 convertible senior notes		(119)	—		8					—		—		8
Issuance of common stock upon exercise of stock options		419	1		5,357					—		—		5,358
Issuance of common stock upon vesting of restricted stock units		1,044	2		—					—		—		2
Issuance of common stock under ESPP		97	—		8,338					—		—		8,338
Stock-based compensation		—	—		129,693					—		—		129,693
Other comprehensive loss		—	—		—					(3,814)		—		(3,814)
Net loss		—	—		—					—		(80,997)		(80,997)
Balance as of September 30, 2022		70,503	$	71	$	582,908				$	(4,101)	$	(309,433)	$	269,445

(1)Effective January 1, 2021, the Company adopted ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Accordingly, the Company recorded a net reduction to opening accumulated deficit of $22.7 million and a net reduction to opening additional paid-in capital of $168.4 million as of January 1, 2021 due to the cumulative impact of adopting this new standard.

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Nine Months Ended
	September 30, 2022		September 30, 2021
Cash flows from operating activities:
Net loss	$	(80,997)	$	(49,399)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	33,650		28,194
Amortization of operating lease right-of-use assets	7,491		6,445
Amortization of deferred contract acquisition costs	29,245		18,358
Amortization of premium on marketable investments	1,006		5,114
Provision for doubtful accounts	812		502
Stock-based compensation	128,682		73,204






Amortization of discount and issuance costs on convertible senior notes	2,796		2,960


Deferred taxes	2,076		—
Change in fair of value of contingent consideration	260		5,260
Payment of contingent consideration liability in excess of acquisition-date fair value	(5,900)		—

Other	503		211
Changes in operating assets and liabilities:
Accounts receivable	(5,337)		(12,181)
Prepaid expenses and other current assets	(2,228)		(13,665)
Deferred contract acquisition costs	(62,835)		(51,765)
Other assets	(213)		(2,196)
Accounts payable	1,008		5,319
Accrued and other current liabilities	796		20,528
Accrued federal fees and sales tax liabilities	(2,001)		(3,363)
Deferred revenue	9,519		4,006
Other liabilities	(2,208)		(17,183)
Net cash provided by operating activities	56,125		20,349
Cash flows from investing activities:
Purchases of marketable investments	(250,278)		(543,544)
Proceeds from sales of marketable investments	600		2,369
Proceeds from maturities of marketable investments	321,311		419,922
Purchases of property and equipment	(46,028)		(28,478)
Capitalization of software development costs	(2,420)		—


Payments of initial direct costs	(282)		—
Cash paid for an equity investment in a privately-held company	(2,000)		—
Net cash provided by (used in) investing activities	20,903		(149,731)
Cash flows from financing activities:


Repurchase of a portion of 2023 convertible senior notes, net of costs	(34,057)		(18,870)
Proceeds from exercise of common stock options	5,358		6,029
Proceeds from sale of common stock under ESPP	8,338		8,128



Payment of contingent consideration liability up to acquisition-date fair value	(18,100)		—
Payment of holdback related to an acquisition	—		(3,200)
Payments of finance leases	—		(612)


Net cash used in financing activities	(38,461)		(8,525)
Net increase (decrease) in cash, cash equivalents and restricted cash	38,567		(137,907)
Cash, cash equivalents and restricted cash:
Beginning of period	91,391		220,372
End of period	$	129,958	$	82,465
Supplemental disclosures of cash flow data:
Cash paid for interest	$	1,870	$	1,913
Cash paid for income taxes	$	932	$	47
Non-cash investing and financing activities:

Equipment purchased and unpaid at period-end	$	13,372	$	13,705
Capitalization of leasehold improvements and furniture and fixtures through non-cash lease incentive	$	109	$	5,065

Stock-based compensation included in capitalized software development costs	$	1,011	$	—

Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Condensed Consolidated Balance Sheets - Beginning of Period:
Cash and cash equivalents	$	90,878	$	220,372
Restricted cash in other assets	513		—
Total cash, cash equivalents and restricted cash	$	91,391	$	220,372

Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Condensed Consolidated Balance Sheets - End of Period:
Cash and cash equivalents	$	129,492	$	82,465
Restricted cash in other assets	466		—
Total cash, cash equivalents and restricted cash	$	129,958	$	82,465

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

FIVE9, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Five9, Inc. and its wholly-owned subsidiaries (the “Company”) is a provider of cloud software for contact centers. The Company was incorporated in Delaware in 2001 and is headquartered in San Ramon, California. The Company has offices in Europe, Asia and Australia, which primarily provide research, development, sales, marketing, and client support services.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The significant estimates made by management affect revenue and related reserves, as well as the fair value of liabilities assumed through business combinations. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates.

Significant Accounting Policies

Except for the below significant accounting policy, which updates the significant accounting policies previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as filed with the SEC on February 28, 2022, there have been no material changes from the significant accounting policies previously disclosed in Part II, Item 8, of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Internal-use software development costs

The Company capitalizes certain qualifying costs incurred during the development stage of internal-use software. Costs related to preliminary project activities and post-implementation activities are expensed in research and development as incurred. Preliminary project activities include conceptual formulation, evaluation and final selection of alternatives, planning, proof of concept and requirement analysis of the selected alternative. Post-implementation stage begins when the internal-use software is ready for its intended use, and includes all internal and external training and application maintenance activities. Capitalized internal-use software costs are included within property and equipment, net on the condensed consolidated balance sheets, and are amortized over the estimated useful life of the software, which is three years. The related amortization expense is recognized in cost of revenue.

Recent Accounting Pronouncements Not Yet Effective

The Company has reviewed or is in the process of evaluating all issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such accounting pronouncements will cause a material impact on its condensed consolidated financial position, operating results or cash flows.

Table of Contents

2. Revenue

Contract Balances

The following table provides information about accounts receivable, net, deferred contract acquisition costs, net, contract assets and contract liabilities from contracts with customers (in thousands):


	September 30, 2022		December 31, 2021
Accounts receivable, net	$	88,225	$	83,731

Deferred contract acquisition costs, net:
Current	$	43,587	$	33,295
Non-current	107,961		84,663
Total deferred contract acquisition costs, net	$	151,548	$	117,958

Contract assets and contract liabilities:
Contract assets (included in prepaid expenses and other current assets)	$	3,202	$	2,593
Contract liabilities (deferred revenue)	53,834		43,720
Noncurrent contract liabilities (deferred revenue) (included in other long-term liabilities)	1,502		2,097
Net contract liabilities	$	(52,134)	$	(43,224)

The Company receives payments from customers based upon billing cycles. Invoice payment terms are usually 30 days or less. Accounts receivable are recorded when the right to consideration becomes unconditional.

Deferred contract acquisition costs are recorded when incurred and are amortized over an estimated customer benefit period of five years.

The Company’s contract assets consist of unbilled amounts typically resulting from professional services revenue recognition when it exceeds the total amounts billed to the customer. The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized.

In the three and nine months ended September 30, 2022, the Company recognized revenue of $2.9 million and $35.9 million, respectively, related to its contract liabilities at December 31, 2021.

Remaining Performance Obligations

As of September 30, 2022, the aggregate amount of the total transaction price allocated in contracts with original duration of greater than one year to the remaining performance obligations was $750.9 million. The Company expects to recognize revenue on approximately three-fourths of the remaining performance obligations over the next 24 months, with the balance recognized thereafter. The Company has elected the optional exemption, which allows for the exclusion of the amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less. Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations.

3. Investments and Fair Value Measurements

Marketable Investments

Table of Contents

The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s marketable investments as of September 30, 2022 and December 31, 2021 were as follows (in thousands):



	September 30, 2022
Short-Term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	747	$	—	$	(18)	$	729
U.S. treasury	179,222		3		(2,092)		177,133
U.S. agency securities	159,026		11		(2,355)		156,682
Commercial paper	14,746		—		—		14,746
Municipal bonds	93,088		—		(391)		92,697
Corporate bonds	5,659		—		(34)		5,625
Total	$	452,488	$	14	$	(4,890)	$	447,612

	September 30, 2022
Long-term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value


U.S. agency securities	$	1,996	$	—	$	(35)	$	1,961


Total	$	1,996	$	—	$	(35)	$	1,961



	December 31, 2021
Short-Term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	1,615	$	—	$	—	$	1,615
U.S. treasury	83,237		—		(24)		83,213
U.S. agency securities	159,070		—		(65)		159,005
Commercial paper	47,555		—		—		47,555
Municipal bonds	75,337		—		(96)		75,241
Corporate bonds	12,355		2		(6)		12,351
Total	$	379,169	$	2	$	(191)	$	378,980

	December 31, 2021
Long-term Marketable Investments	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	746	$	—	$	(2)	$	744
U.S. treasury	63,566		—		(251)		63,315
U.S. agency securities	63,960		—		(254)		63,706
Municipal bonds	18,655		—		(64)		18,591
Corporate bonds	1,026		—		(5)		1,021
Total	$	147,953	$	—	$	(576)	$	147,377

Table of Contents

The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than 12 months as of September 30, 2022 and December 31, 2021 (in thousands):


	September 30, 2022				December 31, 2021

	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Certificates of deposit	$	(18)	$	729	$	(2)	$	2,010
U.S. treasury	(2,092)		164,904		(275)		140,527
U.S. agency securities	(2,390)		151,280		(320)		222,710
Municipal bonds	(391)		92,697		(160)		87,184
Corporate bonds	(34)		5,625		(