ZENDESK, INC., S-1/A filed on 3/16/2015
Securities Registration Statement
Document and Entity Information
12 Months Ended
Dec. 31, 2014
Document And Entity Information [Abstract]
 
Document Type
S-1 
Amendment Flag
false 
Document Period End Date
Dec. 31, 2014 
Trading Symbol
ZEN 
Entity Registrant Name
Zendesk, Inc. 
Entity Central Index Key
0001463172 
Entity Filer Category
Non-accelerated Filer 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current Assets:
 
 
Cash and cash equivalents
$ 80,265 
$ 53,725 
Marketable securities
42,204 
9,889 
Accounts receivable, net of allowance for doubtful accounts of $264 and $282
11,523 
7,237 
Prepaid expenses and other current assets
5,013 
3,008 
Total current assets
139,005 
73,859 
Marketable securities, noncurrent
9,205 
2,225 
Property and equipment, net
41,895 
15,431 
Goodwill and intangible assets, net
14,152 
 
Other assets
1,531 
1,221 
Total assets
205,788 
92,736 
Current liabilities:
 
 
Accounts payable
4,763 
3,685 
Accrued liabilities
7,689 
4,648 
Accrued compensation and related benefits
11,738 
4,618 
Deferred revenue
50,908 
28,473 
Current portion of credit facility
3,041 
365 
Current portion of capital leases
10 
364 
Total current liabilities
78,149 
42,153 
Deferred revenue, noncurrent
823 
575 
Credit facility, noncurrent
3,911 
23,395 
Other liabilities
9,199 
1,520 
Total liabilities
92,082 
67,643 
Commitments and contingencies (Note 8)
   
   
Redeemable convertible preferred stock, par value $0.01, issuable in series: no shares and 24.0 million shares authorized; no shares and 23.6 million shares issued and outstanding as of December 31, 2014 and 2013, respectively
 
71,369 
Stockholders' equity (deficit):
 
 
Preferred stock, par value $0.01 per share: 10.0 million and no shares authorized as of December 31, 2014 and 2013, respectively; no shares issued and outstanding as of December 31, 2014 and 2013
   
   
Common stock, par value $0.01 per share: 400.0 million and 125.0 million shares authorized; 76.1 million and 23.7 million shares issued; 75.5 million and 23.2 million shares outstanding as of December 31, 2014 and 2013, respectively (including 0.6 million and 0.8 million shares subject to repurchase, legally issued and outstanding as of December 31, 2014 and 2013, respectively)
755 
229 
Additional paid-in capital
246,000 
18,591 
Accumulated other comprehensive income (loss)
(528)
10 
Accumulated deficit
(131,869)
(64,454)
Treasury stock at cost; 0.5 million shares as of December 31, 2014 and 2013
(652)
(652)
Total stockholders' equity (deficit)
113,706 
(46,276)
Total liabilities, redeemable convertible preferred stock, and stockholders' equity (deficit)
$ 205,788 
$ 92,736 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 264 
$ 282 
Redeemable convertible preferred stock, par value
$ 0.01 
$ 0.01 
Redeemable convertible preferred stock, shares authorized
24,000,000 
Redeemable convertible preferred stock, shares issued
23,600,000 
Redeemable convertible preferred stock, shares outstanding
23,600,000 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
10,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
400,000,000 
125,000,000 
Common stock, shares issued
76,100,000 
23,700,000 
Common stock, shares outstanding
75,500,000 
23,200,000 
Common stock shares outstanding, subject to repurchase
600,000 
800,000 
Treasury stock, shares
500,000 
500,000 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Statement [Abstract]
 
 
 
Revenue
$ 127,049 
$ 72,045 
$ 38,228 
Cost of revenue
46,047 1
24,531 1
13,253 1
Gross profit
81,002 
47,514 
24,975 
Operating expenses:
 
 
 
Research and development
36,403 1
15,288 1
14,816 1
Sales and marketing
77,875 1
37,622 1
22,749 1
General and administrative
32,869 1
16,437 1
11,558 1
Total operating expenses
147,147 1
69,347 1
49,123 1
Operating loss
(66,145)
(21,833)
(24,148)
Other expense, net
(1,533)
(517)
(96)
Loss before provision for (benefit from) income taxes
(67,678)
(22,350)
(24,244)
Provision for (benefit from) income taxes
(263)
221 
121 
Net loss
(67,415)
(22,571)
(24,365)
Accretion of redeemable convertible preferred stock
(18)
(49)
(50)
Deemed dividend to investors in relation to the tender offer
 
 
(8,326)
Net loss attributable to common stockholders
$ (67,433)
$ (22,620)
$ (32,741)
Net loss per share attributable to common stockholders, basic and diluted
$ (1.26)
$ (1.04)
$ (1.67)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
53,571 
21,674 
19,629 
CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cost of Revenue
 
 
 
Share-based compensation expense
$ 2,464 
$ 254 
$ 129 
Research and Development
 
 
 
Share-based compensation expense
10,918 
635 
4,117 
Sales and Marketing
 
 
 
Share-based compensation expense
10,680 
1,210 
1,313 
General and Administrative
 
 
 
Share-based compensation expense
$ 8,077 
$ 2,755 
$ 4,081 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Net loss
$ (67,415)
$ (22,571)
$ (24,365)
Other comprehensive income (loss), net of tax:
 
 
 
Net change in unrealized gain (loss) on available-for-sale investments
(71)
10 
 
Changes in foreign currency translation adjustment
(467)
 
(40)
Comprehensive loss
$ (67,953)
$ (22,561)
$ (24,405)
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (USD $)
In Thousands
Total
Redeemable Convertible Preferred Stock
Common Stock
Additional Paid-in Capital
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Balances at Dec. 31, 2011
$ (16,594)
$ 26,385 
$ 187 
$ 1,349 
$ (652)
$ 40 
$ (17,518)
Balances, shares at Dec. 31, 2011
 
15,016 
21,996 
 
(535)
 
 
Issuance of Series D redeemable convertible preferred stock, value
 
44,885 
 
 
 
 
 
Issuance of Series D redeemable convertible preferred stock, shares
 
8,582 
 
 
 
 
 
Issuance of common stock upon exercise of stock options, value
214 
 
207 
 
 
 
Issuance of common stock upon exercise of stock options, shares
 
 
718 
 
 
 
 
Issuance of common stock upon early exercise of stock options
 
 
529 
 
 
 
 
Vesting of early exercised stock options
723 
 
18 
705 
 
 
 
Repurchase of common stock, shares
 
 
(5)
 
 
 
 
Issuance of common stock upon exercise of warrants
182 
 
 
182 
 
 
 
Share-based compensation
9,725 
 
 
9,725 
 
 
 
Accretion of redeemable convertible preferred stock
(50)
50 
 
(50)
 
 
 
Foreign currency translation adjustment
(40)
 
 
 
 
(40)
 
Net loss
(24,365)
 
 
 
 
 
(24,365)
Balances at Dec. 31, 2012
(30,205)
71,320 
212 
12,118 
(652)
 
(41,883)
Balances, shares at Dec. 31, 2012
 
23,598 
23,238 
 
(535)
 
 
Issuance of common stock upon exercise of stock options, value
681 
 
673 
 
 
 
Issuance of common stock upon exercise of stock options, shares
 
 
765 
 
 
 
 
Issuance of common stock upon early exercise of stock options
 
 
164 
 
 
 
 
Vesting of early exercised stock options
861 
 
852 
 
 
 
Repurchase of common stock, shares
 
 
(457)
 
 
 
 
Share-based compensation
4,997 
 
 
4,997 
 
 
 
Accretion of redeemable convertible preferred stock
(49)
49 
 
(49)
 
 
 
Unrealized gain on investment
10 
 
 
 
 
10 
 
Net loss
(22,571)
 
 
 
 
 
(22,571)
Balances at Dec. 31, 2013
(46,276)
71,369 
229 
18,591 
(652)
10 
(64,454)
Balances, shares at Dec. 31, 2013
 
23,598 
23,710 
 
(535)
 
 
Issuance of common stock upon initial public offering, net of offering costs
103,090 
 
128 
102,962 
 
 
 
Issuance of common stock upon initial public offering, net of offering costs, shares
 
 
12,778 
 
 
 
 
Issuance of common stock upon exercise of stock options, value
4,970 
 
32 
4,938 
 
 
 
Issuance of common stock upon exercise of stock options, shares
3,516 
 
3,207 
 
 
 
 
Issuance of common stock upon early exercise of stock options
 
 
309 
 
 
 
 
Vesting of early exercised stock options
1,512 
 
1,507 
 
 
 
Repurchase of common stock, shares
(4)
 
(4)
 
 
 
 
Issuance of common stock upon exercise of warrants
 
 
(1)
 
 
 
Share-based compensation
34,615 
 
 
34,615 
 
 
 
Accretion of redeemable convertible preferred stock
(18)
18 
 
(18)
 
 
 
Foreign currency translation adjustment
(467)
 
 
 
 
 
 
Conversion of preferred stock to common stock upon initial public offering, value
71,387 
(71,387)
343 
71,044 
 
 
 
Unrealized gain on investment
(71)
 
 
 
 
 
 
Conversion of preferred stock to common stock upon initial public offering, shares
34,300 
(23,598)
34,323 
 
 
 
 
Issuance of common stock for acquisition of Zopim Technologies Ptd Ltd.
10,892 
 
10,883 
 
 
 
Issuance of common stock for acquisition of Zopim Technologies Ptd Ltd., shares
 
 
902 
 
 
 
 
Issuance of common stock for settlement of restricted stock units (RSUs)
 
 
(5)
 
 
 
Issuance of common stock for settlement of restricted stock units (RSUs), shares
 
 
517 
 
 
 
 
Shares withheld related to net share settlement of RSUs, value
(2,118)
 
(1)
(2,117)
 
 
 
Shares withheld related to net share settlement of RSUs
 
 
(147)
 
 
 
 
Issuance of common stock in connection with employee stock purchase plans
3,271 
 
3,267 
 
 
 
Issuance of common stock in connection with employee stock purchase plans, shares
 
 
428 
 
 
 
 
Issuance of common stock upon exercise of warrants, shares
 
 
111 
 
 
 
 
Tax benefit from share-based award activity
334 
 
 
334 
 
 
 
Other comprehensive loss, net of income taxes
(538)
 
 
 
 
(538)
 
Net loss
(67,415)
 
 
 
 
 
(67,415)
Balances at Dec. 31, 2014
$ 113,706 
 
$ 755 
$ 246,000 
$ (652)
$ (528)
$ (131,869)
Balances, shares at Dec. 31, 2014
 
 
76,134 
 
(535)
 
 
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Statement of Stockholders' Equity [Abstract]
 
Net of issuance costs of Series D redeemable convertible preferred stock
$ 115 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Cash flows from operating activities
 
 
 
Net loss
$ (67,415)
$ (22,571)
$ (24,365)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
11,456 
5,222 
2,506 
Share-based compensation
32,139 
4,854 
9,640 
Excess tax benefit from share-based award activity
(334)
 
 
Other
337 
179 
123 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(3,846)
(3,594)
(1,404)
Prepaid expenses and other current assets
(1,444)
(482)
(1,571)
Other assets and liabilities
1,742 
303 
(383)
Accounts payable
947 
2,409 
704 
Accrued liabilities
351 
1,724 
401 
Accrued compensation and related benefits
5,767 
2,043 
1,583 
Deferred revenue
22,390 
13,918 
7,670 
Net cash provided by (used in) operating activities
2,090 
4,005 
(5,096)
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(21,665)
(7,116)
(3,582)
Internal-use software costs
(8,013)
(4,661)
(3,505)
Purchases of marketable securities
(54,330)
(12,409)
 
Proceeds from maturities of marketable securities
10,450 
 
 
Proceeds from sale of marketable securities
4,004 
 
 
Decrease (increase) to restricted cash
153 
 
(32)
Cash paid for the acquisition of Zopim, net of cash acquired
(1,896)
 
 
Net cash used in investing activities
(71,297)
(24,186)
(7,119)
Cash flows from financing activities
 
 
 
Proceeds from initial public offering, net of issuance costs
103,090 
 
 
Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs
 
 
44,885 
Proceeds from exercise of employee stock options
7,229 
1,793 
2,125 
Taxes paid related to net share settlement of equity awards
(2,117)
 
 
Proceeds from issuance of common stock from employee equity plans
4,404 
 
 
Excess tax benefit from share-based award activity
334 
 
 
Proceeds from issuance of debt
3,940 
23,760 
 
Principal payments on debt
(20,748)
 
 
Principal payments on capital lease obligations
(364)
(337)
(305)
Net cash provided by financing activities
95,768 
25,216 
46,705 
Effect of exchange rate changes on cash and cash equivalents
(21)
(40)
Net increase in cash and cash equivalents
26,540 
5,037 
34,450 
Cash and cash equivalents at the beginning of period
53,725 
48,688 
14,238 
Cash and cash equivalents at the end of period
80,265 
53,725 
48,688 
Supplemental cash flow data:
 
 
 
Cash paid for interest and income taxes
1,056 
171 
71 
Non-cash investing and financing activities:
 
 
 
Deemed dividends on common stock
 
 
8,326 
Issuance of common stock for the acquisition of Zopim
10,892 
 
 
Vesting of early exercised stock options
1,512 
860 
62 
Purchases of property and equipment in accrued expenses
374 
251 
 
Property and equipment acquired through tenant improvement allowances
3,932 
 
 
Issuance of warrant in connection with credit facility
 
 
182 
Property and equipment acquired under capital leases
 
 
123 
Share-based compensation capitalized in internal-use software costs
$ 2,476 
$ 143 
$ 85 
Organization
Organization

Note 1. Organization

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

Our mission is to help organizations and their customers build better relationships. We are a software development company that provides a software-as-a-service, or SaaS, customer service platform. Our platform helps organizations engage with people in new ways that foster long-term customer loyalty and satisfaction. We empower organizations to better answer customers’ questions, and to solve their problems through the channels that people use every day when seeking help, such as email, chat, voice, social media and websites. Our customer service platform also helps people find answers on their own through knowledge bases and communities, capitalizing on the increasing customer preference for self-service. Our customer engagement capabilities allow organizations to proactively serve their customers, reaching out to those who may need help and soliciting feedback about their experience. The openness of our customer service platform makes it easy for organizations to integrate with their other applications. Our customer service platform consolidates the data from customer interactions and provides organizations with powerful analytics and performance benchmarking.

References to Zendesk 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

Note 2. 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.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no 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 our common stock and share-based awards, fair value of purchased intangible assets, goodwill, unrecognized tax benefits, useful lives of purchased intangible assets and property and equipment, and the capitalization and estimated useful life of our capitalized internal-use software.

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 our customer service platform and, to a lesser extent, live chat software. Arrangements with customers do not provide the customer with the right to take possession of the software supporting our customer service platform or live chat software 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 or 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. 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, voice, and training services, for which we recognize revenue upon completion.

 

Deferred Revenue

Deferred revenue consists primarily of customer billings in advance of revenue being recognized. We invoice customers for subscriptions to our customer service platform or live chat software 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, voice, and training services was immaterial as of December 31, 2014 and 2013.

Cost of Revenue

Cost of revenue consists primarily of personnel costs (including salaries, benefits, and share-based compensation) for employees associated with our platform infrastructure and our product support organizations, data center costs related to hosting our platform, depreciation and other expenses associated with our self-managed colocation data centers, amortization expense associated with capitalized internal-use software, payment processing fees, amortization expense associated with purchased intangible assets, and allocated shared 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.

There was no restricted cash as of December 31, 2014 as compared to $0.2 million as of December 31, 2013. As of December 31, 2014, the certificate of deposit pledged as collateral on credit cards had been refunded.

Marketable Securities

Marketable securities consist of corporate bonds and auto and credit card asset backed 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 expense, net in the consolidated statements of operations.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified.

 

The allowance for doubtful accounts consists of the following activity (in thousands):

 

     Year Ended December 31,  
         2013             2014      

Allowance for doubtful accounts, beginning balance

   $ 173      $ 282   

Additions

     301        843   

Write-offs

     (192     (861
  

 

 

   

 

 

 

Allowance for doubtful accounts, ending balance

$ 282    $ 264   
  

 

 

   

 

 

 

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 software

3 years

Leasehold improvements

Shorter of the lease term or estimated useful life

Depreciation expense of assets acquired through capital leases is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Fair Value Measurements

We measure certain financial assets 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 in either Level 1 or Level 2 and we have no financial assets or liabilities measured using Level 3 inputs. The fair value of our Level 1 financial assets is based on quoted market prices of the identical underlying security. The fair value of our Level 2 financial assets is based on inputs that are directly or indirectly observable in the market, including readily available pricing sources for identical underlying securities that may not be actively traded.

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. Based on borrowing rates available to us for loans with similar terms and maturities, the carrying value of borrowings approximates fair value or Level 2 within the fair value hierarchy.

 

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 useful life of our capitalized internal-use software was 3.2 years as of December 31, 2014.

Business Combination

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, Purchased 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 year ended December 31, 2014. No goodwill was recorded prior to December 31, 2013.

Purchased Intangible Assets.    Purchased intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisition. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated economic lives following the pattern in which the economic benefits of the assets will be consumed, generally straight-line.

Impairment of Long-Lived Assets.    The carrying amounts of our long-lived assets, including property and equipment, capitalized internal-use software, and purchased intangible assets, are reviewed periodically 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. No impairment of any long-lived assets was identified for the years ended December 31, 2014 and 2013.

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). 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. All RSUs and certain options granted to employees prior to the IPO vest upon the satisfaction of both a service condition and a performance condition. These RSUs and stock options with both a service condition and performance condition are collectively referred to as “Performance Awards” in the following discussion. The service condition for substantially all of these awards is satisfied over four years. The performance condition was satisfied upon the occurrence of a qualifying liquidity event which occurred upon the effectiveness of the registration statement related to our IPO. No share-based compensation expense was recognized for the Performance Awards prior to the IPO as the performance condition had not been deemed probable to have been met. Upon the satisfaction of the performance condition, we recognized a cumulative share-based compensation expense for the portion of the Performance Awards that had met the service condition. For the year ended December 31, 2014, share-based compensation expense related to the Performance Awards recognized was $12.7 million, using the accelerated attribution method. The remaining unrecognized share-based compensation expense related to the Performance Awards will be recorded over the remaining requisite service period using the accelerated attribution method, net of estimated forfeitures.

As of December 31 2014, we had a total of $74.5 million in future period share-based compensation expense related to all equity awards, net of estimated forfeitures, to be recognized over a weighted average period of 3.5 years.

Advertising Expense

Advertising is expensed as incurred. For the years ended December 31, 2014, 2013, and 2012, advertising expense was $12.7 million, $6.5 million, and $3.5 million, respectively.

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 the financial statements as a component of provision for income taxes.

Foreign Currency

The functional currency of our foreign subsidiaries, with the exception of our Singapore subsidiary, 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 expense, net on the statements of operations and were not material for the periods presented. The functional currency of our Singapore subsidiary is the Singapore dollar. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet dates. Revenue and expenses are translated at the average exchange rates for the period. Amounts classified in stockholders’ equity (deficit) are translated at historical exchange rates.

Concentrations of Risk

Financial instruments potentially exposing us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities and accounts receivable. 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.

At December 31, 2014 and 2013, there were no customers that represented more than 10% of the accounts receivable balance. There were no customers that individually exceeded 10% of our revenue in any of the periods presented.

Recently Issued Accounting Standards

In February 2013, the Financial Accounting Statements Board, or FASB, issued Accounting Standards Update No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the statement of operations or as a separate disclosure in the notes. The guidance became effective for reporting periods beginning after December 15, 2012 and is applied prospectively. We adopted this standard for the year ended December 31, 2013, and the adoption did not have any impact on our financial position, results of operations, or cash flows, as the amounts reclassified out of accumulated other comprehensive loss are not significant.

 

In July 2013, the FASB issued Accounting Standards Update No. 2013-11 “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” or ASU 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss, or NOL, carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 supports the approach for companies to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This approach requires companies to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. We adopted this standard for the year ended December 31, 2014, and the adoption did not have a material effect on our financial position, results of operations, or cash flows.

On May 28, 2014, the Financial Accounting Statements Board, or FASB, issued ASU 2014-09 regarding ASC Topic 606 “Revenue from Contracts with Customers.” This ASU provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU will be effective for our fiscal year beginning January 1, 2017. Early adoption is not permitted. We are currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

Acquisition of Zopim Technologies
Acquisition of Zopim Technologies

Note 3. Acquisition of Zopim Technologies

On March 21, 2014, we completed the acquisition of Zopim Technologies Pte Ltd., or Zopim, a software development company that provides a SaaS live chat service. During the three months ended December 31, 2014, we finalized our purchase accounting after adjustments were made to the preliminary purchase price allocation. The total adjusted acquisition date fair value of consideration transferred was $15.8 million ($4.9 million of cash and $10.9 million of our common stock), which included $1.1 million of cash and $2.4 million of common stock consideration held back between 12 and 18 months as partial security for standard indemnification obligations. The total adjusted purchase price was allocated to 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 attributable to expected synergies from future growth and potential future monetization opportunities, and is not deductible for tax purpose.

 

Net tangible liabilities assumed

$ (385

Intangible assets

  6,560   

Goodwill

  9,594   
  

 

 

 

Total purchase price

$ 15,769   
  

 

 

 

In connection with the acquisition, we also established a retention plan pursuant to which we issued RSUs for 0.9 million shares of our common stock, which vest in three annual installments from the date of acquisition. In addition, we agreed to pay cash in an aggregate amount of $3.0 million in two annual installments from the date of acquisition to Zopim employees in connection with their continued employment, which is recorded as compensation expense over the associated service periods of such employees.

Pro forma revenue and results of operations have not been presented because the historical results of Zopim were not material to our consolidated financial statements in any period presented.

Fair Value Measurements
Fair Value Measurements

Note 4. Fair Value Measurements

The following tables present information about our financial assets measured at fair value on a recurring basis as of December 31, 2014 and 2013 based on the three-tier fair value hierarchy (in thousands):

 

     Fair Value Measurement at
December 31, 2014
 
     Level 1      Level 2      Total  

Description

        

Corporate bonds

   $       $ 40,345       $ 40,345   

Money market funds

     21,382                 21,382   

Asset-backed securities

             5,080         5,080   

Commercial paper

             3,993         3,993   

U.S. treasury securities

             1,991         1,991   
  

 

 

    

 

 

    

 

 

 

Total

$ 21,382    $ 51,409    $ 72,791   
  

 

 

    

 

 

    

 

 

 

Included in cash and cash equivalents

$ 21,382   
        

 

 

 

Included in marketable securities

$ 51,409   
        

 

 

 

 

     Fair Value Measurement at
December 31, 2013
 
     Level 1      Level 2      Total  

Description

        

Corporate bonds

   $       $ 12,114       $ 12,114   

Money market funds

     10,836                 10,836   
  

 

 

    

 

 

    

 

 

 

Total

$ 10,836    $ 12,114    $ 22,950   
  

 

 

    

 

 

    

 

 

 

Included in cash and cash equivalents

$ 10,836   
        

 

 

 

Included in marketable securities

$ 12,114   
        

 

 

 

There were no transfers between fair value measurement levels during the years ended December 31, 2014 or 2013.

Gross unrealized gains or losses for cash equivalent and marketable securities as of December 31, 2014 and 2013 were not material. As of December 31, 2014 and 2013, 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 maturities as of December 31, 2014 and 2013 (in thousands):

 

     December 31,
2013
     December 31,
2014
 

Due in one year

   $ 9,889       $ 42,204   

Additions

     2,225         9,205   
  

 

 

    

 

 

 

Allowance for doubtful accounts, ending balance

$ 12,114    $ 51,409   
  

 

 

    

 

 

 
Property and Equipment
Property and Equipment

Note 5. Property and Equipment

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

 

     December 31,  
     2013     2014  

Capitalized internal-use software

   $ 11,104      $ 18,541   

Furniture and fixtures

     1,383        4,524   

Hosting equipment

     7,931        14,085   

Computer equipment and software

     1,680        4,310   

Leasehold improvements

     1,717        15,144   

Construction in progress

     341        3,546   
  

 

 

   

 

 

 

Total

  24,156      60,150   

Less accumulated depreciation and amortization

  (8,725   (18,255
  

 

 

   

 

 

 

Property and equipment, net

$ 15,431    $ 41,895   
  

 

 

   

 

 

 

Depreciation expense was $6.1 million, $2.9 million, and $1.1 million for the years ended December 31, 2014, 2013, and 2012, respectively. We capitalized $10.5 million, $4.8 million, and $3.6 million in costs associated with internal-use software during the years ended December 31, 2014, 2013, and 2012, respectively. Included in the capitalized internal-use software costs are $2.5 million, $0.1 million, and $0.1 million in share-based compensation costs for the years ended December 31, 2014, 2013, and 2012, respectively. Amortization expense of capitalized internal-use software totaled $3.8 million, $2.3 million, and $1.4 million during the years ended December 31, 2014, 2013, and 2012, respectively. The carrying value of capitalized internal-use software at December 31, 2014 and 2013 was $13.6 million and $6.8 million, respectively, including $3.5 million and $0.3 million in construction in progress, respectively.

Goodwill and Purchased Intangibles Assets
Goodwill and Purchased Intangibles Assets

Note 6. Goodwill and Purchased Intangibles Assets

The changes in the carrying amount of goodwill for the year ended December 31, 2014 are as follows (in thousands):

 

Balance as of December 31, 2013

$   

Goodwill acquire

  9,373   

Goodwill adjustments

  221   

Foreign currency translation adjustments

  (354
  

 

 

 

Balance as of December 31, 2014

$ 9,240   
  

 

 

 

 

Purchased intangible assets related to the Zopim acquisition subject to amortization as of December 31, 2014 consist of the following (in thousands). No purchased intangible assets were recorded as of December 31, 2013.

 

     Cost      Accumulated
Amortization
    Foreign
Currency
Translation
Adjustments
    Net      Remaining
Useful Life
 
                               (In years)  

Developed technology

   $ 5,200       $ (1,118   $ (191   $ 3,891         2.7   

Customer relationships

     1,300         (244     (48     1,008         3.2   

Trade name

     60         (45     (2     13         0.2   
  

 

 

    

 

 

   

 

 

   

 

 

    
$ 6,560    $ (1,407 $ (241 $ 4,912   
  

 

 

    

 

 

   

 

 

   

 

 

    

Amortization expense of purchased intangible assets related to the Zopim acquisition for the year ended December 31, 2014 was $1.4 million. No amortization expense was recorded for the year ended December 31, 2013.

Estimated future amortization expense as of December 31, 2014 is as follows (in thousands):

 

2015

$  1,757   

2016

  1,744   

2017

  1,342   

2018

  69   
  

 

 

 
$ 4,912   
  

 

 

 
Credit Facility
Credit Facility

Note 7. Credit Facility

We have a credit facility with Silicon Valley Bank consisting of a $20.0 million revolving line of credit and a $10.0 million equipment line of credit. As of December 31, 2013, outstanding balance under the revolving line of credit was $20.0 million. In June 2014 we repaid all outstanding principal and accrued interest under the revolving line of credit and as of December 31, 2014 there was no balance outstanding. As of December 31, 2014 and 2013, outstanding balance under the equipment line of credit was $7.0 million and $3.8 million, respectively.

Prior to our IPO, borrowings on the revolving line of credit bore interest at the Prime Rate plus 2.0% per annum. Upon the consummation of the IPO, the interest rate was reduced to the Prime Rate. Borrowings on the revolving line of credit are subject to a borrowing base limit determined monthly based on our recurring revenue metrics from previous months and the ratio of certain current assets to current liabilities as of the previous month end. To the extent we borrow funds on the revolving line of credit, we are entitled to make interest-only payments until January 1, 2016, when the outstanding balance is due in full.

Borrowings on the equipment line of credit bear interest of 2.5% per annum. For each equipment advance, we were entitled to make interest-only payments until September 14, 2014, when the last draw against the equipment line of credit could be made. The outstanding balance as of September 14, 2014 is payable in 30 equal monthly installments, with the last payment due on March 14, 2017. We are also required to make a final payment fee of $0.3 million on March 14, 2017.

 

The credit facility is collateralized by substantially all of our assets, excluding our intellectual property. Our domestic subsidiary is a guarantor of the credit facility and we have pledged up to 65% of the equity in our international subsidiaries as collateral. The credit facility also imposes various covenants on us, including the delivery of financial and other information, the maintenance of our primary operating and securities accounts with the lender, the maintenance of minimum revenue targets and an agreed ratio of certain current assets to current liabilities, as well as limitations on dispositions, changes in business or management, certain mergers or consolidations, dividends and other corporate activities. As of December 31, 2014 and 2013, we were in compliance with all of the covenants contained in the credit facility.

Contractual future principal repayments in relation to the credit facility are as follows for the year ending December 31 (in thousands):

 

2015

$ 3,041   

2016

  3,118   

2017

  793   
  

 

 

 
$ 6,952   
  

 

 

 

In June 2012, in connection with the credit facility, we issued a non-refundable, fully earned warrant to Silicon Valley Bank to purchase 125,000 shares of common stock at $1.92 per share with an expiration date of June 2019. The fair value of the warrant on issuance is being accreted to interest expense using the effective interest rate method over the life of the credit facility. This warrant was exercised in the three months ended June 30, 2014.

Commitments and Contingencies
Commitments and Contingencies

Note 8. Commitments and Contingencies

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. In 2013, we renewed the lease of our office in San Francisco through October 2019, with an option to renew for an additional 7 years and 8 months. We also entered into a lease for additional office space in San Francisco with an 8-year term, renewable for an additional period of 5 years. For the years ended December 31, 2014, 2013, and 2012, rent expense was $6.8 million, $2.3 million, and $1.6 million, respectively.

We lease computer equipment from various parties under capital lease agreements that expire through March 2015. The total outstanding balance financed under capital leases was immaterial at December 31, 2014 and $0.4 million at December 31, 2013. Accumulated depreciation on the leased assets was $1.0 million and $0.7 million at December 31, 2014 and 2013, respectively. Depreciation of assets recorded under capital leases is included in depreciation expense.

 

As of December 31, 2014, the future minimum lease payments by year under noncancelable leases are as follows for the year ending December 31 (in thousands):

 

2015

$ 7,025   

2016

  7,067   

2017

  6,935   

2018

  6,936   

2019

  6,672   

Thereafter

  12,707   
  

 

 

 

Total minimum lease payments

$ 47,342   
  

 

 

 

Letters of Credit

As of December 31, 2014 and 2013, we had a total of $3.7 million and $3.8 million, respectively, in letters of credit outstanding primarily related to our leased office space in San Francisco. The letters of credit are collateralized by substantially all of our assets, excluding our intellectual property. 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 incident to 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 financial position, 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 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 customer service platform, live chat software, 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.

We have entered into service-level agreements with certain customers 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 experienced any significant failures to meet the defined levels of reliability and performance warranted by those agreements and, as a result, we have not accrued any liabilities related to these agreements in the accompanying consolidated financial statements.

Common Stock and Stockholders' Equity (Deficit)
Common Stock and Stockholders' Equity (Deficit)

Note 9. Common Stock and Stockholders’ Equity (Deficit)

Convertible Preferred Stock

Upon the completion of the IPO, all outstanding convertible preferred stock was converted into 34.3 million shares of common stock.

Reverse Stock Split

In April 2014, our board of directors and stockholders approved a one-for-two reverse stock split of our common stock. All share and per share information throughout the consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.

Common Stock Authorized

At December 31, 2013, there were 80.0 million and 30.0 million shares authorized for Series A and Series B common stock, respectively, and there were 9.9 million and 13.3 million shares outstanding of Series A and Series B common stock, respectively, of which 0.8 million shares of Series B common stock were unvested resulting from employees exercising stock options prior to vesting. Upon the completion of our IPO, each share of Series B common stock was converted into Series A common stock on a one-for-one basis, and the Series A common stock was redesignated as common stock. In addition, we increased the amount of common stock authorized for issuance to 400.0 million common shares with a par value of $0.01 per share.

Employee Equity Plans

Employee Stock Purchase Plan

Our board of directors adopted the Employee Stock Purchase Plan, or ESPP, in February 2014, which became effective in May 2014 upon the effectiveness of the registration statement related to our IPO. The ESPP initially reserved and authorized the issuance of up to 3.6 million shares of common stock. The ESPP provides that the number of shares reserved and available for issuance under the plan automatically increases each January, beginning on January 1, 2015, by the lesser of 1.5 million shares, 1% of the number of shares issued and outstanding on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee.

Under the 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. We commenced our first purchase period under the ESPP on May 15, 2014. For the year ended December 31, 2014, 0.4 million shares of common stock were purchased under the ESPP at $7.65 per share, resulting in cash proceeds of $3.3 million. As of December 31, 2014, 3.2 million shares of common stock were available for issuance under the ESPP.

 

Stock Option and Grant Plan

Our board of directors adopted the 2009 Stock Option and Grant Plan, in July 2009. The 2009 Stock Option and Grant Plan was terminated in connection with our IPO, and accordingly, no shares are available for issuance under this plan. The 2009 Stock Option and Grant Plan continues to govern outstanding awards granted thereunder.

Our board of directors adopted the 2014 Stock Option and Incentive Plan, or the 2014 Plan, in February 2014, which became effective in May 2014 upon the effectiveness of the registration statement related to our IPO. The 2014 Plan serves as the successor to our 2009 Stock Option and Grant Plan. The 2014 Plan initially reserved and authorized the issuance of 7.5 million shares of our common stock. Additionally, shares not issued or subject to outstanding grants under the 2009 Stock Option and Grant Plan rolled into the 2014 Plan, resulting in a total of 8.3 million available shares under the 2014 Plan as of the effective date. The 2014 Plan provides that the number of shares reserved and available for issuance under the plan automatically increases each January 1, beginning on January 1, 2015, by 5% of the outstanding number of shares of our common stock on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee.

A summary of our stock option and RSU activity for the year ended December 31, 2014 is as follows (in thousands, except per share information):

 

    Shares
Available
for Grant
    Options Outstanding     RSUs Outstanding  
      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, 2014

    1,854        10,134      $ 2.82        8.15      $ 50,185        811      $ 6.76   

Increase in authorized shares

    13,750               

Stock options granted

    (6,308     6,308        11.40           

RSUs granted

    (3,030             3,030        14.44   

Stock options exercised

      (3,516     2.03           

RSUs vested

              (370     9.56   

Unvested shares repurchased

    4               

Stock options forfeited or canceled

    883        (883     4.96           

RSUs forfeited or cancelled

    407                (407     9.31   
 

 

 

   

 

 

         

 

 

   

 

 

 

Outstanding—December 31, 2014

  7,560      12,043    $ 7.39      8.29    $ 204,467      3,064    $ 13.69   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Options vested and expected to vest as of December 31, 2014

  10,742    $ 7.07      8.21    $ 185,866   
   

 

 

   

 

 

   

 

 

   

 

 

     

Options vested and exercisable as of December 31, 2014

  4,293    $ 3.87      7.34    $ 88,025   
   

 

 

   

 

 

   

 

 

   

 

 

     

The total intrinsic value of stock options exercised during the year ended December 31, 2014, 2013, 2012 was $66.2 million, $4.6 million, and $1.8 million, respectively. Aggregate 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, 2014, 2013, and 2012 was $7.22, $1.62, and $0.56, respectively.

Aggregate 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. Zendesk’s closing stock price as reported on the New York Stock Exchange, or NYSE as of December 31, 2014 was $24.37.

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). 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:

 

    Fair Value of Common Stock.    Prior to our IPO in May 2014, our board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant. These factors included, but were not limited to: (i) contemporaneous valuations performed by unrelated third-party specialists, (ii) rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock, (iii) actual operating and financial performance, (iv) relevant precedent transactions involving our capital stock, (v) likelihood of achieving a liquidity event, such as an initial public offering or a sale of our company given prevailing market conditions and the nature and history of our business, (vi) market multiples of comparable companies in our industry, (vii) stage of development, (viii) industry information such as market size and growth, (ix) illiquidity of share-based awards involving securities in a private company, and (x) macroeconomic conditions.

Since our IPO, we have used the market closing price for our common stock as reported on the NYSE.

 

    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 stock options vesting term and 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 the price volatility factor based on the historical volatility of publicly traded industry peers. To determine our peer group of companies, we consider public companies in the technology industry and select those that are similar to us in size, stage of life cycle, and financial leverage. We do not rely on implied volatilities of traded options in our industry peers’ common stock because the volume of activity is relatively low. We intend to continue to consistently apply this methodology using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own common stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

 

    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,
     2012    2013    2014

Expected volatility

   57%—59%    50%—63%    54%—56%

Dividend rate

   0%    0%    0%

Risk-free interest rate

   0.68%—1.47%    0.63%—2.02%    1.75%—2.02%

Expected term (in years)

   5.28—6.27    4.47—6.27    6.02—6.50

The assumptions used to estimate the fair value of ESPP awards are as follows:

 

     Year Ended
December 31, 2014

Expected volatility

   45%—49%

Dividend rate

   0%

Risk-free interest rate

   0.05%—0.35%

Expected term (in years)

   0.50—1.5

In addition to the assumptions used in the Black-Scholes option valuation model, we must also estimate a forfeiture rate to calculate the share-based compensation expense for our awards. Our forfeiture rate is based on an analysis of our actual forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover, and other factors. Changes in the estimated forfeiture rate can have a significant impact on our share-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the share-based compensation expense recognized in our financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the share-based compensation expense recognized in our financial statements.

We will continue to use judgment in evaluating the expected volatility, expected term, and forfeiture rate utilized in our share-based compensation expense calculations on a prospective basis. As we continue to accumulate additional data related to our common stock, we may refine our estimates of expected volatility, expected term, and forfeiture rates, which could materially impact our future share-based compensation expense.

 

In the years ended December 31, 2014 and 2013 we recorded $4.3 million and $1.7 million share-based compensation expense related to the accelerated vesting of certain stock options resulting from employee terminations, respectively. No such expense was recorded in the year ended December 31, 2012.

In September 2012, in connection with our sale of the Series D redeemable convertible preferred stock, the purchasers of the Series D redeemable convertible preferred stock conducted a tender offer to acquire approximately 8.0 million shares of common stock from employees, former employees, and other existing investors. In connection with the tender offer, we waived any rights of first refusal or other transfer restrictions applicable to such shares. The shares were repurchased from the stockholders at a purchase price of $9.62 per share. As a result of this transaction, we recorded a total of $8.6 million in share-based compensation expense in the year ended December 31, 2012 for the difference between the price paid for shares held by our employees and former employee stockholders and the estimated fair market value on the date of the transaction. Of the total share-based compensation expense, we recorded $20,000, $3.9 million, $1.0 million, and $3.7 million in cost of revenue, research and development, sales and marketing, and general and administrative expenses, respectively.

In connection with the tender offer, we recorded $8.3 million in deemed dividends, within additional paid-in capital, for the difference between the price paid for shares held by stockholders that were not employees or former employees and the estimated fair market value on the date of the transaction.

Early Exercise of Stock Options and Purchase of Unvested Stock Awards

Common stock purchased pursuant to an early exercise of stock options or unvested stock awards is not deemed to be outstanding for financial reporting purposes until those shares vest. Therefore, cash received in exchange for unvested shares is recorded as a liability and is transferred into common stock and additional paid-in capital as the shares vest. Upon termination of service, we may, at our discretion, repurchase unvested shares acquired through early exercise of stock options or purchase of unvested stock awards at a price equal to the price per share paid upon the exercise of such options or the purchase of such unvested stock awards. As of December 31, 2014 and 2013 there were 0.6 million and 0.8 million shares outstanding as a result of early exercise of stock options and purchase of unvested stock awards by our employees and directors that were classified as accrued liabilities for an aggregated amount of $2.1 million and $1.4 million, respectively.

Treasury Stock

We repurchased 0.5 million shares of common stock in the year ended December 31, 2011 and recorded the repurchased shares as treasury shares in the stockholders’ equity (deficit) section of the balance sheet at cost.

Net Loss Per Share
Net Loss Per Share

Note 10. Net Loss Per Share

We compute net loss per share of common stock in conformity with the two-class method required for participating securities. We consider all series of the redeemable convertible preferred stock to be participating securities as the holders of the preferred stock are entitled to receive a non-cumulative dividend on a pari passu basis in the event that a dividend is paid on common stock. We also consider shares of common stock issued upon the early exercise of stock awards subject to repurchase to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of the redeemable convertible preferred stock and the holders of shares of common stock acquired upon early exercise of stock options do not have a contractual obligation to share in our losses. As such, our net losses for the years ended December 31, 2014, 2013 and 2012 were not allocated to these participating securities. Upon the closing of the IPO in May 2014, all shares of our then-outstanding redeemable convertible preferred stock automatically converted into our common stock.

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, less the weighted-average unvested common stock subject to repurchase. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including common stock issuable upon conversion of the redeemable convertible preferred stock, outstanding share-based awards, and outstanding warrant, 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,  
     2012     2013     2014  
     Class A     Class B     Class A     Class B        

Net loss

   $ (12,104   $ (12,261   $ (10,290   $ (12,281   $ (67,415

Less: Accretion of redeemable convertible preferred stock

     (25     (25     (22     (27     (18

Less: Deemed dividend to investors in relation to the tender offer

     (4,136     (4,190                     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

$ (16,265 $ (16,476 $ (10,312 $ (12,308 $ (67,433
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic shares:

Weighted-average common shares outstanding

  9,881      12,153      9,881      12,964      54,383   

Less: Weighted-average common shares subject to repurchase

  (130   (2,275        (1,171   (812
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares used to compute basic net loss per share

  9,751      9,878      9,881      11,793      53,571   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted shares:

Weighted-average common shares used to compute diluted net loss per share

  9,751      9,878      9,881      11,793      53,571   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders:

Basic and diluted

$ (1.67 $ (1.67 $ (1.04 $ (1.04 $ (1.26
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

     As of December 31,  
     2012      2013      2014  

Redeemable convertible preferred stock

     34,323         34,323           

Shares subject to outstanding common stock options

     7,781         10,134         12,043   

Shares subject to common stock warrants

     125         125           

Restricted stock units

             811         3,064   
  

 

 

    

 

 

    

 

 

 
  42,229      45,393      15,107   
  

 

 

    

 

 

    

 

 

 
Income Taxes
Income Taxes

Note 11. Income Taxes

The components of loss before provision for income taxes are as follows (in thousands):

 

     Year Ended December 31,  
     2012     2013     2014  

U.S.

   $ (24,739   $ (23,117   $ (66,755

Foreign

     495        767        (923
  

 

 

   

 

 

   

 

 

 

Total

$ (24,244 $ (22,350 $ (67,678
  

 

 

   

 

 

   

 

 

 

The income tax provision is composed of the following (in thousands):

 

     Year Ended December 31,  
       2012         2013         2014    

Current tax provision

      

Federal

   $      $      $ 2   

State

     2        37        1   

Foreign

     126        189        567   
  

 

 

   

 

 

   

 

 

 
  128      226      570   

Deferred tax provision:

Federal

              

State

              

Foreign

  (7   (5   (833
  

 

 

   

 

 

   

 

 

 

Total provision for (benefit from) income taxes

$ 121    $ 221    $ (263
  

 

 

   

 

 

   

 

 

 

 

Significant components of deferred tax assets are as follows (in thousands):

 

     As of December 31,  
     2013     2014  

Deferred tax assets:

    

Tax credit carryforward

   $ 15      $ 197   

Net operating loss carryforward

     19,278        33,878   

Share-based compensation

     771        5,311   

Accrued liabilities and reserves

     1,316        3,710   

Other

     677        600   
  

 

 

   

 

 

 

Total deferred tax assets

  22,057      43,696   

Less: valuation allowance

  (19,837   (39,496
  

 

 

   

 

 

 

Deferred tax assets, net of valuation allowance

  2,220      4,200   

Deferred tax liabilities:

Depreciation and amortization

  (2,207   (4,597
  

 

 

   

 

 

 

Net deferred tax assets (liabilities)

$ 13    $ (397
  

 

 

   

 

 

 

The following is a reconciliation of the statutory federal income tax rate and the effective tax rates:

 

     Year Ended December 31,  
       2012         2013         2014    

Tax at federal statutory rate

     34.0     34.0     34.0

State tax provision, net of federal benefit

            (0.2       

Share-based compensation

     (11.1     (4.4     (5.5

Valuation allowance

     (23.3     (30.4     (27.9

Other

     (0.1            (0.2
  

 

 

   

 

 

   

 

 

 

Effective tax rate

  (0.5 )%    (1.0 %)    0.4
  

 

 

   

 

 

   

 

 

 

We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of foreign subsidiaries as of December 31, 2014 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, 2014, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $2.4 million. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

As of December 31, 2014, we had net operating loss carryforwards of approximately $133.0 million for federal income taxes and $47.5 million for state income taxes. If not utilized, these carryforwards will begin to expire in 2029 for federal purposes and 2031 for state purposes.

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.

As of December 31, 2014, we had research and development credit carryforwards of approximately, $2.5 million and $2.7 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.

 

A share option exercise may result in a tax deduction prior to the actual recognition of the related excess tax benefit because we have a net operating loss carryforward. Our net operating losses include $40.9 million of excess stock option benefits that will be creditable to additional paid in capital when realized.

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.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) is as follows (in thousands):

 

Balance at December 31, 2012

$  1,939   

Additions for tax positions related to the prior year

    

Additions for tax positions related to the current year

  1,978   

Lapse of statutes of limitations

    
  

 

 

 

Balance as December 31, 2013

  3,917   

Additions for tax positions related to the prior year

  (32

Additions for tax positions related to the current year

  2,070   

Lapse of statutes of limitations

    
  

 

 

 

Balance at December 31, 2014

$ 5,955   
  

 

 

 

As of December 31, 2014, we had $0.3 million of 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 income taxes. Included in the balance of unrecognized tax benefits at December 31, 2014 and 2013 are potential benefits of $0.9 million and $0.5 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.

Our 2009-2013 tax years remain subject to examination by the taxing authorities for U.S. federal, state, and foreign tax purposes.

Geographic Information
Geographic Information

Note 12. Geographic Information

Revenue

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

 

     Year Ended December 31,  
     2012      2013      2014  

United States

   $ 22,445       $ 42,415       $ 72,217   

EMEA

     10,257         19,125         35,856   

Other

     5,526         10,505         18,976   
  

 

 

    

 

 

    

 

 

 

Total

$ 38,228    $ 72,045    $ 127,049   
  

 

 

    

 

 

    

 

 

 

 

Long-Lived Assets

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

 

     December 31,  
     2013      2014  

United States

   $ 6,466       $ 22,817   

EMEA

     2,054         4,373   

Other

     135         1,096   
  

 

 

    

 

 

 

Total

$ 8,655    $ 28,286   
  

 

 

    

 

 

 

The carrying value of capitalized internal-use software is excluded from the balance of long-lived assets presented in the table above.

Retirement Plans
Retirement Plans

Note 13. 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 may, at our discretion, make matching contributions to the 401(k) plan. We are responsible for the administrative costs of the 401(k) plan. We have not made any contributions to the 401(k) plan since inception.

Subsequent Events
Subsequent Events

Note 14. Subsequent Events

In January 2015, we changed the time-off policy for U.S. employees. Under the new policy, salaried employees no longer accrue paid time off and a one-time payment of $2.4 million was made in January 2015 to U.S. salaried employees for the amount accrued as of such date.

Summary of Significant Accounting Policies (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.

Reclassification

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no 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 our common stock and share-based awards, fair value of purchased intangible assets, goodwill, unrecognized tax benefits, useful lives of purchased intangible assets and property and equipment, and the capitalization and estimated useful life of our capitalized internal-use software.

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 our customer service platform and, to a lesser extent, live chat software. Arrangements with customers do not provide the customer with the right to take possession of the software supporting our customer service platform or live chat software 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 or 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. 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, voice, and training services, for which we recognize revenue upon completion.

Deferred Revenue

Deferred revenue consists primarily of customer billings in advance of revenue being recognized. We invoice customers for subscriptions to our customer service platform or live chat software 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, voice, and training services was immaterial as of December 31, 2014 and 2013.

Cost of Revenue

Cost of revenue consists primarily of personnel costs (including salaries, benefits, and share-based compensation) for employees associated with our platform infrastructure and our product support organizations, data center costs related to hosting our platform, depreciation and other expenses associated with our self-managed colocation data centers, amortization expense associated with capitalized internal-use software, payment processing fees, amortization expense associated with purchased intangible assets, and allocated shared 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.

There was no restricted cash as of December 31, 2014 as compared to $0.2 million as of December 31, 2013. As of December 31, 2014, the certificate of deposit pledged as collateral on credit cards had been refunded.

Marketable Securities

Marketable securities consist of corporate bonds and auto and credit card asset backed 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 expense, net in the consolidated statements of operations.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts when identified.

 

The allowance for doubtful accounts consists of the following activity (in thousands):

 

     Year Ended December 31,  
         2013             2014      

Allowance for doubtful accounts, beginning balance

   $ 173      $ 282   

Additions

     301        843   

Write-offs

     (192     (861
  

 

 

   

 

 

 

Allowance for doubtful accounts, ending balance

$ 282    $ 264   
  

 

 

   

 

 

 

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 software

3 years

Leasehold improvements

Shorter of the lease term or estimated useful life

Depreciation expense of assets acquired through capital leases is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Fair Value Measurements

We measure certain financial assets 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 in either Level 1 or Level 2 and we have no financial assets or liabilities measured using Level 3 inputs. The fair value of our Level 1 financial assets is based on quoted market prices of the identical underlying security. The fair value of our Level 2 financial assets is based on inputs that are directly or indirectly observable in the market, including readily available pricing sources for identical underlying securities that may not be actively traded.

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. Based on borrowing rates available to us for loans with similar terms and maturities, the carrying value of borrowings approximates fair value or Level 2 within the fair value hierarchy.

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 useful life of our capitalized internal-use software was 3.2 years as of December 31, 2014.

Business Combination

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, Purchased 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 year ended December 31, 2014. No goodwill was recorded prior to December 31, 2013.

Purchased Intangible Assets.    Purchased intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our acquisition. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated economic lives following the pattern in which the economic benefits of the assets will be consumed, generally straight-line.

Impairment of Long-Lived Assets.    The carrying amounts of our long-lived assets, including property and equipment, capitalized internal-use software, and purchased intangible assets, are reviewed periodically 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. No impairment of any long-lived assets was identified for the years ended December 31, 2014 and 2013.

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). 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. All RSUs and certain options granted to employees prior to the IPO vest upon the satisfaction of both a service condition and a performance condition. These RSUs and stock options with both a service condition and performance condition are collectively referred to as “Performance Awards” in the following discussion. The service condition for substantially all of these awards is satisfied over four years. The performance condition was satisfied upon the occurrence of a qualifying liquidity event which occurred upon the effectiveness of the registration statement related to our IPO. No share-based compensation expense was recognized for the Performance Awards prior to the IPO as the performance condition had not been deemed probable to have been met. Upon the satisfaction of the performance condition, we recognized a cumulative share-based compensation expense for the portion of the Performance Awards that had met the service condition. For the year ended December 31, 2014, share-based compensation expense related to the Performance Awards recognized was $12.7 million, using the accelerated attribution method. The remaining unrecognized share-based compensation expense related to the Performance Awards will be recorded over the remaining requisite service period using the accelerated attribution method, net of estimated forfeitures.

As of December 31 2014, we had a total of $74.5 million in future period share-based compensation expense related to all equity awards, net of estimated forfeitures, to be recognized over a weighted average period of 3.5 years.

Advertising Expense

Advertising is expensed as incurred. For the years ended December 31, 2014, 2013, and 2012, advertising expense was $12.7 million, $6.5 million, and $3.5 million, respectively.

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 the financial statements as a component of provision for income taxes.

Foreign Currency

The functional currency of our foreign subsidiaries, with the exception of our Singapore subsidiary, 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 expense, net on the statements of operations and were not material for the periods presented. The functional currency of our Singapore subsidiary is the Singapore dollar. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet dates. Revenue and expenses are translated at the average exchange rates for the period. Amounts classified in stockholders’ equity (deficit) are translated at historical exchange rates.

Concentrations of Risk

Financial instruments potentially exposing us to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, marketable securities and accounts receivable. 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.

At December 31, 2014 and 2013, there were no customers that represented more than 10% of the accounts receivable balance. There were no customers that individually exceeded 10% of our revenue in any of the periods presented.

Recently Issued Accounting Standards

In February 2013, the Financial Accounting Statements Board, or FASB, issued Accounting Standards Update No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires an entity to disaggregate the total change of each component of other comprehensive income either on the face of the statement of operations or as a separate disclosure in the notes. The guidance became effective for reporting periods beginning after December 15, 2012 and is applied prospectively. We adopted this standard for the year ended December 31, 2013, and the adoption did not have any impact on our financial position, results of operations, or cash flows, as the amounts reclassified out of accumulated other comprehensive loss are not significant.

 

In July 2013, the FASB issued Accounting Standards Update No. 2013-11 “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” or ASU 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss, or NOL, carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 supports the approach for companies to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This approach requires companies to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. We adopted this standard for the year ended December 31, 2014, and the adoption did not have a material effect on our financial position, results of operations, or cash flows.

On May 28, 2014, the Financial Accounting Statements Board, or FASB, issued ASU 2014-09 regarding ASC Topic 606 “Revenue from Contracts with Customers.” This ASU provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU will be effective for our fiscal year beginning January 1, 2017. Early adoption is not permitted. We are currently evaluating the accounting, transition, and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

Summary of Significant Accounting Policies (Tables)

The allowance for doubtful accounts consists of the following activity (in thousands):

 

     Year Ended December 31,  
         2013             2014      

Allowance for doubtful accounts, beginning balance

   $ 173      $ 282   

Additions

     301        843   

Write-offs

     (192     (861
  

 

 

   

 

 

 

Allowance for doubtful accounts, ending balance

$ 282    $ 264   
  

 

 

   

 

 

 

The estimated useful lives of our property and equipment are as follows:

 

Furniture and fixtures

5 years

Hosting equipment

3 years

Computer equipment and software

3 years

Leasehold improvements

Shorter of the lease term or estimated useful life
Acquisition of Zopim Technologies (Tables)
Schedule of Purchase Price Allocation for Acquisitions

The total adjusted purchase price was allocated to assets acquired and liabilities assumed as set forth below (in thousands). 

 

Net tangible liabilities assumed

$ (385

Intangible assets

  6,560   

Goodwill

  9,594   
  

 

 

 

Total purchase price

$ 15,769   
  

 

 

 
Fair Value Measurements (Tables)

The following tables present information about our financial assets measured at fair value on a recurring basis as of December 31, 2014 and 2013 based on the three-tier fair value hierarchy (in thousands):

 

     Fair Value Measurement at
December 31, 2014
 
     Level 1      Level 2      Total  

Description

        

Corporate bonds

   $       $ 40,345       $ 40,345   

Money market funds

     21,382                 21,382   

Asset-backed securities

             5,080         5,080   

Commercial paper

             3,993         3,993   

U.S. treasury securities

             1,991         1,991   
  

 

 

    

 

 

    

 

 

 

Total

$ 21,382    $ 51,409    $ 72,791   
  

 

 

    

 

 

    

 

 

 

Included in cash and cash equivalents

$ 21,382   
        

 

 

 

Included in marketable securities

$ 51,409   
        

 

 

 

 

     Fair Value Measurement at
December 31, 2013
 
     Level 1      Level 2      Total  

Description

        

Corporate bonds

   $       $ 12,114       $ 12,114   

Money market funds

     10,836                 10,836   
  

 

 

    

 

 

    

 

 

 

Total

$ 10,836    $ 12,114    $ 22,950   
  

 

 

    

 

 

    

 

 

 

Included in cash and cash equivalents

$ 10,836   
        

 

 

 

Included in marketable securities

$ 12,114   
        

 

 

 

The following table classifies our marketable securities by contractual maturities as of December 31, 2014 and 2013 (in thousands):

 

     December 31,
2013
     December 31,
2014
 

Due in one year

   $ 9,889       $ 42,204   

Additions

     2,225         9,205   
  

 

 

    

 

 

 

Allowance for doubtful accounts, ending balance

$ 12,114    $ 51,409   
  

 

 

    

 

 

 
Property and Equipment (Tables)
Components of Property and Equipment

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

 

     December 31,  
     2013     2014  

Capitalized internal-use software

   $ 11,104      $ 18,541   

Furniture and fixtures

     1,383        4,524   

Hosting equipment

     7,931        14,085   

Computer equipment and software

     1,680        4,310   

Leasehold improvements

     1,717        15,144   

Construction in progress

     341        3,546   
  

 

 

   

 

 

 

Total

  24,156      60,150   

Less accumulated depreciation and amortization

  (8,725   (18,255
  

 

 

   

 

 

 

Property and equipment, net

$ 15,431    $ 41,895   
  

 

 

   

 

 

 
Goodwill and Purchased Intangibles Assets (Tables)

The changes in the carrying amount of goodwill for the year ended December 31, 2014 are as follows (in thousands):

 

Balance as of December 31, 2013

$   

Goodwill acquire

  9,373   

Goodwill adjustments

  221   

Foreign currency translation adjustments

  (354
  

 

 

 

Balance as of December 31, 2014

$ 9,240   
  

 

 

 

Purchased intangible assets related to the Zopim acquisition subject to amortization as of December 31, 2014 consist of the following (in thousands). No purchased intangible assets were recorded as of December 31, 2013.

 

     Cost      Accumulated
Amortization
    Foreign
Currency
Translation
Adjustments
    Net      Remaining
Useful Life
 
                               (In years)  

Developed technology

   $ 5,200       $ (1,118   $ (191   $ 3,891         2.7   

Customer relationships

     1,300         (244     (48     1,008         3.2   

Trade name

     60         (45     (2     13         0.2   
  

 

 

    

 

 

   

 

 

   

 

 

    
$ 6,560    $ (1,407 $ (241 $ 4,912   
  

 

 

    

 

 

   

 

 

   

 

 

    

Estimated future amortization expense as of December 31, 2014 is as follows (in thousands):

 

2015

$  1,757   

2016

  1,744   

2017

  1,342   

2018

  69   
  

 

 

 
$ 4,912   
  

 

 

 
Credit Facility (Tables)
Schedule of Contractual Future Principal Repayments in Relation to Credit Facility

Contractual future principal repayments in relation to the credit facility are as follows for the year ending December 31 (in thousands):

 

2015

$ 3,041   

2016

  3,118   

2017

  793   
  

 

 

 
$ 6,952   
  

 

 

 
Commitments and Contingencies (Tables)
Schedule of Future Minimum Lease Payments by Year under Noncancelable Leases

As of December 31, 2014, the future minimum lease payments by year under noncancelable leases are as follows for the year ending December 31 (in thousands):

 

2015

$ 7,025   

2016

  7,067   

2017

  6,935   

2018

  6,936   

2019

  6,672   

Thereafter

  12,707   
  

 

 

 

Total minimum lease payments

$ 47,342   
  

 

 

 
Common Stock and Stockholders' Equity (Deficit) (Tables)

A summary of our stock option and RSU activity for the year ended December 31, 2014 is as follows (in thousands, except per share information):

 

    Shares
Available
for Grant
    Options Outstanding     RSUs Outstanding  
      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, 2014

    1,854        10,134      $ 2.82        8.15      $ 50,185        811      $ 6.76   

Increase in authorized shares

    13,750               

Stock options granted

    (6,308     6,308        11.40           

RSUs granted

    (3,030             3,030        14.44   

Stock options exercised

      (3,516     2.03           

RSUs vested

              (370     9.56   

Unvested shares repurchased

    4               

Stock options forfeited or canceled

    883        (883     4.96           

RSUs forfeited or cancelled

    407                (407     9.31   
 

 

 

   

 

 

         

 

 

   

 

 

 

Outstanding—December 31, 2014

  7,560      12,043    $ 7.39      8.29    $ 204,467      3,064    $ 13.69   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Options vested and expected to vest as of December 31, 2014

  10,742    $ 7.07      8.21    $ 185,866   
   

 

 

   

 

 

   

 

 

   

 

 

     

Options vested and exercisable as of December 31, 2014

  4,293    $ 3.87      7.34    $ 88,025   
   

 

 

   

 

 

   

 

 

   

 

 

     

The assumptions used to estimate the fair value of stock options granted to employees are as follows:

 

     Year Ended December 31,
     2012    2013    2014

Expected volatility

   57%—59%    50%—63%    54%—56%

Dividend rate

   0%    0%    0%

Risk-free interest rate

   0.68%—1.47%    0.63%—2.02%    1.75%—2.02%

Expected term (in years)

   5.28—6.27    4.47—6.27    6.02—6.50

The assumptions used to estimate the fair value of ESPP awards are as follows:

 

     Year Ended
December 31, 2014

Expected volatility

   45%—49%

Dividend rate

   0%

Risk-free interest rate

   0.05%—0.35%

Expected term (in years)

   0.50—1.5
Net Loss Per Share (Tables)

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,  
     2012     2013     2014  
     Class A     Class B     Class A     Class B        

Net loss

   $ (12,104   $ (12,261   $ (10,290   $ (12,281   $ (67,415

Less: Accretion of redeemable convertible preferred stock

     (25     (25     (22     (27     (18

Less: Deemed dividend to investors in relation to the tender offer

     (4,136     (4,190                     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

$ (16,265 $ (16,476 $ (10,312 $ (12,308 $ (67,433
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic shares:

Weighted-average common shares outstanding

  9,881      12,153      9,881      12,964      54,383   

Less: Weighted-average common shares subject to repurchase

  (130   (2,275        (1,171   (812
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares used to compute basic net loss per share

  9,751      9,878      9,881      11,793      53,571   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted shares:

Weighted-average common shares used to compute diluted net loss per share

  9,751      9,878      9,881      11,793      53,571   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders:

Basic and diluted

$ (1.67 $ (1.67 $ (1.04 $ (1.04 $ (1.26
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

     As of December 31,  
     2012      2013      2014  

Redeemable convertible preferred stock

     34,323         34,323           

Shares subject to outstanding common stock options

     7,781         10,134         12,043   

Shares subject to common stock warrants

     125         125           

Restricted stock units

             811         3,064   
  

 

 

    

 

 

    

 

 

 
  42,229      45,393      15,107   
  

 

 

    

 

 

    

 

 

 
Income Taxes (Tables)

The components of loss before provision for income taxes are as follows (in thousands):

 

     Year Ended December 31,  
     2012     2013     2014  

U.S.

   $ (24,739   $ (23,117   $ (66,755

Foreign

     495        767        (923
  

 

 

   

 

 

   

 

 

 

Total

$ (24,244 $ (22,350 $ (67,678
  

 

 

   

 

 

   

 

 

 

The income tax provision is composed of the following (in thousands):

 

     Year Ended December 31,  
       2012         2013         2014    

Current tax provision

      

Federal

   $      $      $ 2   

State

     2        37        1   

Foreign

     126        189        567   
  

 

 

   

 

 

   

 

 

 
  128      226      570   

Deferred tax provision:

Federal

              

State

              

Foreign

  (7   (5   (833
  

 

 

   

 

 

   

 

 

 

Total provision for (benefit from) income taxes

$ 121    $ 221    $ (263
  

 

 

   

 

 

   

 

 

 

Significant components of deferred tax assets are as follows (in thousands):

 

     As of December 31,  
     2013     2014  

Deferred tax assets:

    

Tax credit carryforward

   $ 15      $ 197   

Net operating loss carryforward

     19,278        33,878   

Share-based compensation

     771        5,311   

Accrued liabilities and reserves

     1,316        3,710   

Other

     677        600   
  

 

 

   

 

 

 

Total deferred tax assets

  22,057      43,696   

Less: valuation allowance

  (19,837   (39,496
  

 

 

   

 

 

 

Deferred tax assets, net of valuation allowance

  2,220      4,200   

Deferred tax liabilities:

Depreciation and amortization

  (2,207   (4,597
  

 

 

   

 

 

 

Net deferred tax assets (liabilities)

$ 13    $ (397
  

 

 

   

 

 

 

The following is a reconciliation of the statutory federal income tax rate and the effective tax rates:

 

     Year Ended December 31,  
       2012         2013         2014    

Tax at federal statutory rate

     34.0     34.0     34.0

State tax provision, net of federal benefit

            (0.2       

Share-based compensation

     (11.1     (4.4     (5.5

Valuation allowance

     (23.3     (30.4     (27.9

Other

     (0.1            (0.2
  

 

 

   

 

 

   

 

 

 

Effective tax rate

  (0.5 )%    (1.0 %)    0.4
  

 

 

   

 

 

   

 

 

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) is as follows (in thousands):

 

Balance at December 31, 2012

$  1,939   

Additions for tax positions related to the prior year

    

Additions for tax positions related to the current year

  1,978   

Lapse of statutes of limitations

    
  

 

 

 

Balance as December 31, 2013

  3,917   

Additions for tax positions related to the prior year

  (32

Additions for tax positions related to the current year

  2,070   

Lapse of statutes of limitations

    
  

 

 

 

Balance at December 31, 2014

$ 5,955   
  

 

 

 
Geographic Information (Tables)

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

 

     Year Ended December 31,  
     2012      2013      2014  

United States

   $ 22,445       $ 42,415       $ 72,217   

EMEA

     10,257         19,125         35,856   

Other

     5,526         10,505         18,976   
  

 

 

    

 

 

    

 

 

 

Total

$ 38,228    $ 72,045    $ 127,049   
  

 

 

    

 

 

    

 

 

 

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

 

     December 31,  
     2013      2014  

United States

   $ 6,466       $ 22,817   

EMEA

     2,054         4,373   

Other

     135         1,096   
  

 

 

    

 

 

 

Total

$ 8,655    $ 28,286   
  

 

 

    

 

 

 
Organization - Additional Information (Detail)
12 Months Ended
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Year founded
2007 
Reincorporated date
2009-04 
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified
1 Months Ended 12 Months Ended
May 31, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Share price
 
$ 24.37 
 
 
Proceeds from initial public offering, net of underwriting discounts and commissions and other offering expenses
$ 103,100,000 
$ 103,090,000 
 
 
Underwriting discounts and commission on IPO
8,100,000 
 
 
 
Offering expenses
3,800,000 
 
 
 
Number of shares of common stock issued upon automatic conversion of convertible preferred stock
34,300 
34,300 
 
 
Restricted cash
 
200,000 
 
Impairment of goodwill
 
 
 
Goodwill
 
9,240,000 
 
Impairment of long lived asset
 
 
Future period share-based compensation expense
 
74,500,000 
 
 
Future period share-based compensation expense, period to recognized
 
3 years 6 months 
 
 
Advertising expense
 
12,700,000 
6,500,000 
3,500,000 
Customer Concentration Risk |
Accounts Receivable
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Number of customers
 
 
Customer Concentration Risk |
Accounts Receivable |
Maximum
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Percentage of total revenue or receivables
 
10.00% 
10.00% 
 
Customer Concentration Risk |
Revenue
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Number of customers
 
 
Customer Concentration Risk |
Revenue |
Maximum
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Percentage of total revenue or receivables
 
10.00% 
10.00% 
 
Performance Awards
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Share-based compensation expense
 
12,700,000 
 
 
Service condition for performance awards
 
4 years 
 
 
Capitalized Internal-Use Software
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Weighted average useful life of capitalized internal use software
 
3 years 2 months 12 days 
 
 
IPO
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Shares of common stock sold in initial public offering
12,800 
 
 
 
Share price
$ 9.00 
 
 
 
Prior to IPO |
Performance Awards
 
 
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
Share-based compensation expense
 
$ 0 
 
 
Summary of Significant Accounting Policies - Schedule of Allowance for Doubtful Accounts (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Accounting Policies [Abstract]
 
 
Allowance for doubtful accounts, beginning balance
$ 282 
$ 173 
Additions
843 
301 
Write-offs
(861)
(192)
Allowance for doubtful accounts, ending balance
$ 264 
$ 282 
Summary of Significant Accounting Policies - Estimated Useful Lives of Property and Equipment (Detail)
12 Months Ended
Dec. 31, 2014
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 
Computer Equipment and Software
 
Property Plant And Equipment [Line Items]
 
Estimated useful lives of Property and equipment
3 years 
Leasehold Improvements
 
Property Plant And Equipment [Line Items]
 
Estimated useful lives of Property and equipment
Shorter of the lease term or estimated useful life 
Acquisition of Zopim Technologies - Additional Information (Detail) (Zopim, USD $)
Share data in Millions, unless otherwise specified
0 Months Ended 12 Months Ended
Mar. 21, 2014
Dec. 31, 2014
Mar. 21, 2014
Business Acquisition [Line Items]
 
 
 
Business acquisition, fair value of consideration transferred
$ 15,800,000 
$ 15,769,000 
 
Business acquisition, fair value of consideration transferred, cash
4,900,000 
 
 
Business acquisition, fair value of consideration transferred, common stock
 
 
10,900,000 
RSUs issued pursuant to retention plan, in connection with the acquisition
0.9 
 
 
Cash to be pay pursuant to retention plan, in connection with the acquisition
3,000,000 
 
 
Minimum
 
 
 
Business Acquisition [Line Items]
 
 
 
Number of months that cash and shares were held back
12 months 
 
 
Maximum
 
 
 
Business Acquisition [Line Items]
 
 
 
Number of months that cash and shares were held back
18 months 
 
 
Common Stock Consideration
 
 
 
Business Acquisition [Line Items]
 
 
 
Cash portion of fair value consideration transferred
2,400,000 
 
2,400,000 
Cash
 
 
 
Business Acquisition [Line Items]
 
 
 
Cash portion of fair value consideration transferred
$ 1,100,000 
 
$ 1,100,000 
Acquisition of Zopim Technologies - Schedule of Purchase Price Allocation for Acquisitions (Detail) (USD $)
0 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Mar. 21, 2014
Zopim
Dec. 31, 2014
Zopim
Business Acquisition [Line Items]
 
 
 
 
Net tangible liabilities assumed
 
 
 
$ (385,000)
Intangible assets
 
 
 
6,560,000 
Goodwill
9,240,000 
 
9,594,000 
Total purchase price
 
 
$ 15,800,000 
$ 15,769,000 
Fair Value Measurements - Financial Assets Measured at Fair Value on Recurring Basis (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
$ 72,791 
$ 22,950 
Included in cash and cash equivalents
21,382 
10,836 
Included in marketable securities
51,409 
12,114 
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
21,382 
10,836 
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
51,409 
12,114 
Corporate bonds
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
40,345 
12,114 
Corporate bonds |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
40,345 
12,114 
Money market funds
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
21,382 
10,836 
Money market funds |
Level 1
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
21,382 
10,836 
Asset-backed Securities
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
5,080 
 
Asset-backed Securities |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
5,080 
 
Commercial paper
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
3,993 
 
Commercial paper |
Level 2
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
3,993 
 
U.S. treasury securities
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
Total fair value of financial assets
1,991 
 
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
$ 1,991 
 
Fair Value Measurements - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Fair Value Disclosures [Abstract]
 
 
Transfer from fair value measurement level 1 to level 2
$ 0 
 
Transfer from fair value measurement level 2 to level 1
 
Gross unrealized gains or losses for cash equivalent and marketable securities
Securities that were in an unrealized loss position for more than 12 months.
$ 0 
$ 0 
Fair Value Measurements - Marketable Securities by Contractual Maturities (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Fair Value Disclosures [Abstract]
 
 
Due in one year
$ 42,204 
$ 9,889 
Additions
9,205 
2,225 
Allowance for doubtful accounts, ending balance
$ 51,409 
$ 12,114 
Property and Equipment - Components of Property and Equipment (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
$ 60,150 
$ 24,156 
Less accumulated depreciation and amortization
(18,255)
(8,725)
Property and equipment, net
41,895 
15,431 
Capitalized Internal-Use Software
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
18,541 
11,104 
Furniture and Fixtures
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
4,524 
1,383 
Hosting Equipment
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
14,085 
7,931 
Computer Equipment and Software
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
4,310 
1,680 
Leasehold Improvements
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
15,144 
1,717 
Construction in Progress
 
 
Property Plant And Equipment [Line Items]
 
 
Property and equipment, gross
$ 3,546 
$ 341 
Property and Equipment - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Property, Plant and Equipment [Abstract]
 
 
 
Depreciation expense
$ 6,100,000 
$ 2,900,000 
$ 1,100,000 
Capitalized internal-use software
10,500,000 
4,800,000 
3,600,000 
Share-based compensation capitalized in internal-use software costs
2,476,000 
143,000 
85,000 
Amortization expense of capitalized internal-use software
3,800,000 
2,300,000 
1,400,000 
Carrying value of capitalized internal-use software
13,600,000 
6,800,000 
 
Construction in progress
$ 3,500,000 
$ 300,000 
 
Goodwill and Purchased Intangibles Assets - Summary of Changes in Carrying Amount of Goodwill (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
 
Beginning balance
$ 0 
Goodwill acquired
9,373,000 
Goodwill adjustments
221,000 
Foreign currency translation adjustments
(354,000)
Ending balance
$ 9,240,000 
Goodwill and Purchased Intangibles Assets - Summary of Intangible Assets Acquired (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Finite Lived Intangible Assets [Line Items]
 
Cost
$ 6,560 
Accumulated Amortization
(1,407)
Foreign Currency Translation Adjustments
(241)
Net
4,912 
Developed Technology
 
Finite Lived Intangible Assets [Line Items]
 
Cost
5,200 
Accumulated Amortization
(1,118)
Foreign Currency Translation Adjustments
(191)
Net
3,891 
Remaining Useful Life
2 years 8 months 12 days 
Customer Relationships
 
Finite Lived Intangible Assets [Line Items]
 
Cost
1,300 
Accumulated Amortization
(244)
Foreign Currency Translation Adjustments
(48)
Net
1,008 
Remaining Useful Life
3 years 2 months 12 days 
Trade Name
 
Finite Lived Intangible Assets [Line Items]
 
Cost
60 
Accumulated Amortization
(45)
Foreign Currency Translation Adjustments
(2)
Net
$ 13 
Remaining Useful Life
2 months 12 days 
Goodwill and Purchased Intangibles Assets - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Goodwill And Intangible Assets Disclosure [Abstract]
 
 
Amortization expense
$ 1.4 
$ 0 
Goodwill and Purchased Intangibles Assets - Summary of Estimated Future Amortization Expense (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]
 
2015
$ 1,757 
2016
1,744 
2017
1,342 
2018
69 
Net
$ 4,912 
Credit Facility - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2014
Silicon Valley Bank
Jun. 30, 2012
Silicon Valley Bank
Dec. 31, 2013
Silicon Valley Bank
Revolving Credit Facility
Dec. 31, 2014
Silicon Valley Bank
Revolving Credit Facility
Dec. 31, 2014
Silicon Valley Bank
Equipment Line Of Credit
Dec. 31, 2013
Silicon Valley Bank
Equipment Line Of Credit
Line Of Credit Facility [Line Items]
 
 
 
 
 
 
 
Credit facility
 
 
 
 
$ 20.0 
$ 10.0 
 
Line of credit outstanding amount
 
 
 
20.0 
7.0 
3.8 
Percentage of interest rate above the prime rate
 
 
 
2.00% 
 
 
 
Credit facility interest rate
 
 
 
 
 
2.50% 
 
Credit facility, outstanding balance payable period
 
 
 
 
 
30 months 
 
Credit facility, frequency of payment and payment terms
 
 
 
 
 
The outstanding balance as of September 14, 2014 is payable in 30 equal monthly installments, with the last payment due on March 14, 2017. 
 
Final payment on principal amount
 
 
 
 
 
$ 0.3 
 
Percentage of equity pledged in international subsidiaries as collateral
65.00% 
 
 
 
 
 
 
Shares of common stock to purchase by warrants issued
 
 
125,000 
 
 
 
 
Warrants exercise price
 
 
$ 1.92 
 
 
 
 
Warrants, expiration date
 
June 2019 
 
 
 
 
 
Credit Facility - Schedule of Contractual Future Principal Repayments in Relation to Credit Facility (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Debt Disclosure [Abstract]
 
2015
$ 3,041 
2016
3,118 
2017
793 
Contractual future principal repayments, Total
$ 6,952 
Commitments and Contingencies - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Registration Payment Arrangement [Line Items]
 
 
 
Lease agreements description
In 2013, we renewed the lease of our office in San Francisco through October 2019, with an option to renew for an additional 7 years and 8 months. We also entered into a lease for additional office space in San Francisco with an 8-year term, renewable for an additional period of 5 years. 
 
 
Rent expense
$ 6,800,000 
$ 2,300,000 
$ 1,600,000 
Current portion of capital leases
10,000 
364,000 
 
Accumulated depreciation on leased assets
1,000,000 
700,000 
 
Letters of credit outstanding amount
$ 3,700,000 
$ 3,800,000 
 
Letters of credit description
The letters of credit are collateralized by substantially all of our assets, excluding our intellectual property. These letters of credit renew annually and mature at various dates through October 31, 2022. 
 
 
Letters of credit expiry date
Oct. 31, 2022 
 
 
Capital Lease Agreements
 
 
 
Registration Payment Arrangement [Line Items]
 
 
 
Lease expiration date
Mar. 31, 2015 
 
 
Headquarters
 
 
 
Registration Payment Arrangement [Line Items]
 
 
 
Lease expiration date
Oct. 31, 2019 
 
 
Lease agreement renewal term
7 years 8 months 
 
 
Additional office space
 
 
 
Registration Payment Arrangement [Line Items]
 
 
 
Lease agreement renewal term
5 years 
 
 
Lease agreement term
8 years 
 
 
Commitments and Contingencies - Schedule of Future Minimum Lease Payments by Year under Noncancelable Leases (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Commitments And Contingencies Disclosure [Abstract]
 
2015
$ 7,025 
2016
7,067 
2017
6,935 
2018
6,936 
2019
6,672 
Thereafter
12,707 
Total minimum lease payments
$ 47,342 
Common Stock and Stockholders' Equity (Deficit) - Additional Information (Detail) (USD $)
1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended
May 31, 2014
Apr. 30, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2013
Series A
Dec. 31, 2013
Series B
May 31, 2014
Employee Stock Purchase Plan
Dec. 31, 2014
Employee Stock Purchase Plan
Dec. 31, 2014
2014 Stock Option and Grant Plan
May 31, 2014
2014 Stock Option and Grant Plan
Dec. 31, 2014
Stock Options
Dec. 31, 2013
Stock Options
Dec. 31, 2012
Stock Options
Dec. 31, 2012
Cost of Revenue
Dec. 31, 2012
Research and Development
Dec. 31, 2012
Sales and Marketing
Dec. 31, 2012
General and Administrative
Dec. 31, 2012
Series D Redeemable Convertible Preferred Stock
Sep. 30, 2012
Series D Redeemable Convertible Preferred Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares of common stock issued upon automatic conversion of convertible preferred stock
34,300,000 
 
34,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse stock split of common stock
 
0.5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized
 
 
400,000,000 
125,000,000 
 
 
80,000,000 
30,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares outstanding
 
 
75,500,000 
23,200,000 
 
 
9,900,000 
13,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares unvested
 
 
 
 
 
 
 
800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock, conversion basis
 
 
Upon the completion of our IPO, each share of Series B common stock was converted into Series A common stock on a one-for-one basis, and the Series A common stock was redesignated as common stock. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value
 
 
$ 0.01 
$ 0.01 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation, initial reserves and authorized shares of common stock
 
 
 
 
 
 
 
 
3,600,000 
 
 
7,500,000 
 
 
 
 
 
 
 
 
 
Shares reserved and available for issuance under the plan, automatically increase each January
 
 
 
 
 
 
 
 
1,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation, increase in number of shares reserved and available for issuance as percentage of shares issued and outstanding
 
 
 
 
 
 
 
 
1.00% 
 
5.00% 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 
400,000 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average price per share
 
 
 
 
 
 
 
 
 
$ 7.65 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from exercise of employee stock options
 
 
$ 7,229,000 
$ 1,793,000 
$ 2,125,000 
 
 
 
 
$ 3,300,000 
 
 
 
 
 
 
 
 
 
 
 
Shares of common stock available for issuance
 
 
 
 
 
 
 
 
 
3,200,000 
 
 
 
 
 
 
 
 
 
 
 
Share-based compensation, number of shares available for grant
 
 
7,560,000 
1,854,000 
 
 
 
 
 
 
8,300,000 
 
 
 
 
 
 
 
 
 
 
Intrinsic value of options exercised
 
 
66,200,000 
4,600,000 
1,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value of stock options
 
 
$ 7.22 
$ 1.62 
$ 0.56 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share price
 
 
$ 24.37 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 9.62 
Share based compensation related to accelerated vesting
 
 
 
 
 
 
 
 
 
 
 
 
4,300,000 
1,700,000 
 
 
 
 
 
 
Shares offered by preferred shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,000,000 
Share-based compensation
 
 
32,139,000 
4,854,000 
9,640,000 
 
 
 
 
 
 
 
 
 
 
20,000 
3,900,000 
1,000,000 
3,700,000 
8,600,000 
 
Deemed dividends
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,300,000 
Shares outstanding as a result of early exercise of stock options and purchase of unvested stock awards
 
 
600,000 
800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued liability for shares outstanding as a result of early exercise of stock options and purchase of unvested stock awards
 
 
$ 2,100,000 
$ 1,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares repurchased as treasury shares
 
 
4,000 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock and Stockholders' Equity (Deficit) - Summary of Stock Option and RSU Activity (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2011
Shares Available for Grant
 
 
 
Balance at the beginning of the period
1,854 
 
 
Increase in authorized shares
13,750 
 
 
Stock options granted
(6,308)
 
 
RSUs granted
(3,030)
 
 
Unvested shares repurchased
 
500 
Stock options forfeited or canceled
883 
 
 
RSUs forfeited or cancelled
407 
 
 
Balance at the end of the period
7,560 
1,854 
 
Number of Shares
 
 
 
Balance at the beginning of the period
10,134 
 
 
Stock options granted
6,308 
 
 
Stock options exercised
(3,516)
 
 
Stock options forfeited or canceled
(883)
 
 
Balance at the end of the period
12,043 
10,134 
 
Options vested and expected to vest at the end of the period
10,742 
 
 
Options vested and exercisable at the end of the period
4,293 
 
 
Weighted-Average Exercise Price
 
 
 
Balance at the beginning of the period
$ 2.82 
 
 
Stock options granted
$ 11.40 
 
 
Stock options exercised
$ 2.03 
 
 
Stock options forfeited or canceled
$ 4.96 
 
 
Balance at the end of the period
$ 7.39 
$ 2.82 
 
Options vested and expected to vest at the end of the period
$ 7.07 
 
 
Options vested and exercisable at the end of the period
$ 3.87 
 
 
Weighted Average Remaining Contractual Term
 
 
 
Options Outstanding, Weighted-average remaining contractual term
8 years 3 months 15 days 
8 years 1 month 24 days 
 
Options vested and expected to vest, Weighted-average remaining contractual term
8 years 2 months 16 days 
 
 
Options vested and exercisable, Weighted-average remaining contractual term
7 years 4 months 2 days 
 
 
Aggregate Intrinsic Value
 
 
 
Options Outstanding, Aggregate Intrinsic Value, Balance at beginning of period
$ 50,185 
 
 
Options Outstanding, Aggregate Intrinsic Value, Balance at end of period
204,467 
50,185 
 
Options vested and expected to vest, Aggregate Intrinsic Value, Balance at end of period
185,866 
 
 
Options vested and exercisable, Aggregate Intrinsic Value, Balance at end of period
$ 88,025 
 
 
Outstanding RSUs
 
 
 
Balance at the beginning of the period
811 
 
 
RSUs granted
3,030 
 
 
RSUs vested
(370)
 
 
RSUs forfeited or cancelled
(407)
 
 
Balance at the end of the period
3,064 
811 
 
Weighted-Average Grant Date Fair Value
 
 
 
Balance at the beginning of the period
$ 6.76 
 
 
RSUs granted
$ 14.44 
 
 
RSUs vested
$ 9.56 
 
 
RSUs forfeited or cancelled
$ 9.31 
 
 
Balance at the end of the period
$ 13.69 
$ 6.76 
 
Common Stock and Stockholders' Equity (Deficit) - Assumptions Used to Estimate Fair Value of Stock Options Granted to Employees (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Dividend rate
0.00% 
0.00% 
0.00% 
Stock Options |
Minimum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility
54.00% 
50.00% 
57.00% 
Risk-free interest rate
1.75% 
0.63% 
0.68% 
Expected term (in years)
6 years 7 days 
4 years 5 months 19 days 
5 years 3 months 11 days 
Stock Options |
Maximum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility
56.00% 
63.00% 
59.00% 
Risk-free interest rate
2.02% 
2.02% 
1.47% 
Expected term (in years)
6 years 6 months 
6 years 3 months 7 days 
6 years 3 months 7 days 
Common Stock and Stockholders' Equity (Deficit) - Assumptions Used to Estimate Fair Value of ESPP Awards (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Dividend rate
0.00% 
0.00% 
0.00% 
ESPP Awards
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Dividend rate
0.00% 
 
 
ESPP Awards |
Minimum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility
45.00% 
 
 
Risk-free interest rate
0.05% 
 
 
Expected term (in years)
6 months 
 
 
ESPP Awards |
Maximum
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
 
 
 
Expected volatility
49.00% 
 
 
Risk-free interest rate
0.35% 
 
 
Expected term (in years)
1 year 6 months 
 
 
Net Loss per Share - Computation of Basic and Diluted Net Loss per Share of Common Stock (Detail) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Earnings Per Share Basic [Line Items]
 
 
 
Net loss
$ (67,415)
$ (22,571)
$ (24,365)
Accretion of redeemable convertible preferred stock
(18)
(49)
(50)
Deemed dividend to investors in relation to the tender offer
 
 
(8,326)
Net loss attributable to common stockholders
(67,433)
(22,620)
(32,741)
Basic shares:
 
 
 
Weighted-average common shares outstanding
54,383 
 
 
Weighted-average common shares subject to repurchase
(812)
 
 
Weighted-average common shares used to compute basic net loss per share
53,571 
 
 
Diluted shares:
 
 
 
Weighted-average common shares used to compute diluted net loss per share
53,571 
 
 
Net loss per share attributable to common stockholders:
 
 
 
Net loss per share attributable to common stockholders, basic and diluted
$ (1.26)
$ (1.04)
$ (1.67)
Class A
 
 
 
Earnings Per Share Basic [Line Items]
 
 
 
Net loss
 
(10,290)
(12,104)
Accretion of redeemable convertible preferred stock
 
(22)
(25)
Deemed dividend to investors in relation to the tender offer
 
 
(4,136)
Net loss attributable to common stockholders
 
(10,312)
(16,265)
Basic shares:
 
 
 
Weighted-average common shares outstanding
 
9,881 
9,881 
Weighted-average common shares subject to repurchase
 
 
(130)
Weighted-average common shares used to compute basic net loss per share
 
9,881 
9,751 
Diluted shares:
 
 
 
Weighted-average common shares used to compute diluted net loss per share
 
9,881 
9,751 
Net loss per share attributable to common stockholders:
 
 
 
Net loss per share attributable to common stockholders, basic and diluted
 
$ (1.04)
$ (1.67)
Class B
 
 
 
Earnings Per Share Basic [Line Items]
 
 
 
Net loss
 
(12,281)
(12,261)
Accretion of redeemable convertible preferred stock
 
(27)
(25)
Deemed dividend to investors in relation to the tender offer
 
 
(4,190)
Net loss attributable to common stockholders
 
$ (12,308)
$ (16,476)
Basic shares:
 
 
 
Weighted-average common shares outstanding
 
12,964 
12,153 
Weighted-average common shares subject to repurchase
 
(1,171)
(2,275)
Weighted-average common shares used to compute basic net loss per share
 
11,793 
9,878 
Diluted shares:
 
 
 
Weighted-average common shares used to compute diluted net loss per share
 
11,793 
9,878 
Net loss per share attributable to common stockholders:
 
 
 
Net loss per share attributable to common stockholders, basic and diluted
 
$ (1.04)
$ (1.67)
Net Loss per Share - Schedule of Anti-Dilutive Securities Excluded from the Diluted per Common Stock Calculation (Detail)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per common stock amount
15,107 
45,393 
42,229 
Redeemable Convertible Preferred Stock
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per common stock amount
 
34,323 
34,323 
Shares Subject to Outstanding Common Stock Options
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per common stock amount
12,043 
10,134 
7,781 
Shares subject to common stock warrants
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per common stock amount
 
125 
125 
Restricted Stock Units
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Antidilutive securities excluded from computation of earnings per common stock amount
3,064 
811 
 
Income Taxes - Components of Loss Before Provision for Income Taxes (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
U.S.
$ (66,755)
$ (23,117)
$ (24,739)
Foreign
(923)
767 
495 
Loss before provision for (benefit from) income taxes
$ (67,678)
$ (22,350)
$ (24,244)
Income Taxes - Schedule of Income Tax Provision (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current tax provision:
 
 
 
Federal
$ 2 
$ 0 
$ 0 
State
37 
Foreign
567 
189 
126 
Total current tax provision
570 
226 
128 
Deferred tax provision:
 
 
 
Federal
State
Foreign
(833)
(5)
(7)
Total provision for (benefit from) income taxes
$ (263)
$ 221 
$ 121 
Income Taxes - Schedule of Significant Components of Deferred Tax Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
Tax credit carryforward
$ 197 
$ 15 
Net operating loss carryforward
33,878 
19,278 
Share-based compensation
5,311 
771 
Accrued liabilities and reserves
3,710 
1,316 
Other
600 
677 
Total deferred tax assets
43,696 
22,057 
Less: valuation allowance
(39,496)
(19,837)
Deferred tax assets, net of valuation allowance
4,200 
2,220 
Deferred tax liabilities:
 
 
Depreciation and amortization
(4,597)
(2,207)
Net deferred tax assets (liabilities)
$ (397)
$ 13 
Income Taxes - Schedule of Reconciliation of the Statutory Federal Income Tax Rate and the Effective Tax Rates (Detail)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Tax at federal statutory rate
34.00% 
34.00% 
34.00% 
State tax provision, net of federal benefit
 
(0.20%)
 
Share-based compensation
(5.50%)
(4.40%)
(11.10%)
Valuation allowance
(27.90%)
(30.40%)
(23.30%)
Other
(0.20%)
 
(0.10%)
Effective tax rate
0.40% 
(1.00%)
(0.50%)
Income Taxes - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Line Items]
 
 
Cumulative amount of earnings
$ 2.4 
 
Excess stock option benefits creditable to additional paid in capital
40.9 
 
Interest and penalties related to uncertain tax positions
0.3 
 
Potential benefits, which if recognized, would affect the effective tax rate.
0.9 
0.5 
Federal
 
 
Income Tax Disclosure [Line Items]
 
 
Net operating loss carryforwards
133.0 
 
Tax credit carryforwards expiration year
2029 
 
Research and development credit carryforwards
2.5 
 
Research and development credit carryforwards expiration year
2029 
 
State
 
 
Income Tax Disclosure [Line Items]
 
 
Net operating loss carryforwards
47.5 
 
Tax credit carryforwards expiration year
2031 
 
Research and development credit carryforwards
$ 2.7 
 
Income Taxes - Schedule of Unrecognized Tax Benefits (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Income Tax Disclosure [Abstract]
 
 
Unrecognized tax benefits, Beginning balance
$ 3,917 
$ 1,939 
Additions for tax positions related to the prior year
(32)
 
Additions for tax positions related to the prior year
 
Additions for tax positions related to the current year
2,070 
1,978 
Lapse of statutes of limitations
Unrecognized tax benefits, Ending balance
$ 5,955 
$ 3,917 
Geographic Information - Schedule of Revenue by Geographic Areas (Detail) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
$ 127,049 
$ 72,045 
$ 38,228 
United States
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
72,217 
42,415 
22,445 
EMEA
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
35,856 
19,125 
10,257 
Other
 
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
 
Revenue
$ 18,976 
$ 10,505 
$ 5,526 
Geographic Information - Schedule of Long-Lived Assets by Geographic Areas (Detail) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
$ 28,286 
$ 8,655 
United States
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
22,817 
6,466 
EMEA
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
4,373 
2,054 
Other
 
 
Revenues From External Customers And Long Lived Assets [Line Items]
 
 
Long-lived assets
$ 1,096 
$ 135 
Subsequent Events - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
1 Months Ended
Jan. 31, 2015
Subsequent Events [Abstract]
 
One-time payment for employee
$ 2.4