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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021

or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             

Commission File Number 001-36067

FireEye, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware20-1548921
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
601 McCarthy Blvd.
Milpitas, CA 95035
(Address of principal executive offices) (Zip Code)

(408) 321-6300
(Registrant's telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par value per shareFEYEThe NASDAQ Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No  
The number of shares of the registrant's common stock outstanding as of April 27, 2021 was 238,445,376.


Table of Contents
TABLE OF CONTENTS

Page
 
Item 4.
Item 5.
Item 6.




PART I — FINANCIAL INFORMATION
Item1.    Financial Statements
FIREEYE, INC.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
March 31, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$516,972 $676,454 
Short-term investments783,689 624,824 
Accounts receivable, net of allowance for doubtful accounts of $2,101 and $2,559 at March 31, 2021 and December 31, 2020, respectively
109,213 153,575 
Inventories5,432 4,023 
Prepaid expenses and other current assets103,027 103,368 
Total current assets1,518,333 1,562,244 
Property and equipment, net79,550 79,770 
Operating lease right-of-use assets, net39,238 38,251 
Goodwill1,364,837 1,364,886 
Intangible assets, net114,222 126,067 
Deposits and other long-term assets68,764 74,664 
TOTAL ASSETS$3,184,944 $3,245,882 
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$13,076 $5,107 
Operating lease liabilities, current13,843 16,024 
Accrued and other current liabilities24,804 23,239 
Accrued compensation70,342 95,664 
Deferred revenue, current587,933 613,709 
Total current liabilities709,998 753,743 
Convertible senior notes, non-current, net972,280 960,896 
Deferred revenue, non-current322,765 342,748 
Operating lease liabilities, non-current54,710 42,202 
Other long-term liabilities4,498 $12,339 
Total liabilities2,064,251 2,111,928 
Commitments and contingencies (NOTE 10)
Series A convertible preferred stock, par value of $0.0001 per share; 400 shares authorized, issued and outstanding as of March 31, 2021 and December 31, 2020
$405,562 $401,050 
Stockholders' equity:
Common stock, par value of $0.0001 per share; 1,000,000 shares authorized, 238,440 shares and 235,690 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
24 24 
Additional paid-in capital3,657,910 3,623,244 
Treasury stock, at cost; 1,778 shares as of March 31, 2021 and December 31, 2020, respectively
(80,000)(80,000)
Accumulated other comprehensive income
2,039 3,834 
Accumulated deficit(2,864,842)(2,814,198)
Total stockholders’ equity715,131 732,904 
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY$3,184,944 $3,245,882 
See accompanying notes to condensed consolidated financial statements.
1

Table of Contents
FIREEYE, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

Three Months Ended March 31,
20212020
Revenue:
Product, subscription and support$183,017 $174,083 
Professional services63,331 50,639 
Total revenue246,348 224,722 
Cost of revenue:
Product, subscription and support51,968 53,136 
Professional services32,602 28,450 
Total cost of revenue84,570 81,586 
Total gross profit161,778 143,136 
Operating expenses:
Research and development72,420 67,503 
Sales and marketing99,601 100,200 
General and administrative26,489 27,429 
Restructuring charges 10,974 
Total operating expenses198,510 206,106 
Operating loss(36,732)(62,970)
Interest income1,644 4,424 
Interest expense(14,624)(15,846)
Other income (expense), net571 (989)
Loss before income taxes(49,141)(75,381)
Provision for income taxes1,503 925 
Net loss$(50,644)$(76,306)
Dividend on series A convertible preferred stock(4,512) 
Accretion of series A convertible preferred stock(82) 
Net loss attributable to common stockholders, basic and diluted$(55,238)$(76,306)
Net loss per share attributable to common stockholders, basic and diluted$(0.24)$(0.35)
Weighted average shares used in computing net loss per share, basic and diluted
234,740 217,789 
See accompanying notes to condensed consolidated financial statements.
2

Table of Contents
FIREEYE, INC.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Three Months Ended March 31,
20212020
Net loss$(50,644)$(76,306)
Change in net unrealized loss on available-for-sale investments
(1,795)(2,849)
Comprehensive loss$(52,439)$(79,155)
See accompanying notes to condensed consolidated financial statements.
3

Table of Contents
FIREEYE, INC.
Condensed Consolidated Statement of Convertible Preferred Stock and Stockholders' Equity
(Unaudited, in thousands)
Three Months Ended March 31,
20212020
Total stockholders' equity, beginning balances$732,904 $701,666 
Common stock and additional paid-in-capital:
Balance, beginning of period3,623,268 3,457,381 
Issuance of common stock for equity awards, net of tax withholdings1,097 1,348 
Shares withheld for taxes(8,798)(7,399)
Accretion of series A convertible preferred stock(82) 
Dividends on series A convertible preferred stock(4,512) 
Stock-based compensation46,961 37,148 
Balance, end of period3,657,934 3,488,478 
Treasury stock:
Balance, beginning of period(80,000)(150,000)
Balance, end of period(80,000)(150,000)
Accumulated other comprehensive income (loss):
Balance, beginning of period3,834 1,180 
Unrealized loss investments(1,795)(2,849)
Balance, end of period2,039 (1,669)
Accumulated deficit:
Balance, beginning of period(2,814,198)(2,606,895)
Net loss(50,644)(76,306)
Balance, end of period(2,864,842)(2,683,201)
Total stockholders' equity, ending balances$715,131 $653,608 
Series A convertible preferred stock:
Balance, beginning of period$401,050 $ 
Series A convertible preferred stock issuance costs(82) 
Accretion of series A convertible preferred stock82  
   Dividends on series A convertible preferred stock4,512  
Balance, end of period$405,562 $ 

See accompanying notes to condensed consolidated financial statements
4

Table of Contents
FIREEYE, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(50,644)$(76,306)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization27,613 24,241 
Stock-based compensation45,767 36,178 
Non-cash interest expense related to convertible senior notes11,384 12,365 
Deferred income taxes(126)143 
Other2,010 6,267 
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable44,517 30,256 
Inventories(234)(935)
Prepaid expenses and other assets5,453 2,827 
Accounts payable8,130 1,717 
Accrued liabilities5,379 (1,319)
Accrued compensation(25,322)(1,572)
Deferred revenue(45,759)(54,711)
Other long-term liabilities(7,308)(3,607)
Net cash provided by (used in) operating activities20,860 (24,456)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and demonstration units(10,023)(11,680)
Purchases of short-term investments(339,801)(103,131)
Proceeds from maturities of short-term investments176,755 108,462 
Purchase of investment in privately held company (1,000)
Business acquisitions, net of cash acquired49 (12,948)
Lease deposits461 67 
Net cash used in investing activities(172,559)(20,230)
CASH FLOWS FROM FINANCING ACTIVITIES:
Series A convertible preferred stock issuance costs(82)
Payment related to shares withheld for taxes(8,798)(7,399)
Proceeds from exercise of equity awards1,097 1,348 
Net cash used in financing activities(7,783)(6,051)
Net change in cash and cash equivalents(159,482)(50,737)
Cash and cash equivalents, beginning of period676,454 334,603 
Cash and cash equivalents, end of period$516,972 $283,866 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes$2,158 $727 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of property and equipment and demonstration units in accounts payable and accrued liabilities
$2,696 $3,215 
Dividend on series A convertible preferred stock$4,512 $ 
Accretion of series A convertible preferred stock$82 $ 
5

Table of Contents
FIREEYE, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
See accompanying notes to condensed consolidated financial statements.
6

Table of Contents
FIREEYE, INC.
Notes to Condensed Consolidated Financial Statements

7


1. Description of Business and Summary of Significant Accounting Policies
Description of Business
FireEye, Inc., with principal executive offices located in Milpitas, California, was incorporated as NetForts, Inc. on February 18, 2004, under the laws of the State of Delaware, and changed its name to FireEye, Inc. on September 7, 2005.
FireEye, Inc. and its wholly owned subsidiaries (collectively, the “Company”, “we”, “us” or “our”) provide comprehensive intelligence-based cybersecurity solutions that allow organizations to prepare for, prevent, investigate, respond to and remediate cyber attacks, including attacks that target on-premise, cloud and critical infrastructure environments. Our portfolio of cybersecurity products and services helps customers minimize the risk of costly cybersecurity breaches by:
validating the effectiveness of existing cybersecurity controls before an attack occurs,
detecting and preventing advanced, targeted and other evasive attacks missed by other security controls,
enabling more efficient management of security operations, including alert management, investigations and response when a breach occurs, and
providing assessment, training and other strategic security consulting services that help organizations improve their resilience to attack.
Our portfolio of cybersecurity solutions includes threat detection and prevention products that include appliance-based, virtual and cloud solutions for web security, email security and endpoint security. These products are complemented by our cloud-based threat intelligence, security analytics and security automation and orchestration technologies, as well as our managed security services, cybersecurity consulting and incident response offerings. In combination, our solutions and services enable a proactive approach to cybersecurity that extends across the threat management lifecycle to minimize the risk of costly cybersecurity breaches.
We have organized our cybersecurity solutions in a hub and spokes model designed to integrate machine-generated threat data from our detection and prevention products with our analytics, response and orchestration technologies delivered through our Helix cybersecurity operations platform. Helix is designed to enable more efficient security operations by correlating security and event data across an organization’s environment to determine which threats present the greatest risk, automate repetitive security processes, and provide tools and workflows to investigate and respond to attacks. The Helix cloud-based interface presents a unified view of an organization’s attack surface, including on-premise and cloud environments, and provides the contextual threat intelligence and threat management tools to enable a rapid response.
The majority of our products, subscriptions and services are sold to end-customers through distributors, resellers, and strategic partners, with a lesser percentage of sales directly to our end-customers.

In November 2020, we acquired Respond Software, Inc. ("Respond Software"), a cybersecurity investigation automation company. In connection with this acquisition, we paid cash consideration of $116.1 million, and issued 4,931,862 shares of our common stock of which 694,768 shares are subject to vesting conditions. The estimated fair value of the common stock issued and not subject to vesting conditions was $60.3 million. We also assumed unvested stock options, which are now exercisable for our common stock, of which $1.2 million of the fair value has been accounted for as consideration for assumed awards pertaining to pre-combination service prior to acquisition. Based on the above, total purchase consideration for Respond Software was $177.6 million. We are currently in the process of completing the preliminary purchase price allocation.
In November 2020, we entered into a Securities Purchase Agreement with BTO Delta Holdings DE L.P., an investment vehicle of funds affiliated with The Blackstone Group Inc., and a Securities Purchase Agreement with ClearSky Security Fund I LLC and ClearSky Power & Technology Fund II LLC (together, the “Series A Securities Financing Agreements”). Pursuant to the Series A Securities Financing Agreements, in December 2020 we issued and sold 400,000 shares of a newly designated 4.5% Series A Convertible Preferred Stock, par value $0.0001 per share, at a price of $1,000 per share, for an aggregate purchase price of $400.0 million. We intend to use the net proceeds from the issuance and sale to fund acquisitions, buybacks of our common stock, and for working capital purposes.
In January 2020, we acquired Cloudvisory LLC ("Cloudvisory"), a provider of cloud visibility and control solutions. As consideration for the acquisition, we paid approximately $13.2 million in cash and assumed $0.3 million in net tangible liabilities.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of FireEye, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and following the requirements of the Securities and Exchange Commission (“SEC”), for interim reporting. As permitted under those rules, certain footnotes or other financial information
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that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair statement of our financial information. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future year. The balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements at that date but does not include all information required by U.S. GAAP for annual consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such management estimates include, but are not limited to, determining the nature and timing of satisfaction of performance obligations, useful life of our security appliances that are dependent on intelligence and assessing the material rights associated with it, determining the standalone selling price of performance obligations, subscriptions and services, commissions expense including the period of benefit of customer acquisition cost, bonus expense, future taxable income, contract manufacturer liabilities, litigation and settlement costs and other loss contingencies, fair value of our equity awards, achievement of targets for performance stock units, fair value of the liability and equity components of the Convertible Senior Notes (as defined in Note 9) and the purchase price allocation of acquired businesses. We base our estimates on historical experience and on assumptions that we believe are reasonable. Changes in facts or circumstances may cause us to change our assumptions and estimates in future periods, and it is possible that actual results could differ from current or revised future estimates.
Summary of Significant Accounting Policies
There have been no significant changes to our significant accounting policies as of and for the three months ended March 31, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2020.
Recently Adopted Accounting Pronouncements
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard requires capitalization of the implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Further, the standard also requires the Company to expense the capitalized implementation costs of a hosting arrangement over the term of the hosting arrangement. We adopted the standard effective January 1, 2020. The standard did not have a significant impact on our unaudited condensed consolidated financial statements.
Simplifying the Test for Goodwill Impairment
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (i.e. Step 2 of the current guidance), instead measuring the impairment charge as the excess of the reporting unit's carrying amount over its fair value (i.e. Step 1 of the current guidance). We adopted the standard effective January 1, 2020. The standard did not have a significant impact on our unaudited condensed consolidated financial statements.
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard changes the impairment model for most financial assets and certain other instruments by introducing a current expected credit loss ("CECL") model. The CECL model is a more forward-looking approach based on expected losses rather than incurred losses, requiring entities to estimate and record losses expected over the remaining contractual life of an asset. The guidance was effective for the Company beginning in the first quarter of 2020. We adopted the standard effective January 1, 2020. The standard did not have a significant impact on our unaudited condensed consolidated financial statements.
Simplifying Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the
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approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. We adopted ASU 2019-12 as of January 1, 2020. The adoption did not have a significant impact on our unaudited condensed consolidated financial statements.
Recent Legislation
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. Changes in tax laws or rates are accounted for in the period of enactment. The income tax provisions of the CARES Act do not have a significant impact on our current taxes, deferred taxes, or uncertain tax positions.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06): This standard simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from U.S. GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis. We are currently evaluating the timing, method of adoption and overall impact of this standard on our consolidated financial statements.
2. Fair Value Measurements
The accounting guidance for fair value measurements provides a framework for measuring fair value on either a recurring or nonrecurring basis, whereby the inputs used in our valuation techniques are assigned a hierarchical level. The following are the three levels of inputs to measure fair value:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs that reflect quoted prices for identical assets or liabilities in less active markets; quoted prices for similar assets or liabilities in active markets; benchmark yields, reported trades, broker/dealer quotes, inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs that reflect our own assumptions incorporated in valuation techniques used to measure fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our own or the counterparty’s non-performance risk is considered in measuring the fair values of assets.
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The following table presents our assets and liabilities measured at fair value on a recurring basis using the above input categories (in thousands):
As of March 31, 2021As of December 31, 2020
Description
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Cash equivalents:
Money market funds
$223,910 $ $ $223,910 $32,954 $ $ $32,954 
Total cash equivalents
223,910   223,910 32,954   32,954 
Short-term investments:
Certificates of deposit
 2,982  2,982  2,752  2,752 
Commercial paper
 4,999  4,999  19,994  19,994 
Corporate notes and bonds
 529,773  529,773  437,652  437,652 
U.S. Treasuries
 72,087  72,087  74,934  74,934 
U.S. Government agencies
 173,848  173,848  89,492  89,492 
Total short-term investments
 783,689  783,689  624,824  624,824 
Total assets measured at fair value
$223,910 $783,689 $ $1,007,599 $32,954 $624,824 $ $657,778 
Additionally, we have a restructuring liability related to certain real estate facilities that was calculated based on the present value of future non-lease payments, discounted at a rate commensurate with our current cost of financing as well as external ratings. This non-recurring fair value measurement is considered to be a Level 3 measurement due to the use of significant unobservable inputs. See Note 6 Restructuring Charges for a reconciliation of this liability.
We measure certain assets, including goodwill, intangible assets and our equity-method investment in a privately held company at fair value on a nonrecurring basis when there are identifiable events or changes in circumstances that may have a significant adverse impact on the fair value of these assets. In light of the COVID-19 pandemic, we performed an analysis of impairment indicators of these assets and noted no adverse impact to their fair values as of March 31, 2021.
The estimated fair value of the Convertible Senior Notes was determined to be $1.0 billion as of March 31, 2021 and as of December 31, 2020. The fair value was determined based on the closing trading prices per $100 principal amount of the respective Convertible Senior Notes as of the last day of trading for the period. We consider the fair value of the Convertible Senior Notes to be a Level 2 measurement as they are not actively traded.

3. Investments
Our investments consisted of the following (in thousands):
As of March 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Certificates of deposit
$2,922 $60 $ $2,982 
Commercial paper
4,999   4,999 
Corporate notes and bonds
527,173 2,885 (285)529,773 
U.S. Treasuries
72,077 16 (6)72,087 
U.S. Government agencies
173,971 2 (125)173,848 
Total
$781,142 $2,963 $(416)$783,689 
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As of December 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Certificates of deposit
$2,679 $73 $ $2,752 
Commercial paper
$19,994 $ $ $19,994 
Corporate notes and bonds
433,445 4,248 (41)437,652 
U.S. Treasuries
74,914 26 (6)74,934 
U.S. Government agencies
89,451 54 (13)89,492 
Total
$620,483 $4,401 $(60)$624,824 
The following tables present the gross unrealized losses and related fair values of our investments that have been in a continuous unrealized loss position (in thousands):
As of March 31, 2021
Less Than 12 MonthsGreater Than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Commercial paper
$4,999 $ $ $ $4,999 $ 
Corporate notes and bonds
224,706 (285)3,362  228,068 (285)
U.S. Treasuries
22,792 (6)  22,792 (6)
U.S. Government agencies
147,146 (125)1,700  148,846 (125)
Total
$399,643 $(416)$5,062 $ $404,705 $(416)
As of December 31, 2020
Less Than 12 MonthsGreater Than 12 MonthsTotal
Fair ValueUnrealized LossFair ValueUnrealized LossFair ValueUnrealized Loss
Commercial paper
$4,997 $ $ $ $4,997 $ 
Corporate notes and bonds
92,855 (41)870  93,725 (41)
U.S. Treasuries
42,799 (6)  42,799 (6)
U.S. Government agencies
37,488 (13)1,700  39,188 (13)
Total
$178,139 

$(60)

$2,570 

$ $180,709 $(60)
Unrealized losses related to these investments are due to interest rate fluctuations as opposed to credit quality. In addition, we do not intend to sell, and it is not more likely than not that we would be required to sell, these investments before recovery of their cost basis.
The following table summarizes the contractual maturities of our investments as of March 31, 2021 (in thousands):
Amortized CostFair Value
Due within one year$349,132 $350,290 
Due within one to three years 432,010 433,399 
Total$781,142 $783,689 
All available-for-sale securities have been classified as current, based on management's ability to use the funds in current operations.
As of December 31, 2020 and March 31, 2021, we held an 11.0% ownership interest in a privately held company, which is accounted for under the equity method based on our ability to exercise significant influence over operating and financial policies of the privately held company. The investment was fully written off as of March 31, 2021 and no gains or losses were recorded during the three months ended March 31, 2021. We were informed that substantially all of the assets of the privately held company were sold during the three months ended March 31, 2021 and that the privately held company is expected to dissolve after the first anniversary of the asset sale. None of the proceeds of the sale were paid to us or other shareholders of the privately held company in respect of their stock holdings.

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4. Property and Equipment
Property and equipment, net consisted of the following (in thousands):
As of March 31, 2021As of December 31, 2020
Computer equipment and software
$228,594 $220,870 
Leasehold improvements
64,094 62,249 
Furniture and fixtures
15,298 15,203 
Machinery and equipment
465 465 
Total property and equipment
308,451 298,787 
Less: accumulated depreciation
(228,901)(219,017)
Total property and equipment, net
$79,550 $79,770 
Depreciation and amortization expense related to property, equipment and demonstration units during the three months ended March 31, 2021 and 2020 was $11.3 million and $9.0 million, respectively.
During the three months ended March 31, 2021 and 2020, we capitalized $7.9 million and $5.8 million, respectively, of software development costs primarily related to our platform and cloud subscription offerings. Amortization expense related to capitalized software development costs during the three months ended March 31, 2021 and 2020 were $5.0 million and $4.6 million, respectively.
Refer to Note 6 Restructuring Charges regarding fixed assets write-offs.
5. Business Combinations
Acquisition of Cloudvisory
In January 2020, we acquired Cloudvisory, a provider of cloud visibility and control solutions. As consideration for the acquisition, we paid approximately $13.2 million in cash and assumed $0.3 million in net tangible liabilities.
The acquisition of Cloudvisory was accounted for in accordance with the acquisition method of accounting for business combinations with FireEye as the accounting acquirer. Under the acquisition method of accounting, the total purchase consideration is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The total purchase price of $13.2 million was allocated using the information available to us. The results of operations of Cloudvisory have been included in our consolidated statements of operations from the acquisition date, though revenue and net income from Cloudvisory were not material for the three months ended March 31, 2021. Transaction costs were immaterial and expensed as incurred. Pro forma financial information has not been presented for this acquisition as the impact to our consolidated financial statements was not material. Allocation of the purchase price is as follows (in thousands):
Amount
Net tangible liabilities assumed$(288)
Intangible assets5,650 
Goodwill7,846 
Total purchase price allocation$13,208 
The purchase price exceeded the fair value of the net tangible liabilities and identifiable intangible assets acquired, resulting in the recognition of goodwill. Goodwill is primarily attributable to expected synergies in our subscription offerings and cross-selling opportunities. The goodwill generated as a result of the Cloudvisory acquisition is deductible for tax purposes.
Intangible assets consist primarily of developed technology and trade name. Intangible assets attributable to developed technology include a combination of patented and unpatented technology, trade secrets, computer software and research processes that represent the foundation for the existing and planned new products to facilitate the generation of new content. Trade name is attributable to marketing goods and services under the Cloudvisory brand.
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The estimated useful life and fair values of the identifiable intangible assets are as follows (in thousands):
Estimated Useful Life (in years)Amount
Developed technology3$5,500 
Trade name1150 
Total identifiable intangible assets$5,650 
The value of developed technology was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired technology, which were discounted at a rate of 35% to determine the fair value.
The value of the trade name was estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangibles asset that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate of 1% was applied to the projected revenues associated with the intangible asset to determine the amount of savings using a discount rate of 35% to determine the fair value.
Discount rates for each respective intangible asset were determined by accounting for the risk associated with each asset, including required technology development necessary to support respective projections, the uncertainty of market success and the risk inherent with projected financial results. The estimated useful lives were determined by evaluating the expected economic and useful lives of the assets and of similar intangible assets from previous business combinations and adjusting accordingly for circumstances that may be unique to Cloudvisory.
Acquisition of Respond Software
In November 2020, we acquired all outstanding shares of privately held Respond Software, a cybersecurity investigation automation company. The acquisition of Respond Software, a leader in automation of extended detection and response (XDR), is intended to add significant capabilities to our Mandiant Advantage platform by automating threat detection and reducing the amount of analyst time necessary to investigate threats due to the reduction in false positives as well as to accelerate Respond Software's learning models with our unique expertise and threat intelligence. In connection with this acquisition, we paid cash consideration of $116.1 million and issued 4,931,862 shares of our common stock—694,768 of these shares were subject to vesting conditions as of December 31, 2020, of which 257,852 were canceled during the three months ended March 31, 2021 and 436,916 shares remained subject to vesting conditions as of March 31, 2021. The estimated fair value of the common stock issued and not subject to vesting conditions was $60.3 million. We also assumed unvested stock options, which are now exercisable for our common stock, of which $1.2 million of the fair value has been accounted for as consideration for assumed awards pertaining to pre-combination service prior to acquisition. Based on the above, total purchase consideration for Respond Software was $177.6 million.
The acquisition of Respond Software was accounted for in accordance with the acquisition method of accounting for business combinations with FireEye as the accounting acquirer. Under the acquisition method of accounting, the total purchase consideration is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. The total purchase price of $177.6 million was allocated using the information available to us. As a result, we may continue to adjust the preliminary purchase price allocation after obtaining more information regarding asset valuations, liabilities assumed, and revisions of preliminary estimates. The results of operations of Respond Software have been included in our consolidated statements of operations from the acquisition date, and revenue and net income from Respond Software were not material for the year ended December 31, 2020. Transaction costs were immaterial and expensed as incurred. Pro forma financial information has not been presented for this acquisition as the impact to our consolidated financial statements was not material. Allocation of the preliminary purchase price is as follows (in thousands):
Amount
Net tangible assets assumed(4,551)
Intangible assets31,880 
Deferred tax liability(1,120)
Goodwill151,388 
Total purchase price allocation$177,597 
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The preliminary purchase price exceeded the fair value of the net tangible liabilities and identifiable intangible assets acquired, resulting in the recognition of goodwill. Goodwill is primarily attributable to expected synergies in our subscription offerings and cross-selling opportunities. The goodwill is not expected to be deductible for U.S. income tax purposes.
Intangible assets consist primarily of developed technology, in-process technology, customer relationships and trade name. Intangible assets attributable to developed technology include a combination of patented and unpatented technology, trade secrets, computer software and research processes that represent the foundation for the existing and planned new products to facilitate the generation of new content. Customer relationship intangibles relate to Respond Software's ability to sell current and future content, as well as products built around this content, to its existing customers. Trade name is attributable to marketing goods and services under the Respond Software brand.
The estimated useful life and fair values of the identifiable intangible assets are as follows (dollars in thousands):
Estimated Useful Life (in years)Amount
Developed technology522,300 
In-Process technology42,200 
Customer relationships56,760 
Trade name2620 
Total identifiable intangible assets$31,880 
The value of developed technology was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired technology, which were discounted at a rate of 12% to determine the fair value.
The value of in-process technology was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contribute to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the acquired technology, which were discounted at a rate of 13% to determine the fair value.
The value of customer relationships was estimated using the "with and without" version of the Income Approach, which measures the difference between cash flows generated assuming the existence of the current customer relationships and the cash flows assuming those relationships do not exist and are replaced over time. Estimated costs on projected revenues, excluding acquired contract backlog, were made using historical data pertaining to sales to new and existing customers. The cash flow impact of projected cost savings, primarily avoidance of legal costs pertaining to new customers and lower commission rates applicable to existing customers than new customers, were discounted at a rate of 11% to determine the fair value.
The value of the trade name was estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangibles asset that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate of 1% was applied to the projected revenues associated with the intangible asset to determine the amount of savings using a discount rate of 12% to determine the fair value.
Discount rates for each respective intangible asset were determined by accounting for the risk associated with each asset, including required technology development necessary to support respective projections, the uncertainty of market success and the risk inherent with projected financial results. The estimated useful lives were determined by evaluating the expected economic and useful lives of the assets and of similar intangible assets from previous business combinations and adjusting accordingly for circumstances that may be unique to Respond Software.
Goodwill and Purchased Intangible Assets
Goodwill increased by $0.05 million for tax adjustment for the three months ended March 31, 2021. There were no other changes to the carrying amount of goodwill.
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Purchased intangible assets consisted of the following (in thousands):
As of March 31, 2021As of December 31, 2020
Developed technology
$178,303 $178,303 
Content
158,700 158,700 
Customer relationships
122,450 122,450 
Contract backlog
13,200 13,200 
Trade names
17,930 17,930 
Non-competition agreements
1,400 1,400 
Total intangible assets
491,983 491,983 
Less: accumulated amortization
(377,761)(365,916)
Total net intangible assets
$114,222 $126,067 
Amortization expense of intangible assets during the three months ended March 31, 2021 and 2020 was $11.8 million and $12.0 million, respectively.
The expected future annual amortization expense of intangible assets as of March 31, 2021 is presented below (in thousands):
Years Ending December 31,Amount
2021 (remaining nine months)$35,046 
202235,575 
202328,444 
20249,985 
2025 and thereafter5,172 
Total$114,222 

6. Restructuring Charges
The following table sets forth the restructuring balance as of December 31, 2020 related to previous restructuring activities and a summary of restructuring activities during the three months ended March 31, 2021 (in thousands):
Severance and related costsFacilities costsTotal costs
Balance, December 31, 2020$570 $478 $1,048 
Provision for restructuring charges   
Cash payments(443)(321)(764)
Other adjustments(110)9 (101)
Balance, March 31, 2021$17 $166 $183 
The remainder of the restructuring balance of $0.2 million at March 31, 2021 is composed of $0.2 million of non-cancelable non-lease costs which we expect to pay over the terms of the related obligations through the first quarter of 2022.
7. Leases
We have operating leases primarily for corporate offices. Our leases have remaining lease terms of one to eleven years, some of which include options to extend the leases for up to five years, and some of which include options to terminate within one year.
The components of lease expenses were as follows (in thousands):
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Operating lease costs$4,099 $4,418 
Short-term lease costs298 527 
Sublease income(223)(274)
Total net lease costs$4,174 $4,671 
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Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):
As of March 31, 2021
Operating leases:
Operating lease right-of-use assets, net$39,238 
Operating lease liabilities, current$13,843 
Operating lease liabilities, non-current54,710 
Total operating lease liabilities$68,553 
Weighted average remaining lease term (in years)6.7
Weighted average discount rate6.2 %
Supplemental cash flow and other information related to leases is as follows (in thousands):
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$5,385 $4,730 
Lease liabilities arising from obtaining right-of-use assets:
Operating leases$11,683 $478 
Cash flows of operating lease liabilities are as follows (in thousands):
Years Ending December 31, 
Amount 
2021 (remaining nine months)$5,995 
202214,519 
202312,584 
202411,243 
202510,640 
202610,605 
2027 and thereafter20,272 
Total lease payments
85,858 
Less: imputed interest
(17,305)
Total lease obligations
68,553 
Less: current lease obligations
(13,843)
Long-term lease obligations
$54,710 
As of March 31, 2021, we did not have any additional operating lease commitments for office leases that have not yet commenced.
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8. Deferred Revenue
Deferred revenue consisted of the following (in thousands):
As of March 31, 2021As of December 31, 2020
Product, subscription and support, current
$