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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 001-35098
 
Cornerstone OnDemand, Inc.
(Exact name of registrant as specified in its charter)

Delaware13-4068197
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
1601 Cloverfield Blvd.
Suite 620 South
Santa Monica, CA 90404
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
(310) 752-0200
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareCSODNasdaq Stock Market LLC(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, a 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 FilerAccelerated Filer
Non-accelerated FilerSmaller 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  
As of April 30, 2021, the registrant had 66,199,581 shares of common stock, $0.0001 par value per share, outstanding.



CORNERSTONE ONDEMAND, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
  Page No.
TRADEMARKS
© Copyright 2021 Cornerstone OnDemand, Inc. All rights reserved. “Cornerstone,” “Cornerstone OnDemand,” the Cornerstone OnDemand logo, “CyberU” and other trademarks or service marks of Cornerstone OnDemand, Inc. and its subsidiaries appearing in this Quarterly Report on Form 10-Q are the property of Cornerstone OnDemand, Inc. Trade names, trademarks and service marks of other companies appearing in this Quarterly Report on Form 10-Q are the property of their respective holders and should be treated as such.

1


RISK FACTOR SUMMARY
Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this Quarterly Report on Form 10-Q. If any of the following risks actually occur (or if any of those listed elsewhere in this Quarterly Report on Form 10-Q occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Additional risks and uncertainties of which we are unaware, or that we currently believe are not material, may also become important factors that adversely affect our business.
Risks Related to the Nature of Our Business
Unfavorable conditions in our industry or the global markets, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our operating results.
Our business depends substantially on the level of our customer satisfaction and specifically on customers renewing their agreements with us, purchasing additional products from us, or adding additional users. Any significant decline in our customer satisfaction rates, customer renewal rates, or the rates at which our customers purchase additional products or add additional users would harm our future operating results.
The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed.
Because of how we recognize revenue, a significant downturn in our business may not be immediately reflected in our operating results.
Defects in our solutions could affect our reputation, result in significant costs to us, and impair our ability to sell our products and related services.
Evolving regulation of the Internet, changes in the infrastructure underlying the Internet, or interruptions in Internet access may adversely affect our financial condition by increasing our expenditures and causing customer dissatisfaction.
If for any reason we are not able to develop enhancements and new features, keep pace with technological developments or respond to future disruptive technologies, our business will be harmed.
Even if demand for people development products and services increases generally, there is no guarantee that demand for SaaS products like ours will increase to a corresponding degree.
Integrated, comprehensive SaaS products such as ours represent a relatively recent approach to addressing organizations’ people development challenges, and we may be forced to change our pricing and billing terms as the market evolves.
Risks Related to COVID-19
Our operations and employees face risks related to the ongoing COVID-19 pandemic, that could adversely affect our financial condition and operating results. The COVID-19 pandemic could materially affect our operations, and the business or operations of our customers, suppliers, partners, or other third parties with whom we conduct business.
Risks Related to Acquisitions
Failure to integrate our business and operations successfully with those of Saba in the expected time-frame or otherwise may adversely affect our operating results and financial condition.
As we have in the past, we may seek to acquire or invest in other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, or otherwise disrupt our operations and harm our operating results.
Risks Related to Information Technology Upon Which We Rely
Our systems collect, access, use, and store personal and other customer proprietary information. As a result, we are subject to security risks and are required to invest resources to prevent, mitigate, or correct issues arising from potential or actual security breaches. If a security breach occurs, our reputation could be harmed, our business may suffer, and we could incur significant liability.
We rely on third-party hardware and software that may be difficult to replace or could cause errors or failures of our service.
If we fail to manage our SaaS hosting network infrastructure capacity, our customers may experience service outages and delays in the deployment of our people development solutions.
Any significant disruption in our SaaS hosting network infrastructure could harm our reputation, require us to provide credits or refunds, result in early terminations of customer agreements or a loss of customers, and adversely affect our business.
2


Risks Related to Our Reliance on Third Parties
Our growth depends in part on the success of our strategic relationships with third parties.
We rely significantly on implementation partners to deliver professional services to our customers, and if these implementation partners fail to deliver these professional services effectively, or if we are unable to incentivize new partners to service our customers, our operating results will be harmed.
Failure to effectively manage customer deployments by third-party service providers could adversely impact our business.
Risks Related to Our Financial Results and Need for Additional Capital
Our financial results may fluctuate due to our long, variable and, therefore, unpredictable sales cycle and our focus on large and mid-market organizations.
Servicing our debt will require a significant amount of cash, which could adversely affect our business, financial condition, and results of operations.
We may require additional capital to support growth, and this capital may not be available on acceptable terms, if at all.
Our financial results may fluctuate due to various business factors, some of which may be beyond our control.
Because we generally recognize subscription revenue from our customers over the terms of their agreements but incur most costs associated with generating such agreements upfront, rapid growth in our customer base may put downward pressure on our operating margin in the short term.
We have a history of losses, and we cannot be certain that we will achieve or sustain profitability.
Risks Related to Compliance with Laws
Existing or future laws and regulations relating to privacy or data security could increase the cost of our products, limit their use and adoption, and subject us or our customers to litigation, regulatory investigations and penalties, and other potential liabilities.
We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in full compliance with applicable laws.
Risks Related to International Operations
Fluctuations in the exchange rate of foreign currencies could result in foreign currency gains and losses.
We currently have a number of international offices and may expand our international operations. Doing business internationally has unique risks with respect to operational execution and regulatory compliance.
Risks Related to Intellectual Property
If we fail to adequately protect our proprietary rights, our competitive advantage and brand could be impaired and we may lose valuable assets, generate reduced revenue, and incur costly litigation to protect our rights.
We may be sued by third parties for alleged infringement of their proprietary rights or may find it necessary to enter into licensing arrangements with third parties to settle or forestall such claims, either of which could have a material adverse effect on our operating results and financial condition.
Indemnity provisions may expose us to substantial liability for intellectual property infringement and other losses.
We use open source software in our products, which could subject us to litigation or other actions.
Risks Related to Reliance on Our Employees
If we fail to retain key employees or to recruit and retain qualified technical and sales personnel, our business could be harmed.
Failure to effectively retain, and continue to increase the productivity of, our direct sales teams will impede our growth.
Risks Related to Tax Issues
We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions, or taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition, or results of operations.
Our ability to use net operating loss carryforwards and certain other tax attributes to reduce future tax payments may be subject to limitations.

3


PART I. FINANCIAL INFORMATION
ITEM 1.Financial Statements
CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par values)
(unaudited)
March 31, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$128,862 $153,151 
Accounts receivable, net137,191 221,461 
Deferred commissions, current portion45,587 45,786 
Prepaid expenses and other current assets35,615 30,615 
Total current assets347,255 451,013 
Capitalized software development costs, net51,559 50,812 
Property and equipment, net27,982 32,271 
Operating right-of-use assets69,470 74,419 
Deferred commissions, net of current portion88,132 89,698 
Long-term investments1,750 8,565 
Intangible assets, net412,343 436,290 
Goodwill961,593 961,322 
Deferred tax assets19,152 19,169 
Other assets12,246 11,010 
Total assets$1,991,482 $2,134,569 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses, and other current liabilities$104,496 $129,908 
Deferred revenue, current portion425,988 446,886 
Operating lease liabilities, current portion12,866 10,830 
Debt, current portion10,047 10,047 
Total current liabilities553,397 597,671 
Debt, net of current portion1,077,714 1,176,239 
Deferred revenue, net of current portion3,002 5,184 
Operating lease liabilities, net of current portion61,563 65,911 
Deferred tax liabilities7,854 11,936 
Other liabilities, non-current5,315 8,754 
Total liabilities1,708,845 1,865,695 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.0001 par value
7 6 
Additional paid-in capital860,980 835,069 
Accumulated deficit(577,114)(564,662)
Accumulated other comprehensive loss(1,236)(1,539)
Total stockholders’ equity282,637 268,874 
Total liabilities and stockholders’ equity$1,991,482 $2,134,569 
See accompanying notes.
4


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 Three Months Ended
March 31,
 20212020
Revenue$209,273 $150,136 
Cost of revenue60,536 41,924 
Gross profit148,737 108,212 
Operating expenses:
Sales and marketing69,735 55,330 
Research and development30,770 24,085 
General and administrative31,562 24,725 
Acquisition-related and integration1,530 6,811 
Restructuring6,089  
Total operating expenses139,686 110,951 
Income (loss) from operations9,051 (2,739)
Other income (expense):
Interest expense(18,770)(5,501)
Other, net(4,904)(5,364)
Other expense, net(23,674)(10,865)
Loss before income tax provision(14,623)(13,604)
Income tax benefit (provision)2,171 (171)
Net loss$(12,452)$(13,775)
Net loss per share, basic and diluted$(0.19)$(0.22)
Weighted average common shares outstanding, basic and diluted65,397 61,631 
See accompanying notes.
5


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
 Three Months Ended
March 31,
 20212020
Net loss$(12,452)$(13,775)
Other comprehensive income, net of tax:
Foreign currency translation adjustment(2,756)3,333 
Unrealized gain on interest rate swap contracts3,059  
Net change in unrealized losses on investments (223)
Other comprehensive income, net of tax303 3,110 
Total comprehensive loss$(12,149)$(10,665)
See accompanying notes.
6


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
 Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal
 SharesPar Value
Balance as of December 31, 202064,926 $6 $835,069 $(564,662)$(1,539)$268,874 
Issuance of common stock upon the exercise of options181 1 5,151 — — 5,152 
Vesting of restricted stock units948 — — — —  
Stock-based compensation— — 20,760 — — 20,760 
Net loss— — — (12,452)— (12,452)
Other comprehensive income, net of tax— — — — 303 303 
Balance as of March 31, 202166,055 $7 $860,980 $(577,114)$(1,236)$282,637 

Common StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal
SharesPar Value
Balance as of December 31, 201961,038 $6 $682,717 $(524,680)$439 $158,482 
Issuance of common stock upon the exercise of options699 — 8,081 — — 8,081 
Vesting of restricted stock units775 — — — —  
Stock-based compensation— — 25,360 — — 25,360 
Net loss— — — (13,775)— (13,775)
Other comprehensive income, net of tax— — — — 3,110 3,110 
Balance as of March 31, 202062,512 $6 $716,158 $(538,455)$3,549 $181,258 
See accompanying notes.
7


CORNERSTONE ONDEMAND, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Three Months Ended
March 31,
 20212020
Cash flows from operating activities
Net loss$(12,452)$(13,775)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization36,800 11,964 
Accretion of debt discount and amortization of debt issuance costs4,184 1,090 
Net foreign currency and other loss4,928 5,179 
Stock-based compensation expense19,482 23,170 
Deferred income taxes(4,203) 
Bad debt (recoveries) expense(306)447 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable81,394 35,516 
Deferred commissions2,248 582 
Prepaid expenses and other assets(6,488)(6,550)
Accounts payable, accrued expenses, and other current liabilities(28,338)(18,135)
Deferred revenue(21,515)(35,557)
Other liabilities, non-current2,377 2,057 
Net cash provided by operating activities78,111 5,988 
Cash flows from investing activities
Purchases of marketable investments (20,419)
Maturities and sales of investments 272,173 
Capital expenditures(943)(971)
Capitalized software costs(7,721)(7,389)
Cash paid for acquisitions, net of cash acquired (18,639)
Net cash (used in) provided by investing activities(8,664)224,755 
Cash flows from financing activities
Repayment of debt(102,512) 
Proceeds from employee stock plans7,511 10,130 
Net cash (used in) provided by financing activities(95,001)10,130 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash1,187 (626)
Net (decrease) increase in cash, cash equivalents, and restricted cash(24,367)240,247 
Cash, cash equivalents, and restricted cash at beginning of period155,854 215,907 
Cash, cash equivalents, and restricted cash at end of period$131,487 $456,154 
Supplemental cash flow data
Cash paid for interest$18,976 $8,625 
Cash paid for income taxes2,674 955 
Non-cash investing and financing activities:
Capitalized stock-based compensation1,278 2,190 
As of March 31,
20212020
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents$128,862 $456,154 
Restricted cash included in prepaid expenses and other current assets396  
Restricted cash included in other assets2,229  
Total cash, cash equivalents, and restricted cash$131,487 $456,154 
See accompanying notes.
8


CORNERSTONE ONDEMAND, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Overview
Cornerstone OnDemand, Inc. (“Cornerstone” or the “Company”) is a leading global provider of people development solutions, delivered as software-as-a-service (“SaaS”). The Company helps organizations around the globe recruit, train, and manage their employees. The Company’s solutions combine the world’s leading unified talent management solutions with state-of-the-art analytics and HR administration solutions to enable organizations to manage the entire employee lifecycle. Its focus on continuous learning and development helps organizations empower employees to realize their potential and drive success. On April 22, 2020, the Company acquired Saba Software, Inc. (“Saba”), a provider of talent experience solutions.
The Company works with customers across all geographies and markets. Its Learning, Content, Performance, Careers, Recruiting, and HR solutions help with sourcing, recruiting, and onboarding new hires; managing training and development requirements; nurturing knowledge sharing and collaboration among employees; goal setting, reviews, competency management, and continuous feedback; linking compensation to performance; identifying development plans based on performance gaps; streamlining employee data management, self-service, and compliance reporting; and then utilizing state-of-the-art analytics capabilities to make smarter, more-informed decisions using data from across the solution for talent mobility, engagement, and development so that HR and leadership can focus on strategic initiatives to help their organizations succeed.
The Company’s management has determined that the Company operates in one segment as it only reports financial information on an aggregated and consolidated basis to the Company’s chief executive officer, who is the Company’s chief operating decision maker.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements. These unaudited condensed financial statements are presented in accordance with (i) accounting standards generally accepted in the United States of America (“GAAP”) for interim financial information and (ii) the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements include all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the interim periods presented.
Results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, for any other interim period, or for any other future year. Certain prior period balances have been reclassified to conform to the current period presentation.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which enhances and simplifies various aspects of the income tax accounting guidance. The guidance is effective for the Company in the first quarter of 2021. The adoption did not have a material impact on the Company’s consolidated financial statements.
Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”), on February 22, 2021.
9


2.    BUSINESS COMBINATIONS
Saba
On April 22, 2020, the Company acquired 100% of the equity interests of the direct and indirect subsidiaries of Vector Talent Holdings, L.P., including Saba Software, Inc. (such subsidiaries, collectively, “Saba”), to expand its cloud-based learning, talent management, and talent experience software offerings. The Company acquired Saba for an aggregate purchase price of $1.310 billion, consisting of $1.277 billion in cash (net of cash acquired) and 1,110,352 shares of the Company’s common stock with an aggregate value of $32.9 million. The acquisition was financed with a combination of cash on hand and proceeds from new borrowings (refer to Note 3 – Debt for additional information). Under the terms of the purchase agreement, the final consideration was subject to certain adjustments based on a determination of closing net working capital and net indebtedness (as defined in the purchase agreement). The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill is primarily attributable to the acquired workforce and synergies expected to arise after the acquisition, including future technologies and customers of the combined business. The final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from the acquisition date).
The results of operations and the provisional fair values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements as of the date of acquisition. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as a result of the acquisition of Saba, as adjusted in 2020 (in thousands):
Preliminary Fair Value at Acquisition Date
Measurement Period Adjustments1
Adjusted Fair Value at Acquisition Date
Cash and cash equivalents$49,471 $— $49,471 
Accounts receivable58,764 — 58,764 
Prepaid expenses and other current assets13,020 — 13,020 
Property and equipment9,446 — 9,446 
Operating right-of-use assets16,700 — 16,700 
Intangible assets481,000 — 481,000 
Goodwill905,498 (3,547)901,951 
Other assets2,698 1,122 3,820 
Total assets1,536,597 (2,425)1,534,172 
Accounts payable and accrued expenses28,978 
28,978 
Deferred revenue69,940 1,092 71,032 
Operating lease liabilities16,532 — 16,532 
Deferred tax liabilities, net46,472 (853)45,619 
Other liabilities12,782 — 12,782 
Total liabilities174,704 239 174,943 
Total purchase consideration$1,361,893 $(2,664)$1,359,229 
1 The Company received approximately $2.7 million from escrow and made other revisions to certain acquired balances during the year-ended December 31, 2020.
Identifiable Intangible Assets
The following table provides the preliminary valuation of the Saba intangible assets, along with their estimated useful lives:
Estimated Fair Value
(in thousands)
Estimated Useful Life
(in years)
Customer relationships$294,800 11
Customer contracts58,500 2
Developed technology120,500 
3 5
Trade names, trademarks, and domain names7,200 3
Total$481,000 
10


The identifiable intangible assets are amortized on a straight-line basis over their respective estimated useful lives to sales and marketing for customer-related intangible assets, cost of revenue for developed technology intangible assets, and general and administrative expense for all other intangible assets. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to estimated future subscription revenue and related profit margins, costs anticipated to fulfill remaining acquired performance obligations and related profit margins, customer retention rates, technology migration curves, royalty rates, discount rates, and economic lives assigned to acquired intangible assets.
Clustree
On January 24, 2020, the Company purchased all of the outstanding shares of Clustree SAS (“Clustree”), a developer of a skills engine and skills ontology. The Company paid cash consideration of approximately $18.6 million. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill generated from this transaction is primarily attributable to the ability to enhance the Company’s product portfolio.
The Company’s allocation of the total purchase consideration as of January 24, 2020 is summarized below:
Fair Value
(in thousands)
Tangible assets$1,275 
Intangible assets developed technology
9,800 
Intangible assets customer relationships
800 
Goodwill8,875 
Deferred tax liabilities(1,020)
Accounts payable and accrued expenses(755)
Deferred revenue(336)
Net assets acquired$18,639 
The intangible assets related to developed technology and customer relationships are amortized on a straight-line basis over three years to cost of revenue and two years to sales and marketing, respectively.
Acquisition-related and Integration
Acquisition-related and integration expenses for both Saba and Clustree primarily consist of external fees for advisory, legal, and other professional services, and totaled approximately $1.5 million and $6.8 million for the three months ended March 31, 2021 and 2020, respectively. These were expensed as incurred and recorded in acquisition-related and integration expenses in the condensed consolidated statements of operations.
11


3.    DEBT
Term Loan B and Revolving Credit Facility
On April 22, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent (“Agent”), which provided for a seven-year senior secured term loan B facility (the “Term Loan Facility”) in an aggregate principal amount of $1.0047 billion for a purchase price equal to 97.5% of the aggregate principal amount after original issue discount. Equity interests in certain subsidiaries of the Company and domestic assets of the Company, subject to customary exceptions, are pledged as collateral. Principal payments are due quarterly at a rate of 0.25% of the original principal amount; the remaining outstanding principal balance is due in April 2027. In addition, the Company entered into a five-year senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $150.0 million, of which $150.0 million and $102.5 million remained available at March 31, 2021 and December 31, 2020, respectively. The available borrowings under the Revolving Credit Facility are limited by indebtedness covenants with the holders of the Convertible Notes (as defined below) and letters of credit issued under the Credit Agreement. The Revolving Credit Facility includes a letter of credit sub-facility of up to $30.0 million. Borrowings under the Credit Agreement bear interest at a rate per annum equal to LIBOR for an interest period of one month, plus an applicable margin of 4.25%, with a 0.00% LIBOR floor. On April 23, 2021, the Company entered into an amendment to the Credit Agreement to effectuate a repricing of the Term Loan Facility resulting in a rate per annum equal to LIBOR plus an applicable margin of 3.25%, with a 0.00% LIBOR floor (refer to Note 17 – Subsequent Events for additional information). The Company uses interest rate swap contracts designated as cash flow hedges to manage its exposure to fluctuations in interest rates. These contracts hedge the variable LIBOR component of the interest rate on the Term Loan Facility and effectively fix the interest rate for the hedged portion of the principal value to 0.28% plus the applicable margin over a stated period of time (refer to Note 9 – Fair Value of Financial Instruments for additional information). Interest is payable on a monthly or quarterly basis at the Company’s option.
The net carrying amounts of the components of the Term Loan Facility consist of the following (in thousands):
March 31, 2021December 31, 2020
Principal amount$849,677 $952,188 
Unaccreted debt discount(22,128)(23,082)
Unamortized debt issuance costs(20,487)(21,392)
Net carrying value$807,062 $907,714 
The effective interest rate is 5.4% for the Term Loan Facility as of March 31, 2021.
The following table presents the interest expense recognized related to the Term Loan Facility (in thousands):
Three Months Ended
March 31, 2021
Contractual interest expense$9,840 
Accretion of debt discount954 
Amortization of debt issuance costs905 
Total$11,699 
Undrawn amounts under the Revolving Credit Facility accrue a commitment fee at an initial per annum rate of 0.50% subject to certain adjustments, beginning July 1, 2020. In addition to the unused commitment fee, the Company is required to pay certain letter of credit and related fronting fees and other administrative fees. The Company did not draw any amounts under the Revolving Credit Facility as of March 31, 2021 and December 31, 2020.
The Term Loan Facility, Revolving Credit Facility, and Convertible Notes (as discussed below) contain customary covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, grant liens, make certain investments (including acquisitions), dispose of certain assets, and make certain payments (including share repurchases and dividends). As of March 31, 2021, the Company was in compliance with all financial covenants.
12


Convertible Notes
In 2017, the Company issued $300.0 million principal amount of 5.75% senior convertible notes (the “Convertible Notes”) for a purchase price equal to 98% of the principal amount to certain entities affiliated with Silver Lake (a principal owner of the Company) and LinkedIn. The Company received net proceeds of $284.8 million, net of a discount of $6.0 million and issuance costs of $9.2 million. The debt discount is being accreted to interest expense over the term of the Convertible Notes using the effective interest method. The issuance costs were deferred and are being amortized to interest expense over the term of the Convertible Notes using the effective interest method. Interest is payable semi-annually in arrears on January 1 and July 1, commencing January 1, 2018.
The Convertible Notes are convertible at an initial conversion rate of 23.8095 shares of the Company’s common stock per $1,000 principal amount of the Convertible Notes, which represents an initial conversion price of $42.00 per share, subject to adjustment for anti-dilutive issuances, voluntary increases in the conversion rate, and make-whole adjustments upon a fundamental change. A fundamental change includes a change in control, delisting of the Company’s common stock, or a liquidation of the Company. Upon conversion, the Company will deliver the applicable number of the Company’s common stock and cash in lieu of any fractional shares. Holders of the Convertible Notes may convert their Convertible Notes at any time prior to the close of business on the scheduled trading day immediately preceding the maturity date.
The holders of the Convertible Notes may require the Company to repurchase all or a portion of their Convertible Notes at a cash repurchase price equal to 100% of the principal amount of the notes being repurchased, plus the remaining scheduled interest through and including the maturity date, upon a fundamental change or event of default, including non-payment of interest or principal and other obligations.
On April 20, 2020, the Company amended the indenture to the Convertible Notes with US Bank National Association, as trustee (the “Supplemental Indenture”). Upon the completion of the acquisition of Saba on April 22, 2020, the Supplemental Indenture became effective, which permitted the Company to incur additional indebtedness and extended the maturity date of the Convertible Notes from July 1, 2021 to March 17, 2023. In connection with this amendment, the Company paid approximately $3.4 million in consent and other fees to the holders of the Convertible Notes which were capitalized as debt issuance costs. As part of the amendment, the Company applied modification accounting as the criteria requiring extinguishment accounting were not met. As a result of the modification accounting, the fair value of the conversion feature increased by $18.6 million. This increase in fair value was recorded as a debt discount with a corresponding increase to additional paid-in capital. The Company will accrete the debt discount related to the conversion feature and amortize the debt issuance costs related to consent and other fees, including the previously unaccreted and unamortized amounts, to interest expense over the remaining term of the Convertible Notes.
The net carrying amounts of the components of the Convertible Notes consist of the following (in thousands):
March 31, 2021December 31, 2020
Principal amount$300,000 $300,000 
Unaccreted debt discount(14,572)(16,178)
Unamortized debt issuance costs(4,729)(5,250)
Net carrying value$280,699 $278,572 
The effective interest rate is 9.2% for the Convertible Notes as of March 31, 2021.
The following table presents the interest expense recognized related to the Convertible Notes (in thousands):
Three Months Ended
March 31,
20212020
Contractual interest expense$4,313 $4,313 
Accretion of debt discount1,607 431 
Amortization of debt issuance costs522 663 
Total$6,442 $5,407 

13


4.    NET LOSS PER SHARE
The following table presents the Company’s basic and diluted net loss per share (in thousands, except per share amounts): 
 Three Months Ended
March 31,
 20212020
Net loss$(12,452)$(13,775)
Net loss per share, basic and diluted$(0.19)$(0.22)
Weighted-average shares of common stock outstanding, basic and diluted65,397 61,631 
The potential shares of common stock that would have a dilutive impact are computed using the treasury stock method or the if-converted method, as applicable. The following potential shares were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive (in thousands):
Three Months Ended
March 31,
 20212020
Options to purchase common stock, restricted stock units, and performance-based restricted stock units7,170 7,240 
Shares issuable pursuant to employee stock purchase plan145 173 
Convertible notes7,143 7,143 
Total shares excluded from net loss per share14,458 14,556 

5.    CASH AND INVESTMENTS
The Company’s investments in marketable and non-marketable securities are made pursuant to its investment policy, which has established guidelines relative to the diversification of the Company’s investments and their maturities, with the principal objective of capital preservation and maintaining liquidity that is sufficient to meet cash flow requirements.
As of March 31, 2021 and December 31, 2020, the Company did not have any marketable investments. During the three months ended March 31, 2021, the Company recorded a $6.9 million write-down related to a non-marketable investment accounted for using the equity method because an other than temporary impairment was identified. During the three months ended March 31, 2020, the Company recognized a $1.9 million loss on the sale of available-for-sale securities.
The Company’s non-marketable investments are composed of the following (in thousands):
March 31, 2021December 31, 2020
Accounted for at cost, adjusted for observable price changes$1,750 $1,750 
Accounted for using the equity method 6,815 
Total non-marketable investments$1,750 $8,565 

14


6.    INTANGIBLE ASSETS AND GOODWILL
Finite-lived Intangibles
The Company has finite-lived intangible assets which are amortized over their estimated useful lives on a straight-line basis. The following table presents the gross carrying amount and accumulated amortization of finite-lived intangible assets (dollars in thousands):
 March 31, 2021December 31, 2020
 Weighted Average Useful Life
(in years)
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Developed technology4.1$143,419 $(40,994)$102,425 $143,151 $(31,658)$111,493 
Content library5.54,700 (2,046)2,654 4,700 (1,833)2,867 
Customer relationships11.0296,925 (25,796)271,129 296,812 (18,946)277,866 
Customer contracts2.058,737 (27,574)31,163 58,717 (20,225)38,492 
Trade names, trademarks, and domain names3.07,236 (2,264)4,972 7,233 (1,661)5,572 
Total$511,017 $(98,674)$412,343 $510,613 $(74,323)$436,290 
Amortization of customer-related intangible assets is recorded in sales and marketing expense in the accompanying condensed consolidated statements of operations; amortization of developed technology and content library intangible assets is recorded in cost of revenue; amortization of all other finite-lived intangibles is recorded in general and administrative expense. Total amortization expense was $24.3 million and $1.7 million for the three months ended March 31, 2021 and 2020, respectively.
The following table presents the Company's estimate of remaining amortization expense for finite-lived intangible assets that existed as of March 31, 2021 (in thousands):
2021 - remaining period$71,912 
202273,116 
202350,761 
202442,425 
202531,199 
Thereafter142,930 
Estimated remaining amortization expense$412,343 
The Company evaluates the recoverability of its long-lived assets with finite useful lives, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company does not believe an impairment trigger occurred which would impact the recoverability of the carrying values as of March 31, 2021. There were no impairment charges related to identifiable intangible assets for the three months ended March 31, 2021 and 2020.
Goodwill
The following table presents the carrying amount of goodwill (in thousands):
Balance as of December 31, 2020
$961,322 
Effect of foreign currency translation271 
Balance as of March 31, 2021
$961,593 

15


7.    RESTRUCTURING
The Company has recently undertaken various restructuring activities as part of the Company’s integration plan with Saba to streamline the organization. The activities were composed primarily of workforce reductions and exits of certain facilities. The cost of workforce reductions is primarily composed of severance payments and termination benefits, including stock-based compensation in certain cases. The cost of vacated facilities is primarily composed of incremental amortization expense associated with vacated right-of-use assets and associated leasehold improvements. The present actions are expected to be substantially complete during 2021. All liabilities for severance and related benefits are included in accounts payable, accrued expenses, and other current liabilities in the condensed consolidated balance sheets.
Activity for the Company’s restructuring plan is as follows:
Three Months Ended
March 31, 2021
(in thousands)
Severance payments and termination benefits$4,177 
Stock-based compensation1,201 
Vacated facilities711 
Total restructuring expense$6,089 
Restructuring liability balance as of December 31, 2020
$6,233 
Severance payments and termination benefits4,177 
Cash payments(5,509)
Effect of foreign currency translation(100)
Restructuring liability balance as of March 31, 2021
$4,801 

8.    OTHER BALANCE SHEET AMOUNTS
Property and Equipment, net
The balance of property and equipment, net is as follows (in thousands):
 Useful LifeMarch 31, 2021December 31, 2020
Computer equipment and software
1 5 years
$67,244 $66,205 
Furniture and fixtures
1 7 years
7,171 6,580 
Leasehold improvements
1 – 8 years
27,118 26,204 
Total property and equipment101,533 98,989 
Less: accumulated depreciation and amortization(73,551)(66,718)
Total property and equipment, net$27,982 $32,271 
Depreciation expense was $5.3 million and $3.1 million for the three months ended March 31, 2021 and 2020, respectively.
Accounts Payable, Accrued Expenses, and Other Current Liabilities
The balance of accounts payable, accrued expenses, and other current liabilities is as follows (in thousands):
 March 31, 2021December 31, 2020
Accounts payable$5,091 $1,424 
Accrued compensation and related liabilities51,276 76,974 
Other accrued expenses and other current liabilities48,129 51,510 
Total accounts payable, accrued expenses, and other current liabilities$104,496 $129,908 
16


Deferred Commissions
The Company defers commissions paid to its sales force and related payroll taxes as these amounts are incremental costs of obtaining a contract with a customer and are recoverable from future revenue due to the non-cancelable customer agreements that gave rise to the commissions. Deferred commissions are amortized over the related benefit period which has been determined to be six years for commissions for initial contracts. Commissions expense was $12.3 million and $9.1 million for the three months ended March 31, 2021 and 2020, respectively, and was recorded in sales and marketing in the accompanying condensed consolidated statements of operations.
9.    FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from independent sources. The fair value hierarchy is based on the following three levels of inputs, of which the first two are considered observable and the last one is considered unobservable:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – Unobservable inputs
Assets and liabilities measured at fair value on a recurring basis included the following (in thousands):
 March 31, 2021December 31, 2020
 Fair ValueLevel 1Level 2Level 3Fair ValueLevel 1Level 2Level 3
Interest rate swap contracts designated as cash flow hedges$2,189 $ $2,189 $ $(885)$ $(885)$ 
At March 31, 2021 and December 31, 2020, the Company had no cash equivalents measured at fair value on a recurring basis.
Derivatives Designated as Hedging Instruments – Cash Flow Hedges
The change in fair value of derivatives designated and qualifying as cash flow hedges is deferred as a component of accumulated other comprehensive loss in the accompanying condensed consolidated balance sheets and is subsequently reclassified into earnings in the period that the hedged interest expense affects earnings. As of March 31, 2021, the Company had two outstanding interest rate swap derivatives designated as hedging instruments with an aggregate notional value of $596.7 million. These contracts have maturities of four years or less with amortizing notional values over the contract term.
The following table summarizes the amount of income recognized from derivative instruments and the line items in the accompanying condensed consolidated statements of operations where the results were recorded for cash flow hedges (in thousands):
Amount of Gain (Loss) Recognized in Other Comprehensive Loss on DerivativeLocation of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss
Three Months EndedThree Months Ended
March 31, 2021
March 31, 2021
Interest rate swap contracts$2,809 Interest expense$(251)
The Company expects that $(0.6) million recorded as a component of accumulated other comprehensive income (loss) will be realized in the statements of operations over the next twelve months.
17


The following table summarizes the fair values of derivative instruments and the line items in the accompanying condensed consolidated balance sheets where the instruments are recorded (in thousands):
Derivative AssetsDerivative Liabilities
March 31, 2021
December 31, 2020
March 31, 2021
December 31, 2020
Derivatives designated as cash flow hedges:Balance Sheet location:
Interest rate swap contractsPrepaid expenses and other current assets$ $ Accounts payable, accrued expenses, and other current liabilities$(25)(40)
Interest rate swap contractsOther assets2,214 Other liabilities, non-current (845)
Convertible Notes
The Company’s Convertible Notes, as described in Note 3Debt, are presented in the accompanying condensed consolidated balance sheets at their original issuance value, net of unaccreted debt discount and unamortized debt issuance costs, and are not remeasured to fair value each period. The fair value of the Company’s Convertible Notes as of March 31, 2021 was approximately $390 million. The fair value of the Convertible Notes, which are classified as Level 2 financial instruments, was estimated on the basis of the current equity value implicit in the instrument.
10.    STOCKHOLDERS’ EQUITY
Common Stock
As of March 31, 2021 and December 31, 2020, there were 1,000,000,000 shares of common stock authorized. As of March 31, 2021 and December 31, 2020, there were 66,054,616 and 64,926,234 shares issued and outstanding, respectively.
Share Repurchase Programs
In August 2019, the Company’s board of directors authorized a $150.0 million share repurchase program of its common stock (the “2019 Share Repurchase Program”). The 2019 Share Repurchase Program is set to terminate when the aggregate cost of shares repurchased under the 2019 Share Repurchase Program reaches $150.0 million. Share repurchases may be executed through various means, including, without limitation, open market transactions, privately negotiated transactions, or otherwise. The timing and amount of any share repurchase will depend on share price, corporate and regulatory requirements, economic and market conditions, and other factors. At April 1, 2021, $127.6 million remained available for repurchase of shares under the 2019 Share Repurchase Program. There were no share repurchases under the 2019 Share Repurchase Program during the three months ended March 31, 2021 and 2020.
11.    STOCK-BASED AWARDS
Stock Options
Stock option activity is summarized as follows (in thousands, except per share and term information):
Number of SharesWeighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value1
Outstanding, December 31, 2020
1,819 $37.81 2.6$15,541 
Exercised(181)28.47 
Outstanding, March 31, 2021
1,638 $38.84 2.4$12,230 
Exercisable at March 31, 2021
1,638 $38.84 2.4$12,230 
Vested and expected to vest at March 31, 2021
1,638 $38.84 2.4$12,230 
1 Based on the Company’s closing stock price of $43.58 on March 31, 2021 and $44.04 on December 31, 2020.
There were no stock options granted during the three months ended March 31, 2021 and 2020.
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Restricted Stock Units
Restricted stock unit (“RSU”) activity is summarized as follows (shares in thousands):
Number of SharesWeighted-
Average Grant Date
Fair Value
Unvested shares at December 31, 2020
3,891 $42.21 
Granted444 50.42 
Forfeited(112)43.10 
Vested(841)42.29 
Unvested shares at March 31, 2021
3,382 $43.24 
Unrecognized compensation expense related to unvested RSUs was $109.6 million at March 31, 2021, which is expected to be recognized over a weighted-average period of 2.4 years.
Performance-Based Restricted Stock Units
Performance-based restricted stock unit (“PRSU”) activity is summarized as follows (shares in thousands):
Number of SharesWeighted-
Average Grant Date
Fair Value
Unvested shares at December 31, 20201
2,229 $41.95 
Granted519 85.50 
Forfeited(491)40.91 
Vested(107)40.64 
Unvested shares at March 31, 20211
2,150 $52.76 
1 Assumes maximum achievement of the specified financial targets.
Unrecognized compensation expense related to unvested PRSUs was $29.0 million at March 31, 2021, which is expected to be recognized over a weighted-average period of 1.9 years.
Employee Stock Purchase Plan
Under the Company’s 2010 Employee Stock Purchase Plan (“ESPP”), eligible employees are granted the right to purchase shares at the lower of 85% of the fair value of the stock at the time of grant or 85% of the fair value at the time of exercise. The right to purchase shares is granted semi-annually, in June and December, for six month offering periods. Under the ESPP 4,825,668 shares remained available for issuance at March 31, 2021. During the three months ended March 31, 2021 and 2020, no shares were purchased under the ESPP.
Stock-Based Compensation
Stock-based compensation expense is reflected in the accompanying condensed consolidated statements of operations as follows (in thousands):
 Three Months Ended
March 31,
 20212020
Cost of revenue$2,056 $2,701 
Sales and marketing6,297 8,584 
Research and development4,055 4,800 
General and administrative5,873 7,085 
Restructuring1,201  
Total$19,482 $23,170 

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12.    INCOME TAXES
The Company’s income tax benefit (provision) was approximately $2.2 million and $(0.2) million with an effective income tax rate of 14.8% and (1.3)% for the three months ended March 31, 2021 and 2020. The Company’s effective tax rate differs from the US statutory rate of 21% primarily due to the change in the valuation allowance on the Company’s deferred tax assets and income taxes in foreign jurisdictions with no valuation allowances.
The income tax provision is related to domestic income, certain foreign income, and withholding taxes. The Company does not have a material tax provision in significant jurisdictions in which it operates, such as the United States, as it has historically generated losses. The Company has recorded a full valuation allowance against its net deferred tax assets and the Company does not currently anticipate recording an income tax benefit related to these deferred tax assets or current year losses.
The Company’s provision for income taxes for the three months ended March 31, 2021 was estimated using the discrete method and was based on its financial results through the end of the period. The Company determined that using the discrete method is more appropriate than using the annual effective tax rate method. The Company is unable to estimate the annual effective tax rate with sufficient precision to use the effective tax rate method, which requires a full-year projection of income.
The Company is subject to United States federal income tax as well as to income tax in multiple state and foreign jurisdictions, including the United Kingdom. Federal income tax returns of the Company are subject to IRS examination for the 2017 through 2020 tax years. State income tax returns are subject to examination for the 2016 through 2020 tax years. There are ongoing audits in insignificant tax jurisdictions. The Company does not anticipate any material impact from these audits.
13.    COMMITMENTS AND CONTINGENCIES
Commitments
In March 2020, the Company entered into an agreement with a provider of cloud computing services to provide services over approximately seven years. The remaining obligation as of March 31, 2021 is $76.7 million.
Letters of Credit
The Company maintains standby letters of credit in association with other contractual arrangements. Total letters of credit outstanding at March 31, 2021 and December 31, 2020 were $8.8 million and $8.9 million, respectively.
Guarantees and Indemnifications
The Company has made guarantees and indemnities under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions, including revenue transactions in the ordinary course of business. The Company is obligated to indemnify its directors and officers to the maximum extent permitted under the laws of the State of Delaware. However, the Company has a directors and officers insurance policy that may reduce its exposure in certain circumstances and may enable it to recover a portion of future amounts that may be payable, if any. The duration of the guarantees and indemnities varies and, in many cases, is indefinite but subject to statutes of limitations. To date, the Company has made no payments related to these guarantees and indemnities. The Company estimates the fair value of its indemnification obligations as insignificant based on this history and the Company’s insurance coverage and, therefore, has not recorded any liability for these guarantees and indemnities in the accompanying condensed consolidated balance sheets.
Litigation
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. If the Company determines that it is probable that a loss has been incurred and the amount is reasonably estimable, the Company will record a liability. The Company has determined that it does not have a potential liability related to any legal proceedings or claims that would individually, or in the aggregate, have a significant adverse effect on its financial condition or operating results.
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14.    LEASES
The Company has various non-cancelable operating leases for its offices and data centers. These arrangements have remaining lease terms up to ten years. Certain lease agreements contain renewal options, termination rights, rent abatement, and/or escalation clauses with renewal terms that can extend the lease term, generally from one to five years.
The components of lease cost related to the Company’s operating leases are as follows:
Three Months Ended
March 31,
20212020
(in thousands)
Operating lease cost$5,462 $3,969 
Sublease income(448)(1,037)
Net lease cost$5,014 $2,932 
Supplemental cash flow information related to leases, including leases acquired in business combinations, is as follows:
Three Months Ended
March 31,
20212020
(in thousands)
Cash paid for operating leases$3,511 $2,629 
Right-of-use assets obtained in exchange for lease obligations 1,062 
Supplemental balance sheet information related to the Company’s operating leases is as follows:
March 31, 2021December 31, 2020
Weighted-average remaining lease term5.1 years5.2 years
Weighted-average incremental borrowing rate3.6  %3.5 %
Maturities of the Company’s operating lease liabilities at March 31, 2021 are as follows (in thousands):
2021$10,333 
202220,206 
202319,071 
20249,711 
20258,218 
Thereafter14,670 
Total lease payments82,209 
Less: Imputed interest1
(7,780)
Present value of operating lease liabilities$74,429 
1 Calculated using the incremental borrowing rate for each lease.

15.    REVENUE, DEFERRED REVENUE, AND REMAINING PERFORMANCE OBLIGATIONS
Disaggregation of Revenue
The following table sets forth the Company’s sources of revenue (in thousands): 
 Three Months Ended
March 31,
 20212020
Subscription revenue$200,584 $144,421 
Professional services revenue8,689