PING IDENTITY HOLDING CORP. Unless the context requires otherwise, references in this report to "Ping Identity ," the "Company," "we," "us" and "our" refer toPing Identity Holding Corp. and its consolidated subsidiaries. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . OverviewPing Identity's mission is to secure the digital world through intelligent identity. We deliver on this mission by providing intelligent identity solutions for the enterprise, leveraging AI and ML to provide real-time authentication. We are built to scale for 3 billion-plus individual and machine identities globally at speeds that allow for up to 50,000 unique authentications per second. We enable companies to achieve zero trust security by making identity frictionless, giving our customer the ability to go faster, get to the cloud, and reduce costs, all while improving their end-user experiences. We solve big problems for the world's largest enterprises. We serve more than half of the Fortune 100, and we have partnerships with companies such as Microsoft and Amazon. We serve a broad range of vertical markets with particular strength in financial services, healthcare, technology, aerospace, and retail especially among the Global 5000.Ping Identity's platform enables a range of use cases for workforces, for partners, and for a wide variety of consumer-facing applications. Our solutions and solution packages can be deployed as SaaS, as on premises software, or a hybrid. We also provide flexibility to deploy our SaaS solutions inPing Identity's cloud, the customer's private cloud, or in a public cloud. The Ping Intelligent Identity Platform is comprised of multiple solutions that can be purchased individually or integrated as a more complete set of solutions for the customer, workforce, partner or IoT use case: Single Sign-On ("SSO"), Multi-Factor Authentication ("MFA"), Access Security, Directory, Dynamic Authorization, Risk Management, Identity Verification, API Intelligence, Orchestration and Fraud Detection. Our offerings are predominantly priced based on the solution, use case and number of identities. We sell our platform through subscription-based contracts, and substantially all of our customers pay annually in advance. We sell our solutions primarily through direct sales, which are enhanced by collaboration with our channel partners, resellers, system integrators and technology partners. This includes sourcing new leads, aiding in pre-sale processes (such as proof of concepts, demos or requests for proposals) and reselling our solutions to customers. We also leverage a number of our channel partners and system integrators to provide the implementation services for some of our larger and more complex deployments, significantly increasing the time-to-value for our customers and maximizing the efficiency of our go-to-market efforts. Proposed Merger Transaction OnAugust 2, 2022 ,Ping Identity entered into an Agreement and Plan of Merger (the "Merger Agreement") withProject Polaris Holdings, LP , aDelaware limited partnership ("Parent"), andProject Polaris Merger Sub, Inc. , aDelaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"). Parent and Merger Sub are affiliates ofThoma Bravo Fund XV, L.P. , aDelaware limited partnership and private equity fund managed byThoma Bravo, L.P. Pursuant to the Merger Agreement, Merger Sub will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the "Merger"). If the Merger is consummated, the Company's common stock will be delisted from theNew York Stock Exchange and deregistered under the Exchange Act. The Merger Agreement provides, among other things, that upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock of the Company that is issued and outstanding as of immediately prior to the Effective Time (other than 32 Table of Contents certain shares), will be automatically cancelled, extinguished and converted into the right to receive$28.50 , without interest thereon. The closing of the proposed Merger is subject to certain conditions, including the adoption of the Merger Agreement by stockholders representing a majority of the outstanding shares of the Company's common stock and the receipt of applicable regulatory approvals. The proposed Merger is expected to close during the fourth quarter of 2022. See Note 17 of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
Impact of COVID-19, Macroeconomic and Geopolitical Conditions
While the impact of the COVID-19 pandemic is lessening, challenges resulting from the pandemic persist. To date, we have seen limited effects on the Company's annual results of operations and overall financial performance as a result of COVID-19. As noted below in "Key Factors Affecting Our Performance-Seasonality," typical seasonal fluctuations in our revenue have changed as a result of the COVID-19 pandemic. However, the effects of the continued outbreak of COVID-19 may include disruptions of sales channels, marketing activities and supply chains, and we cannot fully predict the effects of the continuing pandemic on our business and our financial performance in future periods. Additionally, adverse macroeconomic conditions, including but not limited to inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, higher interest rates and currency fluctuations could adversely affect demand for our products. In addition, the Russian invasion ofUkraine has resulted in, among other things, economic sanctions imposed by the international community, which have impacted the global economy and given rise to potential global security issues that may adversely affect international business and economic conditions. Although we have no direct operations inRussia orUkraine , certain of our customers and third-party service providers have been negatively impacted by the war inUkraine . To date, the impact on these parties has not had a material impact on our operations. In the first quarter of 2022, we indefinitely ceased all sales toRussia , which sales were not material to our results. Our condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management evaluates these estimates and assumptions on an ongoing basis and makes estimates based on historical experience and various other assumptions that are believed to be reasonable. Actual results may differ from these estimates. Key Factors Affecting our Performance
We believe that our future performance will depend on many factors, including the following:
Generating Additional Sales to Existing Customers
A customer journey often begins with the purchase of one of our solutions for one use case. Once customers realize the value of that solution, their spend with us expands by (i) adopting another identity use case, (ii) deploying additional solutions and solution packages and/or (iii) adding more identities over time. Our future revenue growth is dependent upon our ability to continue to expand our customers' use of our platform. Our ability to increase sales to existing customers will depend on a number of factors, including satisfaction or dissatisfaction with our solutions, competition, pricing, economic conditions and spending by customers on our solutions. We have adopted a customer success strategy and implemented processes across our customer base to drive revenue retention and expansion.
Increasing the Size of our Customer Base
We believe there is significant opportunity to increase market adoption of our
platform by new customers. Our SSO, Access Security and Directory solutions
often replace legacy and homegrown systems. We also have significant greenfield
opportunities with our MFA, Dynamic Authorization, Risk Management, Identity
Verification, API Intelligence, Orchestration and Fraud Detection solutions and
the IoT use case. To increase
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our customer base, we plan to continue to expand our sales force and channel partner network, both domestically and internationally, enhance our marketing efforts and target new buyers. For example, we have extended our cloud-based offering to target developers, who represent a new potential buyer for us. Over time, we believe sales to developers could increase the size of our customer base.
Maintaining our Technology Differentiation and Product Leadership
The Ping Intelligent Identity Platform is designed for large enterprises with complex, hybrid IT requirements. We have spent over a decade building a standards-based platform with turnkey integrations designed to ensure that large enterprises can easily and rapidly deploy our platform within their complex infrastructures. We intend to continue making investments in research and development to extend our platform and technology capabilities while also expanding our solutions to address new use cases.
Investing for Growth
We believe Identity and Access Management represents a large market opportunity,
and we plan to invest in order to support further growth. During 2018, we
accelerated investments in our business to expand our footprint within this
large and growing market. Specifically, we invested in new cloud-based offerings
to broaden the Ping Intelligent Identity Platform and the scope of our solutions
to cover new identity security threats, such as APIs. We also invested in
deploying our platform as a single tenant cloud-based offering, managed by us,
to help extend the reach of our solutions within our customers' infrastructures,
while providing them with the level of control and configuration they require.
Since 2018, we have seen progress with these investments and expect to continue
to invest in these areas. Additionally, we plan to invest in increased marketing
efforts, expanding our sales force, and growing our network of channel partners,
resellers, system integrators and technology partners. However, we are not
expecting these investments to provide our business with meaningful increases to
annual recurring revenue ("ARR") growth in the immediate term as we expect
natural purchasing cycles will affect the speed of market adoption.
Additionally, we have a large and growing international presence and intend to
grow our customer base in various international regions by making investments in
our sales team globally. For the quarter ended June 30, 2022 , our international
revenue was 29% of our total revenue. We expect international sales to be a
meaningful revenue contributor in future periods.
Seasonality
Given the purchasing patterns of our enterprise customers, we typically experience seasonality in terms of when we receive orders from our customers. Our customers often time their purchases and renewals of our solutions to coincide with their fiscal year end, which is typicallyJune 30 orDecember 31 . Because of these purchasing patterns, a greater percentage of our annual subscription revenue from term-based licenses, the revenue from which is recognized up front at the later of delivery or commencement of the license term, has come from our second and fourth quarters, rather than from other quarters. However, due to fluctuations in the economic environment resulting from COVID-19, we did not see our historical trends in seasonality for the year endedDecember 31, 2021 , where 26% and 25% of our annual revenue was in our second and fourth quarters, respectively. Key Business Metrics
In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Annual Recurring Revenue
ARR represents the annualized value of all subscription contracts as of the end of the period. ARR neutralizes fluctuations due to seasonality, contract term and the sales mix of subscriptions for term-based licenses and SaaS. ARR only includes the annualized value of subscription contracts. ARR does not have
any
standardized
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meaning and is therefore unlikely to be comparable to similarly titled measures
presented by other companies. ARR should be viewed independently of revenue and
deferred revenue and is not intended to be combined with or to replace either of
those items. ARR is not a forecast and the active contracts at the end of a
reporting period used in calculating ARR may or may not be extended or renewed
by our customers.
The table below sets forth our ARR as of the end of
June 30, Change
2022 2021 $ %
(dollars in thousands)
ARR $ 340,988 $ 279,630 $ 61,358 22 %
Dollar-Based Net Retention Rate
To further illustrate the land and expand economics of our customer relationships, we examine the rate at which our customers increase their subscriptions for our solutions. Our dollar-based net retention rate measures our ability to increase revenue across our existing customer base through expanded use of our platform, offset by customers whose subscription contracts with us are not renewed or renew at a lower amount.
We calculate our dollar-based net retention rate as of the end of a reporting period as follows:
? Numerator. We measure ending ARR for the current reporting period from
customers with associated ending ARR for the same period last year.
? Denominator. We measure ending ARR for the same period last year.
The quotient obtained from this calculation is our dollar-based net retention rate. Our dollar-based net retention rate was 114% atJune 30, 2022 . We believe our ability to cross-sell our new solutions to our installed base, particularly MFA, API Intelligence, Fraud Detection, Orchestration, Risk Management, Dynamic Authorization and Identity Verification, will continue to support our high dollar-based net retention rate.
Large Customers
We believe that our ability to increase the number of customers on our platform, particularly the number of customers with ARR greater than$250,000 , demonstrates our focus on the large enterprise market and our penetration within those enterprises. Historically, increasing awareness of our platform, further developing our sales and marketing expertise and channel partner ecosystem, and continuing to build solutions that address the unique identity needs of large enterprises have increased our number of large customers across industries. We believe there are significant upsell and cross-sell opportunities within our customer base by expanding the number of use cases, adding additional identities and selling new solutions.
Our customers with ARR over
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the
following non-GAAP measures are useful in evaluating our operating performance.
We believe that non-GAAP financial information, when taken collectively, may be
helpful to investors because it provides consistency and comparability with past
financial performance and assists in comparisons with other companies, some of
which use similar non-GAAP financial information to supplement their GAAP
results. The non-GAAP financial information is presented for supplemental
informational purposes only, and should not be considered a substitute for
financial information presented in accordance with GAAP, and may be different
from similarly-titled non-GAAP measures used by other companies. A
reconciliation is provided below for each non-GAAP financial measure to the most
directly comparable financial measure stated in accordance with GAAP. Investors
are encouraged to review the related
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GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Free Cash Flow
Free Cash Flow is a supplemental measure of liquidity that is not made under GAAP and that does not represent, and should not be considered as, an alternative to cash flow from operations, as determined by GAAP. We define Free Cash Flow as net cash provided by (used in) operating activities less cash used for purchases of property and equipment and capitalized software development costs. We use Free Cash Flow as one measure of the liquidity of our business. We believe that Free Cash Flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our core operations that, after the purchases of property and equipment and capitalized software development costs, can be used for strategic initiatives, including investing in our business and selectively pursuing acquisitions and strategic investments. We further believe that historical and future trends in Free Cash Flow, even if negative, provide useful information about the amount of cash generated (or consumed) by our operating activities that is available (or is not available) to be used for strategic initiatives. For example, if Free Cash Flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. We also believe that the use of Free Cash Flow enables us to more effectively evaluate our liquidity period-over-period and relative to our competitors.
A reconciliation of Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP measure, is as follows:
Six Months Ended
June 30,
2022 2021
(in thousands)
Net cash provided by (used in) operating activities $ (3,682) $ 43,965
Less:
Purchases of property and equipment (2,029) (1,502)
Capitalized software development costs (9,611)
(8,582)
Free Cash Flow$ (15,322) $
33,881
Net cash used in investing activities$ (12,144) $
(49,959)
Net cash provided by (used in) financing activities
$ 6,876 $ 584 Free Cash Flow has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. For example, Free Cash Flow does not represent the total increase or decrease in our cash balance for a given period. Because of these limitations, Free Cash Flow should not be considered as a replacement for cash flow from operations, as determined by GAAP, or as a measure of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using non-GAAP measures only for supplemental purposes.
Non-GAAP Gross Profit
Non-GAAP Gross Profit is a supplemental measure of operating performance that is
not made under GAAP and that does not represent, and should not be considered
as, an alternative to gross profit, as determined by GAAP. We define Non-GAAP
Gross Profit as gross profit, adjusted for stock-based compensation expense and
certain amortization expense of acquired intangible assets and software
developed for internal use.
We use Non-GAAP Gross Profit to understand and evaluate our core operating
performance and trends, to prepare and approve our annual budget, and to develop
short-term and long-term operating plans. We believe that Non-GAAP Gross Profit
is a useful measure to us and to our investors because it provides consistency
and comparability with our past financial performance and between fiscal
periods, as the metric generally eliminates the effects of the variability of
amortization of acquired intangibles and internal-use software and
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stock-based compensation expense from period to period, which may fluctuate for reasons unrelated to overall operating performance. We believe that the use of this measure enables us to more effectively evaluate our performance period-over-period and relative to our competitors.
A reconciliation of Non-GAAP Gross Profit to gross profit, the most directly comparable GAAP measure, is as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Gross profit $ 42,216 $ 56,500 $ 98,244 $ 104,638
Amortization expense 8,743 6,077 17,259 11,886Stock-based compensation expense 727 942 1,475
2,068 Non-GAAP Gross Profit$ 51,686 $ 63,519 $ 116,978 $ 118,592
Non-GAAP Gross Profit has limitations as an analytical tool, and you should not
consider it in isolation, or as a substitute for analysis of our results as
reported under GAAP. Because of these limitations, Non-GAAP Gross Profit should
not be considered as a replacement for gross profit, as determined by GAAP, or
as a measure of our profitability. We compensate for these limitations by
relying primarily on our GAAP results and using non-GAAP measures only for
supplemental purposes.
Components of Results of Operations
Revenue
We recognize revenue under ASC 606. Under ASC 606, we recognize revenue when our customer obtains control of goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.
We derive revenue primarily from sales of subscriptions for our solutions to new and existing customers and, to a lesser extent, sales of professional services.
Subscription. Subscription revenue includes subscription term-based license revenue for solutions deployed on-premise within the customer's IT infrastructure or in a third-party cloud of their choice, subscription support and maintenance revenue from such deployments, and SaaS subscriptions, which give customers the right to access our cloud-hosted software solutions. We typically invoice subscription fees annually in advance. Subscription term-based license revenue is recognized upon transfer of control of the software, which occurs at delivery or when the license term commences, if later. All of our support and maintenance revenue and revenue from SaaS subscriptions is recognized ratably over the term of the applicable agreement. For the three months endedJune 30, 2022 and 2021, 35% and 61%, respectively, of our revenue was from subscription term-based licenses. For the six months endedJune 30, 2022 and 2021, 44% and 60%, respectively, of our revenue was from subscription term-based licenses. Changes in period-over-period subscription revenue growth are primarily impacted by the following factors:
? the type of new and renewed subscriptions (i.e., term-based or SaaS); and
? the duration of new and renewed term-based subscriptions.
While the number of new and increased subscriptions during a period impacts our
subscription revenue growth, the type and duration of those subscriptions has a
significantly greater impact on the amount and timing of revenue recognized in a
period. Subscription revenue from term-based licenses is recognized at the
beginning of the subscription term, while subscription revenue from SaaS and
support and maintenance is recognized ratably over the subscription term. As a
result, our revenue may fluctuate due to the timing of term-based
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licensing transactions. In addition, keeping other factors constant, when the percentage of subscription term-based licenses to total subscriptions sold or renewed in a period increases relative to the prior period, revenue growth will increase. Conversely, when the percentage of subscription SaaS and support and maintenance to total subscriptions sold or renewed in a period increases, revenue growth will generally decrease. Additionally, a multi-year subscription term-based license will generally result in greater revenue recognition up-front relative to a one-year subscription term-based license. Therefore, keeping other factors constant, revenue growth will also trend higher in a period where the percentage of multi-year subscription term-based licenses to total subscription term-based licenses increases. Professional Services and Other. Professional services and other revenue consists primarily of fees from professional services provided to our customers and partners to configure and optimize the use of our solutions, as well as training services related to the configuration and operation of our solutions. Our professional services are generally priced on a time and materials basis, which is generally invoiced monthly and for which revenue is recognized as the services are performed. Revenue from our training services and sponsorship fees is recognized on the date the services are complete. Over time, we expect our professional services revenue to remain relatively stable as a percentage of total revenue. Cost of Revenue
Subscription. Subscription cost of revenue consists primarily of employee compensation costs for employees associated with supporting our subscription arrangements and certain third-party expenses. Employee compensation and related costs include cash compensation and benefits to employees, stock-based compensation, costs of third-party contractors and associated overhead costs. Third-party expenses consist of cloud infrastructure costs and other expenses directly associated with our customer support. We expect our subscription cost of revenue to increase in absolute dollars to the extent our subscription revenue increases. Professional Services and Other. Professional services and other cost of revenue consists primarily of employee compensation costs directly associated with delivery of professional services and training, including stock-based compensation, costs of third-party contractors, facility rental charges and other associated overhead costs. We expect our professional services and other cost of revenue to increase in absolute dollars relative to the growth of our business.
Amortization Expense. Amortization expense consists of amortization of developed technology and internal-use software.
Operating Expenses
Our operating expenses consist of sales and marketing, research and development
and general and administrative expenses as well as depreciation and
amortization. Personnel costs are the most significant component of operating
expenses and consist of salaries, benefits, bonuses, payroll taxes and
stock-based compensation expense.
Sales and Marketing. Sales and marketing expenses consist primarily of employee
compensation costs, sales commissions, costs of general marketing and
promotional activities, travel-related expenses and allocated overhead. Certain
sales commissions earned by our sales force on subscription contracts are
deferred and amortized over the period of benefit, which is generally four
years. We expect to continue to invest in our sales force domestically and
internationally, as well as in our channel relationships. We expect our sales
and marketing expenses to increase on an absolute dollar basis and continue to
be our largest operating expense category for the foreseeable future.
Research and Development. Research and development expenses consist primarily
of employee compensation costs, allocated overhead and software and maintenance
expenses. We will continue to invest in innovation and offer our customers new
solutions to enhance our existing platform and expect such investment to
increase on an absolute dollar basis as our business grows.
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General and Administrative. General and administrative expenses consistprimarily of employee compensation costs, for corporate personnel, such as those in our executive, human resource, legal, facilities, accounting and finance, information security and information technology departments. In addition, general and administrative expenses include third-party professional fees, as well as all other supporting corporate expenses not allocated to other departments. General and administrative expense also includes acquisition-related expenses, which primarily consist of third-party expenses related to business acquisitions, such as professional services and legal fees. We expect our general and administrative expenses to increase on an absolute dollar basis as our business grows. Also, we expect to incur additional general and administrative expenses as a result of continuing to operate as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of theSEC , and increased expenses for insurance, investor relations and professional services. Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation of our fixed assets and amortization of finite-lived acquired intangible assets such as customer relationships, trade names and non-compete agreements.
Other Income (Expense)
Interest Expense. Interest expense consists primarily of interest payments on our outstanding borrowings under our credit facilities as well as the amortization of associated deferred financing costs. See "- Liquidity and Capital Resources - Senior Secured Credit Facilities."
Other Income (Expense), Net. Other income (expense), net primarily consists of gains and losses from transactions denominated in a currency other than the functional currency, interest income and other income (expense). As we have expanded our international operations, our exposure to fluctuations in foreign currencies has increased, and we expect this to continue.
Benefit (Provision) for Income Taxes
Benefit (Provision) for income taxes consists primarily of income taxes related toU.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business. 39 Table of Contents Results of Operations
The following table sets forth our condensed consolidated statements of operations data for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Revenue:
Subscription $ 66,308 $ 73,151 $ 146,508 $ 137,367 Professional services and other 5,719 5,753 10,210
10,481
Total revenue 72,027 78,904 156,718 147,848
Cost of revenue:
Subscription (exclusive of
amortization shown below)(1) 14,223 10,185 27,611 19,599
Professional services and other
(exclusive of amortization shown
below)(1) 6,845 6,142 13,604 11,725
Amortization expense 8,743 6,077 17,259 11,886
Total cost of revenue 29,811 22,404 58,474 43,210
Gross profit 42,216 56,500 98,244 104,638
Operating expenses:
Sales and marketing(1) 36,712 29,082 67,653 54,631
Research and development(1) 22,086 18,692 42,553 40,394General and administrative(1) 19,882 19,545 36,113
34,000
Depreciation and amortization 4,448 4,327 8,836
8,692
Total operating expenses 83,128 71,646 155,155 137,717
Loss from operations (40,912) (15,146) (56,911) (33,079)
Other income (expense):
Interest expense (3,883) (310) (7,519) (706)Other income (expense), net (2,860) 430 (3,664)
(442)
Total other income (expense) (6,743) 120 (11,183)
(1,148)
Loss before income taxes (47,655) (15,026) (68,094)
(34,227)
Benefit (provision) for income taxes (193) 4,047 (12) 7,314 Net loss$ (47,848) $ (10,979) $ (68,106) $ (26,913)
(1) Includes stock-based compensation as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Subscription cost of revenue $ 497 $ 513 $ 964 $ 1,048
Professional services and other
cost of revenue 230 429 511 1,020
Sales and marketing 4,340 4,843 6,520 9,041
Research and development 2,879 4,647 6,105 13,159
General and administrative 5,539 7,044 7,513 10,147
Total $ 13,485 $ 17,476 $ 21,613 $ 34,415
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The following table sets forth our condensed consolidated statements of
operations data expressed as a percentage of total revenue for the periods
indicated:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Revenue:
Subscription 92 % 93 % 93 % 93 %
Professional services and
other 8 7 7 7
Total revenue 100 100 100 100
Cost of revenue:
Subscription (exclusive of
amortization shown below) 20 13 18 13
Professional services and
other (exclusive of
amortization shown below) 10 8 9 8
Amortization expense 12 7 11 8
Total cost of revenue 42 28 38 29
Gross profit 58 72 62 71
Operating expenses:
Sales and marketing 51 37 43 37
Research and development 31 24 27 27
General and administrative 28 25 23 23Depreciation and amortization 6 5 5
6
Total operating expenses 116 91 98 93
Loss from operations (58) (19) (36) (22)
Other income (expense):
Interest expense (5) - (5) (1)Other income (expense), net (3) - (2) - Total other income (expense) (8) - (7) (1) Loss before income taxes (66) (19) (43)
(23)
Benefit (provision) for income
taxes - 5 - 5
Net loss (66) % (14) % (43) % (18) %
Comparison of the Three and Six Months Ended June 30, 2022 and 2021
Revenue
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 $ % 2022 2021 $ %
(dollars in thousands)
Revenue:
Subscription $ 66,308 $ 73,151 $ (6,843) (9) % $ 146,508 $ 137,367 $ 9,141 7 %
Professional
services and other 5,719 5,753 (34) (1) 10,210 10,481 (271) (3)
Total revenue $ 72,027 $ 78,904 $ (6,877) (9) % $ 156,718 $ 147,848 $ 8,870 6 %
Total revenue decreased by$6.9 million , or 9%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The decrease in revenue was primarily attributable to a decrease in subscription revenue of$6.8 million , discussed further below.
Total revenue increased by
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The table below sets forth the components of subscription revenue for the three
and six months ended
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 $ % 2022 2021 $ %
(dollars in thousands)
Subscription:
Multi-year
subscription
term-based licenses $ 15,992 $ 32,391 $ (16,399) (51) % $ 48,774 $ 56,229 $ (7,455) (13) %
1-year subscription
term-based licenses 9,164 15,464 (6,300) (41) 20,692 32,808 (12,116) (37)
Total subscription
term-based licenses 25,156 47,855 (22,699) (47) 69,466 89,037 (19,571) (22)
Subscription SaaS 22,726 13,425 9,301 69 42,907 25,411 17,496 69
Maintenance and
support 18,426 11,871 6,555 55 34,135 22,919 11,216 49
Total subscription
revenue $ 66,308 $ 73,151 $ (6,843) (9) $ 146,508 $ 137,367 $ 9,141 7
Subscription revenue decreased by 9%, or $6.8 million in the three months ended
June 30, 2022 compared to the three months ended June 30, 2021 . Total
subscription revenue decreased primarily as a result of changes to the relative
value ascribed to our maintenance and support obligations as compared to license
obligations in contracts with multiple performance obligations, resulting in an
increase in maintenance and support revenue that will be deferred to future
periods and a decrease in term-based license revenue recognized in the period,
as discussed further below.
Subscription revenue increased by 7%, or $9.1 million , in the six months ended
June 30, 2022 compared to the six months ended June 30, 2021 . Total subscription
revenue increased as a result of a greater amount of new and renewing SaaS
subscriptions in the six months ended June 30, 2022 , compared to the six months
ended June 30, 2021 . Remaining changes to subscription revenue were primarily
due to the following:
Change in subscription type. The following table sets forth the components of
subscription revenue expressed as a percentage of total subscription revenue:
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 % 2022 2021 %
Subscription
term-based licenses 38 % 65 % (27) % 47 % 65 % (18) %
Subscription SaaS 34 18 16 30 18 12
Maintenance and
support 28 17 11 23 17 6
Total subscription
revenue 100 % 100 % 100 % 100 %
Subscription term-based license revenue as a percentage of subscription revenue
decreased from 65% for each of the three and six months ended June 30, 2021 , to
38% and 47% for the three and six months ended June 30, 2022 , respectively.
Subscription SaaS as a percentage of total subscription revenue increased from
18% in each of the three and six months ended June 30, 2021 to 34% and 30% in
the three and six months ended June 30, 2022 , respectively. Maintenance and
support as a percentage of total subscription revenue increased from 17% for
each of the three and six months ended June 30, 2021 to 28% and 23% for the
three and six months ended June 30, 2022 , respectively.
Additionally, subscription SaaS revenue increased by 69%, or $9.3 million , and
69%, or $17.5 million , in the three and six months ended June 30, 2022 , compared
to the three and six months ended June 30, 2021 . Maintenance and support revenue
increased by 55%, or $6.6 million , and 49%, or $11.2 million , in the three and
six months ended June 30, 2022 , compared to the three and six months ended June
30, 2021 . As our business moves increasingly to SaaS, our investments have
followed, with a higher percentage of investment shifting to SaaS as well as
maintenance and support of our software. Subscription SaaS and maintenance have
increased as a percentage of total subscription revenue as adoption of our SaaS
solutions has increased, as well as to reflect an increase in the relative value
attributable to our software maintenance and support obligations, resulting in
greater deferral of revenue in the period in which the subscription is
contracted. We expect this trend to continue in future periods.
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Change in term-based subscription duration. The following table sets forth the components of subscription term-based licenses expressed as a percentage of total subscription term-based licensed revenue:
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 % 2022 2021 %
Multi-year
subscription
term-based licenses 64 % 68 % (4) % 70 % 63 % 7 %
1-year subscription
term-based licenses 36 32 4 30 37 (7)
Total subscription
term-based licenses 100 % 100 % 100 % 100 %
Multi-year subscription term-based license revenue as a percentage of total
subscription term-based license revenue decreased from 68% in the three months
ended
Multi-year subscription term-based license revenue as a percentage of total subscription term-based license revenue increased from 63% in the six months endedJune 30, 2021 to 70% in the six months endedJune 30, 2022 . Despite this increase in the percentage of multi-year subscriptions, multi-year subscription term-based license revenue deceased for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 as a result of additional value ascribed to our software maintenance and support obligations as compared to license obligations in contracts with multiple performance obligations, resulting in a decrease in term-based license revenue recognized. Cost of Revenue Three Months Ended Six Months Ended June 30, Change June 30, Change 2022 2021 $ % 2022 2021 $ % (dollars in thousands) Cost of revenue: Subscription (exclusive of amortization shown below)$ 14,223 $ 10,185 $ 4,038 40 %$ 27,611 $ 19,599 $ 8,012 41 % Professional services and other (exclusive of amortization shown below) 6,845 6,142 703 11 13,604 11,725 1,879 16 Amortization expense 8,743 6,077 2,666 44 17,259 11,886 5,373 45 Total cost of revenue$ 29,811 $ 22,404 $ 7,407 33 %$ 58,474 $ 43,210 $ 15,264 35 % Subscription cost of revenue increased by$4.0 million , or 40%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 .$1.5 million of the increase was primarily attributable to an increase in headcount to support the growth of our subscription SaaS offerings and ongoing maintenance for our expanding customer base.$1.3 million of the increase was attributable to an increase in cloud-based hosting and management costs largely associated with the increased adoption of our solutions.$1.2 million of the increase was primarily due to an increase in software costs incurred to support our expanding SaaS offerings. Subscription cost of revenue increased by$8.0 million , or 41%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 .$3.2 million of the increase was primarily attributable to an increase in headcount to support the growth of our subscription SaaS offerings and ongoing maintenance for our expanding customer base.$3.1 million of the increase was attributable to an increase in cloud-based hosting and management costs largely associated with the increased adoption of our solutions.$1.6 million of the increase was primarily due to an increase in software costs incurred to support our expanding SaaS offerings. 43 Table of Contents
Professional services and other cost of revenue increased$0.7 million , or 11%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 .$0.7 million of the increase was primarily attributable to an increase in headcount and an increase in partner-related costs to support the growth in our business. Professional services and other cost of revenue increased by$1.9 million , or 16%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 .$2.0 million of the increase was primarily attributable to an increase in headcount and an increase in partner-related costs to support the growth in our business. Amortization expense increased by$2.7 million , or 44%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . Amortization expense increased by$5.4 million , or 45%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was attributable primarily to increases in the amortization of developed technology resulting from our acquisitions in 2021 of$1.8 million and$3.6 million for the three and six months endedJune 30, 2022 , as compared to the three and six months endedJune 30, 2021 , respectively. The remaining increase in amortization expense was primarily related to an increase in the amortization of our capitalized software of$1.1 million and$2.1 million for the three and six months endedJune 30, 2022 , as compared to the three and six months endedJune 30, 2021 , respectively. The increase in capitalized software was driven by an increase in employee costs capitalized as software development costs as a result of our ongoing investment in developing our SaaS services.
Operating Expenses
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 $ % 2022 2021 $ %
(dollars in thousands)Sales and marketing$ 36,712 $ 29,082 $ 7,630 26 %$ 67,653 $ 54,631 $ 13,022 24 % Research and development 22,086 18,692 3,394 18 42,553 40,394 2,159 5 General and administrative 19,882 19,545 337 2 36,113 34,000 2,113 6 Depreciation and amortization 4,448 4,327 121 3 8,836 8,692 144 2 Total operating expenses$ 83,128 $ 71,646 $ 11,482 16 % $
155,155
Sales and Marketing. Sales and marketing expenses increased by$7.6 million , or 26%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 .$4.7 million of the increase was primarily attributable to an increase in headcount related to the expansion of our sales force and our marketing department.$1.6 million of the increase was due to an increase in partner and consulting costs related to marketing campaigns and initiatives.$1.4 million of the increase was due to an increase in travel and other event-related costs as COVID-19 restrictions continued to ease. The increase in event-related costs was partially offset by a decrease in expense incurred to host the Identiverse conference in the second quarter of 2021. The conference was sold byPing Identity in the fourth quarter of 2021, so no comparable costs were incurred in 2022. Sales and marketing expenses increased by$13.0 million , or 24%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 .$9.5 million of the increase was primarily attributable to an increase in headcount related to the expansion of our sales force and our marketing department.$3.2 million of the increase was due to an increase in travel and other event-related costs as COVID-19 restrictions continued to ease. The increase in event-related costs was partially offset by a decrease in expense incurred to host the Identiverse conference in the second quarter of 2021. The conference was sold byPing Identity in the fourth quarter of 2021, so no comparable costs were incurred in 2022.$1.7 million of the increase was due to an increase in partner and consulting costs related to marketing campaigns and initiatives. These increases were partially offset by a$2.5 million decrease in stock-based compensation expense primarily related to expense recognized for the conversion of previously outstanding LTIP awards into RSUs in the first quarter of 2021, and options and restricted stock units subject to performance and market conditions determined to be probable of vesting in the second quarter of 2021 ("market-based options" and "market-based PSUs"), as further described in Note 13 of our condensed consolidated financial statements included in Part I, Item 1 of 44 Table of Contents this Quarterly Report on Form 10-Q. The decrease in stock-based compensation expense was partially offset by expense recognized for equity awards granted afterJune 30, 2021 . Research and Development. Research and development expenses increased by$3.4 million , or 18%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 .$2.8 million of the increase was primarily attributable to an increase in headcount to enhance and expand our solutions.$1.6 million of the increase was related to an increase in cloud-based hosting costs largely associated with the development and configuration of our cloud-based solutions. These increases were partially offset by a$1.8 million decrease in stock-based compensation expense primarily related to expense recognized for market-based PSUs in the second quarter of 2021. The decrease in stock-based compensation expense was partially offset by expense recognized for equity awards granted afterJune 30, 2021 . The remaining increase was primarily due to an increase in partner and consulting costs to support the design and growth of our SaaS offerings. Research and development expenses increased by$2.2 million , or 5%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 .$6.3 million of the increase was primarily attributable to an increase in headcount to enhance and expand our solutions, and an increase of$2.4 million in cloud-based hosting costs largely associated with the development and configuration of our cloud-based solutions.$1.0 million of the increase was primarily attributable to an increase in partner and consulting costs to support the design and growth of our SaaS offerings. These increases were offset by a$7.1 million decrease in stock-based compensation expense primarily related to expense recognized for the conversion of previously outstanding LTIP awards into RSUs in the first quarter of 2021, and market-based PSUs in the second quarter of 2021. The decrease in stock-based compensation expense was partially offset by expense recognized for equity awards granted afterJune 30, 2021 . The increase in research and development expense was also offset by an increase of$1.1 million related to employee costs that were capitalized as software development in the six months endedJune 30, 2022 as compared toJune 30, 2021 . General and Administrative. General and administrative expenses increased by$0.3 million , or 2%, for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 .$1.9 million of the increase was primarily attributable to an increase in headcount to support growth in our business. This increase was partially offset by a$1.5 million decrease in stock-based compensation expense primarily related to expense recognized for market-based options and PSUs in the second quarter of 2021. The decrease in stock-based compensation expense was partially offset by expense recognized for equity awards granted afterJune 30, 2021 . General and administrative expenses increased by$2.1 million , or 6%, for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 .$4.6 million of the increase was primarily attributable to an increase in headcount to support growth in our business. This increase was partially offset by a$2.6 million decrease in stock-based compensation expense primarily related to expense recognized for the conversion of previously outstanding LTIP awards into RSUs in the first quarter of 2021, and market-based options and PSUs in the second quarter of 2021. The decrease in stock-based compensation expense was partially offset by expense recognized for equity awards granted afterJune 30, 2021 .
Depreciation and Amortization. Depreciation and amortization expense
remained substantially the same during the three and six months ended
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Other Income (Expense)
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 $ % 2022 2021 $ %
(dollars inthousands)
Interest expense
$ (7,519) $ (706) $ (6,813) 965 % Other income (expense), net (2,860) 430 (3,290) (765) (3,664) (442) (3,222) 729 Total other income$ (6,743) $ 120 $ (6,863) (5,719) %$ (11,183) $ (1,148) $ (10,035) 874 % (expense) Interest Expense. Interest expense increased by$3.6 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was attributable primarily to the increase in our average debt outstanding during the second quarter of 2022 as compared to 2021. An increase in the weighted average interest rate, from 1.4% for the three months endedJune 30, 2021 to 4.6% for the three months endedJune 30, 2022 , also contributed to the increase in interest expense during the period. Interest expense increased by$6.8 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was attributable primarily to the increase in our average debt outstanding during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . An increase in the weighted average interest rate, from 1.4% for the six months endedJune 30, 2021 to 4.4% for the six months endedJune 30, 2022 , also contributed to the increase in interest expense during the period. Other Income (Expense), Net. Other income (expense), net decreased by$3.3 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase was attributable primarily to a change in the amount of foreign currency gains and losses, from a gain of$0.4 million in the three months endedJune 30, 2021 to a loss of$3.1 million in the three months endedJune 30, 2022 . The foreign exchange loss in the three months endedJune 30, 2022 was primarily driven by the strengthening US dollar against our mix of foreign currencies. Other income (expense), net decreased by$3.2 million for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . The increase was attributable primarily to a change in the amount of foreign currency gains and losses, from a loss of$0.5 million in the six months endedJune 30, 2021 compared to a loss of$3.9 million in the six months endedJune 30, 2022 . The foreign exchange loss in the six months endedJune 30, 2022 was primarily driven by the strengthening US dollar against our mix of foreign currencies.
Benefit for Income Taxes
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2022 2021 $ % 2022 2021 $ %
(dollars in thousands)
Benefit (provision)
for income taxes $ (193) $ 4,047 $ (4,240) (105) % $ (12) $ 7,314 $ (7,326) (100) %
Our provision for income taxes was$0.2 million and our benefit for income taxes was$4.0 million for the three months endedJune 30, 2022 and 2021, respectively. For the six months endedJune 30, 2022 and 2021, our provision for income taxes was$12 thousand and our benefit for income taxes was$7.3 million , respectively. The increase in the tax provision for the three and six months endedJune 30, 2022 as compared to the three and six months endedJune 30, 2021 primarily relates to a valuation allowance recorded against our deferred tax assets in the six months endedJune 30, 2022 . This increase was partially offset by a larger expected pre-tax loss in 2022 as compared to 2021, along with an increase in R&D and other credits recorded in the three months endedJune 30, 2022 . 46 Table of Contents Liquidity and Capital Resources General
As ofJune 30, 2022 , our principal sources of liquidity were cash and cash equivalents totaling$210.3 million , which were held for working capital purposes, and borrowing availability under our 2021 Revolving Credit Facility as described below. As ofJune 30, 2022 , our cash equivalents were comprised of money market funds. We expect our operating cash requirements to increase in the near future as we continue to invest in key initiatives to drive the Company's growth toward the cloud. However, we expect our long-term operating cash flows to improve as we increase our operational efficiency and realize benefits from cash investments. We have financed our operations primarily through cash received from operations and proceeds from our debt and equity financings. We believe our existing cash and cash equivalents, our 2021 Credit Facilities and cash provided by sales of our solutions and services will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and beyond. Our future capital requirements will depend on several factors, including but not limited to our obligation to repay any amounts outstanding under our 2021 Credit Agreement, our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced solutions, the continuing market adoption of our platform, the effects of the macroeconomic environment and geopolitical events, and the continuing effects of the COVID-19 pandemic. In the future, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our results of operations. A majority of our customers pay in advance for annual subscriptions, a portion of which is recorded as deferred revenue. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which is later recognized as revenue in accordance with our revenue recognition policy. As ofJune 30, 2022 , we had deferred revenue of$85.1 million , of which$81.2 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
Senior Secured Credit Facilities
OnNovember 23, 2021 , in connection with the refinancing of our 2019 Credit Facilities, we entered into the 2021 Credit Agreement providing for (a) a new term loan B facility consisting of an aggregate principal amount of$300 million (the "2021 Term Loan Facility" and the loans thereunder, the "2021 Term Loans") and (b) a new revolving line of credit facility in an aggregate principal amount of$150 million (the "2021 Revolving Facility" and together with the 2021 Term Loan Facility, the "2021 Credit Facilities). The 2021 Term Loans mature onNovember 23, 2028 . Amortization payments on the 2021 Term Loans are equal to 0.25% of the initial aggregate principal amount of the 2021 Term Loans, payable at the end of each fiscal quarter, commencing with the fiscal quarter endingJune 30, 2022 . The 2021 Revolving Facility matures onNovember 23, 2026 . There were no amounts drawn under the 2021 Revolving Facility as ofJune 30, 2022 . Under the terms of the 2021 Credit Agreement, Holdings and its restricted subsidiaries are required to maintain a total net leverage ratio (as calculated pursuant to the 2021 Credit Agreement) (i) commencing with the fiscal quarter endingJune 30, 2022 and through and including the fiscal quarter endingMarch 31, 2024 , of no more than 5.00:1.00 and (ii) commencing with the fiscal quarter endingJune 30, 2024 and each fiscal quarter thereafter, of no more than 4.00:1.00. As ofJune 30, 2022 , we were in compliance with all financial covenants.
See additional discussion of the 2021 Credit Facilities in Note 10 of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Cash Flows
The following table presents a summary of our condensed consolidated cash flows
from operating, investing and financing activities for the periods indicated:
Six Months Ended
June 30,
2022 2021
(in thousands)
Net cash provided by (used in) operating
activities $ (3,682) $ 43,965
Net cash used in investing activities (12,144)
(49,959)
Net cash provided by (used in) financing activities 6,375
(35,267)
Effect of exchange rate changes on cash and cash equivalents and restricted cash (831)
(130)
Net decrease in cash and cash equivalents and restricted cash$ (10,282) $
(41,391)
Cash and cash equivalents and restricted cash at beginning of period 220,889
146,499
Cash and cash equivalents and restricted cash at end of period$ 210,607 $ 105,108 Operating Activities
Our largest source of operating cash is cash collections from our customers for subscriptions and professional services. Our primary uses of cash from operating activities are for employee-related expenditures, marketing expenses and third-party hosting costs. For the six months endedJune 30, 2022 , net cash used in operating activities was$3.7 million , reflecting our net loss of$68.1 million , adjusted for non-cash charges of$55.5 million and net cash inflows of$8.9 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation, amortization of deferred commissions, depreciation and amortization of property and equipment and intangible assets and deferred income taxes. The primary drivers of the changes in operating assets and liabilities related to a$18.0 million decrease in contract assets due to the issuance of invoices and timing of revenue recognition, a$7.5 million increase in deferred revenue driven by the timing of revenue recognition, and a$3.7 million decrease in accounts receivable due to the timing of collection of payment from our customers. These were partially offset by a$8.8 million increase in deferred commissions, a$6.9 million decrease in accrued compensation due to the timing of cash disbursements to our employees, a$3.5 million increase in prepaid expenses and other current assets, and a$2.3 million increase in other assets primarily due to the timing of payment of long-term prepaid balances. For the six months endedJune 30, 2021 , net cash provided by operating activities was$44.0 million , reflecting our net loss of$26.9 million , adjusted for non-cash charges of$51.9 million and net cash inflows of$19.0 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of stock-based compensation, amortization of deferred commissions, depreciation and amortization of property and equipment and intangible assets and deferred income taxes. The primary drivers of the changes in operating assets and liabilities related to a$17.6 million decrease in accounts receivable due to the timing of collection of payment from our customers, a$5.7 million decrease in contract assets due to the issuance of invoices and timing of revenue recognition, a$4.3 million increase in accrued compensation due to the timing of cash disbursements to our employees, a$3.4 million decrease in prepaid expenses and other current assets, and an increase of$1.3 million in accrued expenses and other liabilities due to the timing of cash disbursements. These were partially offset by an$8.2 million increase in deferred commissions, and a$5.0 million decrease in deferred revenue driven by the timing of revenue recognition.
Investing Activities
Net cash used in investing activities was$12.1 million and$50.0 million during the six months endedJune 30, 2022 and 2021, respectively, representing a decrease of$37.8 million . The net decrease is primarily attributable to the acquisition of SecuredTouch in 2021 for a total of$39.9 million in cash. There was no 48 Table of Contents comparable activity during the six months endedJune 30, 2022 . The remaining increase was primarily related to an increase in the capitalization of internal-use software costs of$1.0 million in the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 .
Financing Activities
Net cash provided by financing activities was$6.4 million during the six months endedJune 30, 2022 whereas net cash used in financing activities was$35.3 million during the six months endedJune 30, 2021 , representing an increase of$41.6 million . During the six months endedJune 30, 2022 , we made a principal payment of$0.8 million on our 2021 Term Loan Facility. This compares to cash outflows related to long-term debt of$30.0 million during the six months endedJune 30, 2021 , due to the repayment of$110.0 million and draw down of$80.0 million on our 2019 Revolving Credit Facility. The remaining increase relates to an increase of$5.4 million in proceeds received from option exercises and a decrease of$6.0 million in payments for tax withholding on equity awards for the six months endedJune 30, 2022 as compared toJune 30, 2021 . Indemnification Agreements In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we previously entered into indemnification agreements with our directors and certain officers and employees that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our condensed consolidated balance sheets, condensed consolidated statements of operations and comprehensive loss, or condensed consolidated statements of cash flows. Off-Balance Sheet Arrangements As ofJune 30, 2022 , we did not have any relationships with unconsolidated organizations or financial partnerships, such as structure finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent assets and liabilities at the date of our financial statements. We evaluate our estimates and assumptions on an ongoing basis. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.
There have been no material changes to our critical accounting policies and
estimates as compared to the critical accounting policies and estimates
described in our Annual Report on Form 10-K for the year ended
Recent Accounting Pronouncements
For a description of our recently adopted accounting pronouncements and recently
issued accounting standards not yet adopted, see "Note 2-Summary of Significant
Accounting Policies-Recent Accounting
49
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Pronouncements" to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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