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, 2020 . OverviewPing Identity is the Intelligent Identity solution for the enterprise. We enable companies to achieveZero Trust identity-defined security and more personalized, streamlined user experiences. The Ping Intelligent Identity Platform provides customers, workforce and partners with secure, convenient access to their applications whether they are SaaS, mobile, in the cloud or on-premise. We leverage artificial intelligence ("AI") and machine learning ("ML") to analyze device, network, application and user behavior data to make real-time authentication and security control decisions, enhancing the user experience. Our platform is designed to detect anomalies and automatically insert additional security measures, such as multi-factor authentication, only when necessary. We built our platform to meet the requirements of the most demanding enterprises, including over 60% of the Fortune 100. Our cloud-based platform has differentiated deployment flexibility to support multi-cloud and on-premise infrastructures to meet the diverse and demanding requirements of large enterprise customers. Our platform offers a comprehensive suite of turnkey integrations, and is able to scale to millions of identities and thousands of cloud and on-premise applications in a single deployment. The Ping Intelligent Identity Platform can secure all primary use cases, including customer, workforce, partner and the Internet of Things ("IoT"). For example, enterprises can use our platform to enhance their customers' user experience by creating a single ID and login across web and mobile properties. Enterprises can also use our platform to provide their employees and commercial partners with secure, seamless access from any device to the applications, data and APIs they need to be productive. 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:
? secure single sign-on ("SSO");
? adaptive multi-factor authentication ("MFA");
? security control for applications and APIs ("Access Security");
? personalized and unified profile directories ("Directory");
? centralized, fine-grained control over access to sensitive identity and device
data;
? risk signal capture and analysis to make more intelligent authentication and
authorization decisions;
? identity verification services to prove an individual's identity with facial
biometrics and government issued IDs; and
? AI and ML powered API security ("API Intelligence").
Our offerings are predominately 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.
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Impact of COVID-19
COVID-19 continues to disrupt the business of our customers and partners and we
expect that it will continue to impact our business and consolidated results of
operations and financial condition in the next quarters. The worldwide spread of
the COVID-19 outbreak has resulted in a global slowdown of economic activity
with a corresponding decrease in demand for certain goods and services,
including from our own customers, while also disrupting sales channels,
marketing activities and supply chains for an unknown period of time. To add to
the continued uncertainty, it is unclear what an economic recovery will look
like after this unprecedented economic shutdown. We have endeavored to follow
recommended actions of government and health authorities to protect our
employees worldwide. For example, as of July 30, 2021 , the majority of our
employees continue working remotely. While we have not incurred significant
disruptions in providing our services from the COVID-19 pandemic, we are unable
to predict the long-term extent of the impact on our business due to numerous
uncertainties, including but not limited to, vaccination programs, virus
variants, actions taken by governmental authorities, the continued impact to our
customers and partners and other factors as described in "Risk Factors" in Part
I, Item 1A of our Annual Report on Form 10-K for the year ended December 31,
2020 . Specifically, during the first half of 2021, we continued to experience
overall strong engagement with enterprise customers as continued work-from-home
and increased virtual customer engagement highlighted the need for modernization
of their identity security infrastructure.
While we continued to see limited effects of the COVID-19 pandemic on our
results of operations and overall financial performance for the three and six
months ended June 30, 2021 , the total effect of the COVID-19 pandemic will not
be fully reflected in our results of operations and overall financial
performance until future periods and such effect is uncertain. COVID-19
restrictions were lifted in many parts of the U.S. during the three and six
months ended June 30, 2021 , which had a positive impact on our financial
performance during that period, but we cannot predict the effect that variants
of COVID-19, and any new restrictions related to such variants, will have on our
business and our financial performance. In addition, 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. Significant estimates and assumptions reflected in our
condensed consolidated financial statements include, but are not limited to,
establishing valuation allowances based on expected credit losses and the
collectability of financial assets, determining useful lives for finite-lived
assets, assessing the recoverability of long-lived assets, determining the fair
values of assets acquired and liabilities assumed in business combinations,
determining the value of right-of-use assets and lease liabilities, accounting
for income taxes and related valuation allowances against deferred tax assets,
valuing stock option awards and assessing the probability of the awards meeting
vesting conditions, recognizing revenue, determining the amortization period for
deferred commissions and assessing the accounting treatment for commitments and
contingencies. 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, including as a result of the COVID-19 pandemic. We will
continue to evaluate the nature and extent of the impact to our business and our
condensed consolidated results of operations and financial condition.
Key Factors Affecting our Performance
We believe that our future performance will depend on many factors, including the following:
Generation of Additional Sales to Existing Customers
As part of our land and expand strategy, 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 spending 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
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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, Data Governance, API Intelligence solutions and the IoT use case. To increase our customer base, we plan 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.
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 the economic environment resulting from COVID-19, we did not see our historical trends in seasonality for the year endedDecember 31, 2020 , where 24% and 26% of our annual revenue was in our second and fourth quarter, respectively. Our historical trends in seasonality may continue to be disrupted during the year endingDecember 31, 2021 due to the impact of COVID-19. 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.
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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 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
2021 2020 $ %
(dollars in thousands)
ARR $ 279,630 $ 235,232 $ 44,398 19 %
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 111% atJune 30, 2021 . We believe our ability to cross-sell our new solutions to our installed base, particularly MFA and API Intelligence, 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
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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 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,
2021 2020
(in thousands)
Net cash provided by operating activities $ 43,965 $ 21,244
Less:
Purchases of property and equipment (1,502)
(1,420)
Capitalized software development costs (8,582)
(6,749)
Free Cash Flow$ 33,881 $
13,075
Net cash used in investing activities$ (49,959) $
(12,872)
Net cash provided by (used in) financing activities
$ 584 $ 1,186 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
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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 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,
2021 2020 2021 2020
(in thousands)
Gross profit $ 56,500 $ 42,302 $ 104,638 $ 87,990
Amortization expense 6,077 4,944 11,886 9,546Stock-based compensation expense 942 273 2,068
503 Non-GAAP Gross Profit$ 63,519 $ 47,519 $ 118,592 $ 98,039
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, 2021 and 2020, 61% and 60%, respectively, of our revenue was from subscription term-based licenses. For the six months endedJune 30, 2021 and 2020, 60% and 61%, respectively, of our revenue was from subscription term-based licenses. We expect that a majority of our revenue will be from subscription term-based licenses for the foreseeable future. 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.
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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 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. In the three and six months endedJune 30, 2021 , as customers elected longer contract durations in response to the strengthening economic outlook and easing of COVID-19 restrictions, multi-year subscription term-based license revenue increased as a percentage of total subscription term-based license revenue, which resulted in higher revenue growth. There is no guarantee that our customers will continue electing contracts with longer durations in future periods even if economic conditions continue to improve. 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 including stock-based compensation, sales commissions, costs of general marketing and promotional activities, travel-related expenses and allocated overhead. Certain sales commissions earned by our sales force on
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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 including stock-based compensation, 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 basisas our business grows. General and Administrative. General and administrative expenses consist primarily of employee compensation costs including stock-based compensation, 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. 37 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,
2021 2020 2021 2020
(in thousands)
Revenue:
Subscription $ 73,151 $ 54,268 $ 137,367 $ 111,086 Professional services and other 5,753 4,713 10,481
9,307
Total revenue 78,904 58,981 147,848 120,393
Cost of revenue:
Subscription (exclusive of
amortization shown below)(1) 10,185 7,509 19,599 14,618
Professional services and other
(exclusive of amortization shown
below)(1) 6,142 4,226 11,725 8,239
Amortization expense 6,077 4,944 11,886 9,546
Total cost of revenue 22,404 16,679 43,210 32,403
Gross profit 56,500 42,302 104,638 87,990
Operating expenses:
Sales and marketing(1) 29,082 20,751 54,631 42,941
Research and development(1) 18,692 11,411 40,394 23,625
General and administrative(1) 19,545 12,082 34,000 23,597
Depreciation and amortization 4,327 4,233 8,692 8,482
Total operating expenses 71,646 48,477 137,717 98,645
Loss from operations (15,146) (6,175) (33,079) (10,655)
Other income (expense):
Interest expense (310) (724) (706) (1,230)
Other income (expense), net 430 695 (442) (555)
Total other income (expense) 120 (29) (1,148) (1,785)
Loss before income taxes (15,026) (6,204) (34,227) (12,440)
Benefit for income taxes 4,047 2,932 7,314 4,876
Net loss $ (10,979) $ (3,272) $ (26,913) $ (7,564) (1) Includes stock-based compensation as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
(in thousands)
Subscription cost of revenue $ 513 $ 174 $ 1,048 $ 320
Professional services and other
cost of revenue 429 99 1,020 183
Sales and marketing 4,843 1,243 9,041 2,040
Research and development 4,647 1,298 13,159 2,186
General and administrative 7,044 1,731 10,147 2,673
Total $ 17,476 $ 4,545 $ 34,415 $ 7,402
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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,
2021 2020 2021 2020
Revenue:
Subscription 93 % 92 % 93 % 92 %
Professional services and
other 7 8 7 8
Total revenue 100 100 100 100
Cost of revenue:
Subscription (exclusive of
amortization shown below) 13 13 13 12
Professional services and
other (exclusive of
amortization shown below) 8 7 8 7
Amortization expense 7 8 8 8
Total cost of revenue 28 28 29 27
Gross profit 72 72 71 73
Operating expenses:
Sales and marketing 37 36 37 36
Research and development 24 19 27 20
General and administrative 25 20 23 19Depreciation and amortization 5 7 6
7
Total operating expenses 91 82 93 82
Loss from operations (19) (10) (22) (9)
Other income (expense):
Interest expense - (1) (1) (1)Other income (expense), net - 1 - - Total other income (expense) - - (1)
(1)
Loss before income taxes (19) (10) (23) (10)
Benefit for income taxes 5 5 5 4
Net loss (14) % (5) % (18) % (6) %
Comparison of the Three and Six Months Ended June 30, 2021 and 2020
Revenue
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2021 2020 $ % 2021 2020 $ %
(dollars in thousands)
Revenue:
Subscription $ 73,151 $ 54,268 $ 18,883 35 % $ 137,367 $ 111,086 $ 26,281 24 %
Professional
services and other 5,753 4,713 1,040 22 10,481 9,307 1,174 13
Total revenue $ 78,904 $ 58,981 $ 19,923 34 % $ 147,848 $ 120,393 $ 27,455 23 %
Total revenue increased by $19.9 million , or 34%, for the three months ended
June 30, 2021 compared to the three months ended June 30, 2020 . 95% of the
revenue growth was attributable to an increase in subscription revenue of $18.9
million , discussed further below. The remaining growth was attributable to an
increase in professional services and other revenue of $1.0 million primarily
due to an increase of $1.1 million in event sponsorship revenue from our live
Identiverse conference which was conducted virtually in the prior year period as
a result of COVID-19.
Total revenue increased by
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revenue of
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
2021 2020 $ % 2021 2020 $ %
(dollars in thousands)
Subscription:
Multi-year
subscription
term-based licenses $ 32,391 $ 21,141 $ 11,250 53 % $ 56,229 $ 45,129 $ 11,100 25 %
1-year subscription
term-based licenses 15,464 14,183 1,281 9 32,808 28,332 4,476 16
Subscription
term-based licenses 47,855 35,324 12,531 35 89,037 73,461 15,576 21
Subscription SaaS 13,425 8,890 4,535 51 25,411 17,416 7,995 46
Maintenance and
support 11,871 10,054 1,817 18 22,919 20,209 2,710 13
Total subscription
revenue $ 73,151 $ 54,268 $ 18,883 35 % $ 137,367 $ 111,086 $ 26,281 24 %
Subscription revenue increased by 35%, or$18.9 million , and 24%, or$26.3 million , in the three and six months endedJune 30, 2021 compared to the three and six months endedJune 30, 2020 , respectively. Total subscription revenue increased as a result of a greater amount of new and renewing subscriptions in the three and six months endedJune 30, 2021 compared to the three and six months endedJune 30, 2020 . 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 2021 2020 % 2021 2020 % Subscription term-based licenses 65 % 65 % - % 65 % 66 % (1) % Subscription SaaS 18 16 2 18 16 2 Maintenance and support 17 19 (2) 17 18 (1) Total subscription revenue 100 % 100 % 100 % 100 % Subscription term-based license revenue as a percentage of subscription revenue remained consistent at 65% for the three months endedJune 30, 2021 and 2020 and decreased from 66% in the six months endedJune 30, 2020 to 65% in the six months endedJune 30, 2021 . Subscription SaaS as a percentage of total subscription revenue increased from 16% in each of the three and six months endedJune 30, 2020 to 18% in the three and six months endedJune 30, 2021 . Maintenance and support as a percentage of total subscription revenue decreased from 19% and 18% for the three and six months endedJune 30, 2020 , respectively, to 17% for each of the three and six months endedJune 30, 2021 . Additionally, subscription SaaS revenue increased by 51%, or$4.5 million , and 46%, or$8.0 million , in the three and six months endedJune 30, 2021 compared to the three and six months endedJune 30, 2020 . The increase in subscription SaaS revenue overall, and as a percentage of total subscription revenue, was primarily driven by the increased adoption of our SaaS solutions. This resulted in greater deferral of revenue from subscriptions entered into or renewed during the three and six months endedJune 30, 2021 compared to the three and six months endedJune 30, 2020 . We expect subscription SaaS to continue to gradually increase as a percentage of total subscription revenue in future periods, resulting in greater deferral of revenue in the period in which the subscription is contracted. 40 Table of Contents
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
2021 2020 % 2021 2020 %
Multi-year
subscription
term-based licenses 68 % 60 % 8 % 63 % 61 % 2 %
1-year subscription
term-based licenses 32 40 (8) 37 39 (2)
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 increased from 60% in the three months endedJune 30, 2020 to 68% in the three months endedJune 30, 2021 . Multi-year subscription term-based license revenue as a percentage of total subscription term-based license revenue increased from 61% in the six months endedJune 30, 2020 to 63% in the six months endedJune 30, 2021 . This resulted in more upfront revenue recognition from multi-year subscriptions entered into or renewed during the three and six months endedJune 30, 2021 as compared to the three and six months endedJune 30, 2020 , as customers elected longer contract durations in response to the strengthening economic outlook and easing of COVID-19 restrictions during the three and six months endedJune 30, 2021 . There is no guarantee that our customers will continue electing contracts with longer durations in future periods even if economic conditions continue to improve. Cost of Revenue Three Months Ended Six Months Ended June 30, Change June 30, Change 2021 2020 $ % 2021 2020 $ % (dollars in thousands) Cost of revenue: Subscription (exclusive of amortization shown below)$ 10,185 $ 7,509 $ 2,676 36 %$ 19,599 $ 14,618 $ 4,981 34 % Professional services and other (exclusive of amortization shown below) 6,142 4,226 1,916 45 11,725 8,239 3,486 42 Amortization expense 6,077 4,944 1,133 23 11,886 9,546 2,340 25 Total cost of revenue$ 22,404 $ 16,679 $ 5,725 34 %$ 43,210 $ 32,403 $ 10,807 33 % Subscription cost of revenue increased by$2.7 million , or 36%, for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 .$1.6 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.$0.7 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.$0.3 million of the increase was attributable to an increase in stock-based compensation. Subscription cost of revenue increased by$5.0 million , or 34%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .$2.5 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.$1.7 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.$0.7 million of the increase was attributable to an increase in stock-based compensation. Professional services and other cost of revenue increased$1.9 million , or 45%, for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 .$1.6 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.$0.3 million of the increase was attributable to an increase in stock-based compensation. 41 Table of Contents
Professional services and other cost of revenue increased by$3.5 million , or 42%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .$2.7 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, as well as a$0.8 million increase in stock-based compensation. Amortization expense increased by$1.1 million , or 23%, for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 . Amortization expense increased by$2.3 million , or 25%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 . The increase was attributable primarily to an increase in the amortization of our capitalized software as well as an increase in the amortization of developed technology resulting from our acquisitions of ShoCard and Symphonic in March andOctober 2020 , respectively, as further described in Note 7 of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on
Form
10-Q.
Operating Expenses
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2021 2020 $ % 2021 2020 $ %
(dollars in thousands)Sales and marketing$ 29,082 $ 20,751 $ 8,331 40 %$ 54,631 $ 42,941 $ 11,690 27 % Research and development 18,692 11,411 7,281 64 40,394 23,625 16,769 71 General and administrative 19,545 12,082 7,463 62 34,000 23,597 10,403 44 Depreciation and amortization 4,327 4,233 94 2 8,692 8,482 210 2 Total operating expenses$ 71,646 $ 48,477 $ 23,169 48 % $
137,717
Sales and Marketing. Sales and marketing expenses increased by$8.3 million , or 40%, for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 .$3.6 million of the increase was attributable to an increase in stock-based compensation expense. This increase was primarily related to expense recognized for awards granted in the second quarter of 2021 and expense recognized for the 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 12 of our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.$2.7 million of the increase was primarily attributable to an increase in headcount related to the expansion of our sales force and our marketing department. Additionally, promotional and partner and consulting expenses increased by$1.8 million primarily due to expenses incurred related to the live Identiverse conference held in the second quarter of 2021 and additional spend around branding and awareness campaigns. The remaining increase was primarily related to an increase in travel as COVID-19 restrictions eased during the second quarter. Sales and marketing expenses increased by$11.7 million , or 27%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .$7.0 million of the increase was attributable to an increase in stock-based compensation expense primarily related to market-based PSUs and options, and awards granted in the second quarter of 2021.$3.9 million of the increase was primarily attributable to an increase in headcount related to the expansion of our sales force and our marketing department. Additionally, promotional and partner and consulting expenses increased by$2.4 million primarily due to the live Identiverse conference held in the second quarter of 2021 and additional spend around branding and awareness campaigns. These increases were offset by a decrease in travel and other event-related costs of$1.4 million due to COVID-19 restrictions in the first quarter of 2021. Research and Development. Research and development expenses increased by$7.3 million , or 64%, for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 .$4.2 million of the increase was primarily attributable to an increase in headcount to enhance and expand our solutions.$3.3 million of the increase was attributable to an increase in stock-based compensation expense, primarily related to market-based PSUs and awards granted in the second quarter of 2021. Partner and consulting costs increased$1.1 million primarily to support the design and expansion of our SaaS offerings. The increase in research and development expense was offset by an increase of$1.7 million related to employee costs that 42 Table of Contents
were capitalized as software development costs in the three months ended
Research and development expenses increased by$16.8 million , or 71%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .$11.0 million of the increase was attributable to an increase in stock-based compensation expense primarily related to the conversion of previously outstanding LTIP awards into time-based vesting RSUs in the first quarter of 2021, along with expense recognized for market-based PSUs and awards granted in the second quarter of 2021.$7.3 million of the increase was primarily attributable to an increase in headcount to enhance and expand our solutions. Partner and consulting costs increased$1.7 million primarily to support the design and growth of our SaaS offerings. The increase in research and development expense was offset by an increase of$3.0 million related to employee costs that were capitalized as software development costs in the six months endedJune 30, 2021 as compared toJune 30, 2020 . General and Administrative. General and administrative expenses increased by$7.5 million , or 62%, for the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 .$5.3 million of the increase was attributable to an increase in stock-based compensation expense primarily related to the market-based PSUs and options, and expense recognized for awards granted in the second quarter of 2021.$1.4 million of the increase was primarily attributable to an increase in headcount to support growth in our business, and$0.4 million of the increase was related to expenses incurred in connection with the acquisition ofSecuredTouch, Inc. The remaining increase was primarily related to an increase in allocated overhead. General and administrative expenses increased by$10.4 million , or 44%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .$7.5 million of the increase was attributable to an increase in stock-based compensation expense primarily related to market-based PSUs and options, and awards granted in the second quarter of 2021.$1.9 million of the increase was primarily attributable to an increase in headcount to support growth in our business. Consulting costs increased by$0.9 million , primarily due to expenses incurred related to strategic planning.
Depreciation and Amortization. Depreciation and amortization expense
remained substantially the same during the three and six months ended
Other Income (Expense)
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2021 2020 $ % 2021 2020 $ %
(dollars in thousands)
Interest expense $ (310) $ (724) $ 414 (57) % $ (706) $ (1,230) $ 524 (43) %
Other income
(expense), net 430 695 (265) (38) (442) (555) 113 (20)
Total other income $ 120 $ (29) $ 149 (514) % $ (1,148) $ (1,785) $ 637 (36) %
(expense)
Interest Expense. Interest expense decreased by $0.4 million , or 57%, for
the three months ended June 30, 2021 compared to the three months ended
June 30, 2020 . The decrease was attributable primarily to the reduction in our
average debt outstanding during the second quarter of 2021 as compared to 2020.
A decrease in the weighted average interest rate, from 1.8% for the three months
ended June 30, 2020 to 1.4% for the three months ended June 30, 2021 , also
contributed to the decrease in interest during the period.
Interest expense decreased by $0.5 million , or 43%, for the six months ended
June 30, 2021 compared to the six months ended June 30, 2020 . The decrease was
attributable primarily to the reduction in our average debt outstanding during
the six months ended June 30, 2021 as compared to the six months ended June 30,
2020 . A decrease in the weighted average interest rate, from 2.2% for the six
months ended June 30, 2020 to 1.4% for the six months ended June 30, 2021 , also
contributed to the decrease in interest during the period.
Other Income (Expense), Net. Other income (expense), net decreased by
43
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attributable primarily to a change in the amount of foreign currency gains and losses, from a gain of$0.6 million in the three months endedJune 30, 2020 to a gain of$0.4 million in the three months endedJune 30, 2021 , along with a decrease in interest income recognized in the three months endedJune 30, 2021 compared to the three months endedJune 30, 2020 . Other income (expense), net decreased by$0.1 million , or 20%, for the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 . The decrease was attributable primarily to a change in the amount of foreign currency gains and losses, from a loss of$0.8 million in the six months endedJune 30, 2020 compared to a loss of$0.5 million in the six months endedJune 30, 2021 . This was partially offset by a decrease in interest income recognized in the six months endedJune 30, 2021 compared to the six months endedJune 30, 2020 .
Benefit for Income Taxes
Three Months Ended Six Months Ended
June 30, Change June 30, Change
2021 2020 $ % 2021 2020 $ %
(dollars in thousands)
Benefit for income taxes
Our benefit for income taxes was$4.0 million and$2.9 million for the three months endedJune 30, 2021 and 2020, respectively. For the six months endedJune 30, 2021 and 2020, our benefit for income taxes was$7.3 million and$4.9 million , respectively. The increase in the tax benefit for the three and six months endedJune 30, 2021 as compared to the three and six months endedJune 30, 2020 primarily relates to a larger expected pre-tax loss in 2021 as compared to 2020, the release of a foreign valuation allowance, and an increase in R&D and other credits recorded in the three and six months endedJune 30, 2021 . The increase in tax benefit for the six months endedJune 30, 2021 as compared to the six months endedJune 30, 2020 was partially offset by a valuation allowance recorded against ourU.S. deferred tax assets during the first quarter of 2021. Liquidity and Capital Resources General
As ofJune 30, 2021 , our principal sources of liquidity were cash and cash equivalents totaling$104.3 million , which were held for working capital purposes, and borrowing availability under our Revolving Credit Facility as described below. As ofJune 30, 2021 , our cash equivalents were comprised of money market funds. During the six months endedJune 30, 2021 and 2020, our positive cash flows from operations have enabled us to make continued investments in supporting the growth of our business. We expect that our operating cash flows, in addition to our cash and cash equivalents, will enable us to continue to make such investments in the future. We have financed our operations primarily through cash received from operations and proceeds from our debt and equity financings. OnMarch 30, 2020 , we drew down on the remaining$97.8 million available for borrowing under our Revolving Credit Facility (described further below). Given the uncertainty in the global economy as result of the COVID-19 pandemic and out of an abundance of caution, we elected to draw down the remaining available balance to further strengthen our cash position and maintain flexibility. InFebruary 2021 , we repaid$110.0 million of the balance drawn on our Revolving Credit Facility, and inJune 2021 , we drew down an additional$80.0 million for the acquisition ofSecuredTouch, Inc. , and for general working capital purposes. As ofJune 30, 2021 , there was$120.0 million outstanding under our Revolving Credit Facility. We believe our existing cash and cash equivalents, our Revolving Credit Facility 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. Our future capital requirements will depend on several factors, including but not limited to our obligation to repay any amounts outstanding under our 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, and the continuing effects of the COVID-19 pandemic, including potential reductions in revenue and delays in payments from our customers and partners. In the future, we may 44 Table of Contents
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, 2021 , we had deferred revenue of$47.7 million , of which$43.4 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
OnDecember 12, 2019 , we entered into the Credit Agreement providing for the Revolving Credit Facility with an initial$150.0 million in commitments for revolving loans, which amount may be increased or decreased under specific circumstances, with a$15.0 million letter of credit sublimit and a$50.0 million alternative currency sublimit. In addition, the Credit Agreement provides for the ability ofPing Identity Corporation to request term loan facilities, in a minimum amount of$10 million for each facility, if, among other things, the Senior Secured Net Leverage Ratio (as defined in the Credit Agreement), calculated giving pro forma effect to the requested term loan facility, is no greater than 3.50 to 1.00. The interest rates applicable to revolving borrowings under the Credit Agreement are, at the borrower's option, either (i) a base rate, which is equal to the greater of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus 0.5% and (c) the Adjusted LIBO Rate for a one month Interest Period (each term as defined in the Credit Agreement) plus 1%, or (ii) the Adjusted LIBO Rate equal to the LIBO Rate for the Interest Period multiplied by the Statutory Reserve Rate (each term as defined in the Credit Agreement), plus in the case of each of clauses (i) and (ii), the Applicable Rate. The Applicable Rate (i) for base rate loans ranges from 0.25% to 1.0% per annum and (i) for LIBO Rate loans ranges from 1.25% to 2.0% per annum, in each case, based on the Senior Secured Net Leverage Ratio (as defined in the Credit Agreement). The Adjusted LIBO Rate cannot be less than zero. Base rate borrowings may only be made in dollars. The interest rate as ofJune 30, 2021 was 1.34%. The Credit Agreement also includes a fallback provision, which, subject to certain terms and conditions, provides for a replacement of the LIBO Rate with (x) one or more SOFR-based rates or (y) any other alternative benchmark rates giving consideration to any evolving or then existing conventions for similarU.S. dollar denominated syndicated credit facilities. The borrower pays a commitment fee during the term of the Credit Agreement ranging from 0.20% to 0.35% of the available revolving commitments per annum based on the Senior Secured Net Leverage Ratio (as defined in the Credit Agreement). Any borrowing under the Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty other than customary breakage costs, and any amounts repaid may be reborrowed. No mandatory prepayments will be required other than when borrowings or letter of credit usage exceed the aggregate commitment of all lenders. The Credit Agreement was amended onApril 20, 2021 and effective as ofMarch 31, 2021 (the "Credit Amendment"). The Credit Amendment, among other provisions, modified the definition of "EBITDA", added additional language regarding recovery for erroneous payments and amended certain administrative agent processes. 45 Table of Contents 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 EndedJune 30, 2021 2020 (in thousands)
Net cash provided by operating activities$ 43,965 $
21,244
Net cash used in investing activities (49,959)
(12,872)
Net cash provided by (used in) financing activities (35,267)
101,497
Effect of exchange rate changes on cash and cash equivalents and restricted cash (130)
(406)
Net increase (decrease) in cash and cash equivalents and restricted cash$ (41,391) $
109,463
Cash and cash equivalents and restricted cash at beginning of period 146,499
68,386
Cash and cash equivalents and restricted cash at end of period$ 105,108 $ 177,849 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, 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. During the six months endedJune 30, 2020 net cash provided by operating activities was$21.2 million due to our net loss of$7.6 million that was adjusted for non-cash charges of$24.7 million and net cash inflows of$4.1 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 an$8.7 million decrease in accounts receivable due to the timing of collection of payment from our customers, a$7.2 million decrease in prepaid expenses and other current assets, a$3.9 million increase in accounts payable, a$2.2 million increase in accrued expenses and other liabilities due to the timing of cash disbursements and a$1.3 million decrease in contract assets. These were partially offset by a$7.5 million decrease in deferred revenue driven by the timing of revenue recognition, a$3.2 million increase in deferred commissions and an$8.7 million decrease in accrued compensation related to the timing of cash disbursements to our employees. Investing Activities
Net cash used in investing activities was
46
Table of Contents
attributable to the acquisition of SecuredTouch in June 2021 for $39.9 million
as compared to the acquisition of ShoCard in the first quarter of 2020 for $4.7
million . The remaining increase was primarily related to an increase in the
capitalization of internal-use software costs of $1.8 million in the six months
ended June 30, 2021 as compared to the six months ended June 30, 2020 .
Financing Activities
Net cash used in financing activities was$35.3 million during the six months endedJune 30, 2021 whereas net cash provided by financing activities was$101.5 million during the six months endedJune 30, 2020 , representing a decrease of$136.8 million . During the six months endedJune 30, 2021 , we repaid$110.0 million and drew down$80.0 million on our Revolving Credit Facility, resulting in net cash outflows related to long-term debt of$30.0 million in the period. This compares to cash inflows related to long-term debt of$97.8 million during the six months endedJune 30, 2020 , due to the draw down of$97.8 million on our Revolving Credit Facility inMarch 2020 . The remaining decrease relates to a decrease of$4.1 million in proceeds received from option exercises and an increase of$4.5 million in payments for tax withholding on equity awards for the six months endedJune 30, 2021 as compared toJune 30, 2020 . 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, 2021 , 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
47
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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 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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