Freshworks Inc

Previous wording

In June 2024, we acquired all outstanding shares of D42 Parent, Inc., (Device42), an IT asset management company for approximately $238.1 million, which primarily consisted of $225.3 million in cash, and approximately $12.9 million of common stock and stock options. Our consolidated financial statements and key business metrics as of and for the three and six months ended June 30, 2024 include Device42 since the acquisition date.

Current wording

In June 2024, we acquired all outstanding shares of D42 Parent, Inc., (Device42), an IT asset management company for approximately $238.1 million, which primarily consisted of $225.3 million in cash, and approximately $12.9 million of common stock and stock options. Our consolidated financial statements and key business metrics as of and for the three and nine months ended September 30, 2024 include Device42 since the acquisition date.

Previous wording

Our customer base and operations have scaled over time. Our total revenue was $174.1 million and $145.1 million in the three months ended June 30, 2024 and 2023, respectively, representing year-over-year growth of 20%; and $339.3 million and $282.8 million in the six months ended June 30, 2024 and 2023, respectively, representing year-over-year growth of 20%. We incurred operating losses of $43.8 million and $43.3 million for three months ended June 30, 2024 and 2023, respectively; and $76.0 million and $91.4 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Our customer base and operations have scaled over time. Our total revenue was $186.6 million and $153.6 million in the three months ended September 30, 2024 and 2023, respectively, representing year-over-year growth of 22%; and $525.8 million and $436.3 million in the nine months ended September 30, 2024 and 2023, respectively, representing year-over-year growth of 21%. We incurred operating losses of $38.9 million and $38.7 million for three months ended September 30, 2024 and 2023, respectively; and $114.8 million and $130.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, and geopolitical developments have impacted and may continue to impact business spending and the overall economy, and in turn our business. These macroeconomic events could adversely affect demand for our products and services. For example, during the quarter ended June 30, 2024, our net dollar retention rate was adversely impacted by lower expansion within existing customers driven by macroeconomic pressures and we expect these pressures to persist for the foreseeable future. Additionally, foreign currency exchange rate fluctuations negatively impacted our revenue growth historically and volatility in the foreign currency market may still exist. For the quarters ended June 30, 2024, March 31, 2024 and June 30, 2023, we had approximately 27%, 28% and 27%, respectively, of revenue exposure related to the Euro and British Pound. If adverse conditions arise, they could have a material adverse impact on our results and our ability to accurately predict our future results and earnings.

Current wording

Current macroeconomic uncertainties, including inflationary pressures, significant volatility in global markets, and geopolitical developments have impacted and may continue to impact business spending and the overall economy, and in turn our business. These macroeconomic events could adversely affect demand for our products and services. For example, during the recent quarters, our net dollar retention rate was adversely impacted by lower expansion within existing customers driven by macroeconomic pressures and we expect these pressures to persist for the foreseeable future. Additionally, foreign currency exchange rate fluctuations negatively impacted our revenue growth historically and volatility in the foreign currency market may still exist. For each of the quarters ended September 30, 2024, June 30, 2024 and September 30, 2023, we had approximately 27% of revenue exposure related to the euro and British Pound. If adverse conditions arise, they could have a material adverse impact on our results and our ability to accurately predict our future results and earnings.

Previous wording

We define ARR as the sum total of subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of the contract. For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR. While monthly subscribers as a group have historically maintained or increased their subscriptions over time, there is no guarantee that any particular customer on a monthly subscription will renew its subscription in any given month, and therefore the calculation of ARR for these monthly subscriptions may not accurately reflect revenue to be received over a 12-month period from such customers, and net dollar retention rate may reflect a higher rate than the actual rate if customers on monthly subscriptions choose not to renew during the course of the 12 months. Monthly subscriptions represented 15% and 19% of ARR as of June 30, 2024 and 2023, respectively. The net dollar retention rate for customers on monthly contracts has generally been lower than our overall net dollar retention rate. In addition, as part of our regular review of customer data that includes reviewing customers purchasing our products via resellers so we can properly attribute them as end customers, we may make adjustments that could impact the calculation of net dollar retention rate.

Current wording

We define ARR as the sum total of subscription, software license, and maintenance revenue we would contractually expect to recognize over the next 12 months from all customers at a point in time, assuming no increases, reductions, or cancellations in their subscriptions, and assuming that revenues are recognized ratably over the term of the contract. For monthly subscriptions, we take the recurring revenue run-rate of such subscriptions for the last month of the period and multiply it by 12 to get to ARR. While monthly subscribers as a group have historically maintained or increased their subscriptions over time, there is no guarantee that any particular customer on a monthly subscription will renew its subscription in any given month, and therefore the calculation of ARR for these monthly subscriptions may not accurately reflect revenue to be received over a 12-month period from such customers, and net dollar retention rate may reflect a higher rate than the actual rate if customers on monthly subscriptions choose not to renew during the course of the 12 months. Monthly subscriptions represented 15% and 18% of ARR as of September 30, 2024 and 2023, respectively. The net dollar retention rate for customers on monthly contracts has generally been lower than our overall net dollar retention rate. In addition, as part of our regular review of customer data that includes reviewing customers purchasing our products via resellers so we can properly attribute them as end customers, we may make adjustments that could impact the calculation of net dollar retention rate.

Previous wording

Our net dollar retention rate was 106% as of June 30, 2024, which was a decrease from 108% as of June 30, 2023 primarily due to lower expansion within existing customers driven by macroeconomic pressures, partially offset by the addition of Device42. We expect our net dollar retention rate could fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

Current wording

Our net dollar retention rate was 107% as of September 30, 2024, which was a decrease from 108% as of September 30, 2023 primarily due to lower expansion within existing customers driven by macroeconomic pressures, offset by a favorable foreign currency impact, the addition of Device42 and a slight improvement in our overall churn rate. We expect our net dollar retention rate could fluctuate in future periods due to a number of factors, including, but not limited to, difficult macroeconomic conditions, our expected growth, the level of penetration within our customer base, our ability to upsell and cross-sell products to existing customers, and our ability to retain our customers.

Previous wording

We believe that continued investment in our products is important for our growth, and as such, we expect that our research and development expenses will continue to increase in dollar amount for the foreseeable future. This percentage may fluctuate from period to period depending upon the timing and amount of these expenses.

Current wording

We believe that continued investment in our products is important for our growth, and as such, we expect that our research and development expenses will continue to increase in dollar amount for the foreseeable future, but such expenses as a percentage of revenue may fluctuate from period to period depending upon the timing and amount of these expenses.

Previous wording

Provision for (benefit from) income taxes consists primarily of income taxes related to U.S. states and foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our U.S. federal and state net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. Provision for (benefit from) income taxes could also includes changes in valuation allowance. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as stock-based compensation, and changes in our valuation allowance.

Current wording

Provision for (benefit from) income taxes consists primarily of income taxes related to U.S. states and foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on our U.S. federal and state net deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. Provision for (benefit from) income taxes could also include changes in valuation allowance. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as stock-based compensation, and changes in our valuation allowance.

Previous wording

(2) General and administrative expense includes stock-based compensation associated with RSUs and PRSUs granted to our Executive Chairman of $12.7 million and $13.9 million for the three months ended June 30, 2024 and 2023, respectively, and $26.2 million and $27.7 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(2) General and administrative expense includes stock-based compensation associated with RSUs and PRSUs granted to our Executive Chairman of $12.1 million and $14.1 million for the three months ended September 30, 2024 and 2023, respectively, and $38.3 million and $41.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Revenue increased by $29.1 million, or 20%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Of the total increase in revenue, approximately $10.9 million was attributable to revenue from existing customers as of June 30, 2023, net of contraction and churn, and approximately $18.2 million was attributable to revenue from new customers acquired during the twelve months ended June 30, 2024 (including revenue from Device42 since the date of the acquisition), net of contraction and churn. Our net dollar retention rate of 106% as of June 30, 2024 reflects the expansion within existing customers and the sale of additional products to these customers. Our net dollar retention rate decreased from 108% as of June 30, 2023 primarily due to relatively lower expansion within existing customers driven by macroeconomic pressures, partially offset by the addition of Device42. The majority of our revenue continues to be generated from subscription services.

Current wording

Revenue increased by $33.0 million, or 22%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Of the total increasein revenue, approximately $9.7 million was attributable to revenue from existing customers as of September 30, 2023, net of contraction and churn, and approximately $23.3 million was attributable to revenue from new customers acquired during the twelve months ended September 30, 2024, net of contraction and churn, as well as all revenue from Device42 during the quarter. Our net dollar retention rate of 107% as of September 30, 2024 reflects the expansion within existing customers and the sale of additional products to these customers. Our net dollar retention rate decreased from 108% as of September 30, 2023 primarily due to lower expansion within existing customers driven by macroeconomic pressures, offset by a favorable foreign currency impact, the addition of Device42 and a slight improvement in our overall churn rate. The majority of our revenue continues to be generated from subscription services.

Previous wording

Cost of revenue increased by $3.3 million, or 13%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was primarily due to increases of $1.1 million in software license fees and third-party hosting costs, $0.7 million in professional service fees, $0.6 million in personnel-related costs and $0.6 million in amortization of developed technologies and internally capitalized software. Our gross margin increased to 84% for the three months ended June 30, 2024 from 83% in the same period of the prior year, as we increased our revenue and continue to realize benefits from economies of scale primarily related to our third-party hosting costs.

Current wording

Cost of revenue increased by $3.5 million, or 13%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This was primarily due to increases of $1.4 million in amortization of acquired developed technologies and internally capitalized software, $0.9 million in personnel-related costs, $0.8 million in third-party hosting costs and $0.5 million in professional and consulting expenses. Our gross margin increased to 84% for the three months ended September 30, 2024 from 83% in the same period of the prior year, as we increased our revenue and continue to realize benefits from economies of scale primarily related to our third-party hosting costs.

Previous wording

The $26.2 million, or 16%, increase in our operating expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, was primarily driven by increases in personnel-related costs due to annual compensation adjustments and stock-based compensation expense, advertisement, branding, travel and event costs, and professional services fees.

Current wording

The $29.6 million, or 18%, increase in our operating expenses for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, was primarily driven by increases in personnel-related costs due to annual compensation adjustments, stock-based compensation expense, amortization of developed technologies, advertisement, marketing and branding costs, and professional services fees.

Previous wording

Research and development expense increased by $6.8 million, or 20%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily driven by an increase of $4.9 million in personnel-related costs.

Current wording

Research and development expense increased by $13.0 million, or 37%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by an increase of $7.1 million in personnel-related costs, $3.8 million in stock-based compensation expense, $0.7 million in professional services and subscription costs, and $0.5 million in web-hosting charges.

Previous wording

Sales and marketing expense increased by $16.3 million, or 18%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was primarily driven by increases of $6.6 million in personnel related costs, $4.4 million in advertisement, branding, travel and event costs, $1.6 million in reseller commissions, $1.1 million in stock-based compensation expense and $1.0 million in professional services fees.

Current wording

Sales and marketing expense increased by $10.6 million, or 12%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This was primarily driven by increases of $8.5 million in personnel-related costs, $2.3 million in amortization of acquired intangible assets, $1.2 million in advertisement, marketing and branding costs, $0.6 million in reseller commissions, and $0.5 million in travel expenses, partially offset by a decrease of $3.5 million in stock-based compensation expense.

Previous wording

General and administrative expense increased by $3.2 million, or 8%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This was primarily driven by increases of $2.5 million in personnel related costs and $2.1 million in professional services fees, partially offset by decreases of $1.3 million in local and regulatory taxes, and $0.5 million in directors and officers' insurance.

Current wording

General and administrative expense increased by $6.0 million, or 15%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This was primarily driven by increases of $3.1 million in stock-based compensation expense, $2.5 million in personnel-related costs and $0.6 million in professional services fees, partially offset by decrease of $0.5 million in directors and officers' insurance.

Previous wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. The benefit from income taxes was $6.4 million and the income tax expense was $7.6 million for the six months ended June 30, 2024 and 2023, respectively. The net increase in tax benefit of $14.0 million was primarily related to a tax benefit of$14.3 million from the Device42 acquisition, partially offset by $0.3 million of higher tax expenses due to higher foreign profits before tax.

Current wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. For the three months ended September 30, 2024 and 2023, we recorded a provision for income taxes of $5.0 million and $3.3 million on loss before taxes of $24.9 million and $27.7 million, respectively. The increase in provision for income taxes during the three months ended September 30, 2024, was primarily due to an increase in profit before tax in certain foreign jurisdictions.

Previous wording

Revenue increased by $56.5 million, or 20%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Of the total increase in revenue, approximately $28.1 million was attributable to revenue from existing customers as of June 30, 2023, net of contraction and churn, and approximately $28.4 million was attributable to revenue from new customers acquired during the twelve months ended June 30, 2024 (including revenue from Device42 since the date of the acquisition), net of contraction and churn. Our net dollar retention rate of 106% as of June 30, 2024 reflects the expansion within existing customers and the sale of additional products to these customers. The substantial majority of our revenue continues to be generated from subscription services.

Current wording

Revenue increased by $89.5 million, or 21%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Of the total increase in revenue, approximately $46.2 million was attributable to revenue from existing customers as of September 30, 2023, net of contraction and churn, and approximately $43.3 million was attributable to revenue from new customers acquired during the twelve months ended September 30, 2024, net of contraction and churn, as well as all revenue from Device42 since the date of the acquisition. Our net dollar retention rate of 107% as of September 30, 2024 reflects the expansion within existing customers and the sale of additional products to these customers. The substantial majority of our revenue continues to be generated from subscription services.

Previous wording

Cost of revenue increased by $4.0 million, or 8%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was primarily due to increases of $1.5 million in software license fees, $1.1 million in third-party hosting costs, $0.6 million in amortization of developed technologies and internally capitalized software and $0.5 million in professional service fees. Our gross margin increased to 84% for the six months ended

Current wording

Cost of revenue increased by $7.5 million, or 10%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This was primarily due to increases of $2.0 million in amortization of developed technologies and internally capitalized software, $1.9 million in third-party hosting costs, $1.4 million in software license fees and $1.0 million in professional service fees. Our gross margin increased to 84% for the nine months ended September 30, 2024 from 82% in the same period of the prior year, as we increased our revenue and realized benefits from economies of scale primarily related to our third-party hosting costs.

Previous wording

The $37.1 million, or 11%, increase in our operating expenses in the six months ended June 30, 2024 compared to the six months ended June 30, 2023, was primarily driven by increases in personnel-related costs due to annual compensation adjustments, net of certain changes in employee incentives and changes in stock-based compensation expense, advertising, marketing and branding expenses and professional fees.

Current wording

The $66.7 million, or 14%, increase in our operating expenses in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, was primarily driven by increases in personnel-related costs due to annual compensation adjustments, net of certain changes in employee incentives, changes in stock-based compensation expense, advertising, marketing and branding expenses and professional fees.

Previous wording

Research and development expense increased by $8.6 million, or 13%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was primarily driven by increases of $6.1 million in personnel-related costs, including lower capitalization for internally developed software, $1.0 million in professional services fees and subscription costs and $0.6 million in travel expenses.

Current wording

Research and development expense increased by $21.6 million, or 21%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This was primarily driven by increases of $12.1 million in personnel-related costs, $3.8 million in stock-based compensation expense, $1.5 million lower capitalization for internally developed software, $0.9 million in professional services fees, $0.8 million in software license fees, $0.7 million in web hosting costs, $0.7 million in travel expenses and $0.6 million in rent expenses.

Previous wording

Sales and marketing expense increased by $24.1 million, or 14%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was primarily driven by increases of $7.8 million in advertisement, branding, travel and event costs, $7.3 million in personnel related costs, primarily due to annual compensation adjustments, $2.7 million in stock-based compensation expense, $2.5 million in reseller commissions, $1.9 million in professional services fees and $0.8 million in subscription costs.

Current wording

Sales and marketing expense increased by $34.7 million, or 13%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This was primarily driven by increases of $15.7 million in personnel-related costs, $6.5 million in advertisement, marketing and branding costs, $3.1 million in reseller commissions, $3.0 million in travel expenses, $2.8 million in amortization of acquired intangible assets, $2.0 million in professional services fees, $0.9 million in subscription costs and $0.6 million in rent expenses, partially offset by $0.8 million in stock-based compensation expense.

Previous wording

General and administrative expense increased by $4.3 million, or 5%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was primarily driven by increases of $2.5 million in personnel-related costs and $2.3 million in professional services fees, comprised primarily of legal, accounting and consulting fees, partially offset by decreases of $1.1 million in directors and officers' insurance and $0.7 million in tax-related costs.

Current wording

General and administrative expense increased by $10.4 million, or 8%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. This was primarily driven by increases of $4.9 million in personnel-related costs, $3.3 million in stock-based compensation expense, $2.9 million in professional services fees, comprised primarily of legal, accounting and consulting fees and $0.5 million in software license fees, partially offset by decreases of $1.6 million in directors and officers' insurance and $1.0 million in tax-related costs.

Previous wording

Interest income increased by $7.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to interest income earned on higher balances maintained in our marketable securities portfolio and increases in average interest rates.

Current wording

Interest income increased by $7.3 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to an increase in interest rates and increased interest income earned on larger balances maintained in our marketable securities portfolios.

Previous wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. The benefit from income taxes was$10.4 million and the income tax expense was $3.6 million for the three months ended June 30, 2024 and 2023, respectively. The net increase in tax benefit of$13.9 million was primarily related to a tax benefit of$14.3 million from the Device42 acquisition, partially offset by $0.4 million of higher tax expenses due to higher foreign profits before tax.

Current wording

We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. The benefit from income taxes was $1.4 million and the income tax expense was $10.9 million for the nine months ended September 30, 2024 and 2023, respectively. The net increase in tax benefit of $12.3 million was primarily related to a tax benefit of $14.3 million from the Device42 acquisition in the current year, partially offset by higher tax expenses due to higher foreign profits before tax.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $310.3 million and marketable securities of $708.8 million. Our marketable securities consist primarily of U.S. treasury securities, U.S. government agency securities, corporate debt securities, and certificates of deposit.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $391.1 million and marketable securities of $663.9 million. Our marketable securities consist primarily of U.S. treasury securities, U.S. government agency securities, corporate debt securities, and certificates of deposit.

Previous wording

Since inception, we have funded our operations primarily with financing through the issuance of redeemable convertible preferred and common stock to investors and through our IPO in September 2021. As of June 30, 2024, we had an accumulated deficit of $3.7 billion. Our operating activities resulted in cash inflows of $77.0 million for the six months ended June 30, 2024.

Current wording

Since inception, we have funded our operations primarily with financing through the issuance of redeemable convertible preferred and common stock to investors and through our IPO in September 2021. As of September 30, 2024, we had an accumulated deficit of $3.7 billion. Our operating activities resulted in cash inflows of $119.3 million for the nine months ended September 30, 2024. In November 2024, we committed to a restructuring plan that is expected to incur charges in the fourth quarter of 2024, consisting primarily of cash expenditures for separation-related payments, employee benefits and related costs. See Note 14—Subsequent Events.

Previous wording

Net cash provided by operating activities of $77.0 million for the six months ended June 30, 2024 reflects our net loss of $43.5 million, adjusted for non-cash items such as stock-based compensation of $107.6 million, amortization of deferred contract acquisition costs of $13.5 million, depreciation and amortization of $6.7 million, and non-cash lease expense of $4.4 million; offset by 13.8 million from changes in deferred income taxes and $8.7 million from discount amortization of marketable securities. Additionally, net cash inflows from changes in operating assets and liabilities were $11.0 million. The net cash inflows from changes in operating assets and liabilities were due to a decrease of $4.9 million in accounts receivable and increases in operating liabilities of $17.2 million in deferred revenue, $8.9 million in accrued and other liabilities and $6.0 million in accounts payable; offset by increases in operating assets of $16.9 million in deferred contract acquisition costs and $7.2 million in prepaid expenses and other assets; and a decrease of $2.0 million in operating lease liabilities.

Current wording

Net cash provided by operating activities of $119.3 million for the nine months ended September 30, 2024 reflects our net loss of $73.5 million, adjusted for non-cash items such as stock-based compensation of $166.3 million, amortization of deferred contract acquisition costs of $20.7 million, depreciation and amortization of $13.1 million, and non-cash lease expense of $6.6 million; offset by 13.8 million from changes in deferred income taxes and $13.0 million from discount amortization of marketable securities. Additionally, net cash inflows from changes in operating assets and liabilities were $12.6 million. The net cash inflows from changes in operating assets and liabilities were due to a decrease of $6.6 million in accounts receivable and increases in operating liabilities of $27.0 million in deferred revenue, $10.2 million in accrued and other liabilities and $3.1 million in accounts payable; offset by increases in operating assets of $24.7 million in deferred contract acquisition costs and $7.7 million in prepaid expenses and other assets; and a decrease of $1.8 million in operating lease liabilities.

Previous wording

Net cash provided by operating activities of $31.4 million for the six months ended June 30, 2023 reflects our net loss of $78.3 million, adjusted for non-cash items such as stock-based compensation of $104.9 million, amortization of deferred contract acquisition costs of $11.5 million, depreciation and amortization of $6.1 million, non-cash lease expense of $3.7 million; offset by $7.8 million from discount amortization of marketable securities and net cash outflows of $8.8 million from changes in operating assets and liabilities. The net cash outflows from changes in operating assets and liabilities were due to increases in operating assets of $12.8 million in deferred contract acquisition costs, $6.6 million in prepaid expenses and other assets, $3.6 million in accounts receivable, and a decrease in operating liabilities of $5.5 million in accrued and other liabilities, $4.9 million in lease liabilities, and $4.2 million in accounts payable; offset by an increase in operating liabilities of $28.7 million in deferred revenue.

Current wording

Net cash provided by operating activities of $55.3 million for the nine months ended September 30, 2023 reflects our net loss of $109.4 million, adjusted for non-cash items such as stock-based compensation of $160.1 million, amortization of deferred contract acquisition costs of $17.6 million, depreciation and amortization of $9.1 million and non-cash lease expense of $5.7 million; offset by $12.1 million from discount amortization of marketable securities and net cash outflows of $15.9 million from changes in operating assets and liabilities. The net cash outflows from changes in operating assets and liabilities were due to increases in operating assets of $19.1 million in deferred contract acquisition costs, $11.8 million in prepaid expenses and other assets, $10.0 million in accounts receivable; and a decrease in operating liabilities of $9.1 million in lease liabilities, $3.2 million in accrued and other liabilities, and $3.2 million in accounts payable; offset by an increase in operating liabilities of $40.5 million in deferred revenue.

Previous wording

Net cash used in investing activities of $220.5 million for the six months ended June 30, 2024 consisted of $213.9 million cash paid for the business combination, net of cash acquired, $1.2 million in purchases of marketable securities, net of maturities and sales, $2.4 million in capitalized internal-use software, and $3.1 million in purchases of property and equipment.

Current wording

Net cash used in investing activities of $170.3 million for the nine months ended September 30, 2024 consisted of $213.9 million cash paid for the business combination, net of cash acquired, $4.1 million in purchases of property and equipment, $3.6 million in capitalized internal-use software, offset by $51.2 million in maturities and sales of marketable securities, net of purchases.

Previous wording

Net cash provided by investing activities of $44.1 million for the six months ended June 30, 2023 consisted of $48.3 million in proceeds from maturities and sales, net of purchases of marketable securities; offset by $3.5 million in capitalized internal-use software and $0.7 million in purchases of property and equipment.

Current wording

Net cash provided by investing activities of $146.3 million for the nine months ended September 30, 2023 consisted of $152.3 million in proceeds from maturities and sales, net of purchases of marketable securities; offset by $5.1 million in capitalized internal-use software and $1.0 million in purchases of property and equipment.

Previous wording

Net cash used in financing activities of $34.3 million for the six months ended June 30, 2024 consisted of $38.0 million in payment of withholding taxes on net share settlement of equity awards; offset by $3.6 million of proceeds from the issuance of common stock under our employee stock purchase plan, net of taxes withheld.

Current wording

Net cash used in financing activities of $46.0 million for the nine months ended September 30, 2024 consisted of $49.6 million in payment of withholding taxes on net share settlement of equity awards; offset by $3.6 million of proceeds from the issuance of common stock under our employee stock purchase plan, net of taxes withheld.

Previous wording

Net cash used in financing activities of $23.4 million for the six months ended June 30, 2023 consisted of $27.7 million in payment of withholding taxes on net share settlement of equity awards; offset by $4.3 million of proceeds from the issuance of common stock under our employee stock purchase plan, net of taxes withheld.

Current wording

Net cash used in financing activities of $47.4 million for the nine months ended September 30, 2023 consisted of $51.8 million in payment of withholding taxes on net share settlement of equity awards; offset by $4.3 million of proceeds from the issuance of common stock under our employee stock purchase plan, net of taxes withheld.

Previous wording

We generally enter into subscription and software license agreements with our customers on monthly, annual, or multi-year terms and invoice customers in advance in either monthly or annual installments. A small portion of our annual contracts may have billing terms that are different from their subscription terms and most of our multi-year contracts are invoiced annually. As of June 30, 2024, remaining performance obligations totaled $469.8 million, which comprised $287.6 million of deferred revenue and $182.2 million of unbilled amounts.

Current wording

We generally enter into subscription and software license agreements with our customers on monthly, annual, or multi-year terms and invoice customers in advance in either monthly or annual installments. A small portion of our annual contracts may have billing terms that are different from their subscription terms and most of our multi-year contracts are invoiced annually. As of September 30, 2024, remaining performance obligations totaled $488.9 million, which comprised $299.4 million of deferred revenue and $189.5 million of unbilled amounts.

Previous wording

As of June 30, 2024, our estimated future contractual obligations totaled $335.5 million, of which $31.7 million and $303.8 million were operating lease commitments and other contractual obligations, respectively. See Note 8—Leases and Note 9—Commitments and Contingencies in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

Current wording

As of September 30, 2024, our estimated future contractual obligations totaled $323.4 million, of which $31.2 million and $292.2 million were operating lease commitments and other contractual obligations, respectively. See Note 8—Leases and Note 9—Commitments and Contingencies in the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

Previous wording

There have been no changes to our critical accounting policies and estimates during the three and six months ended June 30, 2024 as compared to those disclosed in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K filed with the SEC on February 16, 2024, except for the addition of the following revenue recognition policy for the business acquired in June 2024:

Current wording

There have been no changes to our critical accounting policies and estimates during the three and nine months ended September 30, 2024 as compared to those disclosed in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K filed with the SEC on February 16, 2024, except for the addition of the following revenue recognition policy for the business acquired in June 2024:

Previous wording

Software license revenue are generally sold as bundled arrangements that include the rights to a software license and maintenance. For these contracts,the transaction price is allocated to the separate performance obligations on the basis of relative standalone selling price. Software license revenue consists of term licenses and is recognized upfront, upon making the software available to the customer. The associated software maintenance revenue is recognized as support and updates are provided, which is generally ratably over the contract term.

Current wording

Software license revenue are generally sold as bundled arrangements that include the rights to a software license and maintenance. For these contracts, the transaction price is allocated to the separate performance obligations on the basis of relative standalone selling price. Software license revenue consists of term licenses and is recognized upfront, upon making the software available to the customer. The associated software maintenance revenue is generally recognized ratably over the contract term as support and updates are provided to the customers over the term of the arrangement.