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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-Q

__________________

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2023

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-35662

__________________

QUALYS, INC.

(Exact name of registrant as specified in its charter)

__________________

Delaware		77-0534145
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

919 E. Hillsdale Boulevard, 4th Floor, Foster City, California 94404

(Address of principal executive offices, including zip code)

(650) 801-6100

(Registrant’s telephone number, including area code)

__________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	QLYS	The NASDAQ Stock Market LLC

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant's common stock outstanding as of April 28, 2023 was 36,895,797.

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Qualys, Inc.

TABLE OF CONTENTS

		Page
Risk Factor Summary
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Stockholders' Equity	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	54
	Signatures	55

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RISK FACTOR SUMMARY

Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors,” together with the other information in this Quarterly Report on Form 10-Q. If any of the following risks actually occurs (or if any of those listed elsewhere in this Quarterly Report on Form 10-Q occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

	•	Our quarterly and annual operating results may vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline.
	•	If we do not successfully anticipate market needs and opportunities or are unable to enhance our solutions and develop new solutions that meet those needs and opportunities on a timely or cost-effective basis, we may not be able to compete effectively and our business and financial condition may be harmed.
	•	If we fail to continue to effectively scale and adapt our platform to meet the performance and other requirements of our customers, our operating results and our business would be harmed.
	•	If we are unable to renew existing subscriptions for our IT, security and compliance solutions, sell additional subscriptions for our solutions and attract new customers, our operating results would be harmed.
	•	Our current research and development efforts may not produce successful products or enhancements to our platform that result in significant revenue, cost savings or other benefits in the near future.
	•	Our platform, website and internal systems may be subject to intentional disruption or other security incidents that could result in liability and adversely impact our reputation and future sales.
	•	Our sales cycle can be long and unpredictable, and our sales efforts require considerable time and expense. As a result, revenues may vary from period to period, which may cause our operating results to fluctuate and could harm our business.
	•	Adverse economic conditions or reduced IT spending may adversely impact our business.
	•	Our IT, security and compliance solutions are delivered from 11 shared cloud platforms, and any disruption of service at these facilities would interrupt or delay our ability to deliver our solutions to our customers which could reduce our revenues and harm our operating results.
	•	We face competition in our markets, and we may lack sufficient financial or other resources to maintain or improve our competitive position.
	•	If our solutions fail to detect vulnerabilities or incorrectly detect vulnerabilities, our brand and reputation could be harmed, which could have an adverse effect on our business and results of operations.
	•	If we are unable to continue the expansion of our sales force, sales of our solutions and the growth of our business would be harmed.
	•	We rely on third-party channel partners to generate a substantial amount of our revenues, and if we fail to expand and manage our distribution channels, our revenues could decline and our growth prospects could suffer.
	•	A significant portion of our customers, channel partners and employees are located outside of the United States, which subjects us to a number of risks associated with conducting international operations, and if we are unable to successfully manage these risks, our business and operating results could be harmed.
	•	If the market for cloud solutions for IT, security and compliance does not evolve as we anticipate, our revenues may not grow and our operating results would be harmed.
	•	Our business and operations have continued to grow since inception, and if we do not appropriately manage any future growth, or are unable to improve our systems and processes, our operating results may be negatively affected.
	•	A portion of our revenues are generated by sales to government entities, which are subject to a number of challenges and risks.
	•	Undetected software errors or flaws in our solutions could harm our reputation, decrease market acceptance of our solutions or result in liability.
	•	Our solutions could be used to collect and store personal information of our customers’ employees or customers, and therefore privacy and other data handling concerns could result in additional cost and liability to us or inhibit sales of our solutions.
	•	Our solutions contain third-party open source software components, and our failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our solutions.
	•	We use third-party software and data that may be difficult to replace or cause errors or failures of our solutions that could lead to lost customers or harm to our reputation and our operating results.
	•	Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.
	•	Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and harm our business and operating results.

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PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Qualys, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except per share data)

	*March 31,*			*December 31,*
	*2023*			*2022*
Assets
Current assets:
Cash and cash equivalents	$	193,854		$	173,719
Short-term marketable securities		139,925			147,608
Accounts receivable, net of allowance of $912 and $736 as of March 31, 2023 and December 31, 2022, respectively		101,786			121,795
Prepaid expenses and other current assets		29,183			30,216
Total current assets		464,748			473,338
Long-term marketable securities		44,587			59,206
Property and equipment, net		45,161			47,428
Operating leases - right of use asset		30,737			33,752
Deferred tax assets, net		49,865			45,412
Intangible assets, net		12,030			12,801
Goodwill		7,447			7,447
Restricted cash		2,700			2,700
Other noncurrent assets		18,478			18,857
Total assets	$	675,753		$	700,941
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,740		$	2,808
Accrued liabilities		41,777			42,592
Deferred revenues, current		296,516			293,728
Operating lease liabilities, current		12,925			13,060
Total current liabilities		352,958			352,188
Deferred revenues, noncurrent		21,931			23,490
Operating lease liabilities, noncurrent		25,913			29,121
Other noncurrent liabilities		7,129			7,013
Total liabilities		407,931			411,812
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock: $0.001 par value; 20,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Common stock: $0.001 par value; 1,000,000 shares authorized, 36,933 and 37,362 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		37			37
Additional paid-in capital		521,716			512,486
Accumulated other comprehensive loss		(1,571	)		(1,947	)
Accumulated deficit		(252,360	)		(221,447	)
Total stockholders’ equity		267,822			289,129
Total liabilities and stockholders’ equity	$	675,753		$	700,941

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Qualys, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Revenues	$	130,683		$	113,420
Cost of revenues		26,954			24,002
Gross profit		103,729			89,418
Operating expenses:
Research and development		27,795			23,107
Sales and marketing		25,628			20,142
General and administrative		15,128			12,634
Total operating expenses		68,551			55,883
Income from operations		35,178			33,535
Other income (expense), net:
Interest income		2,397			518
Other income (expense), net		(216	)		(710	)
Total other income (expense), net		2,181			(192	)
Income before income taxes		37,359			33,343
Income tax provision		8,254			7,933
Net income	$	29,105		$	25,410
Net income per share:
Basic	$	0.79		$	0.65
Diluted	$	0.77		$	0.64
Weighted average shares used in computing net income per share:
Basic		37,068			38,992
Diluted		37,669			40,001

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Qualys, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(in thousands)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Net income	$	29,105		$	25,410
Other comprehensive income (loss), net of tax
Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax		1,131			(2,128	)
Net change in unrealized gains (losses) on cash flow hedges, net of tax		(755	)		451
Other comprehensive income (loss), net of tax		376			(1,677	)
Comprehensive income	$	29,481		$	23,733

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Qualys, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Cash flow from operating activities:
Net income	$	29,105		$	25,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		7,444			8,982
Provision for credit losses		119			141
Loss on disposal of property and equipment		-			5
Stock-based compensation		16,033			11,745
Amortization (accretion) of premiums (discount) on marketable securities, net		(259	)		762
Deferred income taxes		(4,241	)		(5,095	)
Changes in operating assets and liabilities:
Accounts receivable		19,890			19,563
Prepaid expenses and other assets		(1,289	)		6,067
Accounts payable		(1,215	)		599
Accrued liabilities and other noncurrent liabilities		(2	)		3,435
Deferred revenues		1,228			7,426
Net cash provided by operating activities		66,813			79,040
Cash flow from investing activities:
Purchases of marketable securities		(46,010	)		(81,800	)
Sales and maturities of marketable securities		69,709			84,915
Purchases of property and equipment		(4,037	)		(7,639	)
Net cash provided by (used in) investing activities		19,662			(4,524	)
Cash flow from financing activities:
Repurchase of common stock		(66,551	)		(46,581	)
Proceeds from exercise of stock options		2,328			2,569
Payments for taxes related to net share settlement of equity awards		(5,105	)		(3,631	)
Proceeds from issuance of common stock through employee stock purchase plan		2,988			2,086
Net cash used in financing activities		(66,340	)		(45,557	)
Net increase in cash, cash equivalents and restricted cash		20,135			28,959
Cash, cash equivalents and restricted cash at beginning of period		176,419			138,528
Cash, cash equivalents and restricted cash at end of period	$	196,554		$	167,487

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Qualys, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)

									*Accumulated*			*Retained*
	*Common Stock*					*Additional*			*Other*			*Earnings*			*Total*
						*Paid-In*			*Comprehensive*			*(Accumulated*			*Stockholders’*
	*Shares*			*Amount*		*Capital*			*Income (Loss)*			*Deficit)*			*Equity*
Balances at December 31, 2022		37,362		$	37	$	512,486		$	(1,947	)	$	(221,447	)	$	289,129
Net income		—			—		—			—			29,105			29,105
Other comprehensive loss, net of tax		—			—		—			376			—			376
Issuance of common stock upon exercise of stock options		61			—		2,328			—			—			2,328
Repurchase of common stock		(584	)		—		(7,014	)		—			(60,018	)		(67,032	)
Issuance of common stock upon vesting of restricted stock units		108			—		—			—			—			—
Taxes related to net share settlement of equity awards		(43	)		—		(5,105	)		—			—			(5,105	)
Issuance of common stock through employee stock purchase plan		29					2,988									2,988
Stock-based compensation		—			—		16,033			—			—			16,033
Balances at March 31, 2023		36,933		$	37	$	521,716		$	(1,571	)	$	(252,360	)	$	267,822

									*Accumulated*			*Retained*
	*Common Stock*					*Additional*			*Other*			*Earnings*			*Total*
						*Paid-In*			*Comprehensive*			*(Accumulated*			*Stockholders’*
	*Shares*			*Amount*		*Capital*			*Income (Loss)*			*Deficit)*			*Equity*
Balances at December 31, 2021		39,112		$	39	$	477,323		$	1,007		$	(41,655	)	$	436,714
Net income		—			—		—			—			25,410			25,410
Other comprehensive income, net of tax		—			—		—			(1,677	)		—			(1,677	)
Issuance of common stock upon exercise of stock options		66			—		2,569			—			—			2,569
Repurchase of common stock		(368	)		—		(4,416	)		—			(42,165	)		(46,581	)
Issuance of common stock upon vesting of restricted stock units		70			—		—			—			—			—
Taxes related to net share settlement of equity awards		(28	)		—		(3,631	)		—			—			(3,631	)
Issuance of common stock through employee stock purchase plan		23			—		2,086									2,086
Stock-based compensation		—			—		11,745			—			—			11,745
Balances at March 31, 2022		38,875		$	39	$	485,676		$	(670	)	$	(58,410	)	$	426,635

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Qualys, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1.

Description of Business and Summary of Significant Accounting Policies

Description of Business

Qualys, Inc. (the “Company”, "we", "us", "our") was incorporated in the state of Delaware on December 30, 1999. The Company is headquartered in Foster City, California and has wholly-owned subsidiaries throughout the world. The Company is a leading provider of cloud-based information technology ("IT"), security and compliance solutions that enable organizations to identify security risks to their IT infrastructures, help protect their IT systems and applications from ever-evolving cyber-attacks and achieve compliance with internal policies and external regulations. The Company’s cloud solutions address the growing security and compliance complexities and risks that are amplified by the dissolving boundaries between internal and external IT infrastructures and web environments, the rapid adoption of cloud computing and the proliferation of geographically dispersed IT assets. Organizations can use the Company’s integrated suite of solutions delivered on its Qualys Cloud Platform to cost-effectively obtain a unified view of their security and compliance posture across globally-distributed IT infrastructures.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information as well as the instructions to Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Certain information and disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 2022, included herein, was derived from the audited financial statements as of that date but does not include all disclosures, including notes required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations expected for the entire year ending December 31, 2023 or for any other future annual or interim periods. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023. Certain prior year amounts have been reclassified to conform to current year presentation.

Risks and Uncertainties

The uncertainty surrounding macroeconomic factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, rising interest rates, financial institution failures and associated uncertainty, labor shortages, significant volatility of global markets and geopolitical conflicts could have a material adverse effect on the Company's long-term business and could lead to further economic disruption and expose the Company to greater risk as its current and potential customers may reduce or eliminate their overall spending on IT security.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the condensed consolidated financial statements and the reported results of operations during the reporting period. The Company’s management regularly assesses these estimates, which primarily affect revenue recognition, allowance for credit loss, the valuation of goodwill and intangible assets, leases, stock-based compensation and income tax provision. Actual results could differ from those estimates and such differences may be material to the accompanying unaudited condensed consolidated financial statements.

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Recently Adopted Accounting Pronouncements

None.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company does not believe any new accounting pronouncements issued by the FASB that have not become effective will have a material impact on its condensed consolidated financial statements.

There have been no material changes to the Company’s significant accounting policies set forth in "Note 1" of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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NOTE 2.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For certain of the Company’s financial instruments, including certain cash equivalents, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate their fair values due to the relatively short maturity of these balances.

The Company measures and reports certain cash equivalents, marketable securities, derivative foreign currency forward contracts at fair value in accordance with the provisions of the authoritative accounting guidance that addresses fair value measurements. This guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1-Valuations based on quoted prices in active markets for identical assets or liabilities.

Level 2-Valuations based on other than quoted prices in active markets for identical assets and liabilities, including quoted prices for identical assets or liabilities in less active or inactive markets, quoted prices for similar assets or liabilities in active markets, or inputs other than quoted prices that are observable for substantially the full term of the assets or liabilities.

Level 3-Valuations based on inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The Company's financial instruments consist of assets and liabilities measured using Level 1 and 2 inputs. Level 1 assets include a highly liquid money market fund, which is valued using unadjusted quoted prices that are available in an active market for an identical asset. Level 2 assets include fixed-income U.S. Treasury and government agency securities, commercial paper, corporate bonds, asset-backed securities, foreign government securities and derivative financial instruments consisting of foreign currency forward contracts. The securities, bonds and commercial paper are valued using prices from independent pricing services based on quoted prices of identical instruments in less active or inactive markets, quoted prices of similar instruments in active markets, or industry models using data inputs such as interest rates and prices that can be directly observed or corroborated in active markets. The foreign currency forward contracts are valued using observable inputs, such as quotations on forward foreign exchange points and foreign interest rates.

The following table sets forth by level within the fair value hierarchy the fair value of the Company's financial assets and liabilities measured at fair value on a recurring basis:

	*March 31, 2023*
	*Level 1*		*Level 2*		*Fair Value*
	(in thousands)
Money market funds	$	3,520	$	—	$	3,520
Commercial paper		—		75,697		75,697
U.S. Treasury and government agencies		—		84,793		84,793
Corporate bonds		—		45,790		45,790
Asset-backed securities		—		8,546		8,546
Foreign currency forward contracts		—		199		199
Total assets	$	3,520	$	215,025	$	218,545
Foreign currency forward contracts	$	—	$	3,121	$	3,121
Total liabilities	$	—	$	3,121	$	3,121

	*December 31, 2022*
	*Level 1*		*Level 2*		*Fair Value*
	(in thousands)
Money market funds	$	82,701	$	—	$	82,701
U.S. Treasury and government agencies		—		156,662		156,662
Foreign government		—		1,006		1,006
Corporate bonds		—		63,910		63,910
Asset-backed securities		—		15,027		15,027
Foreign currency forward contracts		—		1,493		1,493
Total assets	$	82,701	$	238,098	$	320,799
Foreign currency forward contracts	$	—	$	4,679	$	4,679
Total liabilities	$	—	$	4,679	$	4,679

There were no transfers between Level 1, Level 2 and Level 3 categories during the three months ended March 31, 2023 and 2022.

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Cash equivalent and investments

The Company's cash equivalents and marketable securities consist of the following:

	*March 31, 2023*
	*Amortized Cost*		*Unrealized Gains*		*Unrealized Losses*			*Fair Value*
	(in thousands)
Cash equivalents: (1)
Money market funds	$	3,520	$	—	$	—		$	3,520
Commercial paper	$	30,319		—		(5	)		30,314
Total		33,839		—		(5	)		33,834
Short-term marketable securities:
Commercial paper		45,384		8		(9	)		45,383
Corporate bonds		27,878		—		(412	)		27,466
Asset-backed securities		23		—		—			23
U.S. Treasury and government agencies		67,351		—		(298	)		67,053
Total		140,636		8		(719	)		139,925
Long-term marketable securities:
Corporate bonds		18,715		—		(391	)		18,324
Asset-backed securities		8,600		—		(77	)		8,523
U.S. Treasury and government agencies		18,131		—		(391	)		17,740
Total		45,446		—		(859	)		44,587
Total	$	219,921	$	8	$	(1,583	)	$	218,346

( 1) Excludes cash of $160.0 million.

	*December 31, 2022*
	*Amortized Cost*		*Unrealized Gains*		*Unrealized Losses*			*Fair Value*
	(in thousands)
Cash equivalents: (2)
Money market funds	$	82,701	$	—	$	—		$	82,701
U.S. Treasury and government agencies		29,787		4		—			29,791
Total		112,488		4		—			112,492
Short-term marketable securities:
Corporate bonds		36,908		3		(337	)		36,574
Asset-backed securities		726		—		(2	)		724
U.S. Treasury and government agencies		110,225		—		(921	)		109,304
Foreign government		1,008		—		(2	)		1,006
Total		148,867		3		(1,262	)		147,608
Long-term marketable securities:
Corporate bonds		28,146		—		(810	)		27,336
Asset-backed securities		14,435		—		(132	)		14,303
U.S. Treasury and government agencies		18,076		—		(509	)		17,567
Total		60,657		—		(1,451	)		59,206
Total	$	322,012	$	7	$	(2,713	)	$	319,306

(2) Excludes cash of $61.2 million.

The following table summarizes the gross unrealized losses and fair value of the Company's marketable securities that were in an unrealized loss position aggregated by length of time:

	*March 31, 2023*
	*Less than 12 months*					*12 months or longer*					*Total*
	Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses
	(in thousands)
Commercial paper	$	59,397	$	(14	)	$	-	$	-		$	59,397	$	(14	)
Asset-backed securities		8,179		(75	)		359		(2	)		8,538		(77	)
Corporate bonds		18,058		(103	)		25,430		(700	)		43,488		(803	)
U.S. Treasury and government agencies		62,978		(479	)		21,555		(210	)		84,533		(689	)
Total	$	148,612	$	(671	)	$	47,344	$	(912	)	$	195,956	$	(1,583	)

	*December 31, 2022*
	*Less than 12 months*					*12 months or longer*					*Total*
	Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses
	(in thousands)
Foreign government agencies	$	998	$	(2	)	$	-	$	-		$	998	$	(2	)
Asset-backed securities		13,365		(124	)		1,652		(10	)		15,017		(134	)
Corporate bonds		33,800		(389	)		26,326		(758	)		60,126		(1,147	)
U.S. Treasury and government agencies		89,802		(1,175	)		36,833		(255	)		126,635		(1,430	)
Total	$	137,965	$	(1,690	)	$	64,811	$	(1,023	)	$	202,776	$	(2,713	)

The Company had the ability and intent to hold all marketable securities that were in an unrealized loss position until recovery of the amortized cost basis. The Company considered the extent to which fair value was less than amortized cost basis and conditions related to security’s industry and geography and changes to the ratings, if any, and concluded the decline in fair value compared to carrying value was not related to credit loss.

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The following summarizes the fair value of cash equivalents and marketable securities by contractual maturity:

	*March 31, 2023*
	*Amortized Cost*		*Fair Value*
	(in thousands)
Due within One Year	$	174,452	$	173,736
Due after One Year through Two Years		36,846		36,064
Mature over Two Years		—		—
Asset-backed securities		8,623		8,546
Total	$	219,921	$	218,346

Non-Marketable Securities

During the fiscal year ended December 31, 2018, the Company invested $2.5 million in preferred stock of a privately-held company. The fair value of the investment is not readily available, and there are no quoted market prices for the investment. The Company accounts for the investment at cost less impairment and will measure the investment at fair value when the Company identifies observable price changes. The investment is assessed for impairment whenever events or changes in circumstances indicate that the fair value of the investment is less than carrying value. We have not recorded any impairments or fair value adjustment related to the investment for the three months ended March 31, 2023. The investment is included in other noncurrent assets on the condensed consolidated balance sheets. The Company has not received any dividends from the investment.

Derivative Financial Instruments

Designated cash flow hedges

The Company enters into foreign currency forward contracts to reduce the risk of variability in future cash flow due to foreign currency exchange rate fluctuation from certain forecasted subscription revenue orders billed in British Pound ("GBP") and Euro ("EUR") and operating expenses incurred in Indian Rupee ("INR"), which are designated as cash flow hedges. Hedge effectiveness is assessed at inception and at each reporting period utilizing regression analysis. Unrealized foreign exchange gains or losses related to those designated cash flow hedge contracts are recorded in Accumulated other comprehensive income ("AOCI") and will be reclassified into revenues or operating expenses, respectively, in the same periods when the hedged transactions are recognized in earnings.

As of March 31, 2023, the Company had designated cash flow hedge forward contracts with notional amounts of €37.5 million, £11.5 million and Rs.3,572.0 million. As of December 31, 2022, the Company had designated cash flow hedge forward contracts with notional amounts of €37.4 million, £10.4 million and Rs.3,411.0 million.

As of March 31, 2023, a net amount of unrealized gains of $1.6 million before tax on the foreign currency forward contracts for GBP and Euro reported in AOCI is expected to be reclassified into revenue within the next 12 months. As of March 31, 2023, a net amount of unrealized loss of $0.6 million before tax on the foreign currency forward contracts for INR reported in AOCI is expected to be reclassified into operating expenses within the next 12 months.

Non-designated forward contracts

The Company also uses foreign currency forward contracts to hedge certain foreign currency denominated assets or liabilities, which are not designated as cash flow hedges. Unrealized foreign exchange gain or losses related to the non-designated forward contracts are recorded in other income (expenses), net and offset the foreign exchange gain or loss on the underlying net monetary assets or liabilities.

As of March 31, 2023, the Company had non-designated forward contracts with notional amounts of €8.5 million, £4.3 million, Rs.455 million, and Canadian Dollar ("C$") 5 million. As of December 31, 2022, the Company had non-designated forward contracts with notional amounts of €40.2 million, £16.2 million, Rs.484 million, and C$3.8 million.

The following summarizes the fair value of derivative financial instruments as of March 31, 2023 and December 31, 2022:

	*March 31,*			*December 31,*
	*2023*			*2022*
	(in thousands)
Assets
Foreign currency forward contracts designated as cash flow hedge	$	190		$	1,041
Foreign currency forward contracts not designated as hedging instruments		9			452
Total	$	199		$	1,493
Liabilities
Foreign currency forward contracts designated as cash flow hedge	$	(2,409	)	$	(2,634	)
Foreign currency forward contracts not designated as hedging instruments		(712	)		(2,045	)
Total	$	(3,121	)	$	(4,679	)

The Company presents its derivative assets and derivative liabilities at gross fair values in the condensed consolidated balance sheets. However, under the master netting agreements with the respective counterparties of the foreign exchange contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. The potential offset to both assets and liabilities under the right of set-off associated with the Company's foreign currency exchange contracts are immaterial as of March 31, 2023 and December 31, 2022. The derivatives held by the Company are not subject to any credit contingent features negotiated with its counterparties. The Company is not required to pledge nor is entitled to receive cash collateral related to the above contracts. The counterparties to these derivatives are large, global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material.

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The following summarizes the gains (losses) recognized from forward contracts and other foreign currency transactions in other income (expense), net in the condensed consolidated statements of operations:

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
	(in thousands)
Net gains from non-designated forward contracts	$	259		$	1,155
Other foreign currency transactions losses		(425	)		(1,818	)
Total foreign exchange losses, net		(166	)		(663	)
Other expenses		(50	)		(47	)
Other income (expense), net	$	(216	)	$	(710	)

NOTE 3.

Accumulated Other Comprehensive Income (Loss)

The components and changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2023 and 2022 were as follows:

	Available-for-sale debt securities			Cash flow hedges			Total
	(in thousands)
Balances at December 31, 2022	$	(2,705	)	$	758		$	(1,947	)
Change in unrealized gains (losses) during the period		1,131			(443	)		688
Amount reclassified into income during the period		-			(534	)		(534	)
Income tax benefit		-			222			222
Net change during the period		1,131			(755	)		376
Balances at March 31, 2023		(1,574	)		3			(1,571	)

Balances at December 31, 2021	$	(185	)	$	1,192		$	1,007
Change in unrealized gains (losses) during the period		(2,070	)		648			(1,422	)
Amount reclassified into income during the period		-			(60	)		(60	)
Income tax provision		(58	)		(137	)		(195	)
Net change during the period		(2,128	)		451			(1,677	)
Balances at March 31, 2022		(2,313	)		1,643			(670	)

The effects on income before income taxes of amounts reclassified from AOCI to the condensed consolidated statements of operations were as follows:

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
	(in thousands)
Reclassification of AOCI - Cash flow hedges
Revenues	$	1,136		$	(46	)
Cost of revenues		(139	)		23
Research and development		(383	)		68
Sales and marketing		(23	)		4
General and administrative		(57	)		11
Total	$	534		$	60

There was no reclassification of AOCI to other income (expense), net related to Available-for-sale debt securities during the three months ended March 31, 2023 and 2022.

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NOTE 4.

Property and Equipment, Net

Property and equipment, net, consists of the following:

	*March 31,*			*December 31,*
	*2023*			*2022*
	(in thousands)
Computer equipment	$	177,434		$	173,832
Computer software		25,808			25,808
Leasehold improvements		21,009			21,009
Scanner appliances		16,326			15,696
Furniture, fixtures and equipment		6,528			6,524
Total property and equipment		247,105			242,869
Less: accumulated depreciation and amortization		(201,944	)		(195,441	)
Property and equipment, net	$	45,161		$	47,428

As of March 31, 2023 and December 31, 2022, physical scanner appliances and other computer equipment that are or will be subject to leases by customers had a net carrying value of $10.1 million and $6.7 million, respectively, including assets that had not been placed in service of $6.7 million and $4.0 million, respectively. Depreciation and amortization expenses relating to property and equipment were $6.5 million and $7.1 million for the three months ended March 31, 2023 and 2022, respectively, which were primarily recorded in cost of revenues in the condensed consolidated statements of operations.

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NOTE 5.

Revenue from Contracts with Customers

The Company records deferred revenue when cash payments are received or due in advance of its performance obligations offset by revenue recognized in the period. Revenues of $113.8 million and $100.0 million were recognized during the three months ended March 31, 2023 and 2022, respectively, which amounts were included in the deferred revenue balances of $317.2 million and $290.6 million as of December 31, 2022 and 2021, respectively.

The Company's payment terms vary by the type and location of its customers. The term between invoicing and when payment is due is not significant. In certain circumstances, based on the credit quality of the customer, the Company requires payment before the products or services are delivered to the customer.

The following table sets forth the expected revenue from all remaining performance obligations as of March 31, 2023:

	(in thousands)
2023 (remaining nine months)	$	131,257
2024		106,502
2025		47,649
2026		5,779
2027		776
2028 and thereafter		69
Total	$	292,032

Revenues allocated to remaining performance obligations represents the transaction price of noncancelable orders for which service has not been performed, which include deferred revenue and the amounts that will be invoiced and recognized as revenues in future periods from open contracts and excludes unexercised renewals. The Company applied the short-term contract exemption to exclude the remaining performance obligations that are part of a contract that has an original expected duration of one year or less.

From time to time, the Company enters into contracts with customers that extend beyond one year, with certain of its customers electing to pay for more than one year of services upon contract execution. The Company concluded that these contracts did not contain a financing component.

Revenues by sales channel are as follows:

	*Three Months Ended*
	*March 31,*
	*2023*		*2022*
	(in thousands)
Direct	$	75,093	$	66,471
Partner		55,590		46,949
Total	$	130,683	$	113,420

The Company utilizes partners to enable and accelerate the adoption of its cloud platform by increasing its distribution capabilities and market awareness of its cloud platform as well as by targeting geographic regions outside the reach of its direct sales force. The Company's channel partners maintain relationships with their customers throughout the territories in which they operate and provide their customers with services and third-party solutions to help meet those customers’ evolving security and compliance requirements. As such, these partners may offer the Company's IT security and compliance solutions in conjunction with one or more of their own products or services and act as a conduit through which the Company can connect with these prospective customers to offer its solutions. For sales involving a channel partner, the channel partner engages with the prospective customer directly and involves the Company's sales team as needed to assist in developing and closing an order. When a channel partner secures a sale, the Company sells the associated subscription to the channel partner who in turn resells the subscription to the customer. Sales to channel partners are made at a discount and revenues are recorded at this discounted price over the subscription terms. The Company does not have any influence or specific knowledge of its partners' selling terms with their customers. See Note 12, "Segment Information and Information about Geographic Area" for disaggregation of revenue by geographic area.

Deferred costs to obtain contracts are as follows:

	*March 31,*		*December 31,*
	*2023*		*2022*
	(in thousands)
Current	$	5,120	$	5,018
Noncurrent	$	10,143	$	10,090

For the three months ended March 31, 2023 and 2022, the Company recognized $1.4 million and $1.2 million, respectively, of amortization expense relating to deferred costs to obtain contracts in sales and marketing expense in the condensed consolidated statements of operations. During the same periods, there was no impairment loss related to the deferred costs to obtain contracts.

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NOTE 6.

Intangible Assets, Net

Intangible assets consist primarily of developed technology and patent licenses acquired from business or asset acquisitions. Acquired intangibles are amortized on a straight-line basis over the respective estimated useful lives of the assets.

The carrying values of intangible assets are as follows:

					*March 31, 2023*
(in thousands)	*Weighted Average Life (Years)*		*Weighted Average Remaining Life (Years)*		*Cost*		*Accumulated Amortization*			*Net Book Value*
Developed technology		4.6		1.3	$	40,141	$	(28,561	)	$	11,580
Patent licenses		14.0		1.4		1,387		(1,246	)		141
Non-compete agreements		2.0		—		500		(500	)		—
Assembled workforce		2.0		1.5		359		(90	)		269
Total intangibles subject to amortization					$	42,387	$	(30,398	)	$	11,990
Intangible assets not subject to amortization											40
Total intangible assets, net										$	12,030

					*December 31, 2022*
(in thousands)	*Weighted Average Life (Years)*		*Weighted Average Remaining Life (Years)*		*Cost*		*Accumulated Amortization*			*Net Book Value*
Developed technology		4.6		1.4	$	40,141	$	(27,860	)	$	12,281
Patent licenses		14.0		1.7		1,387		(1,221	)		166
Non-compete agreements		2.0		—		500		(500	)		—
Assembled workforce		2.0		1.7		359		(45	)		314
Total intangibles subject to amortization					$	42,387	$	(29,626	)	$	12,761
Intangible assets not subject to amortization											40
Total intangible assets, net										$	12,801

Intangible asset amortization expense was $0.8 million and $1.7 million for the three months ended March 31, 2023 and 2022, respectively. Intangible asset amortization expenses were primarily recorded in cost of revenues in the condensed consolidated statements of operations.

As of March 31, 2023, the Company expects amortization expense in future periods to be as follows:

	(in thousands)
2023 (remaining nine months)	$	2,314
2024		2,904
2025		2,557
2026		2,477
2027		1,738
Total expected future amortization expense	$	11,990

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NOTE 7.

Leases

The Company leases certain offices, computer equipment and its shared cloud platform facilities under non-cancelable operating leases for varying periods through 2028. While under the Company's lease agreements the Company has options to extend its certain leases, the Company has not included renewal options in determining the lease terms for calculating its lease liabilities, as these options are not reasonably certain of being exercised. Lease expense was $4.0 million and $3.6 million for the three months ended March 31, 2023 and 2022, respectively.

Supplemental cash flow information related to operating leases was as follows:

	*Three Months Ended*
	*March 31,*
	*2023*		*2022*
	(in thousands)
Cash payments included in the measurement of lease liabilities	$	3,905	$	4,035
Lease liabilities arising from obtaining right-of-use assets	$	-	$	638

The weighted average remaining lease term and the weighted average discount rate of the Company's operating leases were as follows:

	*March 31,*			*December 31,*
	*2023*			*2022*
Weighted average remaining lease term (years)		3.5			3.7
Weighted average discount rate		5.3	%		5.2	%

NOTE 8.

Commitments and Contingencies

Indemnifications

The Company from time to time enters into certain types of contracts that contingently require it to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company's bylaws, under which it must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship, (ii) contracts under which the Company must indemnify directors and certain officers for liabilities arising out of their relationship, and (iii) contracts under which the Company may be required to indemnify customers or resellers from certain liabilities arising from potential infringement of intellectual property rights, as well as potential damages caused by limited product defects. To date, the Company has not incurred and has not recorded any liability in connection with such indemnifications.

The Company maintains director and officer insurance, which may cover certain liabilities arising from its obligation to indemnify its directors.

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NOTE 9.

Stockholders' Equity and Stock-based Compensation

Equity Incentive Plans

Restated 2012 Equity Incentive Plan

On June 8, 2022 ("Effective Date"), the Company's stockholders approved the Amended and Restated 2012 Equity Incentive Plan (the "Restated 2012 Plan"). Under the Restated 2012 Plan, the Company is authorized to grant to eligible participants incentive stock options, nonstatutory stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance units and performance shares. Pursuant to the relevant plan provisions, 3,072 thousand shares were available for grant under the Restated 2012 Plan on the Effective Date. In addition, any outstanding awards or options granted under the previous version of the 2012 Equity Incentive Plan (“Previous 2012 Plan”) will be added back to the shares available for grant under the Restated 2012 Plan if they expire unexercised or are otherwise forfeited after the Effective Date. Any remaining shares available for grant under the Previous 2012 Plan as of the Effective Date were no longer available for future grants under the Restated 2012 Plan.

As of March 31, 2023, 2,307 thousand shares were available for grant under the Restated 2012 Plan.

2021 Employee Stock Purchase Plan

On June 9, 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”). A total of 600 thousand shares were authorized for issuance to eligible participating employees upon adoption of the ESPP. The ESPP provides for consecutive 6-month offering periods beginning on or about August 16 and February 16 of each year. Eligible employees who elect to participate can contribute from 1% to 15% of their eligible compensation through payroll withholding. During any offering period, contribution rates cannot be changed. However, eligible employees may withdraw from the current offering period. Any contributions made prior to each purchase date in the case of withdrawal or termination of employment will be refunded. On each purchase date, eligible participating employees will purchase the shares at a price per share equal to 85% of the lesser of (i) the fair market value of the Company's stock on the first trading day of the offering period or (ii) the fair market value of the Company's stock on the purchase date (i.e., the last trading day of the offering period).

During the three months ended March 31, 2023, 29.5 thousand shares were issued in connection with the purchase of common stock by participating employees. As of March 31, 2023, 525 thousand shares were available for future purchases.

Stock-based Compensation

The following table shows a summary of the stock-based compensation expense included in the condensed consolidated statements of operations:

	*Three Months Ended*
	*March 31,*
	*2023*		*2022*
	(in thousands)
Cost of revenues	$	1,592	$	1,080
Research and development		4,960		3,287
Sales and marketing		2,454		2,031
General and administrative		7,027		5,347
Total stock-based compensation	$	16,033	$	11,745

As of March 31, 2023, the Company had unrecognized stock-based compensation expenses of $25.1 million, $80.0 million, $4.0 million, and $0.9 million related to options, RSUs, performance-based RSUs, and ESPP purchase rights, respectively, which are expected to be recognized over weighted-average periods of 2.8 years, 2.7 years, 1.1 years, and 0.4 years, respectively.

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Performance-based Restricted Stock Units ("PSUs")

On April 27, 2021, the Compensation Committee granted to the Company’s current president and chief executive officer an equity award consisting of certain RSUs and a target number of 10 thousand PSUs. The PSUs are scheduled to vest at the end of the three-year performance period from January 2021 through December 2023. The actual number of the PSUs eligible to vest ranges from 0% to 200% of the target number, depending on the level of achievement of goals related to revenue growth and free cash flow per share growth during the performance period. If the Company's current president and chief executive officer is terminated (a) by reason of death or disability or (b) by the Company for reasons other than cause or good reason within 12 months following a change in control, then 100% of any unvested portions of the award will vest, with any vesting in connection with terminations due to change in control conditioned upon the effectiveness of a release of claims in favor of the Company.

On October 28, 2021, the Compensation Committee approved to certain executive officers of the Company equity awards consisting of certain RSUs and an aggregate target number of 73 thousand PSUs. The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2022 through December 2024. Each annual installments at 200% of the annual target will be considered granted when the performance targets for the corresponding performance year are determined and approved. The actual number of the PSUs eligible to vest each year ranges from 0% to 200% of the annual target number, depending on the level of achievement of goals related to revenue growth and adjusted EBITDA margin corresponding to that year. The vesting and release of the first and second installment is capped at 100% of the target number at the end of the first and second year, respectively, with cumulative achievement over 100%, if any, to be vested and released at the end of the third year, together with the vesting of the third installment. If any of the executive officers is terminated by reason of death or disability, 100% of the target number of the unvested PSU will vest immediately, or (a) by the Company for reasons other than cause or (b) by the executive officers for good reason within 12 months following a change in control, any unvested PSUs eligible to vest pursuant to cumulative achievements over 100% for past installments along with any target number of unvested PSUs for any remaining installments will vest immediately.

On October 27, 2022, the Compensation Committee approved to certain executive officers of the Company equity awards consisting of certain RSUs and an aggregate target number of 86 thousand PSUs. The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2023 through December 2025. Each annual installments at 200% of the annual target will be considered granted when the performance targets for the corresponding performance year are determined and approved. The actual number of the PSUs eligible to vest each year ranges from 0% to 200% of the annual target number, depending on the level of achievement of goals related to revenue growth and adjusted EBITDA margin corresponding to that year. The vesting and release of the first and second installment is capped at 100% of the target number at the end of the first and second year, respectively, with cumulative achievement over 100%, if any, to be vested and released at the end of the third year, together with the vesting of the third installment. If any of the executive officers is terminated by reason of death or disability, 100% of the target number of the unvested PSU will vest immediately, or (a) by the Company for reasons other than cause or (b) by the executive officers for good reason within 12 months following a change in control, any unvested PSUs eligible to vest pursuant to cumulative achievements over 100% for past installments along with any target number of unvested PSUs for any remaining installments will vest immediately.

On February 6, 2023, the Compensation Committee approved to an executive officer of the Company equity awards consisting of certain RSUs and an aggregate target number of 6 thousand PSUs. The target PSUs are scheduled to vest in three equal annual installments over a three-year period from January 2023 through December 2025. Each annual installments at 200% of the annual target will be considered granted when the performance targets for the corresponding performance year are determined and approved. The actual number of the PSUs eligible to vest each year ranges from 0% to 200% of the annual target number, depending on the level of achievement of goals related to revenue growth and adjusted EBITDA margin corresponding to that year. The vesting and release of the first and second installment is capped at 100% of the target number at the end of the first and second year, respectively, with cumulative achievement over 100%, if any, to be vested and released at the end of the third year, together with the vesting of the third installment. If any of the executive officers is terminated by reason of death or disability, 100% of the target number of the unvested PSU will vest immediately, or (a) by the Company for reasons other than cause or (b) by the executive officers for good reason within 12 months following a change in control, any unvested PSUs eligible to vest pursuant to cumulative achievements over 100% for past installments along with any target number of unvested PSUs for any remaining installments will vest immediately.

The Company recognized $1.3 million and $0.8 million, respectively, of stock-based compensation expenses related to all PSUs during the three months ended March 31, 2023 and 2022.

Stock Option Activity

A summary of the Company’s stock option activity is as follows:

	*Outstanding Options*			*Weighted Average Exercise Price*		*Weighted Average Remaining Contractual Life*		*Aggregate Intrinsic Value*
	(in thousands)					(Years)		(in thousands)
Balance as of December 31, 2022		1,807		$	87.59		6.5	$	58,024
Granted		121		$	121.02
Exercised		(61	)	$	38.31
Canceled		(29	)	$	123.18
Balance as of March 31, 2023		1,838		$	90.85		6.5	$	74,979
Vested and expected to vest - March 31, 2023		1,614		$	85.86		6.2	$	73,425
Exercisable - March 31, 2023		996		$	62.04		4.5	$	67,948

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Restricted Stock Unit Activity

A summary of the Company’s RSU activity is as follows:

	*Outstanding RSUs*				*Weighted Average Grant Date Fair Value*
	(in thousands)
Balance as of December 31, 2022		1,183		(1)	$	124.42
Granted		52		(2)	$	121.02
Vested		(107	)	(3)	$	114.30
Forfeited		(100	)	(4)	$	127.16
Balance as of March 31, 2023		1,028		(5)	$	125.04
Outstanding and expected to vest - March 31, 2023		806			$	122.64

(1) Included 175 thousand PSUs granted to certain executive officers in 2022 and 2021.

(2) Included 4 thousand PSUs granted to certain executive officer in the three months ended March 31, 2023.

(3) Included 24 thousand PSUs granted to certain executive officers in 2021.

(4) Included 22 thousand PSUs granted to certain executive officers in 2022 and 2021.

(5) Included 132 thousand PSUs granted to certain executive officers in 2023, 2022 and 2021.

Share Repurchase Program

The Company's share repurchase program was authorized by the board of directors as follows:

Announcement Date	*Authorized Dollar Value*
	(in millions)
February 12, 2018	$	100.0
October 30, 2018		100.0
October 30, 2019		100.0
May 7, 2020		100.0
February 10, 2021		100.0
November 3, 2021		200.0
May 4, 2022		200.0
February 9, 2023		100.0
Total as of March 31, 2023	$	1,000.0

Shares may be repurchased from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act of 1934, including pursuant to a pre-set trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act. All share repurchases have been made using cash resources. Repurchased shares are retired and reclassified as authorized and unissued shares of common stock. On retirement of the repurchased shares, common stock is reduced by an amount equal to the number of shares being retired multiplied by the par value. The excess amount that is retired over its par value is first allocated as a reduction to additional paid-in capital based on the initial public offering price of the stock, with the remaining excess to accumulated deficit.

During the three months ended March 31, 2023 and 2022, the Company repurchased 584 thousand shares and 368 thousand shares of its common stock for approximately$66.6 million and $46.6 million, respectively. As of March 31, 2023, approximately $187.9 million remained available for share repurchases pursuant to the Company's share repurchase program.

On August 16, 2022, the President signed into law the Inflation Reduction Act of 2022 which contained provisions effective January 1, 2023,