Filed Pursuant to Rule 424(b)(3)
Registration No. 333-239276

 

Eventbrite, Inc.

Up to 2,599,174 Shares of

Class A Common Stock

 

 

Prospectus Supplement No. 1

(to Prospectus dated July 1, 2020)

 

 

This Prospectus Supplement No. 1 of Eventbrite, Inc. supplements the prospectus, dated July 1, 2020 (the “Prospectus”), which was declared effective by the U.S. Securities and Exchange Commission (the “Commission”) on July 1, 2020, and which forms a part of our Registration Statement on Form S-1 (Registration No. 333-239276). This Prospectus Supplement No. 1 is being filed to update, amend and supplement the information included or incorporated by reference in the Prospectus with the information contained in our quarterly report on Form 10-Q, filed with the Commission on August 7, 2020 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this Prospectus Supplement No. 1.

The Prospectus relates to the resale of up to 2,599,174 shares of our Class A common stock, par value $0.00001 per share, by FP EB Aggregator, L.P. or its permitted transferees.

This Prospectus Supplement No. 1 should be read in conjunction with the Prospectus and is qualified by reference to the Prospectus except to the extent that the information in this Prospectus Supplement No. 1 supersedes the information contained in the Prospectus.

Our Class A common stock is listed on the New York Stock Exchange, or NYSE, under the symbol “EB.” On August 6, 2020, the last reported sale price of our Class A common stock on the NYSE was $8.67 per share.

 

 

Investing in our Class  A common stock involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors ” beginning on page 3 of the Prospectus, as well as those risks and uncertainties described in the accompanying prospectus supplements and the documents included or incorporated by reference herein or therein.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

The date of this Prospectus Supplement No. 1 is August 7, 2020.

 

 

 

 

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 June 30, 2020

or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-38658

 

 

EVENTBRITE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		14-1888467
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

155 5th Street, 7th Floor

San Francisco, CA 94103

(Address of principal executive offices) (Zip Code)

(415) 692-7779

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

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

 

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Class A common stock, $0.00001 par value		EB		New York Stock Exchange 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

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

 

Large accelerated 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  ☒

As of July 15, 2020, 67,466,394 shares of Registrant’s Class A common stock and 23,383,917 shares of Registrant’s Class B common stock were outstanding.

 

 

 

EVENTBRITE, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED

JUNE 30, 2020

TABLE OF CONTENTS

 

				Page
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS				3
PART I. FINANCIAL INFORMATION
Item 1.		Unaudited Interim Condensed Consolidated Financial Statements		4
		Condensed Consolidated Balance Sheets as of June  30, 2020 and December 31, 2019		5
		Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2020 and 2019		6
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019		7
		Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019		9
		Notes to Unaudited Interim Condensed Consolidated Financial Statements		11
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		51
Item 4.		Controls and Procedures		51
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings		52
Item 1A.		Risk Factors		54
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		85
Item 6.		Exhibits		86
Signatures				87

 

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “appears,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements related to the impacts of the COVID-19 global health pandemic, including its impact on us, our operations, or our future financial or operational results; our expectations regarding restructuring charges with respect to the workforce reduction implemented in response to the COVID-19 global health pandemic; statements regarding our credit agreement and our convertible senior notes, including the intended use of the net proceeds; statements about our future financial performance, including our revenue, costs of revenue and operating expenses; our anticipated growth and growth strategies and our ability to effectively manage that growth; our ability to achieve and grow profitability; the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs; our ability to maintain the security and availability of our platform; our predictions about industry and market trends; our ability to attract and retain creators; our ability to successfully operate internationally; our ability to maintain, protect and enhance our intellectual property; our ability to attract and retain qualified employees and key personnel; our ability to comply with modified or new laws and regulations applying to our business; and our ability to successfully defend litigation brought against us.

The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events.

All forward-looking statements are based on information and estimates available to the Company at the time of this Quarterly Report on Form 10-Q and are not guarantees of future performance. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.

 

3

PART 1. FINANCIAL INFORMATION

Item 1. Unaudited Interim Condensed Consolidated Financial Statements

 

4

EVENTBRITE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

		June 30, 2020				December 31, 2019
Assets
Current assets
Cash and cash equivalents		$	546,863			$	420,712
Funds receivable			5,659				54,896
Accounts receivable, net			829				2,932
Creator signing fees, net			1,511				9,597
Creator advances, net			10,532				22,282
Prepaid expenses and other current assets			11,702				14,157
Total current assets			577,096				524,576
Property, plant and equipment, net			15,083				19,735
Operating lease right-of-use assets			18,342				22,160
Goodwill			170,560				170,560
Acquired intangible assets, net			43,948				49,158
Restricted cash			2,230				2,228
Creator signing fees, noncurrent			15,239				16,710
Creator advances, noncurrent			886				922
Other assets			12,291				1,966
Total assets		$	855,675			$	808,015
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable, creators		$	203,222			$	307,871
Accounts payable, trade			4,144				1,870
Chargebacks and refunds reserve			65,907				2,699
Accrued compensation and benefits			7,068				6,347
Accrued taxes			1,489				5,409
Operating lease liabilities			7,538				9,115
Other accrued liabilities			13,110				16,997
Total current liabilities			302,478				350,308
Accrued taxes, noncurrent			14,444				15,173
Operating lease liabilities, noncurrent			12,998				16,162
Long-term debt			196,581				—
Other liabilities			155				557
Total liabilities			526,656				382,200
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.00001 par value; 100,000,000 shares authorized, no shares issued or outstanding as of June 30, 2020 and December 31, 2019			—				—
Common stock, $0.00001 par value; 1,100,000,000 shares authorized; 90,811,061 shares issued and outstanding as of June 30, 2020; 85,718,860 shares issued and outstanding as of December 31, 2019			1				1
Additional paid-in capital			886,904				798,640
Accumulated deficit			(557,886	)			(372,826	)
Total stockholders’ equity			329,019				425,815
Total liabilities and stockholders’ equity		$	855,675			$	808,015

(See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements)

 

5

EVENTBRITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Net revenue		$	8,394			$	80,758			$	57,480			$	162,084
Cost of net revenue(1)			10,094				31,119				38,099				61,684
Gross profit			(1,700	)			49,639				19,381				100,400
Operating expenses(1)
Product development			15,047				16,628				31,218				31,225
Sales, marketing and support			(3,073	)			26,053				96,842				47,778
General and administrative			22,472				22,287				64,581				47,667
Total operating expenses			34,446				64,968				192,641				126,670
Loss from operations			(36,146	)			(15,329	)			(173,260	)			(26,270	)
Interest expense			(3,625	)			(1,033	)			(3,637	)			(2,125	)
Other income (expense), net			1,186				375				(8,099	)			2,555
Loss before income taxes			(38,585	)			(15,987	)			(184,996	)			(25,840	)
Income tax provision (benefit)			(1	)			(1,193	)			64				(1,093	)
Net loss		$	(38,584	)		$	(14,794	)		$	(185,060	)		$	(24,747	)
Net loss per share, basic and diluted		$	(0.44	)		$	(0.18	)		$	(2.12	)		$	(0.31	)
Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted			88,410				81,369				87,174				80,049

 

(1)	Includes stock-based compensation as follows (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Cost of net revenue		$	207			$	325			$	630			$	569
Product development			3,366				2,187				7,055				4,225
Sales, marketing and support			901				1,246				2,332				2,469
General and administrative			5,137				4,948				10,416				9,570

(See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements)

 

6

EVENTBRITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(Unaudited)

 

		Common Stock-Class A								Common Stock-Class B								Additional Paid-In Capital				Accumulated Deficit				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount
Balance at January 1, 2020			61,863,617			$	1				23,855,243			$	—			$	798,640			$	(372,826	)		$	425,815
Issuance of common stock upon exercise of stock options			738,410				—				—				—				4,654				—				4,654
Issuance of restricted stock awards			480				—				—				—				—				—				—
Issuance of common stock for settlement of RSUs			304,600				—				—				—				—				—				—
Shares withheld related to net share settlement			(110,411	)			—				—				—				(1,713	)			—				(1,713	)
Conversion of common stock from Class B to Class A			262,483				—				(262,483	)			—				—				—				—
Vesting of early exercised stock options			—				—				—				—				61				—				61
Stock-based compensation			—				—				—				—				11,201				—				11,201
Net loss			—				—				—				—				—				(146,476	)			(146,476	)
Balance at March 31, 2020			63,059,179				1				23,592,760			$	—				812,843				(519,302	)			293,542
Issuance of common stock upon exercise of stock options			1,290,333				—				13,004				—				6,837				—				6,837
Issuance of restricted stock awards			—				—				—				—				—				—				—
Issuance of common stock for settlement of RSUs			228,233				—				—				—				—				—				—
Shares withheld related to net share settlement			(70,098	)			—				—				—				(616	)			—				(616	)
Conversion of common stock from Class B to Class A			221,847				—				(221,847	)			—				—				—				—
Vesting of early exercised stock options			—				—				—				—				180				—				180
Equity component of convertible notes, net of issuance costs			—				—				—				—				45,452				—				45,452
Purchase of convertible senior notes capped calls			—				—				—				—				(15,600	)			—				(15,600	)
Issuance of common stock for ESPP Purchase			98,476				—				—				—				721				—				721
Shares issued in connection with term loans stock purchase agreement			2,599,174				—				—				—				27,369				—				27,369
Stock-based compensation			—				—				—				—				9,718				—				9,718
Net loss			—				—				—				—				—				(38,584	)			(38,584	)
Balance at June 30, 2020			67,427,144			$	1				23,383,917			$	—			$	886,904			$	(557,886	)		$	329,019

 

7

EVENTBRITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(Unaudited)

 

		Common Stock-Class A								Common Stock-Class B								Treasury Stock								Additional Paid-In Capital				Accumulated Deficit				Total Stockholders’ Equity
		Shares				Amount				Shares				Amount				Shares				Amount
Balance at January 1, 2019			11,502,993			$	—				66,855,401			$	—				(188,480	)		$	(488	)		$	718,405			$	(302,695	)		$	415,222
Issuance of common stock upon exercise of stock options			1,785,106				—				249,207				—				—				—				12,427				—				12,427
Issuance of restricted stock awards			4,402				—				—				—				—				—				—				—				—
Issuance of common stock for settlement of RSUs			62,263				—				—				—				—				—				—				—				—
Shares withheld related to net share settlement			(24,249	)			—				—				—				—				—				(560	)			—				(560	)
Conversion of common stock from Class B to Class A			21,095,075				—				(21,095,075	)			—				—				—				—				—				—
Retirement of treasury shares			—				—				—				—				188,480				488				(488	)			—				—
Vesting of early exercised stock options			—				—				—				—				—				—				92				—				92
Stock-based compensation			—				—				—				—				—				—				8,330				—				8,330
Cumulative effect adjustment upon adoption of ASU 2014-09			—				—				—				—				—				—				—				(600	)			(600	)
Cumulative effect adjustment upon adoption of ASU 2016-02			—				—				—				—				—				—				—				(771	)			(771	)
Net loss			—				—				—				—				—				—				—				(9,953	)			(9,953	)
Balance at March 31, 2019			34,425,590				—				46,009,533				—				—				—				738,206				(314,019	)			424,187
Issuance of common stock upon exercise of stock options			1,785,361				—				—				—				—				—				10,526				—				10,526
Issuance of restricted stock awards			21,016				—				—				—				—				—				—				—				—
Issuance of common stock for settlement of RSUs			52,204				—				—				—				—				—				—				—				—
Issuance of common stock for ESPP Purchase			167,706				—				—				—				—				—				2,234				—				2,234
Shares withheld related to net share settlement			(11,858	)			—				—				—				—				—				(253	)			—				(253	)
Conversion of common stock from Class B to Class A			11,491,455				—				(11,491,455	)			—				—				—				—				—				—
Vesting of early exercised stock options			—				—				—				—				—				—				92				—				92
Stock-based compensation			—				—				—				—				—				—				9,154				—				9,154
Net loss			—				—				—				—				—				—				—				(14,794	)			(14,794	)
Balance at June 30, 2019			47,931,474			$	—				34,518,078			$	—				—			$	—			$	759,959			$	(328,813	)		$	431,146

(See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements)

 

8

EVENTBRITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

		Six Months Ended June 30,
		2020				2019
Cash flows from operating activities
Net loss		$	(185,060	)		$	(24,747	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			11,909				11,969
Amortization of creator signing fees			5,301				4,915
Noncash operating lease expense			3,894				3,933
Accretion of debt discounts and issuance costs			2,688				223
Stock-based compensation			20,433				16,833
Provision for chargebacks and refunds			84,533				9,951
Impairment charges			8,227				1,899
Provision for bad debt and creator advances			16,224				2,380
Loss on disposal of assets			2,159				58
Deferred income taxes			(82	)			(745	)
Changes in operating assets and liabilities:
Accounts receivable			(1,001	)			(1,061	)
Funds receivable			49,237				12,115
Creator signing fees, net			(3,901	)			(9,251	)
Creator advances, net			(913	)			(8,513	)
Prepaid expenses and other current assets			1,964				1,783
Other assets			259				(2	)
Accounts payable, creators			(104,649	)			50,769
Accounts payable, trade			1,440				956
Chargebacks and refunds reserve			(21,325	)			(9,590	)
Accrued compensation and benefits			721				(308	)
Accrued taxes			(3,920	)			(3,525	)
Operating lease liabilities			(4,876	)			(4,105	)
Other accrued liabilities			(9,338	)			3,702
Accrued taxes, noncurrent			(647	)			(1,334	)
Other liabilities			8				(974	)
Net cash provided by (used in) operating activities			(126,715	)			57,331
Cash flows from investing activities
Purchases of property and equipment			(1,230	)			(3,566	)
Capitalized internal-use software development costs			(2,538	)			(4,271	)
Net cash used in investing activities			(3,768	)			(7,837	)
Cash flows from financing activities
Proceeds from issuance of common stock under ESPP			721				2,234
Proceeds from exercise of stock options			11,491				22,954
Taxes paid related to net share settlement of equity awards			(453	)			(706	)
Principal payments on debt obligations			—				(11,406	)
Proceeds from issuance of debt and common stock, net of issuance costs paid			260,777				(457	)
Purchase of convertible notes capped calls			(15,600	)			—
Payments on finance lease obligations			(300	)			(138	)
Payments of deferred offering costs			—				(413	)

 

9

EVENTBRITE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

		Six Months Ended June 30,
		2020				2019
Net cash provided by financing activities			256,636				12,068
Net increase in cash, cash equivalents and restricted cash			126,153				61,562
Cash, cash equivalents and restricted cash
Beginning of period			422,940				439,400
End of period		$	549,093			$	500,962
Supplemental cash flow data
Interest paid		$	613			$	1,876
Income taxes paid, net of refunds			475				367
Noncash investing and financing activities
Vesting of early exercised stock options		$	241			$	184
Purchases of property and equipment, accrued but unpaid			226				338

(See accompanying Notes to Unaudited Interim Condensed Consolidated Financial Statements)

 

10

EVENTBRITE, INC.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

1. Overview and Basis of Presentation

Description of Business

Eventbrite, Inc. (Eventbrite or the Company) has built a powerful, broad technology platform to enable creators to solve the challenges associated with creating live and online experiences. The Company’s platform integrates components needed to seamlessly plan, promote and produce live events, thereby allowing creators to reduce friction and costs, increase reach and drive ticket sales.

Basis of Presentation

The accompanying interim condensed consolidated financial statements of the Company are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and the applicable rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date.

The accompanying unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal and recurring nature considered necessary to state fairly the Company’s consolidated financial position, results of operations and cash flows for the interim periods. All intercompany transactions and balances have been eliminated. The interim results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other future annual or interim period.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and the Consolidated Financial Statements and notes thereto included in Items 7, 7A and 8, respectively, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Form 10-K).

Use of Estimates

In order to conform with U.S. GAAP, the Company is required to make certain estimates, judgments and assumptions when preparing its consolidated financial statements. These estimates, judgments and assumptions affect the reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods. These estimates include, but are not limited to, the recoverability of creator signing fees and creator advances, the chargebacks and refunds reserve, the capitalization and estimated useful life of internal-use software, certain assumptions used in the valuation of equity awards, assumptions used in determining the fair value of business combinations, the allowance for doubtful accounts, indirect tax reserves and contra-revenue amounts related to fraudulent events, customer disputed transactions and refunds. The Company evaluates these estimates on an ongoing basis. Actual results could differ from those estimates and such differences could be material to the Company’s consolidated financial statements.

COVID-19 Impacts

During the six months ended June 30, 2020, a global health pandemic referred to as COVID-19 arose and has disrupted many industries around the world, including the live events industry, resulting in the cancellation or postponement of live events. The effect of and uncertainties surrounding the COVID-19 pandemic has caused the Company to make significant estimates in its condensed consolidated financial statements as of and for the three and six months ended June 30, 2020, specifically related to chargebacks and refunds due to cancelled or postponed events, which impacts net revenue, advance payouts, creator signing fees and creator advances. The COVID-19 pandemic is ongoing in nature and the Company will continue to revise such estimates in future reporting periods to reflect management’s best estimates of future outcomes. The COVID-19 pandemic has adversely affected the Company’s results of operations in the three and six months ended June 30, 2020. Significant uncertainty remains regarding the extent and duration of the impact that the COVID-19 pandemic will have on the Company’s business. The full extent to which COVID-19 impacts the Company’s business, results of operations and financial condition cannot be predicted at this time, and the impact of COVID-19 may persist for an extended period of time or become more pronounced.

 

11

2020 Restructuring

During the three months ended June 30, 2020, the Company’s board of directors approved a program to reduce the Company’s global workforce personnel by approximately 45% (the RIF). This reduction in the global workforce was substantially completed in the second quarter of 2020. Restructuring and other charges by type for the RIF for the period were as follows (in thousands):

 

			Three Months Ended June 30, 2020
Employee severance and post-termination benefit arrangements		$	7,498
Asset impairments and loss on disposals			1,879
Other charges			144
Total restructuring and other charges		$	9,521

SEC Filer and Emerging Growth Company Status

The Company became a large accelerated filer on December 31, 2019, based on the market value of the Company’s Class A common stock held by non-affiliates as of the last day of the second quarter in 2019. Prior to that, the Company was an emerging growth company (EGC) as defined in the Jumpstart Our Business Startups Act (JOBS Act). Being an EGC allowed the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company had elected to use this extended transition period under the JOBS Act.

The Company lost the ability to delay adoption of new or revised accounting pronouncements when it became a large accelerated filer as of December 31, 2019. As a result, the financial statements included in this Quarterly Report on Form 10-Q reflect the adoption of new accounting standards effective for calendar year end public companies, including the adoption of ASU 2016-02, Leases (Topic 842) (ASC 842). The Company previously filed its 2019 quarterly interim financial statements on Form 10-Q by accounting for its leases under ASC 840, Leases (ASC 840), and has consequently recast its previously reported 2019 interim financial information to be reported under ASC 842 in this Quarterly Report on Form 10-Q. Refer to the sections titled Recently Adopted Accounting Pronouncements in Note 2 and Adoption of ASC 842 in Note 8 for more information.

Comprehensive Loss

For all periods presented, comprehensive loss equaled net loss. Therefore, the condensed consolidated statements of comprehensive loss have been omitted from the condensed consolidated financial statements.

Segment Information

The Company’s Chief Executive Officer (CEO) is the chief operating decision maker. The Company’s CEO reviews discrete financial information presented on a consolidated basis for purposes of allocating resources and evaluating the Company’s financial performance. Accordingly, the Company has determined that it operates as a single operating segment and has one reporting unit.

2. Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued ASC 842, which supersedes the previous accounting guidance for leases included within ASC 840. The new guidance generally requires an entity to recognize on its balance sheet operating and finance lease liabilities and corresponding right-of-use assets, as well as to recognize the associated operating lease expenses on its statements of operations.

The Company adopted ASC 842 in the 2019 Form 10-K and retroactively applied its provisions to January 1, 2019 in accordance with ASU No. 2018-11, Targeted Improvements to ASC 842 using a modified retrospective approach, thereby recasting the results of operations for each of the first three quarters of 2019. The recast results for the three and six months ended June 30, 2019 are reflected as such in this Quarterly Report on Form 10-Q. The Company elected not to adjust comparative periods prior to 2019 and will continue to disclose reporting periods prior to January 1, 2019 under ASC 840.

 

12

The most significant impact of adopting ASC 842 was the derecognition of the Company’s build-to-suit asset and improvements, including lessor-owned improvements, with a carrying amount of $26.7 million and the related lease financing obligation of $28.9 million related to the Company’s San Francisco office lease. As of January 1, 2019, the Company ceased to allocate its lease payments to interest expense and the build-to-suit liability. Under ASC 842, the Company classifies this lease as an operating lease and recognizes lease expense in the consolidated statement of operations. Lease payments are recorded as a reduction of the operating lease liability, similar to all of the Company’s other real estate leases. The Company recorded additional lease operating expense of $3.7 million, decreased depreciation expense of $0.5 million and decreased interest expense of $3.3 million during the year ended December 31, 2019 compared to the year ended December 31, 2018, related to its San Francisco office lease as a result of adopting ASC 842.

The adoption of ASC 842 resulted in the recognition of $25.7 million of operating lease right-of-use assets and $29.7 million of operating lease liabilities on the consolidated balance sheet as of January 1, 2019. The Company reclassified $1.7 million of previously recognized deferred rent obligations and lease incentives to operating lease right-of-use assets upon adoption of ASC 842. The Company also recorded finance lease right-of-use assets of $0.4 million and total finance lease liabilities of $0.5 million as of January 1, 2019.

The adoption of ASC Topic 842 had no income tax impact to the consolidated financial statements. The Company wrote-off its deferred tax asset related to its built-to-suit lease and grossed up its deferred taxes consistent with the new ASC 842 classifications: right-of-use asset and lease liability, recording a $2.5 million deferred tax liability related to the recognition of right-of-use assets and a $3.0 million deferred tax asset related to the recognition of lease liabilities upon adoption. The deferred taxes recognized upon the adoption of ASC 842 were offset by a valuation allowance, resulting in no income tax impact to the consolidated financial statements. Furthermore, in conjunction with the adoption entry, the Company adjusted its deferred rent deferred tax asset, fixed asset deferred tax liability and prepaid expenses deferred tax liability through retained earnings, which was offset by a valuation allowance.

For further information, see Note 8.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. The Company adopted this new standard effective January 1, 2020 and has considered forward-looking information in its measurement and recognition of expected credit losses for its accounts receivables, creator signing fees and creator advances, including consideration of the financial statement effects of the COVID-19 pandemic. Refer to Note 4, Note 5 and Note 6 for further information.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. This standard simplifies accounting for income taxes by removing certain exceptions to the general principles and amending existing guidance to improve consistent application. The Company adopted this new standard effective January 1, 2020. Its adoption had no material impact on the Company’s financial reporting or results of operations.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04), which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. The Company adopted this new standard effective January 1, 2020. Its adoption had no material impact on the Company’s financial reporting or results of operations.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. Certain disclosure requirements in Topic 820 are also removed or modified. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain of the amendments are to be applied prospectively while others are to be applied retrospectively. There was not a material impact on the Company’s consolidated financial statements as a result of the adoption of ASU 2018-13.

 

13

Revenue Recognition

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs—Contracts with Customers (Subtopic 340-40) (ASC 606) on January 1, 2019.

The Company determines revenue recognition through the following steps:

 

i.

Identification of the contract, or contracts, with a customer

 

ii.

Identification of the performance obligations in the contract

 

iii.

Determination of the transaction price

 

iv.

Allocation of the transaction price to the performance obligations in the contract

 

v.

Recognition of revenue, when, or as, the Company satisfies the performance obligation

The Company derives its revenues primarily from service fees and payment processing fees charged at the time a ticket for an event is sold. The Company also derives revenues from providing certain creators with account management services and customer support. The Company’s customers are event creators who use the Company’s platform to sell tickets to attendees. Revenue is recognized when or as control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company allocates the transaction price by estimating a standalone selling price for each performance obligation using an expected cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of the event.

The event creator has the choice of whether to use Eventbrite Payment Processing (EPP) or to use a third-party payment processor, referred to as Facilitated Payment Processing (FPP). Under the EPP option, the Company is the merchant of record and is responsible for processing the transaction and collecting the face value of the ticket and all associated fees at the time the ticket is sold. The Company is also responsible for remitting these amounts collected, less the Company’s fees, to the event creator. Under the FPP option, Eventbrite is not responsible for processing the transaction or collecting the face value of the ticket and associated fees. In this case, the Company invoices the creator for all of the Company’s fees.

The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. The Company determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing the event for which a ticket is sold, is responsible for determining the price of the ticket and is responsible for providing a refund if the event is canceled. The Company’s service provides a platform for the creator and event attendee to transact and the Company’s performance obligation is to facilitate and process that transaction and issue the ticket. The amount that the Company earns for its services is fixed. For the payment processing service, the Company determined that it is the principal in providing the service as the Company is responsible for fulfilling the promise to process the payment and has discretion and latitude in establishing the price of its service. Based on management’s assessment, the Company records revenue on a net basis related to its ticketing service and on a gross basis related to its payment processing service. As a result, costs incurred for processing the transactions are included in cost of net revenues in the condensed consolidated statements of operations.

Revenue is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated uncollectible amounts, including estimates related to the effect of the COVID-19 pandemic. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility of that creator. If a creator is unwilling or unable to fulfill their refund obligations, the Company may, at its discretion, provide attendee refunds. Revenue is also presented net of the amortization of creator signing fees. The benefit the Company receives by securing exclusive ticketing and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the creator and accordingly these fees are recorded as a reduction of revenue in the condensed consolidated statements of operations. See also the descriptions of the Company’s advance payouts under the sections Accounts Payable, Creators and Chargebacks and Refund Reserve below.

Cost of Net Revenue

Cost of net revenue consists primarily of payment processing fees, platform and website hosting fees and operational costs, amortization of acquired developed technology costs, amortization of capitalized internal-use software development costs, field operations costs and allocated customer support costs.

 

14

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents includes bank deposits and money market funds held with financial institutions. Cash and cash equivalents balances include the face value of tickets sold on behalf of creators and their share of service charges, which are to be remitted to the creators. Such balances were $198.0 million and $256.8 million as of June 30, 2020 and December 31, 2019, respectively. Although creator cash is legally unrestricted, the Company does not utilize creator cash for its own financing or investing activities as the amounts are payable to creators on a regular basis. These amounts due to creators are included in accounts payable, creators on the consolidated balance sheets. The Company considers all highly liquid investments, including money market funds with an original maturity of three months or less at the date of purchase, to be cash equivalents.

The Company has issued letters of credit under lease agreements and other agreements which have been collateralized with cash. This cash is classified as noncurrent restricted cash on the consolidated balance sheets. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

 

		June 30, 2020				December 31, 2019
Cash and cash equivalents		$	546,863			$	420,712
Restricted cash			2,230				2,228
Total cash, cash equivalents and restricted cash		$	549,093			$	422,940

Funds Receivable

Funds receivable represents cash-in-transit from third-party payment processors that is received by the Company within approximately five business days from the date of the underlying ticketing transaction. The funds receivable balances include the face value of tickets sold on behalf of creators and their share of service charges, which amounts are to be remitted to the creators. Such amounts were $5.3 million and $51.1 million as of June 30, 2020 and December 31, 2019, respectively.

Accounts Payable, Creators

Accounts payable, creators consists of unremitted ticket sale proceeds, net of Eventbrite service fees and applicable taxes. Amounts are remitted to creators within five business days subsequent to the completion of the related event. Creators may apply to receive these proceeds prior to completion of their events as creators often need these funds to pay for event-related costs. For qualified creators, the Company passes ticket sales proceeds to the creator prior to the event, subject to certain limitations. Internally, the Company refers to these payments as advance payouts. When an advance payout is made, the Company reduces its cash and cash equivalents with a corresponding decrease to its accounts payable, creators. As a result of the COVID-19 pandemic and its effect of causing creators to cancel, postpone or reschedule events, the Company temporarily suspended its advance payouts program on March 11, 2020, at which date the total advance payouts to creators related to future events was approximately $354.0 million. As of June 30, 2020, the advance payouts outstanding had reduced to approximately $253.3 million, as a result of creators fulfilling their refund obligations with creator funds as well as events taking place. The Company is exploring new ways to make advance payouts to qualified creators who meet strict guidelines and has started making advance payouts available to a small number of low risk creators on a trial basis.

Chargebacks and Refunds Reserve

Under the Company’s standard terms of service for creators using EPP, the Company settles a creator’s share of the proceeds from ticket sales within five business days after the successful completion of the event. The terms of the Company’s standard merchant agreement obligate creators to reimburse attendees (or the Company, if it has processed the refund) who are entitled to refunds under the creator’s refund policy and under the Company’s refund policy requirement for ticket sales proceeds remitted to creators via advance payouts. When the Company provides advance payouts, it assumes risk that the event may be cancelled, fraudulent, materially not as described or removed from the Company’s platform due to its failure to comply with the Company’s terms of service or merchant agreement, resulting in significant chargebacks, refund requests and/or disputes between attendees and the creator, and risk that the creator will not be able to otherwise make the attendee whole. The Company may refund attendees if the creator is insolvent or has spent the proceeds of the ticket sales for event-related costs, among other circumstances. The Company may not be able to recover its losses from these events, and such unrecoverable amounts could equal the value of the transaction or transactions settled to the creator prior to the event that is disputed, plus any associated chargeback fees not assumed by the creator. The Company records estimates for refunds and chargebacks of its fees as contra-revenue. The Company records estimates for losses related to chargebacks and refunds of the face value of tickets as an operating expense classified within sales, marketing and support. The chargebacks and refunds reserve was $65.9 million and $2.7 million as of June 30, 2020 and December 31, 2019, respectively. The increase in the reserve balance during the six months ended June 30, 2020 was the result of estimated losses from the advance payout program and estimated future refunds

 

15

of its fees, relating largely to the COVID-19 pandemic. Prior to March 31, 2020, the Company included its chargebacks and refunds reserve in other accrued liabilities on the consolidated balance sheets, and has reclassified the balance as of December 31, 2019 on the condensed consolidated balance sheets included in this Quarterly Report on Form 10-Q to be consistent with the presentation as of June 30, 2020.

Impairment of Long-lived Assets

The carrying amounts of long-lived assets, including property and equipment, capitalized internal-use software, acquired intangible assets and right-of-use operating lease assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to future undiscounted net cash flows the asset is expected to generate over its remaining life.

If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the revised shorter useful life.

During the six months ended June 30, 2020, the Company determined that conditions resulting from the COVID-19 pandemic warranted an interim assessment of its long-lived assets balance. The Company performed a recoverability test and concluded no impairment of the carrying value was required.

Goodwill

Goodwill represents the excess of the aggregate fair value of the consideration transferred in a business combination over the fair value of the assets acquired, net of liabilities assumed. Goodwill is not amortized but the Company evaluates goodwill impairment of its single reporting unit annually in the fourth quarter, or more frequently if events or changes in circumstances indicate the goodwill may be impaired.

The Company determined that the conditions resulting from the COVID-19 pandemic and the decline in the market value of the Company’s common stock warranted an interim assessment of its goodwill carrying amount. On January 1, 2020, the Company adopted ASU 2017-04, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. During the six months ended June 30, 2020, the Company performed its analysis by comparing the estimated fair value of the Company to its carrying amount, including goodwill. The Company’s analysis indicated that its estimated fair value, using the market price of its common stock, exceeded its carrying amount and therefore goodwill was not impaired and no additional steps were necessary.

Significant Accounting Policies

Other than as discussed above, there have been no material changes to the Company’s significant accounting policies as described in the Company’s 2019 Form 10-K.

3. Fair Value Measurement

The Company measures its financial assets and liabilities at fair value at each reporting date using a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Other inputs that are directly or indirectly observable in the marketplace.

Level 3 – Unobservable inputs that are supported by little or no market activity.

The Company’s cash equivalents, funds receivable, accounts receivable, accounts payable, funds payable and other current liabilities approximate their fair value. All such financial assets and liabilities are Level 1 and are measured at fair value on a recurring basis. There were no other Level 1 assets or liabilities recorded at June 30, 2020 and December 31, 2019.

Refer to Note 9 “Debt” for details regarding the fair value of our term loans and convertible senior notes.

There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 for the periods ended June 30, 2020 and December 31, 2019.

 

16

4. Accounts Receivable, Net

Accounts receivable, net is comprised of invoiced amounts to customers who use FPP for payment processing as well as other invoiced amounts. During the three and six months ended June 30, 2020, the Company recorded $2.5 million and $3.6 million, respectively, of incremental allowance for doubtful accounts, including estimated future losses in consideration of the impact of the COVID-19 pandemic. The following table summarizes the Company’s accounts receivable balances as of the dates indicated (in thousands):

 

		June 30, 2020				December 31, 2019
Accounts receivable, customers		$	3,216			$	4,979
Allowance for doubtful accounts			(2,387	)			(2,047	)
Accounts receivable, net		$	829			$	2,932

5. Creator Signing Fees, Net

Creator signing fees are incentives paid by the Company to secure exclusive ticketing and payment processing rights with certain creators. As of June 30, 2020, the balance of creator signing fees, net is being amortized over a weighted-average remaining contract life of 3.19 years on a straight-line basis. The write-offs and other adjustments for the three and six months ended June 30, 2020 include estimated future losses in consideration of the COVID-19 pandemic. The following table summarizes the activity in creator signing fees for the periods indicated (in thousands):

 

		Three Months Ended June 30,
		2020				2019
Balance, beginning of period		$	17,725			$	19,120
Creator signing fees paid			7				4,630
Amortization of creator signing fees			(2,171	)			(2,522	)
Write-offs and other adjustments			1,189				(465	)
Balance, end of period		$	16,750			$	20,763

 

		Six Months Ended June 30,
		2020				2019
Balance, beginning of period		$	26,307			$	17,005
Creator signing fees paid			3,901				9,188
Amortization of creator signing fees			(5,301	)			(4,915	)
Write-offs and other adjustments			(8,157	)			(515	)
Balance, end of period		$	16,750			$	20,763

Creator signing fees are classified as follows on the condensed consolidated balance sheet as of the dates indicated (in thousands):

 

		June 30, 2020				December 31, 2019
Creator signing fees, net		$	1,511			$	9,597
Creator signing fees, noncurrent			15,239				16,710
Total creator signing fees		$	16,750			$	26,307

 

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6. Creator Advances, Net

Creator advances provide the creator with funds in advance of the event and are subsequently recovered by withholding amounts due to the Company from the sale of tickets for the event until the creator payment has been fully recovered. The write-offs and other adjustments for the three and six months ended June 30, 2020 include estimated future losses in consideration of the COVID-19 pandemic. The following table summarizes the activity in creator advances for the periods indicated (in thousands):

 

		Three Months Ended June 30,
		2020				2019
Balance, beginning of period		$	14,462			$	26,734
Creator advances paid			20				9,316
Creator advances recouped			(391	)			(4,914	)
Write-offs and other adjustments			(2,673	)			(2,420	)
Balance, end of period		$	11,418			$	28,716

 

		Six Months Ended June 30,
		2020				2019
Balance, beginning of period		$	23,204			$	23,142
Creator advances paid			7,666				19,084
Creator advances recouped			(6,753	)			(10,663	)
Write-offs and other adjustments			(12,699	)			(2,847	)
Balance, end of period		$	11,418			$	28,716

Creator advances, net are classified as follows on the condensed consolidated balance sheet as of the dates indicated (in thousands):

 

		June 30, 2020				December 31, 2019
Creator advances, net		$	10,532			$	22,282
Creator advances, noncurrent			886				922
Total creator advances		$	11,418			$	23,204

7. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following as of the dates indicated (in thousands):

 

		June 30, 2020				December 31, 2019
Capitalized internal-use software development costs		$	47,218			$	44,194
Furniture and fixtures			3,654				3,861
Computers and computer equipment			9,265				14,836
Leasehold improvements			8,207				8,393
Finance lease right-of-use assets			619				1,005
Property, plant and equipment			68,963				72,289
Less: Accumulated depreciation and amortization			(53,880	)			(52,554	)
Property, plant and equipment, net		$	15,083			$	19,735

 

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The Company recorded the following amounts related to depreciation of fixed assets and capitalized internal-use software development costs during the periods indicated (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Depreciation expense		$	977			$	1,599			$	2,491			$	3,236
Capitalized internal-use software development costs			737				2,614				3,024				4,922
Stock-based compensation costs included in capitalized internal-use software development costs			106				448				486				651
Amortization of capitalized internal-use software development costs			2,118				1,799				4,207				3,499

8. Leases

Adoption of ASC 842

The Company adopted ASC 842 in the fourth quarter of 2019, effective as of January 1, 2019 and applied a modified retrospective transition approach. The Company will continue to account for comparative reporting periods prior to that date under ASC 840.

Upon the adoption of ASC 842, the Company derecognized the build-to-suit asset and related lease financing obligation in their entirety, with the exception of the remaining net book value of lessee-owned tenant improvement assets which will be depreciated over the remaining term of the lease. The Company reclassified the San Francisco office lease as an operating lease consistent with the adoption ASC 842. The adoption effect of derecognizing the build-to-suit assets and lease financing obligation and recognizing operating lease right-of-use assets and operating lease liabilities on the consolidated balances sheets was as follows (in thousands):

 

		December 31, 2019				January 1, 2019				December 31, 2018
Property, plant and equipment, net		$	814			$	(26,676	)		$	28,101
Other accrued liabilities			—				(552	)			552
Build-to-suit lease financing obligation			—				(28,510	)			28,510
Operating lease right-of-use assets			5,953				10,130				—
Operating lease liabilities			5,580				5,167				—
Operating lease liabilities, noncurrent			1,446				7,026				—
Accumulated deficit			135				135				—

 

19

As a result of the derecognition of the San Francisco office lease as a build-to-suit lease and reclassification to an operating lease under ASC 842, the Company recast its previously reported results for the three and six months ended June 30, 2019 as follows (in thousands):

 

		Three Months Ended June 30, 2019
		Initially As Reported				Effect of ASC 842 Adoption				Recast As Reported
Net Revenue		$	80,758			$	—			$	80,758
Cost of Net Revenue			31,073				46				31,119
Gross Profit			49,685				(46	)			49,639
Operating Expenses:
Product Development			16,295				333				16,628
Sales, marketing and support			25,872				181				26,053
General and administrative			22,051				236				22,287
Total operating expenses			64,218				750				64,968
Loss from operations			(14,533	)			(796	)			(15,329	)
Interest expense			(1,868	)			835				(1,033	)
Other income, net			375				—				375
Loss before income taxes			(16,026	)			39				(15,987	)
Income tax provision			(1,193	)			—				(1,193	)
Net loss		$	(14,833	)		$	39			$	(14,794	)

 

		Six Months Ended June 30, 2019
		Initially As Reported				Effect of ASC 842 Adoption				Recast As Reported
Net Revenue		$	162,084			$	—			$	162,084
Cost of Net Revenue			61,591				93				61,684
Gross Profit			100,493				(93	)			100,400
Operating Expenses:
Product Development			30,559				666				31,225
Sales, marketing and support			47,434				344				47,778
General and administrative			47,178				489				47,667
Total operating expenses			125,171				1,499				126,670
Loss from operations			(24,678	)			(1,592	)			(26,270	)
Interest expense			(3,801	)			1,676				(2,125	)
Loss on debt extinguishment			—				—				—
Other income, net			2,555				—				2,555
Loss before income taxes			(25,924	)			84				(25,840	)
Income tax provision			(1,093	)			—				(1,093	)
Net loss		$	(24,831	)		$	84			$	(24,747	)

 

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The Company has also recast its previously reported consolidated cash flows in this Quarterly Report on Form 10-Q for the six months ended June 30, 2019. The derecognition of the build-to-suit lease resulted in a reclassification of $0.4 million of cash outflow in financing activities to cash outflow in operating activities. The $0.4 million was reclassified to cash flows from operating activities amongst net loss, depreciation and amortization, noncash operating lease expense, prepaid expenses and other current assets, operating lease liabilities, other current liabilities and other liabilities in the condensed consolidated statements of cash flows for the six months ended June 30, 2019.

Operating Leases

The Company leases its office facilities under operating lease arrangements with varying expiration dates through 2029. Operating lease right-of-use assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. Right-of-use assets also include adjustments related to prepaid or deferred lease payments and lease incentives. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate at the lease commencement date to determine the present value of lease payments. The incremental borrowing rate is calculated based on hypothetical fully-secured borrowings to fund each respective lease over the lease term as of the lease commencement date, based on an assessment of the company’s implied credit rating. As of June 30, 2020 and December 31, 2019, total operating lease right-of-use assets were $18.3 million and $22.2 million, respectively. Operating lease liabilities were $20.5 million as of June 30, 2020, $7.5 million current and $13.0 million non-current, respectively. Operating lease liabilities were $25.3 million as of December 31, 2019, $9.1 million current and $16.2 million non-current, respectively.

Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Company will exercise such options. As of June 30, 2020, the remaining lease term of the Company’s operating leases ranges from less than one year to ten years.

The components of operating lease costs were as follows (in thousands):

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Operating lease costs		$	2,013			$	1,962			$	3,894			$	3,933
Sublease income			(1,047	)			(979	)			(2,042	)			(1,944	)
Total operating lease costs, net		$	966			$	983			$	1,852			$	1,989

The Company made cash payments of $2.5 million and $4.9 million for operating lease liabilities during the three and six months ended June 30, 2020 respectively and $2.3 million and $4.1 million during the three and six months ended June 30, 2019, respectively, which is included within the operating activities section on the condensed consolidated statements of cash flows.

As of June 30, 2020, the Company’s operating leases had a weighted-average remaining lease term of 2.21 years and a weighted-average discount rate of 7.8%.

As of June 30, 2020, maturities of operating lease liabilities were as follows (in thousands):

 

		Operating Leases
The remainder of 2020		$	4,640
2021			5,258
2022			3,677
2023			3,499
2024			2,495
Thereafter			4,723
Total operating lease payments			24,292
Less: Imputed interest			(3,756	)
Total operating lease liabilities		$	20,536

Finance Leases

The Company leases certain computer equipment under finance leases. Finance lease right-of-use assets had a carrying amount of $0.4 million as of December 31, 2019 and are included in property, plant and equipment, net on the consolidated balance sheets. Finance lease liabilities totaled $0.7 million as of December 31, 2019, with $0.4 million and $0.3 million

 

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