10-Q

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 September 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 001-35108

 SERVICESOURCE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		81-0578975
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
707 17th Street, 25th Floor
Denver,	Colorado	80202
(Address of principal executive offices)		(Zip Code)

(720)	889-8500
(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 Par Value	SREV	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 (§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 October 23, 2020, 96,595,951 shares of common stock of ServiceSource International, Inc. were outstanding.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)	3
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Comprehensive Loss	5
Consolidated Statements of Stockholders’ Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	24
Item 4. Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	25
Item 1A. Risk Factors	25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3. Defaults Upon Senior Securities	25
Item 4. Mine Safety Disclosures	25
Item 5. Other Information	25
Item 6. Exhibits	26
Glossary of Terms	27

2

ServiceSource International, Inc.
Consolidated Balance Sheets
(in thousands, except per share and par value amounts)
(unaudited)
	September 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	39,180	$	27,089
Accounts receivable, net	33,366		41,754
Prepaid expenses and other	6,914		7,296
Total current assets	79,460		76,139
Property and equipment, net	31,319		36,149
ROU assets	31,733		36,396
Contract acquisition costs	995		1,602
Goodwill	6,334		6,334
Other assets	3,983		4,844
Total assets	$	153,824	$	161,464
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	993	$	4,392
Accrued expenses	2,411		3,366
Accrued compensation and benefits	17,754		16,700
Revolver	15,000		—
Operating lease liabilities	10,741		9,652
Other current liabilities	1,085		2,218
Total current liabilities	47,984		36,328
Operating lease liabilities, net of current portion	28,129		33,716
Other long-term liabilities	2,313		2,983
Total liabilities	78,426		73,027
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 20,000 shares authorized and none issued and outstanding	—		—
Common stock; $0.0001 par value; 1,000,000 shares authorized; 96,684 shares issued and 96,563 shares outstanding as of September 30, 2020; 94,972 shares issued and 94,851 shares outstanding as of December 31, 2019	10		9
Treasury stock	(441)		(441)
Additional paid-in capital	378,309		374,525
Accumulated deficit	(302,943)		(286,066)
Accumulated other comprehensive income	463		410
Total stockholders’ equity	75,398		88,437
Total liabilities and stockholders’ equity	$	153,824	$	161,464

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

3

ServiceSource International, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net revenue	$	45,790	$	53,395	$	143,542	$	161,264
Cost of revenue	33,210		37,871		103,415		115,696
Gross profit	12,580		15,524		40,127		45,568
Operating expenses:
Sales and marketing	5,638		7,499		19,048		22,934
Research and development	1,489		1,165		4,186		3,702
General and administrative	10,537		10,129		31,844		32,081
Restructuring and other related costs	—		630		703		1,836
Total operating expenses	17,664		19,423		55,781		60,553
Loss from operations	(5,084)		(3,899)		(15,654)		(14,985)
Interest and other expense, net	(500)		(419)		(1,050)		(967)
Loss before provision for income taxes	(5,584)		(4,318)		(16,704)		(15,952)
Provision for income tax benefit (expense)	6		(119)		(173)		(239)
Net loss	$	(5,578)	$	(4,437)	$	(16,877)	$	(16,191)
Net loss per common share:
Basic and diluted	$	(0.06)	$	(0.05)	$	(0.18)	$	(0.17)
Weighted-average common shares outstanding:
Basic and diluted	95,963		94,228		95,437		93,637

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

4

ServiceSource International, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net loss	$	(5,578)	$	(4,437)	$	(16,877)	$	(16,191)
Other comprehensive income (loss)
Foreign currency translation adjustments	102		73		53		(111)
Other comprehensive income (loss)	102		73		53		(111)
Comprehensive loss	$	(5,476)	$	(4,364)	$	(16,824)	$	(16,302)

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

5

ServiceSource International, Inc.
Consolidated Statements of Stockholders' Equity
(in thousands)
(unaudited)
	Common Stock			Treasury Shares/Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total
	Shares	Amount		Shares	Amount
Balance at January 1, 2020	94,972	$	9	(121)	$	(441)	$	374,525	$	(286,066)	$	410	$	88,437
Net loss	—	—		—	—		—		(5,942)		—		(5,942)
Other comprehensive income	—	—		—	—		—		—		498		498
Stock-based compensation	—	—		—	—		1,066		—		—		1,066
Issuance of common stock, RSUs	178	1		—	—		(1)		—		—		—
Proceeds from the exercise of stock options and ESPP	112	—		—	—		76		—		—		76
Balance at March 31, 2020	95,262	$	10	(121)	$	(441)	$	375,666	$	(292,008)	$	908	$	84,135
Net loss	—	—		—	—		—		(5,357)		—		(5,357)
Other comprehensive loss	—	—		—	—		—		—		(547)		(547)
Stock-based compensation	—	—		—	—		1,278		—		—		1,278
Issuance of common stock, RSUs	438	—		—	—		—		—		—		—
Balance at June 30, 2020	95,700	$	10	(121)	$	(441)	$	376,944	$	(297,365)	$	361	$	79,509
Net loss	—	—		—	—		—		(5,578)		—		(5,578)
Other comprehensive income	—	—		—	—		—		—		102		102
Stock-based compensation	—	—		—	—		1,282		—		—		1,282
Issuance of common stock, RSUs	877	—		—	—		—		—		—		—
Proceeds from the exercise of stock options and ESPP	107	—		—	—		83		—		—		83
Balance at September 30, 2020	96,684	$	10	(121)	$	(441)	$	378,309	$	(302,943)	$	463	$	75,398

	Common Stock			Treasury Shares/Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income		Total
	Shares	Amount		Shares	Amount
Balance at January 1, 2019	92,895	$	9	(121)	$	(441)	$	369,246	$	(267,383)	$	402	$	101,833
Net loss	—	—		—	—		—		(5,719)		—		(5,719)
Other comprehensive income	—	—		—	—		—		—		76		76
Stock-based compensation	—	—		—	—		1,564		—		—		1,564
Issuance of common stock, RSUs	229	—		—	—		—		—		—		—
Proceeds from the exercise of stock options and ESPP	139	—		—	—		141		—		—		141
Balance at March 31, 2019	93,263	$	9	(121)	$	(441)	$	370,951	$	(273,102)	$	478	$	97,895
Net loss	—	—		—	—		—		(6,035)		—		(6,035)
Other comprehensive loss	—	—		—	—		—		—		(260)		(260)
Stock-based compensation	—	—		—	—		1,269		—		—		1,269
Issuance of common stock, RSUs	947	—		—	—		—		—		—		—
Net cash paid for payroll taxes on restricted stock unit releases	—	—		—	—		(19)		—		—		(19)
Balance at June 30, 2019	94,210	$	9	(121)	$	(441)	$	372,201	$	(279,137)	$	218	$	92,850
Net loss	—	—		—	—		—		(4,437)		—		(4,437)
Other comprehensive income	—	—		—	—		—		—		73		73
Stock-based compensation	—	—		—	—		1,203		—		—		1,203
Issuance of common stock, RSUs	265	—		—	—		—		—		—		—
Proceeds from the exercise of stock options and employee stock purchase plan	124	—		—	—		82		—		—		82
Balance at September 30, 2019	94,599	$	9	(121)	$	(441)	$	373,486	$	(283,574)	$	291	$	89,771

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

6

ServiceSource International, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
	For the Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(16,877)	$	(16,191)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	10,331		10,158
Amortization of contract acquisition costs	798		1,239
Amortization of ROU assets	7,255		7,222
Stock-based compensation	3,586		3,985
Restructuring and other related costs	633		1,785
Other	54		(200)
Net changes in operating assets and liabilities:
Accounts receivable, net	8,544		10,238
Prepaid expenses and other assets	1,226		507
Contract acquisition costs	(195)		(362)
Accounts payable	(3,597)		(365)
Accrued compensation and benefits	317		(1)
Operating lease liabilities	(7,299)		(6,949)
Accrued expenses	(831)		316
Other liabilities	(1,081)		(4,144)
Net cash provided by operating activities	2,864		7,238
Cash flows from investing activities:
Purchases of property and equipment	(5,124)		(9,243)
Net cash used in investing activities	(5,124)		(9,243)
Cash flows from financing activities:
Repayment on finance lease obligations	(730)		(666)
Proceeds from Revolver	27,000		—
Repayment of Revolver	(12,000)		—
Proceeds from issuance of common stock	159		223
Payments related to minimum tax withholdings on RSU releases	—		(19)
Net cash provided by (used in) financing activities	14,429		(462)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(52)		125
Net change in cash and cash equivalents and restricted cash	12,117		(2,342)
Cash and cash equivalents and restricted cash, beginning of period	29,383		27,779
Cash and cash equivalents and restricted cash, end of period	$	41,500	$	25,437
Supplemental disclosures of cash flow information:
Cash paid for interest	$	408	$	203
Supplemental disclosures of non-cash activities:
Purchases of property and equipment accrued in accounts payable and accrued expenses	$	203	$	1
ROU assets obtained in exchange for new lease liabilities	$	2,271	$	19,603
Increase in operating lease liabilities related to the adoption of ASC 842	$	—	$	32,104
Increase in ROU assets related to the adoption of ASC 842	$	—	$	29,526
Decrease in prepaids and other assets related to the adoption of ASC 842	$	—	$	(749)
Decrease in other liabilities related to the adoption of ASC 842	$	—	$	(3,327)

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

7

ServiceSource International, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1 — The Company

ServiceSource is a leading provider of BPaaS (business process-as-a-service) solutions that enable the transformation of go-to-market organizations and functions for global technology clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer acquisition, engagement, expansion and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability objectives. Through our unique integration of people, process and technology - leveraged against our 20 years of experience and domain expertise in the cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars of B2B commerce in more than 175 countries on our clients’ behalf annually.

“ServiceSource,” “the Company,” “we,” “us,” or “our”, as used herein, refer to ServiceSource International, Inc. and its wholly owned subsidiaries, unless the context indicates otherwise.

For a summary of commonly used industry terms and abbreviations used in this quarterly report on Form 10-Q, see the Glossary of Terms.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements include the accounts of ServiceSource International, Inc. and its wholly owned subsidiaries and have been prepared in accordance with GAAP and with the instructions to Form 10-Q and Article 8 of Regulation S-X for interim financial information. All intercompany balances and transactions have been eliminated in consolidation. These financial statements do not include all the information required by GAAP for annual financial statements. The unaudited Consolidated Balance Sheet as of December 31, 2019 has been derived from the Company’s audited annual Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 19, 2020. In the opinion of management, these Consolidated Financial Statements reflect all adjustments, including normal recurring adjustments, management considers necessary for a fair presentation of the Company’s financial position, operating results, and cash flows for the interim periods presented. These Consolidated Financial Statements and accompanying notes should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2019, included in our annual report on Form 10-K. Interim results are not necessarily indicative of results for the entire year.

Use of Estimates

The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amount of net revenue and expenses during the reporting period.

The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances. The Company has considered the effects of the COVID-19 pandemic in determining its estimates. However, future events are difficult to predict and subject to change, especially with the risks and uncertainties related to the impact of the COVID-19 pandemic, which could cause estimates and judgments to require adjustment. Actual results and outcomes may differ from our estimates.

Reclassifications

Certain items on the Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 have been reclassified to conform to the current year presentation. These reclassifications did not affect the Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Loss or Consolidated Statements of Stockholders' Equity.

8

Government Assistance

During 2020, ServiceSource received a grant from the Singapore government pursuant to its Job Support Scheme, which assists enterprises in retaining their local employees during the COVID-19 pandemic. ServiceSource received approximately $0.5 million and $0.9 million from the grant during the three and nine months ended September 30, 2020 and is expected to receive an additional $0.4 million through July 2021. Government grants are recognized in the Company's Consolidated Statements of Operations during the same period that the expenses related to the grant are incurred if there is reasonable assurance the grant will be received, and the Company has complied with any conditions attached to the grant.  

New Accounting Standards Issued but Not yet Adopted

Financial Instruments - Credit Losses

In June 2016, the FASB issued an ASU that amends the measurement of credit losses on financial instruments and requires measurement and recognition of expected versus incurred credit losses for financial assets held. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2022, with early adoption permitted. This standard will apply to the Company's accounts receivable and contract assets. Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements as credit losses from trade receivables have historically been insignificant. The Company will adopt this standard effective January 1, 2023.

Income Taxes

In December 2019, the FASB issued an ASU that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2020, with early adoption permitted. Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements. The Company will adopt this standard effective January 1, 2021.

Note 3 — Fair Value of Financial Instruments

The Company follows a three-tier fair value hierarchy, which is described in detail in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The following table presents the Company's cash and cash equivalents and restricted cash by significant investment category measured at fair value:

	September 30, 2020		December 31, 2019
	(in thousands)
Level 1:
Cash	$	10,761	$	9,142
Money market mutual funds	28,419		17,947
Cash and cash equivalents	$	39,180	$	27,089
Restricted cash	$	2,320	$	2,294

The Company did not have any other financial instruments or debt measured at fair value as of September 30, 2020 and December 31, 2019. There were no transfers between levels during the nine months ended September 30, 2020 and 2019.

Note 4 — Debt

Revolving Line of Credit

In July 2018, the Company entered into a $40.0 million Revolver that allows it and the other Borrowers named therein to borrow against its domestic receivables as defined in the Credit Agreement. The Revolver matures July 2021 and bears interest at a variable rate per annum based on the greater of the prime rate, the Federal Funds rate plus 0.50% or the one-month LIBOR rate plus 1.00%, plus, in each case, a margin of 1.00% for base rate borrowings or 2.00% for Eurodollar borrowings.

As of September 30, 2020, the Company had $15.0 million of borrowings under the Revolver through a one-month Eurodollar borrowing at an effective interest rate of 2.15% maturing October 2020. An additional $14.0 million was available for borrowing under the Revolver as of September 30, 2020. The Eurodollar borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the Company's borrowing base decreases below the current amount outstanding during the term of the Eurodollar borrowing.

9

Subsequent to September 30, 2020, the one-month $15.0 million Eurodollar borrowing was extended at an effective interest rate of approximately 2.15% maturing November 2020.

The obligations under the Credit Agreement are secured by substantially all the assets of the Borrowers and certain of their subsidiaries, including pledges of equity in certain of the Company’s subsidiaries. The Revolver has financial covenants which the Company was in compliance with as of September 30, 2020 and December 31, 2019.

Deferred Debt Issuance Costs and Interest Expense

Unamortized debt issuance costs related to the Revolver were $0.1 million as of September 30, 2020 and December 31, 2019.

Interest expense related to the amortization of debt issuance costs and interest expense associated with the Company's debt obligation was $0.1 million and $0.04 million for the three months ended September 30, 2020 and 2019, respectively and $0.4 million and $0.1 million for the nine months ended September 30, 2020 and 2019, respectively.

Note 5 — Leases

The Company has operating leases for office space and finance leases for certain equipment under non-cancelable agreements with various expiration dates through May 2030. Certain office leases include the option to extend the term between one to seven years and certain office leases include the option to terminate the lease upon written notice within one to eight years after lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

During 2020, the Company entered into a 22 month sublease agreement with a third-party for one floor of its Manila office space through October 2021, extended its lease for two of its five floors in the Kuala Lumpur office space through December 2023, and extended its lease for one of its three floors in the Sofia office space through February 2026. The Company recognizes rent expense and sublease income on a straight-line basis over the lease period and accrues for rent expense and sublease income incurred but not paid.

Supplemental income statement information related to leases was as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Operating lease cost	$	3,090	$	2,897	$	9,121	$	8,894
Finance lease cost:
Amortization of leased assets	213		164		564		486
Interest on lease liabilities	19		41		75		127
Total finance lease cost	232		205		639		613
Sublease income	(905)		(602)		(2,692)		(1,538)
Net lease cost	$	2,417	$	2,500	$	7,068	$	7,969

10

Supplemental balance sheet information related to leases was as follows:

	September 30, 2020		December 31, 2019
	(in thousands)
Operating leases:
ROU assets	$	31,733	$	36,396
Operating lease liabilities	$	10,741	$	9,652
Operating lease liabilities, net of current portion	28,129		33,716
Total operating lease liabilities	$	38,870	$	43,368
Finance leases:
Property and equipment	$	2,858	$	3,480
Accumulated depreciation	(1,766)		(1,823)
Property and equipment, net	$	1,092	$	1,657
Other current liabilities	$	707	$	952
Other long-term liabilities	186		671
Total finance lease liabilities	$	893	$	1,623

Lease term and discount rate information was as follows:

	For the Nine Months Ended September 30,
	2020		2019
Weighted-average remaining lease term (in years):
Operating lease	5.7		5.9
Finance lease	1.2		2.0
Weighted-average discount rate:
Operating lease	6.2	%	6.5	%
Finance lease	7.0	%	8.1	%

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

11

Note 6 — Revenue Recognition

The following tables present the disaggregation of revenue from contracts with our clients:

Revenue by Performance Obligation

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Selling services	$	44,840	$	52,663	$	140,558	$	159,707
Professional services	950		732		2,984		1,557
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Revenue by Geography

Revenue for each geography generally reflects commissions earned from sales of service contracts managed from revenue delivery centers in that geography and subscription sales and professional services to deploy the Company's solutions. Predominantly all the service contracts sold and managed by the revenue delivery centers relate to end customers located in the same geography. All NALA revenue represents revenue generated within the U.S.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
NALA	$	27,204	$	32,153	$	83,235	$	94,949
EMEA	11,984		12,918		38,837		39,972
APJ	6,602		8,324		21,470		26,343
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Revenue by Contract Pricing

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Variable consideration	$	33,188	$	37,577	$	103,367	$	106,889
Fixed consideration	12,602		15,818		40,175		54,375
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Contract Balances

As of September 30, 2020 and December 31, 2019, contract asset balances were insignificant and as of September 30, 2020 and December 31, 2019, contract liability balances totaled $0.3 million and $0.8 million, respectively.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2020, assuming none of the Company’s current contracts with fixed consideration are renewed, the Company estimates receiving approximately $40.3 million in future selling services fixed consideration and approximately $0.5 million in professional services fixed consideration.

Contract Acquisition Costs

As of September 30, 2020 and December 31, 2019, capitalized contract acquisition costs were $1.0 million and $1.6 million, respectively. The Company recorded amortization expense related to capitalized contract acquisition costs of $0.3 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $0.8 million and $1.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Impairment recognized on contract costs was insignificant for the three and nine months ended September 30, 2020 and 2019.

12

Note 7 — Stock-Based Compensation

2020 Equity Incentive Plan

The 2020 Plan was approved by the Company’s stockholders on May 14, 2020 and expires March 4, 2025. The 2020 Plan provides for a reserve of 6,200,000 shares of the Company's common stock that may be issued pursuant to awards under the 2020 Plan. Permitted awards include, but are not limited to, options, stock appreciation rights, restricted stock units, performance stock units and other cash and stock-based awards.

On May 14, 2020, following the approval of the 2020 Plan, the Company’s board of directors terminated the 2011 Plan with the effect that no additional awards may be issued under the 2011 Plan and all outstanding awards under the 2011 Plan shall continue on and be unaffected by the termination of the 2011 Plan.

2020 PSU Awards

During May 2020 and prior to expiration of the 2011 Plan, the Company granted PSUs to certain executives under the 2011 Plan. The aggregate target number of shares subject to these awards is 0.9 million, with an aggregate grant date fair value of $1.2 million. The number of shares ultimately received related to these awards ranges from 0% to 150% of the participant's target award depending on the Company's achievement of specified Adjusted EBITDA and net bookings targets over a two-year performance period and will vest on the third anniversary of the grant date.

Stock-Based Compensation Expense

The following table presents stock-based compensation expense as allocated within the Company's Consolidated Statements of Operations:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Cost of revenue	$	110	$	126	$	245	$	414
Sales and marketing	200		518		1,021		1,390
Research and development	14		12		33		24
General and administrative	942		523		2,287		2,157
Total stock-based compensation	$	1,266	$	1,179	$	3,586	$	3,985

The above table does not include capitalized stock-based compensation related to internal-use software that was insignificant for the three and nine months ended September 30, 2020 and 2019.

Stock Awards

A summary of the Company's stock option activity and related information was as follows:

	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Intrinsic Value
	(in thousands)				(in thousands)
Outstanding as of December 31, 2019	4,146	$	2.16		$	1,580
Granted	20	$	1.32
Expired and/or forfeited	(609)	$	3.13
Outstanding as of September 30, 2020	3,557	$	1.99	7.08	$	866
Exercisable as of September 30, 2020	2,470	$	2.33	6.50	$	501

The weighted-average fair value of options granted during the nine months ended September 30, 2020 and 2019 was $0.63 and $0.47, respectively. As of September 30, 2020, there was $0.6 million of unrecognized compensation expense related to previously granted stock options, which is expected to be recognized over a weighted-average period of 1.9 years.

13

A summary of the Company's RSU and PSU activity and related information was as follows:

	Units	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested as of December 31, 2019	5,305	$	1.88
Granted	5,602	$	1.43
Vested	(1,493)	$	2.09
Forfeited	(1,180)	$	1.86
Non-vested as of September 30, 2020	8,234	$	1.54

As of September 30, 2020, there was $10.3 million of unrecognized compensation expense related to previously granted RSUs and PSUs, which is expected to be recognized over a weighted-average period of 2.2 years.

Potential shares of common stock that are not included in the determination of diluted net loss per share because they are anti-dilutive for the periods presented consist of stock options, unvested RSUs and PSUs, and shares to be purchased under our ESPP. The Company excluded from diluted earnings per share the weighted-average common share equivalents related to 3.2 million and 7.9 million shares for the three months ended September 30, 2020 and 2019, respectively, and 4.1 million and 8.4 million shares for the nine months ended September 30, 2020 and 2019, respectively, because their effect would have been anti-dilutive.

Note 8 — Restructuring and Other Related Costs

The Company has undergone restructuring efforts to better align its cost structure with its business and market conditions. These restructuring efforts include severance and other employee costs, lease and other contract termination costs and asset impairments. Severance and other employee costs include severance payments, related employee benefits, stock-based compensation related to the accelerated vesting of certain equity awards and employee-related legal fees. Lease and other contract termination costs include charges related to lease consolidation and abandonment of spaces no longer utilized and the cancellation of certain contracts with outside vendors. Asset impairments include charges related to leasehold improvements and furniture in spaces vacated or no longer in use. The restructuring plans and future cash outlays are recorded in "Accrued expenses" and "Other long-term liabilities" in the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019.

During 2019, the Company announced a restructuring effort resulting in a reduction of headcount and office lease costs. The Company recognized charges related to this restructuring effort of $0.7 million for the nine months ended September 30, 2020 and $0.6 million and $1.8 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, the Company does not expect to incur additional restructuring charges related to the 2019 restructuring.

The following table presents a reconciliation of the beginning and ending fair value liability balance related to the 2019 restructuring effort:

	Severance and Other Employee Costs		Lease Termination Costs		Total
			(in thousands)
Balance as of January 1, 2019	$	—	$	—	$	—
Restructuring and other related costs	1,806		123		1,929
Cash paid	(1,624)		(123)		(1,747)
Balance as of December 31, 2019	182		—		182
Restructuring and other related costs	703		—		703
Cash paid	(866)		—		(866)
Change in estimates and non-cash charges	(19)		—		(19)
Balance as of September 30, 2020	$	—	$	—	$	—

In May 2017, the Company announced a restructuring effort resulting in a headcount reduction and the reduction of office space in four locations. As of September 30, 2020, the Company does not expect to incur additional restructuring charges related to the May 2017 restructuring.

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The following table presents a reconciliation of the beginning and ending fair value liability balance related to the May 2017 restructuring effort:

	Severance and Other Employee Costs		Lease and Other Contract Termination Costs		Asset Impairments		Total
	(in thousands)
Balance as of January 1, 2017	$	—	$	—	$	—	$	—
Restructuring and other related costs	3,483		2,939		886		7,308
Cash paid	(3,060)		(1,185)		—		(4,245)
Change in estimates and non-cash charges	—		—		(886)		(886)
Acceleration of stock-based compensation expense in additional paid-in capital	(352)		—		—		(352)
Balance as of December 31, 2017	71		1,754		—		1,825
Restructuring and other related costs	120		89		—		209
Cash paid	(188)		(1,133)		—		(1,321)
Change in estimates and non-cash charges	(3)		252		—		249
Balance as of December 31, 2018	—		962		—		962
Cash paid	—		(183)		—		(183)
Change in estimates and non-cash charges	—		(63)		—		(63)
Balance as of December 31, 2019	—		716		—		716
Cash paid	—		(133)		—		(133)
Change in estimates and non-cash charges	—		(51)		—		(51)
Balance as of September 30, 2020	$	—	$	532	$	—	$	532

Note 9 — Income Taxes

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the valuation allowances on the Company’s net operating losses and foreign tax rate differences. The "Provision for income tax expense" in the Consolidated Statements of Operations primarily consists of income and withholding taxes for foreign and state jurisdictions where the Company has profitable operations, as well as valuation allowance adjustments for certain U.S. tax jurisdictions. No tax benefit was provided for losses incurred in the U.S., Ireland and Singapore because those losses are offset by a full valuation allowance. The tax years 2012 through 2020 generally remain subject to examination by federal, state and foreign tax authorities.

The gross amount of the Company’s unrecognized tax benefits was $1.0 million as of September 30, 2020 and December 31, 2019, none of which, if recognized, would affect the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the three and nine months ended September 30, 2020 and 2019, interest and penalties recognized were insignificant.

Note 10 — Commitments and Contingencies

Letters of Credit

In connection with two of our leased facilities, the Company is required to maintain two letters of credit totaling $2.3 million. The letters of credit are secured by $2.3 million of cash in money market accounts, which are classified as restricted cash in "Other assets" in the Consolidated Balance Sheets.

15

Non-cancelable Service Contract Commitments

Future minimum payments under non-cancelable service contract commitments were as follows:

	September 30, 2020
	(in thousands)
Remainder of 2020	$	2,359
2021	10,385
2022	9,152
2023	7,446
2024	821
Thereafter	—
Total	$	30,163

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following MD&A should be read in conjunction with our unaudited Consolidated Financial Statements and notes thereto which appear elsewhere in this quarterly report on Form 10-Q.

This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements may appear throughout this report. These forward-looking statements are generally identified by the words “believe,” “project,” "target," "forecast", “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and variations of such words or similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, those identified elsewhere in this report, including the risks and uncertainties related to the impact and duration of the COVID-19 pandemic, as well as those discussed in the sections of our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 19, 2020 entitled “Forward Looking Statements” and “Risk Factors”, in the section of our Quarterly Report on Form 10-Q for the period ended March 31, 2020 filed with the SEC on April 30, 2020 entitled “Risk Factors”, and in our other filings with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise, except as required by applicable law.

Overview

ServiceSource is a leading provider of BPaaS solutions that enable the transformation of go-to-market organizations and functions for global technology clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer acquisition, engagement, expansion and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability objectives. Through our unique integration of people, process and technology - leveraged against our 20 years of experience and domain expertise in the cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars of B2B commerce in more than 175 countries on our clients’ behalf annually.

“ServiceSource,” “the Company,” “we,” “us,” or “our”, as used herein, refer to ServiceSource International, Inc. and its wholly owned subsidiaries, unless the context indicates otherwise.

For a summary of commonly used industry terms and abbreviations used in this Form 10-Q, see the Glossary of Terms.

Impact of the COVID-19 Pandemic

With the global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020, we created a dedicated crisis team to proactively implement our business continuity plans.  By March 19, 2020, more than 95% of our employees had moved from an in-office to a work-from-home environment and as of April 1, 2020, we transitioned to a 100% virtual operating model, which includes virtual sourcing, hiring, and onboarding for new employees as well as a process for driving performance and culture in a virtual environment. As a result of the implementation of these business continuity measures, we have not experienced material disruptions in our operations.

We believe we have sufficient liquidity on hand to continue business operations during this volatile period. As of September 30, 2020, we had total available liquidity of $53.2 million consisting of cash on hand and availability under our Revolver. See "Liquidity and Capital Resources" for additional information.

Although there was no material adverse impact on the results of operations for the three and nine months ended September 30, 2020 resulting from COVID-19, the full impact of the pandemic remains to be seen. By way of example, we have seen some instances of delays in responsiveness from our clients’ customers and end users on making purchasing or renewal decisions and customer payments, but on the other hand, we have seen some clients experience heightened levels of demand for their products and services. We have incurred and expect to continue to incur costs directly related to the COVID-19 pandemic such as costs for enhanced cleaning of our facilities, investing capital to allow our employees to function in our virtual, work-from-home operating model and increased paid time off costs resulting from employees taking less paid time off. However, we are benefiting and will continue to benefit from decreases in certain costs related to our facilities and reduced travel and entertainment costs with our virtual-first operating model. We do not currently anticipate that these items will have a material adverse impact on our overall business and financial results.

17

During 2020, ServiceSource received a grant from the Singapore government pursuant to its Job Support Scheme, which assists enterprises in retaining their local employees during the COVID-19 pandemic. ServiceSource received approximately $0.5 million and $0.9 million from the grant during the three and nine months ended September 30, 2020 and is expected to receive an additional $0.4 million through July 2021.

The situation surrounding COVID-19 remains fluid and the potential for a negative impact on our financial condition and results of operations increases the longer the virus impacts the economic activity in the U.S. and globally. See Part II, Item 1A - “Risk Factors” for additional information.

Key Financial Results for the Three Months Ended September 30, 2020

•GAAP revenue was $45.8 million compared with $53.4 million reported for the same period in 2019.

•GAAP net loss was $5.6 million or $0.06 per diluted share, compared with GAAP net loss of $4.4 million or $0.05 per diluted share reported for the same period in 2019.

•Adjusted EBITDA, a non-GAAP financial measure, was negative $0.2 million compared with positive $1.1 million reported for the same period in 2019. See “Non-GAAP Financial Measurements” below for a reconciliation of Adjusted EBITDA from net loss.

•Ended the quarter with $41.5 million of cash and cash equivalents and restricted cash and $15.0 million of borrowings under the Company’s $40.0 million Revolver.

Results of Operations

For the Three Months Ended September 30, 2020 Compared to the Same Period Ended September 30, 2019

Net Revenue, Cost of Revenue and Gross Profit

Net revenue is primarily attributable to commissions we earn from the sale of renewals of maintenance, support and subscription agreements on behalf of our clients. We also generate revenues from selling professional services. Historically, we earned a small percentage of our total revenue from the sale of subscriptions to our cloud-based applications.

Cost of revenue includes employee compensation, technology costs, including those related to the delivery of our cloud-based technologies, and allocated expenses which consist of depreciation, amortization of internally developed software, facility and technology costs.

	For the Three Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Net revenue	$	45,790	100	%	$	53,395	100	%	$	(7,605)	(14)	%
Cost of revenue	33,210		73	%	37,871		71	%	(4,661)		(12)	%
Gross profit	$	12,580	27	%	$	15,524	29	%	$	(2,944)	(19)	%

Net revenue decreased $7.6 million, or 14%, for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to client churn and lower bookings.

Cost of revenue decreased $4.7 million, or 12%, for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to the following:

•$3.1 million decrease in employee related costs associated with a reduction in headcount, the receipt of the Singapore government grant and lower travel and entertainment expenditures;

•$1.1 million decrease in information technology costs due to an increase in capitalizable software development costs and lower headcount; and

•$0.7 million decrease in facility related costs primarily related to sublease income, reduced headcount and transitioning to a virtual-first operating model; partially offset by

•$0.3 million increase in depreciation and amortization expense.

18

Operating Expenses

	For the Three Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Operating expenses:
Sales and marketing	$	5,638	12	%	$	7,499	14	%	$	(1,861)	(25)	%
Research and development	1,489		3	%	1,165		2	%	324		28	%
General and administrative	10,537		23	%	10,129		19	%	408		4	%
Restructuring and other related costs	—		—	%	630		1	%	(630)		(100)	%
Total operating expenses	$	17,664	39	%	$	19,423	36	%	$	(1,759)	(9)	%

Sales and Marketing

Sales and marketing expenses primarily consist of compensation expense and sales commissions to our sales and marketing employees, amortization of contract acquisition costs, marketing programs and events, as well as allocated expenses, which consist of depreciation, amortization of internally developed software, and facility and technology costs.

Sales and marketing expenses decreased $1.9 million, or 25%, for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to a $1.5 million decrease in employee related costs associated with a reduction in headcount, lower bookings, and lower travel and entertainment expenditures, and a $0.2 million decrease in information technology and facility costs related to transitioning to a virtual-first operating model.

Research and Development

Research and development expenses primarily consist of employee compensation expense and allocated expenses, which consist of amortization of internally developed software, facility and technology costs.

Research and development expenses increased $0.3 million, or 28%, for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to a $0.5 million reduction in third party capitalizable software development costs, partially offset by a $0.1 million decrease in information technology and facility costs related to transitioning to a virtual-first operating model.

General and Administrative

General and administrative expenses primarily consist of employee compensation expense for our executive, finance, human resources, and legal functions and expenses for professional fees for accounting, tax and legal services, as well as allocated expenses, which consist of depreciation, amortization of internally developed software, facility and technology costs.

General and administrative expenses increased $0.4 million, or 4%, for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to the following:

•$0.3 million increase due to the settlement of the legal contingency in 2019; and

•$0.2 million increase in professional fees; partially offset by

•$0.1 million decrease in information technology support and other operating costs.

Restructuring and Other Related Costs

Restructuring and other related costs consist primarily of employees’ severance payments and related employee benefits, related legal fees and charges related to lease termination costs.

Restructuring and other related costs decreased $0.6 million, or 100% for the three months ended September 30, 2020 compared to the same period in 2019, due to timing of headcount reductions related to the 2019 restructuring effort that resulted in a reduction of headcount and office lease costs.

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Interest and Other Expense, Net

Interest and other expense, net consists of interest expense associated with our Revolver, imputed interest from finance lease payments, interest income earned on our cash and cash equivalents, amortization of debt issuance costs and foreign exchange gains and losses. 

	For the Three Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Interest expense	$	(161)	—	%	$	(91)	—	%	$	(70)	(77)	%
Other expense, net	$	(339)	(1)	%	$	(328)	(1)	%	$	(11)	(3)	%

* Not considered meaningful.

Interest expense increased $0.1 million, or 77%, for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to borrowings on the Company's Revolver during 2020.

Other expense, net increased 3% for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to foreign currency fluctuations.

Provision for Income Tax Expense

	For the Three Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Provision for income tax benefit (expense)	$	6	—	%	$	(119)	—	%	$	125	105	%

Provision for income tax benefit (expense) resulted primarily from profitable jurisdictions where no valuation allowance has been provided. Provision for income tax decreased for the three months ended September 30, 2020 compared to the same period in 2019, due to a decrease in profitable operations in certain foreign jurisdictions.

For the Nine Months Ended September 30, 2020 Compared to the Same Period Ended September 30, 2019

Net Revenue, Cost of Revenue and Gross Profit

	For the Nine Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Net revenue	$	143,542	100	%	$	161,264	100	%	$	(17,722)	(11)	%
Cost of revenue	103,415		72	%	115,696		72	%	(12,281)		(11)	%
Gross profit	$	40,127	28	%	$	45,568	28	%	$	(5,441)	(12)	%

Net revenue decreased $17.7 million, or 11%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to client churn and lower bookings.

Cost of revenue decreased $12.3 million, or 11%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to the following:

•$8.7 million decrease in employee related costs associated with a reduction in headcount, the receipt of the Singapore government grant and lower travel and entertainment expenditures, partially offset by increased paid time off costs resulting from employees taking less paid time off during the global pandemic;

•$2.6 million decrease in facility related costs primarily related to sublease income, reduced headcount and transitioning to a virtual-first operating model; and

•$1.8 million decrease in information technology costs due to an increase in capitalizable software development costs and lower headcount; partially offset by

•$0.9 million increase in depreciation and amortization expense.

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Operating Expenses

	For the Nine Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Operating expenses:
Sales and marketing	$	19,048	13	%	$	22,934	14	%	$	(3,886)	(17)	%
Research and development	4,186		3	%	3,702		2	%	484		13	%
General and administrative	31,844		22	%	32,081		20	%	(237)		(1)	%
Restructuring and other related costs	703		—	%	1,836		1	%	(1,133)		(62)	%
Total operating expenses	$	55,781	39	%	$	60,553	38	%	$	(4,772)	(8)	%

Sales and Marketing

Sales and marketing expenses decreased $3.9 million, or 17%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to a $3.1 million decrease in employee related costs associated with a reduction in headcount, lower bookings, and lower travel and entertainment expenditures, and a $0.5 million decrease in information technology and facility costs related to sublease income and transitioning to a virtual-first operating model.

Research and Development

Research and development expenses increased $0.5 million, or 13%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to a $0.9 million reduction in third party capitalizable software development costs, partially offset by a $0.4 million decrease in information technology and facility costs related to sublease income and transitioning to a virtual-first operating model.

General and Administrative

General and administrative expenses decreased $0.2 million, or 1%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to the following:

•$0.8 million decrease in depreciation and amortization expense;

•$0.5 million decrease in employee related costs primarily due to lower travel and entertainment expenditures and recruiting costs, partially offset by merit increases and increased paid time off costs resulting from employees taking less paid time off during the global pandemic; and

•$0.1 million decrease in professional fees; partially offset by

•$0.9 million increase in information technology support and facility costs due to lower headcount in cost of revenue; and

•$0.3 million increase due to the settlement of the legal contingency in 2019.

Restructuring and Other Related Costs

Restructuring and other related costs decreased $1.1 million, or 62% for the nine months ended September 30, 2020 compared to the same period in 2019, due to decreased costs incurred related to the 2019 restructuring effort that resulted in a reduction of headcount and office lease costs.

Interest and Other Expense, Net

	For the Nine Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Interest expense	$	(477)	—	%	$	(303)	—	%	$	(174)	(57)	%
Other expense, net	$	(573)	—	%	$	(664)	—	%	$	91	14	%

Interest expense increased $0.2 million, or 57%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to borrowings on the Company’s Revolver during 2020.

21

Other expense, net decreased $0.1 million, or 14%, for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to foreign currency fluctuations.

Provision for Income Tax Expense

	For the Nine Months Ended September 30,
	2020				2019
	Amount		% of Net Revenue		Amount		% of Net Revenue		$ Change		% Change
	(in thousands)				(in thousands)				(in thousands)
Provision for income tax expense	$	(173)	—	%	$	(239)	—	%	$	66	28	%

Provision for income tax expense resulted primarily from profitable jurisdictions where no valuation allowance has been provided. Provision for income tax expense decreased for the nine months ended September 30, 2020 compared to the same period in 2019, due to a decrease in profitable operations in certain foreign jurisdictions.

Liquidity and Capital Resources

Our primary operating cash requirements include the payment of compensation and related costs and costs for our facilities and information technology infrastructure. Historically, we have financed our operations from cash provided by our operating activities. We believe our existing cash and cash equivalents and available funds from the Revolver will be sufficient to meet our working capital and capital expenditure needs over the next twelve months.

We have considered the effects of the COVID-19 pandemic, including customer purchasing and renewal decisions and any delay in customer payments, in our assessment of the sufficiency of our liquidity and capital resources. We will continue to monitor our financial position as pandemic-related challenges develop over time.

As of September 30, 2020, we had cash and cash equivalents of $39.2 million, which primarily consisted of demand deposits and money market mutual funds. Included in cash and cash equivalents was $7.3 million held by our foreign subsidiaries used to satisfy their operating requirements. We consider the undistributed earnings of ServiceSource Europe Ltd. and ServiceSource International Singapore Pte. Ltd. permanently reinvested in foreign operations and have not provided for U.S. income taxes on such earnings. As of September 30, 2020, the Company had no unremitted earnings from our foreign subsidiaries.

In July 2018, the Company entered into a $40.0 million Revolver that allows it and the other Borrowers named therein to borrow against its domestic receivables as defined in the Credit Agreement. The Revolver matures July 2021 and bears interest at a variable rate per annum based on the greater of the prime rate, the Federal Funds rate plus 0.50% or the one-month LIBOR rate plus 1.00%, plus, in each case, a margin of 1.00% for base rate borrowings or 2.00% for Eurodollar borrowings.

As of September 30, 2020 the Company had $15.0 million of borrowings under the Revolver through a one-month Eurodollar borrowing at an effective interest rate of 2.15% maturing October 2020. An additional $14.0 million was available for borrowing under the Revolver as of September 30, 2020. The Eurodollar borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the Company's borrowing base decreases below the current amount outstanding during the term of the Eurodollar borrowing.

Subsequent to September 30, 2020, the one-month $15.0 million Eurodollar borrowing was extended at an effective interest rate of approximately 2.15% maturing November 2020.

The obligations under the Credit Agreement are secured by substantially all the assets of the Borrowers and certain of their subsidiaries, including pledges of equity in certain of the Company’s subsidiaries. The Revolver has financial covenants which the Company was in compliance with as of September 30, 2020 and December 31, 2019.

Letters of Credit and Restricted Cash

In connection with two of our leased facilities, the Company is required to maintain two letters of credit totaling $2.3 million. The letters of credit are secured by $2.3 million of cash in money market accounts, which are classified as restricted cash in "Other assets" in the Consolidated Balance Sheets.

22

Cash Flows

The following table presents a summary of our cash flows:

	For the Nine Months Ended September 30,
	2020		2019
	(in thousands)
Net cash provided by operating activities	$	2,864	$	7,238
Net cash used in investing activities	(5,124)		(9,243)
Net cash provided by (used in) financing activities	14,429		(462)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(52)		125
Net change in cash and cash equivalents and restricted cash	$	12,117	$	(2,342)

Depreciation and amortization expense were comprised of the following:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Internally developed software amortization	$	1,983	$	1,524	$	5,597	$	4,190
Property and equipment depreciation	1,529		1,640		4,734		5,968
Total depreciation and amortization	$	3,512	$	3,164	$	10,331	$	10,158

Operating Activities

Net cash provided by operating activities decreased $4.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily as a result of decreased revenue and higher cash payments during the current period compared to the prior period related to operating costs accrued for previously.

Investing Activities

Net cash used in investing activities decreased $4.1 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, due to decreased cash outflows from purchases of property and equipment during the nine months ended September 30, 2020.

Financing Activities

Net cash provided by financing activities increased $14.9 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily as a result of $15.0 million in net cash inflows from borrowings on the Revolver during the nine months ended September 30, 2020.

Off-Balance Sheet Arrangements

As of September 30, 2020, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. The Company's significant accounting policies and estimates are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2019. These policies were followed in preparing the Consolidated Financial Statements for the three and nine months ended September 30, 2020 and are consistent with the year ended December 31, 2019.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 2 - "Summary of Significant Accounting Policies" to the Consolidated Financial Statements.

23

Non-GAAP Financial Measurements

ServiceSource believes net income (loss), as defined by GAAP, is the most appropriate financial measure of our operating performance; however, ServiceSource considers Adjusted EBITDA to be useful supplemental, non-GAAP financial measure of our operating performance. We believe Adjusted EBITDA can assist investors in understanding and assessing our operating performance on a consistent basis, as it removes the impact of the Company's capital structure and other non-cash or non-recurring items from operating results and provides an additional tool to compare ServiceSource's financial results with other companies in the industry, many of which present similar non-GAAP financial measures.

EBITDA consists of net income (loss) plus provision for income tax expense (benefit), interest and other expense (income), net and depreciation and amortization. Adjusted EBITDA consists of EBITDA plus stock-based compensation, restructuring and other related costs, amortization of contract acquisition costs related to the initial adoption of ASC 606 and costs attributable to establishing a litigation reserve.

This non-GAAP measure should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The following table presents the reconciliation of "Net Loss" to Adjusted EBITDA:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Net loss	$	(5,578)	$	(4,437)	$	(16,877)	$	(16,191)
Provision for income tax (benefit) expense	(6)		119		173		239
Interest and other expense, net	500		419		1,050		967
Depreciation and amortization	3,512		3,164		10,331		10,158
EBITDA	(1,572)		(735)		(5,323)		(4,827)
Stock-based compensation	1,266		1,179		3,586		3,985
Restructuring and other related costs	—		630		703		1,836
Amortization of contract acquisition asset costs - ASC 606 initial adoption	134		277		514		789
Litigation reserve	—		(256)		—		(256)
Adjusted EBITDA	$	(172)	$	1,095	$	(520)	$	1,527

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies as defined by Item 10(f)(1) of Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our CEO and CFO concluded that our disclosure controls and procedures are designed to, and are effective to, provide at a reasonable assurance level, that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

24

Changes in Internal Control Over Financial Reporting

We continue to monitor the design and operating effectiveness of our internal controls for any effect resulting from the COVID-19 pandemic. There has not been any change in our internal control over financial reporting during the quarter covered by this report that materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

For a summary of factors which could affect results and cause results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf, see “Risk Factors” in Part 1I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2019 and “Risk Factors” in Part II, Item 1A of our quarterly report on Form 10-Q for the period ended March 31, 2020. There have been no material changes to the risk factors as disclosed in our annual report on Form 10-K for the year ended December 31, 2019 and our quarterly report on Form 10-Q for the period ended March 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

25

Item 6. Exhibits

Exhibit Number	Description of Document
31.1*	Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set.

* Filed herewith.

** Furnished herewith.

26

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:

Abbreviations or acronyms	Definition
2011 Plan	2011 Equity Incentive Plan
2020 Plan	2020 Equity Incentive Plan
APJ	Asia Pacific-Japan
ASC 606	Accounting Standards Codification Topic 606, Revenue from Contracts with Customers
ASC 740	Accounting Standards Codification Topic 740, Income Taxes
ASC 842	Accounting Standards Codification Topic 842, Leases
ASU	Accounting Standards Update
B2B	Business-to-business
BPaaS	Business Process-as-a-Service
Borrowers	ServiceSource International, Inc. and ServiceSource Delaware, Inc.
CEO	Chief Executive Officer
CFO	Chief Financial Officer
COVID-19	Coronavirus disease 2019
Credit Agreement	Revolving Loan Credit Agreement, dated as of July 30, 2018, among the Borrowers and Compass Bank, as Lender
EMEA	Europe, Middle East and Africa
ESPP	2011 Employee Stock Purchase Plan
FASB	Financial Accounting Standards Board
GAAP	United States Generally Accepted Accounting Principles
IoT	Internet of things
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
NALA	North America and Latin America
PSU	Performance-based restricted stock unit
Revolver	Senior secured revolving line of credit
ROU	Right-of-use
RSU	Restricted stock unit
SEC	Securities and Exchange Commission
U.S.	United States

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SERVICESOURCE INTERNATIONAL, INC. (Registrant)
Date:	October 28, 2020	By:	/s/ RICHARD G. WALKER
			Richard G. Walker Chief Financial Officer and Director (Principal Financial and Accounting Officer)

28

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary B. Moore, certify that:

1.I have reviewed this quarterly report on Form 10-Q of ServiceSource International, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	October 28, 2020	By:	/s/ GARY B. MOORE
			Name: Gary B. Moore
			Title: Chief Executive Officer and Director (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard G. Walker, certify that:

1.I have reviewed this quarterly report on Form 10-Q of ServiceSource International, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	October 28, 2020	By:	/s/ RICHARD G. WALKER
			Name: Richard G. Walker
			Title: Chief Financial Officer and Director (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Based on my knowledge, I, Gary B. Moore, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ServiceSource International, Inc. on Form 10-Q for the quarter ended September 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceSource International, Inc.

Date:	October 28, 2020	By:	/s/ GARY B. MOORE
			Name: Gary B. Moore
			Title: Chief Executive Officer and Director (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Based on my knowledge, I, Richard G. Walker, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ServiceSource International, Inc. on Form 10-Q for the quarter ended September 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceSource International, Inc.

Date:	October 28, 2020	By:	/s/ RICHARD G. WALKER
			Name: Richard G. Walker
			Title: Chief Financial Officer and Director (Principal Financial and Accounting Officer)

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2020	Oct. 23, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-35108
Entity Registrant Name	SERVICESOURCE INTERNATIONAL, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	81-0578975
Entity Address, Address Line One	707 17th Street, 25th Floor
Entity Address, City or Town	Denver,
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80202
City Area Code	(720)
Local Phone Number	889-8500
Title of 12(b) Security	Common Stock, $0.0001 Par Value
Trading Symbol	SREV
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Small Business	true
Emerging Growth Company	false
Entity Shell Company	false
Entity Common stock, shares outstanding		96,595,951
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001310114
Current Fiscal Year End Date	--12-31

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 39,180	$ 27,089
Accounts receivable, net	33,366	41,754
Prepaid expenses and other	6,914	7,296
Total current assets	79,460	76,139
Property and equipment, net	31,319	36,149
ROU assets	31,733	36,396
Contract acquisition costs	995	1,602
Goodwill	6,334	6,334
Other assets	3,983	4,844
Total assets	153,824	161,464
Current liabilities:
Accounts payable	993	4,392
Accrued expenses	2,411	3,366
Accrued compensation and benefits	17,754	16,700
Revolver	15,000	0
Operating lease liabilities	10,741	9,652
Other current liabilities	1,085	2,218
Total current liabilities	47,984	36,328
Operating lease liabilities, net of current portion	28,129	33,716
Other long-term liabilities	2,313	2,983
Total liabilities	78,426	73,027
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 20,000 shares authorized and none issued and outstanding	0	0
Common stock; $0.0001 par value; 1,000,000 shares authorized; 96,684 shares issued and 96,563 shares outstanding as of September 30, 2020; 94,972 shares issued and 94,851 shares outstanding as of December 31, 2019	10	9
Treasury stock	(441)	(441)
Additional paid-in capital	378,309	374,525
Accumulated deficit	(302,943)	(286,066)
Accumulated other comprehensive income	463	410
Total stockholders’ equity	75,398	88,437
Total liabilities and stockholders’ equity	$ 153,824	$ 161,464
Preferred stock, shares outstanding (in shares)	0	0

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	20,000,000	20,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	1,000,000,000	1,000,000,000
Common stock, shares issued (in shares)	96,684,000	94,972,000
Common stock, shares outstanding (in shares)	96,563,000	94,851,000

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Net revenue	$ 45,790	$ 53,395	$ 143,542	$ 161,264
Cost of revenue	33,210	37,871	103,415	115,696
Gross profit	12,580	15,524	40,127	45,568
Operating expenses:
Sales and marketing	5,638	7,499	19,048	22,934
Research and development	1,489	1,165	4,186	3,702
General and administrative	10,537	10,129	31,844	32,081
Restructuring and other related costs	0	630	703	1,836
Total operating expenses	17,664	19,423	55,781	60,553
Loss from operations	(5,084)	(3,899)	(15,654)	(14,985)
Interest and other expense, net	(500)	(419)	(1,050)	(967)
Loss before provision for income taxes	(5,584)	(4,318)	(16,704)	(15,952)
Provision for income tax benefit (expense)	6	(119)	(173)	(239)
Net loss	$ (5,578)	$ (4,437)	$ (16,877)	$ (16,191)
Net loss per common share:
Basic and diluted (in dollars per share)	$ (0.06)	$ (0.05)	$ (0.18)	$ (0.17)
Weighted-average common shares outstanding:
Basic and diluted (in shares)	95,963	94,228	95,437	93,637

XML

Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (5,578)	$ (4,437)	$ (16,877)	$ (16,191)
Other comprehensive income (loss)
Foreign currency translation adjustments	102	73	53	(111)
Other comprehensive income (loss)	102	73	53	(111)
Comprehensive loss	$ (5,476)	$ (4,364)	$ (16,824)	$ (16,302)

XML

Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Treasury Shares/Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income
Beginning balance (in shares) at Dec. 31, 2018		92,895	(121)
Stockholders' equity, beginning balance at Dec. 31, 2018	$ 101,833	$ 9	$ (441)	$ 369,246	$ (267,383)	$ 402
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(5,719)				(5,719)
Other comprehensive income	76					76
Stock-based compensation	1,564			1,564
Issuance of common stock, RSUs (in shares)		229
Issuance of common stock, RSUs	0
Proceeds from the exercise of stock options and ESPP (in shares)		139
Proceeds from the exercise of stock options and ESPP	141			141
Ending balance (in shares) at Mar. 31, 2019		93,263	(121)
Stockholders' equity, ending balance at Mar. 31, 2019	97,895	$ 9	$ (441)	370,951	(273,102)	478
Beginning balance (in shares) at Dec. 31, 2018		92,895	(121)
Stockholders' equity, beginning balance at Dec. 31, 2018	101,833	$ 9	$ (441)	369,246	(267,383)	402
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(16,191)
Other comprehensive income	(111)
Ending balance (in shares) at Sep. 30, 2019		94,599	(121)
Stockholders' equity, ending balance at Sep. 30, 2019	89,771	$ 9	$ (441)	373,486	(283,574)	291
Beginning balance (in shares) at Mar. 31, 2019		93,263	(121)
Stockholders' equity, beginning balance at Mar. 31, 2019	97,895	$ 9	$ (441)	370,951	(273,102)	478
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(6,035)				(6,035)
Other comprehensive income	(260)					(260)
Stock-based compensation	1,269			1,269
Issuance of common stock, RSUs (in shares)		947
Issuance of common stock, RSUs	0
Net cash paid for payroll taxes on restricted stock unit releases	(19)			(19)
Ending balance (in shares) at Jun. 30, 2019		94,210	(121)
Stockholders' equity, ending balance at Jun. 30, 2019	92,850	$ 9	$ (441)	372,201	(279,137)	218
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(4,437)				(4,437)
Other comprehensive income	73					73
Stock-based compensation	1,203			1,203
Issuance of common stock, RSUs (in shares)		265
Issuance of common stock, RSUs	0
Proceeds from the exercise of stock options and ESPP (in shares)		124
Proceeds from the exercise of stock options and ESPP	82			82
Ending balance (in shares) at Sep. 30, 2019		94,599	(121)
Stockholders' equity, ending balance at Sep. 30, 2019	89,771	$ 9	$ (441)	373,486	(283,574)	291
Beginning balance (in shares) at Dec. 31, 2019		94,972	(121)
Stockholders' equity, beginning balance at Dec. 31, 2019	88,437	$ 9	$ (441)	374,525	(286,066)	410
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(5,942)				(5,942)
Other comprehensive income	498					498
Stock-based compensation	1,066			1,066
Issuance of common stock, RSUs (in shares)		178
Issuance of common stock, RSUs	0	$ 1		(1)
Proceeds from the exercise of stock options and ESPP (in shares)		112
Proceeds from the exercise of stock options and ESPP	76			76
Ending balance (in shares) at Mar. 31, 2020		95,262	(121)
Stockholders' equity, ending balance at Mar. 31, 2020	84,135	$ 10	$ (441)	375,666	(292,008)	908
Beginning balance (in shares) at Dec. 31, 2019		94,972	(121)
Stockholders' equity, beginning balance at Dec. 31, 2019	88,437	$ 9	$ (441)	374,525	(286,066)	410
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(16,877)
Other comprehensive income	53
Ending balance (in shares) at Sep. 30, 2020		96,684	(121)
Stockholders' equity, ending balance at Sep. 30, 2020	75,398	$ 10	$ (441)	378,309	(302,943)	463
Beginning balance (in shares) at Mar. 31, 2020		95,262	(121)
Stockholders' equity, beginning balance at Mar. 31, 2020	84,135	$ 10	$ (441)	375,666	(292,008)	908
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(5,357)				(5,357)
Other comprehensive income	(547)					(547)
Stock-based compensation	1,278			1,278
Issuance of common stock, RSUs (in shares)		438
Issuance of common stock, RSUs	0
Ending balance (in shares) at Jun. 30, 2020		95,700	(121)
Stockholders' equity, ending balance at Jun. 30, 2020	79,509	$ 10	$ (441)	376,944	(297,365)	361
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(5,578)				(5,578)
Other comprehensive income	102					102
Stock-based compensation	1,282			1,282
Issuance of common stock, RSUs (in shares)		877
Issuance of common stock, RSUs	0
Proceeds from the exercise of stock options and ESPP (in shares)		107
Proceeds from the exercise of stock options and ESPP	83			83
Ending balance (in shares) at Sep. 30, 2020		96,684	(121)
Stockholders' equity, ending balance at Sep. 30, 2020	$ 75,398	$ 10	$ (441)	$ 378,309	$ (302,943)	$ 463

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net loss	$ (16,877)	$ (16,191)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	10,331	10,158
Amortization of contract acquisition costs	798	1,239
Amortization of ROU assets	7,255	7,222
Stock-based compensation	3,586	3,985
Restructuring and other related costs	633	1,785
Other	54	(200)
Net changes in operating assets and liabilities:
Accounts receivable, net	8,544	10,238
Prepaid expenses and other assets	1,226	507
Contract acquisition costs	(195)	(362)
Accounts payable	(3,597)	(365)
Accrued compensation and benefits	317	(1)
Operating lease liabilities	(7,299)	(6,949)
Accrued expenses	(831)	316
Other liabilities	(1,081)	(4,144)
Net cash provided by operating activities	2,864	7,238
Cash flows from investing activities:
Purchases of property and equipment	(5,124)	(9,243)
Net cash used in investing activities	(5,124)	(9,243)
Cash flows from financing activities:
Repayment on finance lease obligations	(730)	(666)
Proceeds from Revolver	27,000	0
Repayment of Revolver	(12,000)	0
Proceeds from issuance of common stock	159	223
Payments related to minimum tax withholdings on RSU releases	0	(19)
Net cash provided by (used in) financing activities	14,429	(462)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(52)	125
Net change in cash and cash equivalents and restricted cash	12,117	(2,342)
Cash and cash equivalents and restricted cash, beginning of period	29,383	27,779
Cash and cash equivalents and restricted cash, end of period	41,500	25,437
Supplemental disclosures of cash flow information:
Cash paid for interest	408	203
Supplemental disclosures of non-cash activities:
Purchases of property and equipment accrued in accounts payable and accrued expenses	203	1
ROU assets obtained in exchange for new lease liabilities	2,271	19,603
ASU 2016-02
Supplemental disclosures of non-cash activities:
Increase in operating lease liabilities related to the adoption of ASC 842	0	32,104
Increase in ROU assets related to the adoption of ASC 842	0	29,526
Decrease in prepaids and other assets related to the adoption of ASC 842	0	(749)
Decrease in other liabilities related to the adoption of ASC 842	$ 0	$ (3,327)

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The Company

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

The Company

The Company

ServiceSource is a leading provider of BPaaS (business process-as-a-service) solutions that enable the transformation of go-to-market organizations and functions for global technology clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer acquisition, engagement, expansion and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability objectives. Through our unique integration of people, process and technology - leveraged against our 20 years of experience and domain expertise in the cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars of B2B commerce in more than 175 countries on our clients’ behalf annually.

“ServiceSource,” “the Company,” “we,” “us,” or “our”, as used herein, refer to ServiceSource International, Inc. and its wholly owned subsidiaries, unless the context indicates otherwise.

For a summary of commonly used industry terms and abbreviations used in this quarterly report on Form 10-Q, see the Glossary of Terms.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim Consolidated Financial Statements include the accounts of ServiceSource International, Inc. and its wholly owned subsidiaries and have been prepared in accordance with GAAP and with the instructions to Form 10-Q and Article 8 of Regulation S-X for interim financial information. All intercompany balances and transactions have been eliminated in consolidation. These financial statements do not include all the information required by GAAP for annual financial statements. The unaudited Consolidated Balance Sheet as of December 31, 2019 has been derived from the Company’s audited annual Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 19, 2020. In the opinion of management, these Consolidated Financial Statements reflect all adjustments, including normal recurring adjustments, management considers necessary for a fair presentation of the Company’s financial position, operating results, and cash flows for the interim periods presented. These Consolidated Financial Statements and accompanying notes should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2019, included in our annual report on Form 10-K. Interim results are not necessarily indicative of results for the entire year.

Use of Estimates

The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amount of net revenue and expenses during the reporting period.

The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances. The Company has considered the effects of the COVID-19 pandemic in determining its estimates. However, future events are difficult to predict and subject to change, especially with the risks and uncertainties related to the impact of the COVID-19 pandemic, which could cause estimates and judgments to require adjustment. Actual results and outcomes may differ from our estimates.

Reclassifications

Certain items on the Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 have been reclassified to conform to the current year presentation. These reclassifications did not affect the Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Loss or Consolidated Statements of Stockholders' Equity.

Government Assistance

During 2020, ServiceSource received a grant from the Singapore government pursuant to its Job Support Scheme, which assists enterprises in retaining their local employees during the COVID-19 pandemic. ServiceSource received approximately $0.5 million and $0.9 million from the grant during the three and nine months ended September 30, 2020 and is expected to receive an additional $0.4 million through July 2021. Government grants are recognized in the Company's Consolidated Statements of Operations during the same period that the expenses related to the grant are incurred if there is reasonable assurance the grant will be received, and the Company has complied with any conditions attached to the grant.  

New Accounting Standards Issued but Not yet Adopted

Financial Instruments - Credit Losses

In June 2016, the FASB issued an ASU that amends the measurement of credit losses on financial instruments and requires measurement and recognition of expected versus incurred credit losses for financial assets held. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2022, with early adoption permitted. This standard will apply to the Company's accounts receivable and contract assets. Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements as credit losses from trade receivables have historically been insignificant. The Company will adopt this standard effective January 1, 2023.

Income Taxes

In December 2019, the FASB issued an ASU that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2020, with early adoption permitted. Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements. The Company will adopt this standard effective January 1, 2021.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company follows a three-tier fair value hierarchy, which is described in detail in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The following table presents the Company's cash and cash equivalents and restricted cash by significant investment category measured at fair value:

	September 30, 2020		December 31, 2019
	(in thousands)
Level 1:
Cash	$	10,761	$	9,142
Money market mutual funds	28,419		17,947
Cash and cash equivalents	$	39,180	$	27,089
Restricted cash	$	2,320	$	2,294

The Company did not have any other financial instruments or debt measured at fair value as of September 30, 2020 and December 31, 2019. There were no transfers between levels during the nine months ended September 30, 2020 and 2019.

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Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt

Debt

Revolving Line of Credit

In July 2018, the Company entered into a $40.0 million Revolver that allows it and the other Borrowers named therein to borrow against its domestic receivables as defined in the Credit Agreement. The Revolver matures July 2021 and bears interest at a variable rate per annum based on the greater of the prime rate, the Federal Funds rate plus 0.50% or the one-month LIBOR rate plus 1.00%, plus, in each case, a margin of 1.00% for base rate borrowings or 2.00% for Eurodollar borrowings.

As of September 30, 2020, the Company had $15.0 million of borrowings under the Revolver through a one-month Eurodollar borrowing at an effective interest rate of 2.15% maturing October 2020. An additional $14.0 million was available for borrowing under the Revolver as of September 30, 2020. The Eurodollar borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the Company's borrowing base decreases below the current amount outstanding during the term of the Eurodollar borrowing.

Subsequent to September 30, 2020, the one-month $15.0 million Eurodollar borrowing was extended at an effective interest rate of approximately 2.15% maturing November 2020.

The obligations under the Credit Agreement are secured by substantially all the assets of the Borrowers and certain of their subsidiaries, including pledges of equity in certain of the Company’s subsidiaries. The Revolver has financial covenants which the Company was in compliance with as of September 30, 2020 and December 31, 2019.

Deferred Debt Issuance Costs and Interest Expense

Unamortized debt issuance costs related to the Revolver were $0.1 million as of September 30, 2020 and December 31, 2019.

Interest expense related to the amortization of debt issuance costs and interest expense associated with the Company's debt obligation was $0.1 million and $0.04 million for the three months ended September 30, 2020 and 2019, respectively and $0.4 million and $0.1 million for the nine months ended September 30, 2020 and 2019, respectively.

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Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

Leases

The Company has operating leases for office space and finance leases for certain equipment under non-cancelable agreements with various expiration dates through May 2030. Certain office leases include the option to extend the term between one to seven years and certain office leases include the option to terminate the lease upon written notice within one to eight years after lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

During 2020, the Company entered into a 22 month sublease agreement with a third-party for one floor of its Manila office space through October 2021, extended its lease for two of its five floors in the Kuala Lumpur office space through December 2023, and extended its lease for one of its three floors in the Sofia office space through February 2026. The Company recognizes rent expense and sublease income on a straight-line basis over the lease period and accrues for rent expense and sublease income incurred but not paid.

Supplemental income statement information related to leases was as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Operating lease cost	$	3,090	$	2,897	$	9,121	$	8,894
Finance lease cost:
Amortization of leased assets	213		164		564		486
Interest on lease liabilities	19		41		75		127
Total finance lease cost	232		205		639		613
Sublease income	(905)		(602)		(2,692)		(1,538)
Net lease cost	$	2,417	$	2,500	$	7,068	$	7,969

Supplemental balance sheet information related to leases was as follows:

	September 30, 2020		December 31, 2019
	(in thousands)
Operating leases:
ROU assets	$	31,733	$	36,396
Operating lease liabilities	$	10,741	$	9,652
Operating lease liabilities, net of current portion	28,129		33,716
Total operating lease liabilities	$	38,870	$	43,368
Finance leases:
Property and equipment	$	2,858	$	3,480
Accumulated depreciation	(1,766)		(1,823)
Property and equipment, net	$	1,092	$	1,657
Other current liabilities	$	707	$	952
Other long-term liabilities	186		671
Total finance lease liabilities	$	893	$	1,623

Lease term and discount rate information was as follows:

	For the Nine Months Ended September 30,
	2020		2019
Weighted-average remaining lease term (in years):
Operating lease	5.7		5.9
Finance lease	1.2		2.0
Weighted-average discount rate:
Operating lease	6.2	%	6.5	%
Finance lease	7.0	%	8.1	%

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

Leases

Leases

The Company has operating leases for office space and finance leases for certain equipment under non-cancelable agreements with various expiration dates through May 2030. Certain office leases include the option to extend the term between one to seven years and certain office leases include the option to terminate the lease upon written notice within one to eight years after lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

During 2020, the Company entered into a 22 month sublease agreement with a third-party for one floor of its Manila office space through October 2021, extended its lease for two of its five floors in the Kuala Lumpur office space through December 2023, and extended its lease for one of its three floors in the Sofia office space through February 2026. The Company recognizes rent expense and sublease income on a straight-line basis over the lease period and accrues for rent expense and sublease income incurred but not paid.

Supplemental income statement information related to leases was as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Operating lease cost	$	3,090	$	2,897	$	9,121	$	8,894
Finance lease cost:
Amortization of leased assets	213		164		564		486
Interest on lease liabilities	19		41		75		127
Total finance lease cost	232		205		639		613
Sublease income	(905)		(602)		(2,692)		(1,538)
Net lease cost	$	2,417	$	2,500	$	7,068	$	7,969

Supplemental balance sheet information related to leases was as follows:

	September 30, 2020		December 31, 2019
	(in thousands)
Operating leases:
ROU assets	$	31,733	$	36,396
Operating lease liabilities	$	10,741	$	9,652
Operating lease liabilities, net of current portion	28,129		33,716
Total operating lease liabilities	$	38,870	$	43,368
Finance leases:
Property and equipment	$	2,858	$	3,480
Accumulated depreciation	(1,766)		(1,823)
Property and equipment, net	$	1,092	$	1,657
Other current liabilities	$	707	$	952
Other long-term liabilities	186		671
Total finance lease liabilities	$	893	$	1,623

Lease term and discount rate information was as follows:

	For the Nine Months Ended September 30,
	2020		2019
Weighted-average remaining lease term (in years):
Operating lease	5.7		5.9
Finance lease	1.2		2.0
Weighted-average discount rate:
Operating lease	6.2	%	6.5	%
Finance lease	7.0	%	8.1	%

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

Leases

Leases

The Company has operating leases for office space and finance leases for certain equipment under non-cancelable agreements with various expiration dates through May 2030. Certain office leases include the option to extend the term between one to seven years and certain office leases include the option to terminate the lease upon written notice within one to eight years after lease commencement. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

During 2020, the Company entered into a 22 month sublease agreement with a third-party for one floor of its Manila office space through October 2021, extended its lease for two of its five floors in the Kuala Lumpur office space through December 2023, and extended its lease for one of its three floors in the Sofia office space through February 2026. The Company recognizes rent expense and sublease income on a straight-line basis over the lease period and accrues for rent expense and sublease income incurred but not paid.

Supplemental income statement information related to leases was as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Operating lease cost	$	3,090	$	2,897	$	9,121	$	8,894
Finance lease cost:
Amortization of leased assets	213		164		564		486
Interest on lease liabilities	19		41		75		127
Total finance lease cost	232		205		639		613
Sublease income	(905)		(602)		(2,692)		(1,538)
Net lease cost	$	2,417	$	2,500	$	7,068	$	7,969

Supplemental balance sheet information related to leases was as follows:

	September 30, 2020		December 31, 2019
	(in thousands)
Operating leases:
ROU assets	$	31,733	$	36,396
Operating lease liabilities	$	10,741	$	9,652
Operating lease liabilities, net of current portion	28,129		33,716
Total operating lease liabilities	$	38,870	$	43,368
Finance leases:
Property and equipment	$	2,858	$	3,480
Accumulated depreciation	(1,766)		(1,823)
Property and equipment, net	$	1,092	$	1,657
Other current liabilities	$	707	$	952
Other long-term liabilities	186		671
Total finance lease liabilities	$	893	$	1,623

Lease term and discount rate information was as follows:

	For the Nine Months Ended September 30,
	2020		2019
Weighted-average remaining lease term (in years):
Operating lease	5.7		5.9
Finance lease	1.2		2.0
Weighted-average discount rate:
Operating lease	6.2	%	6.5	%
Finance lease	7.0	%	8.1	%

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

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Revenue Recognition

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The following tables present the disaggregation of revenue from contracts with our clients:

Revenue by Performance Obligation

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Selling services	$	44,840	$	52,663	$	140,558	$	159,707
Professional services	950		732		2,984		1,557
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Revenue by Geography

Revenue for each geography generally reflects commissions earned from sales of service contracts managed from revenue delivery centers in that geography and subscription sales and professional services to deploy the Company's solutions. Predominantly all the service contracts sold and managed by the revenue delivery centers relate to end customers located in the same geography. All NALA revenue represents revenue generated within the U.S.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
NALA	$	27,204	$	32,153	$	83,235	$	94,949
EMEA	11,984		12,918		38,837		39,972
APJ	6,602		8,324		21,470		26,343
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Revenue by Contract Pricing

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Variable consideration	$	33,188	$	37,577	$	103,367	$	106,889
Fixed consideration	12,602		15,818		40,175		54,375
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Contract Balances

As of September 30, 2020 and December 31, 2019, contract asset balances were insignificant and as of September 30, 2020 and December 31, 2019, contract liability balances totaled $0.3 million and $0.8 million, respectively.

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2020, assuming none of the Company’s current contracts with fixed consideration are renewed, the Company estimates receiving approximately $40.3 million in future selling services fixed consideration and approximately $0.5 million in professional services fixed consideration.

Contract Acquisition Costs

As of September 30, 2020 and December 31, 2019, capitalized contract acquisition costs were $1.0 million and $1.6 million, respectively. The Company recorded amortization expense related to capitalized contract acquisition costs of $0.3 million and $0.4 million for the three months ended September 30, 2020 and 2019, respectively, and $0.8 million and $1.2 million for the nine months ended September 30, 2020 and 2019, respectively.

Impairment recognized on contract costs was insignificant for the three and nine months ended September 30, 2020 and 2019.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2020 Equity Incentive Plan

The 2020 Plan was approved by the Company’s stockholders on May 14, 2020 and expires March 4, 2025. The 2020 Plan provides for a reserve of 6,200,000 shares of the Company's common stock that may be issued pursuant to awards under the 2020 Plan. Permitted awards include, but are not limited to, options, stock appreciation rights, restricted stock units, performance stock units and other cash and stock-based awards.

On May 14, 2020, following the approval of the 2020 Plan, the Company’s board of directors terminated the 2011 Plan with the effect that no additional awards may be issued under the 2011 Plan and all outstanding awards under the 2011 Plan shall continue on and be unaffected by the termination of the 2011 Plan.

2020 PSU Awards

During May 2020 and prior to expiration of the 2011 Plan, the Company granted PSUs to certain executives under the 2011 Plan. The aggregate target number of shares subject to these awards is 0.9 million, with an aggregate grant date fair value of $1.2 million. The number of shares ultimately received related to these awards ranges from 0% to 150% of the participant's target award depending on the Company's achievement of specified Adjusted EBITDA and net bookings targets over a two-year performance period and will vest on the third anniversary of the grant date.

Stock-Based Compensation Expense

The following table presents stock-based compensation expense as allocated within the Company's Consolidated Statements of Operations:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Cost of revenue	$	110	$	126	$	245	$	414
Sales and marketing	200		518		1,021		1,390
Research and development	14		12		33		24
General and administrative	942		523		2,287		2,157
Total stock-based compensation	$	1,266	$	1,179	$	3,586	$	3,985

The above table does not include capitalized stock-based compensation related to internal-use software that was insignificant for the three and nine months ended September 30, 2020 and 2019.

Stock Awards

A summary of the Company's stock option activity and related information was as follows:

	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Intrinsic Value
	(in thousands)				(in thousands)
Outstanding as of December 31, 2019	4,146	$	2.16		$	1,580
Granted	20	$	1.32
Expired and/or forfeited	(609)	$	3.13
Outstanding as of September 30, 2020	3,557	$	1.99	7.08	$	866
Exercisable as of September 30, 2020	2,470	$	2.33	6.50	$	501

The weighted-average fair value of options granted during the nine months ended September 30, 2020 and 2019 was $0.63 and $0.47, respectively. As of September 30, 2020, there was $0.6 million of unrecognized compensation expense related to previously granted stock options, which is expected to be recognized over a weighted-average period of 1.9 years.

A summary of the Company's RSU and PSU activity and related information was as follows:

	Units	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested as of December 31, 2019	5,305	$	1.88
Granted	5,602	$	1.43
Vested	(1,493)	$	2.09
Forfeited	(1,180)	$	1.86
Non-vested as of September 30, 2020	8,234	$	1.54

As of September 30, 2020, there was $10.3 million of unrecognized compensation expense related to previously granted RSUs and PSUs, which is expected to be recognized over a weighted-average period of 2.2 years.

Potential shares of common stock that are not included in the determination of diluted net loss per share because they are anti-dilutive for the periods presented consist of stock options, unvested RSUs and PSUs, and shares to be purchased under our ESPP. The Company excluded from diluted earnings per share the weighted-average common share equivalents related to 3.2 million and 7.9 million shares for the three months ended September 30, 2020 and 2019, respectively, and 4.1 million and 8.4 million shares for the nine months ended September 30, 2020 and 2019, respectively, because their effect would have been anti-dilutive.

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Restructuring and Other Related Costs

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

Restructuring and Other Related Costs

Restructuring and Other Related Costs

The Company has undergone restructuring efforts to better align its cost structure with its business and market conditions. These restructuring efforts include severance and other employee costs, lease and other contract termination costs and asset impairments. Severance and other employee costs include severance payments, related employee benefits, stock-based compensation related to the accelerated vesting of certain equity awards and employee-related legal fees. Lease and other contract termination costs include charges related to lease consolidation and abandonment of spaces no longer utilized and the cancellation of certain contracts with outside vendors. Asset impairments include charges related to leasehold improvements and furniture in spaces vacated or no longer in use. The restructuring plans and future cash outlays are recorded in "Accrued expenses" and "Other long-term liabilities" in the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019.

During 2019, the Company announced a restructuring effort resulting in a reduction of headcount and office lease costs. The Company recognized charges related to this restructuring effort of $0.7 million for the nine months ended September 30, 2020 and $0.6 million and $1.8 million for the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, the Company does not expect to incur additional restructuring charges related to the 2019 restructuring.

The following table presents a reconciliation of the beginning and ending fair value liability balance related to the 2019 restructuring effort:

	Severance and Other Employee Costs		Lease Termination Costs		Total
			(in thousands)
Balance as of January 1, 2019	$	—	$	—	$	—
Restructuring and other related costs	1,806		123		1,929
Cash paid	(1,624)		(123)		(1,747)
Balance as of December 31, 2019	182		—		182
Restructuring and other related costs	703		—		703
Cash paid	(866)		—		(866)
Change in estimates and non-cash charges	(19)		—		(19)
Balance as of September 30, 2020	$	—	$	—	$	—

In May 2017, the Company announced a restructuring effort resulting in a headcount reduction and the reduction of office space in four locations. As of September 30, 2020, the Company does not expect to incur additional restructuring charges related to the May 2017 restructuring.

The following table presents a reconciliation of the beginning and ending fair value liability balance related to the May 2017 restructuring effort:

	Severance and Other Employee Costs		Lease and Other Contract Termination Costs		Asset Impairments		Total
	(in thousands)
Balance as of January 1, 2017	$	—	$	—	$	—	$	—
Restructuring and other related costs	3,483		2,939		886		7,308
Cash paid	(3,060)		(1,185)		—		(4,245)
Change in estimates and non-cash charges	—		—		(886)		(886)
Acceleration of stock-based compensation expense in additional paid-in capital	(352)		—		—		(352)
Balance as of December 31, 2017	71		1,754		—		1,825
Restructuring and other related costs	120		89		—		209
Cash paid	(188)		(1,133)		—		(1,321)
Change in estimates and non-cash charges	(3)		252		—		249
Balance as of December 31, 2018	—		962		—		962
Cash paid	—		(183)		—		(183)
Change in estimates and non-cash charges	—		(63)		—		(63)
Balance as of December 31, 2019	—		716		—		716
Cash paid	—		(133)		—		(133)
Change in estimates and non-cash charges	—		(51)		—		(51)
Balance as of September 30, 2020	$	—	$	532	$	—	$	532

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Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the valuation allowances on the Company’s net operating losses and foreign tax rate differences. The "Provision for income tax expense" in the Consolidated Statements of Operations primarily consists of income and withholding taxes for foreign and state jurisdictions where the Company has profitable operations, as well as valuation allowance adjustments for certain U.S. tax jurisdictions. No tax benefit was provided for losses incurred in the U.S., Ireland and Singapore because those losses are offset by a full valuation allowance. The tax years 2012 through 2020 generally remain subject to examination by federal, state and foreign tax authorities.

The gross amount of the Company’s unrecognized tax benefits was $1.0 million as of September 30, 2020 and December 31, 2019, none of which, if recognized, would affect the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the three and nine months ended September 30, 2020 and 2019, interest and penalties recognized were insignificant.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Letters of Credit

In connection with two of our leased facilities, the Company is required to maintain two letters of credit totaling $2.3 million. The letters of credit are secured by $2.3 million of cash in money market accounts, which are classified as restricted cash in "Other assets" in the Consolidated Balance Sheets.

Non-cancelable Service Contract Commitments

Future minimum payments under non-cancelable service contract commitments were as follows:

	September 30, 2020
	(in thousands)
Remainder of 2020	$	2,359
2021	10,385
2022	9,152
2023	7,446
2024	821
Thereafter	—
Total	$	30,163

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of PresentationThe accompanying unaudited interim Consolidated Financial Statements include the accounts of ServiceSource International, Inc. and its wholly owned subsidiaries and have been prepared in accordance with GAAP and with the instructions to Form 10-Q and Article 8 of Regulation S-X for interim financial information. All intercompany balances and transactions have been eliminated in consolidation. These financial statements do not include all the information required by GAAP for annual financial statements. The unaudited Consolidated Balance Sheet as of December 31, 2019 has been derived from the Company’s audited annual Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 19, 2020. In the opinion of management, these Consolidated Financial Statements reflect all adjustments, including normal recurring adjustments, management considers necessary for a fair presentation of the Company’s financial position, operating results, and cash flows for the interim periods presented. These Consolidated Financial Statements and accompanying notes should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2019, included in our annual report on Form 10-K. Interim results are not necessarily indicative of results for the entire year.

Use of Estimates

Use of Estimates

The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amount of net revenue and expenses during the reporting period.

The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances. The Company has considered the effects of the COVID-19 pandemic in determining its estimates. However, future events are difficult to predict and subject to change, especially with the risks and uncertainties related to the impact of the COVID-19 pandemic, which could cause estimates and judgments to require adjustment. Actual results and outcomes may differ from our estimates.

Reclassifications

Reclassifications

Certain items on the Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 have been reclassified to conform to the current year presentation. These reclassifications did not affect the Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Comprehensive Loss or Consolidated Statements of Stockholders' Equity.

Government Assistance

Government AssistanceDuring 2020, ServiceSource received a grant from the Singapore government pursuant to its Job Support Scheme, which assists enterprises in retaining their local employees during the COVID-19 pandemic. ServiceSource received approximately $0.5 million and $0.9 million from the grant during the three and nine months ended September 30, 2020 and is expected to receive an additional $0.4 million through July 2021. Government grants are recognized in the Company's Consolidated Statements of Operations during the same period that the expenses related to the grant are incurred if there is reasonable assurance the grant will be received, and the Company has complied with any conditions attached to the grant.

New Accounting Standards Issued but Not yet Adopted

New Accounting Standards Issued but Not yet Adopted

Financial Instruments - Credit Losses

In June 2016, the FASB issued an ASU that amends the measurement of credit losses on financial instruments and requires measurement and recognition of expected versus incurred credit losses for financial assets held. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2022, with early adoption permitted. This standard will apply to the Company's accounts receivable and contract assets. Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements as credit losses from trade receivables have historically been insignificant. The Company will adopt this standard effective January 1, 2023.

Income Taxes

In December 2019, the FASB issued an ASU that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2020, with early adoption permitted. Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements. The Company will adopt this standard effective January 1, 2021.

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Summary of Financial Instruments Measured at Fair Value

The following table presents the Company's cash and cash equivalents and restricted cash by significant investment category measured at fair value:

	September 30, 2020		December 31, 2019
	(in thousands)
Level 1:
Cash	$	10,761	$	9,142
Money market mutual funds	28,419		17,947
Cash and cash equivalents	$	39,180	$	27,089
Restricted cash	$	2,320	$	2,294

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Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Summary of Supplemental Income Statement Information and Other Information

Supplemental income statement information related to leases was as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Operating lease cost	$	3,090	$	2,897	$	9,121	$	8,894
Finance lease cost:
Amortization of leased assets	213		164		564		486
Interest on lease liabilities	19		41		75		127
Total finance lease cost	232		205		639		613
Sublease income	(905)		(602)		(2,692)		(1,538)
Net lease cost	$	2,417	$	2,500	$	7,068	$	7,969

Lease term and discount rate information was as follows:

	For the Nine Months Ended September 30,
	2020		2019
Weighted-average remaining lease term (in years):
Operating lease	5.7		5.9
Finance lease	1.2		2.0
Weighted-average discount rate:
Operating lease	6.2	%	6.5	%
Finance lease	7.0	%	8.1	%

Summary of Supplemental Balance Sheet Information

Supplemental balance sheet information related to leases was as follows:

	September 30, 2020		December 31, 2019
	(in thousands)
Operating leases:
ROU assets	$	31,733	$	36,396
Operating lease liabilities	$	10,741	$	9,652
Operating lease liabilities, net of current portion	28,129		33,716
Total operating lease liabilities	$	38,870	$	43,368
Finance leases:
Property and equipment	$	2,858	$	3,480
Accumulated depreciation	(1,766)		(1,823)
Property and equipment, net	$	1,092	$	1,657
Other current liabilities	$	707	$	952
Other long-term liabilities	186		671
Total finance lease liabilities	$	893	$	1,623

Summary of Maturities of Operating Lease Liabilities

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

Operating Lease, Lease Income

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

Summary of Maturities of Finance Lease Liabilities

Maturities of lease liabilities were as follows as of September 30, 2020:

	Operating Leases		Operating Sublease		Finance Leases		Total
	(in thousands)
Remainder of 2020	$	3,442	$	(919)	$	235	$	2,758
2021	12,594		(3,552)		633		9,675
2022	9,168		(2,538)		64		6,694
2023	4,221		(623)		—		3,598
2024	2,928		—		—		2,928
Thereafter	14,243		—		—		14,243
Total lease payments	46,596		(7,632)		932		39,896
Less: interest	(7,690)		—		(39)		(7,729)
Less: tenant improvement reimbursements(1)	(36)		—		—		(36)
Total	$	38,870	$	(7,632)	$	893	$	32,131

(1) Relates to tenant improvement reimbursements incurred by the Company after lease commencement, but not received from the landlord as of September 30, 2020.

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue from Contracts with Clients

The following tables present the disaggregation of revenue from contracts with our clients:

Revenue by Performance Obligation

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Selling services	$	44,840	$	52,663	$	140,558	$	159,707
Professional services	950		732		2,984		1,557
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Revenue by Geography

Revenue for each geography generally reflects commissions earned from sales of service contracts managed from revenue delivery centers in that geography and subscription sales and professional services to deploy the Company's solutions. Predominantly all the service contracts sold and managed by the revenue delivery centers relate to end customers located in the same geography. All NALA revenue represents revenue generated within the U.S.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
NALA	$	27,204	$	32,153	$	83,235	$	94,949
EMEA	11,984		12,918		38,837		39,972
APJ	6,602		8,324		21,470		26,343
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

Revenue by Contract Pricing

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Variable consideration	$	33,188	$	37,577	$	103,367	$	106,889
Fixed consideration	12,602		15,818		40,175		54,375
Total revenue	$	45,790	$	53,395	$	143,542	$	161,264

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Summary of Stock-Based Compensation Expense

The following table presents stock-based compensation expense as allocated within the Company's Consolidated Statements of Operations:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Cost of revenue	$	110	$	126	$	245	$	414
Sales and marketing	200		518		1,021		1,390
Research and development	14		12		33		24
General and administrative	942		523		2,287		2,157
Total stock-based compensation	$	1,266	$	1,179	$	3,586	$	3,985

Summary of Option and Restricted Stock Activity

A summary of the Company's stock option activity and related information was as follows:

	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Intrinsic Value
	(in thousands)				(in thousands)
Outstanding as of December 31, 2019	4,146	$	2.16		$	1,580
Granted	20	$	1.32
Expired and/or forfeited	(609)	$	3.13
Outstanding as of September 30, 2020	3,557	$	1.99	7.08	$	866
Exercisable as of September 30, 2020	2,470	$	2.33	6.50	$	501

Summary of Additional Information Concerning Vested RSUs and PSUs

A summary of the Company's RSU and PSU activity and related information was as follows:

	Units	Weighted-Average Grant Date Fair Value
	(in thousands)
Non-vested as of December 31, 2019	5,305	$	1.88
Granted	5,602	$	1.43
Vested	(1,493)	$	2.09
Forfeited	(1,180)	$	1.86
Non-vested as of September 30, 2020	8,234	$	1.54

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Restructuring and Other Related Costs (Tables)

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

Schedule of Restructuring and Other Reserve Activities

The following table presents a reconciliation of the beginning and ending fair value liability balance related to the 2019 restructuring effort:

	Severance and Other Employee Costs		Lease Termination Costs		Total
			(in thousands)
Balance as of January 1, 2019	$	—	$	—	$	—
Restructuring and other related costs	1,806		123		1,929
Cash paid	(1,624)		(123)		(1,747)
Balance as of December 31, 2019	182		—		182
Restructuring and other related costs	703		—		703
Cash paid	(866)		—		(866)
Change in estimates and non-cash charges	(19)		—		(19)
Balance as of September 30, 2020	$	—	$	—	$	—

The following table presents a reconciliation of the beginning and ending fair value liability balance related to the May 2017 restructuring effort:

	Severance and Other Employee Costs		Lease and Other Contract Termination Costs		Asset Impairments		Total
	(in thousands)
Balance as of January 1, 2017	$	—	$	—	$	—	$	—
Restructuring and other related costs	3,483		2,939		886		7,308
Cash paid	(3,060)		(1,185)		—		(4,245)
Change in estimates and non-cash charges	—		—		(886)		(886)
Acceleration of stock-based compensation expense in additional paid-in capital	(352)		—		—		(352)
Balance as of December 31, 2017	71		1,754		—		1,825
Restructuring and other related costs	120		89		—		209
Cash paid	(188)		(1,133)		—		(1,321)
Change in estimates and non-cash charges	(3)		252		—		249
Balance as of December 31, 2018	—		962		—		962
Cash paid	—		(183)		—		(183)
Change in estimates and non-cash charges	—		(63)		—		(63)
Balance as of December 31, 2019	—		716		—		716
Cash paid	—		(133)		—		(133)
Change in estimates and non-cash charges	—		(51)		—		(51)
Balance as of September 30, 2020	$	—	$	532	$	—	$	532

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Payments Under Non-cancelable Service Contract Commitments

Future minimum payments under non-cancelable service contract commitments were as follows:

	September 30, 2020
	(in thousands)
Remainder of 2020	$	2,359
2021	10,385
2022	9,152
2023	7,446
2024	821
Thereafter	—
Total	$	30,163

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The Company (Details)	9 Months Ended
	Sep. 30, 2020 country
Accounting Policies [Abstract]
Years of operating experience	20 years
Number of countries in which company operates	175

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Summary of Significant Accounting Policies (Details) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2020 USD ($)
Accounting Policies [Abstract]
Proceeds received from grant	$ 0.5	$ 0.9
Additional proceeds expected to be received from grant	$ 0.4	$ 0.4

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Fair Value of Financial Instruments - Summary of Financial Instruments (Details) - Level 1 - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 39,180	$ 27,089
Restricted cash	2,320	2,294
Cash
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	10,761	9,142
Money market mutual funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 28,419	$ 17,947

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Debt (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 31, 2018	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Oct. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Revolver		$ 15,000,000		$ 15,000,000			$ 0
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Revolver		$ 15,000,000.0		$ 15,000,000.0
Line of Credit | Subsequent Event | Revolving Credit Facility
Debt Instrument [Line Items]
Revolver						$ 15,000,000.0
Line of Credit | Subsequent Event | Revolving Credit Facility | Eurodollar
Debt Instrument [Line Items]
Effective interest rate						2.15%
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 40,000,000.0
Effective interest rate		2.15%		2.15%
Line of credit facility, remaining borrowing capacity		$ 14,000,000.0		$ 14,000,000.0
Deferred loan costs		100,000		100,000			$ 100,000
Interest expense		$ 100,000	$ 40,000.00	$ 400,000	$ 100,000
Line of Credit | Revolving Credit Facility | Federal Funds rate
Debt Instrument [Line Items]
Basis spread of interest rate	0.50%
Line of Credit | Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Basis spread of interest rate	1.00%
Line of Credit | Revolving Credit Facility | Base rate
Debt Instrument [Line Items]
Basis spread of interest rate	1.00%
Line of Credit | Revolving Credit Facility | Eurodollar
Debt Instrument [Line Items]
Basis spread of interest rate	2.00%

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Leases - Narrative (Details)	9 Months Ended
	Sep. 30, 2020
Lessee, Lease, Description [Line Items]
Sublease agreement, term	22 months
Minimum
Lessee, Lease, Description [Line Items]
Option to extend, term (in years)	1 year
Option to terminate, term (in years)	1 year
Maximum
Lessee, Lease, Description [Line Items]
Option to extend, term (in years)	7 years
Option to terminate, term (in years)	8 years

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Leases - Supplemental Income Statement Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Operating lease cost	$ 3,090	$ 2,897	$ 9,121	$ 8,894
Finance lease cost:
Amortization of leased assets	213	164	564	486
Interest on lease liabilities	19	41	75	127
Total finance lease cost	232	205	639	613
Sublease income	(905)	(602)	(2,692)	(1,538)
Net lease cost	$ 2,417	$ 2,500	$ 7,068	$ 7,969

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Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Operating leases:
ROU assets	$ 31,733	$ 36,396
Operating lease liabilities	10,741	9,652
Operating lease liabilities, net of current portion	28,129	33,716
Total operating lease liabilities	38,870	43,368
Finance leases:
Property and equipment	2,858	3,480
Accumulated depreciation	(1,766)	(1,823)
Property and equipment, net	1,092	1,657
Other current liabilities	707	952
Other long-term liabilities	186	671
Total finance lease liabilities	$ 893	$ 1,623
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	us-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortization
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesCurrent
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	us-gaap:OtherLiabilitiesNoncurrent

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Leases - Lease Term and Discount Rate (Details)	Sep. 30, 2020	Sep. 30, 2019
Weighted-average remaining lease term (in years):
Operating lease	5 years 8 months 12 days	5 years 10 months 24 days
Finance lease	1 year 2 months 12 days	2 years
Weighted-average discount rate:
Operating lease	6.20%	6.50%
Finance lease	7.00%	8.10%

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Leases - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Operating Leases
Remainder of 2020	$ 3,442
2021	12,594
2022	9,168
2023	4,221
2024	2,928
Thereafter	14,243
Total lease payments	46,596
Less: interest	(7,690)
Less: tenant improvements reimbursement	(36)
Total	38,870	$ 43,368
Operating Sublease
Remainder of 2020	(919)
2021	(3,552)
2022	(2,538)
2023	(623)
2024	0
Thereafter	0
Total	(7,632)
Finance Leases
Remainder of 2020	235
2021	633
2022	64
2023	0
2024	0
Thereafter	0
Total lease payments	932
Less: interest	(39)
Less: tenant improvements reimbursement	0
Total	893	$ 1,623
Operating and Finance Leases
Remainder of 2020	2,758
2021	9,675
2022	6,694
2023	3,598
2024	2,928
Thereafter	14,243
Total lease payments	39,896
Less: interest	(7,729)
Less: tenant improvements reimbursement	(36)
Total	$ 32,131

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Net revenue	$ 45,790	$ 53,395	$ 143,542	$ 161,264
Variable consideration
Disaggregation of Revenue [Line Items]
Net revenue	33,188	37,577	103,367	106,889
Fixed consideration
Disaggregation of Revenue [Line Items]
Net revenue	12,602	15,818	40,175	54,375
NALA
Disaggregation of Revenue [Line Items]
Net revenue	27,204	32,153	83,235	94,949
EMEA
Disaggregation of Revenue [Line Items]
Net revenue	11,984	12,918	38,837	39,972
APJ
Disaggregation of Revenue [Line Items]
Net revenue	6,602	8,324	21,470	26,343
Selling services
Disaggregation of Revenue [Line Items]
Net revenue	44,840	52,663	140,558	159,707
Professional services
Disaggregation of Revenue [Line Items]
Net revenue	$ 950	$ 732	$ 2,984	$ 1,557

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Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract liability	$ 300		$ 300		$ 800
Contract acquisition asset	1,000		1,000		$ 1,600
Amortization of contract acquisition costs	300	$ 400	798	$ 1,239
Selling services
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Remaining performance obligation	40,300		40,300
Professional services
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Remaining performance obligation	$ 500		$ 500

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Stock-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2020	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	May 14, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award achievement performance period	2 years
Antidilutive shares excluded from diluted earnings per share calculation (in shares)		3,200,000	7,900,000	4,100,000	8,400,000
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)	900,000
Fair value of shares granted	$ 1.2
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-average fair value of options granted (in dollars per share)				$ 0.63	$ 0.47
Unrecognized compensation expense, stock options		$ 0.6		$ 0.6
Unrecognized compensation expense, weighted-average period recognized				1 year 10 months 24 days
RSUs and PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted (in shares)				5,602,000
Unrecognized compensation expense, weighted-average period recognized				2 years 2 months 12 days
Unrecognized compensation expense, RSUs and PSUs		$ 10.3		$ 10.3
Minimum | PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares received from rewards, percent	0.00%
Maximum | PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares received from rewards, percent	150.00%
2020 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares reserved for issuance (in shares)						6,200,000

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Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 1,266	$ 1,179	$ 3,586	$ 3,985
Cost of revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	110	126	245	414
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	200	518	1,021	1,390
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	14	12	33	24
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation	$ 942	$ 523	$ 2,287	$ 2,157

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Stock-Based Compensation - Option Activity (Details) - Employee Stock Option - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Options Outstanding, Number of Shares
Outstanding, beginning balance (in shares)	4,146
Granted (in shares)	20
Expired and/or forfeited (in shares)	(609)
Outstanding, ending balance (in shares)	3,557
Options exercisable (in shares)	2,470
Options Outstanding, Options, Weighted Average Exercise Price
Outstanding, weighted average exercise, beginning balance (in dollars per share)	$ 2.16
Granted, weighted average exercise price (in dollars per share)	1.32
Expired and/or forfeited, weighted average exercise price (in dollars per share)	3.13
Outstanding, weighted average exercise, ending balance (in dollars per share)	1.99
Options exercisable, weighted average option price per share (in dollars per share)	$ 2.33
Outstanding, weighted average remaining contractual life (years)	7 years 29 days
Options exercisable, weighted average remaining contractual life (years)	6 years 6 months
Outstanding, intrinsic value	$ 866	$ 1,580
Options exercisable, intrinsic value	$ 501

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Stock-Based Compensation - Restricted Stock Unit Activity (Details) - RSUs and PSUs shares in Thousands	9 Months Ended
	Sep. 30, 2020 $ / shares shares
Units
Unvested, beginning balance (in shares) | shares	5,305
Granted (in shares) | shares	5,602
Vested (in shares) | shares	(1,493)
Forfeited (in shares) | shares	(1,180)
Unvested, ending balance (in shares) | shares	8,234
Weighted-Average Grant Date Fair Value
Unvested, weighted average grant date fair value, beginning balance (in dollars per share) | $ / shares	$ 1.88
Granted, weighted average grant date fair value (in dollars per share) | $ / shares	1.43
Vested, weighted average grant date fair value (in dollars per share) | $ / shares	2.09
Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares	1.86
Unvested, weighted average grant date fair value, ending balance (in dollars per share) | $ / shares	$ 1.54

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Restructuring and Other Related Costs - Narrative (Details) $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended		12 Months Ended
	May 31, 2017 location	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
February 2019 Restructuring Effort
Restructuring Cost and Reserve [Line Items]
Restructuring charges		$ 600	$ 703	$ 1,800	$ 1,929
May 2017 Restructuring Effort
Restructuring Cost and Reserve [Line Items]
Restructuring charges						$ 209	$ 7,308
Number of locations where reduction of headcount and office spaces took place (location) | location	4

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Restructuring and Other Related Costs - Restructuring and Other Reserve Activities (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
February 2019 Restructuring Effort
Restructuring Reserve [Roll Forward]
Beginning Balance		$ 182	$ 0	$ 0
Restructuring and other related costs	$ 600	703	1,800	1,929
Cash paid		(866)		(1,747)
Change in estimates and non-cash charges		(19)
Ending Balance		0		182	$ 0
February 2019 Restructuring Effort | Severance and Other Employee Costs
Restructuring Reserve [Roll Forward]
Beginning Balance		182	0	0
Restructuring and other related costs		703		1,806
Cash paid		(866)		(1,624)
Change in estimates and non-cash charges		(19)
Ending Balance		0		182	0
February 2019 Restructuring Effort | Lease and Other Contract Termination Costs
Restructuring Reserve [Roll Forward]
Beginning Balance		0	0	0
Restructuring and other related costs		0		123
Cash paid		0		(123)
Change in estimates and non-cash charges		0
Ending Balance		0		0	0
May 2017 Restructuring Effort
Restructuring Reserve [Roll Forward]
Beginning Balance		716	962	962	1,825	$ 0
Restructuring and other related costs					209	7,308
Cash paid		(133)		(183)	(1,321)	(4,245)
Change in estimates and non-cash charges		(51)		(63)	249	(886)
Acceleration of stock-based compensation expense in additional paid-in capital						(352)
Ending Balance		532		716	962	1,825
May 2017 Restructuring Effort | Severance and Other Employee Costs
Restructuring Reserve [Roll Forward]
Beginning Balance		0	0	0	71	0
Restructuring and other related costs					120	3,483
Cash paid		0		0	(188)	(3,060)
Change in estimates and non-cash charges		0		0	(3)	0
Acceleration of stock-based compensation expense in additional paid-in capital						(352)
Ending Balance		0		0	0	71
May 2017 Restructuring Effort | Lease and Other Contract Termination Costs
Restructuring Reserve [Roll Forward]
Beginning Balance		716	962	962	1,754	0
Restructuring and other related costs					89	2,939
Cash paid		(133)		(183)	(1,133)	(1,185)
Change in estimates and non-cash charges		(51)		(63)	252	0
Acceleration of stock-based compensation expense in additional paid-in capital						0
Ending Balance		532		716	962	1,754
May 2017 Restructuring Effort | Asset Impairments
Restructuring Reserve [Roll Forward]
Beginning Balance		0	$ 0	0	0	0
Restructuring and other related costs					0	886
Cash paid		0		0	0	0
Change in estimates and non-cash charges		0		0	0	(886)
Acceleration of stock-based compensation expense in additional paid-in capital						0
Ending Balance		$ 0		$ 0	$ 0	$ 0

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Income Taxes (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 1.0	$ 1.0

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Commitments and Contingencies - Narrative (Details) $ in Millions	Sep. 30, 2020 USD ($) debt_instrument facility
Other Commitments [Line Items]
Number of leased facilities | facility	2
Number of letters of credit | debt_instrument	2
Money Market Mutual Funds | Letter of Credit
Other Commitments [Line Items]
Letters of credit	$ 2.3
Restricted cash	$ 2.3

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Commitments and Contingencies - Future Minimum Payments (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Non-cancelable Service Contract Commitments
Remainder of 2020	$ 2,359
2021	10,385
2022	9,152
2023	7,446
2024	821
Thereafter	0
Total	$ 30,163