Document

We have three classes of common stock: Class A-1 common stock, Class A-2 common stock, and Class B common stock. The rights of the holders of Class A-1 common stock, Class A-2 common stock, and Class B common stock are different with respect to voting, conversion, and transfer rights. Each share of Class B common stock is entitled to one vote. Each share of Class A-1 common stock is entitled to ten votes. Each share of Class A-2 common stock is also entitled to ten votes, but in the event that the total voting power of the Class A-2 common stock represents less than 51% of the total voting power of all our outstanding capital stock, then the voting power of each share of Class A-2 common stock will be automatically increased so that the Class A-2 common stock collectively holds 51% of our total voting power. In such event, the voting power of shares of Class B common stock (the shares being issued in this offering) and Class A-1 common stock will be automatically and proportionately reduced. Upon completion of this offering, approximately 87% of our Class A-2 common stock will be held by Grandview Holdings, LLC, the managers of which are our founders, including our Chief Executive Officer (who is also a director), our President (who is also a director), and our former President (who is also a director). This means that, for the foreseeable future, investors in this offering and holders of our Class B common stock in the future will not have a meaningful voice in our corporate affairs and that the control of our company will be concentrated with Grandview Holdings, LLC and the other holders of our Class A-2 common stock. See the section titled “Risk Factors—Risks Related to Ownership of Our Class B Common Stock and this Offering” for additional information.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our Class B common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included elsewhere in this prospectus and the information set forth under the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless the context otherwise requires, we use the terms “Qualtrics,” “company,” “our,” “us,” and “we” in this prospectus to refer to Qualtrics International Inc. and its consolidated subsidiaries. Our fiscal year ends December 31.

QUALTRICS INTERNATIONAL INC.

Overview

Qualtrics has pioneered a new category of software that enables organizations to succeed in today’s experience economy. Our mission is to help organizations deliver the experiences that turn their customers into fanatics, employees into ambassadors, brands into religions, and products into obsessions.

We Live in an Experience Economy

Today, organizations thrive or fail based on the experiences they deliver. In a world of abundant choice, experiences differentiate brands and products, and foster customer and employee loyalty. Great experiences drive customer loyalty, upsell and expansion, employee engagement, brand quality, improved retention and referral, and ultimately, greater shareholder value. Conversely, unfavorable experiences lead to increased churn, lower productivity, diminished competitiveness, and value destruction. With the advent of digital communication channels, favorable or unfavorable experiences can be shared instantly and spread virally, amplifying these impacts and raising the stakes for organizations of all types and sizes.

Executives Must Own All Dimensions of Experience

In this environment, C-level executives are increasingly accountable for issues that transcend basic product and service quality and encompass all of the dimensions that surround those offerings. This extends to thousands of often subtle factors that determine the quality of experiences their organizations deliver, including company culture, speed, convenience, attentiveness, design, and ease of use. We believe that customer, employee, brand, and product experience represent the four vital signs of organizational well-being and that executives are now measured on their performance across these domains. Customer and employee expectations are high, setting up the potential for significant gaps between actual and anticipated experiences. Yet, executives often lack the tools to understand, assess, and take decisive action to address these “experience gaps” as they arise. Today, disruptive start-ups and other businesses flourish by identifying such gaps and designing experiences that attack these blind spots of incumbents.

Organizations Need to Address Experience Directly, in the Moment

While organizations have traditionally deployed consultants or other third parties to gather data about customer and employee satisfaction, the increasing centrality, complexity, and nuance of delivering great experiences has compelled C-level executives to seek the capability to understand and take ownership of these matters directly and in real time. Given the immediate nature of experience, there is also a strong desire to allow individuals at every level in an organization to comprehend changes in experience quality and empower them to act decisively when it matters most.

We Pioneered Experience Management to Power the Experience Economy

We have created a new category of software, Experience Management, or XM^™, which enables organizations to address the challenges and opportunities presented by the experience economy. XM^™ allows organizations to accomplish the following:


•	Comprehensively gather and analyze a new class of data, Experience Data, or X-data^™, that is richer, more immediate, and more salient to understanding quality of experience than traditional operational data, or O-

data^™, which comes from sources such as customer relationship management, or CRM, enterprise resource planning, or ERP, human capital management, or HCM, Customer Service, and Marketing Automation systems. X-data^™ is the human factor data — individual beliefs, emotions, and intentions — collected across multiple channels through which customers and employees engage with an organization.


•	Go beyond an assessment of what is happening within organizations to an understanding of why trends are emerging in the moment.


•	Address experience holistically, unifying information and insights from customers, employees, and partners and recognizing the operational linkages between the sentiment of these constituencies.


•	Become more predictive and proactive, closing feedback loops, and turning insight into real-time action to prevent and close experience gaps where they exist.


•	Democratize and own analysis and decision making across the organization by delivering powerful capabilities in a simple, easy-to-use product.

In today’s experience economy, we believe that XM^™ is more critical to improving customer experience than CRM, more influential upon employee experience than HCM systems, and more important to enhancing brand experience than Marketing Automation. Consequently, we believe that XM^™ represents a vast, rapidly growing, and underpenetrated market opportunity, and we estimate our total addressable market to be approximately $44 billion in 2018.

Our History Uniquely Positioned Us to Create and Lead XM^™

Our history uniquely positioned us to pioneer and develop this new XM^™ category. Founded in 2002 with the goal of solving the most complex problems encountered by the most advanced academic researchers, we were forged in an environment that required rigorous analytical methods, ease of use, the versatility to address the broadest range of inquiries, and the scalability to reach millions of touch points globally. Our leading presence with academic institutions has introduced millions of students to Qualtrics and allowed them to become proficient in the use of our software. As these students have migrated into the workplace, they have often brought us with them, spawning a whole new class of commercial customers and developing new use cases for our XM^™Platform. Led by these customers, we evolved beyond our traditional research product offering to develop our platform, which incorporates our core research capability and is also designed to specifically address customer, employee, brand, and product use cases. Taken together, we believe that this platform provides a System of Action for organizations to monitor and act upon the vital signs that drive performance in any organization.

Our Platform Defines All the Elements of Experience Management

Our XM^™ Platform is purpose-built to help organizations collect feedback and data across the four vital signs of a business: Customers, Employees, Brand, and Product. XM^™ transforms that data into insight, and drives action to create value. The key elements of our platform include:

•

Research Core — A collection of powerful, flexible research tools to build and distribute data collection systems, aggregate and analyze data, build reports, and draw insight from data. Research Core is designed specifically to instrument, gather, and index human factor data in any format through any channel. Users can synthesize and identify trends within minutes and immediately dig deeper into any data point to extract additional insight.


•	Customer Experience (CX) — Enables a deep understanding of customer sentiment throughout every customer journey allowing organizations to monitor, measure, and take action where there may be any experience gaps, with a focus on identifying specific challenges and designing solutions to remediate issues and improve satisfaction in the moment.


•	Employee Experience (EX) — Allows managers and employees to identify gaps in the employee experience from recruiting and on-boarding to performance management in order to improve employee engagement, raise productivity, and limit attrition from start to finish at every touchpoint.


•	Brand Experience (BX) — Identifies key drivers of brand perception, including psychographic information, marketing effectiveness, and competitive positioning.


•	Product Experience (PX) — Facilitates the aggregation and analysis of critical feedback to identify and isolate the features and experiences that drive product differentiation and quality and permit more informed pricing and packaging decisions across all products.

While our XM^™ Platform represents a deeply integrated set of capabilities, each component features functionality and analytics that are significantly differentiated from one another, allowing our customers to adopt the entire platform or individual solutions that directly address their specific needs. Our platform delivers insight to customers in the form of rich visualizations that unify diverse data streams, demonstrate trends, and identify important deviations that signal the need for action.

We Have Built a Powerful and Innovative Go-To-Market Model

Today, our XM^™ Platform is used by over 9,000 customers globally, including over 75% of the Fortune 100. As our research product evolved into our XM^™ Platform, our customer base and go-to-market model have evolved as well. From our academic roots, we built a strong, low-touch sales model that allowed us to target users in any size organization. By integrating Research Core and emerging use cases into our platform, we began to penetrate larger businesses and developed more outbound sales capability to drive a land and expand sales motion. More recently, we have developed a strong direct sales capability to address larger customers. Throughout this evolution, we have sought to broaden our reach, delight our growing base of customers, and operate efficiently and profitably.

We Bootstrapped Our Company and Have Consistently Generated Cash

We believe that we have built a scalable and sustainable business model. As we built Qualtrics, we relied primarily on capital generated by the business. The primary capital we raised remains on our balance sheet, demonstrating the cash flow efficiency of our business. We have been free cash flow positive in every year since our inception, while driving rapid adoption of our solution among organizations of all sizes around the world. For the years ended December 31, 2016 and 2017, our revenue was $190.6 million, and $289.9 million, respectively, representing year over year growth of 52%. For the years ended December 31, 2016 and 2017, our net income (loss) was ($12.0) million and $2.6 million, respectively, and free cash flow was $3.4 million and $21.3 million, respectively.

Industry Trends in Our Favor

Experiences Drive Differentiation and Competitive Advantage

Today, the value of any organization is dictated by the experiences of its customers, employees, and other constituencies. We now live in a world where those experiences can be shared and amplified globally and instantaneously through digital channels, and brand perception and reputation can shift quickly and profoundly.

Quality of experience has significant impact on organizations of all types and sizes and can be defined by a broad range of factors. Organizations that detect these factors and thoughtfully shape interactions with customers and employees create differentiated experiences and sustained competitive advantage.

Experience Gaps Create Challenges for Organizations

Experience is all-important in winning and retaining customers and employees; however, actual experiences often fall short of expectations. The difference between the experience an organization believes they are delivering and the actual experience delivered is the “experience gap.” Experience gaps often have detrimental consequences for an organization, including lost customers, lower spend, complaints, employee turnover, employee disengagement, poor performance, and product failures.

Organizations Struggle to Explain Why Experience Gaps Exist

Organizations rely on systems of record, such as CRM, ERP, HCM, Customer Service, and Marketing Automation systems, for gathering and reporting O-data^™. While these systems are useful for reporting what is happening as of a certain date, they are not designed to explain why something is happening.

Most organizations are O-data^™ rich and X-data^™ poor. X-data^™ is the human factor data, the beliefs, emotions, and intentions that tell you why things are happening and, more importantly, what is going to happen. X-data^™ is fragmented, often unstructured, and needs to be collected across all engagement methods, including e-mail, SMS, chat, phone, website, and in-app links. Together, X-data^™ and O-data^™ can provide differentiated and related insights to understand where experience gaps exist and how to address them.

Insight from Direct Feedback Drives Value

Direct commerce models have allowed businesses to create multiple touch points with customers and garner data that allows them to rapidly evolve and improve their offerings and operations. Companies without this direct customer connectivity, including those that operate via indirect channels, find themselves at an increasing disadvantage, often resulting in the inability to gather direct customer experience data and reducing the ability to assess customer sentiment and needs.

Organizations Need to Manage Experiences Across Customers, Employees, Brand, and Product

The success of organizations today depends on the quality of the experiences that they deliver to constituents across four critical areas: customer experience, employee experience, brand experience, and product experience.

Organizations must be able to manage all four of these experiences individually and understand the impact that these interconnected experiences have upon each other. Organizations able to manage these experiences in an integrated manner create a competitive advantage that drives increased organizational success and shareholder value.

Organizations Need a Holistic Experience Management Platform

Experience management capabilities need to be available to everyone throughout an organization, from C-level executives who are accountable for results down to those on the front lines best positioned to respond to feedback. To measure experiences, organizations have used a combination of various processes and tools for specific uses:


•	Third Party Market Research Firms and Consultants: This is a labor-intensive approach to researching a specific topic at a specific point in time and can be effective at answering specific questions using sampling panels from their large networks. However, their methods of data collection and analysis lack a software-driven approach that can span across broad use cases in a timely manner.


•	Point Solutions: Services-intensive point solutions require a high level of system integration and human involvement to interpret results, are not available broadly to employees, and lack applicability across all vital signs of an organization.


•	Survey Tools: Survey tools are useful for broad sampling across thousands of subjects, but lack the ability to combine data in different formats across different channels, correlate with O-data^™, and apply the analytical rigor needed to determine what actions need to be taken to improve results.

A comprehensive experience management platform that empowers organizations to identify, assess, and close experience gaps needs the following capabilities: comprehensive data collection, powerful analytics, ability to address experience holistically, real time, easy to use, configurable, scalable, and enterprise-grade privacy and security.

Our Roots

We founded Qualtrics in 2002 to make sophisticated research simple for the academic market. Our roots in academia helped us to develop our research engine with an interface that was intuitive and easy-to-use, yet powerful in functionality. Students trained on our software began to graduate into corporate roles at the same time corporate mandates to reduce outsourced spending and improve data driven decision making were emerging.

The Qualtrics XM^™ Platform

Our XM^™ Platform consists of solutions for Customer Experience, Employee Experience, Brand Experience, and Product Experience, all built on our Research Core and integrated with our Research on Demand offering. Our platform is designed to help organizations measure, prioritize, and optimize the experiences that they provide to customers, employees, and other constituencies.

Key benefits of our platform include:


•	Comprehensive Data Collection. Our XM^™Platform enables organizations to personalize their communication with customers, employees, and partners and interact with these groups through the most effective channels. Through simple integrations, users can incorporate O-data^™ into XM^™ analysis using native formats or through Excel exports, without the use of outside professional services.

•

Differentiated Analytical Capabilities. Our XM^™Platform is powered by a proprietary analytics engine that organizations of all types use to address some of the most demanding research projects. Our platform leverages the latest in artificial intelligence and natural language processing. These capabilities are incorporated into our platform through our intelligent engine, iQ, enabling advanced analytical features to make statistical analysis and insights available to everyone.


•	Ability to Address Experience Holistically. We provide specific solutions across the key areas that have the highest impact on an organization: customers, employees, brand, and product. Our XM^™Platform analyzes experiences within each of these areas individually and correlates data across areas to provide insight into how they impact each other.

•

Real-time Insight and Action. Our XM^™Platform is able to extract real-time feedback and provide insights and analysis when it matters most and drive action natively or by integrating with systems that an organization already uses. For example, our platform can automatically generate a customer ticket when a negative sentiment is expressed on a social media site and prompt an organization to action all the way to issue resolution, serving as a System of Action to remedy potential problems in a timely manner.


•	Ease of Use Enabling Democratization of Research Across All Users. We designed our XM^™ Platform for every knowledge worker. Users can design a customer feedback program in minutes using simple drag and drop functions. This ease of use allows our platform to be used by employees across the organization.


•	Flexible Configuration to Meet Specific Needs. Our customers have configured our XM^™Platform to meet diverse needs. Through an intuitive and elegant interface, users can design programs that implement complex logic, and advanced workflows. Users can also design, deploy, and alter these programs without help from professional services or IT, leading to faster and more impactful insights.


•	Scalable for the Needs of the Largest Organizations. In addition to scaling seamlessly across use cases, our XM^™ Platform can collect, analyze, and interpret data across millions of touch points, meeting the needs of the world’s most sophisticated and demanding organizations.

•

Security and Privacy Designed for the Enterprise. Our XM^™ Platform adheres to the highest standards of security and privacy that are demanded by the largest organizations in the world. Our platform enables role-based permissioning to ensure that only the right people have access to the most sensitive customer and employee information. Additionally, organizations own and retain all their data gathered on our platform.

What Sets Us Apart

As the creator and leader of XM^™, we have several distinguishing advantages:


•	Pioneer and Market Leader for Experience Management. Our experiential learning over the past 16 years has helped us develop, test, and refine our software solutions. Today, users across over 9,000 organizations rely on our software for differentiated and actionable insights into their businesses.

•

Scalable within Organizations from Departments to Enterprise-Wide. Our XM^™ Platform combines ease of use with the scalability required by the world’s largest enterprises. Built for enterprise scale, Qualtrics has been architected as an open and easily configurable platform to facilitate a wide breadth of use cases. For example, Qualtrics now powers over 57,000 dashboards for Walmart’s managers to track employee experience.


•	Academic Roots. Our academic roots have allowed us to differentiate in the following key ways:


•	Technology focus: Our initial focus on the academic market required us to build sophisticated software that balanced the complex design requirements requested by researchers with our goal of providing a user-friendly interface for professors, researchers, and students.


•	Effective on-ramp: We estimate that over 2 million academic users have been introduced to Qualtrics as students or researchers, who in turn have helped bring Qualtrics into their organizations as they have entered the workforce.


•	Modern Technology Architecture. We have a modern technology platform that enables us to scale, store, and process efficiently large batches of data and can support our broad portfolio of solutions.


•	Rapid Time to Value. By making the complex capabilities of our XM^™ Platform simple to use, we allow customers of all types and sizes to generate value quickly.

•

Powerful and Innovative Go-to-Market Model. We deploy a powerful and innovative go-to-market model that addresses the many ways a customer may choose to buy. We utilize a combination of a highly productive inside sales team and a field sales team to target customers. In addition, we leverage the Qualtrics Partner Network, or QPN, for joint go-to-market opportunities, product enhancement, and service delivery.

•

Customer-centric Product Innovation. We are focused on continuously improving our software, and we have a customer-centric focus that is embedded in our culture. Using our own XM^™ Platform, we are able to collect continuous feedback from our customers in real-time, enabling us to drive product innovation. For example, both our Customer Experience and Employee Experience solutions were created based on observing our customers using Research Core for specific customer and employee use cases.

Our Growth Strategy

Key elements of our growth strategy include:


•	Drive New Customer Sales. We believe that our market opportunity remains largely underpenetrated. We will continue to invest aggressively in our direct and indirect sales and marketing capabilities to continue to acquire new customers, including continued growth in the number of enterprise customers.


•	Expand Within Existing Customers. Our customer base of over 9,000 organizations represents a significant growth opportunity for us. Our XM^™ Platform has the flexibility to allow a single division or a specific team to use it on a small scale, which could grow to an organization-wide deployment. As a result, there is an opportunity to expand both the scale and use cases within an organization.

•

Expand Our International Presence. To penetrate international markets, we have developed a hub-and-spoke sales model, comprised of centralized inside-sales teams surrounded by regional direct sales groups. For the nine months ended September 30, 2018, 23% of our revenue was from international markets, and we believe that there is significant opportunity for continued growth from outside the United States.


•	Continue to Innovate and Enhance Our Platform. We use our technology to draw insights and ensure that we are best serving our customers’ needs. We believe continued innovation will lead to a greater value proposition for our customers and increased adoption of our XM^™ Platform by both new and existing customers.


•	Grow Revenue from Key Industry Verticals. While our XM^™ Platform is industry-agnostic, we have made a number of industry specific investments that will accelerate our adoption within certain verticals, including government, education, and financial services. We have developed Certified XM^™ Solutions, leveraging partners’ expertise and embedding industry specific content into our products.


•	Further Develop Our Partner Network. We are building out a network of content and consulting partners, delivery partners, and technology partners who enrich our offerings, scale our coverage, and help us reach a broader audience than we would be able to reach on our own. At our March 2018 X4 Summit, we announced the launch of the QPN.

Risk Associated with Our Business and Investments in Our Class B Common Stock

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. Some of these risks are:


•	Our rapid growth makes it difficult to evaluate our future prospects and may increase the risk that we will not continue to grow at or near historical rates.


•	We may not be able to sustain our revenue growth rate or maintain profitability in the future.


•	If we fail to effectively manage our growth, our business and results of operations could be harmed.


•	The software category in which we participate is new and rapidly changing, and if we do not compete effectively, our business, results of operations, and financial condition could be harmed.


•	If we are unable to retain customers at existing levels or sell additional functionality to our existing customers, our revenue growth will be adversely affected.


•	Experience management is a new and evolving software category. If the category does not develop further, develops more slowly, or in a way that we do not expect, our business will be adversely affected.


•	If we are not able to develop new solutions and enhancements to our existing solutions that achieve market acceptance and that keep pace with technological developments, or if we are not able to deliver these new or enhanced solutions so that they can be easily and consistently deployed by our customers, our business and results of operations would be harmed.


•	If our security measures are breached or unauthorized access to customer data is otherwise obtained, our XM^™ Platform may be perceived as insecure, we may lose existing customers or fail to attract new customers, our reputation may be harmed, and we may incur significant liabilities.


•	Our business could be harmed by any significant disruption of service on our XM^™ Platform or loss of content.


•	If we fail to offer high quality customer support, our business and reputation could suffer.


•	We invest significantly in research and development, and to the extent our research and development investments do not translate into new solutions or material enhancements to our current solutions, or if we do not use those investments efficiently, our business and results of operations would be harmed.


•	Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to expand our number of customers will be impaired and our business, results of operations, and financial condition will be harmed.


•	Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our XM^™ Platform.


•	We rely on the performance of highly skilled personnel, including our management and other key employees, and the loss of one or more of such personnel, or of a significant number of our team members, could harm our business.


•	The multiple class structure of our common stock has the effect of concentrating voting control with certain stockholders, in particular, our chief executive officer and his affiliates, which will limit your ability to influence the outcome of important transactions, including a change in control.

Channels for Disclosure of Information

Investors, the media and others should note that, following the completion of this offering, we intend to announce material information to the public through filings with the Securities and Exchange Commission, or the SEC, the investor relations page on our website, press releases, and public conference calls and webcasts.

Corporate Information

We were formed in 2002 as Qualtrics Labs, Inc. In 2012, Qualtrics, LLC, a Delaware limited liability company, was established as a new parent company for our operating business. In September 2014, we incorporated Qualtrics International Inc. in Delaware. Through a corporate restructuring in September 2014, Qualtrics, LLC became a wholly-owned subsidiary of Qualtrics International Inc. Our principal executive offices are located at 333 West River Park Drive, Provo, Utah 84604, and our telephone number is 385-203-4999. Our website address is www.Qualtrics.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus and inclusions of our website address in this prospectus are inactive textual references only.

“Qualtrics” and our other registered or common law trade names, trademarks, or service marks appearing in this prospectus are our property. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) December 31, 2023 (the last day of the fiscal year following the fifth anniversary of our initial public offering), (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer”, as defined in the rules under the Securities Exchange Act of 1934, or the Exchange Act, and (4) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act,” and any reference herein to “emerging growth company” has the meaning ascribed to it in the JOBS Act.

An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:


•	being permitted to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus;


•	not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act;


•	reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements, including in this prospectus; and


•	exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We have elected to take advantage of certain of the reduced disclosure obligations in this prospectus and may elect to take advantage of other reduced reporting requirements in our future filings with the SEC. As a result, the information

The Offering



Class B common stock offered by us		shares
Class B common stock to be outstanding after this offering		shares ( shares, if the underwriters exercise their over-allotment option in full)
Class A-1 common stock to be outstanding after this offering		shares
Class A-2 common stock to be outstanding after this offering		shares
Total Class A-1, Class A-2, and Class B common stock to be outstanding after this offering		shares
Underwriters’ over-allotment option		shares
Use of proceeds		We estimate that the net proceeds from the sale of shares of our Class B common stock in this offering will be approximately $ (or approximately $ if the underwriters exercise their over-allotment option in full), based upon the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

		The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our Class B common stock and enable access to the public equity markets for us and our stockholders. We intend to use the net proceeds from this offering to satisfy tax withholding and remittance obligations of up to $ million related to the settlement of certain outstanding restricted stock units, or RSUs, in connection with the effectiveness of this offering. This amount is based upon the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. We also intend to use the net proceeds from this offering for working capital or other general corporate purposes, including funding our growth strategies discussed in this prospectus. We may also use a portion of the net proceeds to acquire or make investments in businesses, products, services or technologies. However, we do not have agreements or commitments for any acquisitions at this time. See the section titled “Use of Proceeds” for additional information.



Voting rights		We will have three classes of common stock outstanding upon the completion of this offering: Class A-1 common stock, Class A-2 common stock, and Class B common stock. Class B common stock is entitled to one vote per share and Classes A-1 and A-2 common stock are entitled to ten votes per share. Holders of our Class A-2 common stock are also entitled to additional voting rights in the event that the total aggregate number of votes represented by all of the outstanding shares of our Class A-2 common stock would constitute less than 51% of the total voting power of all classes of our then-outstanding capital stock. In such a case, and for so long as the number of outstanding shares of Class A-2 common stock represents at least 10% of the total number of shares of all classes of our outstanding capital stock, the holders of our Class A-2 common stock will be entitled to a number of votes per share of their Class A-2 common stock as would cause the total number of votes of all outstanding shares of Class A-2 common stock to equal 51% of the total voting power of all of our then-outstanding shares of capital stock. Accordingly, in such event, the aggregate voting power of all outstanding shares of Class A-1 common stock and Class B common stock would be proportionately reduced.

		Holders of Class A-1, Class A-2, and Class B common stock will generally vote together as a single class, unless otherwise required by Delaware law or our amended and restated certificate of incorporation. The holders of our outstanding Class A-1 and Class A-2 common stock, certain of whom are our founders, executive officers, and directors, will hold % of the voting power of our outstanding shares (approximately % is attributable to Class A-2 common stock held by them) following this offering and will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction. See the sections titled “Principal Stockholders” and “Description of Capital Stock” for additional information.
Directed share program		At our request, the underwriters have reserved for sale, at the initial public offering price, up to 7% of the shares of our Class B common stock offered hereby for persons associated with us who have expressed an interest in purchasing shares of our Class B common stock in this offering. See the section titled “Underwriters” for additional information.
Proposed Nasdaq trading symbol		“XM”

The number of shares of our Class A-1 common stock, Class A-2 common stock, and Class B common stock that will be outstanding after this offering (which includes up to shares of Class B common stock to be issued at the closing of this offering on the vesting and settlement of certain outstanding RSUs subject to a performance condition in connection with the completion of this offering) is based on 81,636,234 shares of our Class A-1 common stock, 101,395,607 shares of our Class A-2 common stock, and 5,309,690 shares of our Class B common stock (each as including preferred stock on an as-converted basis) outstanding as of September 30, 2018 , and excludes:


•	1,722,087 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock outstanding as of September 30, 2018 , with a weighted-average exercise price of $12.11 per share;


•	459,821 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock that were granted after September 30, 2018 , with a weighted-average exercise price of $15.38 per share;

•

RSUs for shares of our Class B common stock outstanding as of September 30, 2018 that will settle upon future satisfaction of service conditions following the completion of this offering , up to approximately % of which we plan to withhold, based on an assumed % tax withholding rate, to satisfy income tax obligations upon settlement of the RSUs, as discussed in the section titled “Risk Factors— We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a return ” and Note 12 to our consolidated financial statements included elsewhere in this prospectus;


•	2,144,473 RSUs for shares of our Class B common stock that were granted after September 30, 2018 that will settle upon future satisfaction of service conditions following the completion of this offering;


•	1,618,852 shares of our Class B common stock reserved for future issuance under our 2014 Stock Option and Grant Plan, as amended, or the 2014 Plan, provided that no new awards will be issued under the 2014 Plan following the completion of this offering; and


•	23,750,000 shares of our Class B common stock reserved for future issuance under our equity compensation plans, which will become effective prior to the completion of this offering, consisting of:

•

20,000,000 shares of our common stock reserved for future issuance under our 2018 Stock Option and Incentive Plan, or the 2018 Plan, which will become available for issuance effective upon the effectiveness of the registration statement of which this prospectus is a part, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, and


•	3,750,000 shares of our common stock reserved for future issuance under our 2018 Employee Stock Purchase Plan, or ESPP, which will become available for issuance effective upon the effectiveness of the registration statement of which this prospectus is a part, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan.

Our 2018 Plan and ESPP will each provide for annual automatic increases in the number of shares reserved thereunder and our 2018 Plan also will provide for increases to the number of shares of Class B common stock that may be granted thereunder based on shares underlying any awards under our 2014 Plan that expire, are forfeited, or are otherwise terminated, as more fully described in the section titled “Executive Compensation—Employee Benefits and Stock Plans.”

Except as otherwise indicated, all information in this prospectus assumes the following as of September 30, 2018 :


•	the automatic conversion of all outstanding shares of our Series A-1 redeemable convertible preferred stock and Series A-2 redeemable convertible preferred stock into an aggregate of 101,395,607 shares of our Class A-2 common stock, the conversion of which will occur immediately prior to the completion of this offering;


•	the automatic conversion of all outstanding shares of our Series A-3 redeemable convertible preferred stock and Series B redeemable convertible preferred stock into an aggregate of 81,636,234 shares of our Class A-1 common stock, the conversion of which will occur immediately prior to the completion of this offering;


•	the issuance of up to shares of Class B common stock at the closing of this offering on the vesting and settlement of certain outstanding RSUs subject to a performance condition in connection with the completion of this offering;


•	the filing and effectiveness of our amended and restated certificate of incorporation in Delaware and the effectiveness of our amended and restated bylaws, each of which will occur immediately prior to the completion of this offering;


•	a 2-for-1 reverse stock split of our common stock and redeemable convertible preferred stock that was effected on October 24, 2018; and

Summary Consolidated Financial Data

The following tables summarize our consolidated financial data. We have derived the summary consolidated statements of operations data for the years ended December 31, 2016 and 2017 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statements of operations data for the nine months ended September 30, 2017 and 2018 and our summary consolidated balance sheet data as of September 30, 2018 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair statement of the unaudited interim consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future, and the results for the nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full year or any other future period. The following summary consolidated financial data should be read in conjunction with the sections titled “Selected Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.



	Year Ended December 31,					Nine Months Ended September 30,
	2016			2017		2017		2018
Consolidated Statements of Operations Data:	(In thousands, except per share data)
Revenue:
Subscription	$	142,525		$	213,274	$	151,699	$	215,533
Research on Demand	38,147			51,812		37,524		51,489
Professional services and other	9,931			24,817		17,856		22,544
Total revenue	190,603			289,903		207,079		289,566
Cost of revenue⁽¹⁾⁽²⁾:
Subscription	27,904			25,552		18,162		26,520
Research on Demand	21,322			26,639		19,585		22,237
Professional services and other	11,754			26,893		18,859		27,581
Total cost of revenue	60,980			79,084		56,606		76,338
Gross profit	129,623			210,819		150,473		213,228
Operating expenses⁽¹⁾⁽²⁾:
Research and development	22,303			40,680		29,078		45,643
Sales and marketing	95,919			140,524		102,994		138,318
General and administrative	21,909			26,522		17,239		26,958
Total operating expenses	140,131			207,726		149,311		210,919
Operating income (loss)	(10,508		)	3,093		1,162		2,309
Other non-operating income (expense), net	(501		)	1,370		1,131		274
Income (loss) before income taxes	(11,009		)	4,463		2,293		2,583
Provision for income taxes	1,025			1,907		1,322		1,088
Net income (loss)	$	(12,034	)	$	2,556	$	971	$	1,495
Net income (loss) per share attributable to common stockholders, basic	$	(4.85	)	$	0.01	$	0.01	$	0.01
Net income (loss) per share attributable to common stockholders, diluted	$	(4.85	)	$	0.01	$	0.01	$	0.01
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic	2,482			2,889		2,801		3,597
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted	2,482			185,734		185,493		186,934
Pro forma net income per share attributable to common stockholders, basic
Pro forma net income per share attributable to common stockholders, diluted
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, basic
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, diluted

____________________


(1)	Includes stock-based compensation expense as follows:



	Year Ended December 31,				Nine Months Ended September 30,
	2016		2017		2017		2018
	(In thousands)
Cost of revenue	$	7	$	7	$	6	$	4
Research and development	309		1,438		1,348		1,568
Sales and marketing	64		4,415		4,414		559
General and administrative	322		1,087		750		973
Total stock-based compensation expense	$	702	$	6,947	$	6,518	$	3,104


(2)	Includes amortization of acquired intangible assets as follows:



	Year Ended December 31,				Nine Months Ended September 30,
	2016		2017		2017		2018
	(In thousands)
Cost of revenue	$	81	$	135	$	101	$	500
Research and development	—		—		—		—
Sales and marketing	47		32		30		111
General and administrative	59		59		44		104
Total amortization of acquired intangible assets	$	187	$	226	$	175	$	715



	As of September 30, 2018
	Actual			Pro Forma⁽¹⁾	Pro Forma As Adjusted⁽²⁾⁽³⁾
	(In thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	137,739
Working capital⁽⁴⁾	$	210,373
Total assets	$	334,317
Total deferred revenue	$	228,199
Redeemable convertible preferred stock	$	129,609
Accumulated deficit	$	(79,829	)
Total stockholders’ (deficit) equity	$	(69,846	)

____________________

(1)

The pro forma column in the balance sheet data table above reflects (a) the automatic conversion of all outstanding shares of our Series A-1 and Series A-2 redeemable convertible preferred stock into an aggregate of 101,395,607 shares of our Class A-2 common stock, which conversion will occur immediately prior to the completion of this offering, (b) the automatic conversion of all outstanding shares of our Series A-3 redeemable convertible preferred stock and Series B redeemable convertible preferred stock into an aggregate of 81,636,234 shares of our Class A-1 common stock, which conversion will occur immediately prior to the completion of this offering, (c) stock-based compensation expense of approximately $99.8 million associated with outstanding RSUs subject to a performance condition for which the service-based vesting condition was satisfied as of September 30, 2018 and which we will recognize on the effectiveness of our registration statement in connection with this offering, as further described in Note 12 to our consolidated financial statements included elsewhere in this prospectus, (d) the increase in accrued expenses and other current liabilities and an equivalent decrease in additional paid-in capital of $ million in connection with the withholding tax obligations, assuming an initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, assuming that we issue shares of Class B common stock on a net basis to satisfy all the associated withholding tax obligations, although it is contemplated that certain employees may elect to pay cash to cover withholding amounts, (e) the net issuance of up to shares of Class B common stock at the closing of this offering on the vesting and settlement of certain RSUs subject to a performance condition

in connection with the effectiveness of this offering, and (f) the filing and effectiveness of our amended and restated certificate of incorporation in Delaware.

(2)

The pro forma as adjusted column in the balance sheet data table above gives effect to (a) the pro forma adjustments set forth above and (b) the sale and issuance by us of shares of our Class B common stock in this offering, based upon the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the amount of each of our cash and cash equivalents, working capital, total assets and total stockholders' equity by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the amount of each of our cash and cash equivalents, working capital, total assets and total stockholders’ equity by $ , assuming an initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.


(4)	Working capital is defined as current assets less current liabilities, excluding current deferred revenue. See our audited consolidated financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

In future periods, our revenue could grow more slowly than in recent periods or decline for a number of reasons, including any reduction in demand for our XM^™ Platform, increase in competition, limited ability to, or our decision not to, increase pricing, contraction of the experience management software category, or our failure to capitalize on growth opportunities. In addition, our revenue from subscription, Research on Demand, and professional services and other may grow at different rates than in recent periods or decline for a number of reasons, including those described above. We expect expenses to increase substantially in the near term, particularly as we continue to make significant investments in research and development and technology infrastructure, expand our operations globally and develop new solutions and features for, and enhancements of, our platform. In addition, in connection with operating as a public company, we will incur significant additional legal, accounting and other expenses that we did not incur as a private company. While we have achieved profitability in prior fiscal years, as a result of these significant investments, we do not expect to achieve profitability for the year ended December 31, 2018, and may not be able to achieve profitability in future periods. In addition, the additional expenses we will incur may not lead to sufficient additional revenue to maintain historical revenue growth rates and profitability.

We have experienced, and may continue to experience, rapid growth, which has placed, and may continue to place, significant demands on our management and our operational and financial resources. For example, our headcount has grown from 1,501 employees as of September 30, 2017 to 1,915 employees as of September 30, 2018. In addition, we operate globally, sell subscriptions to over 9,000 customers in more than 100 countries, and have employees in the United States, Australia, Canada, France, Germany, Ireland, Japan, Poland, Singapore, and the United Kingdom. We plan to continue to expand our international presence in the future, which will place additional demands on our resources and operations. Additionally, we continue to increase the breadth and scope of our XM^™ Platform and our operations and continue to develop our partner network. To support this growth, and to manage any future growth effectively, we must continue to improve our IT and financial infrastructures, our operating and administrative systems, and our ability to manage headcount, capital, and internal processes in an efficient manner and deepen our industry experience in key verticals. Our organizational structure is also becoming more complex as we grow our operational, financial, and management infrastructure and we must continue to improve our internal controls as well as our reporting systems and procedures. We intend to continue to invest to expand our business, including investing in technology and sales and marketing operations, developing new solutions and features for our existing solutions, hiring additional personnel,

The experience management software category is new and rapidly changing and has relatively low barriers to entry. While we do not believe that any of our competitors currently offer a full suite of experience management solutions that competes with our XM^™ Platform, certain features of our platform compete in certain segments of the overall experience management software category. For example, Medallia, Inc. is a provider of software for specific use cases for customer experience, Aon Hewitt LLC and Willis Towers Watson PLC are traditional professional and marketing research services firms, and SurveyMonkey Inc. provides individual-focused and self-service survey tools. While we believe we compete favorably against these competitors, some of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing budgets and established marketing relationships, access to larger customer bases, and significantly greater resources for the development of their offerings. These competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements

With the introduction of new technologies, the evolution of our solutions, and new market entrants, we expect competition to intensify in the future. We also anticipate that potential competition may come in the future from incumbent software providers. For example, as we expand our focus into new use cases or other solutions beyond our XM^™ Platform, we expect competition to increase. Pricing pressures from competitors undercutting our prices, and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our solutions to achieve or maintain more widespread market acceptance, any of which could harm our business, results of operations, and financial condition. Furthermore, our actual and potential competitors may establish cooperative relationships among themselves or with third parties, or consolidate through acquisitions or be sold to our competitors with greater resources than we have, that may further enhance their resources and offerings in the market we address and may increase the likelihood of our competitors offering bundled or integrated products with which we cannot compete effectively. Additionally, some current and potential customers and partners, particularly large organizations, have elected, and may in the future elect, to develop or acquire their own internal experience management software tools that would reduce or eliminate the demand for our solutions. For all of these reasons and others we cannot anticipate today, we may not be able to compete successfully against our current and future competitors, which could harm our business, results of operations, and financial condition.

To increase our revenue, we must retain existing customers, convince them to expand their use of our solutions across their organizations and for a variety of use cases, and expand their subscriptions on terms favorable to us. If we are not able to renew our agreements with existing customers or attract new business from existing customers on terms favorable or comparable to prior periods, this could have an adverse effect on our business, revenue, gross margins, and other operating results, and accordingly on the value of our common stock. The rate at which our customers purchase new or enhanced solutions from us, as well as the expansion of use of our solutions across organizations, depends on a number of factors, including general economic conditions, customer specific conditions, competitive pricing, integration with existing technologies, and satisfaction and market acceptance of our platform generally. If our efforts to sell additional functionality and solutions to our customers are not successful, our business and growth prospects may suffer. Our customers have no obligation to renew their subscriptions for our solutions after the expiration of their initial subscription period, and a majority of our subscription contracts were one year in duration for the year ended December 31, 2017. However, some of our customer agreements allow for cancellation on 30 days or less notice but without refund.

Our ability to attract new customers and increase revenue from existing customers depends in large part on our ability to enhance and improve our existing solutions and to introduce compelling new solutions. The success of any enhancement to our solutions depends on several factors, including timely completion and delivery, competitive pricing, adequate quality testing, integration with existing technologies and our XM^™ Platform, and overall market acceptance. Any new solution that we develop may not be introduced in a timely or cost-effective manner, may contain errors, vulnerabilities or bugs, or may not achieve the market acceptance necessary to generate significant revenue. If we are unable to successfully develop new solutions, enhance our existing solutions to meet customer requirements, or otherwise gain market acceptance, our business, results of operations, and financial condition would be harmed.

Our success also depends on our ability to identify important and emerging use cases for our customers and quickly develop new and effective solutions to address those use cases. For example, before March 2017, we did not offer a solution specifically tailored for either Brand Experience or Product Experience. We developed solutions for these specific use cases because we were able to identify that many of our customers were using our existing tools for those purposes. If we are unable to identify similar emerging use cases or applications of our XM^™ Platform in a timely manner and innovate in a way that allows us to address these emerging use cases or applications, and also present them to our customers in a compelling package that differentiates those solutions from our existing capabilities, then we may lose customers to more innovative competitors or alternative solutions, and we will experience difficulties in attracting new customers and expanding revenue from existing customers. In addition, after we launch any new solutions, we must also continuously improve and develop these solutions to make them as robust and rich in features and capabilities as the other solutions on our XM^™ Platform.

Our platform and the other systems or networks used in our business are also at risk for breaches as a result of third party action, or employee, vendor, or contractor error or malfeasance. Security incidents have occurred in the past, and may occur in the future, resulting in unauthorized access to, loss of or unauthorized disclosure of this information, regulatory enforcement actions, litigation, indemnity obligations, and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales, and harm our business. Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of services have been and are expected to continue to be targeted. In addition, to traditional computer “hackers,” malicious code (such as viruses and worms), employee theft or misuse, and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks. If our security measures are compromised as a result of third party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed, and we could incur significant liability. We have not always been able in the past and may be unable in the future to anticipate or prevent techniques used to obtain unauthorized access or to compromise our systems, because they change frequently and are generally not detected until after an incident has occurred. Concerns regarding data privacy and security may cause some of our customers to stop using our solutions and fail to renew their subscriptions. This discontinuance in use or failure to renew could substantially harm our business, operating results, and growth prospects. Further, as we rely on third party and public-cloud infrastructure, we will depend in part on third party security measures to protect against unauthorized access, cyberattacks, and the mishandling of customer data. In addition, failures to meet customers’ expectations with respect to security and confidentiality of their data and information could damage our reputation and affect our ability to retain customers, attract new customers, and grow our business. In addition, a cybersecurity event could result in significant increases in costs, including costs for remediating the effects of such an event; lost revenue due to decrease in customer trust and network downtime; increases in insurance coverage due to cybersecurity incidents; and damages to our reputation because of any such incident.

As our user base and the amount and types of information stored and shared on our platform continue to grow, we will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to satisfy the needs of our users. Further, as we continue to grow and scale our business to meet the needs of our users, we may overestimate or underestimate our infrastructure capacity requirements, which could adversely affect our results of operations. We continuously evaluate our short- and long-term infrastructure capacity requirements to ensure adequate capacity for new and existing users while minimizing unnecessary excess capacity costs. If we overestimate the demand for our platform and therefore secure excess infrastructure capacity, our operating margins could be reduced. If we underestimate our infrastructure capacity requirements, we may not be able to service the expanding needs of new and existing users, and our hosting facilities, network, or systems may fail. In some cases, our contracts with our customers stipulate a minimum uptime availability of our platform, and to the extent we do not meet these obligations, we may be subject to contractual claims from our customers. If any of these events occur, our reputation, business, and financial condition would be harmed.

Our customers rely on our customer support teams to resolve technical and operational issues if and when they arise. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for customer support. We also may be unable to modify the nature, scope, and delivery of our customer support to compete with changes in customer support services provided by our competitors. Increased customer demand for customer support, without corresponding revenue, could increase costs and harm our results of operations. In addition, as we continue to grow our operations and reach a global and vast customer base, we need to be able to provide efficient customer support that meets our customers’ needs globally at scale. The number of our customers has grown significantly, and that will put additional pressure on our support organization. As our business scales, we may need to engage third party customer support service providers, which could negatively impact the quality of our customer support if such third parties are unable to provide customer support that is as effective as that we provide ourselves. Our sales are highly dependent on our business reputation and on positive recommendations from our existing customers. Accordingly, high quality customer support is important for the renewal and expansion of our agreements with existing customers and any failure to maintain such standards of customer support, or a market perception that we do not maintain high quality customer support, could harm our reputation, our ability to sell product to existing and prospective customers, and our business, results of operations, and financial condition.

A key element of our strategy is to invest significantly in our research and development efforts to develop new solutions and rapidly introduce new technologies, features and functionality our existing solutions. For the years ended December 31, 2016 and 2017, our research and development expenses were 11.7% and 14.0% of our revenue, respectively, and during the nine months ended September 30, 2017 and 2018 , our research and development expenses were 14.0% and 15.8% of our revenue, respectively. If we do not spend our research and development budget efficiently or effectively on compelling innovation and technologies, our business may be harmed and we may not realize the expected benefits of our strategy. Moreover, research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling solutions and generate revenue, if any, from such investment. Additionally, anticipated customer demand for a solution or solutions we are developing could decrease after the development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any such solutions or solution. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of solutions that are competitive in our current or future markets, it would harm our business and results of operations.

We believe that our brand identity and awareness have significantly contributed to our success and have helped fuel our efficient go-to-market model. We also believe that maintaining and enhancing the Qualtrics brand is critical to expanding our number of customers. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. Any unfavorable publicity or consumer perception of our XM^™ Platform, or a competitor’s platform in the experience management software category generally, could adversely affect our reputation and our ability to attract and retain customers on our platform, and diminish customer interest in the experience management market generally. Additionally, if we fail to promote and maintain the Qualtrics brand, or if we incur excessive expenses in this effort, our business, results of operations, and financial condition will be materially and adversely affected.

Our ability to broaden our customer base, particularly our business customer base, and achieve broader market acceptance of our platform will depend to a significant extent on the ability of our sales and marketing organizations to work together to drive our sales pipeline and cultivate customer and partner relationships to drive revenue growth. We have invested in and plan to continue to invest aggressively to expand our sales and marketing organizations, both domestically and internationally. Identifying, recruiting, and training sales personnel will require significant time, expense, and attention. We also plan to dedicate significant resources to sales and marketing programs, including user conferences (such as our annual X4 Summit), online advertising, webinars, blogs, corporate communications, white papers, and case studies. In addition, we have developed go-to-market partnerships with a number of key technology, system integrator, and consultant and content partners. If we are unable to recruit, hire, develop, and retain talented sales or marketing personnel, if our new sales or marketing personnel and partners are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective, our ability to broaden our customer base and achieve broader market acceptance of our platform could be harmed. In addition, the investments we make in our sales and marketing organization will occur in advance of experiencing benefits from such investments, making it difficult to determine in a timely manner if we are efficiently allocating our resources in these areas.

Our success and future growth depend upon the continued services of our management team and other key employees. In particular, Ryan Smith, our Chief Executive Officer and one of our co-founders, is critical to our vision, strategic direction, culture, and offerings. From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. We also are dependent on the continued service of our existing employees because of the complexity of our solutions. Our senior management and key employees are employed on an at-will basis. We may terminate any employee’s employment at any time, with or without cause, and any employee may resign at any time, with or without cause. The loss of one or more of our senior management or other key employees could harm our business, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. In particular, recruiting and hiring senior product engineering personnel has been, and we expect to continue to be, challenging given the intense competition in the software industry for skilled product engineering talent. In addition, as our business grows and scales, including internationally, we will need to continue to find and attract talented experience managers both in the United States and internationally. If we are unable to hire talented personnel, we may be unable to scale our operations or release new products in a timely fashion and, as a result, customer satisfaction with our products may decline. Additionally, many of our employees and members of our management team may receive significant proceeds from sales of our equity in the public markets after this offering, which may reduce their motivation to continue to work for us.

In addition to our sales force, we work with certain strategic partners to help grow and develop our sales and distribution channels and implement our XM^™ Platform. We believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships with our existing and potential partners that can drive substantial revenue and provide additional solutions to our customers. We engage certain partners to generate customer acquisition opportunities, and certain other partners to implement our XM^™ Platform with our existing customers. We do not yet have sufficient data or feedback regarding the effectiveness of these partnerships. If the delivery partners are unable to successfully implement our platform with existing customers, or if we are unable to develop and maintain successful relationships with these partners, our business, results of operations, and financial condition could be harmed.

The timing of our sales with our enterprise, government, and international customers and related revenue recognition is difficult to predict because of the length and unpredictability of the sales cycle for these customers. We sell to United States federal, state and local, as well as foreign, governmental agency customers, and government demand and payment for our offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings. We are often required to spend significant time and resources to better educate and familiarize these potential customers with the value proposition of paying for our solutions. The length of our sales cycle for these customers, from initial evaluation to payment for our offerings is generally more than the six months for other customers, and can vary substantially from customer to customer, and thus it is difficult to predict whether and when a sale will be completed.

The software technology underlying our XM^™ Platform is inherently complex and may contain material defects or errors, particularly when first introduced or when new features or capabilities are released. We have from time to time found defects or errors in our platform, and new defects or errors in our existing platform or new software may be detected in the future by us or our users. There can be no assurance that our existing platform and new software will not contain defects. Any real or perceived errors, failures, vulnerabilities, or bugs in our platform could result in negative publicity or lead to data security, access, retention, or other performance issues, all of which could harm our business. The costs incurred in correcting such defects or errors may be substantial and could harm our results of operations and financial condition. Moreover, the harm to our reputation and legal liability related to such defects or errors may be substantial and could harm our business, results of operations, and financial condition.

A key focus of our company is to continue to penetrate unaddressed global markets. In order to do so, we use a hub-and-spoke sales model, comprised of a centralized inside-sales team surrounded by regional direct sales efforts. We have invested significant effort to building and optimizing our international growth. For the nine months ended September 30, 2018 , 23% of our revenue is from international markets, and we have recently invested in offices in nine countries. We expect to continue to expand our international operations, which may include opening additional offices in new jurisdictions and providing our XM ^™ Platform in additional languages. Any new markets or countries into which we attempt to sell subscriptions to our platform may not be receptive. For example, we may not be able to expand further in some markets if we are not able to satisfy certain government- and industry-specific requirements. If we are not successful in converting our investments in international expansion to additional revenue, our business and results of operations may be harmed. In addition, our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems, alternative dispute systems, and commercial markets. International expansion has required, and will continue to require, investment of significant funds and other resources. Operating internationally subjects us to new risks and may increase risks that we currently face, including risks associated with:

The United States federal and various state and foreign governments have adopted or proposed requirements regarding the collection, distribution, use, security, and storage of personally identifiable information and other data relating to individuals, and federal and state consumer protection laws are being applied to enforce regulations related to the online collection, use, and dissemination of data. Some of these requirements include obligations of companies to notify individuals of security breaches involving particular personal information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships. Even though we may have contractual protections with such vendors, contractors, or other organizations, notifications and follow-up actions related to a security breach could impact our reputation, cause us to incur significant costs, including legal expenses, harm customer confidence, hurt our expansion into new markets, cause us to incur remediation costs, or cause us to lose existing customers.

Further, many foreign countries and governmental bodies, including the European Union, or EU, where we conduct business, have laws and regulations concerning the collection and use of personal data obtained from their residents or by businesses operating within their jurisdictions. These laws and regulations often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol, or IP, addresses. With regard to transfers of personal data from our European employees and customers to the United States, we historically relied on our adherence to the United States Department of Commerce’s Safe Harbor Privacy Principles and compliance with the EU-U.S. and Swiss-U.S. Safe Harbor Frameworks as agreed to and set forth by the United States Department of Commerce, the EU, and Switzerland, which established means for legitimizing the transfer of personal data by companies doing business in Europe from the EU and Switzerland to the United States. The EU-U.S. Safe Harbor Framework was deemed an invalid method of compliance with EU restrictions on data transfers in a ruling by the Court of Justice of the European Union in October 2015. We have since taken certain measures to legitimize our transfers of personal data, both internally and on behalf of our customers, from the EU and Switzerland to the United States. These frameworks were established by EU, Swiss, and U.S. authorities to provide mechanisms for companies to transfer EU and Swiss personal data to the United States. It is unclear at this time whether the EU-U.S. or Swiss-U.S. Privacy Shield Frameworks will serve as an appropriate means for us to transfer personal data from the EU or Switzerland to the United States. However, this Framework is under review and there is currently litigation challenging other EU mechanisms for adequate data transfers (i.e., the standard contractual clauses), as well as a call by the EU parliament for the suspension of the Framework as it relates to the U.S. It is uncertain whether the standard contractual clauses will be similarly invalidated by the European courts. We will be impacted by this change in law as a result of a future review of these transfer mechanisms by European regulators, as well as current challenges to these mechanisms in the European courts.

International privacy and data security regulations may become more complex and have greater consequences. For instance, as of May 25, 2018, the General Data Protection Regulation, or GDPR, has replaced the Data Protection Directive with respect to the collection and use of personal data of data subjects in the EU. The GDPR applies extra territorially and imposes several stringent requirements for controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to special categories of personal data and pseudonymised (i.e., key-coded) data and additional obligations when we contract third party processors in connection with the processing of the personal data. The GDPR provides that EU member states may make their own further laws and regulations limiting the (i) processing of personal data, including special categories of special data (e.g., racial or ethnic origin, political opinions, religious or philosophical beliefs), and (ii) profiling and automated individual decision-making of individual; which could limit our ability to use and share personal data or other data and could cause our costs to increase, and harm our business and financial condition. Noncompliance with the GDPR can trigger steep fines of up to €20 million or 4% of global annual revenue, whichever is higher. Separate EU laws and regulations (and member states’ implementations thereof) govern the protection of consumers and of electronic communications.

These new requirements could reduce demand for our XM^™ Platform, increase our costs, impair our ability to grow our business, or restrict our ability to store and process data or, in some cases, impact our ability to offer our platform in some locations and may subject us to liability. Further, in view of new or modified federal, state, or foreign laws and regulations, industry standards, contractual obligations, and other legal obligations, or any changes in their interpretation, we may find it necessary or desirable to fundamentally change our business activities and practices or to expend significant resources to modify our platform and otherwise adapt to these changes. We may be unable to make such changes and modifications in a commercially reasonable manner, or at all, and our ability to develop new content and features could be limited. Further, failure to comply with the GDPR, the CCPA and other countries’ privacy or data security-related laws, rules or regulations could result in material penalties imposed by regulators, affect our compliance with client contracts and have an adverse effect on our business, financial condition, and results of operations.

Our success and ability to compete depends in part upon our intellectual property and other proprietary rights. We primarily rely on a combination of patent, copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be insufficient, and our intellectual property may still be challenged, invalidated, or subject to other attacks from competitors or former employees, and we cannot guarantee that any of our pending applications will be approved or that our existing and future intellectual property rights will be sufficiently broad to protect our proprietary technology. For example, competitors may try to use brand names confusingly similar to ours for similar services in order to benefit from our brand’s value. Others, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property and, in such cases, we may not be able assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information, and we may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.

or proprietary information, or provide us with any competitive advantages. Moreover, we cannot guarantee that any of our pending patent applications will issue or be approved. The United States Patent and Trademark Office, or the USPTO, and various foreign governmental patent agencies also require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued. There are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If this occurs, our competitors might be able to enter the market, which would have a material adverse effect on our business. In addition, we believe that the protection of our trademark rights is an important factor in platform recognition, protecting our brand, and maintaining goodwill. If we do not adequately protect our rights in our trademarks from infringement, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our business. Furthermore, we may not always detect infringement of our intellectual property rights, and any infringement of our intellectual property rights, even if successfully detected, prosecuted and enjoined, could be costly to deal with and could harm our business. In any event, in order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. We cannot assure you that our monitoring efforts will detect every infringement of our intellectual property rights by a third party. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets.

Litigation brought to protect and enforce our intellectual property rights, has been in the past, and could be in the future, costly, time consuming and distracting to management. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and counter-suits attacking the validity and enforceability of our intellectual property rights, which could result in the impairment or loss of portions of our intellectual property rights. An adverse determination of any litigation proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related pending patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Our failure to secure, protect, and enforce our intellectual property rights could delay further implementation of our platform, impair functionality of our platform, delay introductions of new products and services, result in our substituting inferior or more costly technologies into our platform or harm our brand and our business. Further, we may not always detect infringement of our intellectual property rights, and defending our intellectual property rights, even if successfully detected, prosecuted, enjoined, or remedied, could result in the expenditure of significant financial and managerial resources.

In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid, or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. We may be unaware of the intellectual property rights of others that may cover some or all of our technology, or technology that we obtain from third parties. Because patent applications can take years to issue and are often afforded confidentiality for some period of time there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products. Any claims or litigation (with or without merit) could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our solutions or using certain technologies, require us to implement expensive work-arounds, or require that we comply with other unfavorable terms. In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation. We may also be obligated to indemnify our customers or business partners in connection with any such litigation and to obtain licenses, modify our solutions, or refund fees, which could further exhaust our resources. In addition, we may incur substantial costs to resolve claims or litigation, whether or not successfully asserted against us, which could include payment of significant settlement, royalty, or license fees, modification of our solutions or refunds to customers of fees, which would negatively impact our financial performance. Even if we were to prevail in the event of claims or litigation against us, any claim or litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and other employees from our business operations and disrupt our business or harm our brand and reputation.

We use open source software in our XM^™ Platform and expect to continue to use open source software in our platform in the future. There are uncertainties regarding the proper interpretation of and compliance with open source software licenses. Moreover, we cannot assure you that our processes for controlling our use of open source software in our XM^™ Platform have been or will be effective. Consequently, any of these circumstances could result in reputational harm and harm to our business and results of operations. In addition, if the license terms for the open source software we utilize change, we may be forced to re-engineer our platform or incur additional costs to comply with the changed license terms or to replace the affected open source software. Although we have implemented policies and tools to regulate the use and incorporation of open source software into our XM^™Platform, we cannot be certain that we have not incorporated open source software in our platform in a manner that is inconsistent with such policies.

Our agreements with customers and other third parties may include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our solutions or other acts or omissions. The term of these contractual provisions often survives termination or expiration of the applicable agreement. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our solutions, and harm our business, results of operations, and financial condition.

Our business is subject to regulation by various federal, state, local, and foreign governmental agencies, including agencies responsible for monitoring and enforcing copyright laws, employment and labor laws, workplace safety, consumer protection laws, privacy and data protection laws, anti-bribery laws, import and export controls, federal securities laws, and tax laws and regulations. In certain foreign jurisdictions, these regulatory requirements may be more stringent than those in the United States. These laws and regulations are subject to change over time and thus we must continue to monitor and dedicate resources to ensure continued compliance. Non-compliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results, and financial condition could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, operating results, and financial condition.

Our business activities are subject to various restrictions under United States export and similar laws and regulations, including the United States Department of Commerce’s Export Administration Regulations, or the EAR, and various economic and trade sanctions regulations administered by the United States Treasury Department’s Office of Foreign Assets Controls, or OFAC. The United States export control laws and United States economic sanctions laws include restrictions or prohibitions on the sale or supply of certain products and services to United States embargoed or sanctioned countries, governments, persons and entities. In addition, various countries regulate the import of certain technology and have enacted or could enact laws that could limit our ability to provide our customers access to our XM^™ Platform or could limit our customers’ ability to access or use our platform in those countries.

In addition, various countries regulate the import and export of certain encryption and other technology, including import and export permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our platform or could limit our users’ ability to access our platform in those countries. Changes in our XM^™ Platform, or future changes in export and import regulations may prevent our users with international operations from utilizing our platform globally or, in some cases, prevent the export or import of our platform to certain countries, governments, or persons altogether. Any change in export or import regulations, economic sanctions, or related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our platform by, or in our decreased ability to export or sell subscriptions to our platform to, existing or potential users with international operations. Any decreased use of our platform or limitation on our ability to export or sell our platform would likely adversely affect our business, results of operations, and financial results.

As an example of these risks, we note that as of September 30, 2018 , we had outstanding restricted stock awards covering 1.0 million shares and outstanding restricted stock unit awards covering 7.1 million shares that are scheduled to vest upon the effectiveness of this offering, when the performance condition in such awards will be satisfied. If the performance condition had been satisfied with respect to these awards on September 30, 2018 , we would have recorded $99.8 million of stock-based compensation expense in the three months ended September 30, 2018 . Accordingly, in the period during which we complete this offering, we will record this large stock based compensation charge, which will result in a period-over-period decrease in our profitability as calculated under GAAP, for a reason that we believe is unrelated to the underlying performance of our business. It is for this and similar reasons that we note for investors that our quarterly and annual financial results may fluctuate due to factors identified above and we do not believe that our financial results in any one quarter or any other period should be relied upon by investors as indicative of our future financial performance.

We have limited experience with respect to determining the optimal prices for our solutions and, as a result, we have in the past and expect in the future that we will need to change our pricing model from time to time. As the market for our solutions matures, or as competitors introduce new solutions that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically. We provide our software on a subscription basis priced on the number of solutions and level of functionality required by customers and the number of users and level of interactions through our software, and therefore, pricing decisions may also impact the mix of adoption among our subscription plans and negatively impact our overall revenue. Further, pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our products to achieve or maintain more widespread market acceptance, any of which could harm our business, results of operations, and financial condition. For example, in the fourth quarter of 2017, we revised our pricing model, and we are still evaluating the impact of that recent change on our business. As a result, in the future we may be required to reduce our prices or develop new pricing models, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow.

We currently serve our customers both from our data center facilities in the United States and Canada, and from third party data center facilities located in Australia, Germany, and the United States. Any damage to, or failure of, our systems generally could result in interruptions in our XM^™ Platform. As we continue to add new data centers, add capacity in our existing data centers and transition existing data centers from a managed service hosting model to a co-location model, we may move or transfer our data and our customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the use of our platform. Any damage to, or failure of, our platform, or those of our third party data centers, could result in interruptions in use of our platform. Impairment of or interruptions in customers accessing our platform may reduce our revenue, cause us to issue credits or pay penalties, subject us to claims and litigation, cause our customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers. We have experienced interruptions and delays in service in the past and we may experience interruptions and delays in service in the future. Our business will also be harmed if our customers and

We do not control, or in some cases have limited control over, the operation of the data center facilities we use, and they are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, and to adverse events caused by operator error. We cannot rapidly switch to new data centers or move customers from one data center to another in the event of any adverse event. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of terrorism or other act of malfeasance, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in accessing our platform and the loss of customer data.

We have made and will continue to make substantial investments in new equipment to support growth at our data centers and provide enhanced levels of service to our customers. We continue to transition certain of our data centers from a managed service hosting model, where a third party manages most aspects of our cloud operations, to a predominantly co-location model, where we will have more direct control over our hosting infrastructure and its operation. We anticipate that this transition will be expensive in the near term as we invest in new equipment and accelerate depreciation on certain assets from our co-located data centers and incur additional rent expenses as we complete this transition. We currently expect our planned transitions to be substantially complete by the end of 2018. If it takes longer than we expect to complete this transition, the impact on our operating results would likely exceed our initial expectations, particularly if the scope of the project grows and we deploy additional resources and hire additional personnel to complete the project. Additionally, to the extent that we are required to add data center capacity to accommodate customer demands, we may need to significantly increase the bandwidth, storage, power or other elements of our hosting operations, and the costs associated with adjustments to our data center architecture could also harm our margins and operating results.

We recognize revenue from subscriptions ratably over the subscription term of the underlying customer contract, which is generally one year. Our billings are recorded upon invoicing for access to our XM^™ Platform, and thus a significant portion of the billings we report in each quarter are generated from customer agreements entered and invoiced during the period. As a result, much of the revenue we report each quarter is derived from contracts that we entered into with customers in prior periods. Consequently, a decline in new or renewed subscriptions in any quarter will not be fully reflected in revenue or other results of operations in that quarter but will negatively affect our revenue and other results of operations across future quarters. It is difficult for us to rapidly increase our revenue from additional billings in a given period. Any increases in the average term of subscriptions would result in revenue for those contracts being recognized over longer periods of time with little impact on our results of operations in the near term. Our Research on Demand revenue and professional services and other revenue is recognized upon completion of the performance or as the service is rendered. Accordingly, our revenue in any given period may not be an accurate indicator of our financial health and future performance.

In addition, there are various laws and regulations that could impede the growth of the internet or other online services, and new laws and regulations may be adopted in the future. These laws and regulations could, in addition to limiting internet neutrality, involve taxation, tariffs, privacy, data protection, information security, content, copyrights, distribution, electronic contracts and other communications, consumer protection, and the characteristics and quality of services, any of which could decrease the demand for, or the usage of, our platform. Legislators and regulators may make legal and regulatory changes, or interpret and apply existing laws, in ways that require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These changes or increased costs could materially harm our business, results of operations, and financial condition.

We are subject to income taxes as well as non-income-based taxes, such as payroll, sales, use, value-added, property, and goods and services taxes, in both the United States and various foreign jurisdictions. Our domestic and international tax liabilities are subject to various jurisdictional rules regarding the timing and allocation of revenue and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file and to changes in tax laws. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. From time to time, we may be subject to income and non-income tax audits. While we believe we have complied with all applicable income tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes. Should we be assessed with additional taxes, there could be a material adverse effect on our business, results of operations, and financial condition.

Our tax position could also be impacted by changes in accounting principles, changes in United States federal, state, or international tax laws applicable to corporate multinationals, other fundamental law changes currently being considered by many countries, including the United States, and changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions. For example, on December 22, 2017, tax reform legislation referred to as the Tax Cuts and Jobs Act, or the Tax Act, was enacted in the United States. The Tax Act significantly revises United States federal income tax law, including by lowering the corporate income tax rate to 21%, limiting the deductibility of interest expense, imposing new limitations on utilizing net operating losses, or NOLs, created in tax years beginning after December 31, 2017, implementing a modified territorial tax system, and imposing a one-time repatriation tax on deemed repatriated earnings and profits of United States -owned foreign subsidiaries. While the Tax Act will result in a lower domestic corporate income tax rate, which could impact our effective tax rate, we currently do not expect the impact on our effective tax rate to be material. We have reflected the expected impact of the Tax Act in our financial statements in accordance with our understanding of the Tax Act and guidance available as of the date of this prospectus. However, many consequences of the Tax Act, including whether and how state, local, and foreign jurisdictions will react to such changes are not entirely clear at this time and the United States Department of Treasury has broad authority to issue regulations and interpretive guidance that may significantly impact how the Tax Act will apply to us. Any of the foregoing changes could have an adverse impact on our results of operations, cash flows, and financial condition.

We collect sales and similar value-added taxes as part of our customer agreements in a number of jurisdictions. Sales and use, value-added, and similar tax laws and rates vary greatly by jurisdiction. One or more states or countries may seek to impose additional sales, use, or other tax collection obligations on us, including for past sales by us. The U.S. Supreme Court’s recent decision in South Dakota v. Wayfair, Inc. may increase that risk by increasing states’ ability to assert taxing jurisdiction on out-of-state retailers. A successful assertion by a state, country, or other jurisdiction that we should have been or should be collecting additional sales, use, or other taxes on our platform could, among other things, result in substantial tax liabilities for past sales, create significant administrative burdens for us, discourage customers from purchasing our platform, or otherwise harm our business, results of operations, and financial condition.

We have federal and state NOLs, due to prior period losses, which if not utilized will begin to expire in 2035 and 2025 for federal and state purposes, respectively. As of December 31, 2017, we had federal and state NOLs of approximately $39.0 million and $41.7 million, respectively. As of December 31, 2017, we had federal research tax credit carryforwards of $4.2 million and Utah research tax credit carryforwards of $0.7 million, which if not utilized will begin to expire in 2034 and 2029, respectively. These NOLs and research tax credit carryforwards, and NOLs of companies we may acquire, could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect our profitability. Realization of our NOL carryforwards and tax credits is dependent on generating sufficient taxable income prior to their expiration. Although a portion of these carryforwards and tax credits are subject to the provisions of Internal Revenue Code Sections 382 and 383, we have not performed a formal study to determine the amount of a limitation, if any.

We are, and expect to continue to be, subject to regular review and audit by the IRS and other tax authorities in various jurisdictions. As a result, we have received, and may in the future receive, assessments in multiple jurisdictions on various tax-related assertions. For instance, in July 2018, the IRS notified us of an upcoming income tax audit for the 2014 and 2015 tax years, which remains ongoing. Taxing authorities have also challenged, and may in the future challenge, our tax positions and methodologies on various matters, including our positions regarding the collection of sales and use taxes and the jurisdictions in which we are subject to taxes, which could expose us to additional taxes. We regularly assess the likelihood of adverse outcomes resulting from ongoing tax examinations to determine the adequacy of our provision for income taxes. These assessments can require considerable estimates and judgments. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a variety of jurisdictions. There can be no assurance that our tax positions and methodologies or calculation of our tax liabilities are accurate or that the outcomes from ongoing and future tax examinations will not have an adverse effect on our operating results and financial condition. A difference in the ultimate resolution of tax uncertainties from what is currently estimated could have an adverse effect on our operating results and financial condition.

accounting rules and regulations are continually changing in ways that could materially impact our financial statements. For example, in May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, or Topic 606, as amended, which has superseded nearly all existing revenue recognition guidance. For public business entities, the standard is effective for annual reporting periods beginning after December 15, 2017. We have early adopted Topic 606 using the full retrospective transition method. Other companies in our industry may apply these accounting principles differently than we do, adversely affecting the comparability of our financial statements. See Note 2 to our accompanying financial statements for information about Topic 606. In addition, if we were to change our critical accounting estimates, including those related to the recognition of subscription revenue and other revenue sources or the period of benefit for deferred contract acquisition costs, our results of operations could be significantly affected.

The preparation of our financial statements in conformity with United States generally accepted accounting principles, or GAAP, requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class B common stock. Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition, deferred contract acquisition costs, the period of benefit generated from deferred contract acquisition costs, stock-based compensation expense, goodwill and intangible assets, and accounting for income taxes, including deferred tax assets and liabilities.

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the listing standards of The Nasdaq Global Select Market, or Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that

will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our Class B common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second Annual Report on Form 10-K.

We intend to continue to make investments to support our growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our existing XM^™Platform or acquire complementary businesses, technologies, and content. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our growth and to respond to business challenges could be significantly impaired.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound sterling, and Australian Dollar. We have not instituted a hedging program. We expect our international operations to continue to grow in the near term and we are continually monitoring our foreign currency exposure to determine when we should begin a hedging program. Today, our international contracts are denominated in either U.S. dollars or local currency, while our international operating expenses are often denominated in local currencies. Additionally, as we expand our international operations, a larger portion of our operating expenses will be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may affect our results of operations when translated into U.S. dollars.

Our Class A-1 common stock and Class A-2 common stock have ten votes per share, and our Class B common stock, which are the shares we are selling in this offering, have one vote per share. The holders of Class A-2 common stock shall also have special voting rights which become effective in the event that the total number of votes represented by all of the outstanding shares of our Class A-2 common stock would constitute less than 51% of the total voting power of all classes of our then-outstanding capital stock. In such a case, and for so long as the number of outstanding shares of Class A-2 common stock represents at least 10% of the total number of shares of all classes of our outstanding capital stock, the holders of our Class A-2 common stock will be entitled to a number of votes per share of their Class A-2 common stock as would cause the total number of votes of all outstanding shares of Class A-2 common stock to equal 51% of the total voting power of all of our then-outstanding shares of capital stock. Accordingly, in such event, the aggregate voting power of all outstanding shares of Class A-1 common stock and Class B common stock would be proportionately reduced. The Class A-2 common stock, 87% of which is held by our founders, certain of whom are executive officers and directors of the company, will represent approximately % of the voting power of our outstanding capital stock following this offering.

After the completion of this offering, the holders of our Class A-2 common stock will collectively continue to control a majority of the combined voting power of our share capital and therefore be able to control substantially all matters submitted to our stockholders for approval until the fifteen year anniversary of the closing of this offering, or such other date as described in our amended and restated certificate of incorporation. These holders of our Class A-2 common stock may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control may have the effect of delaying, preventing, or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and might ultimately affect the market price of our Class B common stock.

We have also granted our founders, Ryan Smith, our Chief Executive Officer and member of our board of directors, and Jared Smith, our President and member of our board of directors, RSUs for an aggregate of 11.25 million shares of our Class B common stock pursuant to the Founder Grants, which will vest and settle upon the future satisfaction of service conditions and the achievement of certain stock price goals following the completion of this offering. See “Executive Compensation—Founder Restricted Stock Unit Grants” for additional information regarding the Founder Grants. If all, or a large portion, of the Founder Grants should vest and settle, our founders will significantly influence any separate vote of our Class B common stock. Although the terms of our amended and restated certificate of incorporation will only provide for a separate vote of the holders of our Class B common stock on limited matters, under Delaware law, certain actions may require the approval of the holders of the Class B common stock voting as a separate class. For example, if we amend our amended and restated certificate of incorporation to adversely affect our Class B common stock, Delaware law could require approval of the holders of our Class B common stock voting separately as a single class. For any vote of the Class B common stock voting as a separate class, our founders will significantly influence such vote if all, or a large portion, of the Founder Grants should vest and settle, and until the number of outstanding shares of Class B common stock significantly increases. To the extent that the Founder Grants vest and settle, our founders will have the ability to gain liquidity by selling shares of our Class B common stock without reducing their voting power by converting their Class A-2 common stock.

In addition, in July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Under the announced policies, our multi-class capital structure would make us ineligible for inclusion in any of these indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices will not be investing in our stock. These policies are relatively new and it is as of yet unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress these valuations compared to those of other similar companies that are included.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced financial disclosure obligations, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. However, we have irrevocably elected not to avail ourselves of the extended transition period for complying with new or revised accounting standards and therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a large accelerated filer, with at least $700 million of equity securities held by non-affiliates; (iii) the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of this offering. We may choose to take advantage of some but not all of these reduced reporting requirements. If we take advantage of any of these reduced reporting requirements in future filings, the information that we provide our security holders may be different than the information you might get from other public companies in which you hold equity interests. We cannot predict if investors will find our Class B common stock less attractive because we may rely on these exemptions.

We intend to use the net proceeds from this offering to satisfy tax withholding and remittance obligations related to the settlement of certain outstanding RSUs in connection with the completion of this offering, and for working capital and other general corporate purposes. On the settlement date, we plan to withhold and remit income taxes at applicable statutory rates based on the then-current value of the underlying shares. We currently expect that the average of these withholding tax rates will be approximately %. If the price of our common stock at the time of settlement were equal to $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, we estimate that this tax obligation would be approximately $ million in the aggregate. To settle these RSUs, assuming an approximate % tax withholding rate and assuming that no employee elects to pay cash to us to cover withholding amounts, we anticipate that we will net-settle the awards by delivering an aggregate of approximately million shares of Class B common stock to RSU holders and withholding an aggregate of approximately million shares of Class B common stock, based on RSUs outstanding as of September 30, 2018 for which the service-based requirement was satisfied on that da y.

The market price of our Class B common stock could decline as a result of substantial sales of our Class B common stock, particularly sales by our directors, executive officers, and significant stockholders, a large number of our Class B common stock becoming available for sale or the perception in the market that holders of a large number of shares intend to sell their shares. After this offering, we will have 81,636,234 shares outstanding of Class A-1 common stock, 101,395,607 shares outstanding of Class A-2 common stock and shares outstanding of Class B common stock, based on the number of shares outstanding as of September 30, 2018 . This includes the Class B common stock offered in this offering, which may be resold in the public market immediately. The remaining shares of our capital stock are currently restricted as a result of market stand-off agreements restricting their sale for a period of up to 180 days after the date of this prospectus, subject to certain exceptions. In addition, certain of these shares are subject to lock-up agreements with the underwriters, and either Morgan Stanley & Co. LLC or Goldman Sachs & Co. LLC, as representatives of the underwriters, may, in its sole discretion, permit our officers, directors, employees, and current securityholders who are subject to lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

Our amended and restated bylaws to be effective in connection with the closing of this offering will provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees or our stockholders to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provisions of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine shall be a state or federal court located within the state of Delaware, in all cases subject to the court’s having jurisdiction over indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to this provision. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act.

Qualtrics International Inc. is, and we expect to continue to be, a holding company with no material assets other than our ownership of the capital stock of Qualtrics, LLC, which we control directly. As such, Qualtrics International Inc. will have no independent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the results of operations and cash flows of Qualtrics, LLC and its consolidated subsidiaries and distributions we receive from Qualtrics, LLC. There can be no assurance that our direct and indirect subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negative covenants in any future debt instruments, will permit such distributions. In addition, in the event that the board of directors and stockholders of Qualtrics International Inc. were to approve a sale of all of our direct and indirect interests in Qualtrics, LLC, your equity interest would be in a holding company with no material assets other than those assets and other consideration received in such transaction.

This prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

Each $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the net proceeds that we receive from this offering by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million in the number of shares offered by us would increase or decrease, as applicable, the net proceeds that we receive from this offering by approximately $ , assuming an initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds from this offering to satisfy tax withholding and remittance obligations of up to $ million related to the settlement of certain outstanding RSUs in connection with the effectiveness of this offering. This amount is based upon the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share of Class B common stock, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, assuming no change to the applicable tax rates, would increase (decrease) the amount we would be required to pay to satisfy these tax withholding obligations by approximately $ million. We also intend to use some of the net proceeds to satisfy tax withholding obligations related to the vesting and settlement of RSUs, which will begin to vest after the completion of this offering. We do not currently know the amount of net proceeds that would be used to satisfy these tax withholding obligations because it depends on many factors, including our share price on the date of settlement and the number of shares underlying RSUs that are settled on such date. We also intend to use the net proceeds from this offering for working capital or other general corporate purposes, including funding our growth strategies discussed in this prospectus. These uses and growth strategies include investing in research and development, enhancing our XM ^™ Platform and solutions, hiring additional personnel in our engineering, customer support and sales and marketing teams, investing in marketing and partnership programs, growing our international operations, and upgrading our infrastructure; however, we do not currently have any definitive or preliminary plans with respect to the use of proceeds for such purposes.



	As of September 30, 2018
	Actual			Pro Forma	Pro Forma As Adjusted⁽¹⁾
	(In thousands except share and per share data)
Cash and cash equivalents	$	137,739
Redeemable convertible preferred stock, $0.0001 par value per share, issuable in Series A-1, A-2, A-3, B-1, B-2, B-3, B-3A, B-4, B-5, and B-5A: 207,060,845 shares authorized, 183,031,841 shares issued and outstanding, actual; no shares issued or outstanding, pro forma and pro forma as adjusted	$	129,609
Stockholders’ equity:
Class A-1 common stock, $0.0001 par value per share: 81,636,234 shares authorized, no shares issued and outstanding, actual; 81,636,234 shares authorized, issued and outstanding, pro forma and pro forma as adjusted	—
Class A-2 common stock, $0.0001 par value per share: 112,897,836 shares authorized, no shares issued and outstanding, actual; 101,395,607 shares authorized, issued and outstanding, pro forma and pro forma as adjusted	—
Class B common stock, $0.0001 par value per share: 215,971,093 shares authorized, 5,309,690 shares issued and outstanding, actual; shares authorized, shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted	1
Additional paid-in capital	10,747
Accumulated other comprehensive loss	(765		)
Accumulated deficit	(79,829		)
Total stockholders’ deficit	(69,846		)
Total capitalization	$	59,763

Net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of our common stock outstanding. Our historical net tangible value as of September 30, 2018 was $ million, or $ per share. Our pro forma net tangible book value as of September 30, 2018 was $ million, or $ per share, based on the total number of shares of our common stock outstanding as of September 30, 2018 , after giving effect to (i) the automatic conversion of all outstanding shares of our Series A-1 and Series A-2 redeemable convertible preferred stock into an aggregate of 101,395,607 shares of our Class A-2 common stock, which conversion will occur immediately prior to the completion of this offering, (ii) the automatic conversion of all outstanding shares of our Series A-3 redeemable convertible preferred stock and Series B redeemable convertible preferred stock into an aggregate of 81,636,234 shares of our Class A-1 common stock, which conversion will occur immediately prior to the completion of this offering, and (iii) the net issuance of up to shares of Class B common stock at the closing of this offering on the vesting and settlement of certain RSUs subject to a performance condition in connection with the effectiveness of this offering.

Each $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value per share to new investors by $ , and would increase or decrease, as applicable, dilution per share to new investors in this offering by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, our pro forma as adjusted net tangible book value by $ per share and increase or decrease, as applicable, the dilution to new investors by $ per share, assuming an initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The following table presents, as of September 30, 2018 , after giving effect to (i) the automatic conversion of all outstanding shares of our Series A-1 and Series A-2 redeemable convertible preferred stock into an aggregate of 101,395,607 shares of our Class A-2 common stock, which conversion will occur immediately prior to the completion of this offering, (ii) the automatic conversion of all outstanding shares of our Series A-3 redeemable convertible preferred stock and Series B redeemable convertible preferred stock into an aggregate of 81,636,234 shares of our Class A-1 common stock, which conversion will occur immediately prior to the completion of this offering, and (iii) the net issuance of up to shares of Class B common stock at the closing of this offering on the vesting and settlement of certain RSUs subject to a performance condition in connection with the completion of this offering, the differences between the existing stockholders and the new investors purchasing shares of our Class B common stock in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of our common stock and preferred stock, cash received from the exercise of stock options and the average price per share paid or to be paid to us at the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us:

The following tables present our selected consolidated financial and other data. We have derived the selected consolidated statements of operations data for the years ended December 31, 2016 and 2017 and our selected consolidated balance sheet data as of December 31, 2016 and 2017 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the selected consolidated statements of operations data for the nine months ended September 30, 2017 and 2018 and our selected consolidated balance sheet data as of September 30, 2018 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair statement of the unaudited interim consolidated financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future, and the results for the nine months ended September 30, 2017 or 2018 are not necessarily indicative of the results to be expected for the full year or any other future period. The following selected consolidated financial and other data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.



	Year Ended December 31,					Nine Months Ended September 30,
	2016			2017		2017		2018
Consolidated Statements of Operations Data:	(In thousands, except per share data)
Revenue:
Subscription	$	142,525		$	213,274	$	151,699	$	215,533
Research on Demand	38,147			51,812		37,524		51,489
Professional services and other	9,931			24,817		17,856		22,544
Total revenue	190,603			289,903		207,079		289,566
Cost of revenue⁽¹⁾⁽²⁾:
Subscription	27,904			25,552		18,162		26,520
Research on Demand	21,322			26,639		19,585		22,237
Professional services and other	11,754			26,893		18,859		27,581
Total cost of revenue	60,980			79,084		56,606		76,338
Gross profit	129,623			210,819		150,473		213,228
Operating expenses⁽¹⁾⁽²⁾:
Research and development	22,303			40,680		29,078		45,643
Sales and marketing	95,919			140,524		102,994		138,318
General and administrative	21,909			26,522		17,239		26,958
Total operating expenses	140,131			207,726		149,311		210,919
Operating income (loss)	(10,508		)	3,093		1,162		2,309
Other non-operating income (expense), net	(501		)	1,370		1,131		274
Income (loss) before income taxes	(11,009		)	4,463		2,293		2,583
Provision for income taxes	1,025			1,907		1,322		1,088
Net income (loss)	$	(12,034	)	$	2,556	$	971	$	1,495
Net income (loss) per share attributable to common stockholders, basic	$	(4.85	)	$	0.01	$	0.01	$	0.01
Net income (loss) per share attributable to common stockholders, diluted	$	(4.85	)	$	0.01	$	0.01	$	0.01
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic	2,482			2,889		2,801		3,597
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted	2,482			185,734		185,493		186,934
Pro forma net income per share attributable to common stockholders, basic
Pro forma net income per share attributable to common stockholders, diluted
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, basic
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, diluted

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In particular, free cash flow is not a substitute for cash used in operating activities. Additionally, the utility of free cash flow as a measure of our liquidity is further limited as it

We are focused on continuing to acquire new customers to support our long-term growth. We have invested, and expect to continue to invest, heavily in our sales and marketing efforts to drive customer acquisition. As of September 30, 2018, we had over 9,000 customers, including over 75% of the Fortune 100 and 30% of the 2018 Global 2000. Our customers include businesses of all sizes, academic institutions, and government organizations. We define the number of customers at the end of any particular period as the number of parties or individual legal entities that have entered into a separate subscription contract with us for which the term has not ended. For avoidance of doubt, international subsidiaries of parent entities are not separately counted, but business units, brands, and academic institutions are counted if they are distinct legal entities. A single organization or customer may have multiple paid business accounts.

Our business model relies on rapidly and efficiently landing new customers and expanding our relationship with them over time. As the chart below illustrates, we have a history of attracting new customers, driving expanded use through upselling our XM^™ Platform across the enterprise, and cross-selling through the subsequent deployment of additional solutions throughout the enterprise. Specifically, the chart below illustrates the total subscription billings of each cohort over the periods presented with each cohort representing customers who made their first purchase from us in a given fiscal year. For example, the 2014 cohort includes all customers that purchased their first subscription from us between January 1, 2014 and December 31, 2014. Our subscription billings from customers for the 2012 cohort, 2013 cohort, 2014 cohort, 2015 cohort, and 2016 cohort in 2017 represent an increase over each cohort’s initial aggregate subscription billings by 2.6x, 1.8x, 2.1x, 1.7x, and 1.2x, respectively.

We focus on a dollar-based net retention rate metric, because it captures the full impact on revenue of our customers expanding, decreasing, or ending their subscriptions. We do not focus on a numerical-based customer retention rate, because it does not include expansion or contraction and it does not take into account the amount a customer spends and as such does not necessarily correlate consistently to revenue. Because the dollar-based net retention rate also includes expansion and contraction of customers, there is (and will likely continue to be for the foreseeable future) a material disparity between the dollar-based net retention rate and a numerical-based customer retention rate, which by definition cannot exceed 100%. We note that there has not been a material change in our period-over-period actual customer retention rate and associated impact on revenue during the periods presented.

We use calculated billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers and our ability to sell subscriptions to our XM^™ Platform to both existing and new customers. Calculated billings represent our total revenue plus the change in deferred revenue in the period, as presented in our consolidated financial statements. Calculated billings in any particular period aims to reflect amounts invoiced for subscriptions to access our XM^™ Platform, Research on Demand, and professional services related to our new and existing customers. We primarily invoice our subscription customers annually in advance. While we believe that calculated billings provides valuable insight into the cash that will be generated from sales of our subscriptions, Research on Demand, and professional services, this metric may vary from period-to-period for a number of reasons, and therefore has a number of limitations as a quarter-to-quarter or year-over-year comparative measure. These reasons include, but are not limited to, (i) a variety of customer contractual terms could result in some periods having a higher proportion of multi-year time-based subscriptions than other periods, (ii) as we experience an increasing number of larger sales transactions, the timing of executing these larger transactions has and will continue to vary, with some transactions occurring in quarters subsequent to or in advance of those that we anticipated, (iii) fluctuations in payment terms affecting the billings recognized in a particular period, and (iv) seasonality in our billings, as described in quarterly trends. Because of these and other limitations, you should consider calculated billings along with revenue and our other GAAP financial results.

Cost of revenue. Our cost of subscription revenue includes expenses related to operating our XM^™ Platform in data centers, depreciation of our data center equipment, and the amortization of our capitalized internal-use software and acquired technology. Cost of revenue also includes employee-related costs associated with our customer support and XM^™ Platform operations organizations. Our cost of Research on Demand revenue includes vendor costs and employee-related costs associated with the delivery of the solution. Our cost of professional services and other revenue includes employee-related costs associated with the delivery of these services, as well as delivery partner costs. Additionally, we make allocations of certain overhead costs, primarily based on headcount, to each of these costs of revenue. Allocated overhead includes costs such as facilities, including rent, utilities, depreciation on leasehold improvements, and shared information technology costs. We expect our cost of revenue will increase in absolute dollars in future periods as we continue to invest in our business.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, or SAB 118, which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected throughout calendar year 2018, we consider the accounting of the deferred tax remeasurements and state tax conformity to be incomplete but have made a reasonable estimate and have included provisional amounts in the financial statements. Due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions, we expect to complete our analysis within the measurement period provided for and in accordance with SAB 118.

As of December 31, 2017, we had approximately $39.0 million of consolidated federal NOL carryforwards and $41.7 million of state NOL carryforwards available to offset future taxable income. If unused, the federal and state NOL carryforwards will begin to expire in 2035 and 2025, respectively. As of December 31, 2017, we had federal research tax credit carryforwards of $4.2 million and state research tax credit carryforwards of $0.7 million, which if not utilized will begin to expire in 2034 and 2029, respectively. These NOL and research tax credit carryforwards could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect our profitability. Realization of our NOL carryforwards and tax credits is dependent on generating sufficient taxable income prior to their expiration. Although a portion of these carryforwards and tax credits may be subject to the provisions of Internal Revenue Code Sections 382 and 383, we have not performed a formal study to determine the amount of a limitation, if any. The use of the NOL carryforwards and tax credits may have additional limitations resulting from future ownership changes or other factors under Sections 382 and 383 of the Internal Revenue Code.



	Year Ended December 31,					Nine Months Ended September 30,
	2016			2017		2017		2018
	(In thousands)
Revenue:
Subscription	$	142,525		$	213,274	$	151,699	$	215,533
Research on Demand	38,147			51,812		37,524		51,489
Professional services and other	9,931			24,817		17,856		22,544
Total revenue	190,603			289,903		207,079		289,566
Cost of revenue⁽¹⁾⁽²⁾:
Subscription	27,904			25,552		18,162		26,520
Research on Demand	21,322			26,639		19,585		22,237
Professional services and other	11,754			26,893		18,859		27,581
Total cost of revenue	60,980			79,084		56,606		76,338
Gross profit	129,623			210,819		150,473		213,228
Operating expenses⁽¹⁾⁽²⁾:
Research and development	22,303			40,680		29,078		45,643
Sales and marketing	95,919			140,524		102,994		138,318
General and administrative	21,909			26,522		17,239		26,958
Total operating expenses	140,131			207,726		149,311		210,919
Operating income (loss)	(10,508		)	3,093		1,162		2,309
Other non-operating income (expense), net	(501		)	1,370		1,131		274
Income (loss) before income taxes	(11,009		)	4,463		2,293		2,583
Provision for income taxes	1,025			1,907		1,322		1,088
Net income (loss)	$	(12,034	)	$	2,556	$	971	$	1,495



	Year Ended December 31,				Nine Months Ended September 30,
	2016		2017		2017		2018
	(as a % of revenue)
Revenue:
Subscription	75		74		73		74
Research on Demand	20		18		18		18
Professional services and other	5		8		9		8
Total revenue	100	%	100	%	100	%	100	%
Cost of revenue:
Subscription	15		9		9		9
Research on Demand	11		9		9		8
Professional services and other	6		9		9		10
Total cost of revenue	32		27		27		27
Gross profit	68		73		73		73
Operating expenses:
Research and development	12		14		14		16
Sales and marketing	50		49		50		48
General and administrative	12		9		8		9
Total operating expenses	74		72		72		73
Operating income (loss)	(6	)	1		1		—
Other non-operating income, net	—		—		1		—
Income (loss) before income taxes	(6	)	1		2		—
Provision for income taxes	—		—		1		—
Net income (loss)	(6	)%	1	%	1	%	—	%

Cost of subscription and Research on Demand revenue increased $ 11.0 million , or 29% , for the nine months ended September 30, 2018 , as compared to the nine months ended September 30, 2017 , compared to subscription and Research on Demand revenue growth of 41% over the same period. This increase was driven by a $5.6 million increase in server costs, $2.3 million increase in employee-related costs, $1.4 million increase in Research on Demand vendor costs, and $0.4 million increase in amortization of developed technology. Costs did not increase at the same rate as revenue primarily due to improved pricing from Research on Demand vendors. Cost of professional services and other revenue increased $ 8.7 million , or 46% , during the nine months ended September 30, 2018 , as compared to the nine months ended September 30, 2017 . This increase was primarily due to an increase in employee-related costs of $8.6 million as we grew our professional services headcount to support a growing number of large customers. As a result of the factors described above, our gross margins increased 1% during the nine months ended September 30, 2018 , as compared to nine months ended September 30, 2017 .

our solutions from new and existing customers. Of the increase in subscription and Research on Demand revenue for the year ended December 31, 2017 compared to the year ended December 31, 2016, approximately $59.8 million was attributable to existing customers and approximately $24.6 million was attributable to new customers. The increase in revenue from existing customers was driven by upgrades of current subscription and Research on Demand solutions and the purchase of additional solutions within our platform. Pricing changes were not material to the increase in revenue. Professional services and other revenue increased $14.9 million, or 150%, from the year ended December 31, 2016 to the year ended December 31, 2017. This increase was primarily due to beginning to sell implementation and consulting services in the second half of year ended December 31, 2016, as well as an increase in revenue from large customers, who generally require more services.

Cost of subscription and Research on Demand revenue increased $3.0 million, or 6%, for the year ended December 31, 2017, as compared to the year ended December 31, 2016, while subscription and Research on Demand revenue grew 47% over the same periods. This increase was driven by a $4.0 million increase in Research on Demand vendor costs, a $3.7 million increase in server costs, partially offset by a $5.1 million decrease in employee-related costs. Costs did not increase at the same rate as revenue primarily due to a more efficient customer support model and improved pricing with Research on Demand vendors. We realized customer support efficiencies through platform enhancements and added online support resources, which allowed us to transition certain employees from support activities to account expansion activities. Cost of professional services and other revenue increased $15.1 million, or 129%, for the year ended December 31, 2017, as compared to the year ended December 31, 2016. This increase was primarily due to an $11.3 million increase in employee-related costs as we grew our professional services and implementation teams, and a $1.8 million increase in partnership costs related to delivery partners.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Tax Act, was enacted. The Tax Act contains several key tax provisions that affect us, including, but not limited to, reducing the U.S. federal corporate tax rate from 34% to 21% for tax years beginning after December 31, 2017, imposing a one-time repatriation tax on deemed repatriated earnings and changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. We have not completed our accounting assessment for the effects of the Tax Act. We currently maintain a full valuation allowance recorded against our U.S. federal deferred tax assets. As such, the remeasurement of the deferred tax assets and related valuation allowance did not have a material impact to the financial statements for the year ended December 31, 2017, other than disclosures in our financial statements.

Our effective tax rate for the year ended December 31, 2017 was 42.7%. The difference between the U.S. statutory rate of 34% and our effective tax rate is primarily driven by rate increases due to federal tax legislation (147.8%), equity compensation (34.9%), and foreign and state taxes (28.4%). These increases to our effective tax rate are partially offset by rate decreases due to changes in the valuation allowance (125%) and tax credits (78.4%). The effective tax rate increase related to federal tax legislation and decrease related to changes in the valuation allowance are due to the Tax Act, which resulted in a remeasurement of our deferred tax assets and related valuation allowance based on a reduction in the U.S. federal corporate tax rate from 34% to 21%. The effective tax rate increase related to equity compensation is due to non-deductible compensation expense for tax purposes resulting from a tender offer for employee equity awards. The changes resulting from the federal tax legislation and employee tender offer are not expected to recur.



	Three Months Ended
	Dec. 31,			March 31,			June 30,			Sept. 30,		Dec. 31,		March 31,			June 30,			Sept. 30,
	2016			2017			2017			2017		2017		2018			2018			2018
	(In thousands)
Revenue:
Subscription	$	41,552		$	45,376		$	50,776		$	55,548	$	61,576	$	64,233		$	72,034		$	79,266
Research on Demand	10,417			11,634			12,750			13,140		14,287		15,108			18,196			18,185
Professional services and other	2,705			4,870			6,028			6,958		6,960		7,711			6,915			7,918
Total revenue	54,674			61,880			69,554			75,646		82,823		87,052			97,145			105,369
Cost of revenue⁽¹⁾⁽²⁾:
Subscription	7,757			5,513			5,919			6,730		7,391		8,198			8,864			9,458
Research on Demand	6,353			6,372			6,568			6,645		7,054		7,392			7,057			7,788
Professional services and other	4,078			5,670			5,853			7,336		8,034		8,366			9,229			9,986
Total cost of revenue	18,188			17,555			18,340			20,711		22,479		23,956			25,150			27,232
Gross profit	36,486			44,325			51,214			54,935		60,344		63,096			71,995			78,137
Operating expenses⁽¹⁾⁽²⁾:
Research and development	6,998			7,685			10,542			10,851		11,602		12,680			15,297			17,666
Sales and marketing	25,776			33,202			36,092			33,700		37,530		46,044			45,276			46,998
General and administrative	6,763			5,447			6,148			5,644		9,283		10,142			8,931			7,885
Total operating expenses	39,537			46,334			52,782			50,195		58,415		68,866			69,504			72,549
Operating income (loss)	(3,051		)	(2,009		)	(1,568		)	4,740		1,929		(5,770		)	2,491			5,588
Other non-operating income (expense), net	(467		)	201			470			460		238		1,034			(714		)	(46		)
Income (loss) before income taxes	(3,518		)	(1,808		)	(1,098		)	5,200		2,167		(4,736		)	1,777			5,542
Provision for (benefit from) income taxes	300			441			358			523		585		(345		)	802			631
Net income (loss)	$	(3,818	)	$	(2,249	)	$	(1,456	)	$	4,677	$	1,582	$	(4,391	)	$	975		$	4,911



	Three Months Ended
	Dec. 31,		March 31,		June 30,		Sept. 30,		Dec. 31,		March 31,		June 30,		Sept. 30,
	2016		2017		2017		2017		2017		2018		2018		2018
	(As a % of revenue)
Revenue:
Subscription	76		73		73		74		74		74		74		75
Research on Demand	19		19		18		17		17		17		19		17
Professional services and other	5		8		9		9		9		9		7		8
Total revenue	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%
Cost of revenue:
Subscription	14		9		9		9		9		9		9		9
Research on Demand	12		10		9		9		8		9		7		7
Professional services and other	7		9		8		9		10		10		10		9
Total cost of revenue	33		28		26		27		27		28		26		25
Gross profit	67		72		74		73		73		72		74		75
Operating expenses:
Research and development	13		12		15		14		14		14		16		17
Sales and marketing	47		54		52		45		45		53		47		45
General and administrative	12		9		9		7		11		12		9		7
Total operating expenses	72		75		76		66		70		79		72		69
Operating income (loss)	(5	)	(3	)	(2	)	7		3		(7	)	2		6
Other non-operating income (expense), net	(1	)	—		1		1		—		1		—		—
Income (loss) before income taxes	(6	)	(3	)	(1	)	8		3		(6	)	2		6
Provision for income taxes	1		1		—		—		—		—		1		1
Net income (loss)	(7	)%	(4	)%	(1	)%	8	%	3	%	(6	)%	1	%	5	%

Our revenue increased sequentially in each of the quarters presented primarily due to increases in the number of customers and expansion with existing customers. We generally experience seasonality in billings with our customers, and we typically record a higher percentage of billings in our fourth quarter. However, because we recognize subscription revenue ratably over the terms of our subscription agreements, a substantial portion of the subscription revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during previous periods. Consequently, increases or decreases in new or renewal billings in any one period may not be immediately reflected as subscription revenue for that period. Beginning in 2017, our professional services and other revenue increased as a percentage of revenue primarily due to an increase in revenue from large customers, who generally require more services. For the three months ended June 30, 2018 and September 30, 2018, professional services and other revenue decreased as a percentage of total revenue compared to the previous four quarters due to an increased deployment of partners to fulfill these services.

We believe our existing cash and cash equivalents, together with cash provided by operations, will be sufficient to meet our needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, the timing and extent of spending to support further infrastructure development and research and development efforts, the timing and extent of additional capital expenditures to invest in existing and new office spaces, the satisfaction of tax withholding obligations for the settlement of RSUs, the expansion of sales and marketing and international operation activities, the introduction of new product capabilities and enhancement of our XM™ Platform, and the continuing market acceptance of our platform. With respect to the funding of tax withholding and remittance obligations with respect to the settlement of RSUs, we may use a significant portion of our existing cash, including funds raised in this offering. If we elect not to fully fund tax withholding and remittance obligations through cash or if we are unable to do so, we may choose to sell equity or debt securities, or rely on a combination of these alternatives. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be materially and adversely affected.

For the year ended December 31, 2017, net cash provided by operating activities was $39.6 million, which resulted from net income of $2.6 million, adjusted for non-cash charges of $27.9 million and net cash inflow of $9.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $10.8 million for depreciation and amortization expense, $9.6 million of amortization of deferred contract acquisition costs and $6.9 million for stock-based compensation expense. The inflow from operating assets and liabilities was primarily due to an increase of $51.8 million in deferred revenue from advance invoicing in accordance with our subscription contracts, $6.6 million aggregate increase in accrued liabilities and accounts payable, partially offset by $21.2 million increase in accounts receivable due to billings growth and timing of collections, $19.7 million increase in deferred contract acquisition costs as our sales commission payments increased due to addition of new customers and expansion of our existing customer subscriptions, and $6.7 million increase in prepaid and other current assets.

The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments involve revenue recognition with respect to the determination of the standalone selling prices for our services, valuation of our stock-based compensation, including the underlying deemed estimated fair value of our common stock, exchange of preferred stock, valuation of deferred income tax assets and liabilities, uncertain tax positions, and contingencies and litigation. Actual results could differ from those estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

On January 1, 2017, we early adopted the requirements of Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers, or Topic 606. Topic 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs-Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, references to Topic 606 used herein refer to both Topic 606 and Subtopic 340-40. We adopted Topic 606 with retrospective application to the beginning of the earliest period presented. The adoption of Topic 606 resulted in changes to our accounting policies for revenue recognition and deferred commissions. The primary impact of adopting Topic 606 relates to the deferral of incremental costs of obtaining customer contracts and the amortization of those costs.

We generate revenue primarily from sales of subscriptions to access our XM^™ Platform, together with related support services to our customers. Arrangements with our customers do not provide the customer with the right to take possession of the software operating the XM^™ Platform at any time. Instead, customers are granted continuous access to the XM^™ Platform over the contractual period. Access to the platform represents a series of distinct services as we continually provide access to, and fulfill our obligation to the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. Accordingly, the fixed consideration related to subscription revenue is generally recognized on a straight-line basis over the contract term, beginning on the date that the service is made available to our customer.

We consider the lack of payment for issues unrelated to credit risk to be variable consideration and estimate the impact to revenue and deferred revenue on a portfolio basis. This estimated allowance is based upon historical cancellation patterns due to lack of payment, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with problem accounts. We continuously monitor the adequacy of the allowance by comparing actual write-offs against the estimated allowance and update estimates as needed. Allowances are recorded and adjusted based upon historical patterns related to the timing of cancellations. Adjustments to the allowance are recorded in the consolidated balance sheets with an offsetting adjustment to deferred revenue and revenue in the consolidated statements of operations. Write-offs to accounts receivable in a period are recorded in the activity in the allowance for that period. We believe that our allowances are adequate to absorb any known or probable uncollectible amounts due to service cancellations or customer credit risk.

We have issued two types of RSAs, one-tier and two-tier. One-tier RSAs vest solely on a service-based condition. For these awards, we recognize stock-based compensation expense on a straight-line basis over the vesting period. Two-tier RSAs contain both a service-based condition and performance condition, defined as the earlier of (i) an acquisition or change in control of the company or (ii) upon the occurrence of our initial public offering. A change in control event and effective registration event are not deemed probable until consummated; accordingly, no expense is recorded related to two-tier RSAs until the performance condition becomes probable of occurring. Awards which contain both service-based and performance conditions are recognized using the accelerated attribution method once the performance condition is probable of occurring.

As of December 31, 2017, all compensation expense related to two-tier RSAs and two-tier RSUs remained unrecognize d because the performance condition was not satisfied. At the time the performance condition becomes probable, we will recognize the cumulative stock-based compensation expense for the two-tier RSAs and RSUs that have met the service vesting condition using the accelerated attribution method. Under the 2014 Plan as of September 30, 2018 , 1.0 million two-tier RSAs were outstanding and 35.0 million two-tier RSUs were outstanding, of which 1.0 million RSAs and 7.1 million RSUs had met the service condition. If the performance condition had occurred on September 30, 2018 , we would have recorded $ 99.8 million of stock-based compensation expense. If the performance condition had been satisfied on these two-tier RSAs and two-tier RSUs as of September 30, 2018 , we would recognize future stock-based compensation expense of $ 211.9 million over a weighted-average period of approximately two years, if the requisite service is provided.

We considered numerous factors in assessing the estimated fair value of our common stock, including the results of contemporaneous valuations of its common stock by unrelated third parties; the rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock; market multiples of comparable public companies in our industry as indicated by their market capitalization and guideline merger and acquisition transactions; our performance and market position relative to our competitors, who may change from time to time; our historical financial results and estimated trends and prospects for our future performance; the economic and competitive environment; the likelihood and timeline of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; any adjustments necessary to recognize a lack of marketability for our common stock; and precedent sales of or offers to purchase our common stock.

Deferred contract acquisition costs are amortized over an estimated period of benefit of five years. The period of benefit was estimated by considering factors such as estimated average customer life, the rate of technological change in the subscription service , and the impact of competition in its industry. As our average customer life significantly exceeded the rate of change in its technology, we concluded that the rate of change in the technology underlying our subscription service was the most significant factor in determining the period of benefit for which the asset relates. In evaluating the rate of change in the technology, we considered the competition in the industry, its commitment to continuous innovation, and the frequency of product, platform, and technology updates. We determined that the impact of competition in the industry is reflected in the period of benefit through the rate of technological change.

We capitalize certain development costs incurred in connection with our internal-use software. These capitalized costs are primarily related to our XM^™ Platform that we host and are accessed by our customers on a subscription basis. Costs incurred in the preliminary stages of development are expensed as incurred as research and development costs. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal-use software is amortized on a straight line basis over its estimated useful life of 24 months. We recognized amortization expenses of $6.7 million and $5.3 million related to capitalized internal-use software for the years ended December 31, 2017 and 2016, respectively, within cost of subscription revenue.

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates relative to U.S. dollars, our reporting currency. Our revenue is primarily generated in U.S. dollars, Euros, Australian dollars, British pounds sterling, Canadian dollars, New Zealand dollars, Japanese yen, and Singapore dollars. A portion of our operating expenses are incurred outside the United States, denominated in foreign currencies and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British pound sterling, and Australian dollar. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of operations. As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

We have always known that uncommon results require uncommon sense. That is why we have always done things a little differently. From our earliest days, we knew that if we were going to do something special we had to write our own playbook, not follow someone else’s. We bucked convention and chose to bootstrap our company for a decade without raising any outside funding. Through three distinct economic environments, Qualtrics has steadily grown and been free cash flow positive in each and every one of our 16 years. All primary capital raised remains unspent and still on the balance sheet. We intend to continue our thoughtful stewardship of capital as we go forward and to treat your investment with the same care and respect we have treated the capital that we and our private investors have contributed. We are excited to share our story and invite investors to join us in powering the experience economy.

Our history uniquely positioned us to pioneer and develop this new XM^™ category. Founded in 2002 with the goal of solving the most complex problems encountered by the most advanced academic researchers, we were forged in an environment that required rigorous analytical methods, ease of use, the versatility to address the broadest range of inquiries, and the scalability to reach millions of touch points globally. Our leading presence with academic institutions has introduced millions of students to Qualtrics and allowed them to become proficient in the use of our software. As these students have migrated into the workplace, they have often brought us with them, spawning a whole new class of commercial customers and developing new use cases for our XM^™ Platform. Led by these customers, we evolved beyond our traditional research product offering to develop our platform, which incorporates our core research capability and is also designed to specifically address customer, employee, brand, and product use cases. Taken together, we believe that this platform provides a System of Action for organizations to monitor and act upon the vital signs that drive performance in any organization.

O-data^™ alone is far from sufficient to close experience gaps. Moreover, most organizations are O-data^™ rich and X-data^™ poor. X-data^™ is the human factor data, the beliefs, emotions, and intentions that tell you why things are happening and, more importantly, what is going to happen. X-data^™ is fragmented, often unstructured, and needs to be collected across all engagement methods, including e-mail, SMS, chat, phone, website, and in-app links. Together, X-data^™ and O-data^™ can provide differentiated and related insights to understand where experience gaps exist and how to address them. For example, a new product launch did not have the expected results because the price point was too high (X-data^™) and customers expected more features for the higher price point (X-data); as a result, sales are down compared to the last product release (O-data^™).

Direct, timely, and authentic data about the sentiment and experiences of all constituents is needed to drive growth, competitiveness, and value in today’s economy. Direct commerce models have allowed businesses to create multiple touch points with customers and garner data that allows them to rapidly evolve and improve their offerings and operations. Companies without this direct customer connectivity, including those that operate via indirect channels, find themselves at an increasing disadvantage, often resulting in the inability to gather direct customer experience data and reducing the ability to assess customer sentiment and needs. Despite this lack of direct customer connectivity, companies need a software platform that enables them to maintain direct feedback loops. The absence of direct signals meaningfully inhibits organizations’ ability to adapt and thrive.

Corporate use of our software was discovered to be driven largely by four core use cases: customer, employee, brand, and product related feedback and research. We developed focused solutions consisting of use case specific capabilities, content, dashboards, and workflow integration built on top of the base research and analytics engine. To provide a better, more consistent, and focused practice area around the customer, we developed Customer Experience as the first solution on our core platform. Next, we developed our solution for Employee Experience, which utilizes the same research engine at the core of our platform, but has specific functionality around employee experiences. We then developed our Brand and Product Experience solutions to round out a holistic approach to experience management in the areas that have the greatest impact on an organization’s success or failure. In 2017, we launched the Qualtrics XM^™ Platform. We believe that the XM^™ Platform provides a System of Action for organizations to monitor and act upon the vital signs that best drive organizational success.

The iQ Directory contains all experience data collected over time, formally tracking all experiences, interactions and feedback that each individual provides to an organization. iQ Directory enables an organization to collect data from multiple data sources and gain a person-centric view of their constituents by capturing each interaction throughout the constituent’s journey. The directory makes it possible for organizations to pinpoint key drivers and changes in individual sentiment over time and drive action to close experience gaps. For example, an e-commerce company can track a customer’s key experience touchpoints across the lifetime of the customer, including sales of items, customer feedback, and engagement with customer support, all in one location. iQ Directory’s machine learning technology also helps predict how an individual might respond in a certain situation. This enables organizations to interact with people at the right moment, with the right message, via the right channels to drive the most optimal outcomes, and allows interactions with individuals to feel like an ongoing conversation rather than transactional pings along a constituent’s journey. iQ Directory also allows organizations to better understand the journeys that their customers are experiencing, helping them to identify key gaps in customer interaction with their brand.

Our Text iQ functionality uses natural language processing and machine learning algorithms to analyze unstructured, open-end text data for responses and insights. Our technology uncovers trends within unstructured data responses without any additional manual tagging by using a cluster-based approach to understand the context of the unstructured data and extracting insights from the data automatically. Text iQ assigns sentiment scores to incoming open text data to allow organizations to capture the emotion of individual respondents and each topic they discuss, directing organizations on where to focus their attention. For example, after requesting written employee feedback, a financial services company can immediately gain a pulse on how the employees feel about the company and can drill down to understand specific employee sentiment by job type and which aspects employees are most frustrated with, allowing the company to identify and act on problem areas within the workplace. Text iQ automatically updates reports and dashboards with this analysis and immediately pushes this newly-analyzed data to employees, giving them the insights they need to make changes in the moment while also showing the evolution of sentiment over time.

Our Stats iQ technology makes advanced statistical analysis of experience data accessible for any user. Based on the structure of the data set, Stats iQ automatically chooses the appropriate statistical analyses to run and then presents the results to the user in a digestible and understandable format in plain English, which democratizes the ability for anyone in an organization to extract business insight from sophisticated research and analysis. For example, when reviewing feedback on brand awareness and equity, a consumer-packaged goods company can use Stats iQ to automatically correlate awareness and equity by demographics and location to understand which groups of people they should target in their marketing strategy. Stats iQ also helps organizations identify their distinct customer cohorts, and better understand the characteristics, needs, and satisfaction levels of those key groups. Comprehensive and advanced data analytic functions include relate, univariate, bivariate, crosstabs, pivot tables, regression, and modeling.

Our Driver iQ technology uses financial impact and advanced regression analyses to automatically recommend the organizational improvements that will drive the highest ROI. It prioritizes key drivers from the C-Suite to the frontline employees in clear business terms. Using advanced statistical analytics, Driver iQ correlates the quality of the customer-journey with specific satisfaction drivers, and allows users to prioritize the drivers that will most improve the overall experience going forward. For example, when receiving feedback on paint colors for a new line of cars, an automotive company can use Driver iQ to identify which car colors will drive the highest sales amounts, allowing them to produce the optimal amount of each color of car. The Driver iQ interface also allows different users to configure the data in real-time to drill down in the data and identify the key drivers at their specific points of impact, yielding more relevant and actionable insights and follow-up directives for each specific user.

Our Predict iQ technology helps companies understand which customers are likely to leave and what they can do to prevent attrition before it happens. Using deep learning neural networks and open-source algorithms to make its predictions, Predict iQ identifies customers who are likely to churn and provides visibility into what is driving that behavior. The technology can also be used in a workflow with Qualtrics Actions, allowing users to set up triggers to send emails, create tickets, or ping any third party service for immediate action to prevent attrition. For example, within an enterprise software company, if Predict iQ identifies a customer that has unresolved issues with the product and is likely to churn, the company’s pre-set workflows can open up a ticket in Salesforce to remind their sales and customer success teams to resolve any product issues and provide the right amount attention to the customer. Users can also leverage other Qualtrics iQ technologies, such as sentiment analysis from Text iQ and regression models from Stats iQ, into Predict iQ to provide the neural networks with additional variables that users find relevant to enhance the accuracy and sophistication of the deep learning algorithms.



Banking / Insurance		Oil & Gas / Utilities
Allianz SE American Express Company Bank of America Corp. GEICO Corporation		CenterPoint Energy, Inc. Chevron Corporation Duke Energy Corp. E.ON SE

Consumer Packaged Goods		Retail
adidas AG The Coca-Cola Company Levi Strauss & Co Under Armour, Inc.		CDW Corporation CVS Health Corporation Target Corporation Weight Watchers International

Education		Services / Consulting
Denver Public Schools Columbia University Northwestern University University of California, Los Angeles		Aramark Corporation Bain & Company Gallup, Inc. PricewaterhouseCoopers LLP

Government		Technology
Centers for Medicare and Medicaid Services General Services Administration United States Air Force United States Postal Services (USPS)		Atlassian Corporation plc Cisco Systems, Inc. Dropbox, Inc. Microsoft Corporation

Healthcare / Life Sciences		Telecom / Media
AstraZeneca plc Cerner Corporation DaVita Inc. Pfizer Inc.		Scripps Networks Interactive, Inc. Sprint Corporation Telefónica, S.A. The Walt Disney Company

Industrials / Automotive		Travel / Hospitality
Airbus S.A.S. Bayerische Motoren Werke AG (BMW) Ford Motor Company Volkswagen AG		All Nippon Airways Co., Ltd. American Airlines, Inc. Cathay Pacific Airways Limited MGM Resorts International

Non-Profit
CFA Institute The Character Lab Girl Scouts of the United States of America National 4-H Council

In 2015, AGCS knew that it was operating in a highly competitive market where excess supply and declining rates were applying pressure on it to innovate and provide a superior service in order to retain and attract new customers. It needed to make sure it was staying ahead of the market, which required providing its employees and leadership the insights that would help anticipate customer needs and provide a single view of its customers. With the introduction of a new CEO, Allianz began to implement the Allianz renewal agenda, with one of the key pillars being true customer centricity. Through this, AGCS started to develop a clear roadmap to make it a truly customer centric organization. It believed that through a heightened focus around customer experience, it could increase revenue growth, expand its margins, and improve its competitive position. To achieve these goals, AGCS brought together a team of 35 key business leaders from across the world to design a scalable customer experience program that would win over customers and accelerate growth year after year. It needed a partner that would not only provide it with a leading technology platform, but also work with it in a consultative way to help shape the future of its customer experience program.

An important use of Qualtrics at Belkin is the capacity for real-time user feedback across a product life cycle, particularly in the first 90 days of a product launch. For example, after the launch of a new networking product line, the Belkin product team collected user feedback at multiple touchpoints, including post-sales, post-support, website searches, and community message boards. Using Qualtrics, the team organized the data by customer segment, and distributed the data through filterable dashboards. Even though the product development team did the standard pre-work for launch such as focus groups with consultants, post-release sales indicated poor product market fit with the intended buyer. To take immediate action and address the growing sales gap, Belkin held daily team huddles with its marketing, engineering, and product teams to review the Qualtrics data and insights. Using Qualtrics statistical and text analytics, the cross-departmental product team was able to make daily improvements to the product, messaging, packaging, instructions and customer support needs. These daily strategy sessions, powered by Qualtrics real-time insights served to get product sales back on track within two months and eventually helped the team exceed initial first year projections.

Competing in the extremely personalized and competitive world of financial planning and investment management, BlackRock knew that it needed to maintain a high level of service, and understood that a highly engaged workforce was the key to delivering a superior experience to its clients. BlackRock’s leadership desired to build an end-to-end employee experience program agile enough to grow with its organization. BlackRock’s leadership was interested in understanding what drove its engaged and enabled workforce. BlackRock wanted the flexibility to ask the questions specific to its organization and allow its in-house data experts to analyze the data and glean insights. BlackRock sought to partner with an organization that would empower it to listen to its employees and quickly understand what changes needed to be made to improve engagement.

In the first quarter of 2015, to accomplish its goals of creating a flexible and sophisticated EX program, BlackRock turned to Qualtrics. With the Qualtrics EX platform, BlackRock implemented an internally-managed employee experience program that has allowed it to reduce costs, enhance capacity, save time, and mitigate risk. BlackRock began its partnership with Qualtrics by sending out an annual employee engagement feedback request to every employee across its organization. Through Qualtrics’ organizational hierarchy management and integration with its Human Capital Management System, BlackRock provided senior managers and executives with direct, real-time access to engagement metrics, clearly laying out key improvement areas. In collaboration with its leadership, BlackRock’s human resources team used the company-level data to establish company priorities and set action plans for the coming year. To monitor progress in certain focus areas, BlackRock solicited regular employee feedback and encouraged ongoing and open conversations between employees and leadership through customized, pulsed requests to small employee populations throughout the year. Blackrock then expanded to Qualtrics’ 360-review module, allowing it to provide comprehensive, automated, and actionable insights to company leaders regarding areas of improvement in their skill sets.

In the highly competitive sportswear space, Under Armour has built and maintained its advantage through the introduction of innovative products. The product innovation team at Under Armour learned early on that the most game-changing products are developed through a deep understanding of how athletes actually use its products and what they need to succeed. For Under Armour, athletes define unmet needs and are the ultimate critics or champions of the products that Under Armour creates. As such, Under Armour understands how critical it is maintain a connection to athletes throughout the product creation process, engaging with them to learn about their needs and specifications before a product goes to market. To enhance the communication channels and receive real-time product feedback from its athlete-customers, Under Armour needed a platform that could be a competitive advantage by channeling hundreds of deep insights from athletes to products.

In 2013, Under Armour started with a $10,000 per year license to enable its Consumer Insights team to conduct consumer research. Its implementation of Qualtrics quickly grew in scope to include product testing and perception research, and in 2014 Under Armour partnered with Qualtrics to develop a sophisticated wear testing platform. On the Qualtrics XM^™ Platform, Under Armour built a complex product feedback and evaluation system that could run and automate thousands of projects throughout the year, helping it to manage the typical seasonal surges that most apparel companies experience. Under Armour built and began to manage its team of over 10,000 wear-testers through the Qualtrics XM^™ Platform. After Under Armour product teams enter new projects into the platform, Qualtrics automatically identifies the right testers to send the products to, narrowing the database based on details like running miles per week, hours of activity, and surface conditions experienced by each product-tester. Through an API-based integration with FedEx, Qualtrics makes it easy to ship product directly to appropriate testers. These testers then provide detailed product feedback at defined milestones through a variety of formats, including structured questions, heat map images, hot spots, open text, and video and image uploads. Using Qualtrics, Under Armour reports out and distributes real-time evaluation data, providing relevant views of product health and issues with automated custom report templates for different members of cross-functional teams like development, design, and marketing.

1-800 CONTACTS deployed Qualtrics in 2013 for implementation of a post-transactional NPS and customer satisfaction scores, or CSAT, tracking program to understand how well it was meeting its customers’ expectations. Impressed by the number of actionable insights, 1-800 CONTACTS worked with Qualtrics to implement a triggering system that would identify detractors in real time based on low scores and negative sentiment from open-text responses. This system was integrated into 1-800 CONTACTS’ custom call-center application so that dedicated agents would receive alerts and then reach out directly to these customers for resolution. This has become a key part of 1-800 CONTACTS’ customer satisfaction program. Customer comments from the Qualtrics’ platform were also displayed in high-traffic areas in 1-800 CONTACTS headquarters to reinforce a customer-centric culture.

We believe we compete favorably across these factors. However, some of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing budgets and established marketing relationships, access to larger customer bases and significantly greater resources for the development of their offerings. Moreover, because our market is new and rapidly developing, it is possible that new entrants, especially those with substantial resources, more efficient operating models, more rapid technology and content development cycles or lower marketing costs, could introduce new products and services that disrupt our market and better address the needs of our customers and potential customers. See the section titled “Risk Factors— The software category in which we participate is new and rapidly changing, and if we do not compete effectively, our business, results of operations, and financial condition could be harmed ” for additional information.

copyright, trademark, trade secret and other intellectual property protection may not be available or may be limited in foreign countries. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Further, many companies in the communications and technology industries own large numbers of patents, copyrights and trademarks and may threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties. See the section titled “Risk Factors— We may be sued by third parties for alleged infringement or misappropriation of their proprietary rights ” for additional information.

Our corporate headquarters is located in Provo, Utah, and consists of approximately 165,000 square feet of space pursuant to a lease that expires in 2025. Our second largest office is in Seattle, Washington, and consists of approximately 45,000 square feet of space pursuant to a lease that expires in 2021. We maintain additional offices in multiple locations in the United States and internationally in Australia, Canada, France, Germany, Ireland, Japan, Poland, Singapore, and the United Kingdom. We lease all of our facilities, except that we own one office building in Provo, Utah consisting of approximately 39,000 square feet. We intend to procure additional space in the future as we continue to add employees and expand geographically. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Murray J. Demo . Mr. Demo has served as a member of our board of directors since February 2017. Since January 2018, Mr. Demo has served as Executive Vice President and Chief Financial Officer of Rubrik, Inc., a cloud data management company. From October 2015 to January 2018, Mr. Demo served as Chief Financial Officer of Atlassian Corporation PLC, a team collaboration software company. From 2009 to 2012, Mr. Murray served as Executive Vice President and Chief Financial Officer of Dolby Laboratories, an entertainment technology company. From May 2012 to November 2015, Mr. Demo served on the board of directors of Xoom Corporation. From December 2011 to October 2015, Mr. Demo served on the board of directors of Atlassian. Since 2005, Mr. Demo has served as a member of the board of directors of Citrix Systems, Inc. Mr. Demo holds a B.A. in Business Economics from the University of California, Santa Barbara, and an M.B.A. from Golden Gate University.

Jeffrey Lieberman. Mr. Lieberman has served as a member of our board of directors since September 2014. Since 1998, Mr. Lieberman has held various roles at Insight Venture Management, LLC, a private equity and venture capital firm, where he currently serves as Managing Director. Mr. Lieberman served as a member of the board of directors of Shutterstock, Inc., a stock photography and media provider, from June 2007 to December 2016 and Cvent, Inc., a meetings management technology company, from July 2011 to November 2016. Since September 2012, Mr. Lieberman has served as a member of the board of directors of Mimecast Ltd., a cloud-based email management company. Mr. Lieberman also currently serves on the board of directors of several private companies. Mr. Lieberman holds a B.A. in Economics and a B.S. in Systems Engineering from the University of Pennsylvania.

Kimball Malone Scott . Ms. Scott has served as an advisor to our company since May 2013 and a member of our board of directors since May 2016. Ms. Scott is the author of Radical Candor, a book published in March 2017. Since November 2017, Ms. Scott has served as the co-founder of Radical Candor LLC. From January 2016 to June 2017, Ms. Scott served as the Chief Executive Officer and co-founder of Candor, Inc. From March 2010 to December 2012, Ms. Scott was a faculty member at Apple University where she developed and taught a management course to Apple's top leaders. From June 2004 to March 2010, Ms. Scott was an executive at Google where she led online sales and operations for AdSense, YouTube, and DoubleClick. Ms. Scott has served as a CEO coach and advisor for Dropbox, Inc., Twitter, Inc., Square, Inc., and several private technology companies. Ms. Scott holds a B.A. in Slavic Languages and Literature from Princeton University and an M.B.A. from Harvard Business School.

Pursuant to our current certificate of incorporation and amended and restated voting agreement, (i) holders of Series B-1 redeemable convertible preferred stock are entitled to elect two directors, one of which shall be nominated by Accel Growth Fund II L.P., or Accel, and one of which shall be nominated by Sequoia Capital U.S. Growth Fund V, L.P., or Sequoia Capital, (ii) holders of Series A-1, Series A-2 and Series A-3 redeemable convertible preferred stock are entitled to elect six directors, (iii) holders of Series B-2 and Series B-4 redeemable convertible preferred stock are entitled to elect one director, to be nominated by Insight Venture Partners VIII, L.P., or Insight Venture Partners, and (iv) certain holders of preferred stock and common stock, voting together, are entitled to elect the remaining directors who shall be approved by the other members of the Board. Accordingly, our current directors were elected as follows:

Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has determined that Messrs. Demo, Lieberman, Schreier, Sweeney and Thompson and Ms. Scott do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the listing standards of Nasdaq. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”

any compensation, make any equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2017. However, directors may be reimbursed for travel, food, lodging and other expenses directly related to their activities as directors. Non-employee directors affiliated with Accel, Sequoia Capital, and Insight Venture Partners, including Messrs. Sweeney, Schreier, and Lieberman, did not receive compensation from us for their service as directors. In addition, directors who also serve as employees receive no additional compensation for their service as directors. Accordingly, during the fiscal year ended December 31, 2017, Mr. Ryan Smith, our Chief Executive Officer, and Mr. Jared Smith, our President, were members of our board of directors, as well as employees, and thus received no additional compensation for their service as directors. Additionally, during the fiscal year ended December 31, 2017, Mr. Scott Smith, a member of our board of directors, received no additional compensation for his service as a director. See the section titled “Executive Compensation” for more information about Mr. Ryan Smith’s compensation for the fiscal year ended December 31, 2017.

Our policy will provide that, on the date of each of our annual meetings of stockholders following the completion of this offering, each non-employee director who is re-elected to or is continuing on our board of directors after the annual meeting will be granted a restricted stock unit award having an aggregate grant date fair value of $185,000, or the Annual Grant. In addition, upon initial election to our board of directors, each new non-employee director will be granted a prorated Annual Grant, or the Initial Grant. The Initial Grant and Annual Grant will vest in full on the earlier of (i) the anniversary of the grant date or (ii) our next annual meeting of stockholders, subject to continued service as a director through the applicable vesting date. The Initial Grant and the Annual Grant will vest in full upon a Sale Event, as defined in the 2018 Plan.

In September 2018, the Company’s board of directors approved co-founder equity grants to Messrs. Ryan Smith and Jared Smith. These are the first equity grants offered to the founders in the history of the company. The grants issued are a mix of time-based grants and performance grants based upon the future success of the company. The grant includes RSUs with respect to 11,250,000 shares of Class B common stock in the aggregate, or, collectively, the Founder Grants, of which 9.0 million RSUs were granted to Mr. Ryan Smith, our co-founder and Chief Executive Officer, and 2.25 million RSUs were granted to Mr. Jared Smith, our co-founder and President. Subject to satisfaction of a liquidity-based vesting condition, 50 percent of the Founder Grants vest upon the satisfaction of a service condition, or the Founder Time Grants, and 50 percent of the Founder Grants vest upon the satisfaction of a service condition and achievement of certain stock price goals, or the Founder Performance Grants, each as described below. The liquidity-based vesting condition for each Founder Grant is the earlier to occur of (i) a Sale Event (as defined in our 2014 Plan) or (ii) the consummation of our initial public offering, which will be satisfied upon the effectiveness of this offering.

In September 2018, the Company’s board of directors approved an RSU award to Mr. Faugno with respect to 441,750 shares of Class B common stock. If this offering is completed, the RSU award will first begin vesting (subject to a continuing service condition) on January 1, 2022 as to 12.5% of the award, and in seven equal quarterly installments of 12.5% of the award thereafter. In October 2018, the Company’s board of directors also approved an option award to Mr. Faugno with respect to 331,312 shares of Class B common stock. The option award will first begin vesting (subject to a continuing service condition) in 48 equal monthly installments on October 1, 2018. In the case of a Sale Event, if the awards are not assumed, continued or otherwise substituted, they will vest in full. If the awards are assumed, continued, or otherwise substituted in a Sale Event, and if Mr. Faugno’s employment is terminated without Cause or Mr. Faugno resigns for Good Reason (in each case, as defined in Mr. Faugno’s offer letter) on or within 12 months following such Sale Event, then the awards will vest in full. If the awards are assumed, continued or otherwise substituted in a Sale Event, and Mr. Faugno’s employment is terminated without Cause or he resigns for Good Reason at any time that is either (1) more than 12 months after a Sale Event or (2) after both Ryan Smith and Jared Smith cease to be in senior executive positions with the Company, then, 50% of the unvested portions of the awards will vest. The foregoing acceleration terms, or the Faugno Acceleration Terms, also apply to Mr. Faugno’s equity awards that were granted to him on November 15, 2017 in connection with his joining the Company.

Option Awards⁽¹⁾

Stock Awards⁽¹⁾⁽²⁾

Name

Grant Date

Vesting Commencement Date

Number of

securities

underlying

unexercised

options

(#)

exercisable

Number of

securities

underlying

unexercised

options

(#)

unexercisable

Option

exercise

price

($)

Option

expiration

date

Equity incentive plan award: Number of unearned units that have not vested (#)

Equity incentive plan award: Market or payout value of unearned units that have not vested

($)

Ryan Smith

—

Chief Executive Officer

David Faugno

11/15/2017

10/31/2017

—

515,000

12.92

11/15/2027⁽³⁾

Chief Financial Officer

11/15/2017

10/31/2017

825,000⁽⁴⁾

10,972,500⁽⁵⁾

Zig Serafin

10/27/2016

10/18/2016

—

2,925,000⁽⁶⁾

38,902,500⁽⁵⁾

Chief Operating Officer

10/27/2016

10/18/2016

156,000⁽⁷⁾

2,074,800⁽⁵⁾

On September 28, 2016, we entered into an offer letter with Mr. Serafin, who currently serves as our Chief Operating Officer. The offer letter provided for Mr. Serafin’s at will employment and set forth his initial annual base salary and target bonus, as well as his eligibility to participate in our benefit plans generally. Mr. Serafin also received a $200,000 signing bonus in the year of his hire, which is subject to clawback in the event he is terminated by us for Cause or resigns without Good Reason (each, as defined in his offer letter) during the first two years of his employment. Mr. Serafin’s offer letter also provided that he was eligible to receive two RSU awards representing 2,925,000 and 156,000 shares of Class B common stock. In addition, his offer letter provides for the payment of a cash retention bonus of $1,050,000, payable at the earlier of the 4.5 year anniversary of his start date or the effective date of an S-1 filing, in each case, subject to his continued employment with us. Such cash retention bonus may be payable earlier upon certain qualifying terminations. We expect that this cash retention bonus will be paid to Mr. Serafin upon consummation of this offering. In addition, Mr. Serafin’s offer letter provides that if his employment is terminated by us other than for Cause or he resigns for Good Reason, then subject to the execution of a release of claims in favor of the Company, he will be entitled to receive cash severance in an amount equal to six months of his monthly salary. Mr. Serafin’s offer letter also provided him with a loan in the amount of $1 million, which is further described under “Certain Relationships and Related Party Transactions” below.

Authorized Shares. We will initially reserve 20,000,000 shares of our Class B common stock for the issuance of awards under the 2018 Plan, or the Initial Limit. The 2018 Plan will provide that the number of shares reserved and available for issuance under the 2018 Plan will automatically increase each January 1, beginning on January 1, 2019, and ending on (and including) January 1, 2028 by 5% of the outstanding number of shares of our Class B and Class A common stock on the immediately preceding December 31 or such lesser number of shares as determined by our compensation committee, which increase is referred to as the Annual Increase. This number will be subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. The shares we issue under the 2018 Plan will be authorized but unissued shares or shares that we reacquire. The shares of Class B common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated, other than by exercise, under the 2018 Plan and the 2014 Plan will be added back to the shares of Class B common stock available for issuance under the 2018 Plan. The maximum number of shares that may be issued as incentive stock options may not exceed the sum of the Initial Limit plus the lesser of the amount added to the share reserve pursuant to the Annual Increase each year or 20,000,000 shares, if lower, for each year during which the Annual Increase applies. Accordingly, the maximum number of shares that may be issued as incentive stock options may not exceed the sum of the Initial Limit plus 20,000,000 shares. The value of all awards issued under the 2018 Plan and all other cash compensation paid by us to any non-employee director in any calendar year cannot exceed $1,000,000.

Sale Event. The 2018 Plan will provide that upon the effectiveness of a “sale event,” as defined in the 2018 Plan, an acquirer or successor entity may assume, continue or substitute for the outstanding awards under the 2018 Plan. To the extent that awards granted under the 2018 Plan are not assumed or continued or substituted by the successor entity, all awards granted under the 2018 Plan shall terminate. In such case, except as may be otherwise provided in the relevant award agreement, all options and stock appreciation rights with time-based vesting,conditions or restrictions that are not vested and/or exercisable immediately prior to the sale event will become fully vested and exercisable as of the sale event, all other awards with time-based vesting, conditions or restrictions will become fully vested and nonforfeitable as of the sale event, and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with the sale event in the plan administrator’s discretion or to the extent specified in the relevant award agreement. In the event of such termination, individuals holding options and stock appreciation rights may be permitted to exercise such options and stock appreciation rights (to the extent exercisable) prior to the sale event or alternatively, we may make or provide for a payment to participants holding exercisable options and stock appreciation rights equal to the difference between the per share consideration payable to stockholders in the sale event and the exercise price of the options or stock appreciation rights. The Company may also elect to provide for payment in cash or in kind to holders of other awards equal to the per share consideration payable to stockholders in the sale event multiplied by the number of shares subject to the stock awards.

Options. Stock options have been granted under our 2014 Plan. The exercise price per share of all options must have equaled at least 100% of the fair market value per share of our Class B common stock on the date of grant. The term of an incentive stock option may not have exceeded 10 years. An incentive stock option granted to a participant who owns more than 10% of the total combined voting power of all classes of our stock on the date of grant, or any parent or subsidiary corporations, may not have had a term in excess of five years and must have an exercise price of at least 110% of the fair market value per share of our Class B common stock on the date of grant. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or certain other property or other consideration acceptable to the administrator. After a participant’s termination of service, the participant generally may exercise his or her options, to the extent vested as of such date of termination, for 3 months after termination or such longer period of time as specified in the applicable option agreement. If termination is due to death or disability, the option generally will remain exercisable, to the extent vested as of such date of termination, until the 12-month anniversary of such termination. However, in no event may an option be exercised later than the expiration of its term.

Change in Control; Dissolution or Liquidation. The 2014 Plan provides that, upon the consummation of a Sale Event, unless provision is made in connection with the Sale Event for the assumption or continuation of the awards by the successor entity or substitution of the awards with new awards of the successor entity, with appropriate adjustment, the 2014 Plan and all outstanding and unexercised options and other awards issued thereunder will terminate upon the effective time of the Sale Event. In the event of such termination, each option holder shall be permitted, within a specified period prior to the Sale Event as specified by the administrator, to exercise all exercisable options or all options that will become exercisable as of the effective time of the Sale Event, as further described in the 2014 Plan. If shares of unvested restricted stock are forfeited, the shares shall be repurchased from the holder at a price per share equal to the original per share purchase price paid for such shares, subject to adjustments provided in the 2014 Plan. In our discretion, (i) we may make or provide for cash payment to holders of options equal to the difference between (x) the per share cash consideration in the Sale Event multiplied by the number of shares subject to outstanding options being cancelled, and (y) the aggregate exercise price to the holders of all vested and exercisable options and (ii) make or provide for cash payment to holders of restricted stock and RSUs the per share cash consideration in the Sale Event multiplied by the number of shares of restricted stock or RSUs being cancelled. For purposes of the 2014 Plan, a “Sale Event” shall mean the consummation of (i) the dissolution or liquidation of the Company, (ii) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (iii) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power immediately

Our 2018 Employee Stock Purchase Plan, or ESPP, has been adopted by our board of directors and is expected to be approved by our stockholders and will become effective the day before the date that the registration statement of which this prospectus is part is declared effective by the SEC. Our compensation committee administers the ESPP. The ESPP will initially reserve and authorize the issuance of up to a total of 3,750,000 shares of Class B common stock to participating employees. The ESPP will provide that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019 and ending on (and including) January 1, 2028 by the lesser of 3,750,000 shares of our Class B common stock, 1% of the outstanding number of shares of our Class B and Class A common stock on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee. This number will be subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.

We will make one or more offerings, consisting of one or more purchase periods, each year to our employees to purchase shares under the ESPP. The first offering, or the Initial Offering, will begin on the effective date of the registration statement of which this prospectus is part and, unless otherwise determined by the administrator of the ESPP, will end on November 30, 2020, and the next two offerings will commence on the first trading day on or following each of June 1, 2019 and December 1, 2019 and will end on November 30, 2020. Thereafter, unless otherwise determined by the administrator of the ESPP, offerings will commence on the first trading day on or following each June 1 and December 1 and will end on the last trading day on or before November 30 or May 31, respectively. Unless otherwise determined by the administrator of the ESPP, each offering will be divided into equal six-month purchase periods, except that the first purchase period in the Initial Offering will commence on the registration date and end on the last trading day on or before May 31, 2019. Each eligible employee as of the effective date of the registration statement for the Initial Offering will be deemed to be a participant in the ESPP at that time and must authorize payroll deductions or other contributions by submitting an enrollment form by the deadline specified by the plan administrator. Each eligible employee may elect to participate in any subsequent offering by submitting an enrollment form at least 15 business days before the relevant offering date.

Each employee who is a participant in the ESPP may purchase shares by authorizing contributions of up to 20% of his or her compensation during a purchase period. Unless the participating employee has previously withdrawn from the offering, his or her accumulated contributions will be used to purchase shares on the last business day of the purchase period at a price equal to 85% of the fair market value of the shares on the first business day of the offering period (which, for purposes of the Initial Offering, will be equal to our initial public offering price) or the last business day of the purchase period, whichever is lower, provided that no more than a number of shares of Class B common stock determined by dividing $15,000 by the fair market value of the shares on the first business day of the offering period (or a lesser number as established by the plan administrator in advance of the purchase period) may be purchased by any one employee during each purchase period. Under applicable tax rules, an employee may purchase no more than $25,000 worth of shares of Class B common stock, valued at the start of the offering period, under the ESPP for each calendar year in which a purchase right is outstanding.

Our compensation committee may select corporate performance goals from among, but shall not be limited to, the following: achievement of billings, including subscription, Research on Demand, and professional services and other; renewal rate; achievement of cash flow (including, but not limited to, operating cash flow and free cash flow); research and development, earnings before interest, taxes, depreciation and amortization; net income (loss) (either before or after interest, taxes, depreciation and/or amortization); changes in the market price of our common stock; acquisitions or strategic transactions, including licenses, collaborations, joint ventures or promotion arrangements; operating income (loss); total stockholder returns; productivity; expense efficiency; margins; operating efficiency; working capital; earnings (loss) per share of our common stock; bookings, new bookings or renewals; sales or market shares; corporate revenue; net retention rate; and/or net annual recurring revenue, any of which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of growth, (C) compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as compared to applicable market indices, and/or (E) measured on a pre-tax or post-tax basis (if applicable).

Each executive officer who is selected to participate in the Bonus Plan will have a target bonus opportunity set for each performance period. The bonus formulas will be adopted in each performance period by the compensation committee and communicated to each executive. The corporate performance goals will be measured at the end of each performance period as the compensation committee determines. If the corporate performance goals and/or individual performance objectives are met, payments will be made as soon as practicable following the end of each performance period. Subject to the rights contained in any agreement between the executive officer and us, an executive officer must be employed by us on the bonus payment date to be eligible to receive a bonus payment. The Bonus Plan also permits the compensation committee to approve additional bonuses to executive officers in its sole discretion and provides the compensation committee with discretion to adjust the size of the award as it deems appropriate to account for unforeseen factors beyond management’s control that affected corporate performance.

In April 2017, we agreed to waive certain transfer restrictions in connection with a sale and transfer of 239,952 shares of our outstanding Series A-1 redeemable convertible preferred stock, 99,993 shares of our outstanding Series A-3 redeemable convertible preferred stock, and 141,431 shares of our outstanding Class B common stock from certain holders of our capital stock to certain other holders of our capital stock at the Preferred Share Price, for a total aggregate purchase price of approximately $6.0 million, which series of transactions we refer to as the Secondary Sale. The following table summarizes purchases of our Series A-1 redeemable convertible preferred stock, our Series A-3 redeemable convertible preferred stock, and our Class B common stock by related persons in the Secondary Sale. An entity affiliated with R. Duff Thompson, the chairman of our board of directors, sold 99,993 shares of our Series A-3 redeemable convertible preferred stock in the Secondary Sale.

In addition, we have adopted amended and restated bylaws, which will become effective immediately prior to the completion of this offering, and which will provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise. Our amended and restated bylaws are expected to provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact that he or she is or was one of our employees or agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Our amended and restated bylaws will also provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to limited exceptions.

The limitation of liability and indemnification provisions that are expected to be included in our amended and restated certificate of incorporation, amended and restated bylaws and in indemnification agreements that we have entered into or will enter into with our directors and executive officers may discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions. At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

Following the completion of this offering, our audit committee will have the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. Upon completion of this offering, our policy regarding transactions between us and related persons will provide that a related person is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our Class A-1, Class A-2, and Class B common stock, in each case since the beginning of the most recently completed year, and any of their immediate family members. Our audit committee charter that will be in effect upon completion of this offering will provide that our audit committee shall review and approve or disapprove any related party transactions.

We have based our calculation of the percentage of beneficial ownership prior to this offering on 81,636,234 shares of our Class A-1 common stock, 101,395,607 shares of our Class A-2 common stock and 12,385,682 shares of our Class B common stock outstanding as of September 30, 2018 , assuming (i) the automatic conversion of all outstanding shares of our Series A-1 and Series A-2 redeemable convertible preferred stock into our Class A-2 common stock immediately prior to the completion of this offering, as if such conversion had occurred as of September 30, 2018, (ii) the automatic conversion of all outstanding shares of our Series A-3 redeemable convertible preferred stock and Series B redeemable convertible preferred stock into our Class A-1 common stock immediately prior to the completion of this offering, as if such conversion had occurred as of September 30, 2018 , and (iii) the vesting and settlement of all outstanding RSUs for which the service-based vesting would be satisfied as of September 30, 2018 , assuming the performance vesting condition had been achieved as of such date, before giving effect to shares withheld to satisfy the associated withholding tax obligations.

We have based our calculation of the percentage of beneficial ownership after this offering on 81,636,234 shares of our Class A-1 common stock, 101,395,607 shares of our Class A-2 common stock and shares of our Class B common stock outstanding immediately after the completion of this offering, assuming that the underwriters will not exercise their over-allotment option in full and assuming the issuance of up to shares of Class B common stock at the closing of this offering on the vesting and settlement of certain RSUs subject to a performance condition in connection with the completion of this offering. We have deemed shares of our capital stock subject to stock options that are currently exercisable or exercisable within 60 days of September 30, 2018 , to be outstanding and to be beneficially owned by the person holding the stock option for the purpose of computing the percentage ownership of that person. We have deemed shares of our Class B common stock subject to RSUs for which the service condition has been satisfied or would be satisfied within 60 days of September 30, 2018 to be outstanding and to be beneficially owned by the person holding the RSUs for the purpose of computing the percentage ownership of that person. In addition, for RSUs that contain a vesting condition that is contingent upon completion of this offering, we have assumed that such condition has been met. However, we did not deem these shares subject to stock options or restricted stock units outstanding for the purpose of computing the percentage ownership of any other person.



	Beneficial Ownership Before the Offering											Beneficial Ownership After the Offering
	Class A-1 Common Stock			Class A-2 Common Stock			Class B Common Stock			Total Voting Power Before the Offering		Class A-1 Common Stock		Class A-2 Common Stock		Class B Common Stock		Total Voting Power After the Offering
Name of Beneficial Owner	Shares	%		Shares	%		Shares	%		%		Shares	%	Shares	%	Shares	%	%
Directors and Named Executive Officers:
Ryan Smith⁽¹⁾	—	*		88,823,418	87.6	%	—	*		48.2	%
Jared Smith⁽¹⁾	—	*		88,823,418	87.6	%	—	*		48.2	%
David Faugno⁽²⁾	—	*		—	*		335,000	2.6%		*
Zig Serafin⁽³⁾	—	*		—	*		1,131,000	8.4	%	*
Scott Smith⁽¹⁾	—	*		88,823,418	87.6	%	—	*		48.2	%
Murray Demo⁽⁴⁾	—	*		—	*		57,500	*		*
Jeffrey Lieberman⁽⁵⁾	29,208,172	35.8	%	143,974	*		745,805	6.0	%	16.0	%
R. Bryan Schreier⁽⁶⁾	—	*		—	*		—	*		*
Kimball Malone Scott⁽⁷⁾	—	*		—	*		190,000	1.5	%	*
Ryan Sweeney⁽⁸⁾	31,475,690	38.6	%	95,978	*		497,207	4.0	%	17.2	%
R. Duff Thompson⁽⁹⁾	1,300,000	1.6	%	—	*		—	*		*
All directors and executive officers as a group (12 persons)⁽¹⁰⁾	61,983,862	75.9	%	89,063,370	87.8	%	3,871,512	26.6	%	82.2	%
5% Stockholders:
Grandview Holdings LLC⁽¹¹⁾	—	*		88,823,418	87.6	%	—	*		48.2	%
Entities affiliated with Accel⁽⁸⁾	31,475,690	38.6	%	95,978	*		497,207	4.0	%	17.2	%
Entities affiliated with Insight Venture Partners⁽⁵⁾	29,208,172	35.8	%	143,974	*		745,805	6.0	%	16.0	%
Entities affiliated with Sequoia Capital⁽¹²⁾	19,652,372	24.1	%	—	*		—	*		10.7	%

Class B common stock held by Insight Venture Partners (Delaware) VIII, L.P., (iv) 281,081 shares of Class A-1 common stock, 774 shares of Class A-2 common stock and 4,009 shares of Class B common stock held by Insight Venture Partners VIII (Co-Investors), L.P., (v) 2,356,517 shares of Class A-1 common stock, 45,645 shares of Class A-2 common stock and 236,447 shares of Class B common stock held by Insight Venture Partners IX, L.P., (vi) 1,170,894 shares of Class A-1 common stock, 22,680 shares of Class A-2 common stock and 117,485 shares of Class B common stock held by Insight Venture Partners (Cayman) IX, L.P., (vii) 249,672 shares of Class A-1 common stock, 4,836 shares of Class A-2 common stock and 25,051 shares of Class B common stock held by Insight Venture Partners (Delaware) IX, L.P., (viii) 47,036 shares of Class A-1 common stock, 911 shares of Class A-2 common stock and 4,719 shares of Class B common stock held by Insight Venture Partners IX (Co-Investors), L.P., (ix) 7,363,118 shares of Class A-1 common stock, 20,276 shares of Class A-2 common stock and 105,036 shares of Class B common stock held by Insight Venture Partners Coinvestment Fund III, L.P., and (x) 5,328,909 shares of Class A-1 common stock, 14,675 shares of Class A-2 common stock and 76,017 shares of Class B common stock held by Insight Venture Partners Coinvestment Fund (Delaware) III, L.P. The general partner of Insight Venture Partners VIII, L.P., Insight Venture Partners (Cayman) VIII, L.P., Insight Venture Partners (Delaware) VIII, L.P., and Insight Venture Partners VIII (Co-Investors), L.P. (collectively, “Fund VIII”) is Insight Venture Associates VIII, L.P. The general partner of Insight Venture Associates VIII, L.P. is Insight Venture Associates VIII, Ltd., the sole shareholder of which is Insight Holdings Group, LLC. The general partner of Insight Venture Partners IX, L.P., Insight Venture Partners (Cayman) IX, L.P., Insight Venture Partners (Delaware) IX, L.P., and Insight Venture Partners IX (Co-Investors), L.P. (collectively, “Fund IX”) is Insight Venture Associates IX, L.P. The general partner of Insight Venture Associates IX, L.P. is Insight Venture Associates IX, Ltd., the sole shareholder of which is Insight Holdings Group, LLC. The general partner of Insight Venture Partners Coinvestment Fund III, L.P. and Insight Venture Partners Coinvestment Fund (Delaware) III, L.P. (collectively, “Coinvestment Fund III”) is Insight Venture Associates Coinvestment III, L.P. The general partner of Insight Venture Associates Coinvestment III, L.P. is Insight Venture Associates Coinvestment III, Ltd., the sole shareholder of which is Insight Holdings Group, LLC. Jeffrey Horing, Deven Parekh, Peter Sobiloff, Michael Triplett, and Jeffrey Lieberman are the members of the board of managers of Insight Holdings Group, LLC and may be deemed to have shared voting and dispositive power over the shares held by Fund VIII, Fund IX and Coinvestment Fund III. The principal business address for all entities and individuals affiliated with Insight Venture Partners is c/o Insight Venture Partners, 1114 Avenue of the Americas, 36th Floor, New York, NY, 10036.

The following description summarizes certain important terms of our capital stock, as they are expected to be in effect immediately prior to the completion of this offering. We have adopted an amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the completion of this offering, and this description summarizes the provisions that are expected to be included in such documents. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description of the matters set forth in this section titled “Description of Capital Stock,” you should refer to our amended and restated certificate of incorporation, amended and restated bylaws, and amended and restated investors’ rights agreement, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law. Immediately following the completion of this offering, our authorized capital stock will consist of 1,383,031,841 shares of capital stock, $0.0001 par value per share, of which:

Assuming (i) the conversion of all outstanding shares of our preferred stock into shares of our Class A-1 and Class A-2 common stock, which will occur immediately prior to the completion of this offering and (ii) the net issuance of up to shares of Class B common stock on the vesting and settlement of certain outstanding RSUs subject to a performance condition for which the service-based vesting condition was satisfied as of September 30, 2018 , there were shares of our Class B common stock outstanding held by stockholders of record, 81,636,234 sha res of our Class A-1 common stock outstanding held by 77 stockholders of record, 101,395,607 shares of our Class A-2 common stock outstanding held by 22 stockholders of record and no shares of our preferred stock outstanding . Our board of directors is authorized, without stockholder approval except as required by the listing standards of Nasdaq, to issue additional shares of our capital stock.

Holders of our Class B common stock are entitled to one vote for each share of Class B common stock held on all matters submitted to a vote of stockholders and holders of our Class A-1 and Class A-2 common stock are entitled to 10 votes for each share of Class A-1 and Class A-2 common stock held on all matters submitted to a vote of stockholders. The holders of Class A-2 common stock also have special voting rights which become effective in the event that the total number of votes represented by all of the outstanding shares of our Class A-2 common stock would constitute less than 51% of the total voting power of all classes of our then-outstanding capital stock. In such a case, and for so long as the number of outstanding shares of Class A-2 common stock represents at least 10% of the total number of shares of all classes of our outstanding capital stock, the holders of our Class A-2 common stock will be entitled to a number of votes per share of their Class A-2 common stock as would cause the total number of votes of all outstanding shares of Class A-2 common stock to equal 51% of the total voting power of all of our then-outstanding shares of capital stock. Accordingly, in such event, the aggregate voting power of all outstanding shares of Class A-1 common stock and Class B common stock would be proportionately reduced.

Each outstanding share of Class A-1 and Class A-2 common stock is convertible at any time at the option of the holder into one share of Class B common stock. In addition, each share of Class A-1 and Class A-2 common stock will convert automatically into one share of Class B common stock upon any transfer, whether or not for value, which occurs after the closing of this offering, except for certain permitted transfers described in our amended and restated certificate of incorporation, including transfers to family members, trusts solely for the benefit of the stockholder or their family members, and partnerships, corporations, other entities exclusively owned by the stockholder or their family members, and any of Messrs. R. Smith, J. Smith, or S. Smith, or the Founders, or any Founder’s permitted transferees, or any other entity in which one or more of the Founders has sole dispositive power and exclusive voting control with respect to the shares of Class common stock held by such entity.

Each outstanding share of Class A-2 common stock will convert automatically into one share of Class B common stock on the date that the dispositive power and voting control over any shares of Class A-2 common stock then owned by Grandview Holdings, LLC is not held solely and exclusively by one or more of the Founders (whether as a result of the death or incapacity of one or more of the Founders or otherwise), other than pursuant to certain permitted transfers described in our amended and restated certificate of incorporation, or the Specified Event Conversion Date; provided, however, that any shares of Class A-2 common stock over which one or more of the Founders has or retains, directly or indirectly, sole dispositive power and exclusive voting control, will not so convert into Class B common stock and will remain outstanding as Class A-2 common stock following such Specified Event Conversion Date, subject to the other conversion provisions described in our amended and restated certificate of incorporation.

Our board of directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our Class A-1, Class A-2, and Class B common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of our company and might adversely affect the market price of our Class B common stock and the voting and other rights of the holders of our Class A-1, Class A-2, and Class B common stock. We have no current plan to issue any shares of preferred stock.

As of September 30, 2018 , we had outstanding RSUs of 35,023,755 shares of our Class B common stock under our equity compensation plans, which includes RSUs for an aggregate of 11,250,000 shares of our Class B common stock that were granted pursuant to the Founder Grants that will settle upon the future satisfaction of service conditions and the achievement of certain stock price goals following the completion of this offering. See “Executive Compensation—Founder Restricted Stock Unit Grants” for additional information. We also had outstanding RSUs of 22,050 shares of our Class B common stock outside of our equity compensation plans. Of that amount, up to shares of our Class B common stock will be issued at the closing of this offering upon the vesting and settlement of RSUs subject to a performance condition to be satisfied in connection with the completion of this offering. After September 30, 2018 , we issued RSUs for an aggregate of 2,144,473 shares of our Class B common stock under our 2014 Plan. We expect that up to shares of our Class B common stock may be sold in open market transactions within 180 days following the closing of this offering to generate enough proceeds to cover taxes that may become due as a result of the vesting and/or settlement of RSUs that are scheduled to vest and/or settle at, or in the 180 days following, the offering. Of these shares, the shares that are not sold to cover such taxes will remain subject to lock-up agreements with the underwriters. In addition, we expect that up to shares of our Class B common stock may be delivered to our employees and former employees a result of the vesting and/or settlement of RSUs that are scheduled to vest and/or settle at, or in the 180 days following, the offering . The actual number of these shares that may be issued by us in connection with outstanding RSUs will depend on a number of factors, including determinations by holders of our RSUs as to whether

After the completion of this offering, certain holders of our Class A-1, Class A-2 and Class B common stock will be entitled to rights with respect to the registration of their shares under the Securities Act. These registration rights are contained in our Amended and Restated Investors’ Rights Agreement, or IRA, dated as of March 31, 2017. We and certain holders of our Series A and Series B redeemable convertible preferred stock are parties to the IRA. The registration rights set forth in the IRA will expire five years following the completion of this offering, or, with respect to any particular stockholder, when such stockholder is able to sell all of its shares pursuant to Rule 144(b)(1)(i) of the Securities Act or holds one percent or less of our common stock and is able to sell all of its Registrable Securities, as defined in the IRA, pursuant to Rule 144 of the Securities Act during any 90-day period. We will pay the registration expenses (other than underwriting discounts, selling commissions and stock transfer taxes) of the holders of the shares registered pursuant to the registrations described below. In an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares such holders may include. We expect that our stockholders will waive their rights under the IRA (i) to notice of this offering and (ii) to include their registrable shares in this offering. In addition, in connection with this offering, we expect that each stockholder that has registration rights will agree not to sell or otherwise dispose of any securities without the prior written consent of either Morgan Stanley & Co. LLC or Goldman Sachs & Co. LLC, for a period of 180 days after the date of this prospectus, subject to certain terms and conditions and early release of certain holders in specified circumstances. See the section titled “Underwriters.”

After the completion of this offering, the holders of up to 183,031,841 shares of our Class A-1 and Class A-2 common stock will be entitled to certain demand registration rights. At any time beginning 180 days after the effective date of this offering, certain holders of at least 91,515,921 shares of Class A-1 and Class A-2 common stock then outstanding can request that we register for offer and sale the aggregate number Class B shares into which their Class A-1 and Class A-2 shares convert. We are obligated to effect only two such registrations. Such request for registration must cover securities with anticipated aggregate proceeds to us of at least $30,000,000. If we determine that it would be seriously detrimental to our stockholders to effect such a demand registration, we have the right to defer such registration, not more than once in any 12-month period, for a period of up to 90 days.

After the completion of this offering, if we propose to register the offer and sale of our Class B common stock under the Securities Act, the holders of up to 188,341,531 shares of our Class A-1, Class A-2 and Class B common stock will be entitled to certain “piggyback” registration rights, allowing the holders to include the aggregate number of Class B shares into which their Class A-1 and Class A-2 shares convert in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to (1) a demand registration, (2) a registration on Form S-3 or S-8 promulgated under the Securities Act or (4) a registration relating solely to employment benefit plans, the holders of these shares are entitled to notice of the registration and have the right, subject to certain limitations, to include the aggregate number of Class B shares into which their Class A-1 and Class A-2 shares convert in the registration.

After the completion of this offering, the holders of up to 183,031,841 shares of our Class A-1 and Class A-2 common stock will be entitled to certain Form S-3 registration rights. Certain holders of at least 91,515,921 shares of Class A-1 and Class A-2 common stock then outstanding may make a written request that we register the offer and sale of the aggregate number of Class B shares into which their Class A-1 and Class A-2 shares convert on a registration statement on Form S-3 if we are eligible to file a registration statement on Form S-3 so long as the request covers securities the anticipated aggregate public offering price of which, before payment of underwriting discounts and commissions, is at least $5,000,000. Upon completion of any such S-3 registration, each share of our Class A-1 and Class A-2 common stock so registered will automatically convert to Class B common stock. These stockholders may

To be in proper written form, a stockholder’s notice must set forth as to each matter of business the stockholder intends to bring before our annual meeting of stockholders: (1) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the Company’s books, of the stockholder proposing such business and any controlling stockholder or beneficial owner of stockholder’s shares, or a Stockholder Associated Person, (3) the class and number of our shares that are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to our securities, and a description of any other agreement, arrangement or understanding the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to our securities, (5) any material interest of the stockholder or a Stockholder Associated Person in such business, and (6) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the voting power of our voting shares required under applicable law to carry the proposal. In addition, to be in proper written form, a stockholder’s notice must be supplemented not later than ten days following the record date for the determination of stockholders entitled to notice of the meeting to disclose the information contained in clauses (3) and (4) above as of the record date.

To be in proper written form, a stockholder’s notice as it relates to director nominations at annual meetings, must set forth: as to each nominee whom the stockholder proposes to nominate for election or re-election as a director: (1) the name, age, business address, and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the information required to be provided pursuant to clauses (3) and (4) of the prior paragraph with respect to the nominee, (4) a description of all arrangements or understandings between or among any of the stockholder, each nominee, and/or any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder or relating to the nominee’s potential service on the board of directors, (5) a written statement executed by the nominee acknowledging that as a director of the Company, the nominee will owe a fiduciary duty under Delaware law with respect to the Company and its stockholders, and (6) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected). In addition, to be in proper written form, a stockholder’s notice must (i) provide, with respect to such stockholder, the information required to be provided pursuant to clauses (2) through (5) in the prior paragraph, and be supplemented not later than ten days following the record date for the determination of stockholders entitled to notice of the meeting to disclose the information contained in clauses (3) and (4) in the prior paragraph as of the record date (except that the references to “business” in such clauses shall instead refer to nominations of directors) and (ii) a statement whether either such stockholder will deliver a proxy statement and form of proxy to

Stockholder Action; Special Meeting of Stockholders. Our amended and restated certificate of incorporation will provide that before the first date on which, after giving effect to the vote per share provisions in our amended and restated certificate of incorporation, the total aggregate number of votes represented by all then-issued and outstanding shares of Class A-2 common stock constitute less than 51% of the total aggregate number of votes represented by all then-issued and outstanding shares of our capital stock, or the Written Consent Threshold Date, our stockholders may only take action by written consent if such action is first recommended or approved by our board of directors. Following the Written Consent Threshold Date, our stockholders will not be able to take action by written consent for any matter and may only take action at annual or special meetings. As a result, a holder controlling 66-2/3% of our capital stock would not be able to amend our amended and restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our amended and restated bylaws, unless previously approved by our board of directors. Our amended and restated bylaws will further provide that special meetings of our stockholders may be called only by our board of directors, the chairperson of our board of directors, our Chief Executive Officer, or our President (in the absence of a Chief Executive Officer), thus limiting the ability of a stockholder to call a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.

These provisions, including the tri-class structure of our common stock, are intended to preserve our existing founder control structure after completion of our initial public offering, facilitate our continued product innovation and the risk-taking that it requires, permit us to continue to prioritize our long-term goals rather than short-term results, enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in our control or

Prior to this offering, there has been no public market for our Class B common stock, and we cannot predict the effect, if any, that market sales of shares of our Class B common stock or the availability of shares of our Class B common stock for sale will have on the market price of our Class B common stock prevailing from time to time. Future sales of our Class B common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares of our Class B common stock will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our Class B common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Following the completion of this offering, based on the number of shares of our capital stock outstanding as of September 30, 2018 and the net issuance of shares of Class B common stock that will vest and be issued from the settlement of certain outstanding RSUs subject to a performance condition for which the service-based vesting condition was satisfied, we will have a total of shares of our Class B common stock outstanding, 81,636,234 shares of our Class A-1 common stock outstanding and 101,395,607 shares of our Class A-2 common stock outstanding. Of these outstanding shares, all shares of our Class B common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act, would only be able to be sold in compliance with the Rule 144 limitations described below.

The remaining outstanding shares of our Class A-1, Class A-2, and Class B common stock will be, and shares subject to stock options will be upon issuance, deemed “restricted securities” as defined in Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which rules are summarized below. All of our executive officers, directors and holders of substantially all of our capital stock and securities convertible into or exchangeable for our capital stock have entered into market standoff agreements with us and have entered into or will enter into lock-up agreements with the underwriters under which they have agreed or will agree, subject to specific exceptions, not to sell any of our stock for 180 days following the date of this prospectus. As a result of these agreements and the provisions of our IRA described above under the section titled “Description of Capital Stock—Registration Rights,” and subject to the provisions of Rule 144 or Rule 701, shares of our common stock will be available for sale in the public market as follows:

In general, under Rule 144 as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares of our common stock proposed to be sold for at least six months is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.

Rule 701 generally allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701. Moreover, all Rule 701 shares are subject to market standoff agreements with us or lock-up agreements with the underwriters as described above and under the section titled “Underwriters” and will not become eligible for sale until the expiration of those agreements.

In addition, this discussion does not address the tax treatment of partnerships (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) or other entities that are transparent for U.S. federal income tax purposes or persons who hold their Class B common stock through partnerships or other entities that are transparent for U.S. federal income tax purposes. In the case of a holder that is classified as a partnership for U.S. federal income tax purposes, the tax treatment of a person treated as a partner in such partnership for U.S. federal income tax purposes generally will depend on the status of the partner, the activities of the partner and the partnership and certain determinations made at the partner level. A person treated as a partner in a partnership or who holds their stock through another transparent entity should consult his, her or its own tax advisor regarding the tax consequences of the ownership and disposition of our Class B common stock through a partnership or other transparent entity, as applicable.

Legislation commonly referred to as the Foreign Account Tax Compliance Act and associated guidance, or collectively, FATCA, will generally impose a 30% withholding tax on any “withholdable payment” (as defined below) to a “foreign financial institution” (as defined in the Code), unless such institution enters into an agreement with the U.S. government to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which would include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States owners) or another applicable exception applies or such institution is compliant with applicable foreign law enacted in connection with an applicable intergovernmental agreement between the United States and a foreign jurisdiction. FATCA will also generally impose a 30% withholding tax on any “withholdable payment” (as defined below) to a foreign entity that is not a financial institution, unless such entity provides the withholding agent with a certification identifying the substantial U.S. owners of the entity (which generally includes any United States person who directly or indirectly owns more than 10% of the entity), if any, or another applicable exception applies or such entity is compliant with applicable foreign law enacted in connection with an applicable intergovernmental agreement between the United States and a foreign jurisdiction. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes.

The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of Class B common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of Class B common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of Class B common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below. The offering of the shares of Class B common stock by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of Class B common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of Class B common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of Class B common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of Class B common stock listed next to the names of all underwriters in the preceding table.

The restrictions described in the immediately preceding paragraph do not apply to our directors, officers and securityholders with respect to the (i) transfers of our common stock acquired in open market transactions after the completion of this offering provided that no filing under Section 16(a) of the Exchange Act or other public announcement would be required or voluntarily made; (ii) transfers of our common stock as bona fide gifts, by will, to an immediate family member or to certain trusts provided that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership would be required or voluntarily made; (iii) distributions of our common stock to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate, or to an entity controlled or managed by an affiliate provided that no filing under Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership would be required or voluntarily made; (iv) distributions of our common stock to the stockholders, partners or members of such holders provided that no filing under Section 16(a) of the Exchange Act would be required or voluntarily made; (v) (i) the receipt of shares of our common stock upon the settlement of RSUs or the transfer of shares of common stock to the Company upon a vesting or settlement event of RSUs (including by means of a “net settlement” or otherwise); (vi) (A) the receipt of shares of our common stock upon the exercise of stock

options or the exercise of warrants, or (B) the transfer of shares of our common stock to the Company upon the exercise of options or warrants on a “cashless” or “net exercise” basis; provided that in the case of clause (B), no filing under Section 16(a) of the Exchange Act or other public filing, report or announcement reporting a reduction in the aggregate beneficial ownership of shares of Common Stock shall be required or shall be voluntarily made within 30 days following the date of the final prospectus (vii) the establishment by such holders of trading plans under Rule 10b5-1 under the Exchange Act provided that such plan does not provide for the transfer of common stock during the restricted period; (viii) transfers of our common stock pursuant to a domestic order, divorce settlement; (ix) transfers of our common stock to us pursuant to (A) our right to repurchase common stock pursuant to an equity incentive plan described in this prospectus in connection with the termination of services of such holders provided that no filing under Section 16(a) of the Exchange Act would be required or voluntarily made within 75 days after such termination of services or (B) any right of first refusal we may have over such shares; (x) conversion of our outstanding convertible preferred stock into common stock in connection with the closing of this offering; (xi) any sales of up to shares of our common stock in the aggregate in open market transactions to generate such amount of net proceeds to such holders in an aggregate amount up to the total amount of taxes that become due by such holder as a result of the vesting and/or settlement of equity awards that are scheduled to vest and/or settle immediately prior to or during the restricted period, provided that no filing under Section 16(a) of the Exchange Act or other public filing, report or announcement reporting a reduction in the aggregate beneficial ownership of shares of Common Stock shall be required or shall be voluntarily made within 60 days following the date of the final prospectus; and (xii) transfers of our common stock pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction that is approved by our board of directors.

In order to facilitate the offering of the Class B common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Class B common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Class B common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of Class B common stock in the open market to stabilize the price of the Class B common stock. These activities may raise or maintain the market price of the Class B common stock above independent market levels or prevent or retard a decline in the market price of the Class B common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

At our request, the underwriters have reserved for sale, at the initial public offering price, up to 7% of the shares of our Class B common stock offered hereby for persons associated with us who have expressed an interest in purchasing our Class B common stock in this offering. None of our directors, executive officers, or employees will purchase shares of our Class B common stock in the directed share program. The number of shares of our Class B common stock available for sale to the general public in this offering will be reduced to the extent these persons purchase the reserved shares of our Class B common stock. Any reserved shares of our Class B common stock not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of our Class B common stock. Participants in the directed share program will not be subject to the lock-up restriction with the underwriters with respect to any shares of our Class B common stock purchased through the directed share program.

The shares of Class B common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland. Neither this document nor any other offering or marketing material relating to the offering, us, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

The shares of Class B common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (ii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares of Class B common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issuance, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of Class B common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares of Class B common stock may not be circulated or distributed, nor may the shares of Class B common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our Class B common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our Class B common stock, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.



							Pro forma stockholders' equity (deficit) as of September 30, 2018

	As of December 31,				As of September 30,
	2016		2017		2018
					(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	61,860	$	113,435	$	137,739
Accounts receivable, net of allowance	60,515		81,691		86,023
Deferred contract acquisition costs, net	7,440		10,801		13,644
Prepaid expenses and other current assets⁽¹⁾	10,290		16,797		13,422
Total current assets	140,105		222,724		250,828
Property and equipment, net	19,901		28,027		36,092
Goodwill	645		645		3,840
Intangible assets, net	1,439		1,212		6,646
Deferred contract acquisition costs, noncurrent, net	17,516		24,910		31,442
Other assets⁽¹⁾	1,094		2,819		5,469
Total assets	$	180,700	$	280,337	$	334,317
Liabilities, redeemable convertible preferred stock, and stockholders' deficit
Current liabilities:
Accounts payable⁽¹⁾	$	9,511	$	11,375	$	11,236
Accrued liabilities	16,098		21,510		27,149
Deferred tax liabilities, net	549		1,160		2,070
Deferred revenue	131,943		180,414		224,311
Total current liabilities	158,101		214,459		264,766
Deferred revenue, net of current portion	1,448		4,731		3,888
Other liabilities	4,097		4,135		5,900
Total liabilities	$	163,646	$	223,325	$	274,554
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock, $0.0001 par value, 180,607 shares authorized as of December 31, 2016, and 207,061 shares authorized as of December 31 2017, and September 30, 2018 (unaudited); 180,607 shares issued and outstanding as of December 31, 2016, and 183,032 shares issued and outstanding as of December 31, 2017, and September 30, 2018 (unaudited); no shares authorized, issued, and outstanding pro forma (unaudited)	99,762		129,609		129,609
Stockholders' deficit:



Common Stock, $0.0001 par value; Class A-1 common stock - no shares authorized, issued, or outstanding as of December 31, 2016, and 81,636 shares authorized and no shares issued and outstanding as of December 31, 2017 and September 30, 2018 (unaudited), and 81,636 shares authorized, issued, and outstanding pro forma (unaudited); Class A-2 common stock - no shares authorized, issued, or outstanding as of December 31, 2016, and 112,898 shares authorized and no shares issued and outstanding as of December 31, 2017 and September 30, 2018 (unaudited), and 101,396 shares authorized, issued, and outstanding pro forma (unaudited); Class B common stock - 196,500 shares authorized as of December 31, 2016, 215,971 shares authorized as of December 31, 2017, 229,471 shares authorized as of September 30, 2018 (unaudited); 2,770, 3,545, and 3,609 shares issued and outstanding as of December 31, 2016 and 2017, and September 30, 2018 (unaudited), respectively, and authorized, issued, and outstanding pro forma (unaudited)	1			1			1
Additional paid in capital	1,227			8,174			10,747
Accumulated other comprehensive income (loss)	(56		)	552			(765		)
Accumulated deficit	(83,880		)	(81,324		)	(79,829		)
Total stockholders' deficit	(82,708		)	(72,597		)	(69,846		)
Total liabilities, redeemable convertible preferred stock, and stockholders' deficit	$	180,700		$	280,337		$	334,317



	Year Ended December 31,					Nine Months Ended September 30,
	2016			2017		2017		2018
						(unaudited)
Revenue:
Subscription	$	142,525		$	213,274	$	151,699	$	215,533
Research on Demand	38,147			51,812		37,524		51,489
Professional services and other	9,931			24,817		17,856		22,544
Total revenue	190,603			289,903		207,079		289,566
Cost of revenue^(1)(2)(3):
Subscription	27,904			25,552		18,162		26,520
Research on Demand	21,322			26,639		19,585		22,237
Professional services and other	11,754			26,893		18,859		27,581
Total cost of revenue	60,980			79,084		56,606		76,338
Gross Profit	129,623			210,819		150,473		213,228
Operating expenses^(1)(2)(3):
Research and development	22,303			40,680		29,078		45,643
Sales and marketing	95,919			140,524		102,994		138,318
General and administrative	21,909			26,522		17,239		26,958
Total operating expenses	140,131			207,726		149,311		210,919
Operating income (loss)	(10,508		)	3,093		1,162		2,309
Other non-operating income (expense), net	(501		)	1,370		1,131		274
Income (loss) before income taxes	(11,009		)	4,463		2,293		2,583
Provision for income taxes	1,025			1,907		1,322		1,088
Net income (loss)	$	(12,034	)	$	2,556	$	971	$	1,495
Net income (loss) per share attributable to common stockholders, basic	$	(4.85	)	$	0.01	$	0.01	$	0.01
Net income (loss) per share attributable to common stockholders, diluted	$	(4.85	)	$	0.01	$	0.01	$	0.01
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, basic	2,482			2,889		2,801		3,597
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders, diluted	2,482			185,734		185,493		186,934
Pro forma net income per share attributable to common stockholders, basic (unaudited)
Pro forma net income per share attributable to common stockholders, diluted (unaudited)
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, basic (unaudited)
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, diluted (unaudited)



	Redeemable Convertible Preferred Stock					Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Shareholders' Deficit
	Shares		Amount			Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Shareholders' Deficit
Balance, January 1, 2016	180,607		$	99,762		2,113		$	—	$	395		$	77		$	(71,846	)	$	(71,374	)
Stock-based compensation	—		—			—		—		702			—			—			702
Issuance of common stock for Statwing Acquisition	—		—			35		—		130			—			—			130
Conversion of restricted stock to common stock	—		—			622		1		—			—			—			1
Net loss	—		—			—		—		—			—			(12,034		)	(12,034		)
Foreign currency translation adjustment	—		—			—		—		—			(133		)	—			(133		)
Balance, December 31, 2016	180,607		$	99,762		2,770		$	1	$	1,227		$	(56	)	$	(83,880	)	$	(82,708	)
Stock-based compensation	—		—			—		—		6,947			—			—			6,947
Conversion of restricted stock to common stock	—		—			775		—		—			—			—			—
Issuance of Series B-3 and B-5 preferred stock, net of issuance costs	12,527		154,844			—		—		—			—			—			—
Repurchase of Series A-1 and A-2 preferred stock	(10,102	)	(124,997		)	—		—		—			—			—			—
Net income	—		—			—		—		—			—			2,556			2,556
Foreign currency translation adjustment	—		—			—		—		—			608			—			608
Balance, December 31, 2017	183,032		$	129,609		3,545		$	1	$	8,174		$	552		$	(81,324	)	$	(72,597	)
Stock-based compensation (unaudited)	—		—			—		—		3,104			—			—			3,104
Conversion of restricted stock to common stock (unaudited)	—		—			104		—		—			—			—			—
Repurchase of Class B common stock (unaudited)						(40	)			(531		)							(531		)
Net income (unaudited)	—		—			—		—		—			—			1,495			1,495
Foreign currency translation adjustment (unaudited)	—		—			—		—		—			(1,317		)	—			(1,317		)
Balance, September 30, 2018 (unaudited)	183,032		$	129,609		3,609		$	1	$	10,747		$	(765	)	$	(79,829	)	$	(69,846	)



	Year Ended December 31,						Nine Months Ended September 30,
	2016			2017			2017			2018
							(unaudited)
Operating activities
Net income (loss)	$	(12,034	)	$	2,556		$	971		$	1,495
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	8,972			10,787			7,744			10,790
Stock-based compensation	702			6,947			6,518			3,104
Amortization of deferred contract acquisition costs	6,540			9,553			6,867			9,638
Deferred income taxes	223			611			587			929
Tax benefit from business combinations	(194		)	—			—			(828		)
Changes in assets and liabilities:
Accounts receivable, net	(24,927		)	(21,176		)	2,376			(4,332		)
Prepaid expenses and other current assets	(3,537		)	(6,662		)	682			3,472
Deferred contract acquisition costs, net	(13,063		)	(19,718		)	(14,689		)	(19,476		)
Other assets⁽¹⁾	195			(1,498		)	(3,624		)	20
Accounts payable	1,001			1,484			(1,099		)	(353		)
Accrued liabilities	5,251			5,095			1,484			5,186
Deferred revenue	47,461			51,753			28,350			43,054
Other liabilities	1,216			(114		)	(111		)	(190		)
Net cash provided by operating activities	17,806			39,618			36,056			52,509

Investing activities
Cash paid for intangible assets	—			—			—			(1,500		)
Cash paid for business combinations, net of cash acquired	(966		)	—			—			(7,016		)
Capital expenditures	(14,372		)	(18,272		)	(11,350		)	(16,388		)
Net cash used in investing activities	(15,338		)	(18,272		)	(11,350		)	(24,904		)

Financing activities
Proceeds from issuance of series B-3 and B-5 redeemable convertible preferred stock, net of issuance costs	—			154,844			154,846			—
Repurchase of series A-1 and A-2 redeemable convertible preferred stock	—			(124,997		)	(124,999		)	—
Deferred financing costs	(130		)	—			—			(2,414		)
Net cash provided by (used in) financing activities	(130		)	29,847			29,847			(2,414		)
Effect of exchange rate changes on cash and cash equivalents	(82		)	382			270			(887		)
Net increase in cash and cash equivalents	2,256			51,575			54,823			24,304

On January 1, 2017, the Company early adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company’s adoption of Topic 606 is discussed in detail below in Recently adopted accounting pronouncements. Topic 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, references to Topic 606 used herein refer to both Topic 606 and Subtopic 340-40. The Company adopted Topic 606 with retrospective application to the beginning of the earliest period presented.

On October 24, 2018, the Company amended its restated certificate of incorporation to effect a two-for-one reverse stock split of its common stock and redeemable convertible preferred stock. On the effective date of the reverse stock split, (1) each two shares of outstanding redeemable convertible preferred stock and common stock were reduced to one share of redeemable convertible preferred stock and common stock, respectively; (2) the number of shares of common stock issuable under each outstanding option to purchase common stock and issuable upon vesting under each restricted stock unit was proportionately reduced on a two-for-one basis; (3) the exercise price of each outstanding option to purchase common stock was proportionately increased on a two-for-one basis; and (4) corresponding adjustments in the per share conversion prices, dividend rates, and liquidation preferences of the convertible preferred stock were made. All of the share and per share information referenced throughout the consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect this reverse stock split.

The accompanying interim consolidated balance sheet as of September 30, 2018 , the consolidated statements of operations, comprehensive income (loss), and cash flows for the nine months ended September 30, 2017 and 2018 , and the consolidated statement of redeemable convertible preferred stock and stockholders’ deficit for the nine months ended September 30, 2018 and the related footnote disclosures are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with GAAP. The interim consolidated financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the unaudited interim consolidated financial statements include all adjustments necessary to state fairly our financial position as of September 30, 2018 , and the results of operations and cash flows for the nine months ended September 30, 2017 and 2018 . The financial data and the other information disclosed in these notes are unaudited. The results for the nine months ended September 30, 2018 are not necessarily indicative of the operating results expected for the full fiscal 2018 year or any future period.

As described in detail in Note 12 and “Stock-Based Compensation” below, the Company has granted two-tier restricted stock (“RSAs”) and two-tier restricted stock units (“RSUs”) that vest upon the satisfaction of both a service-based vesting condition and a liquidity event-related performance vesting condition, defined as the earlier of (i) an acquisition or change in control of the Company or (ii) upon the occurrence of an initial public offering by the Company. A change in control event and effective registration event are not deemed probable until consummated. At the time the performance vesting condition becomes probable, the Company will recognize the cumulative stock-based compensation expense for the two-tier RSAs and RSUs that have met their service-based vesting condition using the accelerated attribution method. Accordingly, the unaudited pro forma stockholder’s deficit information as of September 30, 2018 , gives effect to stock-based compensation expense of approximately $ 99.8 million associated with these awards using the accelerated attribution method. This pro forma adjustment related to stock-based compensation expense of approximately $ 99.8 million has been reflected as an increase to additional paid-in capital and accumulated deficit. The unaudited pro forma stockholders’ deficit gives effect to the assumed conversion of the two-tier RSAs and RSUs that had satisfied the service-based vesting condition and the performance vesting condition as of September 30, 2018 , and will convert into shares of Class B common stock, net of shares repurchased for tax withholding obligations.

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. The Company’s most significant estimates and judgments involve revenue recognition with respect to the determination of the standalone selling prices for the Company’s services, deferred contract acquisition costs, the period of benefit generated from deferred contract acquisition costs, valuation of the Company’s stock-based compensation, including the underlying deemed estimated fair value of the Company’s common stock, valuation of deferred income tax assets and liabilities, uncertain tax positions, contingencies, goodwill and intangible assets, and litigation. Actual results could differ from those estimates.

The Company generates revenue primarily from sales of subscriptions to access its XM^™ Platform, together with related support services to its customers. Arrangements with customers do not provide the customer with the right to take possession of the software operating the XM^™ Platform at any time. Instead, customers are granted continuous access to the XM^™ Platform over the contractual period. Access to our platform represents a series of distinct services as the Company continually provides access to, and fulfills its obligation to the end customer over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. Accordingly, the fixed consideration related to subscription revenue is generally recognized on a straight-line basis over the contract term, beginning on the date that the service is made available to the customer.

The Company bills in advance for annual contracts, and at times enters into non-cancelable multi-year deals. Non-cancelable multi-year deals typically include price escalations each year. The Company recognizes revenue on a straight-line basis over the non-cancelable term and accounts for the difference between straight-line revenue and annual invoice amounts as a contract asset. These current and noncurrent amounts of contract assets included in prepaid and other current assets and other assets were de minimis as of December 31, 2016 . The current and noncurrent portion of contract assets included in prepaid and other current assets and other assets as of December 31, 2017 were $0.1 million and $0.8 million, respectively. The current and noncurrent portion of contract assets included in prepaid and other current assets and other assets as of September 30, 2018 (unaudited) were $0.4 million and $1.3 million , respectively.



	Year Ended December 31,				Nine Months Ended September 30,
	2016		2017		2017		2018
					(unaudited)
Subscription revenue:
Revenue included in prior period deferred revenue	$	73,420	$	113,406	$	96,142	$	131,451
Revenue generated from same period billings	69,105		99,868		55,557		84,082
Total subscription revenue	$	142,525	$	213,274	$	151,699	$	215,533

Research on Demand revenue:
Revenue included in prior period deferred revenue	$	5,774	$	7,235	$	5,835	$	14,062
Revenue generated from same period billings	32,373		44,577		31,689		37,427
Total Research on Demand revenue	$	38,147	$	51,812	$	37,524	$	51,489

Professional services and other revenue:
Revenue included in prior period deferred revenue	$	4,301	$	12,285	$	10,306	$	13,343
Revenue generated from same period billings	5,630		12,532		7,550		9,201
Total professional services and other revenue	$	9,931	$	24,817	$	17,856	$	22,544

As discussed in detail in Note 12, the Company issues two types of RSAs, one-tier and two-tier. One-tier RSAs vests solely on a service-based condition. For these awards, the Company recognizes stock-based compensation expense on a straight-line basis over the vesting period. Two-tier RSAs contain both a service-based condition and performance condition, defined as the earlier of (i) an acquisition or change in control of the Company or (ii) upon the occurrence of an initial public offering by the Company. A change in control event and effective registration event are not deemed probable until consummated; accordingly, no expense is recorded related to two-tier RSAs until the performance condition becomes probable of occurring. Awards which contain both service-based and performance conditions are recognized using the accelerated attribution method once the performance condition is probable of occurring.

The Company considers the lack of payment for issues unrelated to credit risk to be variable consideration and estimates the impact to revenue and deferred revenue on a portfolio basis. This estimated allowance is based upon historical cancellation patterns due to lack of payment, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with problem accounts. The Company continuously monitors the adequacy of the allowance by comparing actual write offs against the estimated allowance and updates estimates as needed. Allowances are recorded and adjusted based upon historical patterns related to the timing of cancellations. Adjustments to the allowance are recorded in the consolidated balance sheets with an offsetting adjustment to deferred revenue and revenue in the consolidated statements of operations. Write-offs to accounts receivable in a period are recorded in the activity in the allowance for that period. The Company believes that its allowances are adequate to absorb any known or probable uncollectible amounts due to service cancellations or customer credit risk.

Deferred contract acquisition costs are amortized over an estimated period of benefit of five years. The period of benefit was estimated by considering factors such as estimated average customer life, the rate of technological change in the subscription service, and the impact of competition in its industry. As the Company’s average customer life significantly exceeded the rate of change in its technology, the Company concluded that the rate of change in the technology underlying the Company’s subscription service was the most significant factor in determining the period of benefit for which the asset relates. In evaluating the rate of change in the technology, the Company considered the competition in the industry, its commitment to continuous innovation, and the frequency of product, platform, and technology updates. The Company determined that the impact of competition in the industry is reflected in the period of benefit through the rate of technological change.

The Company capitalizes certain development costs incurred in connection with its internal-use software. These capitalized costs are primarily related to the software platforms that are hosted by the Company and accessed by its customers on a subscription basis. Costs incurred in the preliminary stages of development are expensed as incurred as research and development costs. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal-use software is amortized on a straight line basis over its estimated useful life of 24 months. The Company recognized amortization expenses of $5.3 million, $6.7 million, $5.8 million, and $6.2 million related to capitalized internal-use software for the years ended December 31, 2016 and 2017, and the nine months ended September 30, 2017 and 2018 (unaudited), respectively, within cost of subscription revenue.

The Company records goodwill when consideration paid in a purchase acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. The Company has determined that there is a single reporting unit for the purpose of goodwill impairment tests, which are performed annually on October 1^st or more frequently if certain indicators are present. For purposes of assessing the impairment of goodwill, the Company annually estimates the fair value of the reporting unit and compares this amount to the carrying value of the reporting unit. If the Company determines that the carrying value of the reporting unit exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds its fair value. There was no impairment of goodwill for the years ended December 31, 2016 and 2017.

Tradenames are amortized over 5 years into general and administrative expense. The tradenames’ remaining weighted average amortization period is 4.5 years as of September 30, 2018 (unaudited). Purchased license agreements are determined to have definite lives and are amortized on a straight line basis over their estimated remaining economic lives of 4 years. The purchased license agreements’ weighted average remaining amortization period is 3.6 years as of September 30, 2018 (unaudited). Amortization expense related to the license agreements is included in cost of subscription revenue. Purchased patents are determined to have definite lives and are amortized on a straight-line basis over their estimated remaining economic lives, ranging from 9 to 18 years. The patents’ weighted average remaining amortization period is 10.0 years as of September 30, 2018 (unaudited). Amortization expense related to the patents is included in general and administrative expense.

The Company applies fair value accounting for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities, the Company considers the principal or most advantageous market in which it would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions, and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

The adoption of Topic 606 resulted in changes to the Company’s accounting policies for revenue recognition and deferred contract acquisition costs. The primary impact of adopting Topic 606 relates to the deferral of incremental costs of obtaining customer contracts and the amortization of those costs over a period of benefit. Prior to adopting the new standard, deferral of commissions was not required, and the Company's policy was to expense commission costs as incurred. Under Topic 606, the Company defers all incremental costs to obtain the contract, which primarily include sales commissions and related payroll taxes. The Company amortizes these costs over a period of benefit of five years. The deferral of incremental costs resulted in a cumulative adjustment to accumulated deficit of $18.6 million on January 1, 2016. The impact of adopting Topic 606 on the Company’s revenue was not material to any of the periods presented.

In January 2017, the FASB issued ASU No. 2017-04, Goodwill and Other, Simplifying the Test for Goodwill Impairment (Topic 350), which amends the guidance in ASC Topic 350 to eliminate Step 2 from the goodwill impairment test. The updated guidance requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value not to exceed the total amount of goodwill allocated to that reporting unit. ASU No. 2017-04 is effective for fiscal years beginning after December 15, 2021, and is applied prospectively when adopted. Early adoption is permitted. The Company elected to early adopt ASU No. 2017-04 as of January 1, 2017. The adoption of the guidance did not have an impact on the consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Most prominent among the changes in the standard is the recognition of right of use assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company will be required to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company is in the initial stage of its assessment of the new standard and is currently evaluating the timing of adoption, the quantitative impact of adoption, and the related disclosure requirements. The Company anticipates the adoption of this standard will result in a substantial increase in its non-current assets and liabilities recorded on the consolidated balance sheets. The adoption of the standard is not expected to have a material impact on the consolidated statement of operations. While the Company is assessing all potential impacts of the adoption of the standard, it currently expects the most significant impact to be the capitalization of right of use assets and lease liabilities for its office spaces.

In May 2016, the Company acquired the outstanding stock of Statwing, Inc. (“Statwing”), a statistical analysis software provider. The assets, liabilities, and operating results of Statwing are reflected in the Company’s consolidated financial statements from the date of acquisition. Pro forma results of operations have not been presented because the effects of the acquisition were not material to the consolidated financial statements. On the closing date, the Company paid approximately $1.0 million in cash, net of cash assumed in the acquisition, and issued 34,580 shares of the Company’s common stock valued at approximately $0.1 million on the closing date. Additional consideration of $0.2 million in cash and 6,229 shares of the Company’s common stock valued at $20,000 on the closing date was withheld for 18 months following the close of the transaction as protection against certain breaches of representations and warranties covered in the purchase agreement. The Company recorded a tax benefit of $0.2 million as a result of a valuation allowance reversal related to deferred tax liabilities generated from the acquisition.

In March 2018 (unaudited), the Company acquired the outstanding stock of Delighted, Inc. (“Delighted”), a customer experience measurement and rating company. The assets, liabilities, and operating results of Delighted are reflected in the Company’s consolidated financial statements from the date of acquisition. Pro forma results of operations have not been presented because the effects of the acquisition were not material to the consolidated financial statements. On the closing date, the Company paid approximately $7.0 million in cash, net of cash assumed in the acquisition. The Company recorded a tax benefit of $0.8 million as a result of a valuation allowance reversal related to deferred tax liabilities generated from the acquisition. The acquisition resulted in a deferred tax liability of $0.8 million, mostly due to basis differences in acquired intangible assets. After recording the deferred tax liability through purchase accounting, the Company determined its existing deferred tax assets (primarily consisting of net operating loss carryovers and tax credits) could be applied against the deferred tax liability of Delighted and reduced its valuation allowance, resulting in a benefit to the tax provision. The Company had previously recorded a valuation allowance against its deferred tax assets in accordance with ASC 740, Income Taxes, after assessing all available evidence, both positive and negative, including historical levels of income, legislative developments, expectations, and risks associated with estimates of future taxable income, and prudent and feasible tax planning strategies.

From time to time, the Company is a party to a variety of claims, lawsuits, and proceedings which arise in the ordinary course of business, including claims of alleged infringement of intellectual property rights. The Company records a liability when it believes that it is probable that a loss will be incurred and the amount of loss or range of loss can be reasonably estimated. Given the unpredictable nature of legal proceedings, the Company bases its estimate on the information available at the time of the assessment. As additional information becomes available, the Company reassesses the potential liability and may revise the estimate. The Company is not presently a party to any litigation the outcome of which, it believes, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the business, operating results, or financial condition.

Series A preferred stock stockholders have the primary liquidation preference, which is equal to the original issue price plus any declared but unpaid dividends. Series B and C preferred stock stockholders have the secondary liquidation preference and participate on a pari passu basis, with Series B stockholders receiving its original issue price plus any declared but unpaid dividends, and Series C stockholders receiving $3.18 per share plus any declared but unpaid dividends. Series D preferred stock stockholders have the third liquidation preference, which is equal to $1.66 a share plus any declared but unpaid dividends. Holders of Series E preferred stock have the fourth liquidation preference, which is equal to the original issue price plus any declared but unpaid dividends. Upon completion of the distribution, all remaining proceeds will be distributed to preferred and common stock stockholders on a pro-rata basis.

In the event that Series C preferred stockholders receive less than its original issuance cost in a liquidation, an alternative liquidation preference applies. Series A preferred stock stockholders have the primary liquidation preference, which is equal to its original issue price plus any declared but unpaid dividends. Series B and C preferred stock stockholders have the secondary liquidation preference and participate on a pari passu basis, with both Series B and C stockholders receiving its original issue price plus any declared but unpaid dividends. Series D preferred stock stockholders have the third liquidation preference, which is equal to $1.30 a share plus any declared but unpaid dividends. Holders of Series E preferred stock have the fourth liquidation preference, which is equal to its original issue price plus any declared but unpaid dividends. Upon completion of the distribution, all remaining proceeds will be distributed to preferred and common stock stockholders on a pro-rata basis.

Upon a liquidation event, as defined in the current certificate of incorporation, the holders of Series A-1, Series A-2, Series A-3, Series B-1, Series B-2, Series B-3, Series B-4, and Series B-5 preferred stock are entitled to receive, prior to and in preference to any distribution of the proceeds of such liquidation to common stockholders, an amount per share equal to $0.00, $0.38, $2.00, $2.00, $4.46, $12.38, $5.36, and $12.38, respectively, plus any declared but unpaid dividends on such shares. If the proceeds distributed among the holders of the preferred stock are insufficient to permit the preferred stock holders to receive the full payment noted above, then the entire proceeds legally available for distribution shall be distributed ratably among the holders of the preferred stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive.

At the option of the holder thereof, each share of preferred stock is convertible into a number of shares of Class A common stock that results from dividing the applicable original issue price for such series by the applicable conversion price in effect on the date of conversion (the “Conversion Rate”). Each share of preferred stock will be automatically converted into shares of Class A common stock at the Conversion Rate at the time in effect for such series of preferred stock upon the earlier of (i) the closing of the Company’s sale of its common stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, with net proceeds of not less than $50.0 million in the aggregate (“Qualified IPO”), or (ii) the date specified by written consent or agreement of the holders of a majority of the outstanding preferred stock.

The Company’s current certificate of incorporation authorizes the issuance of Class A common stock and Class B common stock. As of December 31, 2016, the Company was authorized to issue 196,500,000 shares of common stock, none of which were designated as Class A common stock and all of which were designated as Class B common stock. As of December 31, 2017 and September 30, 2018 (unaudited), the Company is authorized to issue 194,534,095 shares of Class A common stock. As of December 31, 2017 the Company is authorized to issue 215,971,093 shares of Class B common stock. As of September 30, 2018 (unaudited), the Company is authorized to issue 229,471,093 shares of Class B common stock. Holders of Class A common stock and Class B common stock are entitled to dividends on a pro rata basis, when, as, and if declared by the Company’s Board of Directors, subject to the rights of the holders of the Company’s preferred stock. Holders of Class A common stock are entitled to 10 votes per share, and holders of Class B common stock are entitled to one vote per share. Upon a liquidation event, as defined in the current certificate of incorporation, after payments are made to holders of the Company’s preferred stock, any distribution of proceeds to common stockholders will be made on a pro rata basis to the holders of Class A common stock and Class B common stock. As of December 31, 2016 and 2017 and September 30, 2018 (unaudited), the Company had 2,769,814 shares, 3,545,242 shares, and 3,608,688 shares of Class B common stock outstanding, respectively. No shares of Class A common stock were outstanding for any of the periods presented.

The Company considered numerous factors in assessing the estimated fair value of its common stock, including the rights, preferences, and privileges of its redeemable convertible preferred stock relative to those of its common stock; market multiples of comparable public companies in its industry as indicated by their market capitalization and guideline merger and acquisition transactions; the Company’s performance and market position relative to its competitors, who may change from time to time; the Company’s historical financial results and estimated trends and prospects for its future performance; the economic and competitive environment; the likelihood and timeline of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; any adjustments necessary to recognize a lack of marketability for its common stock; and precedent sales of or offers to purchase its common stock.



			Stock Options Outstanding				One-Tier Restricted Stock Outstanding				Two-Tier Restricted Stock Outstanding				Two-Tier Restricted Stock Units Outstanding
	Number of shares available for issuance under the 2014 Plan		Number of shares outstanding under the 2014 Plan	Weighted- average exercise price per share		Weighted- average remaining contractual term (years)	Number of shares outstanding under the 2014 Plan		Weighted- average grant date fair value per share		Number of shares outstanding under the 2014 Plan		Weighted- average grant fair per share		Number of shares outstanding under the 2014 Plan		Weighted- average grant date fair value per share		Weighted- average remaining contractual life (years)
Balance at January 1, 2016	5,710,915		—	$	—	—	3,103,060		$	0.19	1,421,550		$	0.24	5,014,475		$	0.98	6.3
Additional shares authorized	5,750,000		—	—			—		—		—		—		—		—
Shares granted	(7,440,450	)	—	—			—		—		—		—		7,440,450		3.25
Shares forfeited	382,716		—	—			(71,491	)	0.23		—		—		(311,225	)	1.23
Balance at December 31, 2016	4,403,181		—	—		—	3,031,569		0.19		1,421,550		0.24		12,143,700		2.36		6.1
Additional shares authorized	3,332,150		—	—			—		—		—		—		—		—
Shares granted	(8,033,550	)	1,070,000	12.79			—		—		—		—		6,963,550		12.09
Shares forfeited	861,040		—	—			(27,675	)	0.23		(97,124	)	0.26		(736,240	)	2.26
Shares sold in tender offer	—		—	—			(772,481	)	0.19		(329,110	)	0.23		(141,431	)	1.02
Balance at December 31, 2017	562,821		1,070,000	12.79		9.4	2,231,413		0.19		995,316		0.24		18,229,579		6.05		5.8
Additional shares authorized (unaudited)	18,213,957		—	—			—		—		—		—		—		—
Shares granted (unaudited)	(17,970,721	)	363,750	13.56			—		—		—		—		17,606,971		11.79
Shares forfeited (unaudited)	812,795		—	—			—		—		—		—		(812,795	)	9.09
Shares repurchased (unaudited)	—		—	—			(40,000	)	0.26		—		—		—		—
Balance at September 30, 2018 (unaudited)	1,618,852		1,433,750	12.98		8.9	2,191,413		0.18		995,316		0.24		35,023,755		8.87		5.9



	Year Ended							Year Ended						Nine Months Ended						Nine Months Ended
	December 31, 2016							December 31, 2017						September 30, 2017						September 30, 2018
														(unaudited)						(unaudited)
	Class A-1		Class A-2		Class B			Class A-1		Class A-2		Class B		Class A-1		Class A-2		Class B		Class A-1		Class A-2		Class B
Numerator:
Net income (loss) attributable to common shareholders	$	—	$	—	$	(12,034	)	$	—	$	—	$	39	$	—	$	—	$	15	$	—	$	—	$	29
Effect of dilutive securities:
Redeemable convertible preferred stock	—		—		—			1,112		1,381		—		423		525		—		648		805		—
One-tier restricted stock	—		—		—			—		—		3		—		—		1		—		—		3
Adjusted net income (loss) attributable to common shareholders for two-class method income allocation for diluted income (loss) per share	$	—	$	—	$	(12,034	)	$	1,112	$	1,381	$	42	$	423	$	525	$	16	$	648	$	805	$	32

Denominator:
Weighted-average shares outstanding for basic earnings (loss) per share	—		—		2,482			—		—		2,889		—		—		2,801		—		—		3,597
Effect of dilutive securities:
Redeemable convertible preferred stock	—		—		—			81,411		101,116		—		81,336		101,023		—		81,636		101,395		—
One-tier restricted stock	—		—		—			—		—		197		—		—		223		—		—		3
Stock options	—		—		—			—		—		121		—		—		110		—		—		303
Adjusted weighted-average shares outstanding and assumed conversions for diluted income (loss) per share	—		—		2,482			81,411		101,116		3,207		81,336		101,023		3,134		81,636		101,395		3,903

Basic income (loss) per share	$	—	$	—	$	(4.85	)	$	—	$	—	$	0.01	$	—	$	—	$	0.01	$	—	$	—	$	0.01
Diluted income (loss) per share	$	—	$	—	$	(4.85	)	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01	$	0.01



	Year Ended December 31,	Nine Months Ended September 30,
	2017	2018
	(unaudited)	(unaudited)
Numerator:
Net income
Net income attributable to common stockholders
Denominator:
Weighted-average shares used in computing net income per share attributable to common stockholders, basic
Pro forma adjustment to reflect assumed conversion of convertible preferred stock into common stock
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, basic
Effect of dilutive securities:
One-tier restricted stock
Stock options
Pro forma adjustment to reflect assumed vesting of two-tier restricted stock and restricted stock units with service condition satisfied
Weighted-average shares used in computing pro forma net income per share attributable to common stockholders, diluted

Pro forma income per share attributable to common stockholders, basic
Pro forma income per share attributable to common stockholders, diluted

As of December 31, 2017, the Company had approximately $39.0 million of consolidated federal NOL carryforwards and $19.6 million of Utah NOL carryforwards available to offset future taxable income, respectively. If unused, the federal and Utah NOL carryforwards will begin to expire in 2035 and 2030, respectively. The Company also had approximately $22.1 million of gross other state NOL carryforwards available to offset future taxable income which will expire in varying amounts between 2025 and 2037. The Company has federal research tax credit carryforwards of $4.2 million and Utah research tax credit carryforwards of $0.7 million, which if not utilized will begin to expire in 2034 and 2029, respectively. These NOL and research tax credit carryforwards could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect the Company’s profitability. Realization of the Company’s NOL carryforwards and tax credits is dependent on generating sufficient taxable income prior to their expiration. Although a portion of these carryforwards and tax credits are subject to the provisions of Internal Revenue Code Sections 382 and 383, we have not performed a formal study to determine the amount of a limitation, if any. The use of the NOL carryforwards and tax credits may have additional limitations resulting from future ownership changes or other factors under Sections 382 and 383 of the Internal Revenue Code.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, the Company considers the accounting of the deferred tax remeasurements and state tax conformity to be incomplete but has made a reasonable estimate and has included provisional amounts in the financial statements. Due to the forthcoming guidance and the Company’s ongoing analysis of final year-end data and tax positions, the Company expects to complete its analysis within the measurement period provided for and in accordance with SAB 118.

For the years ended December 31, 2016 and 2017 and nine months ended September 30, 2017 and 2018 (unaudited), the Company paid $235,000, $336,000, $235,000, and $282,000, respectively, for cleaning services provided by an entity owned by relatives of certain Company stockholders. As of December 31, 2016 and 2017 and September 30, 2018 (unaudited), the Company had $35,000 and $26,000, and $15,000 respectively, of related party accounts payable associated with these services. As of December 31, 2017, the Company had recorded $6,000 to related party prepaid expenses and other current assets related to these services. No amount was included in related party prepaid expenses and other current assets as of December 31, 2016 or September 30, 2018 (unaudited), related to these services. In October 2018, the Company terminated its engagement with this entity owned by relatives of certain Company stockholders (unaudited).

During 2015, the Company entered into a 10-year lease agreement with an entity owned by certain Company founders. For the years ended December 31, 2016 and 2017 and the nine months ended September 30, 2017 and 2018 (unaudited), the Company paid $2.6 million, $2.7 million, $2.0 million, and $2.1 million, respectively, related to the lease agreement. As of December 31, 2016 and 2017 and September 30, 2018 (unaudited), the Company had recorded $220,000, $234,000, and $234,000 respectively, to related party prepaid expenses and other current assets, which relates to prepaid rent and credits associated with this lease agreement. As of December 31, 2016 and 2017 and September 30, 2018 (unaudited), the Company had recorded $220,000 to related party other assets for a lease security deposit associated with this lease agreement. In October 2018, the Company terminated its 10-year lease agreement with an entity owned by certain Company founders and entered into a new lease agreement for the same property with an unrelated entity (unaudited).

For the years ended December 31, 2016 and 2017, the Company had a 401(k) Plan (“the Plan”) covering eligible employees of the Company. Eligible employees are U.S. full-time or part-time employees who are at least 18 years of age and who have met a 90-day minimum service requirement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Eligible participants may contribute up to 90% of compensation, to a maximum of $18,000 for the years ended December 31, 2016 and 2017. Participants direct the investment of their contributions into various investment options offered by the Plan. Beginning in 2016, the Company began to contribute, at its discretion, 3% of eligible U.S. employee compensation to the Plan. Contributions to the Plan for the years ended December 31, 2016 and 2017 and the nine months ended September 30, 2017 and 2018 (unaudited), totaled $2.0 million, $2.7 million, $1.9 million, and $2.9 million, respectively.

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe the offers, sales and issuances of the above securities were exempt from registration under the Securities Act (or Regulation D or Regulation S promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided under such rule. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.



Delaware	7372	47-1754215
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)



Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	ý	Smaller reporting company	¨
Emerging growth company	ý



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price⁽¹⁾	Amount of Registration Fee⁽²⁾⁽³⁾
Class B Common Stock, par value $0.0001 per share	$200,000,000	$24,240



	Price to Public	Underwriting Discounts and Commissions⁽¹⁾	Proceeds to Qualtrics
Per Share	$	$	$
Total	$	$	$



MORGAN STANLEY				GOLDMAN SACHS & CO. LLC
BARCLAYS	RBC CAPITAL MARKETS		JEFFERIES	DEUTSCHE BANK SECURITIES	BMO CAPITAL MARKETS
KEYBANC CAPITAL MARKETS		RAYMOND JAMES		CANACCORD GENUITY	BAIRD	BTIG



Anthony J. McCusker Bradley C. Weber Goodwin Procter LLP 601 Marshall Street Redwood City, California 94063 650-752-3100	David Faugno Chief Financial Officer Qualtrics International Inc. 333 West River Park Drive Provo, Utah 84604 385-203-4999	Dave Peinsipp Charles S. Kim Andrew S. Williamson Cooley LLP 101 California Street, 5th Floor San Francisco, California 94111 415-693-2000


(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act. Includes the offering price of any additional shares that the underwriters have the option to purchase solely to cover over allotments, if any.


(2)	Calculated pursuant to Rule 457(o) under the Securities Act based on an estimate of the proposed maximum aggregate offering price.


(3)	The registrant previously paid $24,240 of the registration fee with the initial filing of this registration statement.


(1)	See “Underwriters” for a description of the compensation payable to the underwriters.



	Page
Prospectus Summary	1
Risk Factors	18
Special Note Regarding Forward-Looking Statements	47
Market and Industry Data	49
Use of Proceeds	50
Dividend Policy	51
Capitalization	52
Dilution	55
Selected Consolidated Financial and Other Data	58
Management’s Discussion and Analysis of Financial Condition and Results of Operations	62
Letter From The Qualtrics Founders	90
Business	93



	Page
Management	128
Executive Compensation	136
Certain Relationships and Related Party Transactions	146
Principal Stockholders	151
Description of Capital Stock	155
Shares Eligible For Future Sale	163
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of Our Class B Common Stock	166
Underwriters	170
Legal Matters	178
Experts	179
Where You Can Find Additional Information	180
Index to Consolidated Financial Statements	F-1


•	no exercise by the underwriters of their over-allotment option.


•	awareness of the experience management category generally;


•	availability of products and solutions that compete with ours;


•	accessibility across several devices, operating systems, and applications;


•	cause a reduction in revenue or delay in market acceptance of our platform;


•	require us to issue refunds to our users or expose us to claims for damages;


•	cause us to lose existing users and make it more difficult to attract new users;


•	divert our development resources or require us to make extensive changes to our platform, which would increase our expenses;


•	recruiting and retaining talented and capable employees outside the United States and maintaining our company culture across all of our offices;


•	providing our platform and operating our business across a significant distance, in different languages and among different cultures, including the potential need to modify our platform and features to ensure that they are culturally appropriate and relevant in different countries;


•	compliance with applicable international laws and regulations, including laws and regulations with respect to privacy, data protection, consumer protection, and unsolicited email, and the risk of penalties to our users and individual members of management or employees if our practices are deemed to be out of compliance;


•	management of an employee base in jurisdictions that may not give us the same employment and retention flexibility as does the United States;


•	operating in jurisdictions that do not protect intellectual property rights to the same extent as does the United States;


•	compliance by us and our business partners with anti-corruption laws, import and export control laws, tariffs, trade barriers, economic sanctions, and other regulatory limitations on our ability to provide our platform in certain international markets;


•	foreign exchange controls that might require significant lead time in setting up operations in certain geographic territories and might prevent us from repatriating cash earned outside the United States;


•	double taxation of our international earnings and potentially adverse tax consequences due to changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and


•	higher costs of doing business internationally, including increased accounting, travel, infrastructure, and legal compliance costs.


•	diversion of management’s attention from other business concerns;


•	inability to integrate or benefit from acquired content, technologies, or solutions in a profitable manner;


•	harm to our existing relationships with customers and partners as a result of the acquisition;


•	difficulty integrating the accounting systems, operations, and personnel of the acquired business;


•	difficulty converting the customers of the acquired business onto our platform and contract terms;


•	use of resources that are needed in other parts of our business; and