2/24/2018 S-1 Table of Contents (1) Includes stock­based compensation as follows: Three months ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, 2016 2016 2016 2016 2017 2017 2017 2017 (In millions) Cost of revenue $ 1.5 $ 2.1 $ 2.3 $ 2.3 $ 3.1 $ 3.3 $ 2.9 $ 2.9 Research and development 14.5 19.0 19.3 19.9 21.8 21.7 22.9 26.7 (a) Sales and marketing 24.4 6.6 6.7 6.9 7.7 7.7 7.5 10.8 General and administrative 3.5 4.7 9.0 4.9 6.2 6.0 6.4 7.0 Total stock­based compensation $ 43.9 $ 32.4 $ 37.3 $ 34.0 $ 38.8 $ 38.7 $ 39.7 $ 47.4 (a) Stock­based compensation included in sales and marketing expenses for the three months ended March 31, 2016 includes $18.8 million related to a stock option modification for an executive officer. Three months ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, 2016 2016 2016 2016 2017 2017 2017 2017 (As a % of revenue) Revenue 100% 100% 100% 100% 100% 100% 100% 100% Cost of revenue 54 51 45 38 38 35 32 30 Gross profit 46 49 55 62 62 65 68 70 Operating expenses: Research and development 37 36 34 31 36 34 34 34 Sales and marketing 40 29 25 27 27 26 26 34 General and administrative 14 9 15 13 13 16 14 14 Total operating expenses 90 74 74 71 76 75 74 82 Loss from operations (44)% (25)% (19)% (8)% (13)% (10)% (6)% (12)% Quarterly revenue trends Our revenue increased sequentially in each of the quarters presented primarily due to increases in the number of paying users. Seasonality in our revenue is not material. Quarterly cost of revenue and gross margin trends Our cost of revenue fluctuated in each of the quarters presented primarily due to the timing of our Infrastructure Optimization, which combined with increases in our revenue caused our gross margins to increase or remain constant. Quarterly operating expense trends Except for the three months ended June 30, 2016, our total quarterly operating expenses increased sequentially in the quarters presented primarily due to headcount growth in connection with the expansion of our business and other events that are discussed herein. 76 https://www.sec.gov/Archives/edgar/data/1467623/000119312518055809/d451946ds1.htm 84/235