CrowdStrike Holdings, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 73 Consolidated Financial Statements Consolidated Balance Sheets as of January 31, 2022 and 2021 75 Consolidated Statements of Operations for the years ended January 31, 2022, 2021 and 2020 76 Consolidated Statements of Comprehensive Loss for the years ended January 31, 2022, 2021 and 2020 77 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the years ended January 31, 2022, 2021 and 2020 78 Consolidated Statements of Cash Flows for the years ended January 31, 2022, 2021 and 2020 79 Notes to Consolidated Financial Statements 80 72 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of CrowdStrike Holdings, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of CrowdStrike Holdings, Inc. and its subsidiaries (the “Company”) as of January 31, 2022 and 2021, and the related consolidated statements of operations, of comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for each of the three years in the period ended January 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Changes in Accounting Principles As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2021 and the manner in which it accounts for revenues from contracts with customers in 2020. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures 73 Table of Contents that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition – Identification and Evaluation for Terms and Conditions in Contracts As described in Note 2 to the consolidated financial statements, the Company generates its revenue from contracts with customers for subscriptions and professional services. Management considers the terms and conditions of contracts with customers and the Company’s customary business practices in identifying contracts. Management determines the Company has a contract with a customer when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, it has been determined that the customer has the ability and intent to pay, and the contract has commercial substance. Revenue is recognized when control of the promised services is transferred to the customer, in an amount that reflects the consideration expected to be received in exchange for those services. The Company’s consolidated revenue for the year ended January 31, 2022 was $1,452 million. The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of terms and conditions in contracts, is a critical audit matter are the high degree of auditor subjectivity and effort in performing procedures and evaluating evidence relating to the identification and evaluation of terms and conditions in contracts. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the identification and evaluation of terms and conditions in contracts. These procedures also included, among others, (i) testing management’s process for identifying and evaluating terms and conditions in contracts, including evaluating management’s determination of the impact of those terms and conditions on revenue recognition, and (ii) testing the completeness and accuracy of management’s identification and evaluation of terms and conditions in contracts by examining revenue transactions on a test basis. /s/ PricewaterhouseCoopers LLP San Jose, California March 16, 2022 We have served as the Company’s auditor since 2016. 74 Table of Contents CrowdStrike Holdings, Inc. Consolidated Balance Sheets (in thousands, except per share data) January 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 1,996,633 $ 1,918,608 Accounts receivable, net of allowance for credit losses of $ 1.6 million and $ 1.2 million as of January 31, 2022 and January 31, 2021, respectively 368,145 239,199 Deferred contract acquisition costs, current 126,822 80,850 Prepaid expenses and other current assets 79,352 53,617 Total current assets 2,570,952 2,292,274 Strategic investments 23,632 2,500 Property and equipment, net 260,577 167,014 Operating lease right-of-use assets 31,735 36,484 Deferred contract acquisition costs, noncurrent 192,358 117,906 Goodwill 416,445 83,566 Intangible assets, net 97,336 15,677 Other long-term assets 25,346 17,112 Total assets $ 3,618,381 $ 2,732,533 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 47,634 $ 12,065 Accrued expenses 83,382 51,117 Accrued payroll and benefits 104,563 71,907 Operating lease liabilities, current 9,820 8,977 Deferred revenue 1,136,502 701,988 Other current liabilities 24,929 17,499 Total current liabilities 1,406,830 863,553 Long-term debt 739,517 738,029 Deferred revenue, noncurrent 392,819 209,907 Operating lease liabilities, noncurrent 25,379 31,986 Other liabilities, noncurrent 16,193 17,184 Total liabilities 2,580,738 1,860,659 Commitments and contingencies (Note 11) Stockholders’ Equity Preferred stock, $ 0.0005 par value; 100,000 shares authorized as of January 31, 2022 and January 31, 2021; no shares issued and outstanding as of January 31, 2022 and January 31, 2021 — — Class A common stock, $ 0.0005 par value; 2,000,000 shares authorized as of January 31, 2022 and January 31, 2021; 209,996 shares, and 195,039 shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively; Class B common stock, $ 0.0005 par value; 300,000 shares authorized as of January 31, 2022 and January 31, 2021; 20,710 shares, and 28,685 shares issued and outstanding as of January 31, 2022 and January 31, 2021, respectively 115 112 Additional paid-in capital 1,991,807 1,598,259 Accumulated deficit ( 964,918 ) ( 730,116 ) Accumulated other comprehensive (loss) income ( 1,240 ) 2,319 Total CrowdStrike Holdings, Inc. stockholders’ equity 1,025,764 870,574 Non-controlling interest 11,879 1,300 Total stockholders’ equity 1,037,643 871,874 Total liabilities and stockholders’ equity $ 3,618,381 $ 2,732,533 The accompanying notes are an integral part of these consolidated financial statements. 75 Table of Contents CrowdStrike Holdings, Inc. Consolidated Statements of Operations (in thousands, except per share data) Year Ended January 31, 2022 2021 2020 Revenue Subscription $ 1,359,537 $ 804,670 $ 436,323 Professional services 92,057 69,768 45,090 Total revenue 1,451,594 874,438 481,413 Cost of revenue Subscription 321,904 185,212 112,474 Professional services 61,317 44,333 29,153 Total cost of revenue 383,221 229,545 141,627 Gross profit 1,068,373 644,893 339,786 Operating expenses Sales and marketing 616,546 401,316 266,595 Research and development 371,283 214,670 130,188 General and administrative 223,092 121,436 89,068 Total operating expenses 1,210,921 737,422 485,851 Loss from operations ( 142,548 ) ( 92,529 ) ( 146,065 ) Interest expense ( 25,231 ) ( 1,559 ) ( 442 ) Other income, net 7,756 6,219 6,725 Loss before provision for income taxes ( 160,023 ) ( 87,869 ) ( 139,782 ) Provision for income taxes 72,355 4,760 1,997 Net Loss ( 232,378 ) ( 92,629 ) ( 141,779 ) Net income attributable to noncontrolling interest 2,424 — — Net loss attributable to CrowdStrike $ ( 234,802 ) $ ( 92,629 ) $ ( 141,779 ) Net loss per share attributable to CrowdStrike common stockholders, basic and diluted $ ( 1.03 ) $ ( 0.43 ) $ ( 0.96 ) Weighted-average shares used in computing net loss per share attributable to CrowdStrike common stockholders, basic and diluted 227,142 217,756 148,062 The accompanying notes are an integral part of these consolidated financial statements. 76 Table of Contents CrowdStrike Holdings, Inc. Consolidated Statements of Comprehensive Loss (in thousands) Year Ended January 31, 2022 2021 2020 Net loss $ ( 232,378 ) $ ( 92,629 ) $ ( 141,779 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 3,559 ) 2,630 ( 410 ) Reversal of unrealized gain upon sale of debt securities, net of tax — ( 1,320 ) — Unrealized gain on available-for-sale securities, net of tax — — 1,321 Other comprehensive income (loss) ( 3,559 ) 1,310 911 Less: Comprehensive income attributable to noncontrolling interest 2,424 — — Total comprehensive loss attributable to CrowdStrike $ ( 238,361 ) $ ( 91,319 ) $ ( 140,868 ) The accompanying notes are an integral part of these consolidated financial statements. 77 Table of Contents CrowdStrike Holdings, Inc. Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (in thousands) Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Total Stockholders’ Equity (Deficit) Shares Amount Shares Amount Balances at January 31, 2019 131,268 $ 557,912 47,421 $ 24 $ 31,211 $ ( 519,126 ) $ 98 $ — $ ( 487,793 ) Cumulative effect of accounting change- ASC 606 — — — — — 23,418 — — 23,418 Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs — — 20,700 11 659,207 — — — 659,218 Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 131,268 ) ( 557,912 ) 131,268 66 557,846 — — — 557,912 Reclassification of redeemable convertible preferred stock warrant liability to additional paid-in capital upon initial public offering — — — — 10,559 — — — 10,559 Net exercise of common stock warrants — — 322 — — — — — — Issuance of common stock upon exercise of options — — 10,645 5 21,507 — — — 21,512 Issuance of common stock under RSU release — — 1,127 — — — — — — Issuance of common stock under employee stock purchase plan — — 428 — 12,365 — — — 12,365 Issuance of common stock related to early exercised options — — 1,037 — — — — — — Vesting of early exercised options — — — — 2,704 — — — 2,704 Stock-based compensation expense — — — — 79,940 — — — 79,940 Capitalized stock-based compensation — — — — 857 — — — 857 Settlement related to stockholders short-swing trade profit — — — — 2,283 — — — 2,283 Net loss — — — — — ( 141,779 ) — — ( 141,779 ) Non-controlling interest — — — — — — — 500 500 Unrealized net gain on available-for-sale-securities, net of tax — — — — — — 1,321 — 1,321 Foreign currency translation adjustments — — — — — — ( 410 ) — ( 410 ) Balances at January 31, 2020 — $ — 212,948 $ 106 $ 1,378,479 $ ( 637,487 ) $ 1,009 $ 500 $ 742,607 Issuance of common stock upon exercise of options — — 7,752 6 28,825 — — — 28,831 Issuance of common stock under RSU release — — 1,994 — — — — — — Issuance of common stock under employee stock purchase plan — — 1,030 — 34,263 — — — 34,263 Vesting of early exercised options — — — — 3,318 — — — 3,318 Stock-based compensation expense — — — — 149,375 — — — 149,375 Capitalized stock-based compensation — — — — 3,686 — — — 3,686 Fair value of replacement equity awards attributable to pre-acquisition service — — — — 313 — — — 313 Net loss — — — — — ( 92,629 ) — — ( 92,629 ) Non-controlling interest — — — — — — — 800 800 Other comprehensive loss — — — — — — 1,310 — 1,310 Balances at January 31, 2021 — $ — 223,724 $ 112 $ 1,598,259 $ ( 730,116 ) $ 2,319 $ 1,300 $ 871,874 Issuance of common stock upon exercise of options — — 2,598 1 15,898 — — — 15,899 Issuance of common stock under RSU and PSU release — — 3,408 2 ( 2 ) — — — — Issuance of common stock under employee stock purchase plan — — 904 — 50,277 — — — 50,277 Issuance of common stock related to early exercised options — — 57 — — — — — — Vesting of early exercised options — — — — 3,165 — — — 3,165 Issuance of common stock for founders holdbacks related to acquisitions — — 15 — 3,528 — — — 3,528 Stock-based compensation expense — — — — 305,792 — — — 305,792 Capitalized stock-based compensation — — — — 10,879 — — — 10,879 Fair value of replacement equity awards attributable to pre-acquisition service — — — — 4,011 — — — 4,011 Net income (loss) — — — — — ( 234,802 ) — 2,424 ( 232,378 ) Non-controlling interest — — — — — — 8,155 8,155 Other comprehensive loss — — — — — — ( 3,559 ) — ( 3,559 ) Balances at January 31, 2022 — $ — 230,706 $ 115 $ 1,991,807 $ ( 964,918 ) $ ( 1,240 ) $ 11,879 $ 1,037,643 The accompanying notes are an integral part of these consolidated financial statements. 78 Table of Contents CrowdStrike Holdings, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended January 31, 2022 2021 2020 Operating activities Net loss $ ( 232,378 ) $ ( 92,629 ) $ ( 141,779 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 55,908 38,710 23,026 Amortization of intangible assets 12,902 1,448 487 Amortization of deferred contract acquisition costs 113,884 66,425 35,459 Non-cash operating lease cost 9,103 7,786 — Change in fair value of redeemable convertible preferred stock warrant liability — — 6,022 Stock-based compensation expense 309,952 149,675 79,940 Deferred income taxes ( 13,956 ) ( 1,452 ) ( 681 ) Gain on sale of debt securities, net — ( 1,347 ) — Amortization (accretion) of marketable securities purchased at a premium (discount) — 578 ( 1,247 ) Non-cash interest expense 2,469 853 435 Other non-cash charges — — ( 427 ) Change in fair value of strategic investments ( 4,823 ) — — Changes in operating assets and liabilities, net of impact of acquisitions Accounts receivable, net ( 125,354 ) ( 73,022 ) ( 72,511 ) Deferred contract acquisition costs ( 234,308 ) ( 150,975 ) ( 86,594 ) Prepaid expenses and other assets ( 29,535 ) 2,198 ( 44,008 ) Accounts payable 33,248 11,325 ( 6,570 ) Accrued expenses and other liabilities 38,483 33,083 10,097 Accrued payroll and benefits 32,681 33,212 17,526 Operating lease liabilities ( 9,900 ) ( 8,105 ) — Deferred revenue 616,408 338,803 280,768 Net cash provided by operating activities 574,784 356,566 99,943 Investing activities Purchases of property and equipment ( 112,143 ) ( 52,799 ) ( 80,198 ) Capitalized internal-use software and website development costs ( 20,866 ) ( 10,864 ) ( 7,289 ) Purchases of strategic investments ( 16,309 ) ( 1,500 ) ( 1,000 ) Business acquisitions, net of cash acquired ( 414,518 ) ( 85,517 ) — Purchases of intangible assets ( 680 ) ( 180 ) — Purchases of marketable securities — ( 84,904 ) ( 779,701 ) Proceeds from sales of marketable securities — 639,586 9,581 Maturities of marketable securities — 91,605 228,976 Net cash (used in) provided by investing activities ( 564,516 ) 495,427 ( 629,631 ) Financing activities Proceeds from the issuance of common stock upon initial public offering, net of underwriting discounts — — 665,092 Payments of debt issuance costs related to revolving line of credit ( 219 ) ( 3,328 ) — Payments of debt issuance costs related to Senior Notes ( 1,581 ) — — Proceeds from issuance of Senior Notes, net of debt financing costs — 739,569 — Payments of deferred offering costs — — ( 5,872 ) Proceeds from issuance of common stock upon exercise of stock options 15,899 28,831 21,512 Proceeds from the issuance of common stock upon exercise of early exercisable stock options — — 10,264 Proceeds from issuance of common stock under the employee stock purchase plan 50,277 34,263 12,365 Settlement related to stockholder short-swing trade profit — — 2,283 Capital contributions from non-controlling interest holders 8,155 800 500 Net cash provided by financing activities 72,531 800,135 706,144 Effect of foreign exchange rates on cash and cash equivalents ( 4,774 ) 1,682 ( 66 ) Net increase in cash and cash equivalents 78,025 1,653,810 176,390 Cash and cash equivalents, beginning of period 1,918,608 264,798 88,408 Cash and cash equivalents, end of period $ 1,996,633 $ 1,918,608 $ 264,798 Supplemental disclosure of cash flow information: Interest paid $ 275 $ 18 $ 7 Income taxes paid, net of refunds received $ 74,677 $ 1,732 $ 1,862 Supplemental disclosure of non-cash investing and financing activities: Conversion of redeemable convertible preferred stock to common stock $ — $ — $ 557,912 Conversion of redeemable convertible preferred stock warrant liabilities reclassified to additional paid-in capital $ — $ — $ 10,559 Net decrease in deferred offering costs, accrued but not paid $ — $ — $ ( 2,858 ) Net increase (decrease) in property and equipment included in accounts payable and accrued expenses $ 6,522 $ 1,042 $ ( 3,193 ) Vesting of early exercised stock options $ 3,165 $ 3,318 $ 2,704 Equity consideration for acquisitions $ 4,011 $ 3,842 $ — Debt financing costs, accrued but not paid $ — $ 1,581 $ — Operating lease liabilities arising from obtaining operating right of-use assets $ 4,867 $ 6,249 $ — The accompanying notes are an integral part of these consolidated financial statements. 79 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements 1. Description of Business and Basis of Presentation Business CrowdStrike Holdings, Inc. (the “Company”) was formed on November 7, 2011. The Company provides a leading cloud-delivered solution for next-generation endpoint and cloud workload protection via a software as a service (“SaaS”) subscription-based model that spans multiple security markets, including corporate workload security, security and vulnerability management, managed security services, IT operations management, threat intelligence services, identity protection and log management. The Company’s principal executive offices are in Austin, Texas. The Company conducts its business in the United States, as well as locations internationally, including in Australia, Germany, India, Israel, Romania, and the United Kingdom. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain prior year amounts in the consolidated statements of cash flows were reclassified to conform to the current period presentation. These reclassifications had no effect on net cash provided by (used in) operating, investing, and financing activities and cash and cash equivalent amounts. Effective February 1, 2020, the Company adopted the Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Prior periods were not retrospectively recast, and accordingly, the consolidated statements of operations for the fiscal year ended January 31, 2020 was prepared using the prior lease accounting standard referred to as Accounting Standard Codification (“ASC”) Topic 840. Upon adoption, the Company recorded operating lease ROU assets of $ 37.4 million and corresponding operating lease liabilities of $ 37.4 million on its consolidated balance sheet. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s consolidated financial statements and accompanying notes. These estimates are based on information available as of the date of the consolidated financial statements. On a regular basis, management evaluates these estimates and assumptions. Actual results may differ from these estimates and such difference could be material to the Company’s consolidated financial statements. Estimates and assumptions used by management include, but are not limited to, revenue recognition, the allowance for credit losses, the useful lives of long-lived assets, the fair values of strategic investments, the period of benefit for deferred contract acquisition costs, the discount rate used for operating leases, the recognition and disclosure of contingent liabilities, income taxes, stock-based compensation, and the fair value of assets acquired and liabilities assumed for business combinations. Due to the Coronavirus (“COVID-19”) pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require a material update to its estimates or judgments or an adjustment of the carrying value of its assets or liabilities as of January 31, 2022. While there was not a material impact to the Company’s consolidated financial statements as of and for the year ended January 31, 2022, these estimates may change, as new events occur and additional information is obtained, as well as other factors related to COVID-19 that could result in material impacts to the Company’s consolidated financial statements in future reporting periods. 80 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Concentration of Credit Risk and Geographic Information The Company generates revenue from the sale of subscriptions to access its cloud platform and professional services. The Company’s sales team, along with its channel partner network of system integrators and value-added resellers (collectively, “channel partners”), sells the Company’s services worldwide to organizations of all sizes. Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, accounts receivable, and strategic investments. The Company’s cash is placed with high-credit-quality financial institutions and issuers, and at times exceed federally insured limits. The Company has not experienced any credit loss relating to its cash equivalents and strategic investments. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Channel partners or direct customers who represented 10% or more of the Company’s accounts receivable were as follows: January 31, 2022 2021 Channel partner A (1) 9 % 10 % Customer A (1) 10 % 17 % _______________________________ (1) Channel Partner A and Customer A are controlled by the same company. Channel partners who represented 10% or more of the Company’s total revenue were as follows: Year Ended January 31, 2022 2021 2020 Channel partner B 7 % 8 % 10 % There were no direct customers who represented 10% or more of the Company’s total revenue during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. As of January 31, 2022, the Company had $ 950.6 million of cash equivalents. As of January 31, 2021, the Company did not have any cash equivalents. Strategic Investments In July 2019, the Company agreed to commit up to $ 10.0 million to a newly formed entity, CrowdStrike Falcon Fund LLC (the “Original Falcon Fund”) in exchange for 50 % of the sharing percentage of any distribution by the Original Falcon Fund. In December 2021, the Company agreed to commit an additional $ 50.0 million to a newly formed entity, CrowdStrike Falcon Fund II LLC (“Falcon Fund II”) in exchange for 50 % of the sharing percentage of any distribution by the Falcon Fund II. Further, entities associated with Accel also agreed to commit up to $ 10.0 million and $ 50.0 million, respectively, to the Original Falcon Fund and the Falcon Fund II (collectively, the “Falcon Funds”), and collectively own the remaining 50 % of the sharing percentage of the Falcon Funds. Both Falcon Funds are in the business of purchasing, selling and investing in minority equity and convertible debt securities of privately-held companies that develop applications that have potential for substantial contribution to CrowdStrike and its platform. The Company is the manager of the Falcon Funds and controls the investment decisions and day-to-day operations and accordingly has consolidated each of the Falcon Funds. Each Falcon Fund has a duration of ten years and may be extended for three additional years. At dissolution, the Falcon Funds will be liquidated and the remaining assets will be distributed to the investors based on their respective sharing percentage. The Company elected the measurement alternative for the non-marketable equity investments of the Falcon Funds where eligible. Under the measurement alternative, the non-marketable equity investments are measured at cost, less any impairment, plus or minus adjustments resulting from price changes from observable transactions of identical or similar securities of the 81 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements same issuer. All gains and losses on strategic investments, realized and unrealized, are recognized in Other income (expense), net. Strategic investments are classified within Level 3 in the fair value hierarchy as only an impairment of observable adjustment is recognized based on price changes from observable transactions of identical or similar securities of the same issuer and other unobservable inputs including volatility, rights, and obligations of the investments. The Company classifies the investments in the Falcon Funds as a non-current asset called Strategic Investments on the consolidated balance sheets as of January 31, 2022. The Company has recognized an unrealized gain for its portion of ownership of the strategic investments in the amount of $ 2.4 million, net of gain attributable to non-controlling interest of $ 2.4 million, during the fiscal year ended January 31, 2022. Fair Value of Financial Instruments The Company’s financial instruments consist of cash equivalents, strategic investments, accounts receivable, accounts payable, accrued expenses, the redeemable convertible preferred stock warrant liability, and the Senior Notes. The carrying values of cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term nature. The Senior Notes are carried at the initially allocated liability value less unamortized debt discount and issuance costs on the Company’s consolidated balance sheet. The Company discloses the fair value of the Senior Notes at each reporting period for disclosure purposes only. Refer to Note 3, Investments and Fair Value Measurements, regarding the fair value of the Company’s non-marketable securities and Note 5, Debt, for the fair value of the Company’s Senior Notes. The Company reports the redeemable convertible preferred stock warrant liability at fair value (see Note 3, Investments and Fair Value Measurements). The warrants issued by the Company for redeemable convertible preferred stock in January 2015, December 2016, and March 2017 have been recorded as a liability based on “Level 3” inputs, which consist of unobservable inputs and reflect management’s estimates of assumptions that market participants would use in pricing the liability. The fair value of the warrants was determined using the Black-Scholes option-pricing model, which is affected by changes in inputs to that model including the Company’s stock price, expected stock price volatility, risk-free rate, and contractual term. Immediately prior to the closing of the IPO on June 14, 2019, the redeemable convertible preferred stock warrants converted into 336,386 warrants to purchase Class B common stock on a one -to-one basis. The redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital upon the closing of the IPO. Accounts Receivable Accounts receivable are recorded at the invoiced amount and are non-interest bearing. Accounts receivable are stated at their net realizable value, net of the allowance for credit losses. The Company has a well-established collections history from its customers. Credit is extended to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral from its customers; however, the Company may require payment prior to commencing service in certain instances to limit credit risk. The Company regularly reviews the adequacy of the allowance for credit loss by considering various factors including the age of each outstanding invoice, each customer’s expected ability to pay, historical loss rates and expectations of forward-looking loss estimates to determine whether the allowance is appropriate. Amounts deemed uncollectible are written off against the allowance for credit loss. As of January 31, 2022 and January 31, 2021, the allowance for credit loss was $ 1.6 million and $ 1.2 million, respectively. Software Implementation Costs The Company contracts with third party information technology providers for various service arrangements including software, platform, and information technology infrastructure. The Company capitalizes the implementation cost incurred to develop or obtain internal-use software in such arrangements which are recorded as part of property and equipment, net in the consolidated balance sheets. All capitalized implementation costs are amortized over the term of the arrangement which includes reasonably certain renewals. Costs incurred during the preliminary project and post implement stage are expensed as the activities are performed. Deferred Offering Costs Deferred offering costs consisted of fees and expenses incurred in connection with the sale of the Company’s common stock in an IPO, including legal, accounting, printing and other IPO-related costs. Upon the close of the IPO on June 14, 2019, total deferred offering costs of $ 5.9 million were reclassified to stockholders’ equity and recorded against the proceeds from the offering. 82 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Property and Equipment, Net Property and equipment, net, is stated at historical cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets as follows: Data center and other computer equipment 3 – 5 years Furniture and equipment 5 years Purchased software 3 – 5 years Capitalized internal-use software and website development 3 years Leasehold improvements Estimated useful life or term of the lease, whichever is shorter Expenditures for routine maintenance and repairs are charged to operating expense as incurred. Major renewals and improvements are capitalized and depreciated over their estimated useful lives. Upon retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is recorded in operating expenses in the consolidated statement of operations. The Company reviews for impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset (or asset group) may not be recoverable. Events and changes in circumstances considered by the Company in determining whether the carrying value of long-lived assets may not be recoverable, include, but are not limited to: significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, and changes in the Company’s business strategy. Impairment testing is performed at an asset level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (an “asset group”). An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset (or asset group) and its eventual disposition is less than its carrying amount. No impairment indicators were identified by the Company and no impairment losses were recorded by the Company during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020. Capitalized Internal-Use Software and Website Development Costs The Company capitalizes certain development costs incurred in connection with its internal-use software and website development. These capitalized costs are primarily related to the Company’s cloud-delivered solution for next-generation endpoint protection as well as redefining, redesigning, and rebuilding crowdstrike.com. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized until the software and website are substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. 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 property and equipment, net. Maintenance and training costs are expensed as incurred. Internal-use software and website development costs are amortized to cost of revenue on a straight-line basis over its estimated useful life of three years . Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. Deferred Contract Acquisition Costs Under ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers, the Company capitalizes contract acquisition costs that are incremental to the acquisition of customer contracts. Contract acquisition costs are accrued and capitalized upon execution of the sales contract by the customer. Sales commissions for renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract or follow-on upsell given the substantive difference in commission rates in proportion to their respective contract values. Commissions, including referral fees paid to referral partners, earned upon the initial acquisition of a contract or subsequent upsell are amortized over an estimated period of benefit of four years while commissions earned for renewal contracts are amortized over the contractual term of the renewals. Sales commissions associated with professional service contracts are amortized ratably over an estimated period of benefit of six months . 83 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Deferred Revenue The deferred revenue balance consists of subscription and professional services which have been invoiced upfront and are recognized as revenue only when the revenue recognition criteria are met. The Company’s subscription contracts are typically invoiced to its customers at the beginning of the term, or in some instances, such as in multi-year arrangements, in installments. Professional services are either invoiced upfront, invoiced in installments, or invoiced as the services are performed. Accordingly, the Company’s deferred revenue balance does not include revenue for future years of multi-year non-cancellable contracts that have not yet been billed. The Company recognizes subscription revenue ratably over the contract term beginning on the commencement date of each contract, the date that services are made available to customers. The Company recognizes professional services revenue as services are delivered. Once services are available to customers, the Company records amounts due in accounts receivable and in deferred revenue. To the extent the Company bills customers in advance of the contract commencement date, the accounts receivable and corresponding deferred revenue amounts are netted to zero on the consolidated balance sheets, unless such amounts have been paid as of the balance sheet date. Redeemable Convertible Preferred Stock Warrants Warrants related to the Company’s redeemable convertible preferred stock are classified as liabilities on the Company’s consolidated balance sheets. The warrants are subject to reassessment at each balance sheet date, and any change in fair value is recognized as a component of Other income (expense), net, in the consolidated statements of operations. The Company will continue to adjust the liability for changes in fair value until the earlier of the expiration or exercise of the warrants, or upon their automatic conversion into warrants to purchase common stock in connection with a qualified initial public offering such that they qualify for equity classification and no further remeasurement is required. Immediately prior to the closing of the IPO on June 14, 2019, the redeemable convertible preferred stock warrants converted into 336,386 warrants to purchase Class B common stock on a one -to-one basis. The redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital. Within the same month, the Company received notice from the holders of 336,386 warrants as to their intentions to exercise the warrants for shares of common stock of the Company. Such shares were settled via net settlement method, which was elected by the holders to reduce the number of shares issued upon exercise to reflect net settlement of the exercise price, resulting in the issuance of 322,278 shares of the Company’s common stock. Revenue Recognition In accordance with ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services. To achieve the core principle of this standard, the Company applies the following five steps: (1) Identify the contract with a customer The Company considers the terms and conditions of contracts with customers and its customary business practices in identifying contracts under ASC 606. The Company determines it has a contract with a customer when the contract is approved, each party’s rights regarding the services to be transferred can be identified, payment terms for the services can be identified, it has been determined that the customer has the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, credit and financial information pertaining to the customer. (2) Identify the performance obligations in the contract Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from the Company or from third parties, and are distinct in the context of the contract, 84 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements whereby the transfer of the services is separately identifiable from other promises in the contract. The Company’s performance obligations consist of (i) subscriptions and (ii) professional services. (3) Determine the transaction price The transaction price is determined based on the consideration which the Company is expected to be entitled to in exchange for transferring services to the customer. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component. (4) Allocate the transaction price to performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”). (5) Recognize revenue when or as performance obligations are satisfied Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised service to the customer. Revenue is recognized when control of the services is transferred to the customer, in an amount that reflects the consideration expected to be received in exchange for those services. The Company generates all its revenue from contracts with customers. Subscription Revenue The Company’s Falcon Platform technology solutions are subscription, SaaS offerings designed to continuously monitor, share, and mitigate risks from determined attackers. Customers do not have the right to take possession of the cloud-based software platform. Fees are based on several factors, including the solutions subscribed for by the customer and the number of endpoints purchased by the customer. The subscription fees are typically payable within 30 to 60 days after the execution of the arrangement, and thereafter upon renewal or subsequent installment. The Company initially records the subscription fees as deferred revenue and recognizes revenue on a straight-line basis over the term of the agreement. The typical subscription term is one to three years . The Company’s contracts with customers typically include a fixed amount of consideration and are generally non-cancellable and without any refund-type provisions. Customers typically have the right to terminate their contracts for cause if the Company fails to perform in accordance with the contractual terms. Some customers have the option to purchase additional subscription at a stated price. These options generally do not provide a material right as they are priced at the Company’s SSP. Professional Services Revenue The Company offers several types of professional services including incident response and forensic services, surge forensic and malware analysis, and attribution analysis, which are focused on responding to imminent and direct threats, assessing vulnerabilities, and recommending solutions. These services are distinct from subscription services. Professional services do not result in significant customization of the subscription service. The Company’s professional services are available through time and material and fixed fee agreements. Revenue for time and material agreements is recognized as services are performed. Fixed fee contracts account for an immaterial portion of the Company’s revenue. Contracts with Multiple Performance Obligations Some contracts with customers contain multiple promised services consisting of subscription and professional services that are distinct and accounted for separately. The transaction price is allocated to the separate performance obligations on a relative SSP basis. The SSP is the price at which the Company would sell promised subscription or professional services separately to a customer. Judgment is required to determine the SSP for each distinct performance obligation. The Company determines SSP based on its overall pricing objectives, taking into consideration the type of subscription or professional service and the number of endpoints. 85 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Variable Consideration Revenue from sales is recorded at the net sales price, which is the transaction price, and may include estimates of variable consideration. The amount of variable consideration that is included in the transaction price is constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue will not occur when the uncertainty is resolved. If subscriptions do not meet certain service level commitments, the Company’s customers are entitled to receive service credits, and in certain cases, refunds, each representing a form of variable consideration. The Company has historically not experienced any significant incidents affecting the defined levels of reliability and performance as required by its subscription contracts. Accordingly, any estimated refunds related to these agreements in the consolidated financial statements is not material during the periods presented. The Company provides rebates and other credits within its contracts with certain resellers, which are estimated based on the expected value to be earned or claimed on the related sales transaction. Overall, the transaction price is reduced to reflect the Company’s estimate of the amount of consideration to which it is entitled based on the terms of the contract. Estimated rebates and other credits were not material during the periods presented. Research and Development Expense Research and development costs are expensed when incurred, except for certain internal-use software development costs, which may be capitalized as noted above. Research and development expenses consist primarily of personnel and related headcount costs, costs of professional services associated with the ongoing development of the Company’s technology, and allocated overhead. Advertising All advertising costs are expensed as incurred and are included in sales and marketing expense in the consolidated statements of operations . The Company incurred $ 50.5 million, $ 27.9 million, and $ 8.0 million of advertising costs during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. Stock-Based Compensation Compensation related to stock-based awards to employees and directors are measured and recognized in the Company’s consolidated statements of operations based on the fair value of the awards granted. The Company estimates the fair value of its stock options using the Black-Scholes option-pricing model. The stock-based compensation expense relating to stock options are recognized on a straight-line basis over the period during which the employee or director is required to provide service in exchange for the award, usually the vesting period, which is generally four years . Restricted stock units (“RSUs”) are generally subject to a service-based vesting condition. The service-based vesting condition is generally with a vesting term of four years . The valuation of such RSUs is based solely on the fair value of the Company’s stock price on the date of grant and the corresponding compensation expense are being amortized on a straight-line basis. Performance-based stock units (“PSUs”) are generally subject to both a service-based vesting condition and a performance-based vesting condition. The fair value of the award is equal to the grant date fair market value of the Company’s stock price. PSUs generally vest over a four-year period and subject to continued service through the applicable vesting dates. The stock-based compensation expense relating to PSUs are recognized using the accelerated attribution method over the requisite service period when it is probable that the performance condition will be satisfied. The Special PSU Awards are subject to the Company’s achievement of specified stock price hurdles and a service-based vesting condition. The Company measured the fair value of the Special PSU Awards using a Monte Carlo simulation valuation model. The stock-based compensation expense relating to the Special PSU Awards are recognized using the accelerated attribution method over the requisite service period. 86 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Employee Stock Purchase Plan (“ESPP”) grants are measured based on grant date at fair value using the Black-Scholes option-pricing model. The resulting fair value is recognized using the accelerated attribution method over a two -year offering period and accounted for as having four separate tranches starting on the same initial enrollment date. The requisite service periods for the four tranches are approximately 6 , 12 , 18 , and 24 months. The Company accounts for forfeitures as they occur for all stock-based awards. Business Combinations The Company allocates the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets. Although the Company believes the assumptions and estimates it has made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. Examples of judgments used to estimate the fair value of intangibles assets include, but are not limited to, future expected cash flows, expected customer attrition rates, estimated obsolescence rates, and discount rates. These estimates are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statement of operations. Goodwill and Intangible Assets The Company evaluates and tests the recoverability of goodwill for impairment at least annually, on January 31, or more frequently if circumstances indicate that goodwill may not be recoverable. A qualitative assessment is performed to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of its one reporting unit is less than its carrying value. In assessing the qualitative factors, the Company considers the impact of certain key factors including macroeconomic conditions, industry and market considerations, management turnover, changes in regulation, litigation matters, changes in enterprise value, and overall financial performance. If the Company determines it is more likely than not that the fair value of its one reporting unit is less than its carrying value, a quantitative test is performed by estimating the fair value of its reporting unit, including goodwill, and comparing it to its carrying value. If the fair value is lower than the carrying value, the excess is recognized as an impairment loss. No impairment was recorded during the fiscal years ended January 31, 2022, January 31, 2021, or January 31, 2020. The change in the goodwill balance during the fiscal year ended January 31, 2022 was due to the acquisitions of Humio Limited (“Humio”) and Secure Circle, LLC (“SecureCircle”) and changes in foreign currency exchange rates. The change in the goodwill balance during the fiscal year ended January 31, 2021 was due to the acquisition of Preempt Security, Inc. (“Preempt Security”) and changes in foreign currency exchange rates. See Note 4, Balance Sheet Components, and Note 14, Acquisitions, to the consolidated financial statements for more information. Intangible assets, net, consisting of developed technology, customer relationships, and other acquired intangibles, are stated at cost less accumulated amortization on the consolidated balance sheets. All intangible assets have been determined to have definite lives and are amortized on a straight-line basis over their estimated economic lives, which are generally one to 20 years. Amortization expense related to developed technology is included in cost of revenue, amortization expense related to customer relationships is included in sales and marketing expenses, and amortization expense related to other acquired intangibles is included in cost of revenue, research and development expense and general and administrative expense. The Company reviews the carrying amounts of intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company measures the recoverability of intangible assets by comparing the carrying amount of each asset to the future undiscounted cash flows it expects the asset to generate. If the Company considers any of these assets to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value. Operating Leases The Company enters into operating lease arrangements for real estate assets related to office space. The Company determines if an arrangement is or contains a lease at inception by evaluating various factors, including whether a vendor’s right to substitute an identified asset is substantive. Lease classification is determined at the lease commencement date, which is the 87 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements date the leased assets are made available for use. Operating leases are included in “Operating lease right-of-use assets”, “Operating lease liabilities, current”, and “Operating lease liabilities, noncurrent” in the consolidated balance sheets. The Company did not have any financing leases in any of the periods presented. Operating lease right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Lease payments consist of the fixed payments under the arrangement, less any lease incentives, such as tenant improvement allowances. Variable costs, such as maintenance and utilities based on actual usage, are not included in the measurement of right-to-use assets and lease liabilities but are expensed when the event determining the amount of variable consideration to be paid occurs. As the implicit rate of the leases is not determinable, the Company uses an incremental borrowing rate (“IBR”) based on the information available at the lease commencement date in determining the present value of lease payments. Lease expenses are recognized on a straight-line basis over the lease term. The Company uses the non-cancelable lease term when recognizing the right-of-use (“ROU”) assets and lease liabilities, unless it is reasonably certain that a renewal or termination option will be exercised. The Company accounts for lease components and non-lease components as a single lease component. Leases with a term of twelve months or less are not recognized on the consolidated balance sheets but are recognized as expense on a straight-line basis over the term of the lease. Debt Issuance Costs Debt issuance costs incurred in connection with securing the Company’s financing arrangements are generally presented in the consolidated balance sheets as a direct deduction from the carrying amount of the outstanding borrowings, consistent with debt discounts. However, the Company has chosen to present debt issuance costs under “other long-term assets” for its revolving credit facility on the consolidated balance sheets regardless of whether the Company has any outstanding borrowings on the revolving credit facility. Debt issuance costs, net of accumulated amortization, were $ 4.6 million and $ 4.4 million as of January 31, 2022 and January 31, 2021, respectively. Debt issuance cost associated with the Senior Notes are recorded as a reduction to the carrying value of the Senior Notes on the consolidated balance sheets. The unamortized issuance costs relating to the Senior Notes were $ 2.3 million as of January 31, 2022. All deferred financing costs are being amortized to interest expense. The effective interest method is used for debt issuance cost related to the Senior Notes. Debt issuance costs related to the revolving credit facility are being amortized over the term of the financing arrangement under the straight-line method. The Company’s amortization of these costs were $ 1.0 million, $ 0.8 million and $ 0.4 million for the fiscal years ended January 31, 2022, 2021 and 2020, respectively. Foreign Currency Translation and Transactions The functional currencies of the Company’s foreign subsidiaries are each country’s local currency. Assets and liabilities of the subsidiaries are translated into U.S. Dollars at exchange rates in effect at the reporting date. Amounts classified in stockholders’ equity (deficit) are translated at historical exchange rates. Revenue and expenses are translated at the average exchange rates during the period. The resulting translation adjustments are recorded in accumulated other comprehensive income (loss). Foreign currency transaction gains or losses, whether realized or unrealized, are reflected in the consolidated statements of operations within Other income (expense), net, and have not been material for all periods presented. Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company accounts for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company establishes a liability for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. The Company’s assumptions, judgments and estimates relative to the current provision for income taxes take into account current 88 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements tax laws, the Company’s interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. The Company has established reserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities. In addition, the Company is subject to the continual examination of its income tax returns by the U.S. Internal Revenue Service (“IRS”) and other domestic and foreign tax authorities. The Company regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of its provision for income taxes and have reserved for potential adjustments that may result from such examinations. The Company believes such estimates to be reasonable; however, the final determination of any of these examinations could significantly impact the amounts provided for income taxes in the Company’s consolidated financial statements. Segment Information The Company’s chief operating decision maker (“CODM”) is its chief executive officer. The CODM reviews financial information presented on a consolidated basis for the purposes of allocating resources and evaluating financial performance. Accordingly, management has determined that the Company operates as one operating and reportable segment. Net Loss per Share The Company computes basic and diluted net loss per share attributable to common stockholders for Class A and Class B common stock using the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of outstanding stock options, RSUs, PSUs, ESPP obligations, and founder holdbacks. As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share. Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The Company adopted this guidance on February 1, 2021, which did not have a material effect on its consolidated financial statements. Recently Issued Accounting Pronouncements In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements. 3. Investments and Fair Value Measurements The Company follows ASC 820, Fair Value Measurements, with respect to cash equivalents that are measured at fair value on a recurring basis. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or a liability in an orderly transaction between market participants as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. 89 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements The hierarchy is broken down into three levels as follows: Level 1 Assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in active markets Level 2 Assets and liabilities whose values are based on quoted prices in markets that are not active or inputs that are observable for substantially the full term of the asset or liability Level 3 Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in thousands): January 31, 2022 January 31, 2021 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash equivalents (1) Money market funds $ 300,027 $ — $ — $ 300,027 $ — $ — $ — $ — Total assets $ 300,027 $ — $ — $ 300,027 $ — $ — $ — $ — ______________________________ (1) Included in “Cash and cash equivalents” on the consolidated balance sheets. There were no transfers between the levels of the fair value hierarchy during the periods presented. The following summarizes the changes in strategic investments, which are Level 3 within the fair value hierarchy (in thousands): Year Ended January 31 2022 2021 Total initial cost $ 18,809 $ 2,500 Unrealized gains due to changes in fair value 4,823 — Carrying value $ 23,632 $ 2,500 The following summarizes the changes in the redeemable convertible preferred stock warrant liability, which is classified as a Level 3 instrument: Year Ended January 31 2022 2021 2020 Balance at beginning of period $ — $ — $ 4,537 Adjustment resulting from change in fair value recognized in the consolidated statement of operations — — 6,022 Reclassification of redeemable convertible preferred stock warrant liability to additional paid-in capital upon IPO — — ( 10,559 ) Balance at end of period $ — $ — $ — The fair value of the redeemable convertible preferred stock warrant liability was estimated using the Black-Scholes option-pricing model and was based on significant inputs not observable in the market, and therefore was classified as a Level 3 instrument. The inputs include the Company’s preferred stock price, expected stock price volatility, risk-free interest rate, and 90 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements contractual term. A loss of $ 6.0 million was recorded as a component of Other income (expense), net, because of the remeasurement of the redeemable convertible preferred stock warrant liability during the fiscal year ended January 31, 2020. 4. Balance Sheet Components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands): January 31, 2022 2021 Prepaid software licenses $ 26,085 $ 20,596 Prepaid expenses 18,829 12,220 Prepaid marketing 17,629 10,852 Other current assets 12,783 4,566 Prepaid hosting services 4,026 5,383 Prepaid expenses and other current assets $ 79,352 $ 53,617 Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): January 31, 2022 2021 Data center and other computer equipment $ 198,297 $ 146,220 Capitalized internal-use software and website development costs 70,476 44,358 Leasehold improvements 22,029 19,733 Purchased software 5,232 3,211 Furniture and equipment 7,291 6,498 Construction in process 99,030 35,528 402,355 255,548 Less: Accumulated depreciation and amortization ( 141,778 ) ( 88,534 ) Property and equipment, net $ 260,577 $ 167,014 Construction in process mainly includes data center equipment purchased that has not yet been placed in service. Data center equipment that was purchased but not yet been placed into service was $ 89.8 million and $ 30.0 million as of January 31, 2022 and January 31, 2021, respectively. Depreciation and amortization expense of property and equipment was $ 54.4 million, $ 38.7 million, and $ 23.0 million, during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. There were no impairments for property and equipment during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020 . The Company capitalized $ 30.7 million, $ 14.0 million, and $ 8.1 million in internal-use software and website development costs during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. Amortization expense associated with internal-use software and website development costs totaled $ 12.4 million, $ 7.9 million and $ 6.2 million during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. The net book value of capitalized internal-use software and website development costs was $ 38.6 million and $ 19.5 million as of January 31, 2022 and January 31, 2021, respectively. 91 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Intangible Assets, Net Total intangible assets, net consisted of the following (dollars in thousands): January 31, 2022 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Amount (in months) Developed technology $ 97,668 $ 12,000 $ 85,668 79 Customer relationships 12,045 1,973 10,072 72 Other acquired intangible assets 2,397 801 1,596 89 Total $ 112,110 $ 14,774 $ 97,336 January 31, 2021 Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Amount (in months) Developed technology $ 14,513 $ 2,193 $ 12,320 56 Customer relationships 3,769 649 3,120 54 Other acquired intangible assets 399 162 237 185 Total $ 18,681 $ 3,004 $ 15,677 Amortization expense of intangible assets was $ 12.9 million, $ 1.4 million, and $ 0.5 million, during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. Amortization expense of other acquired intangible assets is recorded within cost of revenue, research and development expense and general and administrative expense in the consolidated statements of operations. The estimated aggregate future amortization expense of intangible assets as of January 31, 2022 is as follows (in thousands): Total Fiscal 2023 $ 16,300 Fiscal 2024 15,608 Fiscal 2025 15,524 Fiscal 2026 14,437 Fiscal 2027 12,261 Thereafter 23,206 Total amortization expense $ 97,336 The developed technology, customer relationships, and other acquired intangible assets are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging from 2 to 20 years. 92 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Goodwill The changes in goodwill during the fiscal year ended January 31, 2022 consisted of the following (in thousands): Amounts Goodwill as of January 31, 2021 $ 83,566 Goodwill acquired (1) 334,294 Foreign currency translation ( 1,415 ) Goodwill as of January 31, 2022 $ 416,445 __________________________________ (1) Goodwill acquired resulted from the acquisition of Humio and SecureCircle. Refer to Note 14, Acquisitions, for additional information. Other Assets, Noncurrent Other assets, noncurrent consisted of the following (in thousands): January 31, 2022 2021 Other assets $ 13,348 $ 8,627 Deferred income tax asset 4,802 1,328 Deferred finance cost 4,620 4,355 Deposits 2,576 2,802 Other assets, noncurrent $ 25,346 $ 17,112 Accrued Expenses Accrued expenses consisted of the following (in thousands): January 31, 2022 2021 Web hosting services $ 23,711 $ 14,187 Other accrued expenses 14,451 11,372 Accrued legal and accounting 14,166 5,709 Accrued purchases of property and equipment 10,878 4,570 Accrued interest expense 10,375 687 Accrued marketing 9,801 14,592 Accrued expenses $ 83,382 $ 51,117 Accrued Payroll and Benefits Accrued payroll and benefits consisted of the following (in thousands): January 31, 2022 2021 Accrued commissions $ 47,298 $ 32,300 Accrued payroll and related expenses 24,910 16,528 Accrued bonuses 17,591 12,110 Employee Stock Purchase Plan 14,764 10,969 Accrued payroll and benefits $ 104,563 $ 71,907 93 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements In April 2020, the Company began deferring payment on its share of payroll taxes owed, as permitted by the CARES Act, through December 31, 2020. As of January 31, 2022, the Company had deferred $ 5.1 million of payroll taxes in other current liabilities. Other Current Liabilities Other current liabilities consisted of the following (in thousands): January 31, 2022 2021 Other current liabilities $ 12,820 $ 9,652 Income tax payable 5,781 2,639 Accrued taxes 4,914 2,837 Customer deposits 1,414 2,371 Other current liabilities $ 24,929 $ 17,499 5. Debt Secured Revolving Credit Facility In April 2019, the Company entered into a Credit Agreement with Silicon Valley Bank and other lenders, to provide a revolving line of credit of up to $ 150.0 million, including a letter of credit sub-facility in the aggregate amount of $ 10.0 million, and a swingline sub-facility in the aggregate amount of $ 10.0 million. On January 4, 2021, the Company amended and restated its existing credit agreement (the “A&R Credit Agreement” and the facility thereunder the “Revolving Facility”) among CrowdStrike, Inc., as borrower, CrowdStrike Holdings, Inc., as guarantor, and Silicon Valley Bank and the other lenders party thereto, providing the Company with a revolving line of credit of up to $ 750.0 million, including a letter of credit sub-facility in the aggregate amount of $ 100.0 million, and a swingline sub-facility in the aggregate amount of $ 50.0 million. The Company also has the option to request an incremental facility of up to an additional $ 250.0 million from one or more of the lenders under the A&R Credit Agreement. The A&R Credit Agreement is guaranteed by all of the Company’s material domestic subsidiaries. The A&R Credit Agreement extended the maturity date of April 19, 2022 to January 2, 2026. On January 6, 2022, the Company modified the A&R Credit Agreement (the “Amended A&R Credit Agreement”) among CrowdStrike, Inc., as borrower, CrowdStrike Holdings, Inc., as guarantor, and Silicon Valley Bank and the other lenders party thereto. There were no changes to the borrowing amounts or maturity date. Under the Amended A&R Credit Agreement, revolving loans are Alternate Base Rate (“ABR”) Loans. Outstanding ABR Loans incur interest at the highest of (a) the Prime Rate, as published by the Wall Street Journal, (b) the federal funds rate in effect on such day plus 0.50 %, and (c) the Term Secured Overnight Finance Rate (the “Term SOFR”) for a one-month tenor in effect on such day plus 1.00 %, in each case plus a margin between ( 0.25 )% and 0.25 %, depending on the senior secured leverage ratio. The Company will be charged a commitment fee of 0.15 % to 0.25 % per year for committed but unused amounts, depending on the senior secured leverage ratio. The financial covenants require the Company to maintain a minimum consolidated interest coverage ratio of 3.00 :1.00, a maximum senior secured leverage ratio of 3.00 :1.00 (through January 31, 2023), and a maximum total leverage ratio of 5.50 :1.00 stepping down to 3.50 :1.00 over time. The Company was in compliance with the financial covenants as of January 31, 2022. The Amended A&R Credit Agreement is secured by substantially all of the Company’s current and future consolidated assets, property and rights, including, but not limited to, intellectual property, cash, goods, equipment, contractual rights, financial assets, and intangible assets of the Company and certain of its subsidiaries. The Amended A&R Credit Agreement contains customary covenants limiting the Company’s ability and the ability of its subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock, and make investments, in each case subject to certain exceptions. No amounts were outstanding under the Amended A&R Credit Agreement as of January 31, 2022. 94 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Senior Notes On January 20, 2021, the Company issued $ 750.0 million in aggregate principal amount of 3.00 % Senior Notes maturing in February 2029. The Senior Notes are guaranteed by the Company’s subsidiary, CrowdStrike, Inc. and will be guaranteed by each of the Company’s existing and future domestic subsidiaries that becomes a borrower or guarantor under the A&R Credit Agreement. The Senior Notes were issued at par and bear interest at a rate of 3.00 % per annum. Interest payments are payable semiannually on February 15 and August 15 of each year, commencing on August 15, 2021. The Company may voluntarily redeem the Senior Notes, in whole or in part, 1) at any time prior to February 15, 2024 at (a) 100.00 % of their principal amount, plus a “make whole” premium or (b) with the net cash proceeds received from an equity offering at a redemption price equal to 103.00 % of the principal amount, provided the aggregate principal amount of all such redemptions does not to exceed 40 % of the original aggregate principal amount of the Senior Notes; 2) at any time on or after February 15, 2024 at a prepayment price equal to 101.50 % of the principal amount; 3) at any time on or after February 15, 2025 at a prepayment price equal to 100.75 % of the principal amount; and 4) at any time on or after February 15, 2026 at a prepayment price equal to 100.00 % of the principal amount; in each case, plus accrued and unpaid interest, if any, to but excluding, the date of redemption. The net proceeds from the debt offering were $ 738.0 million after deducting the underwriting commissions of $ 9.4 million and $ 2.6 million of issuance costs. The debt issuance costs are being amortized to interest expense using the effective interest method over the term of the Senior Notes. Interest expense related to contractual interest expense, amortization of debt issuance costs and accretion of debt discount was $ 24.0 million and $ 0.8 million, respectively, during the fiscal year ended January 31, 2022 and January 31, 2021, respectively. In certain circumstances involving a change of control event, the Company will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s notes of that series at 101 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. The indenture governing the Senior Notes (the “Indenture”) contain covenants limiting the Company’s ability and the ability of its subsidiaries to create liens on certain assets to secure debt; grant a subsidiary guarantee of certain debt without also providing a guarantee of the Senior Notes; declare dividends; and consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to, another person. These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not apply during any period in which the notes are rated investment grade by Fitch Ratings, Inc. (“Fitch”), Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”). As of January 31, 2022, the Company was in compliance with all of its financial covenants under the Indenture associated with the Senior Notes. Based on the trading prices of the Senior Notes, the fair value of the Senior Notes as of January 31, 2022 was approximately $ 708.7 million. While the Senior Notes are recorded at cost, the fair value of the Senior Notes was determined based on quoted prices in markets that are not active; accordingly, the Senior Notes is categorized as Level 2 for purposes of the fair value measurement hierarchy. 6. Income Taxes The Company’s geographical breakdown of its loss before provision for income taxes for the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020 is as follows (in thousands): Year Ended January 31, 2022 2021 2020 Domestic $ ( 179,334 ) $ ( 94,713 ) $ ( 149,807 ) International 19,311 6,844 10,025 Loss before provision for income taxes $ ( 160,023 ) $ ( 87,869 ) $ ( 139,782 ) 95 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements The components of the provision for income taxes during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020 are as follows (in thousands): Year Ended January 31, 2022 2021 2020 Current Federal $ — $ — $ — State 611 401 104 Foreign 85,700 5,811 2,574 Total current 86,311 6,212 2,678 Deferred Federal ( 363 ) ( 136 ) ( 362 ) State ( 63 ) ( 317 ) ( 57 ) Foreign ( 13,530 ) ( 999 ) ( 262 ) Total deferred ( 13,956 ) ( 1,452 ) ( 681 ) Provision for income taxes $ 72,355 $ 4,760 $ 1,997 The following table provides a reconciliation between income taxes computed at the federal statutory rate and the provision for income taxes during the fiscal years ended January 31, 2022 , January 31, 2021, and January 31, 2020 (in thousands): As of January 31, 2022 2021 2020 Provision for income taxes at statutory rate $ ( 33,605 ) $ ( 18,453 ) $ ( 29,354 ) State income taxes, net of federal benefits 673 — 25 Foreign tax rate differential 574 1,994 207 Research and other credits ( 19,113 ) ( 9,373 ) ( 1,534 ) Stock-based compensation ( 145,964 ) ( 140,489 ) ( 43,477 ) Non-deductible expenses 2,783 2,212 1,773 Change in unrecognized tax benefits — — ( 2,659 ) Change in valuation allowance 210,680 168,869 77,016 Tax impact of restructuring 57,236 — — Other ( 909 ) — — Provision for income taxes $ 72,355 $ 4,760 $ 1,997 The Company recognized an income tax expense of $ 72.4 million, $ 4.8 million, and $ 2.0 million for the fiscal years January 31, 2022, January 31, 2021 and January 31, 2020, respectively. The tax expense for the fiscal years ended January 31, 2021 and January 31, 2020 was primarily attributable to pre-tax foreign earnings and withholding taxes related to customer payments in certain foreign jurisdictions in which the Company conducts business. The tax expense for the fiscal year ended January 31, 2022 was primarily attributable to pre-tax foreign earnings and the intercompany sale of intellectual property from Humio. The Company transferred acquired intellectual property from the foreign subsidiary to the U.S. Although the transfer of the intellectual property between consolidated entities did not result in any gain in the consolidated statement of operations, the Company generated a taxable gain in the foreign jurisdiction resulting in an additional tax expense of $ 57.2 million. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 96 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Significant components of the Company’s deferred tax assets and liabilities as of January 31, 2022 and January 31, 2021 are as follows (in thousands): As of January 31, 2022 2021 Deferred tax assets Net operating loss carryforwards $ 428,238 $ 289,889 Research and other credit carryforwards 56,539 22,778 Intangible assets 61,008 — Stock-based compensation 33,202 20,154 Deferred revenue 34,425 21,595 Accrued expenses 12,550 7,791 Operating lease liabilities 10,144 10,718 Capitalized research and development 154,625 63,158 Other, net 4,514 — Gross deferred assets 795,245 436,083 Less: Valuation allowance ( 770,861 ) ( 413,828 ) Total deferred tax assets 24,384 22,255 Deferred tax liabilities Property and equipment, net ( 8,769 ) ( 4,446 ) Capitalized Commissions ( 1,632 ) ( 2,960 ) Intangible assets — ( 3,697 ) Operating right-of-use assets ( 9,256 ) ( 9,610 ) Other, net — ( 302 ) Total deferred tax liabilities ( 19,657 ) ( 21,015 ) Net deferred tax assets (liabilities) $ 4,727 $ 1,240 At each reporting date, the Company has established a valuation allowance against its U.S. net deferred tax assets due to the uncertainty surrounding the realization of those assets. During the fiscal year ended January 31, 2020, the Company has established a valuation allowance against its net U.K. deferred tax assets due to uncertainty surrounding the realization of those assets. The Company periodically evaluates the recoverability of the deferred tax assets and, when it is determined to be more-likely-than-not that the deferred tax assets are realizable, the valuation allowance is reduced. During the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, the valuation allowance increased by $ 357.0 million, $ 206.2 million, and $ 87.2 million, respectively. The increase in the valuation allowance during the fiscal years ended January 31, 2022, January 31, 2021 and January 31, 2020 was primarily driven by losses generated in the United States and United Kingdom. As of January 31, 2022, January 31, 2021, and January 31, 2020 the valuation allowance for deferred taxes balance was $ 770.9 million, $ 413.8 million, and $ 207.6 million, respectively. As of January 31, 2022, the Company had aggregate federal and California net operating loss carryforwards of $ 1.6 billion and $ 168.9 million, respectively, which may be available to offset future taxable income for income tax purposes. The federal and California net operating loss carryforwards begin to expire in fiscal 2031 through fiscal 2042. In addition, for federal losses generated after December 31, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) modified the maximum deduction of net operating loss, eliminated carryback, and provided an indefinite carryforward. As of January 31, 2022, net operating loss carryforwards for other states total $ 868.0 million which begin to expire in fiscal 2023 through fiscal 2042. As of January 31, 2022, net operating loss carryforwards for United Kingdom total $ 81.1 million which are carried forward indefinitely. As of January 31, 2022, the Company had federal and California research and development credit (“R&D credit”) carryforwards of $ 65.6 million and $ 13.7 million, respectively. The federal R&D credit carryforwards will begin to expire in fiscal 2035 though fiscal 2042. The California R&D credits are carried forward indefinitely. 97 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Realization of these net operating loss and research and development credit carryforwards depends on future income, and there is a risk that the Company’s existing carryforwards could expire unused and be unavailable to offset future income tax liabilities. The Internal Revenue Code imposes limitations on a corporation’s ability to utilize net operating loss (“NOLs”) and credit carryovers if it experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. If an ownership change has occurred, or were to occur, utilization of the Company’s NOLs and credit carryovers could be restricted. The Company’s net operating losses and credit carryovers are not currently subject to a limitation due to an ownership change. The total gross unrecognized tax benefit as of January 31, 2022, January 31, 2021 and January 31, 2020 were $ 26.3 million, $ 24.4 million, and $ 5.5 million, respectively. As of January 31, 2022, the Company had $ 1.9 million of unrecognized tax benefits, which, if recognized, would affect the Company’s effective tax rate. The Company’s policy is to classify interest and penalties related to unrecognized tax benefits as part of the income tax provision in the consolidated statements of operations. The Company had incurred insignificant amounts of interest and penalties related to unrecognized tax benefits as of January 31, 2022 and did not accrue interest and penalties in prior periods. During the fiscal years ended January 31, 2022 and 2021, the net increase in uncertain tax benefits was a result of research and development credits. During the fiscal year ended January 31, 2020, the uncertain tax benefits balance decreased due to the application of IRS directive in determining the research credit. The potential change in unrecognized tax benefits during the next 12 months is not expected to be material. The following is a rollforward of the total gross unrecognized tax benefits for the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020 (in thousands): Balance as of February 1, 2019 $ 8,128 Decreases in current period tax positions ( 2,659 ) Balance as of January 31, 2020 5,469 Increases in prior period tax positions 6,926 Increase in current period tax positions 12,052 Balance as of January 31, 2021 24,447 Increases in prior period tax positions 186 Decreases in prior period tax positions ( 9,772 ) Increase in current period tax positions 11,463 Balance as of January 31, 2022 $ 26,324 The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Tax years 2011 and onwards remain subject to examination by U.S. taxing authorities due to the Company’s net operating losses and R&D credit carryforwards. The Company does not provide for federal and state income taxes on the undistributed earnings of its foreign subsidiaries as such earnings are to be reinvested offshore indefinitely. As a result of the Tax Act, if the Company repatriated these earnings, the tax impact of future distributions of foreign earnings would generally be limited to withholding tax from local jurisdictions, and the resulting income tax liability would be insignificant. 7. Equity Transactions Common Stock In connection with the IPO, on June 14, 2019, the Company filed an Amended and Restated Certificate of Incorporation which authorizes the issuance of 2,000,000,000 shares of Class A common stock with a par value of $ 0.0005 per share, 300,000,000 shares of Class B common stock with a par value of $ 0.0005 per share, and 100,000,000 shares of undesignated preferred stock with a par value of $ 0.0005 per share. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible 98 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements into one share of Class A common stock. Class A and Class B common stockholders are not entitled to receive dividends unless declared by the Company’s board of directors. Claims Settlement In December 2019, a security holder paid the Company $ 2.3 million to settle a claim under Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) requires certain persons and entities whose securities trading activities result in “short swing” profits to repay such profits to the issuer of the security. This payment was recorded as an increase to stockholders’ equity and as cash provided by financing activities in the consolidated statement of cash flows for the fiscal year ended January 31, 2020. 8. Leases Operating Leases The Company has entered into non-cancelable operating lease agreements with various expiration dates through fiscal 2027. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments. Cash paid for amounts included in the measurement of operating lease liabilities were $ 11.8 million and $ 11.0 million for the fiscal years ended January 31, 2022 and January 31, 2021, respectively. Operating lease liabilities arising from obtaining operating right of-use assets were $ 4.9 million and $ 6.2 million for the fiscal years ended January 31, 2022 and January 31, 2021, respectively. The weighted-average remaining lease term are 3.0 years and 4.1 years as of January 31, 2022 and January 31, 2021, respectively. The weighted-average discount rates are 5.4 % and 5.9 % as of January 31, 2022 and January 31, 2021, respectively. The component of lease costs was as follows (in thousands): Year Ended January 31, 2022 2021 Lease cost Operating lease cost $ 11,262 $ 10,308 Short-term lease cost 1,918 1,957 Variable lease cost 4,874 3,007 Total lease cost $ 18,054 $ 15,272 Total rent expense recognized prior to the adoption of Topic 842 were $ 10.3 million for the year ended January 31, 2020. There was no sublease income for the fiscal year ended January 31, 2022 or January 31, 2021. As of January 31, 2022, the Company has not entered into any non-cancelable operating leases with a term greater than 12 months that have not yet commenced. The maturities of the Company’s non-cancelable operating lease liabilities are as follows (in thousands): January 31, 2022 Fiscal 2023 $ 10,539 Fiscal 2024 11,861 Fiscal 2025 10,728 Fiscal 2026 4,791 Fiscal 2027 558 Total operating lease payments 38,477 Less: imputed interest ( 3,278 ) Present value of operating lease liabilities $ 35,199 99 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements 9. Stock-Based Compensation Stock Incentive Plan In May 2019, the Company’s board of directors adopted, and the stockholders approved the CrowdStrike Holdings, Inc. 2019 Equity Incentive Plan (the “2019 Plan”) with the purpose of granting stock-based awards to employees, directors, officers and consultants, including stock options, restricted stock awards, restricted stock units and performance-based restricted stock units. A total of 8,750,000 shares of Class A common stock were initially available for issuance under the 2019 Plan. The Company’s compensation committee administers the 2019 Plan. The number of shares of the Company’s common stock available for issuance under the 2019 Plan is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2020, equal to the lesser of: (i) two percent ( 2.0 %) of outstanding shares of the Company’s capital stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as the Company’s board of directors may determine. The 2011 Plan was terminated on June 10, 2019, which was the business day prior to the effectiveness of the Company’s registration statement on Form S-1 used in connection with the Company’s IPO, and stock-based awards are no longer granted under the 2011 Plan. Any shares underlying stock options that expire or terminate or are forfeited or repurchased under the 2011 Plan will be automatically transferred to the 2019 Plan. Stock Options The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The expected term represents the period that the Company’s share-based awards are expected to be outstanding. The expected term assumptions were determined based on the vesting terms, exercise terms, and contractual lives of the options. The expected stock price volatility is based upon comparable public company data. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated option life. The fair value of each option was estimated on the date of grant using the following assumptions during the period: Year Ended January 31, 2022 2021 2020 Expected term (in years) 3.82 – 5.63 3.17 – 6.05 6.05 Risk-free interest rate 0.6 % – 1.0 % 0.2 % – 0.4 % 2.0 % – 2.4 % Expected stock price volatility 36.1 % – 37.1 % 35.8 % – 37.3 % 37.7 % – 37.9 % Dividend yield — % — % — % The following table is a summary of stock option activity for the fiscal year ended January 31, 2022: Number of Shares Weighted- Average Exercise Price Per Share (in thousands) Options outstanding at January 31, 2021 6,646 $ 8.24 Granted 93 $ 3.19 Exercised ( 2,598 ) $ 6.12 Canceled ( 203 ) $ 28.42 Options outstanding at January 31, 2022 3,938 $ 8.48 Options vested and expected to vest at January 31, 2022 3,938 $ 8.48 Options exercisable at January 31, 2022 2,767 $ 6.99 Options outstanding include 362,406 options that were unvested as of January 31, 2022. The aggregate intrinsic value of options vested and exercisable was $ 480.5 million, $ 711.4 million, and $ 469.6 million as of January 31, 2022, January 31, 2021, and January 31, 2020, respectively. The weighted-average remaining contractual term of 100 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements options vested and exercisable was 5.7 years, 6.4 years, and 6.7 years as of January 31, 2022, January 31, 2021, and January 31, 2020, respectively. The weighted-average grant date fair values of all options granted was $ 180.08 , $ 66.31 , and $ 9.51 per share during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. The total intrinsic value of all options exercised was $ 570.9 million, $ 847.5 million, and $ 407.9 million during the fiscal years ended January 31, 2022, January 31, 2021, and January 31, 2020, respectively. The aggregate intrinsic value of stock options outstanding as of January 31, 2022, January 31, 2021, and January 31, 2020 was $ 678.0 million, $ 1.4 billion, and $ 816.3 million, respectively, which represents the excess of the fair value of the Company’s common stock over the exercise price of the options multiplied by the number of options outstanding. The weighted-average remaining contractual term of stock options outstanding was 6.1 years, 7.0 years, and 7.4 years as of January 31, 2022, January 31, 2021, and January 31, 2020, respectively. Total unrecognized stock-based compensation expense related to unvested options was $ 16.6 million as of January 31, 2022. This expense is expected to be amortized on a straight-line basis over a weighted-average vesting period of 1.4 years. Total unrecognized stock-based compensation expense related to unvested options was $ 24.3 million as of January 31, 2021. This expense is expected to be amortized on a straight-line basis over a weighted-average vesting period of 1.7 years. Early Exercise of Employee Options The 2011 Stock Plan allows for the early exercise of stock options for certain individuals as determined by the Board of Directors. The consideration received for an early exercise of an option is a deposit of the exercise price and the related dollar amount is recorded as a liability for early exercise of unvested stock options in the consolidated balance sheets. This liability is reclassified to additional paid-in capital as the awards vest. If a stock option is early exercised, the unvested shares may be repurchased by the Company in case of employment termination or for any reason, including death and disability, at the price paid by the purchaser for such shares. There were no issued shares of common stock related to early exercised stock options during the fiscal year ended January 31, 2022 or January 31, 2021. As of January 31, 2022, the number of shares of common stock related to early exercised stock options subject to repurchase was 197,994 shares for $ 2.2 million. As of January 31, 2021, the number of shares of common stock related to early exercised stock options subject to repurchase was 548,028 shares for $ 5.4 million. Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The Company includes unvested shares subject to repurchase in the number of shares outstanding in the consolidated balance sheet and statements of stockholders’ equity (deficit). Restricted Stock Units Restricted Stock Units (“RSUs”) granted under the 2019 Plan are generally subject to only service-based vesting condition. The service-based vesting condition is generally satisfied based on one of four vesting schedules: (i) vesting of one-fourth of the RSUs on the first “Company vest date” (defined as March 20, June 20, September 20, or December 20) on or following the one-year anniversary of the vesting commencement date with the remainder of the RSUs vesting in twelve equal quarterly installments thereafter, subject to continued service, (ii) vesting in sixteen equal quarterly installments, subject to continued service, (iii) vesting in eight equal quarterly installments, subject to continued service, or (iv) vesting sixteen quarterly installments with 10 % in the first year, 15 % in the second year, 25 % in the third year and 50 % in the fourth year, subject to continued service. The valuation of such RSUs is based solely on the fair value of the Company’s stock price on the date of grant. Expense for RSUs are generally amortized on a straight-line basis. Total unrecognized stock-based compensation expense related to unvested RSUs was $ 702.3 million as of January 31, 2022. This expense is expected to be amortized (subject to acceleration or straight-line basis) over a weighted-average vesting period of 2.3 years. Total unrecognized stock-based compensation expense related to unvested RSUs was $ 393.9 million as of January 31, 2021. This expense is expected to be amortized on an accelerated attribution method over a weighted-average vesting period of 2.6 years. Performance-based Stock Units Performance-based stock units (“PSUs”) granted under the 2019 Plan are generally subject to both a service-based vesting condition and a performance-based vesting condition. PSUs will vest upon the achievement of specified performance targets 101 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements and subject to continued service through the applicable vesting dates. The compensation cost is recognized over the requisite service period when it is probable that the performance condition will be satisfied. Expense for PSUs is being amortized under the accelerated attribution method and may be adjusted over the vesting period based on interim estimates of performance against pre-set objectives. Total unrecognized stock-based compensation expense related to unvested PSUs was $ 42.9 million as of January 31, 2022. This expense is expected to be amortized over a weighted-average vesting period of 1.2 years. Total unrecognized stock-based compensation expense related to unvested PSUs was $ 24.8 million as of January 31, 2021. This expense is expected to be amortized over a weighted-average vesting period of 1.3 years. Special PSU Awards In fiscal 2022 the Company’s Board of Directors granted 655,000 performance stock units (the “Special PSU Awards”) to certain executives under the 2019 Plan. The Special PSU Awards will vest upon the satisfaction of the Company’s achievement of specified stock price hurdles, which is based on the average of the closing stock price per share of the Company’s Class A common stock during any 45 consecutive trading day period during the applicable performance period, and a service-based vesting condition. The service condition applicable to each tranche of the Special PSU Awards will be satisfied in installments as follows, subject to continued employment with the Company through each applicable vesting date: (i) 50 % of the Special PSU Awards underlying the applicable tranche will service vest on the first anniversary of the vesting commencement date applicable to such tranche of the Special PSU Awards (i.e., February 1, 2022, February 1, 2023, February 1, 2024 and February 1, 2025) and (ii) the remaining PSUs with respect to such tranche will thereafter service vest in four equal quarterly installments of 12.5 %. The Company measured the fair value of the Special PSU Awards using a Monte Carlo simulation valuation model. The risk-free interest rates used were 0.85 % - 1.51 %, which was based on the zero-coupon-risk-free interest rate derived from the Treasury Constant Maturities yield curve for the expected term of the award on the grant date. The expected volatility was a blended volatility rate of 54.89 % - 55.36 %, which includes 50 % weight on the Company’s historical volatility calculated from daily stock returns over a 2.21 - 2.58 year look-back from the grant date and 50 % weight based on the Company’s implied volatility as of the grant date. Stock-based compensation expense relating to the Special PSU Awards are recognized using the accelerated attribution method over the longer of the derived service period and the explicit service period. Total unrecognized stock-based compensation expense related to the unvested portion of the Special PSU Awards was $ 118.4 million as of January 31, 2022. This expense is expected to be amortized over a weighted-average vesting period of 2.8 years. The following table is a summary of RSUs, PSUs and the Special PSU Awards activities for the fiscal year ended January 31, 2022: Number of Shares Weighted-Average Grant Date Fair Value Per Share (in thousands) RSUs and PSUs outstanding at January 31, 2021 8,449 $ 59.27 Granted 3,387 $ 224.19 Released ( 3,408 ) $ 62.62 Performance adjustment (1) 153 $ 58.15 Forfeited ( 695 ) $ 99.78 RSUs and PSUs outstanding at January 31, 2022 7,886 $ 125.04 RSUs and PSUs expected to vest at January 31, 2022 7,886 $ 125.04 ___________________________ 102 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements (1) Performance adjustment represents adjustments in shares outstanding due to the actual achievement of performance-based awards, the achievement of which was based upon predefined financial performance targets. Employee Stock Purchase Plan In May 2019, the board of directors adopted, and the stockholders approved the CrowdStrike Holdings, Inc. 2019 Employee Stock Purchase Plan (“ESPP”), which became effective on June 10, 2019, which was the business day prior to the effectiveness of the Company’s registration statement on Form S-1 used in connection with the Company’s IPO. A total of 3,500,000 shares of Class A common stock were initially reserved for issuance under the ESPP. The Company’s compensation committee administers the ESPP. The number of shares of common stock available for issuance under the ESPP is subject to an annual increase on the first day of each fiscal year beginning on February 1, 2020, equal to the lesser of: (i) one percent ( 1 %) of outstanding shares of the Company’s capital stock as of the last day of the immediately preceding fiscal year or (ii) such other amount as its board of directors may determine. In May 2021, the Company’s compensation committee adopted an amendment and restatement of the ESPP, which was approved by the Company’s stockholders in June 2021. The amended and restated ESPP clarified the original intent that the annual increase will in no event exceed 5,000,000 shares of the Company’s Class A common stock in any year. The ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and is comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 11 and December 11 of each year. The first offering period commenced on June 11, 2019 and ended on June 10, 2021. The ESPP provides eligible employees with an opportunity to purchase shares of the Company’s Class A common stock through payroll deductions of up to 15 % of their eligible compensation. A participant may purchase a maximum of 2,500 shares of common stock during a purchase period. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each six-month purchase period. The purchase price of the shares shall be 85 % of the lower of the fair market value of the Class A common stock on (i) the first trading day of the applicable offering period and (ii) the last trading day of each purchase period in the related offering period. Participants may end their participation at any time during an offering period and will be paid their accrued contributions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment. The ESPP allows for up to one increase in contribution during each purchase period. If an employee elects to increase his or her contribution, the Company treats this as an accounting modification. The pre- and post-modification fair values are calculated on the date of the modification, and the incremental expense is then amortized over the remaining purchase period. Incremental expense as a result of such modification was $ 6.2 million and $ 3.5 million for the fiscal years ended January 31, 2022 and January 31, 2021, respectively. The ESPP offers a two-year look-back feature as well as a rollover feature that provides for an offering period to be rolled over to a new lower-priced offering if the offering price of the new offering period is less than that of the current offering period. An ESPP rollover occurred when the Company’s closing stock price on December 10, 2021 was below the closing stock price on June 11, 2021, which triggered a new 24-month offering period through December 10, 2023 and resulted in an immaterial modification charge during the fiscal year ended January 31, 2022. Employee payroll contributions ultimately used to purchase shares are reclassified to stockholders’ equity on the purchase date. ESPP employee payroll contributions accrued of $ 14.8 million and $ 11.0 million as of January 31, 2022 and January 31, 2021, respectively, and are included within accrued payroll and benefits in the consolidated balance sheets. The following table summarizes the assumptions used in the Black-Scholes option-pricing model to determine fair value of the Company’s common shares to be issued under the ESPP for the offering periods beginning in June 2019: Year Ended January 31, 2022 2021 2020 Expected term (in years) 0.5 – 2.0 0.5 – 2.0 0.5 – 2.0 Risk-free interest rate 0.0 % – 1.9 % 0.1 % – 2.0 % 1.6 % – 2.2 % Expected stock price volatility 33.0 % – 55.9 % 30.1 % – 54.3 % 30.1 % – 35.7 % Dividend yield — % — % — % 103 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Stock-Based Compensation Expense Stock-based compensation expense included in the consolidated statements of operations is as follows (in thousands): Year Ended January 31, 2022 2021 2020 Subscription cost of revenue $ 22,044 $ 11,705 $ 5,226 Professional services cost of revenue 10,050 6,005 2,486 Sales and marketing 89,634 50,557 23,919 Research and development 102,027 40,274 15,403 General and administrative 86,197 41,134 32,906 Total stock-based compensation expense $ 309,952 $ 149,675 $ 79,940 10. Revenue, Deferred Revenue and Remaining Performance Obligations The following table summarizes the revenue from contracts by type of customer (in thousands, except percentages): Year Ended January 31, 2022 2021 2020 Amount % Revenue Amount % Revenue Amount % Revenue Channel Partners $ 1,093,336 75 % $ 655,031 75 % $ 331,279 69 % Direct Customers 358,258 25 % 219,407 25 % 150,134 31 % Total revenue $ 1,451,594 100 % $ 874,438 100 % $ 481,413 100 % The Company uses channel partners to complement direct sales and marketing efforts. The partners place an order with the Company after negotiating the order directly with an end customer. The partners negotiate pricing with the end customer and in some rare instances are responsible for certain support levels directly with the end customer. The Company’s contract is with the partner and payment to the Company is not contingent on the receipt of payment from the end customer. The Company recognizes the contractual amount charged to the partners as revenue ratably over the term of the arrangement once access to the Company’s solution has been provided to the end customer. The Company also uses referral partners who refer customers in exchange for a referral fee. The Company negotiates pricing and contracts directly with the end customer. The Company recognizes revenue from the sales to the end customers ratably over the term of the contract once access to the Company’s solution has been provided to the end customer. The following table summarizes the revenue by region based on the shipping address of customers who have contracted to use the Company’s platform or service (in thousands, except percentages): Year Ended January 31, 2022 2021 2020 Amount % Revenue Amount % Revenue Amount % Revenue United States $ 1,046,474 72 % $ 627,402 72 % $ 356,513 74 % Europe, Middle East, and Africa 200,198 14 % 123,900 14 % 67,428 14 % Asia Pacific 142,686 10 % 80,185 9 % 37,672 8 % Other 62,236 4 % 42,951 5 % 19,800 4 % Total revenue $ 1,451,594 100 % $ 874,438 100 % $ 481,413 100 % No single country other than the United States represented 10% or more of the Company’s total revenue during the fiscal years ended January 31, 2022, January 31, 2021 or January 31, 2020. 104 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Contract Balances Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. The Company recognized revenue of $ 696.7 million and $ 410.7 million for the fiscal years ended January 31, 2022 and January 31, 2021, respectively, that were included in the corresponding contract liability balance at the beginning of the period. The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 – 60 days. Contract assets include amounts related to the contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced. Changes in deferred revenue were as follows (in thousands): Year Ended January 31, 2022 2021 Beginning Balance $ 911,895 $ 571,168 Additions to deferred revenue 2,069,020 1,215,165 Recognition of deferred revenue ( 1,451,594 ) ( 874,438 ) Ending Balance $ 1,529,321 $ 911,895 Remaining Performance Obligations The Company’s subscription contracts with its customers have a typical term of one to three years and most subscription contracts are non-cancelable. Customers typically have the right to terminate their contracts for cause as a result of the Company’s failure to perform. As of January 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 2.3 billion. The Company expects to recognize approximately 65 % of the remaining performance obligations in the 12 months following January 31, 2022 and 34 % between 13 to 36 months, with the remainder to be recognized thereafter. Costs to Obtain and Fulfill a Contract The Company capitalizes referral fees paid to partners and sales commission and associated payroll taxes paid to internal sales personnel, contractors or sales agents that are incremental to the acquisition of channel partner and direct customer contracts and would not have occurred absent the customer contract. These costs are recorded as deferred contract acquisition costs, current and deferred contract acquisition costs, noncurrent on the consolidated balance sheets. Sales commissions for renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract or follow-on upsell given the substantive difference in commission rates in proportion to their respective contract values. Commissions, including referral fees paid to referral partners, earned upon the initial acquisition of a contract or subsequent upsell are amortized over an estimated period of benefit of 4 years while commissions earned for renewal contracts are amortized over the contractual term of the renewals. Sales commissions associated with professional service contracts are amortized ratably over an estimated period of benefit of six months and included in sales and marketing expense in the consolidated statements of operations. In determining the period of benefit for commissions paid for the acquisition of the initial contract, the Company took into consideration the expected subscription term and expected renewals of customer contracts, the historical duration of relationships with customers, customer retention data, and the life of the developed technology. The Company periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs. The Company did no t recognize any material impairment losses of deferred contract acquisition costs during the year ended January 31, 2022. 105 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements The following table summarizes the activity of deferred contract acquisition costs (in thousands): Year Ended January 31, 2022 2021 Beginning balance $ 198,756 $ 114,206 Capitalization of contract acquisition costs 234,308 150,975 Amortization of deferred contract acquisition costs ( 113,884 ) ( 66,425 ) Ending balance $ 319,180 $ 198,756 Deferred contract acquisition costs, current $ 126,822 $ 80,850 Deferred contract acquisition costs, noncurrent 192,358 117,906 Total deferred contract acquisition costs $ 319,180 $ 198,756 11. Commitments and Contingencies Purchase Obligations The Company enters into long-term non-cancelable agreements with providers to purchase data center capacity, such as bandwidth and colocation space, for the Company’s cloud platform. As of January 31, 2022, the Company is committed to spend $ 48.1 million on such agreements through fiscal 2028. These obligations are included in purchase obligations below. In the normal course of business, the Company enters into non-cancelable purchase commitments with various parties to purchase products and services such as technology, equipment, office renovations, corporate events, and consulting services. A summary of noncancellable purchase obligations in excess of one year as of January 31, 2022 with expected date of payment is as follows (in thousands): Total Commitments Fiscal 2023 $ 67,540 Fiscal 2024 72,438 Fiscal 2025 27,039 Fiscal 2026 7,094 Fiscal 2027 2,944 Thereafter 564 Total purchase commitments $ 177,619 In October 2021, the Company entered into a new private pricing addendum with Amazon Web Services (“AWS”), which provides the Company with cloud computing infrastructure. Under the new pricing addendum, the minimum commitment is $ 600.0 million of cloud services from AWS through September 2026. As of January 31, 2022, the Company had utilized $ 53.2 million of this commitment. The remaining commitment is excluded from the table above and the Company expects to meet its remaining commitment with AWS. Letters of Credit As of January 31, 2022 and January 31, 2021, the Company had an unused standby letter of credit for $ 0.4 million securing its facility in Sunnyvale, California. As of January 31, 2022 and January 31, 2021, the Company had an unused standby letter of credit for $ 0.8 million and $ 1.0 million, respectively, securing the facility housing its principal executive offices in Austin, Texas. Litigation In November 2016, Fair Isaac Corporation (“FICO”) filed a petition before the Trademark Trial and Appellate Board (“TTAB”) at the U.S. Patent and Trademark Office, seeking cancellation of the Company’s registration of its “CrowdStrike 106 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements Falcon” trademark, and a notice of opposition of the Company’s trademark application for “Falcon OverWatch.” The Company denies that any of the relief FICO seeks is appropriate, and has itself moved to cancel, or in the alternative amend, FICO’s “Falcon” trademark registrations before the TTAB. The proceedings have been consolidated and are in the discovery phase. The Company is vigorously defending the case, but given the early stage, although a loss may reasonably be possible, the Company is unable to predict the likelihood of success of FICO’s claims or estimate a loss or range of loss. As a result, no material liability has been recorded as of January 31, 2022 or January 31, 2021. In March 2022, Webroot, Inc. and Open Text, Inc. (collectively, “Webroot”) filed a lawsuit against the Company in federal court in the Western District of Texas alleging that certain of the Company’s products infringe six patents held by them. In the complaint, Webroot sought unspecified damages, attorneys’ fees and a permanent injunction. The Company is evaluating Webroot’s claims and intends to vigorously defend against them. In addition, the Company is involved in various other legal proceedings and subject to claims that arise in the ordinary course of business. For any claims for which the Company believes a liability is both probable and reasonably estimable, the Company records a liability in the period for which it makes this determination. There is no pending or threatened legal proceeding to which the Company is a party that, in the Company’s opinion, is likely to have a material adverse effect on its consolidated financial statements; however, the results of litigation and claims are inherently unpredictable. Regardless of the outcome, litigation can have an adverse impact on the Company’s business because of defense and settlement costs, diversion of management resources, and other factors. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect the Company’s consolidated financial statements. Warranties and Indemnification The Company’s cloud computing services are typically warranted to perform in a manner consistent with general industry standards that are reasonably applicable and materially in accordance with the Company’s online help documentation under normal use and circumstances. The Company’s arrangements generally include certain provisions for indemnifying customers against liabilities if its products or services infringe a third party’s intellectual property rights. In addition, for its Falcon Complete customers, the Company offers a limited warranty, subject to certain conditions, to cover certain costs incurred by the customer in case of a cybersecurity breach. The Company has entered into an insurance policy to reduce its potential liability arising from this limited warranty arrangement. To date, the Company has not incurred any material costs because of such obligations and has not accrued any liabilities related to such obligations in the consolidated financial statements. The Company has also agreed to indemnify its directors and certain executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by the Company, arising out of that person’s services as the Company’s director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that would generally enable the Company to recover a portion of any future amounts paid. The Company may also be subject to indemnification obligations by law with respect to the actions of its employees under certain circumstances and in certain jurisdictions. No liabilities have been accrued associated with this indemnification provision as of January 31, 2022 or January 31, 2021 . 12. Geographic Information The Company’s long-lived assets are composed of property and equipment, net, and operating lease right-of-use assets, are summarized by geographic area as follows (in thousands): January 31, 2022 2021 United States $ 256,282 $ 174,889 International 36,030 28,609 Total property and equipment, net and operating lease right-of-use assets $ 292,312 $ 203,498 107 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements No single country other than the United States represented 10% or more of the Company’s total long-lived assets as of January 31, 2022 and January 31, 2021. 13. Related Party Transactions Subscription and Professional Services Revenue from Related Parties During the fiscal years ended January 31, 2022, January 31, 2021 and January 31, 2020, certain investors and companies with whom the Company’s Board of Directors are affiliated with, purchased subscriptions and professional services. The Company recorded revenue from subscriptions and professional services from related parties of $ 7.7 million, $ 4.3 million, and $ 9.0 million during the fiscal years ended January 31, 2022, January 31, 2021 and January 31, 2020, respectively. Accounts receivable associated with these related parties was $ 2.2 million, and $ 1.3 million as of January 31, 2022 and January 31, 2021, respectively. Accounts Payable to Related Parties During the fiscal years ended January 31, 2022, January 31, 2021 and January 31, 2020, the Company purchased goods and services totaling $ 26.0 million, $ 8.8 million, and $ 3.2 million, respectively, from certain investors and companies with whom its Board of Directors are affiliated with. The accounts payable to such vendors was $ 3.7 million and immaterial as of January 31, 2022 and January 31, 2021, respectively. 14. Acquisitions Secure Circle, LLC On November 29, 2021, the Company acquired 100 % of the equity interest of Secure Circle, LLC (“SecureCircle”), a SaaS-based cybersecurity service that extends Zero Trust security to data on, from and to the endpoint. The acquisition has been accounted for as a business combination. The total consideration transferred was $ 60.8 million, which consisted solely of cash. The purchase price was allocated, on a preliminary basis, to identified intangible assets, which include developed technology and customer relationships of $ 18.3 million, net tangible assets acquired of $( 0.5 ) million and goodwill of $ 43.0 million allocated to the Company’s one reporting unit, representing the excess of the purchase price over the fair value of net tangible and intangible assets acquired. The goodwill was primarily attributable to the assembled workforce of SecureCircle, planned growth in new markets and synergies expected to be achieved from the integration of SecureCircle. Goodwill was deductible for income tax purposes. Subsequent to the closing of the acquisition, SecureCircle employees were granted RSUs and PSUs under the 2019 Plan. The awards which are subject to continued service will be recognized ratably as stock-based compensation expense over the requisite service period. The awards which are based on specified performance targets will be recognized under the accelerated attribution method. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands): Fair Value Useful Life (in months) Developed technology $ 15,300 72 Customer relationships 3,000 72 Total intangible assets acquired $ 18,300 The Company incurred acquisition expense of $ 1.2 million for the fiscal year ended January 31, 2022. The acquisition costs are recorded in general and administrative expenses on the Company’s consolidated statement of operations. 108 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements The results of operations of SecureCircle have been included in the Company’s consolidated financial statements from the date of acquisition. The acquisition of SecureCircle did not have a material impact on the Company’s consolidated financial statements, and therefore historical and pro forma disclosures have not been presented. Humio Limited On March 5, 2021, the Company acquired 100 % of the equity interest of Humio Limited (“Humio”), a privately-held company that is a leading provider of high-performance cloud log management and observability technology. The total consideration transferred was $ 370.3 million which consisted of $ 353.8 million in cash, net of $ 12.5 million cash acquired, and $ 4.0 million representing the fair value of replacement equity awards attributable to pre-acquisition service. The purchase price was allocated, to identified intangible assets, which include developed technology, customer relationships, and trade names, of $ 75.6 million, net tangible assets acquired of $ 3.4 million, and goodwill of $ 291.3 million allocated to the Company’s one reporting unit, representing the excess of the purchase price over the fair value of net tangible and intangible assets acquired. The goodwill was primarily attributable to the assembled workforce of Humio, planned growth in new markets, and synergies expected to be achieved from the integration of Humio. Goodwill is not deductible for income tax purposes. Per the terms of the share purchase agreement with Humio, certain unvested stock options held by Humio employees were canceled and exchanged for replacement stock options under the 2019 Plan. Additionally, certain shares of stock issued pursuant to share-based compensation awards to entities affiliated with certain Humio employees were exchanged for replacement RSAs of the Company, which are subject to future vesting. The portion of the fair value of the replacement equity awards associated with pre-acquisition service of Humio’s employees represented a component of the total purchase consideration. The remaining fair value of these issued awards is subject to the recipients’ continued service and thus were excluded from the purchase price. In addition, Humio employees were granted RSUs and PSUs under the 2019 Plan. The awards which are subject to continued service will be recognized ratably as stock-based compensation expense over the requisite service period. The awards which are based on specified performance targets will be recognized under the accelerated attribution method. The following table sets forth the preliminary fair value of the identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands): Fair Value Useful Life (in months) Developed technology $ 68,800 96 Customer relationships 5,400 96 Trade names 1,400 24 Total intangible assets acquired $ 75,600 The Company incurred acquisition expense of $ 5.0 million for the fiscal year ended January 31, 2022. The acquisition costs are recorded in general and administrative expenses on the Company’s consolidated statement of operations. The results of operations of Humio have been included in the Company’s consolidated financial statements from the date of acquisition. The acquisition of Humio did not have a material impact on the Company’s consolidated financial statements, and therefore historical and pro forma disclosures have not been presented. Preempt Security, Inc. On September 30, 2020, the Company acquired 100 % of the equity interest of Preempt Security, Inc. (“Preempt Security”), a privately-held Delaware corporation that developed real-time access control and threat prevention technology (the “Acquisition”). The Acquisition has been accounted for a business combination. The total consideration transferred was $ 91.2 million which consisted of $ 87.4 million in cash and $ 3.8 million representing the fair value of replacement equity awards attributable to pre-acquisition service. The purchase price was allocated to identified intangible assets, which include developed technology, customer relationships and trade names, of $ 16.4 million, net tangible assets acquired of $( 0.5 ) million and goodwill of $ 75.3 million allocated to the Company’s one reporting segment, representing the excess of the purchase price over the fair value of net tangible and intangible assets acquired. The goodwill was primarily attributable to the assembled workforce 109 Table of Contents CrowdStrike Holdings, Inc. Notes to Consolidated Financial Statements of Preempt Security, planned growth in new markets and synergies expected to be achieved from the integration of Preempt Security. Goodwill is not deductible for income tax purposes. Per the terms of the merger agreement with Preempt Security, certain unvested stock options held by Preempt Security employees were canceled and exchanged for replacement stock options under the 2019 Plan. Additionally, certain shares of stock issued pursuant to share-based compensation awards to key employees of Preempt Security were canceled and exchanged for replacement RSUs of the Company, which are subject to future vesting. The portion of the fair value of the replacement equity awards associated with pre-acquisition service of Preempt Security’s employees represented a component of the total purchase consideration. The remaining fair value of these issued awards is subject to the recipients’ continued service with the Company and the achievement of specified performance targets, and thus were excluded from the purchase price. The awards which are subject to continued service will be recognized ratably as stock-based compensation expense over the requisite service period. The awards which are based on specified performance targets will be recognized under the accelerated attribution method. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (dollars in thousands): Fair Value Useful Life (in months) Developed technology $ 13,200 60 Customer relationships 3,100 60 Trade names 85 12 Total intangible assets acquired $ 16,385 The Company incurred an immaterial amount of acquisition expense for the fiscal year ended January 31, 2022. The acquisition costs are recorded in general and administrative expenses on the Company’s consolidated statement of operations. The results of operations of Preempt Security have been included in the Company’s consolidated financial statements from the date of acquisition. The acquisition of Preempt Security did not have a material impact on the Company’s consolidated financial statements, and therefore historical and pro forma disclosures have not been presented. 15. Net Loss Per Share Attributable to Common Stockholders Basic and diluted net loss per share attributable to CrowdStrike’s common stockholders is computed in conformity with the two-class method required for participating securities. Basic net loss per share attributable to CrowdStrike common stockholders is computed by dividing the net loss attributable to CrowdStrike by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is the same as basic net loss per share because the effects of potentially dilutive items were antidilutive given the Company’s net loss position in the periods presented. The rights of the holders of Class A and Class B common stock are identical, except with the respect to voting and conversion rights. As such, the undistributed earnings are allocated equally to each share of common stock without class distinction and the resulting basic and diluted net loss per share attributable to CrowdStrike common stockholders are the same for shares of Class A and Class B common stock. The following table sets forth the computation of basic and diluted net loss per share attributable to CrowdStrike common stockholders (in thousands, except per share data): Year Ended January 31, 2022 2021 2020 Numerator: Net loss attributable to Class A and Class B CrowdStrike common stockholders $ ( 234,802 ) $ ( 92,629 ) $ ( 141,779 ) Denominator: Weighted-average shares used in computing net loss per share attributable to Class A and Class B of CrowdStrike common stockholders, basic and diluted 227,142 217,756 148,062 Net loss per share attributable to Class A and Class B CrowdStrike common stockholders, basic and diluted $ ( 1.03 ) $ ( 0.43 ) $ ( 0.96 ) The potential shares of common stock that were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive are as follows (in thousands): Year Ended January 31, 2022 2021 2020 Shares of common stock subject to repurchase from outstanding stock options 198 548 984 RSUs and PSUs subject to future vesting 7,886 8,449 6,063 Shares of common stock issuable from stock options 3,938 6,646 14,689 Share purchase rights under the employee stock purchase plan 642 872 1,458 Potential common shares excluded from diluted net loss per share 12,664 16,515 23,194 The above table excludes founder holdbacks related to business combinations. A variable number of shares will be issued upon vesting to settle a fixed monetary amount of $ 18.5 million, which shares are contingent upon continued employment with the Company. The share price will be determined based on the Company’s average stock price or the volume weighted average stock price 5 days prior to each vesting date. As of January 31, 2022, 14,667 shares were issued to settle founder holdbacks at a weighted average price of $ 243.72 per share. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.