What changed in this filing

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Item 1. Financial Statements

2020-12-04 compared with 2020-09-04 · 109 added, 98 removed, 590 unchanged (26% of the section changed)

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of July 31, 2020 and January 31, 2020

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended July 31 , 2020 and 2019

Condensed Consolidated Statement of Stockholders' Equity for the Three and Six Months Ended July 31, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended July 31, 2020 and 2019

Condensed Consolidated Balance Sheets as of October 31, 2020 and January 31, 2020

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended October 31, 2020 and 2019

Condensed Consolidated Statement of Stockholders' Equity for the Three and Nine Months Ended October 31, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended October 31, 2020 and 2019

Notes to Condensed Consolidated Financial Statements

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data) July 31, 2020 January 31, 2020

(in thousands, except per share data) October 31, 2020 January 31, 2020

Current assets

2 unchanged sentences

Restricted cash 281 280

Accounts receivable 224,502 237,841

Accounts receivable, net 261,085 237,841

Contract assets—current 22,477 12,502

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Preferred stock, $ 0.0001 par value;

10,000 shares authorized, 0 shares issued and outstanding as of July 31, 2020 and January 31, 2020

10,000 shares authorized, 0 shares issued and outstanding as of October 31, 2020 and January 31, 2020

Common stock, $ 0.0001 par value;

500,000 shares authorized, 185,137 shares outstanding as of July 31, 2020;

500,000 shares authorized, 186,531 shares outstanding as of October 31, 2020;

500,000 shares authorized, 181,254 shares outstanding as of January 31, 2020

Treasury stock, at cost:

5 shares as of October 31, 2020 and 0 shares as of January 31, 2020

Additional paid-in capital 1,736,241 1,685,167

Accumulated other comprehensive income (loss) 2,098 ( 1,673 )

Accumulated other comprehensive loss ( 1,140 ) ( 1,673 )

Accumulated deficit ( 1,308,040 ) ( 1,137,185 )

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

Three Months Ended July 31, Six Months Ended July 31,

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands, except per share data) 2020 2019 2020 2019

14 unchanged sentences

Interest expense ( 7,769 ) ( 7,364 ) ( 23,013 ) ( 21,793 )

Interest income and other income, net 2,601 4,531 6,343 9,748

Interest income and other income (expense), net ( 311 ) 5,801 6,032 15,549

Loss before provision for income taxes ( 56,550 ) ( 45,560 ) ( 165,939 ) ( 157,400 )

5 unchanged sentences

Foreign currency translation gain (loss), net of tax $ ( 2,413 ) $ 1,336 $ 1,112 $ ( 340 )

Unrealized gains on investments, net of tax 87 358 246 696

Unrealized gains (losses) on investments, net of tax ( 825 ) 418 ( 579 ) 1,114

Other comprehensive income (loss) ( 3,238 ) 1,754 533 774

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity

Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity

(in thousands) Shares Amount

Balances at April 30, 2020 183,428 $ 18 $ 1,714,462 $ ( 6,703 ) $ ( 1,184,989 ) $ 522,788

Balances at July 31, 2020 185,137 $ 19 $ 1,749,323 $ — $ 2,098 $ ( 1,249,549 ) $ 501,891

Exercise of stock options 171 — 1,945 — — — 1,945

Settlement of RSUs 1,015 — — — — — —

Tax withholding on RSU settlement — — ( 89,449 ) — — ( 89,449 )

Issuance of shares as consideration for acquisition 247 — 48,361 — — 48,361

Tax withholding on net share settlement of RSUs and ESPP — — ( 114,277 ) ( 1,048 ) — — ( 115,325 )

Employee stock purchase plans 208 — 16,269 — — — 16,269

Employee stock-based compensation — — 82,981 — — — 82,981

Net loss — — — — — ( 58,491 ) ( 58,491 )

Other comprehensive income, net — — — 8,801 — 8,801

Balances at July 31, 2020 185,137 $ 19 $ 1,749,323 $ 2,098 $ ( 1,249,549 ) $ 501,891

Other comprehensive loss, net — — — — ( 3,238 ) — ( 3,238 )

Balances at October 31, 2020 186,531 $ 19 $ 1,736,241 $ ( 1,048 ) $ ( 1,140 ) $ ( 1,308,040 ) $ 426,032

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity

(in thousands) Shares Amount

Balances at April 30, 2019 173,628 $ 17 $ 1,575,471 $ ( 3,258 ) $ ( 974,548 ) $ 597,682

Balances at July 31, 2019 175,953 $ 18 $ 1,612,786 $ ( 2,945 ) $ ( 1,043,180 ) $ 566,679

Exercise of stock options 1,877 — 19,815 — — 19,815

1 unchanged sentence

Tax withholding on RSU settlement — — ( 39,310 ) — — ( 39,310 )

Employee stock purchase plans 277 — 13,309 — — 13,309

Employee stock-based compensation — — 53,713 — — 53,713

1 unchanged sentence

Other comprehensive income, net — — — 1,754 — 1,754

Balances at July 31, 2019 175,953 $ 18 $ 1,612,786 $ ( 2,945 ) $ ( 1,043,180 ) $ 566,679

Balances at October 31, 2019 179,252 $ 18 $ 1,660,313 $ ( 1,191 ) $ ( 1,089,778 ) $ 569,362

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity

Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity

(in thousands) Shares Amount

2 unchanged sentences

Settlement of RSUs 3,095 1 ( 1 ) — — — —

Tax withholding on RSU settlement — — ( 136,172 ) — — ( 136,172 )

Tax withholding on net share settlement of RSUs and ESPP — — ( 250,449 ) ( 1,048 ) — — ( 251,497 )

Employee stock purchase plan 464 — 29,859 — — — 29,859

3 unchanged sentences

Other comprehensive income, net — — — — 533 — 533

Balances at July 31, 2020 185,137 $ 19 $ 1,749,323 $ 2,098 $ ( 1,249,549 ) $ 501,891

Balances at October 31, 2020 186,531 $ 19 $ 1,736,241 $ ( 1,048 ) $ ( 1,140 ) $ ( 1,308,040 ) $ 426,032

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity

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Cumulative impact of Topic 842 adoption — — — — ( 48 ) ( 48 )

Other comprehensive loss, net — — — ( 980 ) — ( 980 )

Balances at July 31, 2019 175,953 $ 18 $ 1,612,786 $ ( 2,945 ) $ ( 1,043,180 ) $ 566,679

Other comprehensive income, net — — — 774 — 774

Balances at October 31, 2019 179,252 $ 18 $ 1,660,313 $ ( 1,191 ) $ ( 1,089,778 ) $ 569,362

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Six Months Ended July 31,

Nine Months Ended October 31,

(in thousands) 2020 2019

1 unchanged sentence

Net loss $ ( 170,855 ) $ ( 160,952 )

Adjustments to reconcile net to net cash used in operating activities

Adjustments to reconcile net loss to net cash provided by operating activities

Depreciation and amortization 51,455 36,916

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited)

Six Months Ended July 31,

Nine Months Ended October 31,

(in thousands) 2020 2019

41 unchanged sentences

Our condensed consolidated balance sheet as of January 31, 2020 was derived from audited financial statements but does not include all disclosures required by U.S.

The results of operations for the six months ended July 31, 2020 are not necessarily indicative of the results to be expected for the year ending January 31, 2021 .

The results of operations for the nine months ended October 31, 2020 are not necessarily indicative of the results to be expected for the year ending January 31, 2021 .

O ur fiscal year ends on January 3 1.

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We consider whether a credit loss exists based on the extent of the unrealized loss position, any adverse conditions specifically related to the security or the issuer's operating environment, pay structure of the security, the issuer's payment history and any changes in the issuer's credit rating.

Estimated credit losses are determined using a discounted cash flow model and recorded as an allowance, with changes in expected credit losses on our investments recorded in “Interest income and other income, net” in the consolidated statements of operations and comprehensive loss.

Unrealized gains and losses related to noncredit factors are reflected in “Accumulated other comprehensive income (loss)” on the consolidated balance sheets.

Estimated credit losses are determined using a discounted cash flow model and recorded as an allowance, with changes in expected credit losses on our investments recorded in “Interest income and other income (expense), net” in the consolidated statements of operations and comprehensive loss.

Unrealized gains and losses related to noncredit factors are reflected in “Accumulated other comprehensive loss” on the consolidated balance sheets.

Recently Adopted Accounting Pronouncements

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Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset.

The effect of adopting ASU 2016-13 and ASU 2019-04 on our consolidated financial statements and related disclosures was not material for the six months ended July 31, 2020.

The effect of adopting ASU 2016-13 and ASU 2019-04 on our consolidated financial statements and related disclosures was not material to the consolidated financial statements.

On February 1, 2020, we adopted ASU No.

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The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update.

The impact of prospectively adopting ASU 2018-15 on our consolidated financial statements was not material for the six months ended July 31, 2020.

The effect of adopting ASU 2018-15 on our consolidated financial statements and related disclosures was not material to the consolidated financial statements.

Other Recent Accounting Pronouncements

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Revenue and Performance Obligations

Subscription revenue is recognized over time and accounted for approximately 95 % and 94 % of our revenue for the three months ended July 31, 2020 and 2019.

It accounted for approximately 95 % and 94 % of our revenue for the six months ended July 31, 2020 and 2019.

As of July 31, 2020, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $ 849.0 million.

We expect to recognize 54 % of the transaction price allocated to remaining performance obligations within the 12 months following July 31, 2020, in our consolidated statement of operations and comprehensive loss.

Subscription revenue is recognized over time and accounted for approximately 96 % and 95 % of our revenue for the three months ended October 31, 2020 and 2019.

It accounted for approximately 95 % and 94 % of our revenue for the nine months ended October 31, 2020 and 2019.

As of October 31, 2020, the amount of the transaction price allocated to remaining performance obligations for contracts greater than one year was $ 937.9 million.

We expect to recognize 54 % of the transaction price allocated to remaining performance obligations within the 12 months following October 31, 2020, in our consolidated statement of operations and comprehensive loss.

Fair Value Measurements

The following table summarizes our financial assets that are measured at fair value on a recurring basis:

July 31, 2020

October 31, 2020

(in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

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Level 2 total 299,328 689 ( 145 ) 299,872

Available-for-sale securities

Corporate notes and bonds 500 — — 500

Total $ 453,239 $ 689 $ ( 145 ) $ 453,783

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Total $ 818,970 $ 1,204 $ ( 82 ) $ 820,092

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of July 31, 2020 and January 31, 2020, in addition to cash of $ 107.0 million and $ 75.8 million.

(1) Included in “cash and cash equivalents” in our consolidated balance sheets as of October 31, 2020 and January 31, 2020, in addition to cash of $ 221.6 million and $ 75.8 million.

We use quoted prices in active markets for identical assets to determine the fair value of our Level 1 investments.

The fair value of our Level 2 investments is determined using pricing based on quoted market prices or alternative market observable inputs .

The fair value of our available-for-sale securities as of July 31, 2020, by remaining contractual maturities, were as follows (in thousands):

The fair value of our Level 3 investments is determined based on an income approach using unobservable inputs.

The fair value of our available-for-sale securities as of October 31, 2020, by remaining contractual maturities, were as follows (in thousands):

Due in one year or less $ 223,590

Due in one to two years 76,782

As of July 31, 2020, we had a total of 97 available-for-sale securities, with 17 securities in an unrealized loss position.

An allowance for credit losses was deemed unnecessary for these securities, given the extent of the unrealized loss positions as well the issuers' high credit ratings and consistent payment history.

As of October 31, 2020, we had a total of 94 available-for-sale securities, with 30 securities in an unrealized loss position.

An allowance for credit losses was deemed unnecessary for these securities, given the extent of the unrealized loss positions as

well the issuers' high credit ratings and consistent payment history.

As of January 31, 2020, we had 178 available-for-sale securities, none of which were considered to be other-than-temporarily impaired.

We had no liabilities measured at fair value on a recurring basis as of July 31, 2020 and January 31, 2020.

We had no liabilities measured at fair value on a recurring basis as of October 31, 2020 and January 31, 2020.

Convertible Senior Notes

As of July 31, 2020 and January 31, 2020, the estimated fair value of our 0.5 % Convertible Senior Notes (the “Notes”) with aggregate principal amount of $ 575.0 million was $ 1.7 billion and $ 743.5 million.

As of October 31, 2020 and January 31, 2020, the estimated fair value of our 0.5 % Convertible Senior Notes (the “Notes”) with aggregate principal amount of $ 575.0 million was $ 1.6 billion and $ 743.5 million.

We estimated the fair value based on the quoted market prices in an inactive market on the last trading day of the reporting period (Level 2).

3 unchanged sentences

Property and equipment consisted of the following:

(in thousands) July 31, 2020 January 31, 2020

(in thousands) October 31, 2020 January 31, 2020

Computer and network equipment $ 90,667 $ 66,937

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$ 159,652 $ 128,293

As of July 31, 2020 and January 31, 2020 , work in progress consisted of capitalized costs of internally-developed software projects under development and data center build-out projects.

As of January 31, 2020, work in progress also included office build out projects, most of which were completed as of July 31, 2020 .

For the three months ended July 31, 2020 and 2019, we capitalized $ 6.8 million and $ 4.5 million of internally developed software, including $ 1.9 million and $ 1.2 million of capitalized stock-based compensation.

For the six months ended July 31, 2020 and 2019, we capitalized $ 11.0 million and $ 10.4 million of internally developed software, including $ 2.9 million and $ 2.6 million of capitalized stock-based compensation.

Depreciation expense associated with property and equipment was $ 10.5 million and $ 7.9 million for the three months ended July 31, 2020 and 2019, and $ 20.3 million and $ 15.1 million for the six months ended July 31, 2020 and 2019.

As of October 31, 2020 and January 31, 2020 , work in progress consisted of capitalized costs of internally-developed software projects under development and data center build-out projects.

For the three months ended October 31, 2020 and 2019, we capitalized $ 9.5 million and $ 4.2 million of internally developed software, including $ 1.9 million and $ 1.0 million of capitalized stock-based compensation.

For the nine months ended October 31, 2020 and 2019, we capitalized $ 20.5 million and $ 14.5 million of internally developed software, including $ 4.9 million and $ 3.6 million of capitalized stock-based compensation.

Depreciation expense associated with property and equipment was $ 12.1 million and $ 8.4 million for the three months ended October 31, 2020 and 2019, and $ 32.4 million and $ 23.5 million for the nine months ended October 31, 2020 and 2019.

Acquisition of Seal Software Group Limited

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Additionally, we granted certain continuing employees of Seal restricted stock units (“RSUs”) with service and performance conditions covering up to 0.1 million shares of our common stock with an aggregate grant date fair value of $ 11.4 million that will be accounted for as a post-acquisition compensation expense over the vesting period.

The performance-based condition will be satisfied upon Seal meeting certain bookings targets for the year ended January 31, 2021.

As of July 31, 2020, it was not probable that these targets would be met .

The performance-based

condition will be satisfied upon Seal meeting certain bookings targets for the year ended January 31, 2021.

As of October 31, 2020, it was not probable that these targets would be met .

We accounted for the transaction as a business combination using the acquisition method of accounting.

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Excess purchase price consideration was recorded as goodwill and is primarily attributable to the assembled workforce and expanded market opportunities when integrating Seal’s AI and analytics capabilities within our existing product offering.

The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available concerning the fair value of the assets acquired and liabilities assumed.

The purchase price allocation was prepared on a preliminary basis and is subject to further adjustments as additional information becomes available and certain tax returns are finalized.

Any adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the acquisition date.

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Total intangible assets $ 83,700

The results of operations of Seal, which were not material to our consolidated results of operations, were included in our consolidated statements from the acquisition date.

In the three and six months ended July 31, 2020 , we incurred acquisition costs of $ 5.3 million and $ 6.0 million.

In the three and nine months ended October 31, 2020 , we incurred acquisition costs of $ 0.1 million and $ 6.2 million.

These costs included legal, accounting fees and other costs directly related to the acquisition of Seal and are recognized within operating expenses in our condensed consolidated statements of operations.

In the three and nine months ended October 31, 2020 , we recognized revenues from Seal of $ 5.4 million and $ 11.8 million and net losses of $ 9.2 million and $ 16.5 million, excluding the impact of acquired intangible asset amortization.

The results of operations of Seal were included in our consolidated statements of operations from the acquisition date.

The following unaudited pro forma information has been prepared for illustrative purposes only and assumes the acquisition occurred on February 1, 2019.

It includes pro forma adjustments related to the amortization of acquired intangible assets, share-based compensation expense, professional services revenue and contract acquisitions costs adjustments under the new revenue recognition standard, and contract liabilities fair value adjustment.

The unaudited pro forma results have been prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2019, or of future results of operations:

Three Months Ended July 31, Six Months Ended July 31,

The unaudited pro forma results have been

prepared based on estimates and assumptions, which we believe are reasonable, however, they are not necessarily indicative of the consolidated results of operations had the acquisition occurred on February 1, 2019, or of future results of operations:

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands) 2020 2019 2020 2019

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federal income tax purposes.

In the three and six months ended July 31, 2020 , we incurred costs of $ 1.6 million directly related to the acquisition of Liveoak.

In the three and nine months ended October 31, 2020 , we incurred costs of $ 0.2 million and $ 1.8 million directly related to the acquisition of Liveoak.

These costs are recognized within operating expenses in our condensed consolidated statements of operations.

We included the results of operations of Liveoak in our condensed consolidated statements of operations from the acquisition date.

These results were not material to our condensed consolidated statements of operations for the three and six months ended July 31, 2020.

These results were not material to our condensed consolidated statements of operations for the three and nine months ended October 31, 2020.

Goodwill and Intangible Assets, Net

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Cumulative translation adjustment ( 460 )

Balance at July 31, 2020 $ 349,254

Balance at October 31, 2020 $ 348,504

Intangible assets consisted of the following:

As of July 31, 2020 As of January 31, 2020

As of October 31, 2020 As of January 31, 2020

(in thousands, except years) Weighted-average Remaining Useful Life (Years) Estimated Fair Value Accumulated Amortization Acquisition-related Intangibles, Net Estimated Fair Value Accumulated Amortization Acquisition-related Intangibles, Net

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Amortization of finite-lived intangible assets was as follows:

Three Months Ended July 31, Six Months Ended July 31,

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands) 2020 2019 2020 2019

2 unchanged sentences

Total $ 7,357 $ 4,305 $ 19,032 $ 13,458

As of July 31, 2020, future amortization of finite-lived intangibles that will be recorded in cost of revenue and operating expenses is estimated as follows:

As of October 31, 2020, future amortization of finite-lived intangibles that will be recorded in cost of revenue and operating expenses is estimated as follows:

Fiscal Period:

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Contract assets represent amounts for which we have recognized revenue, pursuant to our revenue recognition policy, for contracts that have not yet been invoiced to our customers where there is a remaining performance obligation, typically for multi-year arrangements.

Total contract assets were $ 17.8 million and $ 13.4 million as of July 31, 2020 and January 31, 2020, of which $ 0.8 million and $ 0.9 million were noncurrent and included within “ Other assets—noncurrent ” on our condensed consolidated balance sheets.

Total contract assets were $ 23.3 million and $ 13.4 million as of October 31, 2020 and January 31, 2020, of which $ 0.8 million and $ 0.9 million were noncurrent and included within “ Other assets—noncurrent ” on our condensed consolidated balance sheets.

The change in contract assets reflects the difference in timing between our satisfaction of remaining performance obligations and our contractual right to bill our customers.

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Such amounts are generally recognized as revenue over the contractual period.

For the six months ended July 31, 2020 and 2019, we recognized revenue of $ 375.8 million and $ 265.7 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

For the nine months ended October 31, 2020 and 2019, we recognized revenue of $ 463.1 million and $ 342.6 million that was included in the corresponding contract liability balance at the beginning of the periods presented.

We receive payments from customers based upon contractual billing schedules.

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The following table represents a rollforward of our deferred contract acquisition and fulfillment costs:

Six Months Ended July 31,

Nine Months Ended October 31,

(in thousands) 2020 2019

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The net proceeds from the issuance of the Notes were $ 560.8 million after deducting the initial purchasers’ discounts and transaction costs.

As of July 31, 2020, the conversion conditions described in our 2020 Annual Report on Form 10-K were met.

As of October 31, 2020, the conversion conditions described in our 2020 Annual Report on Form 10-K were met.

The last reported sales price of our common stock was greater than or equal to 130 % of the conversion price for at least 20 trading days during a period of 30 consecutive trading days ending on, and including, the last trading day of the three months ended July 31, 2020.

The Notes therefore became convertible on August 1, 2020 and continue to be convertible through October 31, 2020.

The Notes therefore became convertible on August 1, 2020 and continue to be convertible through January 31, 2021.

The net carrying value of the liability component of the Notes was as follows:

(in thousands) July 31, 2020 January 31, 2020

(in thousands) October 31, 2020 January 31, 2020

Principal $ 575,000 $ 575,000

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Net carrying amount $ 486,149 $ 465,321

As of July 31, 2020 and January 31, 2020, the net carrying amount of the equity component of the Notes was $ 131.3 million, net of $ 3.3 million transaction costs.

As of October 31, 2020 and January 31, 2020, the net carrying amount of the equity component of the Notes was $ 131.3 million, net of $ 3.3 million transaction costs.

The interest expense recognized related to the Notes was as follows:

Three Months Ended July 31, Six Months Ended July 31,

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands) 2020 2019 2020 2019

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Capped Calls are excluded from the calculation of diluted earnings per share, as they would be antidilutive.

As of October 31, 2020, the market price of our common stock exceeded the cap price of $ 110.00 per share;

therefore, the Notes would have caused economic dilution if converted.

We lease offices under noncancelable operating lease agreements that expire at various dates through February 2032.

As of July 31, 2020, we had no finance leases.

As of October 31, 2020, we had no finance leases.

Some operating leases contain escalation provisions for adjustments in the consumer price index.

The following table is a summary of our lease costs:

Three Months Ended July 31, Six Months Ended July 31,

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands) 2020 2019 2020 2019

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Total lease cost $ 8,959 $ 6,822 $ 26,038 $ 19,529

Future lease payments under noncancelable operating leases as of July 31, 2020, were as follows:

Future lease payments under noncancelable operating leases as of October 31, 2020, were as follows:

Fiscal Period:

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Present value of lease liabilities $ 199,711

The weighted average remaining lease term and discount rate for operating leases as of July 31, 2020 were 7.0 years and 4.3 %.

The weighted average remaining lease term and discount rate for operating leases as of October 31, 2020 were 6.8 years and 4.3 %.

Commitments and Contingencies

As of July 31, 2020, we had unused letters of credit outstanding associated with our various operating leases totaling $ 9.4 million.

As of October 31, 2020, we had unused letters of credit outstanding associated with our various operating leases totaling $ 8.3 million.

We have entered into certain noncancelable contractual arrangements that require future purchases of goods and services.

These arrangements primarily relate to cloud infrastructure support and sales and marketing activities.

As of July 31, 2020, our future noncancelable minimum payments due under these contractual obligations with a remaining term of more than one year were as follows:

As of October 31, 2020, our future noncancelable minimum payments due under these contractual obligations with a remaining term of more than one year were as follows:

Fiscal Period:

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Historically, we have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.

As a result, we believe the fair value of these indemnification agreements is not material as of July 31, 2020, and January 31, 2020.

As a result, we believe the fair value of these indemnification agreements is not material as of October 31, 2020, and January 31, 2020.

We maintain commercial general liability insurance and product liability insurance to offset certain of our potential liabilities under these indemnification agreements.

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Outstanding awards under these two plans continue to be subject to the terms and conditions of the respective plans.

As of July 31, 2020, 32.1 million shares of our common stock were available for issuance under the 2018 Plan.

As of October 31, 2020, 32.4 million shares of our common stock were available for issuance under the 2018 Plan.

The 2018 Plan provides that the number of shares reserved will automatically increase on the first day of each fiscal year, beginning on February 1, 2019, and ending on February 1, 2028, by 5 % of the total number of shares of our capital stock outstanding on the immediately preceding January 31st (or such lesser number of shares as our board of directors or a committee of our board of directors may approve).

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Stock Options

Option activity for the three months ended July 31, 2020 was as follows:

Option activity for the nine months ended October 31, 2020 was as follows:

(in thousands, except years and per share data) Number of Options Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value

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Canceled/expired ( 21 ) 18.09

Outstanding at July 31, 2020 5,577 $ 15.42 5.46 $ 1,123,149

Vested and expected to vest at July 31, 2020 5,566 $ 15.42 5.46 $ 1,120,956

Exercisable at July 31, 2020 5,188 $ 15.27 5.38 $ 1,045,726

As of July 31, 2020, our total unrecognized compensation cost related to stock option grants was $ 2.7 million.

Outstanding at October 31, 2020 5,399 $ 15.51 5.22 $ 1,008,292

Vested and expected to vest at October 31, 2020 5,396 $ 15.50 5.22 $ 1,007,687

Exercisable at October 31, 2020 5,199 $ 15.43 5.18 $ 971,253

As of October 31, 2020, our total unrecognized compensation cost related to stock option grants was $ 1.3 million.

We expect to recognize this expense over the remaining weighted-average period of approximately 0.3 years.

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The market-based conditions will be satisfied if certain milestones based on our common stock price or relative total shareholder return are met.

RSU activity for the three months ended July 31, 2020 was as follows:

RSU activity for the nine months ended October 31, 2020 was as follows:

(in thousands, except per share data) Number of Units Weighted-Average Grant Date Fair Value

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Canceled ( 804 ) $ 49.93

Unvested at July 31, 2020 13,350 $ 70.00

As of July 31, 2020, our total unrecognized compensation cost related to RSUs was $ 717.8 million.

Unvested at October 31, 2020 12,008 $ 76.91

As of October 31, 2020, our total unrecognized compensation cost related to RSUs was $ 708.2 million.

We expect to recognize this expense over the remaining weighted-average period of approximately 2.4 years.

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The ESPP provides for separate six-month offering periods that begin in the first and third quarter of each year.

In the six months ended July 31, 2020, 0.3 million shares of our common stock were purchased under the ESPP.

Compensation expense related to the ESPP was $ 2.9 million and $ 2.1 million for the three months ended July 31, 2020 and 2019, and $ 4.8 million and $ 4.0 million for the six months ended July 31, 2020 and 2019.

In the nine months ended October 31, 2020, 0.5 million shares of our common stock were purchased under the ESPP.

Compensation expense related to the ESPP was $ 3.4 million and $ 2.4 million for the three months ended October 31, 2020 and 2019, and $ 8.2 million and $ 6.4 million for the nine months ended October 31, 2020 and 2019.

The number of shares reserved under the ESPP will automatically increase on the first day of each fiscal year, starting on February 1, 2019 and continuing through February 1, 2028, in an amount equal to the lesser of (i) 1 % of the total number of shares of our common stock outstanding on January 31 of the preceding fiscal year, (ii) 3.8 million shares, or (iii) a lesser number of shares determined by our board of directors.

As of July 31, 2020, 6.5 million shares of our common stock were reserved for issuance under the ESPP.

As of October 31, 2020, 6.3 million shares of our common stock were reserved for issuance under the ESPP.

Net Loss per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for periods presented:

Three Months Ended July 31, Six Months Ended July 31,

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands, except per share data) 2020 2019 2020 2019

11 unchanged sentences

Each quarter, we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our income tax provision was $ 0.8 million and $ 1.2 million for the three months ended July 31, 2020 and 2019.

Our income tax provision was $ 3.0 million and $ 2.5 million for the six months ended July 31, 2020 and 2019.

Our income tax provision was $ 1.9 million and $ 1.0 million for the three months ended October 31, 2020 and 2019.

Our income tax provision was $ 4.9 million and $ 3.6 million for the nine months ended October 31, 2020 and 2019.

The overall increase in the tax provision was primarily driven by higher foreign tax expenses, resulting from higher year-over-year earnings in certain foreign jurisdictions as we continue to scale our foreign operations to support our ongoing international growth.

4 unchanged sentences

In the event we determine our deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

As of July 31, 2020, our gross unrecognized tax benefits totaled $ 14.9 million, excluding related accrued interest and penalties, of which $ 2.9 million would impact the effective tax rate if recognized.

As of October 31, 2020, our gross unrecognized tax benefits totaled $ 15.7 million, excluding related accrued interest and penalties, of which $ 2.7 million would impact the effective tax rate if recognized.

Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision.

2 unchanged sentences

and various foreign jurisdictions.

Our tax years from inception in 2003 through July 31, 2020 remain subject to examination by U.S.

Our tax years from inception in 2003 through October 31, 2020 remain subject to examination by U.S.

and California taxing authorities, as well as taxing authorities in various other state and foreign jurisdictions.

6 unchanged sentences

Revenue by geographic area was as follows:

Three Months Ended July 31, Six Months Ended July 31,

Three Months Ended October 31, Nine Months Ended October 31,

(in thousands) 2020 2019 2020 2019

3 unchanged sentences

No single country other than the U.S.

had revenue greater than 10% of total revenue in the three and six months ended July 31, 2020 and 2019 .

had revenue greater than 10% of total revenue in the three and nine months ended October 31, 2020 and 2019 .

Our long-lived assets by geographic area, which consist of property and equipment, net and operating lease right-of-use assets were as follows:

(in thousands) July 31, 2020 January 31, 2020

(in thousands) October 31, 2020 January 31, 2020

218,059 $ 182,288

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements