What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-04 compared with 2020-03-06 · 355 added, 285 removed, 783 unchanged (45% of the section changed)

5 unchanged sentences

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Cash Flows

4 unchanged sentences

We have audited the accompanying consolidated balance sheets of Okta, Inc.

(the Company) as of January 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended January 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of January 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows for each of the three years in the period ended January 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2021, in conformity with U.S.

17 unchanged sentences

Revenue recognition - Identifying and evaluating terms and conditions in contracts

Description of the Matter

As explained in Note 2 to the consolidated financial statements, the Company derives revenue from subscription fees and professional services fees.

The Company’s arrangements are generally noncancelable and nonrefundable.

Description of the Matter As explained in Note 2 to the consolidated financial statements, the Company derives revenue from subscription fees and professional services fees.

The Company’s arrangements are generally non-cancellable and non-refundable.

In addition, the arrangements do not provide customers with the right to take possession of the software and, as a result, are accounted for as service arrangements.

Subscription revenue, which includes support, is recognized on a straight-line basis over the noncancelable contractual term of the arrangement, generally beginning on the date that the Company’s service is made available to the customer.

Subscription revenue, which includes support, is recognized on a straight-line basis over the non-cancellable contractual term of the arrangement, generally beginning on the date that the Company’s service is made available to the customer.

Revenue for the Company’s professional services is recognized as services are performed in proportion to their pattern of transfer.

1 unchanged sentence

For example, certain non-standard terms and conditions required judgment to identify the distinct performance obligations and determine the timing of revenue recognition.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s internal controls over the identification and evaluation of terms and conditions in contracts that impact revenue recognition, including the identification of performance obligations and the determination of the timing of revenue recognition.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s internal controls over the identification and evaluation of terms and conditions in contracts that impact revenue recognition, including the identification of performance obligations and the determination of the timing of revenue recognition.

This included testing relevant controls over the information systems that are used in the initiation, billing and recording of revenue transactions.

4 unchanged sentences

Convertible Notes

Description of the Matter

As explained in Note 9 to the consolidated financial statements, in September 2019 the Company issued $1,060 million of convertible senior notes due September 1, 2025 (2025 Notes), which permit the Company to settle in cash or stock at its option.

Description of the Matter As explained in Note 9 to the consolidated financial statements, in June 2020 the Company issued $1.15 billion of convertible senior notes due June 15, 2026 (2026 Notes), which permit the Company to settle in cash or stock at its option.

Concurrent with the offering of the 2026 Notes, the Company entered into separate capped call transactions to reduce potential dilution upon conversion of the 2026 Notes.

Simultaneous with the issuance of the 2025 Notes, the Company repurchased a portion of the convertible notes issued in February 2018, due February 25, 2023 (2023 Notes)(2023 Notes Partial Repurchase), and accounted for this transaction as a debt extinguishment.

Simultaneous with the issuance of the 2026 Notes, the Company repurchased a portion of the convertible notes issued in February 2018, due February 15, 2023 (2023 Notes) (Second Partial Repurchase of 2023 Notes), and accounted for this transaction as a debt extinguishment.

These transactions are collectively referred to as the Convertible Notes Transactions.

1 unchanged sentence

The Company accounted for the Convertible Notes Transactions as separate liability and equity components, determined the fair value of the respective liability components based on an estimate of the fair value of a similar liability without a conversion option and assigned the residual value to the equity component.

The Company estimated the fair value of the liability component of the 2025 Notes and 2023 Notes using a discounted cash flow model with a risk adjusted yield for similar debt instruments, absent any embedded conversion feature.

The Company estimated the fair value of the liability component of the 2026 Notes, 2025 Notes and 2023 Notes using a discounted cash flow model with a risk adjusted yield for similar debt instruments, absent any embedded conversion feature.

In estimating the risk adjusted yield, the Company used both an income and market approach.

For the income approach, the Company used a convertible bond pricing model, which included several assumptions including volatility and the risk-free rate.

For the income approach, the Company used a convertible bond pricing model, which included several assumptions including volatility, risk-free rate, and observable trading activity for the Company’s existing Notes.

For the market approach, the Company performed an evaluation of issuances of convertible debt securities by other comparable companies.

Additionally, a detailed analysis of the terms of the 2026 Notes was required to determine existence of any derivatives that may require separate mark-to-market accounting under applicable accounting guidance.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s Convertible Notes Transactions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s Convertible Notes Transactions.

For example, we tested the Company’s controls over the initial recognition and measurement of the Convertible Notes Transactions, including the recording of the associated liability and equity components.

Our testing of the Company’s initial accounting for the Convertible Notes Transactions, among other procedures, included reading the underlying agreements and evaluating the Company’s accounting analysis of the initial accounting of the Convertible Notes Transactions, including the determination of the balance sheet classification of each transaction, identification of any derivatives included in the arrangements, and determination that the 2023 Notes Partial Repurchase was a debt extinguishment.

Our testing of the fair value of the liability components of the 2025 Notes and the 2023 Notes Partial Repurchase, included, among other procedures, evaluating the Company's selection of the valuation methodology and significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

Our testing of the Company’s initial accounting for the Convertible Notes Transactions, among other procedures, included reading the underlying agreements and evaluating the Company’s accounting analysis of the initial accounting of the Convertible Notes Transactions, including the determination of the balance sheet classification of each transaction, identification of any derivatives included in the arrangements, and determination that the Second Partial Repurchase of 2023 Notes was a debt extinguishment.

Our testing of the fair value of the liability components of the 2026 Notes and the Second Partial Repurchase of 2023 Notes, included, among other procedures, evaluating the Company's selection of the valuation methodology and significant assumptions and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

Specifically, when assessing the key assumptions, we focused on the Company’s assumptions used to determine the risk adjusted yield as well as its analysis of comparable issuances of debt securities by other companies.

10 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended January 31, 2020, and the related notes and our report dated March 5, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows for each of the three years in the period ended January 31, 2021, and the related notes and our report dated March 4, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

20 unchanged sentences

As of January 31,

As Adjusted (1)

Current assets:

2 unchanged sentences

Accounts receivable, net of allowances of $ 3,451 and $ 1,166

194,818 130,115

Deferred commissions 45,949 33,636

5 unchanged sentences

Intangible assets, net 27,009 32,529

Goodwill 48,023 48,023

Other assets 24,256 18,505

Total assets $ 3,298,797 $ 1,955,395

Liabilities and stockholders’ equity

6 unchanged sentences

Total current liabilities 1,545,614 546,963

2025 convertible senior notes, net

Convertible senior notes, net, noncurrent 857,387 837,002

Operating lease liabilities, noncurrent 179,518 154,511

13 unchanged sentences

Additional paid-in capital 1,656,096 1,105,564

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income 5,390 892

Accumulated deficit ( 967,456 ) ( 701,124 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 3,298,797 $ 1,955,395

(1) Adjusted for adoption of ASC 842.

See Notes to Consolidated Financial Statements.

2 unchanged sentences

Year Ended January 31,

2021 2020 2019

Subscription $ 796,613 $ 552,688 $ 370,855

Professional services and other 38,811 33,379 28,399

1 unchanged sentence

Cost of revenue

Subscription 170,095 116,445 77,354

Professional services and other 47,586 42,937 36,067

Total cost of revenue 217,681 159,382 113,421

Gross profit 617,743 426,685 285,833

Operating expenses

6 unchanged sentences

Interest income and other, net 12,891 17,089 9,180

Loss on early extinguishment of debt

Interest expense and other, net

Loss before benefit from income taxes

Benefit from income taxes

Loss on early extinguishment and conversion of debt ( 2,263 ) ( 14,572 ) —

Interest and other, net ( 62,032 ) ( 24,500 ) ( 5,892 )

Loss before provision for (benefit from) income taxes ( 266,191 ) ( 210,332 ) ( 125,514 )

Provision for (benefit from) income taxes 141 ( 1,419 ) ( 17 )

Net loss $ ( 266,332 ) $ ( 208,913 ) $ ( 125,497 )

Net loss per share, basic and diluted $ ( 2.09 ) $ ( 1.78 ) $ ( 1.17 )

4 unchanged sentences

Year Ended January 31,

2021 2020 2019

Net loss $ ( 266,332 ) $ ( 208,913 ) $ ( 125,497 )

Other comprehensive income (loss):

4 unchanged sentences

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(dollars in thousands)

Redeemable Convertible

Preferred Stock

Class A Common Stock

6 unchanged sentences

Issuance of common stock upon exercise of stock options and other activity, net 6,465,957 1 104,084 — 37,610 — — 37,611

Issuance of common stock upon net exercise of warrant

Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs

Issuance of Series B redeemable convertible preferred stock upon net exercise of warrants

Conversion of convertible preferred stock to common stock in connection with initial public offering

Issuance of common stock and restricted stock in connection with acquisition

Issuance of common stock pursuant to charitable donation

Issuance of common stock under employee stock purchase plan 615,210 — — — 13,727 — — 13,727

Issuance of common stock for settlement of RSUs 976,248 — — — — — — —

Issuance of common stock pursuant to charitable donation 20,000 — — — 1,008 — — 1,008

Conversion of Class B common stock to Class A common stock 22,406,009 2 ( 22,406,009 ) ( 2 ) — — — —

Cumulative-effect adjustment in connection with the adoption of ASU 2016-09

Equity component of convertible senior notes, net of issuance costs — — — — 77,631 — — 77,631

Issuance of warrants related to convertible senior notes — — — — 52,440 — — 52,440

Purchases of hedges related to convertible senior notes — — — — ( 80,040 ) — — ( 80,040 )

Stock-based compensation — — — — 76,867 — — 76,867

Other comprehensive income

Other comprehensive loss — — — — — ( 710 ) — ( 710 )

Net loss — — — — — — ( 125,497 ) ( 125,497 )

Balances as of January 31, 2019 101,093,322 10 11,059,181 1 744,896 ( 319 ) ( 492,211 ) 252,377

2 unchanged sentences

Issuance of common stock for settlement of RSUs 1,716,222 — — — — — — —

Issuance of common stock for bonus settlement 34,600 — — — 2,809 — — 2,809

Issuance of common stock pursuant to charitable donation 15,000 — — — 1,746 — — 1,746

Conversion of Class B common stock to Class A common stock 2,511,409 — ( 2,511,409 ) — — — — —

Redeemable Convertible

Preferred Stock

Equity component of convertible senior notes, net of issuance costs — — — — 217,347 — — 217,347

Equity component of early extinguishment of convertible senior notes 2,973,311 — — — ( 26,713 ) — — ( 26,713 )

Proceeds from hedges related to convertible senior notes — — — — 405,851 405,851

Payments for warrants related to convertible senior notes — — — — ( 358,622 ) — — ( 358,622 )

Purchases of capped calls related to convertible senior notes ( 74,094 ) ( 74,094 )

Stock-based compensation — — — — 127,846 — — 127,846

Other comprehensive income — — — — — 1,211 — 1,211

Net loss — — — — — — ( 208,913 ) ( 208,913 )

Balances as of January 31, 2020 113,990,069 $ 11 8,647,779 $ 1 $ 1,105,564 $ 892 $ ( 701,124 ) $ 405,344

Class A Common Stock

4 unchanged sentences

Equity (Deficit)

Equity component of 2025 convertible senior notes, net of issuance costs

Issuance of warrants related to 2023 convertible senior notes

Purchases of hedges related to 2023 convertible senior notes

Stock-based compensation

Other comprehensive loss

Balances as of January 31, 2019

Issuance of common stock upon exercise of stock options and other activity, net 4,113,825 1 254,858 — 45,619 — — 45,620

Issuance of common stock under employee stock purchase plan

Issuance of common stock under employee stock purchase plan, net of cancellations 247,131 — — — 25,911 — — 25,911

Issuance of common stock for settlement of RSUs 2,109,393 — — — — — — —

Issuance of common stock for settlement of bonus

Issuance of common stock for bonus settlement 85,701 — — — 9,818 — — 9,818

Issuance of common stock pursuant to charitable donation 42,500 — — — 9,292 — — 9,292

Conversion of Class B common stock to Class A common stock 743,190 — ( 743,190 ) — — — — —

Exercise of hedges related to convertible senior notes ( 167,946 ) — — — — — — —

Equity component of convertible senior notes, net of issuance costs — — — — 306,220 — — 306,220

Equity component of early extinguishment of 2023 convertible senior notes

Equity component of early extinguishment and conversion of convertible senior notes 1,660,104 — — — 70,493 — — 70,493

Proceeds from hedges related to convertible senior notes — — — — 195,046 — — 195,046

3 unchanged sentences

Other comprehensive income — — — — — 4,498 — 4,498

Net loss — — — — — — ( 266,332 ) ( 266,332 )

Balances as of January 31, 2021 122,823,967 $ 12 8,159,447 $ 1 $ 1,656,096 $ 5,390 $ ( 967,456 ) $ 694,043

3 unchanged sentences

Year Ended January 31,

As Adjusted (1)

2021 2020 2019

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Net loss $ ( 266,332 ) $ ( 208,913 ) $ ( 125,497 )

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

Stock-based compensation 196,181 126,624 76,320

3 unchanged sentences

Deferred income taxes ( 1,182 ) ( 2,253 ) ( 765 )

Write-off of intangible assets

Non-cash charitable contributions 9,292 1,746 1,008

Loss on early extinguishment of debt

Loss on early extinguishment and conversion of debt 2,263 14,572 —

Other, net 5,537 ( 11 ) 640

Changes in operating assets and liabilities:

8 unchanged sentences

Deferred revenue 142,148 116,432 89,303

Net cash provided by (used in) operating activities

Net cash provided by operating activities 127,962 55,603 15,172

Cash flows from investing activities:

9 unchanged sentences

Cash flows from financing activities:

Proceeds from initial public offering, net of underwriters' discounts and commissions

Proceeds from issuance of convertible senior notes, net of issuance costs 1,134,841 1,040,660 334,980

5 unchanged sentences

Purchases of capped calls related to convertible senior notes ( 133,975 ) ( 74,094 ) —

Payments of deferred offering costs

Proceeds from stock option exercises, net of repurchases 45,620 45,363 36,861

Proceeds from shares issued in connection with employee stock purchase plan 25,911 18,767 13,727

Other, net — ( 126 ) ( 206 )

Net cash provided by financing activities 1,091,598 853,385 357,762

Year Ended January 31,

As Adjusted (1)

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash 2,263 ( 209 ) ( 632 )

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash ( 83,323 ) 220,738 174,982

Cash, cash equivalents and restricted cash at beginning of year 531,953 311,215 136,233

Cash, cash equivalents and restricted cash at end of year $ 448,630 $ 531,953 $ 311,215

Year Ended January 31,

2021 2020 2019

Supplementary cash flow disclosure:

Cash paid during the period for:

Interest $ 3,759 $ 862 $ 403

Income taxes 978 1,123 514

Non-cash investing and financing activities:

Issuance of common stock for repurchases of 2023 convertible senior notes

Vesting of early exercised common stock options

Issuance of common stock in connection with warrant exercises

Issuance of common stock for repurchases and conversions of convertible senior notes 307,910 380,406 —

Benefit from exercise of hedges related to convertible senior notes 37,076 — —

Common stock issued as charitable contribution 9,292 1,746 1,008

Operating lease right-of-use assets exchanged for lease obligations

Property and equipment acquired through tenant improvement allowances

Operating lease right-of-use assets exchanged for lease liabilities 45,611 16,832 127,575

Property and equipment acquired through tenant improvement allowance 4,811 304 22,236

Property and equipment and other accrued but not yet paid 974 855 7,225

Bonus settled through the issuance of common stock

Issuance of common stock in connection with business combination

Conversion of redeemable convertible preferred stock to common stock

Issuance of common stock for bonus settlement 9,818 2,809 —

Reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets to the amounts shown in the statements of cash flows above:

3 unchanged sentences

Total cash, cash equivalents and restricted cash $ 448,630 $ 531,953 $ 311,215

(1) Adjusted for adoption of ASC 842.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

(the Company) is the leading independent identity management platform for the enterprise.

The Okta Identity Cloud enables the Company's customers to securely connect people to technology, anywhere, anytime and from any device.

The Okta Identity Cloud enables the Company's customers to securely connect the right people to the right technologies and services at the right time.

The Company was incorporated in January 2009 as Saasure, Inc., a California corporation, and was later reincorporated in April 2010 under the name Okta, Inc.

4 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications of prior period amounts have been made in our consolidated balance sheets and consolidated statement of cash flows to conform to the current period presentation.

We reclassified $ 14.8 million of certain accrued accounts payable to accrued expenses as of January 31, 2019.

These reclassifications had no impact on net loss, stockholders’ equity or cash flows as previously reported.

The Company’s fiscal year ends on January 31.

4 unchanged sentences

Actual results could vary from those estimates.

The Company’s most significant estimates include the stand alone selling price (SSP) for each distinct performance obligation included in customer contracts with multiple performance obligations, the determination of the period of benefit for deferred commissions, the determination of the effective interest rate of the liability components of our convertible senior notes, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation of deferred income tax assets and the valuation of acquired intangible assets.

The Company’s most significant estimates include the SSP for each distinct performance obligation included in customer contracts with multiple performance obligations, the determination of the period of benefit for deferred commissions, the determination of the effective interest rate of the liability components of its convertible senior notes, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation of deferred income tax assets and the valuation of acquired intangible assets.

In March 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus, COVID-19, a pandemic, which continues to spread across the globe.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the consolidated financial statements for the year ended January 31, 2021.

As events continue to evolve and additional information becomes available, our assumptions and estimates may change materially in future periods.

Foreign Currency

12 unchanged sentences

The Company sells subscriptions to its platform through arrangements that are generally one to five years in length.

The Company’s arrangements are generally noncancelable and nonrefundable.

The Company’s arrangements are generally non-cancellable and non-refundable.

Furthermore, if a customer reduces the contracted usage or service level, the customer has no right of refund.

8 unchanged sentences

Subscription Revenue

Professional Services Revenue

16 unchanged sentences

Sales commissions for new revenue contracts, including incremental sales to existing customers, are deferred and then amortized on a straight-line basis over a period of benefit, which the Company has determined to be generally five years .

The Company determined the period of benefit by taking into consideration its customer contracts, its technology and other factors.

Sales commissions for renewal contracts (which are not considered commensurate with sales commissions for new revenue contracts and incremental sales to existing customers) are deferred and then amortized on a straight-line basis over the related period of benefit, which is generally

the related contract renewal term.

The Company determined the period of benefit by taking into consideration the terms of its customer contracts, its technology and other factors.

period of benefit, which is generally the related contract renewal term.

Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of operations.

8 unchanged sentences

The fair market value of cash equivalents approximated their carrying value as of January 31, 2021 and 2020.

As of January 31, 2020 and 2019 , the Company's long-term restricted cash balance was $ 11.4 million related to letters of credit for its facility lease agreements.

Long-term restricted cash is included within other assets on the Company's consolidated balance sheet.

As of January 31, 2021 and 2020, the Company's long-term restricted cash balance was $ 9.5 million and $ 11.4 million, respectively, primarily related to letters of credit for its facility lease agreements.

Short-Term Investments

The Company’s short-term investments comprise asset-backed securities, U.S.

The Company’s short-term investments comprise U.S.

treasury securities and corporate debt securities.

1 unchanged sentence

The Company has classified and accounted for its short-term investments as available-for-sale securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity.

As a result, the Company classifies its short-term investments, including securities with stated maturities beyond twelve months, within current assets in the consolidated balance sheets.

Available-for-sale securities are recorded at fair value each reporting period.

Unrealized gains and losses on these short-term investments are reported as a separate component of accumulated other comprehensive loss in the consolidated balance sheets until realized.

Interest income is reported within interest income and other, net in the consolidated statements of operations.

The Company periodically evaluates its short-term investments to assess whether those with unrealized loss positions are other-than-temporarily impaired.

The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value is less than the Company’s cost basis, the investment’s financial condition and near-term prospects of the investee.

As a result, short-term investments, including securities with stated maturities beyond twelve months, are classified within current assets in the consolidated balance sheets.

Available-for-sale securities are recorded at fair value each reporting period and are periodically evaluated for unrealized losses.

For unrealized losses in securities that the Company intends to hold and will not more likely than not be required to sell before recovery, the Company further evaluates whether declines in fair value below amortized cost are due to credit or non-credit related factors.

The Company considers credit related impairments to be changes in value that are driven by a change in the creditor’s ability to meet its payment obligations, and records an allowance and recognizes a corresponding loss in interest income and other, net when the impairment is incurred.

Unrealized non-credit related losses and unrealized gains are reported as a separate component of accumulated other comprehensive loss in the consolidated balance sheets until realized.

Realized gains and losses are determined based on the specific identification method and are reported in interest income and other, net in the consolidated statements of operations.

If the Company determines that the decline in an investment’s fair value is other-than-temporary, the difference is recognized as an impairment loss in the consolidated statements of operations.

Accounts Receivable and Allowances

Accounts receivable are recorded at the invoiced amount, net of allowances.

Amounts deemed uncollectible are recorded to these allowances in the consolidated balance sheets with an offsetting decrease in related deferred revenue and a charge to general and administrative expense in the consolidated statement of operations.

These allowances are based on the Company’s assessment of the collectibility of accounts by considering the age of each outstanding invoice, the collection history of each customer, and an evaluation of current expected risk of credit loss based on current economic conditions and reasonable and supportable forecasts of future economic conditions over the life of the receivable.

We assess collectibility by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when we identify specific customers with collectibility issues.

Amounts deemed uncollectible are recorded as an allowance in the consolidated balance sheets with an offsetting decrease in deferred revenue or a charge to general and administrative expense in the consolidated statements of operations.

As of January 31, 2021, allowances include collectibility concerns stemming from business and market disruption caused by COVID-19 and may fluctuate materially in future periods as the duration and severity of the impact of the COVID-19 pandemic remains uncertain.

Property and Equipment

3 unchanged sentences

The useful lives of property and equipment are as follows:

Capitalized internal-use software costs

Computers and equipment

Furniture and fixtures

Leasehold improvements

Shorter of estimated useful life or remaining lease term

Capitalized internal-use software costs 3 years

Computers and equipment 3 years

Furniture and fixtures 7 years

Leasehold improvements Shorter of estimated useful life or remaining lease term

Business Combinations

When the Company acquires a business, the purchase price is allocated to the net tangible and identifiable intangible assets acquired.

When the Company acquires a business, the purchase price is allocated to the net tangible and identifiable intangible assets acquired based on their estimated fair values.

Any residual purchase price is recorded as goodwill.

The allocation of the purchase price requires management to make estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets.

The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets.

These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital and the cost savings expected to be derived from acquiring an asset.

14 unchanged sentences

Lease liabilities due within twelve months are included within accrued expenses and other current liabilities on the Company's consolidated balance sheet.

The estimation of the incremental borrowing rate is based on an analysis of publicly traded debt securities of companies with similar credit and financial profiles.

The estimation of the incremental borrowing rate is based on an estimate of the Company's unsecured borrowing rate for its Notes, adjusted for tenor and collateralized security features.

Right-of-use assets are measured based on the corresponding lease liability adjusted for (i) payments made to the lessor at or before the commencement date, (ii) initial direct costs incurred and (iii) tenant incentives received, incurred or payable under the lease.

1 unchanged sentence

The Company does not assume renewals or early terminations of its leases unless it is reasonably certain to exercise these options at commencement and does not allocate consideration between lease and non-lease components.

For short-term leases, the Company records rent expense in its condensed consolidated statements of operations on a straight-line basis over the lease term and records variable lease payments as incurred.

For short-term leases, the Company records rent expense in its consolidated statements of operations on a straight-line basis over the lease term and records variable lease payments as incurred.

Convertible Senior Notes

In February 2018 , the Company issued $ 345.0 million aggregate principal amount of 0.25 % convertible senior notes due February 15, 2023 in a private offering (2023 Notes).

In September 2019 , the Company issued $ 1,060.0 million aggregate principal amount of 0.125 % convertible senior notes due September 1, 2025 (2025 Notes, the 2025 Notes together with the 2023 Notes, the Notes).

Concurrent with the issuance of the 2025 Notes, the Company used part of the net proceeds to repurchase a portion of the 2023 Notes (2023 Notes Partial Repurchase).

See Note 9 for additional details.

The Notes are accounted for in accordance with FASB ASC Subtopic 470-20, Debt with Conversion and Other Options.

Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the Notes, that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument.

The carrying amount of the liability component of the instrument is computed by estimating the fair value of a similar liability without the conversion option using income and market based approaches.

For the income-based approach, the Company uses a convertible bond pricing model that includes several assumptions such as volatility and the risk-free rate.

For the market-based approach, the Company observes the price of derivative price instruments purchased in conjunction with our convertible senior note issuances or evaluates issuances of convertible debt securities by other companies with similar credit risk ratings at the time of issuance.

The Company accounts for the issuance of convertible senior notes in accordance with FASB ASC Subtopic 470-20, Debt with Conversion and Other Options.

Pursuant to ASC Subtopic 470-20, as the Notes have a net settlement feature and may be settled wholly or partially in cash upon conversion, the Company is required to separately account for the liability (debt) and equity (conversion option) components of the instrument.

The carrying amount of the liability component is computed by estimating the fair value of a similar liability without the conversion option using income and market based approaches.

For the income-based approach, the Company uses a convertible bond pricing model that includes several assumptions such as volatility, the risk-free rate, and observable trading activity for the Company's existing Notes.

For the market-based approach, the Company observes the price of derivative instruments purchased in conjunction with our convertible senior note issuances or the Company evaluates issuances of convertible debt securities by other companies with similar credit risk ratings at the time of issuance.

The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the instrument.

The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the respective terms of the Notes using an effective interest rate method.

This difference represents a debt discount that is amortized to interest expense over the respective terms of the Notes using an effective interest rate method.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, the allocation of issuance costs incurred between the liability and equity components were based on their relative values.

Similarly, in accordance with ASC Subtopic 470-20, transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor, such as the contemporaneous 2023 Notes Partial Repurchase and issuance of the 2025 Notes, should be evaluated as a modification or an exchange transaction depending on whether the exchange is determined to have substantially different terms.

The 2023 Notes Partial Repurchase and issuance of the 2025 Notes were deemed to have substantially different terms due to the significant difference between the value of the conversion option immediately prior to and after the exchange, and consequently, the 2023 Notes Partial Repurchase was accounted for as a debt extinguishment.

Pursuant to ASC Subtopic 470-20, total consideration for the 2023 Notes Partial Repurchase was separated into liability and equity components by estimating the fair value of a similar liability without a conversion option and assigning the residual value to the equity component.

The effective interest rate used to estimate the fair value of the liability component of the 2023 Notes Partial Repurchase is based on the income and market based approaches used to determine the effective interest rate of the 2025 Notes, adjusted for the remaining tenor of the 2023 Notes.

The gain or loss on extinguishment of the debt is subsequently determined by comparing repurchase consideration allocated to the liability component to the sum of the carrying value of the liability component, net of the proportionate amounts of unamortized debt discount and remaining unamortized debt issuance costs.

Similarly, in accordance with ASC Subtopic 470-20, transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor should be evaluated as a modification or an exchange transaction depending on whether the exchange is determined to have substantially different terms.

When the exchange is deemed to have substantially different terms due to a significant difference between the value of the conversion option immediately prior to and after the exchange, the transaction is accounted for as a debt extinguishment.

Pursuant to ASC Subtopic 470-20, total consideration for the satisfaction of an existing debt obligation is separated into liability and equity components by estimating the fair value of a similar liability without a conversion option and assigning the residual value to the equity component.

The effective interest rate used to estimate the fair value of the liability component is based on the income and market based approaches used to determine the effective interest rate of the new debt obligation, adjusted for the remaining tenor of the extinguished debt.

The difference between the fair value and the amortized carrying value of the extinguished debt, net of the proportionate amounts of unamortized debt discount and remaining unamortized debt issuance costs, is recorded as a gain or loss on extinguishment.

Advertising Expenses

6 unchanged sentences

In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of future taxable income and ongoing tax planning strategies.

Because of the uncertainty of the realization of the deferred tax assets, the Company has recorded a full valuation

allowance against its deferred tax assets.

Because of the uncertainty of the realization of the deferred tax assets, the Company has recorded a full valuation allowance against its deferred tax assets.

Realization of its deferred tax assets is dependent primarily upon future U.S.

19 unchanged sentences

Year Ended January 31,

2021 2020 2019

United States $ 701,635 $ 494,529 $ 337,367

International 133,789 91,538 61,887

Total $ 835,424 $ 586,067 $ 399,254

Other than the United States, no individual country exceeded 10% of total revenue for the years ended January 31, 2021, 2020 and 2019.

3 unchanged sentences

The Company computes basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities.

Under the two-class method, basic net loss per share

attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase, without consideration for potentially dilutive securities as they do not share in losses.

Under the two-class method, basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase, without consideration for potentially dilutive securities as they do not share in losses.

The diluted net loss per share attributable to common stockholders is computed giving effect to all potential dilutive common stock equivalents outstanding for the period.

For purposes of this calculation, options to purchase common stock, unvested restricted stock units, or RSUs, purchase rights issued under the 2017 Employee Stock Purchase Plan, or ESPP, shares subject to repurchase from early exercised options, unvested common stock and restricted stock issued in connection with certain business combinations, convertible senior notes and warrants are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as the effect is antidilutive.

For purposes of this calculation, options to purchase common stock, unvested restricted stock units (RSUs) purchase rights issued under the 2017 Employee Stock Purchase Plan shares subject to repurchase from early exercised options, unvested common stock and restricted stock issued in connection with certain business combinations, convertible senior notes and warrants are considered common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive.

Since the Company's IPO, Class A and Class B common stock are the only outstanding equity of the Company.

1 unchanged sentence

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842) , which requires lessees to record a right-of-use asset and a corresponding lease liability on their balance sheet for most leases.

The Company adopted the requirements of ASC 842 as of February 1, 2019, using the modified retrospective method for leases that existed as of February 1, 2017, or were entered into thereafter.

The modified retrospective method provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach.

In order to simplify an entity’s transition, ASC 842 provides a package of three practical expedients, which must be elected together and applied consistently to all of an entity’s leases.

The Company elected to use the package of practical expedients and, therefore, did not reassess:

whether contractual arrangements that expired prior to or existed as of February 1, 2017, are or contain leases,

the classification of leases that expired prior to or existed as of February 1, 2017, and

initial direct costs for leases that existed as of February 1, 2017.

As of the later of February 1, 2017 or each lease’s respective commencement date, the Company recorded lease liabilities equal to the present value of the remaining minimum lease payments and right-of-use assets equal to the corresponding lease liability adjusted for (i) any prepaid or accrued lease payments, (ii) the remaining balance of any lease incentives received, (iii) unamortized initial direct costs and (iv) any impairments.

The Company adjusted its consolidated balance sheet from amounts previously reported due to the adoption of ASC 842.

Select consolidated balance sheet line items, which reflect the adoption of ASC 842, are as follows (in thousands):

As of January 31, 2019

Adoption of ASC 842

Current assets:

Prepaid expenses and other current assets

Total current assets

Operating lease right-of-use assets

Other noncurrent assets

Liabilities and stockholders’ equity

Current liabilities:

Accrued expenses and other liabilities

Total current liabilities

Operating lease liabilities, noncurrent

Other noncurrent liabilities

Total liabilities

Total liabilities and stockholders’ equity

The Company’s consolidated statements of cash flows reflect the adoption of ASC 842.

The adoption of ASC 842 did not have an impact on cash provided by or used in operating, investing, or financing activities or on the Company’s condensed consolidated statements of operations.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments, which changes the existing incurred loss impairment model for financial assets held at amortized cost.

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, which changes the existing incurred loss impairment model for financial assets held at amortized cost.

The new model uses a forward-looking expected loss method to calculate credit loss estimates.

1 unchanged sentence

These changes will result in earlier recognition of credit losses.

This guidance is effective for the Company on February 1, 2020 with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures and does not expect a material impact.

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset.

This guidance is effective for the Company on February 1, 2020 with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures and does not expect a material impact.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies accounting for income taxes by revising or clarifying existing guidance in ASC 740, as well as removing certain exceptions within ASC 740.

The guidance is effective for the Company on February 1, 2021 with early adoption permitted.

The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements and related disclosures.

The Company adopted the requirements of ASU 2016-13 as of February 1, 2020 on a modified retrospective basis.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset.

The Company adopted the requirements of ASU 2018-15 as of February 1, 2020 on a prospective basis.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), as part of its Simplification Initiative to reduce the cost and complexity in accounting for income taxes.

ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation and clarifies the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

The Company early adopted ASU 2019-12 as of February 1, 2020 on a

prospective basis.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU No.

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt.

Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument.

Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium.

Among other potential impacts, this change is expected to reduce reported interest expense, increase reported net income, and result in a reclassification of certain conversion feature-related balance sheet amounts from stockholders’ equity to liabilities as it relates to the Company’s convertible senior notes.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS), which is consistent with the Company’s accounting treatment under the current standard.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a fully retrospective or modified retrospective basis.

The Company is currently evaluating the timing, method of adoption and overall impact of this standard on its consolidated financial statements.

Business Combinations

On March 18, 2019, the Company acquired all issued and outstanding capital stock of Azuqua, Inc.

(Azuqua), a company which provides a no-code, cloud-based integration platform that automates workflows between applications and services.

The acquisition date cash consideration transferred for Azuqua was $ 44.2 million , net of $ 1.1 million in cash acquired.

The Company recorded $ 15.7 million for developed technology intangible assets with an estimated useful life of five years and preliminarily recorded $ 29.9 million of goodwill which is primarily attributed to the assembled workforce as well as the integration of Azuqua’s technology and the Company’s technology.

During the year ended year ended January 31, 2020, the Company completed a business combination for a purchase price of $ 44.2 million, net of $ 1.1 million in cash acquired.

The Company recorded $ 15.7 million for developed technology intangible assets with an estimated useful life of five years and recorded $ 29.9 million of goodwill which is primarily attributed to the assembled workforce as well as the integration of the acquired technology.

The Company incurred $ 3.0 million of acquisition-related costs, which were recorded as general and administrative expense in the quarter ended April 30, 2019.

On July 13, 2018, the Company acquired all issued and outstanding capital stock of ScaleFT, Inc.

(ScaleFT), a “zero trust” security company which provides access solutions for the modern workforce.

The acquisition date cash consideration transferred for ScaleFT was $ 15.6 million , net of $ 0.6 million in cash acquired.

The Company recorded $ 4.6 million for developed technology intangible assets with an estimated useful life of three years and $ 11.8 million of goodwill which is primarily attributed to the assembled workforce as well as the integration of ScaleFT’s technology and the Company’s technology.

The Company incurred $ 1.1 million of acquisition-related costs, which were recorded as general and administrative expense in the quarter ended July 31, 2018.

The Company also entered into deferred compensation arrangements in connection with these acquisitions totaling $ 10.8 million , of which $ 4.4 million was recognized as compensation during the year ended January 31, 2020 .

The remaining deferred compensation balance of $ 4.8 million is being recognized over a future weighted-average period of 1.6 years subject to continued service with the Company.

The Company also entered into deferred compensation arrangements in connection with prior acquisitions totaling $ 10.8 million, of which $ 3.0 million was recognized as compensation during the year ended January 31, 2021.

The remaining deferred compensation balance is immaterial.

These acquisitions did not have a material impact on the Company’s consolidated financial statements;

5 unchanged sentences

Money market funds $ 311,257 $ — $ — $ 311,257

treasury securities

Total cash equivalents 311,257 — — 311,257

3 unchanged sentences

Total short-term investments 2,119,608 2,000 ( 24 ) 2,121,584

Total $ 2,430,865 $ 2,000 $ ( 24 ) $ 2,432,841

As of January 31, 2020

1 unchanged sentence

Money market funds $ 416,584 $ — $ — $ 416,584

Corporate debt securities

treasury securities 19,996 — — 19,996

Total cash equivalents 436,580 — — 436,580

3 unchanged sentences

Total short-term investments 881,779 1,205 ( 8 ) 882,976

Total $ 1,318,359 $ 1,205 $ ( 8 ) $ 1,319,556

All short-term investments were designated as available-for-sale securities as of January 31, 2021 and 2020.

The Company's short-term investments as of January 31, 2020 and 2019 all mature within one year, as follows (in thousands):

As of January 31, 2020

The following table presents the contractual maturities of the Company's short-term investments as of January 31, 2021 and 2020 (in thousands):

As of January 31, 2021

Due within one year $ 1,509,241 $ 1,510,810

Due between one to five years 610,367 610,774

Total $ 2,119,608 $ 2,121,584

As of January 31, 2021 and 2020, the Company included $ 31.0 million and nil , respectively, of unsettled maturities of short-term investments in Prepaid expenses and other current assets.

The Company included $ 10.5 million and $ 5.7 million of interest receivable in Prepaid expenses and other current assets as of January 31, 2021 and 2020, respectively.

The Company did not recognize an allowance for credit losses against interest receivable as of January 31, 2021 and 2020 because such potential losses were not material.

The Company had 10 and 7 short-term investments in unrealized loss positions as of January 31, 2021 and 2020, respectively.

There were no material gross unrealized gains or losses from available-for-sale securities and no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the years ended January 31, 2021, 2020 and 2019.

For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the Company has the intention to sell any of these investments and (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis .

Based on this evaluation, the Company determined that there were no other-than-temporary impairments associated with short-term investments as of January 31, 2020 and 2019 .

For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis

and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors.

Based on this evaluation, the Company determined that for short-term investments, there were no material credit or non-credit related impairments as of January 31, 2021 and 2020.

Fair Value Measurements

9 unchanged sentences

As of January 31, 2021

Level 1 Level 2

Level 3 Total

Cash equivalents:

Money market funds $ 311,257 $ — $ — $ 311,257

treasury securities

Total cash equivalents 311,257 — — 311,257

5 unchanged sentences

As of January 31, 2020

Level 1 Level 2

Level 3 Total

Cash equivalents:

Money market funds $ 416,584 $ — $ — $ 416,584

Corporate debt securities

treasury securities — 19,996 — 19,996

Total cash equivalents 416,584 19,996 — 436,580

11 unchanged sentences

2025 convertible senior notes $ 885,465 $ 1,605,508

2026 convertible senior notes $ 867,643 $ 1,493,850

(1) Before unamortized debt issuance costs.

The difference between the principal amount of the 2023 Notes and the 2025 Notes, $ 120.6 million and $ 1,060.0 million , respectively, and the net carrying amounts before unamortized debt issuance costs represents the unamortized debt discount (See Note 9 for additional details).

The principal amounts of the 2023 Notes, the 2025 Notes and the 2026 Notes are $ 40.2 million, $ 1,060.0 million and $ 1,150.0 million, respectively.

The difference between the principal amounts of the 2023 Notes, the 2025 Notes and the 2026 Notes and the respective net carrying amounts before unamortized debt issuance costs represents the unamortized debt discount (See Note 9 for additional details).

The estimated fair values of the Notes, which are Level 2 financial instruments, were determined based on the quoted bid prices of the Notes in an over-the-counter market on the last trading day of the reporting period.

As of January 31, 2021, the difference between the net carrying amount of the Notes and their estimated fair values represented the equity conversion value premium the market assigned to the Notes.

Based on the closing price of our common stock of $ 128.05 on January 31, 2020 , the if-converted value of the 2023 Notes exceeded the principal amount of $ 120.6 million , while the if-converted value of the 2025 Notes was less than the principal amount of $ 1,060.0 million .

Based on the closing price of our common stock of $ 259.01 on January 31, 2021, the if-converted value of the 2023 Notes, 2025 Notes and 2026 Notes exceeded the principal amount of $ 40.2 million, $ 1,060.0 million and $ 1,150.0 million, respectively .

Goodwill and Intangible Assets, net

As of January 31, 2020 and 2019 , goodwill was $ 48.0 million and $ 18.1 million , respectively.

During the year ended January 31, 2020 , the Company recorded $ 29.9 million of goodwill in connection with the Azuqua acquisition that was completed in March 2019.

See Note 3 for further details.

As of January 31, 2021 and 2020, goodwill was $ 48.0 million.

During the year ended January 31, 2020, the Company recorded $ 29.9 million of goodwill in connection with a business combination that was completed in March 2019.

No goodwill impairments were recorded during the years ended January 31, 2021, 2020 and 2019.

Goodwill balances as of January 31, 2020 and 2019 were as follows (in thousands):

Balance at January 31, 2019

Goodwill recorded in connection with Azuqua acquisition

Balance at January 31, 2020

Intangible Assets, net

1 unchanged sentence

As of January 31, 2021

Accumulated Amortization

Gross Accumulated Amortization Write-offs Net

Capitalized internal-use software costs $ 30,259 $ ( 19,478 ) $ — $ 10,781

1 unchanged sentence

Software licenses 126 ( 4 ) — 122

$ 59,185 $ ( 32,176 ) $ — $ 27,009

As of January 31, 2020

Accumulated Amortization

Gross Accumulated Amortization Write-offs Net

Capitalized internal-use software costs $ 24,890 $ ( 14,828 ) $ ( 119 ) $ 9,943

1 unchanged sentence

Software licenses 1,112 ( 1,005 ) — 107

The Company capitalized $ 5.1 million and $ 3.4 million of internal-use software costs during the years ended January 31, 2020 and 2019 , respectively, which included $ 1.2 million and $ 0.5 million of stock-based compensation costs, respectively.

Amortization expense of capitalized internal-use software costs totaled $ 4.9 million , $ 4.8 million and $ 2.7 million during the years ended January 31, 2020 , 2019 and 2018 , respectively.

The Company wrote-off an immaterial amount and $ 1.1 million of previously capitalized costs in the years ended January 31, 2020 and 2018 , respectively, as they were not realizable.

The charges were recognized in research and development in the consolidated statements of operations.

During the year ended January 31, 2020 , the Company recorded $ 24.2 million of purchased developed technology, of which $ 15.7 million related to the Azuqua acquisition (see Note 3 for further details), and the remainder was in connection with an asset acquisition in May 2019, whereby the Company recorded $ 8.5 million of purchased developed technology with an estimated useful life of five years.

The remaining weighted-average useful life of all purchased developed technology was 3.9 and 2.5 years as of January 31, 2020 , and 2019 , respectively.

$ 54,802 $ ( 22,154 ) $ ( 119 ) $ 32,529

The Company capitalized $ 5.5 million and $ 5.1 million of internal-use software costs during the years ended January 31, 2021 and 2020, respectively.

During the year ended January 31, 2020, the Company recorded $ 24.2 million of purchased developed technology in connection with a business combination and an asset acquisition.

The remaining weighted-average useful life of all purchased developed technology was 3.1 years and 3.9 years as of January 31, 2021, and 2020, respectively.

Amortization expense of intangible assets for the years ended January 31, 2021, 2020 and 2019 was $ 11.1 million, $ 10.6 million, and $ 5.8 million, respectively.

1 unchanged sentence

Remaining Amortization

2022 $ 10,354

Total $ 27,009

Balance Sheet Components

11 unchanged sentences

As of January 31,

2021 2020 2019

Balance, beginning of period $ 1,166 $ 2,098 $ 1,472

(Reductions) additions

Additions (reductions) 3,252 ( 673 ) 888

Write-offs ( 967 ) ( 259 ) ( 262 )

Balance, end of period $ 3,451 $ 1,166 $ 2,098

5 unchanged sentences

Operating lease liabilities 23,403 12,064

Other 3,147 702

Accrued expenses and other current liabilities $ 53,729 $ 36,887

(1) Adjusted for adoption of ASC 842.

Other Liabilities, Noncurrent

2 unchanged sentences

Deferred tax liabilities $ 3,877 $ 1,558

Other 7,498 3,803

Other liabilities, noncurrent $ 11,375 $ 5,361

(1) Adjusted for adoption of ASC 842.

Deferred Revenue and Performance Obligations

4 unchanged sentences

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents all future, noncancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and noncancelable amounts that will be invoiced and recognized as revenue in future periods.

As of January 31, 2020 , total remaining noncancelable performance obligations under the Company’s subscription contracts with customers was approximately $ 1,209.7 million .

Transaction price allocated to the remaining performance obligations represents all future, non-cancellable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancellable amounts that will be invoiced and recognized as revenue in future periods.

As of January 31, 2021, total remaining non-cancellable performance obligations under the Company’s subscription contracts with customers was approximately $ 1,796.9 million.

Of this amount, the Company expects to recognize revenue of approximately $ 841.8 million, or 47 %, over the next 12 months, with the balance to be recognized as revenue thereafter.

Revenue from remaining performance obligations for professional services and other contracts as of January 31, 2020 was not material.

Unbilled Receivables

The Company receives payments from customers based on billing schedules as established in its contracts.

Unbilled receivables and contract assets represent amounts for which the Company has recognized revenue in excess of billings pursuant to its revenue recognition policy.

As of January 31, 2020 and January 31, 2019 , contract assets and unbilled receivables were $ 1.0 million and $ 1.5 million , respectively, which are included in prepaid expenses and other current assets in the consolidated balance sheets.

Remaining performance obligations for professional services and other contracts as of January 31, 2021 were not material.

Convertible Senior Notes, Net

5 unchanged sentences

The total net proceeds from the 2023 Notes, after deducting initial purchasers’ discounts and debt issuance costs, was $ 335.0 million.

In September 2019, the Company used part of the net proceeds from the issuance of the 2025 Notes for the 2023 Notes Partial Repurchase, which consisted of a repurchase of $ 224.4 million aggregate principal amount of the 2023 Notes in privately-negotiated transactions for aggregate consideration of $ 604.8 million , consisting of approximately $ 224.4 million in cash and approximately 3.0 million shares of Class A common stock.

Of the $ 604.8 million in aggregate consideration, $ 197.7 million and $ 407.1 million were allocated to the debt and equity components, respectively, using an effective interest rate of 4.00 % to determine the fair value of the liability component.

This interest rate was based on the income and market based approaches used to determine the effective interest rate of the 2025 Notes, adjusted for the remaining tenor of the 2023 Notes.

As of the repurchase date, the carrying value of the notes subject to the 2023 Notes Partial Repurchase, net of unamortized debt discount and issuance costs, was $ 183.1 million .

The 2023 Notes Partial Repurchase resulted in a $ 14.6 million loss on early debt extinguishment, of which $ 3.8 million consisted of unamortized debt issuance costs.

In September 2019, the Company used part of the net proceeds from the issuance of the 2025 Notes to repurchase a portion of the 2023 Notes, which consisted of a repurchase of $ 224.4 million aggregate principal amount of the 2023 Notes in privately-negotiated transactions for aggregate consideration of $ 604.8 million, consisting of approximately $ 224.4 million in cash and approximately 3.0 million shares of Class A common stock.

The $ 604.8 million in aggregate consideration was allocated between the debt and equity components in the amounts of $ 197.7 million and $ 407.1 million, respectively, using an effective interest rate of 4.00 % to determine the fair value of the liability component.

As of the repurchase date, the carrying value of the notes subject to the First Partial Repurchase of 2023 Notes, net of unamortized debt discount and issuance costs, was $ 183.1 million.

The First Partial Repurchase of 2023 Notes resulted in a $ 14.6 million loss on early debt extinguishment during the year ended January 31, 2020, of which $ 3.8 million consisted of unamortized debt issuance costs.

In June 2020, the Company used part of the net proceeds from the issuance of the 2026 Notes to repurchase a portion of the 2023 Notes, which consisted of a repurchase of $ 69.9 million aggregate principal amount of the 2023 Notes in privately-negotiated transactions, for aggregate consideration of $ 260.5 million, consisting of approximately $ 0.2 million in cash and approximately 1.4 million shares of Class A common stock.

million in aggregate consideration was allocated between the debt and equity components in the amounts of $ 61.8 million and $ 198.7 million respectively, using an effective interest rate of 4.90 % to determine the fair value of the liability component.

As of the repurchase date, the carrying value of the notes subject to the Second Partial Repurchase of 2023 Notes, net of unamortized debt discount and issuance costs, was $ 59.6 million.

The Second Partial Repurchase of 2023 Notes resulted in a $ 2.2 million loss on early debt extinguishment during the year ended January 31, 2021, of which $ 1.0 million consisted of unamortized debt issuance costs.

The interest rates used in the 2023 Notes Partial Repurchases were based on the income and market based approaches used to determine the effective interest rate of the 2025 Notes and 2026 Notes, adjusted for the remaining tenor of the 2023 Notes.

As of January 31, 2021, $ 40.2 million of principal remained outstanding on the 2023 Notes.

7 unchanged sentences

On or after October 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2023 Notes regardless of the foregoing circumstances.

For at least twenty trading days during the period of thirty consecutive trading days ended January 31, 2020 , the last reported sale price of the Company’s common stock was equal to or exceeded 130 % of the conversion price of the 2023 Notes on each applicable trading day.

For at least 20 trading days during the period of 30 consecutive trading days ended January 31, 2021, the last reported sale price of the Company’s common stock was equal to or exceeded 130 % of the conversion price of the 2023 Notes on each applicable trading day.

As a result, the 2023 Notes are convertible at the option of the holders during the fiscal quarter ending April 30, 2021 and were classified as current liabilities on the consolidated balance sheet as of January 31, 2021.

In addition, as of the date of this filing, the Company has received an immaterial amount of conversion requests and holders of the 2023 Notes have converted an immaterial amount of such notes (which was not in connection with the 2023 Notes Partial Repurchase).

During the year ended January 31, 2021, the Company paid approximately $ 0.3 million in cash and issued approximately 0.2 million shares of Class A common stock to settle approximately $ 10.4 million principal amount of 2023 Notes (not in connection with the Second Partial Repurchase of the 2023 Notes).

The loss on early note conversion was not material.

During the fourth quarter of fiscal 2021, the Company received additional conversion requests, and approximately $ 4.3 million aggregate principal amount of the 2023 Notes were primarily settled in shares of Class A common stock in the first quarter of fiscal 2022.

In addition, subsequent to January 31, 2021, the Company received conversion requests for approximately $ 3.2 million aggregate principal amount of the 2023 Notes.

Holders of the 2023 Notes who convert their 2023 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the 2023 Indenture) are, under certain circumstances, entitled to an increase in the conversion rate.

Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the 2023 Indenture), holders of the 2023 Notes may require the Company to repurchase all or a portion of their 2023 Notes at a price equal to 100 % of the principal amount of the 2023 Notes being repurchased, plus any accrued and unpaid interest.

In accounting for the issuance of the 2023 Notes, the Company separated the 2023 Notes into liability and equity components, utilizing an effective interest rate of 5.68 % to determine the fair value of the liability component.

In accounting for the issuance of the 2023 Notes, the Company separated the 2023 Notes into liability and equity components, using an effective interest rate of 5.68 % to determine the fair value of the liability component.

This interest rate was based on both an income and a market based approach.

For the income approach, the Company used a convertible bond pricing model, which included several assumptions including volatility and the risk-free rate.

For the market approach, the Company observed the price of the Note Hedge (see below) it purchased for its 2023 Notes and also performed an evaluation of issuances of convertible debt securities by other companies with similar credit risk ratings at the time of issuance.

T he following table sets forth total interest expense recognized related to the 2023 Notes (in thousands):

For the market approach, the Company observed the price of the Note Hedges (see below) it purchased for its 2023 Notes and also performed an evaluation of issuances of convertible debt securities by other companies with similar credit risk ratings at the time of issuance.

The following table sets forth total interest expense recognized related to the 2023 Notes (in thousands):

Year Ended January 31,

2 unchanged sentences

Amortization of debt discount 3,316 11,219

Total issuance costs of $ 10.0 million related to the 2023 Notes were allocated between liability and equity in the same proportion as the allocation of the total proceeds to the liability and equity components.

Total $ 3,808 $ 12,810

Total initial issuance costs of $ 10.0 million related to the 2023 Notes were allocated between liability and equity in the same proportion as the allocation of the total proceeds to the liability and equity components.

Issuance costs attributable to the liability component are being amortized to interest expense over the respective term of the 2023 Notes using the effective interest rate method.

The issuance costs attributable to the equity component were netted against the respective equity component in Additional paid-in capital.

The Company recorded liability issuance costs of $ 7.7 million and equity issuance costs of $ 2.3 million .

The Company initially recorded liability issuance costs of $ 7.7 million and equity issuance costs of $ 2.3 million.

The 2023 Notes, net consisted of the following (in thousands):

1 unchanged sentence

Liability component:

Principal $ 40,246

unamortized debt issuance costs and debt discount ( 4,591 )

1 unchanged sentence

Equity component:

2023 Notes $ 9,328

issuance costs ( 271 )

1 unchanged sentence

(1) Included in the consolidated balance sheets within Additional paid-in capital.

In connection with the pricing of the 2023 Notes, the Company entered into convertible note hedge transactions with respect to its Class A common stock (Note Hedges).

In connection with the pricing of the 2023 Notes, the Company entered into convertible note hedges with respect to its Class A common stock.

The Note Hedges are purchased call options that give the Company the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2023 Notes, approximately 7.1 million shares of its Class A common stock for approximately $ 48.36 per share (subject to adjustment), corresponding to the approximate initial conversion price of the 2023 Notes, exercisable upon conversion of the 2023 Notes.

4 unchanged sentences

The amount paid for the Note Hedges was recorded as a reduction to Additional paid-in capital in the consolidated balance sheets.

In September 2019, and in connection with the 2023 Notes Partial Repurchase, the Company terminated Note Hedges corresponding to approximately 4.6 million shares for cash proceeds of $ 405.9 million .

In September 2019 and in June 2020, and in connection with the First Partial Repurchase of 2023 Notes and Second Partial Repurchase of 2023 Notes, the Company terminated Note Hedges corresponding to approximately

4.6 million and 1.4 million shares for cash proceeds of $ 405.9 million and $ 195.0 million, respectively.

The proceeds were recorded as an increase to Additional paid-in capital in the consolidated balance sheets.

During the year ended January 31, 2021, the Company exercised and net-share-settled a portion of the Note Hedges, corresponding to approximately $ 10.4 million principal amount of 2023 Notes and received approximately 0.2 million shares of Class A common stock and an immaterial cash payment.

As of January 31, 2021, Note Hedges giving the Company the option to purchase approximately 0.8 million shares (subject to adjustment) remained outstanding.

5 unchanged sentences

The proceeds from the sale of the Warrants were recorded as an increase to Additional paid-in capital in the consolidated balance sheets.

In September 2019, and in connection with the 2023 Notes Partial Repurchase, the Company terminated Warrants corresponding to approximately 4.6 million shares for total cash payments of $ 358.6 million .

The termination payment was recorded as a decrease to Additional paid-in capital in the consolidated balance sheets.

In September 2019 and in June 2020, and in connection with the First Partial Repurchase of 2023 Notes and Second Partial Repurchase of 2023 Notes, the Company terminated Warrants corresponding to approximately 4.6 million and 1.4 million shares for total cash payments of $ 358.6 million and $ 175.4 million, respectively.

The termination payments were recorded as a decrease to Additional paid-in capital in the consolidated balance sheets.

As of January 31, 2021, Warrants to acquire up to approximately 1.0 million shares (subject to adjustment) remained outstanding.

9 unchanged sentences

• during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2020 (and only during such fiscal quarter), if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price of the 2025 Notes on each applicable trading day;

during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2025 Notes for each trading day of that five consecutive trading day period was less than 98 % of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2025 Notes for each trading day of that five consecutive

trading day period was less than 98 % of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day;

• if the Company calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date;

1 unchanged sentence

On or after June 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2025 Notes regardless of the foregoing circumstances.

During the year ended January 31, 2020 , the conditions allowing holders of the 2025 Notes to convert were not met.

As a result, the 2025 Notes are convertible at the option of the holders during the fiscal quarter ending April 31, 2021 and were classified as current liabilities on the consolidated balance sheet as of January 31, 2021.

No requests to convert material amounts of notes are currently outstanding.

The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after September 6, 2022, if the last reported sale price of the Company’s Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

During the year ended January 31, 2020 , the Company had not redeemed any of the 2025 Notes.

During the year ended January 31, 2021, the Company did not redeem any of the 2025 Notes.

Holders of the 2025 Notes who convert their 2025 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the 2025 Indenture) or in connection with the Company’s issuance of a redemption notice are, under certain circumstances, entitled to an increase in the conversion rate.

Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the Indenture), holders of the 2025 Notes may require the Company to repurchase all or a portion of their 2025 Notes at a price equal to 100 % of the principal amount of the 2025 Notes being repurchased, plus any accrued and unpaid interest.

In accounting for the issuance of the 2025 Notes, the Company separated the 2025 Notes into liability and equity components utilizing an effective interest rate of 4.10 % to determine the fair value of the liability component.

In accounting for the issuance of the 2025 Notes, the Company separated the 2025 Notes into liability and equity components using an effective interest rate of 4.10 % to determine the fair value of the liability component.

This interest rate was based on both an income and a market based approach.

6 unchanged sentences

Amortization of debt discount 33,932 12,919

Total $ 37,354 $ 14,207

Total issuance costs of $ 19.3 million related to the 2025 Notes were allocated between liability and equity in the same proportion as the allocation of the total proceeds to the liability and equity components.

5 unchanged sentences

Liability component:

Principal $ 1,060,000

unamortized debt issuance costs and debt discount ( 186,971 )

1 unchanged sentence

Equity component:

2025 Notes $ 221,387

issuance costs ( 4,040 )

1 unchanged sentence

(1) Included in the consolidated balance sheets within Additional paid-in capital.

In connection with the pricing of the 2025 Notes, the Company entered into capped call transactions with respect to its Class A common stock (Capped Calls).

2025 Capped Calls

In connection with the pricing of the 2025 Notes, the Company entered into capped call transactions with respect to its Class A common stock.

The 2025 Capped Calls are purchased call options that give the Company the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2025 Notes, approximately 5.6 million shares of its Class A common stock for approximately $ 188.71 per share (subject to adjustment), corresponding to the approximate initial conversion price of the 2025 Notes, exercisable upon conversion of the 2025 Notes.

4 unchanged sentences

The amount paid for the 2025 Capped Calls was recorded as a reduction to Additional paid-in capital in the consolidated balance sheets.

The Company has entered into various non-cancelable office space operating leases with original lease periods expiring between 2020 and 2028.

2026 Convertible Senior Notes

The 2026 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.375 % per year.

Interest is payable in cash semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2020.

The 2026 Notes mature on June 15, 2026 unless earlier redeemed, repurchased or converted.

The total net proceeds from the 2026 Notes, after deducting initial purchasers’ discounts and debt issuance costs, were $ 1,134.8 million.

The terms of the 2026 Notes are governed by an Indenture by and between the Company and Wilmington Trust, National Association, as Trustee (the 2026 Indenture, and together with the 2023 Indenture and 2025 Indenture, the Indentures).

Upon conversion, the 2026 Notes may be settled in cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company’s election.

The 2026 Notes are convertible at an initial conversion rate of 4.1912 shares of Class A common stock per $1,000 principal amount of the 2026 Notes, which is equal to an initial conversion price of approximately $ 238.60 per share of Class A common stock, subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

Prior to the close of business on the business day immediately preceding March 15, 2026, holders of the 2026 Notes may convert all or a portion of their 2026 Notes only in multiples of $1,000 principal amount, under the following circumstances:

• during any fiscal quarter commencing after the fiscal quarter ending on October 31, 2020 (and only during such fiscal quarter), if the last reported sale price of our Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130 % of the conversion price of the 2026 Notes on each applicable trading day;

• during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2026 Notes for each trading day of that five consecutive trading day period was less than 98 % of the product of the last reported sale price of our Class A common stock and the conversion rate on such trading day;

• if the Company calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date;

• upon the occurrence of specified corporate events, as described in the 2026 Indenture.

On or after March 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2026 Notes regardless of the foregoing circumstances.

During the year ended January 31, 2021, the conditions allowing holders of the 2026 Notes to convert were not met.

The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after June 20, 2023, if the last reported sale price of the Company’s Class A common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on and including the trading day preceding the date on which we provide notice of redemption price equal to 100 % of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.

During the year ended January 31, 2021, the Company did no t redeem any of the 2026 Notes.

Holders of the 2026 Notes who convert their 2026 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the Indenture) or in connection with the Company’s issuance of a redemption notice are, under certain circumstances, entitled to an increase in the conversion rate.

Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the Indenture), holders of the 2026 Notes may require the Company to repurchase all or a portion of their 2026 Notes at a price equal to 100 % of the principal amount of the 2026 Notes being repurchased, plus any accrued and unpaid interest.

In accounting for the issuance of the 2026 Notes, the Company separated the 2026 Notes into liability and equity components using an effective interest rate of 5.75 % to determine the fair value of the liability component.

This interest rate was based on both an income and a market based approach.

For the income approach, the Company used a convertible bond pricing model, which included several assumptions including volatility, the risk-free rate and observable trading activity for the Company’s existing Notes.

For the market approach, the Company performed an evaluation of issuances of convertible debt securities by other companies with similar credit risk ratings at the time of issuance.

The following table sets forth total interest expense recognized related to the 2026 Notes (in thousands):

January 31, 2021

Contractual interest expense $ 2,731

Amortization of debt issuance costs 813

Amortization of debt discount 27,954

Total $ 31,498

Total issuance costs of $ 15.2 million related to the 2026 Notes were allocated between liability and equity in the same proportion as the allocation of the total proceeds to the liability and equity components.

Issuance costs attributable to the liability component are being amortized to interest expense over the respective term of the 2026 Notes using the effective interest rate method.

The issuance costs attributable to the equity component were netted against the respective equity component in Additional paid-in capital.

The Company recorded liability issuance costs of $ 11.1 million and equity issuance costs of $ 4.1 million.

The 2026 Notes, net consisted of the following (in thousands):

As of January 31, 2021

Liability component:

Principal $ 1,150,000

unamortized debt issuance costs and debt discount ( 292,613 )

Net carrying amount $ 857,387

Equity component:

2026 Notes $ 310,311

issuance costs ( 4,090 )

Carrying amount of the equity component (1)

(1) Included in the consolidated balance sheets within Additional paid-in capital.

2026 Capped Calls

In connection with the pricing of the 2026 Notes, the Company entered into capped call transactions with respect to its Class A common stock.

The 2026 Capped Calls are purchased call options that give the Company the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2026 Notes, approximately 4.8 million shares of its Class A common stock for approximately $ 238.60 per share (subject to adjustment), corresponding to the approximate initial conversion price of the 2026 Notes, exercisable upon conversion of the 2026 Notes.

The 2026 Capped Calls have initial cap prices of $ 360.14 per share (subject to adjustment) and will expire in 2026, if not exercised earlier.

The 2026 Capped Calls are intended to offset potential dilution to the Company’s Class A common stock and/or offset the potential cash payments that the Company could be required to make in excess of the principal amount upon any conversion of the 2026 Notes under certain circumstances.

The 2026 Capped Calls are separate transactions and are not part of the terms of the 2026 Notes.

The Company paid an aggregate amount of $ 134.0 million for the 2026 Capped Calls.

The amount paid for the 2026 Capped Calls was recorded as a reduction to Additional paid-in capital in the consolidated balance sheets.

The Company has entered into various non-cancellable office space operating leases with original lease periods expiring between 2021 and 2028.

These leases do not contain material variable rent payments, residual value guarantees, covenants or other restrictions.

1 unchanged sentence

The Company is entitled to two five-year options to extend this lease, subject to certain requirements.

The Company has various sublease agreements with third parties.

The subleases have remaining lease terms of between five months and five years.

Sublease income, which is recorded as a reduction of rental expense, was $ 3.2 million for the year ended January 31, 2020 and nil for each of the years ended January 31, 2019 and 2018 .

Operating lease costs were as follows (in thousands):

Year Ended January 31,

2021 2020 2019

Operating lease costs (1)

$ 33,076 $ 23,193 $ 23,290

(1) Amounts are presented exclusive of sublease income and include short-term leases, which are immaterial.

The weighted-average remaining term of the Company’s operating leases was 7.9 years and 8.9 years and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.7 % and 5.8 % as of January 31, 2020 and January 31, 2019 , respectively.

The weighted-average remaining term of the Company’s operating leases was 6.8 and 7.9 years and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.6 % and 5.7 % as of January 31, 2021 and January 31, 2020, respectively.

Maturities of the Company’s operating lease liabilities, which do not include short-term leases, as of January 31, 2021 were as follows (in thousands):

Operating Leases

2022 $ 34,410

Thereafter 73,135

Total lease payments 247,406

2 unchanged sentences

Cash payments included in the measurement of the Company’s operating lease liabilities were $ 31.1 million and $ 18.3 million for the years ended January 31, 2021 and January 31, 2020, respectively.

As of January 31, 2020 , the Company has $ 56.9 million of undiscounted future payments under various operating leases that have not yet commenced, which are excluded from the table above.

These operating leases will commence in fiscal 2021 and have lease terms between 1.3 years and 8.7 years .

The Company recorded an impairment charge for operating lease right-of-use assets of $ 3.1 million and nil for the years ended January 31, 2021 and January 31, 2020, respectively.

Commitments and Contingencies

5 unchanged sentences

Purchase Obligations

2022 $ 53,992

Total contractual obligations $ 128,227

7 unchanged sentences

To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying consolidated financial statements as a result of these obligations.

The Company has entered into service-level agreements with a majority of its customers defining levels of uptime reliability and performance and permitting those customers to receive credits for prepaid amounts related to unused subscription services if the Company fails to meet the defined levels of uptime.

In very limited instances, the Company allows customers to early terminate their agreements in the event that the Company fails to meet those levels as they may constitute a breach of contract.

The Company has entered into service-level agreements with a majority of its customers defining levels of uptime reliability and performance and permitting certain customers to receive credits for paid amounts related to subscription services when the Company fails to meet the defined levels of uptime.

In very limited instances, the Company allows customers to early terminate their agreements in the event that the Company fails to meet those

levels as they may constitute a breach of contract.

If the customer did terminate, they would receive a refund of prepaid unused subscription fees.

4 unchanged sentences

Shares of Class A common stock are not convertible.

In September 2019, in connection with the 2023 Notes Partial Repurchase, the Company issued approximately 3.0 million shares of Class A common stock.

In September 2019 and June 2020, in connection with the 2023 Notes Partial Repurchases, the Company issued approximately 3.0 million and 1.4 million shares of Class A common stock, respectively.

In addition, during the year ended January 31, 2021, the Company issued approximately 0.2 million shares of Class A common stock in connection with 2023 Notes conversion requests and received approximately 0.2 million shares of Class A common stock from the settlement of Note Hedges.

See Note 9 for additional details.

11 unchanged sentences

Year Ended January 31,

2021 2020 2019

Stock options $ 21,371 $ 21,888 $ 23,466

RSUs 164,412 94,637 41,637

ESPP 10,373 9,408 7,248

Restricted stock awards 25 590 1,608

Restricted common stock — 101 2,361

Total $ 196,181 $ 126,624 $ 76,320

Stock-based compensation expense was recorded in the following cost and expense categories in the Company’s consolidated statements of operations (in thousands):

Year Ended January 31,

2021 2020 2019

Cost of revenue:

Subscription $ 21,895 $ 12,923 $ 7,837

Professional services and other 8,083 7,164 4,983

2 unchanged sentences

General and administrative 49,131 30,777 17,942

Stock-based compensation expense recorded to research and development in the consolidated statements of operations exclude amounts that were capitalized related to internal-use software for the years ended January 31, 2020 , 2019 and 2018 .

See Note 6 for additional details.

Total $ 196,181 $ 126,624 $ 76,320

Equity Incentive Plans

2 unchanged sentences

All shares that remain available for future grants are under the 2017 Plan.

As of January 31, 2020 , options to purchase 11,348,049 shares of Class B common stock and 1,011,253 shares of Class A common stock remained outstanding.

As of January 31, 2020 , the total number of shares reserved for future Class A stock grants under the 2017 Plan was 16,456,003 shares, including shares transferred from the 2009 Plan.

As of January 31, 2021, options to purchase 1,074,212 shares of Class A common stock and 7,175,901 shares of Class B common stock remained outstanding.

Stock Options

Options issued to new employees under the Plan generally are exercisable for periods not to exceed ten years and generally vest over four years with 25 % vesting after one year and with the remainder vesting monthly thereafter in equal installments.

Options issued under the Plan generally are exercisable for periods not to exceed ten years and generally vest over four years with 25 % vesting after one year and with the remainder vesting monthly thereafter in equal installments.

Shares offered under the Plan may be:

4 unchanged sentences

Outstanding as of January 31, 2020 12,359,302 $ 11.82 6.2 $ 1,436,487

Granted 402,891 145.08

Exercised ( 4,368,683 ) 10.44

Canceled ( 143,397 ) 19.23

Outstanding as of January 31, 2021 8,250,113 $ 18.93 5.6 $ 1,980,668

5 unchanged sentences

The intrinsic value of the options exercised, which represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option, was $ 772.3 million, $ 558.6 million and $ 309.3 million for the years ended January 31, 2021, 2020 and 2019, respectively.

As of January 31, 2020 and January 31, 2019 , there was a total of $ 28.2 million and $ 37.3 million , respectively, of unrecognized stock-based compensation expense, which is being recognized over a weighted-average period of 1.4 and 1.9 years , respectively.

As of January 31, 2021 and January 31, 2020, there was a total of $ 31.1 million and $ 28.2 million, respectively, of unrecognized stock-based compensation expense related to options, which was being recognized over a weighted-average period of 1.4 years.

The Company used the Black-Scholes option pricing model to estimate the fair value of stock options granted with the following assumptions:

Year Ended January 31,

2021 2020 2019

Expected volatility 45 % 43 % 40 %

2 unchanged sentences

1.55 % - 2.27 %

1.87% - 2.21%

Expected dividend yield — — —

1 unchanged sentence

A summary of the Company’s RSU activities and related information is as follows:

RSUs Weighted-

Grant Date Fair Value Per Share

Outstanding as of January 31, 2020 4,893,241 $ 77.99

Granted 2,198,704 173.64

Vested ( 2,195,094 ) 80.28

Forfeited ( 444,744 ) 90.01

Outstanding as of January 31, 2021 4,452,107 $ 122.90

1 unchanged sentence

As of January 31, 2021, there was $ 502.8 million of unrecognized stock-based compensation expense related to unvested RSUs, which is being recognized over a weighted-average period of 2.5 years based on vesting under the award service conditions.

Equity Awards Issued in Connection with Business Combinations

In connection with the Stormpath transaction in February 2017, the Company issued 800,000 shares of restricted common stock to Stormpath with an aggregate fair value of $ 8.6 million , of which 400,000 shares vested during each year ended January 31, 2020 and January 31, 2019 .

The stock-based compensation expense related to the restricted common stock was recognized using an accelerated attribution method over two years.

The Company separately entered into retention arrangements with certain employees of Stormpath and issued 598,500 restricted stock awards with performance conditions under the 2009 Plan, with an aggregate fair value of $ 6.6 million .

The restricted stock awards vest ratably over two or three years from the transaction date, and 210,850 of these shares vested during each of the years ended January 31, 2020 and 2019.

Additionally, the Company granted 518,900 service-based stock options under the 2009 Plan to certain Stormpath employees with an aggregate fair value of $ 2.5 million to vest ratably over the requisite four -year service period.

Of the $ 9.1 million total aggregate fair value of the awards, $ 1.5 million is related to pre-combination service and was recognized as goodwill.

The post-combination expenses for the restricted stock awards and stock options are $ 5.5 million and $ 2.1 million , respectively.

related to the restricted stock awards is being recognized over two or three years based on an accelerated attribution method.

The expense for the stock options is being recognized ratably over the requisite service period.

As of January 31, 2020 , the remaining unrecognized compensation cost was immaterial.

The total fair value of RSUs vested during fiscal 2021, 2020 and 2019 was $ 410.4 million, $ 193.9 million and $ 58.7 million, respectively.

Employee Stock Purchase Plan

In February 2017, the Company’s board of directors adopted, and in March 2017, the Company’s stockholders approved the ESPP, which became effective prior to the completion of the IPO.

The ESPP initially reserves and authorizes the issuance of up to a total of 3,000,000 shares of Class A common stock to participating employees.

Except for the initial offering period which began April 7, 2017 and ended on June 20, 2018, or stock price changes that would reset the offering period after the initial six-month purchase period, the ESPP provides for 12 -month offering periods beginning June 21 and December 21 of each year, and each offering period consists of up to two six -month purchase periods.

The ESPP provides for 12-month offering periods beginning June 21 and December 21 of each year, and each offering period consists of up to two six-month purchase periods.

The Company estimated the fair value of ESPP purchase rights using a Black-Scholes option pricing model with the following assumptions:

Year Ended January 31,

2021 2020 2019

Expected volatility 48 % - 54 %

3 unchanged sentences

2.12 % - 2.62 %

0.95% - 1.73%

Expected dividend yield — — —

6 unchanged sentences

Year Ended January 31,

Loss before benefit from income taxes

The components of the benefit from income taxes for the years ended January 31, 2020 , 2019 and 2018 were as follows (in thousands):

2021 2020 2019

Domestic $ ( 282,026 ) $ ( 220,846 ) $ ( 128,214 )

Foreign 15,835 10,514 2,700

Loss before provision for (benefit from) income taxes $ ( 266,191 ) $ ( 210,332 ) $ ( 125,514 )

The components of the provision for (benefit from) income taxes for the years ended January 31, 2021, 2020 and 2019 were as follows (in thousands):

Year Ended January 31,

2021 2020 2019

Federal $ 11 $ 33 $ —

State 136 86 61

Foreign 1,294 822 667

Total current provision for income taxes 1,441 941 728

Federal 51 ( 518 ) ( 620 )

State 5 ( 406 ) ( 130 )

Foreign ( 1,356 ) ( 1,436 ) 5

Total deferred benefit from income taxes ( 1,300 ) ( 2,360 ) ( 745 )

Total benefit from income taxes

For the tax year ended January 31, 2020 the income tax benefit resulted from the release of valuation allowance in the United States in connection with the Azuqua acquisition and excess tax benefits from stock-based compensation in the United Kingdom.

For the tax year ended January 31, 2019, the income tax benefit resulted from the release of valuation allowance in the United States in connection with the ScaleFT acquisition and excess tax benefits from stock-based compensation in the United Kingdom.

The income tax benefits in the years ended January 31, 2020 and 2019 were partially offset by foreign income taxes, state taxes and tax amortization of goodwill.

For the year ended January 31, 2018, the income tax benefit resulted from $ 1.3 million of excess tax deductions related to option exercises by foreign employees, a portion of which we used to claim a refund for taxes paid in prior years .

Total provision for (benefit from) income taxes $ 141 $ ( 1,419 ) $ ( 17 )

For the tax year ended January 31, 2021, the income tax expense from profitable jurisdictions was partially offset by the excess tax benefits from stock-based compensation in the United Kingdom.

For the tax year ended January 31, 2020 the income tax benefit resulted from the release of valuation allowance in the United States in connection with an acquisition and excess tax benefits from stock-based compensation in the United Kingdom.

For the tax year ended January 31, 2019, the income tax benefit resulted from the release of valuation allowance in the United States in connection with an acquisition and excess tax benefits from stock-based compensation in the United Kingdom.

The income tax expense and benefits in the years ended January 31, 2021, 2020 and 2019 were partially offset by foreign income taxes, state taxes and tax amortization of goodwill.

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended January 31, 2021, 2020 and 2019:

Year Ended January 31,

2021 2020 2019

Tax at federal statutory rate 21.0 % 21.0 % 21.0 %

3 unchanged sentences

Research and development credits 6.4 18.0 —

Tax Cuts and Jobs Act of 2017

Other, net ( 0.8 ) ( 2.0 ) ( 1.8 )

Effective tax rate ( 0.1 ) % 0.7 % — %

1 unchanged sentence

As of January 31,

As Adjusted (1)

Deferred tax assets:

5 unchanged sentences

Research and development and other credits 57,060 39,918

Convertible debt

Disallowed interest 6,091 4,507

6 unchanged sentences

Capitalized internal-use software costs ( 2,691 ) ( 2,248 )

Goodwill ( 306 ) ( 262 )

Operating lease right-of-use assets ( 37,522 ) ( 31,165 )

2 unchanged sentences

Net deferred tax assets $ 3,521 $ 2,129

Adjusted for adoption of ASC 842.

As a result of continuing losses, the Company has determined that it is not more likely than not that it will realize the benefits of the U.S.

14 unchanged sentences

The Company is subject to taxation in the United States and various states and foreign jurisdictions.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was signed into law making significant changes to the Internal Revenue Code.

Changes include, but are not limited to, a corporate tax rate decrease to effective for tax years beginning after December 31, 2017.

This change in tax rate resulted in a reduction in the Company's net U.S.

deferred tax assets before valuation allowance by $ 56.5 million , which was fully offset by a reduction in the Company's valuation allowance.

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future use of net operating losses, temporary changes to the prior and future

limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits.

The Company does not expect there to be a material tax impact on its consolidated financial statements at this time, and will continue to assess the implications of the CARES Act and its continuing developments and interpretations.

A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows (in thousands):

Year Ended January 31,

2021 2020 2019

Gross amount of unrecognized tax benefits as of the beginning of the year $ 15,987 $ 23,931 $ 11,719

1 unchanged sentence

Additions based on tax positions related to current year 7,189 6,866 10,353

Reductions based on tax positions related to current year

Reductions based on tax positions taken in a prior year ( 952 ) ( 15,468 ) —

11 unchanged sentences

The Company computes net loss per share of common stock in conformity with the two-class method required for participating securities.

The Company considers all series of preferred stock to be participating securities as the holders of the preferred stock are entitled to receive a non-cumulative dividend on a pari passu basis in the event that a dividend is paid on the common stock.

The holders of the preferred stock do not have a contractual obligation to share in the Company’s losses.

As such, the Company’s net loss for the year ended January 31, 2018 was not allocated to these participating securities.

Upon the closing of the IPO in April 2017, all shares of the Company’s then-outstanding redeemable convertible preferred stock automatically converted into the Company’s common stock.

The following table presents the calculation of basic and diluted net loss per share (in thousands, except per share data):

Year Ended January 31,

2021 2020 2019

Class A Class B Class A Class B Class A

Net loss $ ( 248,892 ) $ ( 17,440 ) $ ( 192,138 ) $ ( 16,775 ) $ ( 107,926 ) $ ( 17,571 )

Weighted-average shares outstanding, basic and diluted 118,882 8,330 107,809 9,412 92,452 15,052

3 unchanged sentences

Year Ended January 31,

2021 2020 2019

Issued and outstanding stock options 8,250 12,359 17,804

4 unchanged sentences

Shares committed under the ESPP 137 253 271

Shares related to 2023 convertible senior notes

Shares subject to warrants related to the issuance of 2023 convertible senior notes

Shares related to 2025 convertible senior notes

Shares related to 2023 Notes 832 2,494 7,134

Shares subject to warrants related to the issuance of 2023 Notes 1,048 2,494 —

Shares related to 2025 Notes 5,617 5,617 —

Shares related to 2026 Notes 4,820 — —

25,156 28,292 30,881

The Company uses the if-converted method for calculating any potential dilutive effect of the conversion options embedded in the Notes on diluted net income per share, if applicable.

The conversion options of the 2023 and 2025 Notes and exercise rights of the Warrants will have a dilutive impact on net income per share of common stock when the average market price per share of the Company’s Class A common stock for a given period exceeds the conversion prices of $ 48.36 per share, $ 188.71 per share and exercise price of $ 68.06 per share, respectively.

During the year ended January 31, 2020 , the weighted average price per share of the Company’s Class A common stock exceeded the conversion price of the 2023 Notes and the exercise price of the Warrants;

however, since the Company was in a net loss position there was no dilutive effect during any period presented.

The conversion options of the 2023, 2025 and 2026 Notes are dilutive in periods of net income on a weighted-average basis using an assumed conversion date equal to the later of the beginning of the reporting period and the date of issuance of the respective Notes.

The exercise rights of the Warrants will have a dilutive impact on net income per share of common stock under the treasury-stock method when the average market price per share of the Company’s Class A common stock for a given period exceeds the conversion price of $ 68.06 per share.

During the year ended January 31, 2021, the average price per share of the Company’s Class A common stock exceeded the exercise price of the Warrants;

however, since the Company is in a net loss position there was no dilutive effect during any period presented.

Subsequent Events

On March 3, 2021, the Company entered into a definitive agreement to acquire Auth0, an identity management platform, pursuant to the Merger Agreement.

Upon consummation of the transaction contemplated by the Merger Agreement, all outstanding shares of Auth0 capital stock, options, warrants, convertible securities, phantom equity and other outstanding equity interests will be cancelled in exchange for aggregate consideration of $ 6.5 billion in the form of shares of Class A common stock of the Company and assumed awards of corresponding Company equity interests, subject to customary purchase price adjustments and certain customary cash payouts in lieu of shares of Company Class A common stock, as provided by the Merger Agreement.

The purchase price payable in shares of Class A common stock will be valued at $ 276.2147 per share (which price was calculated based on the daily volume-weighted average sales price per share of Company Class A common stock for the 20 trading days ending on February 26, 2021).

The per share price of these shares has been fixed as of the Merger Agreement signing date, and the aggregate value of these shares will fluctuate based on changes in our share price between the signing and closing dates.

The proposed transaction is expected to close during the Company’s second quarter of fiscal 2022, the quarter ending July 31, 2021.

The closing of this transaction is subject to certain customary closing conditions and approvals.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data