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Item 7. Management’s Discussion and Analysis

2022-03-07 compared with 2021-03-04 · 125 added, 143 removed, 403 unchanged (40% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.

In addition to historical financial information, the following discussion contains forward-looking statements that is based upon current plans, expectations and beliefs that involve risks and uncertainties.

In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K.

Our fiscal year ends January 31.

Okta is the leading independent identity management platform for the enterprise.

Okta is the leading independent identity provider.

The Okta Identity Cloud is powered by our category-defining platform that enables our customers to securely connect the right people to the right technologies and services at the right time.

Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile and web applications, on-premises servers, application program interfaces (APIs), IT infrastructure providers and services from a multitude of devices.

Every day, thousands of organizations and millions of people use Okta to securely access a wide range of cloud, mobile and web applications, on-premises servers, application program interfaces, IT infrastructure providers and services from a multitude of devices.

Developers leverage our platform to securely and efficiently embed identity into the software they build, allowing them to focus on their core mission.

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Our customers consist of leading global organizations ranging from the largest enterprises, to small and medium-sized businesses, universities, non-profits and government agencies.

We also partner with leading application, infrastructure and security vendors through our Okta Integration Network.

As of January 31, 2021, we had over 7,000 integrations with these cloud, mobile and web applications and IT infrastructure providers.

We also partner with leading application, IT infrastructure and security vendors through our Okta Integration Network.

As of January 31, 2022, we had over 7,000 integrations with these cloud, mobile and web applications and IT infrastructure and security vendors.

We employ a Software-as-a-Service ("SaaS") business model, and generate revenue primarily by selling multi-year subscriptions to our cloud-based offerings.

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We typically invoice customers in advance in annual installments for subscriptions to our platform.

Impact of Coronavirus (COVID-19) Pandemic

In December 2019, a novel coronavirus (COVID-19) was reported in China, in January 2020, the World Health Organization (WHO) declared it a Public Health Emergency of International Concern and in March 2020, the WHO declared it a pandemic.

This contagious disease outbreak has continued to spread across the globe and is impacting worldwide economic activity and financial markets.

The extent of the impact of COVID-19 on our future operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, related public health measures, and their impact on the macroeconomy, our current and prospective customers, employees and vendors.

Impact of COVID-19 Pandemic

The extent of the impact of COVID-19 on our future operational and financial performance remains uncertain and will depend on certain developments, including the duration and spread of COVID-19 and variants of concern, related public health measures, including vaccine mandates, the manufacture, distribution, efficacy and public acceptance of treatments and vaccines, and their impact on the macroeconomy, our current and prospective customers, employees and vendors.

None of these impacts can be predicted with certainty.

Our revenue is relatively predictable as a result of our subscription-based business model, which constituted over 95% of total revenue for the year ended January 31, 2021.

Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow, remaining performance obligations (RPO) and billings growth as well as potential future

impacts on revenue growth and other key metrics on a trailing basis.

Our allowance for doubtful accounts and sales reserves have increased primarily due to an increase in overall uncertainty in our forecasts of future economic conditions and concession requests.

While we see risks associated with more highly impacted companies and industries, we are also seeing new interest from other organizations, driven by rapidly changing work and business environments.

As workforces have transitioned to working from home in a distributed model, Zero Trust has become an increasingly important security model and identity an increasingly critical service.

Our revenue is relatively predictable as a result of our subscription-based business model, which constituted approximately 96% of total revenue for the year ended January 31, 2022.

Future growth may be impacted by longer sales cycles, which we have experienced, which in turn, could result in delays in deals closing, creating near-term headwinds for cash flow, remaining performance obligations (“RPO”) and billings growth as well as potential future impacts on revenue growth and other key metrics on a trailing basis.

While we see risks associated with more highly impacted companies and industries, we are also seeing new interest from other organizations, driven by rapidly

changing work and business environments.

As workforces have transitioned to fully remote and hybrid work models, Zero Trust has become an increasingly important security model and identity an increasingly critical service.

We believe we will be able to continue to deliver our cloud-based platform and support to our customers, without compromising our employees’ safety.

Since March 2020, we have put in place mandatory work-from-home procedures for our global office locations, and our employees have the necessary tools and technology to remain connected and productive.

In addition, we shifted our annual user conference, Oktane20 Live, to a virtual-only experience, resulting in cost savings, and in the near-term, we have changed our customer, employee and industry events, including Oktane21 Live, to virtual-only format.

We have further benefited from cost savings, driven by reduced growth in employee compensation costs due to slower hiring, reductions in employee-related expenses as our sales and marketing activities shift primarily to an online-only sales format and a shift to work-from-home procedures.

For most of fiscal 2021, we established mandatory work-from-home procedures for our global office locations, and our employees had the necessary tools and technology to remain connected and productive.

In addition, in fiscal 2021 we shifted our customer, employee and industry events, including our annual user conference to virtual-only formats, resulting in cost savings.

We further experienced cost savings driven by reductions in employee-related expenses as our sales and marketing activities shifted primarily to an online-only sales format and our employees shifted to work-from-home procedures.

In fiscal 2022, as the administration of vaccines increased, we reopened our offices to partial capacity, allowing our employees to voluntarily return and resumed some in-person sales and marketing activities.

In fiscal 2023, we are shifting to hybrid in-person and virtual sales formats and experiences for future annual user conferences, and we expect our future costs to increase.

See Risk Factors for further discussion of the potential impact of COVID-19 and its related public health measures on our business.

Proposed Acquisition of Auth0

On March 3, 2021, we entered into a definitive agreement to acquire Auth0, Inc.

(Auth0) pursuant to an Agreement and Plan of Merger (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.

If consummated, the acquisition of Auth0 may have a significant impact on our liquidity, financial condition and results of operations.

The following discussion and analysis of our results of operations and our liquidity and capital resources focuses on our existing operations exclusive of the impact of the proposed acquisition of Auth0.

Any forward-looking statements contained herein do not take into account the impact of the proposed acquisition.

Acquisition of Auth0

On May 3, 2021, we completed the acquisition of Auth0, Inc ("Auth0").

The acquisition date fair value, net of acquired cash and subject to final adjustments, was approximately $5,671.0 million, including approximately 19.2 million shares of our Class A common stock valued at $5,175.6 million, $257.0 million in cash, and assumed equity awards with an initial fair market value of $238.4 million.

In addition, we issued unvested restricted stock valued at $332.1 million and assumed unvested equity and restricted cash awards valued at $430.2 million, which are subject to future vesting and will be recorded as expense over the period the services are provided.

Approximately 5% of the total consideration was held back by us to secure the indemnification obligations of the Auth0 securityholders arising during the twelve months following the closing.

The estimated transaction value of approximately $6,500.0 million includes restricted stock and assumed equity and restricted cash awards subject to future vesting and was based on the fixed conversion stock price specified in the Merger Agreement.

Further, the estimated transaction value excludes the impact of cash acquired and other customary closing purchase price adjustments.

See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Financial Information and Segments

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We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract with us or one of our partners to access our platform.

For purposes of determining our customer count, we do not include customers that use our platform under self-service arrangements only.

Dollar-Based Net Retention Rate

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We then divide the Current Period ACV by the Prior Period ACV to arrive at our Dollar-Based Net Retention Rate.

Our strong Dollar-Based Net Retention Rate is primarily attributable to an expansion of users and upselling additional products within our existing customers.

Our Dollar-Based Net Retention Rate is inclusive of ACV from self-service customers.

Our strong Dollar-Based Net Retention Rate is primarily attributable to gross retention, an expansion of users and upselling additional products within our existing customers.

Larger enterprises often implement a limited initial deployment of our platform before increasing their deployment on a broader scale.

Remaining Performance Obligations

Remaining performance obligations (RPO) represent all future, non-cancellable, contracted revenue under our subscription contracts with customers 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.

Remaining Performance Obligations (RPO)

RPO represent all future, non-cancelable, contracted revenue under our subscription contracts with customers that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.

Current RPO represents the portion of RPO expected to be recognized during the next 12 months.

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Calculated Billings

Calculated Billings represent our total revenue plus the change in deferred revenue and less the change in unbilled receivables in the period.

Calculated Billings represent our total revenue plus the change in deferred revenue, net of acquired deferred revenue, and less the change in unbilled receivables, net of acquired unbilled receivables, in the period.

Calculated Billings in any particular period reflect sales to new customers plus subscription renewals and upsells to existing customers, and represent amounts invoiced for subscription, support and professional services.

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Calculated Billings increased 76% in the year ended January 31, 2022 over the year ended January 31, 2021.

We implemented operational changes to our billings process in the year ended January 31, 2022 pursuant to which we billed customers earlier than we would have under our historical billing practices.

These changes had a favorable effect on billings in the year ended January 31, 2022.

Absent the impact of the billings process changes, Calculated Billings would have grown 60% year-over-year in the year ended January 31, 2022.

As our Calculated Billings continue to grow in absolute terms, we expect our Calculated Billings growth rate to trend down over time.

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Cost of subscription primarily consists of expenses related to hosting our services and providing support.

These expenses include employee-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of our subscription services, travel-related costs, amortization expense associated with capitalized internal-use software and acquired technology, and allocated overhead.

These expenses include employee-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software and maintenance costs, outside services associated with the delivery of our subscription services, amortization expense associated with capitalized internal-use software and acquired developed technology and allocated overhead.

We intend to continue to invest additional resources in our platform infrastructure and our platform support organizations.

As we continue to invest in technology innovation, we anticipate that capitalized internal-use software costs and related amortization may increase.

As we continue to invest in technology innovation, we anticipate that capitalized internal-use software

costs and related amortization may increase.

We expect our investment in technology to expand the capability of our platform enabling us to improve our gross margin over time.

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Cost of Professional Services and Other .

Cost of professional services consists primarily of employee-related costs for our professional services delivery team, travel-related costs, and costs of outside services associated with supplementing our professional services delivery team.

Cost of professional services consists primarily of employee-related costs for our professional services delivery team, travel-related costs, allocated overhead and costs of outside services associated with supplementing our professional services delivery team.

The cost of providing professional services has historically been higher than the associated revenue we generate.

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Sales and Marketing.

Sales and marketing expenses consist primarily of employee compensation costs, costs of general marketing and promotional activities, travel-related expenses and allocated overhead.

Sales and marketing expenses consist primarily of employee compensation costs, costs of general marketing and promotional activities, travel-related expenses, amortization expense associated with acquired customer relationships (including unbilled and unrecognized contracts yet to be fulfilled) and trade names and allocated overhead.

Commissions earned by our sales force that are considered incremental and recoverable costs of obtaining a contract with a customer are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be generally five years.

However, we expect our sales and marketing expenses to decrease as a percentage of our total revenue as our total revenue grows.

We expect our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense category for the foreseeable future as we expand our sales and marketing efforts and as we return to in-person sales formats and experiences for future annual user conferences.

In the short-term, our sales and marketing expenses may increase as a percentage of our total revenue, however, over time, we expect this percentage to decrease as our total revenue grows.

General and Administrative.

General and administrative expenses consist primarily of employee compensation costs for finance, accounting, legal, information technology and human resources personnel.

In addition, general and administrative expenses include non-personnel costs, such as legal, accounting and other professional fees, charitable contributions, and all other supporting corporate expenses, such as information technology, not allocated to other departments.

In addition, general and administrative expenses include acquisition and integration-related costs, non-personnel costs, such as legal, accounting and other professional fees, charitable contributions, and all other supporting corporate expenses, such as information technology, not allocated to other departments.

We expect our general and administrative expenses will increase in absolute dollars as our business grows.

Interest and Other, Net

Interest and other, net consists of interest expense, which primarily includes amortization of debt discount and issuance costs and contractual interest expense for our 2023 Notes, convertible notes due in 2025 (2025 Notes) and convertible notes due in 2026 (2026 Notes, together with the 2023 Notes and 2025 Notes, the Notes), interest income from our investment holdings and loss on early extinguishment and conversion of debt.

Interest and other, net consists of interest expense, which primarily includes amortization of debt discount and issuance costs and contractual interest expense for our 2023 Notes, convertible notes due in 2025 ("2025 Notes") and convertible notes due in 2026 ("2026 Notes", together with the 2023 Notes and 2025 Notes, the "Notes"), interest income from our investment holdings, gains and losses from our strategic investments and loss on early extinguishment and conversion of debt.

Provision for (Benefit from) Income Taxes

Our provision for (benefit from) income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions.

Our provision for (benefit from) income taxes consists of federal and state income taxes in the United States and income taxes in certain foreign jurisdictions where we operate.

The primary difference between our effective tax rate and the federal statutory rate relates to the net operating losses in jurisdictions with a valuation allowance against related deferred tax assets.

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Subscription revenue increased by $452.6 million, or 57%, for the year ended January 31, 2022 compared to the year ended January 31, 2021.

The increase was primarily due to the addition of new customers as well as an increase in users and sales of additional products to existing customers.

The increase was primarily due to the addition of new customers, an increase in users and sales of additional products to existing customers, and the inclusion of Auth0 revenue from the acquisition date of May 3, 2021,

Professional services and other revenue increased by $12.2 million, or 31%, for the year ended January 31, 2022 compared to the year ended January 31, 2021.

The increase in professional services revenue was primarily related to an increase in implementation and other services associated with an increase in the number of new customers purchasing our subscription services.

The increase in professional services revenue was primarily related to an increase in implementation and other services associated with growth in the number of new customers purchasing our subscription services, as well as the inclusion of Auth0 revenue from the acquisition date.

The business combination with Auth0 contributed approximately $139.7 million in total revenue for the period from the acquisition date.

Cost of Revenue, Gross Profit and Gross Margin

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Total gross margin 70 % 74 %

Cost of subscription revenue increased by $53.7 million, or 46%, for the year ended January 31, 2021 compared to the year ended January 31, 2020, primarily due to an increase of $34.7 million in employee compensation costs related to higher headcount to support the growth in our subscription services, an increase of $6.8 million in software license costs and an increase of $6.7 million in third-party hosting costs as we increased capacity to support our growth.

Our gross margin for subscription revenue remained consistent at 79% during the year ended January 31, 2021, compared to the year ended January 31, 2020.

Cost of subscription revenue increased by $159.0 million, or 93%, for the year ended January 31, 2022 compared to the year ended January 31, 2021, primarily due to an increase of $77.5 million in employee compensation costs related to higher headcount to support the growth in our subscription services, including the Auth0 acquisition, an increase in amortization of acquired developed technology of $28.0 million primarily in connection with the Auth0 acquisition, an increase of $26.6 million in third-party hosting costs as we expanded capacity to support our growth and an increase of $11.8 million in software license costs.

Our gross margin for subscription revenue decreased to 74% from 79% during the year ended January 31, 2022, compared to the year ended January 31, 2021 primarily due to the inclusion of Auth0 revenue, which carries a higher relative cost and lower gross margin as well as an increase in amortization of acquired developed technology primarily in connection with the Auth0 acquisition.

While our gross margins for subscription revenue may fluctuate in the near-term as we invest in our growth, we expect our subscription revenue gross margin to improve over the long-term as we achieve additional economies of scale.

Cost of professional services and other revenue increased by $4.6 million, or 11%, for the year ended January 31, 2021, compared to the year ended January 31, 2020, primarily due to an increase of $3.7 million in employee compensation costs related to higher headcount.

Our gross margin for professional services and other revenue improved to (23)% during the year ended January 31, 2021 from (29)% during the year ended January 31, 2020 primarily due to increases in professional services and other revenue at a faster rate than increases in associated costs.

Cost of professional services and other revenue increased by $19.7 million, or 41%, for the year ended January 31, 2022, compared to the year ended January 31, 2021, primarily due to an increase of $15.5 million in employee compensation costs related to higher headcount, including the Auth0 acquisition.

Our gross margin for professional services and other revenue decreased to (32)% during the year ended January 31, 2022 from (23)% during the year ended January 31, 2021 and includes Auth0.

Operating Expenses

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Research and development expenses increased $246.4 million, or 111%, for the year ended January 31, 2022 compared to the year ended January 31, 2021.

The increase was primarily due to an increase of $57.6 million in employee compensation costs due to higher headcount.

The increase was primarily due to an increase of $220.2 million in employee compensation costs related to higher headcount, including the Auth0 acquisition and an increase of $8.1 million in research and design expenses.

The increase in employee compensation costs includes $47.8 million in stock-based compensation expense primarily related to the revesting agreements from our Auth0 acquisition.

Sales and Marketing Expenses

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Percentage of revenue 59 % 51 %

Sales and marketing expenses increased $87.0 million, or 26%, for the year ended January 31, 2021, compared to the year ended January 31, 2020.

The increase was primarily due to an increase of $71.0 million in employee compensation costs related to headcount growth, an increase of $5.9 million in allocated overhead costs and an increase of $3.4 million in software license costs, partially offset by a decrease of $18.5 million in employee-related expenses primarily due to reduced travel-related expenditures resulting from our temporary shift of our sales and marketing activities to a primarily online-only format.

Marketing and event costs increased by $24.5 million primarily due to increases in demand generation programs, advertising, brand awareness efforts aimed at acquiring new customers and a change in the timing of expenses incurred for a future event, partially offset by a decrease of $4.9 million due to a change to a virtual format for our annual customer conference in the first quarter of fiscal 2021 compared to an in-person format in the first quarter of fiscal 2020.

Sales and marketing expenses increased $343.0 million, or 80%, for the year ended January 31, 2022, compared to the year ended January 31, 2021 primarily due to an increase of $208.7 million in employee compensation costs related to headcount growth, including the Auth0 acquisition, an increase in marketing and event costs of $65.7 million primarily due to increases in demand generation programs, advertising and brand awareness efforts aimed at acquiring new customers and higher production and advertising costs for our virtual format annual customer conference, an increase in amortization expense of $29.6 million for acquired customer relationships and trade names in connection with the Auth0 acquisition incurred in the year ended January 31, 2022, but not in the year ended January 31, 2021, an increase in software license costs of $5.6 million, an increase in consulting expenses of $4.0 million and an increase in travel expenses of $3.1 million.

We expect sales and marketing expenses will increase in absolute dollars and may increase as a percentage of total revenue in future periods as we invest in acquiring new customers for both Okta and Auth0 products.

General and Administrative Expenses

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General and administrative expenses increased $259.6 million, or 151%, for the year ended January 31, 2022 compared to the year ended January 31, 2021.

The increase was primarily due to an increase of $41.3 million in employee compensation costs related to higher headcount to support our continued growth and an increase in non-cash charitable contributions of $7.5 million, partially offset by a decrease of $3.4 million in acquisition costs.

The increase was primarily due to an increase of $178.5 million in employee compensation costs related to higher headcount to support our continued growth, including the Auth0 acquisition, an increase of $51.2 million due to acquisition and integration-related costs incurred in the year ended January 31, 2022, but not in the year ended January 31, 2021, an increase in software license costs of $9.2 million and an increase in consulting expenses of $4.5 million.

The increase in employee compensation costs includes $33.8 million in one-time stock-based compensation expense related to accelerated vesting of equity awards for certain Auth0 employees at transaction close and $36.5 million in stock-based compensation expense related to the revesting agreements from our Auth0 acquisition in the year ended January 31, 2022.

Interest and Other, Net

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Interest and other, net $ (82,593) $ (62,032)

Interest expense increased $45.6 million or 169% for the year ended January 31, 2021 compared to the year ended January 31, 2020, primarily related to an increase of $23.1 million and $31.5 million for the 2025 Notes and 2026 Notes, respectively, partially offset by a decrease of $9.0 million for the 2023 Notes, due to the partial repurchase of the 2023 Notes in September 2019 (First Partial Repurchase of 2023 Notes) and the partial repurchase of the 2023 Notes in June 2020 (Second Partial Repurchase of 2023 Notes, and together with the First Partial Repurchase of the 2023 Notes, the 2023 Notes Partial Repurchases).

Interest income and other, net decreased $4.2 million, or (25)% for the year ended January 31, 2021 compared to the year ended January 31, 2020, primarily due to lower interest rates, resulting in lower interest income earned on higher cash and cash equivalents and short-term investment balances.

Loss on early extinguishment and conversion of debt decreased $12.3 million for the year ended January 31, 2021 primarily due to differences in the loss on early extinguishment of debt recognized for the First Partial Repurchase of 2023 Notes in the year ended January 31, 2020 compared to the Second Partial Repurchase of 2023 Notes in the year ended January 31, 2021.

Interest expense increased $19.5 million, or 27%, for the year ended January 31, 2022 compared to the year ended January 31, 2021, due primarily to an increase of $20.5 million for the 2026 Notes that were issued in the second quarter of fiscal year 2021, partially offset by a decrease of $2.6 million for the 2023 Notes, due to the partial repurchase of the 2023 Notes in June 2020 ("Second Partial Repurchase of 2023 Notes") and other conversion activity.

Interest income and other, net decreased $3.1 million, or (24)%, for the year ended January 31, 2022 compared to the year ended January 31, 2021, primarily due to a decrease of $8.4 million in interest income resulting from lower interest rates and an increase of $2.9 million in foreign currency exchange losses, partially offset by an $8.2 million change in net realized gains and unrealized adjustments in the carrying value of our strategic investments.

Loss on early extinguishment and conversion of debt decreased $2.1 million, or (92)%, for the year ended January 31, 2022 compared to the year ended January 31, 2021 due to the Second Partial Repurchase of 2023 Notes which occurred in the year ended January 31, 2021 but not in the year ended January 31, 2022.

Non-GAAP Financial Measures

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The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in our financial statements.

The principal limitation of these non-GAAP financial measures is that they exclude significant expenses

that are required by GAAP to be recorded in our financial statements.

In addition, they are subject to inherent limitations as they reflect the exercise of judgment by our management about which expenses are excluded or included in determining these non-GAAP financial measures.

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Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense included in cost of revenue and amortization of acquired intangibles.

We define Non-GAAP gross profit and Non-GAAP gross margin as GAAP gross profit and GAAP gross margin, adjusted for stock-based compensation expense included in cost of revenue, amortization of acquired intangibles and acquisition and integration-related expenses.

Year Ended January 31,

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Amortization of acquired intangibles 34,391 6,373 5,488

Acquisition and integration-related expenses (1)

Non-GAAP gross profit $ 1,001,491 $ 654,094 $ 452,260

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Non-GAAP gross margin 77 % 78 % 77 %

(1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin

We define non-GAAP operating income (loss) and non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles and acquisition-related expenses.

We define Non-GAAP operating income (loss) and Non-GAAP operating margin as GAAP operating loss and GAAP operating margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles and acquisition and integration-related expenses.

Year Ended January 31,

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Amortization of acquired intangibles 64,000 6,373 5,488

Acquisition-related expenses (1)

Acquisition and integration-related expenses (1)

56,667 — 3,449

Non-GAAP operating income (loss) $ (73,718) $ 7,687 $ (48,525)

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Non-GAAP operating margin (6) % 1 % (8) %

(1) We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring incremental costs incurred.

Non-GAAP Net Income (Loss) and Non-GAAP Net Margin

We define non-GAAP net income (loss) and non-GAAP net margin as GAAP net loss and GAAP net margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles, acquisition-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment and conversion of debt.

Year Ended January 31,

2021 2020 (1)

(dollars in thousands)

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

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

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

Amortization of acquired intangibles 6,373 5,488 832

Acquisition-related expenses (2)

Amortization of debt discount and debt issuance costs (3)

68,424 25,892 14,387

Loss on early extinguishment and conversion of debt (4)

2,263 14,572 —

Non-GAAP net income (loss) $ 16,201 $ (31,142) $ (32,950)

Net margin (32) % (36) % (31) %

Non-GAAP net margin 2 % (5) % (8) %

(1) Prior periods have been adjusted to conform to the current presentation.

See footnotes (3) and (4) for additional details.

(2) We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring incremental costs incurred.

(3) Amortization of debt issuance costs is an adjustment to non-GAAP net income (loss), effective July 31, 2020.

Debt issuance costs included are $3.2 million, $1.8 million and $1.2 million for the years ended January 31, 2021, 2020 and 2019, respectively.

(4) Loss on early extinguishment and conversion of debt is calculated inclusive of write-offs of debt issuance costs, effective July 31, 2020.

The amounts of these write-offs are $1.1 million, $3.8 million and nil for the years ended January 31, 2021, 2020 and 2019, respectively.

Non-GAAP Net Income (Loss) Per Share, Basic and Diluted

(1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

Non-GAAP Net Income (Loss), Non-GAAP Net Margin and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted

We define Non-GAAP net income (loss) and Non-GAAP net margin as GAAP net loss and GAAP net margin, adjusted for stock-based compensation expense, non-cash charitable contributions, amortization of acquired intangibles, acquisition and integration-related expenses, amortization of debt discount and debt issuance costs and loss on early extinguishment and conversion of debt.

We define Non-GAAP net income (loss) per share, basic, as Non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted.

We define Non-GAAP net income (loss) per share, diluted, as Non-GAAP net income (loss) divided by GAAP weighted-average shares used to compute net loss per share, basic and diluted adjusted for the potentially dilutive effect of (i) employee equity incentive plans, excluding the impact of unrecognized stock-based compensation expense, and (ii) convertible senior notes outstanding and related warrants.

In addition, non-GAAP net income (loss) per share, diluted, includes the anti-dilutive impact of the Company’s note hedge and capped call agreements on convertible senior notes outstanding, which fully reduced the potential dilutive effect of the convertible senior notes outstanding.

Accordingly, the Company did not record any adjustments to non-GAAP net income (loss) for the potential impact of the convertible senior notes outstanding under the if-converted method.

In addition, Non-GAAP net income (loss) per share, diluted, includes the anti-dilutive impact of our note hedge and capped call agreements on convertible senior notes outstanding.

Accordingly, we did not record any adjustments to Non-GAAP net income (loss) for the potential impact of the convertible senior notes outstanding under the if-converted method.

Year Ended January 31,

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Amortization of acquired intangibles 64,000 6,373 5,488

Acquisition-related expenses (2)

Amortization of debt discount and debt issuance costs (3)

Acquisition and integration-related expenses (1)

56,667 — 3,449

Amortization of debt discount and debt issuance costs 86,461 68,424 25,892

Loss on early extinguishment and conversion of debt 179 2,263 14,572

2,263 14,572 —

Non-GAAP net income (loss) $ (68,386) $ 16,201 $ (31,142)

Net margin (65) % (32) % (36) %

Non-GAAP net margin (5) % 2 % (5) %

Weighted-average shares used to compute net loss per share, basic and diluted 148,036 127,212 117,221

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Non-GAAP net income (loss) per share, basic $ (0.46) $ 0.13 $ (0.27)

$ 0.13 $ (0.27) $ (0.31)

Non-GAAP net income (loss) per share, diluted $ (0.46) $ 0.11 $ (0.27)

$ 0.11 $ (0.27) $ (0.31)

(1) Prior periods have been adjusted to conform to the current presentation.

See footnotes (3), (4) and (5) for additional details.

(2) We define acquisition-related expenses as costs associated with acquisitions, including transaction costs and other non-recurring incremental costs incurred.

(3) Amortization of debt issuance costs is an adjustment to non-GAAP net income (loss), effective July 31, 2020.

Debt issuance costs included are $3.2 million, $1.8 million and $1.2 million for the years ended January 31, 2021, 2020 and 2019, respectively.

(4) Loss on early extinguishment and conversion of debt is calculated inclusive of write-offs of debt issuance costs, effective July 31, 2020.

The amounts of these write-offs are $1.1 million, $3.8 million and nil for the years ended January 31, 2021, 2020 and 2019, respectively.

(5) The total impact of the adjustments noted in footnotes (3) and (4) on non-GAAP net income (loss) per share, basic and diluted is $0.04 and $0.01 for the years ended January 31, 2020 and 2019, respectively.

(1) Acquisition and integration-related expenses include transaction costs and other non-recurring incremental costs incurred through the one-year anniversary of transaction close.

Free Cash Flow and Free Cash Flow Margin

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Capitalization of internal-use software costs (4,336) (4,159) (3,888)

Proceeds from sales of property and equipment — — 740

Free cash flow $ 87,473 $ 110,720 $ 36,273

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Calculated Billings

We define Calculated Billings as total revenue plus the change in deferred revenue and less the change in unbilled receivables during the period.

We define Calculated billings as total revenue plus the change in deferred revenue, net of acquired deferred revenue, and less the change in unbilled receivables, net of acquired unbilled receivables, in the period.

Year Ended January 31,

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Unbilled receivables (beginning of period) 2,604 1,026 1,457

Unbilled receivables (end of period) (2,604) (1,026) (1,457)

Acquired unbilled receivables 2,327 — —

Deferred revenue (beginning of period) (513,598) (371,450) (254,390)

Unbilled receivables (end of period) (3,228) (2,604) (1,026)

Acquired deferred revenue (66,239) — —

Calculated billings $ 1,718,289 $ 975,994 $ 703,558

Liquidity and Capital Resources

As of January 31, 2021, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,556.2 million, which were held for working capital purposes.

As of January 31, 2022, our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $2,501.8 million, which were held for working capital and general corporate purposes, including future acquisition activity.

Our cash equivalents and investments consisted primarily of U.S.

treasury securities, money market funds and corporate debt securities.

treasury securities, corporate debt securities and money market funds.

Historically, we have generated significant operating losses and both positive and negative cash flows from operations as reflected in our accumulated deficit and consolidated statements of cash flows.

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Concurrent with the private offering of the 2025 Notes, we repurchased $224.4 million principal amount of the 2023 Notes in privately-negotiated transactions for aggregate consideration of $604.8 million, including approximately $224.4 million in cash and approximately 3.0 million shares of Class A common stock.

We also terminated a portion of our existing Note Hedges and Warrants in amounts corresponding to the principal amount of the First Partial Repurchase of 2023 Notes for net proceeds of $47.2 million.

We also terminated a portion of our existing Note Hedges and Warrants in amounts corresponding to the principal amount of the partial repurchase of the 2023 Notes in September 2019 ("First Partial Repurchase of 2023 Notes", and together with the Second Partial Repurchase of 2023 Notes, the "2023 Notes Partial Repurchases") for net proceeds of $47.2 million.

In June 2020, we completed our private offering of the 2026 Notes due on June 15, 2026 and received aggregate proceeds of $1,150.0 million, before deducting issuance costs of approximately $15.2 million.

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We also terminated a portion of our existing Note Hedges and Warrants in amounts corresponding to the principal amount of the Second Partial Repurchase of 2023 Notes for net proceeds of $19.6 million.

Through the year ended January 31, 2021, we converted approximately $10.4 million principal amount of 2023 Notes (not in connection with the Second Partial Repurchase of 2023 Notes) and exercised corresponding Note Hedges.

In connection with these transactions, we issued approximately 0.2 million shares of Class A common stock and made immaterial cash payments and received approximately 0.2 million shares of Class A common stock and an immaterial cash payment.

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

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

While the potential impacts of the COVID-19 pandemic may create near-term headwinds for cash flow caused by factors such as delays in customer payments and delays in deals closing, we believe our existing cash and cash equivalents, our investments and cash provided by sales of our products and services will be sufficient to meet our short-term and long-term projected working capital and capital expenditure needs for the foreseeable future.

Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the expansion of our international operations, the introduction of new and enhanced product offerings, and the continuing market adoption of our platform.

Through January 31, 2022, we converted and settled approximately $33.4 million principal amount of 2023 Notes (not in connection with the 2023 Notes Partial Repurchases) and exercised and net-share-settled Note Hedges corresponding to approximately $33.4 million principal amount of 2023 Notes.

In connection with these transactions, we issued approximately 0.7 million shares of Class A common stock and received approximately 0.5 million shares of Class A common stock, accompanied by immaterial cash payments.

Subsequent to January 31, 2022, the Company received conversion requests for approximately $2.0 million aggregate principal amount of the 2023 Notes.

On May 3, 2021, we completed the acquisition of Auth0.

In connection with this acquisition, consideration included cash of $149.6 million, net of cash acquired of $107.4 million, and approximately 19.2 million shares of our common stock with an estimated fair value of $5,175.6 million.

In addition, we assumed outstanding employee equity awards with vested fair value of $238.4 million.

Our consolidated results of operations include the results of operations for Auth0 for the period from May 3, 2021 through January 31, 2022.

On August 2, 2021, we completed the acquisition of atSpoke, providing total cash consideration, net of cash acquired of $79.0 million.

Of this amount, $13.4 million of consideration was held back as partial security for any adjustments and indemnification obligations and will be paid within 18 months of the closing date.

We believe our existing cash and cash equivalents, our investments and cash provided by sales of our products and services will be sufficient to meet our short-term and long-term projected working capital and capital expenditure needs for the foreseeable future.

Our future capital requirements will depend on many factors, including our subscription growth rate, subscription renewal activity, billing frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the expansion of our international operations, the introduction of new and enhanced product offerings, the continuing market adoption of our platform, and the costs associated with integration of acquired businesses.

We continue to assess our capital structure and evaluate the merits of deploying available cash.

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As of January 31, 2022, we had deferred revenue of $996.2 million, of which $973.3 million was recorded as a current liability and is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.

On March 3, 2021, we and Auth0 entered into the Merger Agreement, pursuant to which we agreed to acquire Auth0, subject to the terms and conditions set forth therein.

If consummated, the acquisition of Auth0 may have a significant impact on our liquidity, financial condition and results of operations.

The following table summarizes our cash flows for the periods indicated:

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Our primary uses of cash from operating activities are for employee-related expenditures, marketing expenses and third-party hosting costs.

In recent periods, we have supplemented working capital requirements through net proceeds from the issuance of the 2023, 2025 and 2026 Notes in February 2018, September 2019 and June 2020, respectively, and from our initial public offering (IPO) in April 2017.

During the year ended January 31, 2022, cash provided by operating activities was $104.1 million primarily due to our net loss of $848.4 million, adjusted for non-cash charges of $811.4 million and net cash inflows of $141.1 million provided by changes in our operating assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation, amortization of debt discount and issuance costs, amortization of deferred commissions, depreciation and amortization of property and equipment and intangible assets, non-cash charitable contributions, loss on early extinguishment and conversion of debt and deferred income taxes.

The primary drivers of the changes in operating assets and liabilities related to a $142.1 million increase in deferred revenue, a $53.8 million increase in accounts payable, accrued compensation and accrued other expenses and a $19.1 million decrease in operating lease right-of-use assets, partially offset by a $81.0 million increase in deferred commissions, a $66.4 million increase in accounts receivable, a $17.2 million decrease in operating lease liabilities and a $13.2 million increase in prepaid expenses and other assets.

Non-cash charges primarily consisted of stock-based compensation, depreciation, amortization and accretion of property and equipment, intangible assets and short-term investments, amortization of debt discount and issuance costs and amortization of deferred commissions.

The primary drivers of the changes in operating assets and liabilities related to a $416.4 million increase in deferred revenue, a $78.5 million increase in accrued compensation, accrued other expenses and accounts payable, and a $22.9 million decrease in operating lease right-of-use assets, partially offset by a $174.8 million increase in accounts receivable, a $170.6 million increase in deferred commissions, a $24.5 million decrease in operating lease liabilities and a $6.8 million increase in prepaid expenses and other assets.

During the year ended January 31, 2021, cash provided by operating activities was $128.0 million primarily due to our net loss of $266.3 million, adjusted for non-cash charges of $357.0 million and net cash inflows of $37.3 million provided by changes in our operating assets and liabilities.

Non-cash charges primarily consisted of stock-based compensation, amortization of deferred commissions, amortization of debt discount and issuance costs, depreciation and amortization of property and equipment and intangible assets, deferred income taxes, non-cash charitable contributions and loss on early extinguishment of debt.

Investing Activities

Net cash used in investing activities during the year ended January 31, 2022 of $366.8 million was primarily attributable to purchases of investments of $1,846.7 million, payments of $215.2 million, net of cash acquired, in connection with our Auth0 and atSpoke acquisitions and purchases of property and equipment of $12.3 million to support additional office space and headcount and the capitalization of internal-use software costs of $4.3 million

associated with the development of additional features and functionality for our platform.

These activities were partially offset by proceeds from the sales and maturities of investments of $1,711.8 million.

Net cash used in investing activities during the year ended January 31, 2021 of $1,305.1 million was primarily attributable to the purchases of investments of $2,029.0 million, purchases of property and equipment of $13.1 million to support additional office space and headcount and the capitalization of internal-use software costs of $4.2 million associated with the development of additional features and functionality for our platform.

These activities were offset by proceeds from the sales and maturities of investments of $741.3 million.

Net cash used in investing activities during the year ended January 31, 2020 of $688.0 million was primarily attributable to the purchases of investments of $999.4 million, payment of $44.3 million, net of cash acquired, in connection with an acquisition, purchases of property and equipment of $15.4 million to support additional office space and headcount, payment of $8.6 million in connection with the purchase of developed technology intangible assets and the capitalization of internal-use software costs of $3.9 million associated with the development of additional features and functionality for our platform.

These activities were offset by proceeds from the sales and maturities of investments of $383.5 million.

Financing Activities

Cash provided by financing activities during the year ended January 31, 2022 of $89.1 million was primarily attributable to proceeds from the exercise of stock options of $53.5 million, and proceeds from employee purchases under our employee stock purchase plan ("ESPP") of $35.6 million.

Cash provided by financing activities during the year ended January 31, 2021 of $1,091.6 million was primarily attributable to the issuance of the 2026 Notes for proceeds of $1,134.8 million, net of issuance costs and proceeds from the termination of Note Hedges of $195.0 million, offset by payments for termination of Warrants of $175.4 million and the purchase of the 2026 Capped Calls of $134.0 million.

Other items impacting cash provided by financing activities include proceeds from the exercise of stock options of $45.6 million and proceeds from our employee stock purchase plan (ESPP) of $25.9 million.

Cash provided by financing activities during the year ended January 31, 2020 of $853.4 million was primarily attributable to the issuance of the 2025 Notes for proceeds of $1,040.7 million, net of issuance costs, and proceeds from the termination of Note Hedges of $405.9 million, offset by payments for termination of Warrants of $358.6

million, payments for the First Partial Repurchase of 2023 Notes of $224.4 million, and the purchase of the 2025 Capped Calls of $74.1 million.

Other items impacting cash provided by financing activities include proceeds from the exercise of stock options of $45.6 million and proceeds from our ESPP of $25.9 million.

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Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP").

In the preparation of these consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.

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Our 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.

Furthermore, if a customer reduces the contracted

usage or service level, the customer has no right of refund.

Our subscription arrangements do not provide customers with the right to take possession of the software supporting the platform and, as a result, are accounted for as service arrangements.

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When such observable prices are not available, we determine SSP based on overarching pricing objectives and strategies, taking into consideration market conditions and other factors, including customer size, volume purchased, market and industry conditions, product-specific factors and historical sales of the deliverables.

Deferred Commissions

Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer.

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 we have determined to be generally five years.

We determined the period of benefit by taking into consideration the terms of our customer contracts, our 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.

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

Deferred commissions on our consolidated balance sheets totaled $154.5 million and $111.5 million at January 31, 2021 and 2020, respectively.

Business Combinations

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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.

These estimates are inherently uncertain and unpredictable.

These estimates can include, but are not limited to:

• future expected cash flows from subscription contracts, professional services contracts, other customer contracts and acquired developed technologies;

• person hours required in recreating certain acquired technologies;

• historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;

• royalty rates applied to acquired developed technology platforms and other intangible assets;

• obsolescence curves and other useful life assumptions, such as the period of time and intended use of acquired intangible assets in our product offerings;

• discount rates;

• uncertain tax positions and tax-related valuation allowances;

• fair value of assumed equity awards.

These estimates are inherently uncertain and unpredictable, and unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

During the measurement period, which may be up to one year from the acquisition date, adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed may be recorded, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

Goodwill on our consolidated balance sheets totaled $48.0 million at January 31, 2021 and 2020.

We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period.

Goodwill on our consolidated balance sheets totaled $5,401.3 million and $48.0 million as of January 31, 2022 and 2021, respectively.

Goodwill is tested for impairment annually on November 1 or more frequently if certain indicators are present.

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Convertible Senior Notes

We account for the issuance of convertible senior notes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 470-20, Debt with Conversion and Other Options.

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

We account for the issuance of convertible senior notes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Subtopic 470-20, Debt with Conversion and Other Options ("ASC 470-20").

Pursuant to ASC 470-20, as our Notes have a net settlement feature and may be settled wholly or partially in cash upon conversion, we are 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, we use 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, we observe the price of derivative instruments purchased in conjunction with our convertible senior note issuances or we evaluate issuances of convertible debt securities by other companies with similar credit risk ratings at the time of issuance.

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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 should be evaluated as a modification or an exchange transaction depending on whether the exchange is determined to have substantially different terms.

Similarly, in accordance with ASC 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.

Pursuant to ASC 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.

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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 7. Management’s Discussion and Analysis