What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-03 compared with 2022-03-07 · 465 added, 495 removed, 746 unchanged (56% of the section changed)

5 unchanged sentences

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

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, 2022 and 2021, 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, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of January 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2023, in conformity with U.S.

12 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition – Identifying and evaluating terms and conditions in contracts

12 unchanged sentences

Additionally, to verify completeness of non-standard terms and conditions, we obtained confirmations of terms and conditions for a sample of arrangements with customers.

Acquisition of Auth0 – Fair value of technology and customer-related intangible assets

Description of the Matter As explained in Note 3 to the consolidated financial statements, the Company completed the acquisition of Auth0, a privately-held, Identity-as-a-Service company during fiscal 2022 for total consideration of $5.7 billion, which was accounted for as a business combination.

Auditing the Company's accounting for its acquisition of Auth0 was complex due to the significant estimation required in determining the fair value of developed technology and customer relationship intangible assets, which were valued and recorded at $172.0 million and $140.9 million, respectively.

The Company used discounted cash flow models to determine the value of developed technology and customer relationship intangible assets.

The significant estimation was primarily due to the judgmental nature of the inputs to the valuation model and the sensitivity of the fair value to certain significant underlying assumptions, in particular, the projections of future revenue, including the impact of obsolescence curves for developed technology assets, expected customer attrition rates and anticipated growth in revenue from acquired customers.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over its accounting for acquisitions, such as controls over the recognition and measurement of developed technology and customer relationships intangible assets, including the valuation model and underlying assumptions used to develop such estimates.

To test the estimated fair value of the developed technology and customer relationship intangible assets, our audit procedures included, among others, involvement of our valuation specialists to assist us in the evaluation of the valuation methodology used by the Company and procedures to test the assumptions used in the valuation, including the completeness and accuracy of the underlying data.

We compared the revenue forecast assumptions, including the impact of technology obsolescence curves, expected customer attrition rates and anticipated growth in revenue from acquired customers, to current industry, market and economic trends, and to historical results of the acquired business and the Company.

/s/ Ernst & Young LLP

8 unchanged sentences

(the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2023, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Auth0, Inc.

which is included in the 2022 consolidated financial statements of the Company and constituted 2% of consolidated total assets and 11% of consolidated revenue for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Auth0, Inc.

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, 2022 and 2021, 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, 2022, and the related notes and our report dated March 7, 2022 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, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended January 31, 2023, and the related notes and our report dated March 3, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

18 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(dollars in millions, shares in thousands, except per share data)

As of January 31,

3 unchanged sentences

Accounts receivable, net of allowances of $ 8 and $ 4

397,509 194,818

Deferred commissions 92 75

32 unchanged sentences

Additional paid-in capital 7,974 7,750

Accumulated other comprehensive income ( 12,009 ) 5,390

Accumulated other comprehensive loss ( 33 ) ( 12 )

Accumulated deficit ( 2,475 ) ( 1,816 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(dollars in millions, shares in thousands, except per share data)

Year Ended January 31,

12 unchanged sentences

General and administrative 409 432 171

Restructuring and other charges 29 — —

Total operating expenses 2,124 1,672 821

11 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(in millions)

Year Ended January 31,

7 unchanged sentences

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(dollars in thousands)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in millions, shares in thousands)

Class A Common Stock

3 unchanged sentences

Stockholders’

Equity (Deficit)

Balances as of January 31, 2020 113,990 $ — 8,648 $ — $ 1,106 $ 1 $ ( 702 ) $ 405

Issuance of common stock upon exercise of stock options and other activity, net 4,114 — 254 — 46 — — 46

Issuance of common stock under employee stock purchase plan 322,795 — — — 18,767 — — 18,767

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

Issuance of common stock under employee stock purchase plan, net of cancellations 247 — — — 26 — — 26

Issuance of common stock for settlement of restricted stock units 2,109 — — — — — — —

Issuance of common stock for bonus settlement 86 — — — 10 — — 10

1 unchanged sentence

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

Exercise of hedges related to convertible senior notes ( 168 ) — — — — — — —

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

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

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

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

5 unchanged sentences

Balances as of January 31, 2021 122,824 $ — 8,159 $ — $ 1,656 $ 5 $ ( 968 ) $ 693

Class A Common Stock

Class B Common Stock

Comprehensive

Income (Loss)

Stockholders’

Equity (Deficit)

Issuance of common stock in connection with business combinations 19,190 — — — 5,409 — — 5,409

Issuance of common stock in connection with business combinations subject to future vesting 1,269 — — — — — — —

Issuance of common stock upon exercise of stock options and other activity, net 2,552 — 2 — 54 — — 54

Issuance of common stock under employee stock purchase plan, net of cancellations 186 — — — 36 — — 36

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

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

Issuance of common stock for settlement of restricted stock units 2,294 — — — — — — —

Issuance of common stock pursuant to charitable donation 30 — — — 7 — — 7

Conversion of Class B common stock to Class A common stock 1,183 — ( 1,183 ) — — — — —

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 and conversion of convertible senior notes 476 — — — 21 — — 21

Proceeds from hedges related to convertible senior notes ( 380 ) — — — — — — —

Payments for warrants related to convertible senior notes — — — — ( 175,399 ) — — ( 175,399 )

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

Stock-based compensation — — — — 567 — — 567

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

Other comprehensive loss — — — — — ( 17 ) — ( 17 )

Net loss — — — — — — ( 848 ) ( 848 )

Balances as of January 31, 2022 149,624 $ — 6,978 $ — $ 7,750 $ ( 12 ) $ ( 1,816 ) $ 5,922

Issuance of common stock in connection with business combinations 19,190,297 2 — — 5,409,342 — — 5,409,344

Issuance of common stock in connection with business combinations subject to future vesting 1,269,008 — — — — — — —

Class A Common Stock

Class B Common Stock

Comprehensive

Income (Loss)

Stockholders’

Adjustments from adoption of ASU 2020-06 — — — — ( 528 ) — 156 ( 372 )

Forfeiture of unvested common stock issued in connection with business combinations ( 14 ) — — — — — — —

Issuance of common stock upon exercise of stock options and other activity, net 965 — 451 — 17 — — 17

Issuance of common stock under employee stock purchase plan, net of cancellations 492 — — — 31 — — 31

Issuance of common stock for settlement of RSUs 2,294,313 — — — ( 13 ) — — ( 13 )

Issuance of common stock for settlement of restricted stock units 2,555 — — — — — — —

Issuance of common stock pursuant to charitable donation 42 — — — 4 — — 4

Conversion of Class B common stock to Class A common stock 129 — ( 129 ) — — — — —

Equity component of early extinguishment and conversion of convertible senior notes 475,915 — — — 20,776 — — 20,776

Settlement of convertible senior notes 356 — — — 17 — — 17

Proceeds from hedges related to convertible senior notes ( 140 ) — — — — — — —

Stock-based compensation — — — — 683 — — 683

Other comprehensive income — — — — — ( 17,399 ) — ( 17,399 )

Other comprehensive loss — — — — — ( 21 ) — ( 21 )

Net loss — — — — — — ( 815 ) ( 815 )

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(in millions)

Year Ended January 31,

9 unchanged sentences

Non-cash charitable contributions 4 7 9

Lease impairment charges 14 — 3

Loss on early extinguishment and conversion of debt — — 2

23 unchanged sentences

Proceeds from issuance of convertible senior notes, net of issuance costs — — 1,135

Payments for repurchases and conversions of convertible senior notes ( 26 ) ( 446 ) ( 224,414 )

Proceeds from hedges related to convertible senior notes — — 195

3 unchanged sentences

Proceeds from shares issued in connection with employee stock purchase plan 31 36 26

Other, net — — ( 126 )

Net cash provided by financing activities 48 89 1,092

Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash ( 6 ) ( 2 ) 2

Net (decrease) increase in cash, cash equivalents and restricted cash ( 175,974 ) ( 83,323 ) 220,738

Net decrease in cash, cash equivalents and restricted cash ( 2 ) ( 176 ) ( 83 )

Cash, cash equivalents and restricted cash at beginning of year 273 449 532

10 unchanged sentences

Benefit from exercise of hedges related to convertible senior notes 18 92 37

Common stock issued as charitable contribution 7,238 9,292 1,746

Operating lease right-of-use assets exchanged for lease liabilities 11 22 46

10 unchanged sentences

(the “Company”) is the leading independent identity provider.

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's Workforce Identity and Customer Identity Clouds are powered by the Company's Identity Platform enabling customers to securely connect the right people to the right technologies and services at the right time, and developers to securely and efficiently embed identity into the software they build, allowing them to innovate and focus on their core mission.

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.

2 unchanged sentences

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").

All intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial statements include the results of operations for acquired businesses from their acquisition dates to January 31, 2022.

See Note 3 for additional details.

The Company conducts business globally and is managed, operated and organized by major functional departments that operate on a consolidated basis.

As result, the Company operates in one reportable segment.

The Company’s fiscal year ends on January 31.

1 unchanged sentence

Certain reclassifications of components of prior period operating cash flows have been made in the consolidated statements of cash flows to conform to the current period presentation.

These reclassifications had no impact on total operating cash flows as previously reported.

These reclassifications had no impact on the aggregate cash flow classifications as previously reported.

In fiscal 2023, the Company elected to change its presentation of dollars from thousands to millions.

As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding.

In addition, percentages presented may not add to their respective totals or recalculate due to rounding.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances.

The preparation of consolidated financial statements in conformity with GAAP requires estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

Estimates are based on historical experience and on other assumptions that management believes are reasonable under the circumstances.

Actual results could vary from those estimates.

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, the valuation of goodwill and acquired intangible assets, including their useful lives and the valuation of certain equity awards assumed.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which has 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 years ended January 31, 2022 and 2021.

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

The Company’s most significant estimates include the valuation of deferred income tax assets, uncertain tax positions, assets and liabilities acquired in business combinations, and loss contingencies related to litigation.

Foreign Currency

The functional currencies of the Company’s foreign subsidiaries are the respective local currencies.

Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive loss within the consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit).

Foreign currency transaction gains and losses are included in other expense, net in the consolidated statements of operations and were not material for the years ended January 31, 2022, 2021 or 2020.

Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income (loss) within the consolidated statements of stockholders’ equity.

Foreign currency transaction gains and losses are included in interest and other, net in the consolidated statements of operations and were not material in fiscal 2023, 2022 or 2021.

All assets and liabilities denominated in a foreign currency are translated into U.S.

dollars at the exchange rate on the balance sheet date.

Revenue and expenses are translated at the average exchange rate during the period, and equity balances are translated using historical exchange rates.

Revenue and expenses are translated at the average exchange rate during the period.

Summary of Significant Accounting Policies

Segment Information

The Company operates in a single operating segment.

The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

Revenue Recognition

The Company derives revenue from subscription fees (which include support fees) and professional services fees.

Revenue is derived from subscription fees (which include support fees) and professional services fees.

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

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.

The Company’s 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.

The arrangements are generally non-cancellable and non-refundable.

Furthermore, if a customer reduces the contracted

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

The 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.

This revenue recognition policy is consistent for sales generated directly with customers and sales generated indirectly through channel partners.

The Company determines revenue recognition through the following steps:

Revenue recognition is determined through the following steps:

• Identification of the contract, or contracts, with a customer;

2 unchanged sentences

• Allocation of the transaction price to the performance obligations in the contract;

• Recognition of revenue when, or as, the Company satisfies a performance obligation.

• Recognition of revenue when, or as, the performance obligations are satisfied.

The Company recognizes revenue net of any applicable value added or sales tax.

Subscription Revenue

1 unchanged sentence

Professional Services Revenue

The Company’s professional services principally consist of customer-specific requests for application integrations, user interface enhancements and other customer-specific requests.

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

Professional services principally consist of customer-specific requests for application integrations, user interface enhancements and other customer-specific requests.

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

Contracts with Multiple Performance Obligations

1 unchanged sentence

For these contracts, the Company accounts for individual performance obligations separately if they are distinct.

The transaction price is allocated to the separate performance obligations on a relative SSP basis.

The transaction price is allocated to the separate performance obligations on a relative standalone selling price ("SSP") basis.

The Company determines SSP based on observable, if available, prices for those related services when sold separately.

When such observable prices are not available, the Company determines 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.

Pricing objectives, market conditions or other factors may change in the future resulting in changes to standalone selling prices that could impact the timing or amount of revenue recognition.

Deferred Revenue

5 unchanged sentences

Deferred Commissions

Sales commissions earned by the Company’s 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 the Company has determined to be generally five years .

Sales commissions earned by the Company’s sales force are generally considered incremental and recoverable costs of obtaining a contract with a customer.

The Company determined the period of benefit by taking into consideration the terms of 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 two years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Sales commissions capitalized as contract costs totaled $ 121 million and $ 171 million in fiscal 2023 and 2022, respectively.

Amortization of contract costs was $ 84 million, $ 57 million and $ 40 million in fiscal 2023, 2022 and 2021, respectively.

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

Sales commissions capitalized as contract costs totaled $ 170.7 million and $ 81.0 million in the years ended January 31, 2022 and 2021, respectively.

Amortization of contract costs was $ 57.2 million, $ 39.7 million and $ 28.6 million for the years ended January 31, 2022, 2021 and 2020, respectively.

There was no impairment loss in relation to the costs capitalized.

Cost of Revenue

Costs of revenue primarily consist of costs related to providing the Company’s cloud-based platform to its customers, including third-party hosting fees, amortization of capitalized internal-use software and finite-lived purchased developed technology, customer support, other employee-related expenses for security, technical operations and professional services staff, and allocated overhead costs.

Research and Development

Research and development expense incurred in the normal course of business is expensed as incurred.

Software Development Costs

Qualifying internally-developed software development costs, including the associated stock-based compensation expenses, are capitalized during the application development stage, as long as management has authorized and committed to funding the project, it is probable the project will be completed and the software will be used to perform the function intended.

Capitalization of such costs ceases once the project is substantially complete and ready for its intended use.

Capitalized software development costs are included in Intangible assets, net on the consolidated balance sheets and are amortized on a straight-line basis over an expected useful life of 3 years.

Advertising Expenses

Advertising costs are expensed as incurred.

Advertising expense was $ 77 million, $ 79 million, and $ 33 million in fiscal 2023, 2022 and 2021, respectively.

Restructuring and Other Charges

Restructuring generally includes significant actions involving employee-related severance charges, facilities consolidation and contract termination costs.

Employee-related severance charges are largely based upon substantive severance plans, while some are mandated requirements in certain foreign jurisdictions.

Severance costs generally include severance payments, outplacement services, health insurance coverage and legal costs.

These charges are reflected in the period when both the actions are probable, at the balance sheet date, and the amounts are reasonably estimable.

Right-of-use asset impairments are recognized on the date the premises have been vacated or the Company have ceased-use of the leased facilities.

Actual results may differ from the Company's estimates and assumptions.

Restructuring liabilities are classified in accrued expenses and other current liabilities in the consolidated balance sheets.

Stock-Based Compensation

The Company's equity incentive plans provide for granting stock options, restricted stock units ("RSUs"), restricted stock awards to employees, consultants, officers and directors and RSUs with market-based vesting conditions to certain executives.

In addition, the Company offers an ESPP to eligible employees.

Stock-based compensation expense related to stock awards (including stock options, RSUs, market-based RSUs, and ESPP) is measured based on the fair value of the awards granted and recognized as an expense over the requisite service period.

The fair value of each option and ESPP awards are estimated on the grant date using the Black-Scholes option pricing model which requires the use of various assumptions, including the expected term of the award, the expected volatility of the price of the underlying common stock, risk-free interest rates, and expected dividend yield

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

of the underlying common stock.

Stock-based compensation expense is recognized following the straight-line attribution method over the requisite service period for options, and over the offering period for ESPP awards.

The expected term of the Company’s stock options granted to employees has been determined utilizing the simplified method due to lack of historical exercise data.

The expected volatility has been determined using a weighted-average of the historical volatility measures of a group of guideline companies and the Company's own historical volatility.

The risk-free interest rate used is based on the U.S.

Treasury yield in effect at the time of grant for a period consistent with the expected term of the award.

The expected dividend is assumed to be zero as the Company has never declared or paid any cash dividends and do not currently intend to declare dividends in the foreseeable future.

The fair value of each RSU award is based on the fair value of the underlying common stock as of the grant date.

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, generally four years .

The fair value of each market-based RSU award is measured using a Monte Carlo simulation valuation model which requires the use of various assumptions, including the stock price volatility and risk-free interest rate as of the valuation date corresponding to the length of time remaining in the performance period.

Stock-based compensation expense for awards with market conditions is recognized over the requisite service period using the accelerated attribution method and is not reversed if the market condition is not met.

The assumptions used to determine the fair value of the stock awards represent management's best estimates.

These estimates involve inherent uncertainties and the application of management's judgment.

Forfeitures are accounted for as they occur.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis.

Deferred tax assets are also recognized for operating losses and tax credit carry forwards.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Management considers all positive and negative evidence in evaluating the Company’s ability to realize its deferred tax assets, for example its historical results and forecasts of future ability to realize its deferred tax assets, including forecasts of future taxable income by jurisdiction.

Deferred tax assets and liabilities are measured using enacted tax rates applicable in the years in which they are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax law is recognized in the provision for income taxes in the period that includes the enactment date.

The Company does not provide for income taxes on undistributed earnings of subsidiaries that are intended to be indefinitely reinvested.

Where the Company does not intend to indefinitely reinvest subsidiary earnings, income and withholding taxes, as applicable, are provided on such undistributed earnings.

The calculation of tax liabilities involves dealing with uncertainties in the application of complex tax regulations.

The Company determines if the weight of available evidence indicates that it is more likely than not that a tax position will be sustained on tax audit, assuming that all issues are audited and resolution of any related appeals or litigation processes are considered.

The tax benefit is then measured as the largest amount that is more than 50% likely to be realized upon ultimate settlement.

The reserves for uncertain tax positions are adjusted as facts and circumstances change, for example on closing of a tax audit, expiration of statutes of limitation on potential assessments or refinement of an estimate.

To the extent that the final outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such a determination is made.

The provisions for income taxes include the impact of reserves for uncertain tax positions, along with the related interest and penalties.

Cash, Cash Equivalents and Restricted Cash

2 unchanged sentences

The fair market value of cash equivalents approximated their carrying value as of January 31, 2023 and 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of January 31, 2023 and 2022, the Company's long-term restricted cash balance was $ 7 million and $ 8 million, respectively, primarily related to letters of credit for its facility lease agreements.

5 unchanged sentences

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.

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

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.

3 unchanged sentences

Strategic Investments

The Company's strategic investments consist of equity investments in privately held companies and are included in Other assets on the consolidated balance sheets.

Investments in privately held companies without readily determinable fair values in which the Company does not own a controlling interest or have significant

influence over are measured using the measurement alternative.

The Company's strategic investments consist primarily of equity investments in privately held companies and are included in Other assets on the consolidated balance sheets.

Investments in privately held companies without readily determinable fair values in which the Company does not own a controlling interest or have significant influence over are measured using the measurement alternative.

In applying the measurement alternative, the Company adjusts the carrying values of strategic investments based on observable price changes from orderly transactions for identical or similar investments of the same issuer.

1 unchanged sentence

Adjustments and impairments are recorded in Interest and other, net on the consolidated statements of operations.

In determining the estimated fair value of its strategic investments in privately held companies, the Company uses the most recent data available to the Company.

In determining the estimated fair value of its strategic investments in privately held companies, the Company uses the most recent and available data.

Valuations of privately held securities are inherently complex due to the lack of readily available market data and require the use of judgment.

5 unchanged sentences

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.

The Company assesses collectibility by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when specific customers with collectibility issues are identified.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property and Equipment

3 unchanged sentences

The useful lives of property and equipment are as follows:

Capitalized internal-use software costs 3 years

Computers and equipment 3 years

2 unchanged sentences

Business Combinations

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 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:

• 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 the Company’s 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.

The Company continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company's preliminary estimates to goodwill provided that the Company is within the measurement period.

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 the consolidated statements of operations.

Business combinations are accounted for under the acquisition method of accounting, which requires the acquired assets, including separately identifiable intangible assets, and assumed liabilities to be recorded as of the acquisition date at their respective estimated fair values.

Any excess of the purchase price over the fair value of the assets acquired, including separately identifiable intangible assets and liabilities assumed, is recorded as goodwill.

The determination of the fair value of assets acquired and liabilities assumed involves assessments of factors such as the expected future cash flows associated with individual assets and liabilities and appropriate discount rates at the date of the acquisition.

Significant management inputs used in the estimation of fair value of assets acquired and liabilities assumed include, but are not limited to, expected future cash flows, future changes in technology, estimated replacement costs, discount rates and assumptions about the period of time the brand will continue to be used in the Company’s product portfolio.

Where appropriate, external advisers are consulted to assist in the determination of fair value.

For non-observable market values, fair value has been determined using acceptable valuation methods.

The results of operations for businesses acquired are included in the financial statements from the acquisition date.

Acquisition-related expenses and post-acquisition restructuring costs are recognized separately from the business combination and are expensed as incurred.

Goodwill and Other Long-Lived Assets

The excess of the purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recognized as goodwill.

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

Goodwill represents the excess of the purchase price over the estimated fair value of net assets of businesses acquired in a business combination.

Goodwill amounts are not amortized.

Goodwill is tested for impairment annually on the first day of the fourth quarter of each fiscal year, or whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.

The Company operates as a single operating segment.

Management has the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the Company is less than the carrying amount, including goodwill.

If it is determined that it is more likely than not that the fair value of the Company is less than the carrying amount, a quantitative assessment is performed by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

The Company also has the option to bypass the qualitative assessment, and perform the quantitative assessment.

No goodwill impairments were recorded during the years presented.

Long-lived assets, such as property and equipment and finite-lived intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

1 unchanged sentence

If the carrying amount exceeds the undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds its fair value.

The Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives in cost of revenue in the consolidated statements of operations.

Intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Operating Leases and Incremental Borrowing Rate

1 unchanged sentence

The Company determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets on its consolidated balance sheets at lease commencement.

Lease liabilities are measured based on the present value of the total lease payments not yet paid, discounted based on the more readily determinable of either the rate implicit in the lease or the Company’s incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease.

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

Lease liabilities are measured based on the present value of the total lease payments not yet paid, discounted based on the more readily determinable of either the rate implicit in the lease or the incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease.

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

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.

2 unchanged sentences

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 leases with a lease term of 12 months or less ("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

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

Pursuant to ASC 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.

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 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 extinguishment 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 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

Advertising costs are expensed as incurred.

Advertising expense was $ 78.9 million, $ 33.1 million, and $ 17.0 million for the years ended January 31, 2022, 2021 and 2020.

The Company accounts for income taxes in accordance with the liability method of accounting for income taxes.

Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled.

The Company records a valuation allowance to reduce its deferred tax assets to the net amount that the Company believes is more likely than not to be realized.

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

Because of the uncertainty of the realization of the U.S.

deferred tax assets, the Company has recorded a full valuation allowance against its U.S.

deferred tax assets.

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

taxable income.

The Company recognizes and measures tax benefits from uncertain tax positions using a two-step approach.

The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes.

The second step is to measure the tax benefit as the

largest amount that is more than 50% likely to be realized upon ultimate settlement.

Significant judgment is required to evaluate uncertain tax positions.

Although the Company believes that it has adequately reserved for its uncertain tax positions, it can provide no assurance that the final tax outcome of these matters will not be materially different.

The Company evaluates its uncertain tax position on a regular basis and evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of an audit and effective settlement of audit issues.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company’s financial condition and results of operations.

The provision for income taxes includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest and penalties.

Concentrations of Risk and Significant Customers

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable.

Cash and cash equivalents and short-term investments are currently held in three financial institutions and, at times, may exceed federally insured limits.

As of January 31, 2022 and 2021 and for each of the three years ended January 31, 2022, no single customer represented greater than 10% of accounts receivable or greater than 10% of revenue, respectively.

In order to reduce the risk of downtime of the Company’s subscription services, the Company uses data center facilities operated by a third-party located in Virginia, Oregon, Ohio, Germany, Ireland, Singapore, Sydney and Japan.

The Company has internal procedures to restore services in the event of disaster at any of its current data center facilities.

Even with these procedures for disaster recovery in place, the Company’s subscription services could be significantly interrupted during the time period following a disaster at one of its sites and the subsequent restoration of services at another site.

Geographical Information

Revenue by location is determined by the billing address of the customer.

The following table sets forth revenue by geographic area (in thousands):

Year Ended January 31,

2022 2021 2020

United States $ 1,036,389 $ 701,635 $ 494,529

International 263,812 133,789 91,538

Total $ 1,300,201 $ 835,424 $ 586,067

Other than the United States, no individual country exceeded 10% of total revenue for the years ended January 31, 2022, 2021 and 2020.

Property and equipment by geographic location is based on the location of the legal entity that owns the asset.

As of January 31, 2022 and 2021, substantially all of the Company’s property and equipment was located in the United States.

For leases with a lease term of 12 months or less ("short-term leases"), rent expense is recorded in the consolidated statements of operations on a straight-line basis over the lease term and records variable lease payments as incurred.

Loss Contingencies

The Company is periodically involved in various legal claims and proceedings.

The Company routinely reviews the status of each significant matter and assesses its potential financial exposure.

If the potential loss from any matter is considered probable and the amount can be reasonably estimated, the Company records a liability for the estimated loss.

If either or both of the criteria for recording the liability are not met, the Company assesses whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred.

If there is a reasonable possibility that a loss may have been incurred, the Company discloses the estimate of the amount of loss or range of loss, discloses that the amount is immaterial, or discloses that an estimate of loss cannot be made, as applicable.

Because of inherent uncertainties related to these legal matters, the Company bases its loss accruals on the best information available at the time.

As additional information becomes available, the Company reassesses its potential liability and may review its estimates.

Actual outcomes of these legal and regulatory proceedings may differ materially from the Company’s estimates.

Concentrations of Risk

Financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable.

The Company's short-term investments are primarily intended to facilitate liquidity and capital preservation and consist predominately of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers.

The Company's policy is designed to limit exposure from any particular issuer or institution.

Credit risk arising from accounts receivable is mitigated due to the large number of customers and their dispersion across various industries and geographies.

For the periods presented, there were no customers that represented more than 10% of the Company's accounts receivable balance or total revenue.

The Company serves customers and users from data center facilities located across various different physical locations, such as the U.S., Europe and Asia-Pacific, most of which are operated by a single third party.

The Company has disaster recovery protocols at the third-party service providers.

Even with these procedures for disaster recovery in place, access to the Company's service could be significantly interrupted, resulting in an adverse effect on its operating results and financial condition.

Net Loss per Share

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.

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 ("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 initial public offering, Class A and Class B common stock are the only outstanding equity of the Company.

The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion rights.

Basic and diluted net loss per share attributable to common stockholders is computed 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 without consideration for potentially dilutive securities as they do not share in losses.

The diluted net loss per share attributable to common

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 RSUs, 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.

The rights of the holders of the Company's Class A and Class B common stock are identical, except with respect to voting and conversion rights.

See Note 15 for additional details.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued Accounting Standards Update (“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.

Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, 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.

The Company will adopt ASU 2020-06 effective February 1, 2022, using the modified retrospective method.

In the consolidated balance sheets the adoption of the new standard is estimated to result in an increase of approximately $ 372 million to the total carrying value of the Company’s convertible senior notes, a decrease of approximately $ 527 million to additional paid-in capital and a cumulative-effect adjustment of approximately $ 155 million to the beginning balance of accumulated deficit as of February 1, 2022.

In October 2021, the FASB issued ASU No.

Recently Adopted Accounting Pronouncements

The Company adopted ASU 2020-06, effective February 1, 2022, using the modified retrospective method.

The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

The new guidance 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, the guidance removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, no longer requires separately presenting in equity an embedded conversion feature for such debt.

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

Instead, the convertible debt instrument is accounted for wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative, or (2) a convertible debt instrument was issued at a substantial premium.

Additionally, the guidance requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, which is consistent with the Company’s accounting treatment prior to the adoption of the new guidance.

The Company recognized a cumulative effect of initially applying the guidance as an adjustment to the February 1, 2022 opening balance of accumulated deficit.

Due to the elimination of the equity conversion component of the Company’s convertible senior notes outstanding as of February 1, 2022, additional paid-in capital was reduced.

The elimination of the equity conversion component had the effect of increasing the Company’s net debt balance.

The reduction of other liabilities is related to changes to the Company’s deferred tax liabilities.

The adoption of the new guidance resulted in the following changes to the Company’s consolidated balance sheet as of February 1, 2022:

January 31, 2022 Adjustments from Adoption of ASU 2020-06 Balance at

February 1, 2022

(dollars in millions)

Convertible senior notes, net $ 16 $ 1 $ 17

Convertible senior notes, net, noncurrent 1,816 372 2,188

Other liabilities, noncurrent 31 ( 1 ) 30

Stockholders’ equity

Additional paid-in capital 7,750 ( 528 ) 7,222

Accumulated deficit ( 1,816 ) 156 ( 1,660 )

In addition, the adoption of the new guidance resulted in a decrease in reported net interest expense of approximately $ 85 million and a decrease in basic and diluted net loss per share of $ 0.54 in fiscal 2023.

The Company adopted the Financial Accounting Standards Board ("FASB") issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers, in order to align the recognition of a contract liability with the definition of a performance obligation.

ASU 2021-08 is effective for interim and annual periods beginning after December 15, 2022, on a prospective basis, with early adoption permitted.

The Company has elected to early adopt this standard effective February 1, 2022, with no material impact to its consolidated financial statements and related disclosures.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), effective February 1, 2022, on a prospective basis.

The update requires contract assets and contract liabilities acquired in a business combination be recognized and measured in accordance with the latest revenue guidance.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company adopted the FASB issued ASU No.

2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), effective February 1, 2022, on a prospective basis.

The new guidance addresses specific guidance related to modifications or exchanges of freestanding equity-classified written call options (such as warrants) by specifying the accounting for various modification scenarios.

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

Business Combinations

1 unchanged sentence

On May 3, 2021, the Company acquired all outstanding shares of privately-held Auth0, an Identity-as-a-Service company.

The Company expects to combine Auth0’s developer-centric identity solution with the Company’s Okta Identity Cloud to drive synergies, product options and value for current and future customers.

The acquisition date fair value of the consideration transferred for Auth0 was approximately $ 5,671.0 million, which consisted of the following (in thousands):

Estimated Fair Value

Cash $ 257,010

Common stock issued 5,175,623

Fair value of outstanding employee equity awards assumed 238,389

Total consideration $ 5,671,022

Cash consideration of $ 257.0 million includes $ 3.8 million held back as partial security for post-closing true-up adjustments as well as indemnification claims made within one year of the acquisition date.

Approximately 19.2 million shares of common stock valued at $ 5,175.6 million were issued to selling stockholders, which includes approximately 1.1 million shares valued at $ 294.6 million held back as partial security for post-closing true-up adjustments as well as any indemnification claims made within one year of the acquisition date.

The Company entered into revesting agreements with Auth0’s founders pursuant to which approximately 1.2 million additional shares of Okta’s Class A common stock issued to the founders as of the closing date will vest over three years .

The $ 332.1 million fair value of the unvested restricted stock is not included as purchase consideration above, as it has a post-combination service requirement and will be accounted for separately from the business combination as stock compensation expense.

The Company issued replacement equity awards with a fair value of $ 655.1 million, of which $ 238.4 million was allocated to the purchase consideration as it is attributable to pre-combination services rendered and $ 416.7 million was allocated to post-combination services and will be expensed over the remaining service periods as stock-based compensation.

The fair value of the stock options assumed by the Company was determined using the Black-Scholes option pricing model.

The Company also converted certain equity awards to unvested restricted cash awards totaling $ 13.5 million that will be expensed over the remaining service periods.

See Note 13 for further discussion of amounts related to post-combination services that will be expensed over the remaining service periods as stock-based compensation.

Acquisition costs of $ 29.0 million related to Auth0 were expensed by the Company in general and administrative expenses in its consolidated statements of operations for the six months ended July 31, 2021.

Total consideration transferred for Auth0 was $ 5,671 million, including approximately 19 million shares of common stock valued at $ 5,176 million, cash of $ 257 million, and assumed outstanding equity awards with vested fair value of $ 238 million.

Cash consideration of $ 4 million and approximately 1 million shares valued at $ 295 million were held back as partial security for post-closing true-up adjustments as well as any indemnification claims made within one year of the acquisition date.

The consideration held back was paid in full during fiscal 2023.

The Company incurred $ 29 million of acquisition-related costs, which were recorded as general and administrative expenses in its consolidated statement of operations in fiscal 2022.

The transaction was accounted for as a business combination.

The total purchase price of $ 5,671.0 million was allocated using information currently available to the Company and may be subject to change as additional information is received.

The primary areas that remain preliminary relate to the fair values of income and non-income-based taxes and residual goodwill.

The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date.

Preliminary allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values is as follows (in

Estimated Fair Value

Cash and cash equivalents $ 107,425

Accounts receivable 28,572

Prepaid expenses and other current assets 12,748

Property and equipment, net 1,928

Operating lease right-of-use assets 6,873

Other assets 5,201

Intangible assets 334,300

Accounts payable ( 3,610 )

Accrued expenses and other current liabilities ( 10,946 )

Accrued compensation ( 19,187 )

Deferred revenue ( 65,339 )

Operating lease liabilities, noncurrent ( 5,694 )

Other liabilities, noncurrent ( 11,341 )

Net assets acquired $ 380,930

The excess of purchase consideration over the fair value of the net tangible assets and identifiable intangible assets acquired was $ 5,290.1 million and was recorded as goodwill, which is primarily attributable to expected synergies in sales opportunities across complementary products, customers and geographies, cross-selling opportunities, and improvements in the selling process.

None of the goodwill is expected to be deductible for U.S.

federal income tax purposes.

The estimated useful lives and fair values of the identifiable intangible assets are as follows (in thousands):

Preliminary Estimated

(in years) Amount

Developed technology 5 years

Customer relationships 2 - 6 years

Trade name 5 years

Total identifiable intangible assets $ 334,300

Developed technology represents the estimated fair value of the features underlying the Auth0 products as well as the platform supporting and providing services to Auth0 customers.

Customer relationships represents the estimated fair value of the underlying relationships with Auth0 customers, including the fair value of unbilled and unrecognized contracts yet to be fulfilled.

Trade name represents the estimated fair value of the Auth0 brand.

Revenue and earnings of Auth0 included in the Company’s consolidated income statement from the acquisition date through January 31, 2022 are as follows (in thousands):

For the period

January 31, 2022

Revenue $ 139,679

Net loss ( 385,302 )

The unaudited pro forma consolidated revenue and earnings for the year ended January 31, 2022 and 2021, calculated as if Auth0 had been acquired as of February 1, 2020 are as follows (in thousands):

Pro Forma Consolidated Statement of Operations Data

Year Ended January 31,

Revenue $ 1,349,779 $ 944,782

Net loss ( 846,694 ) ( 690,482 )

The pro forma financial information for all periods presented above has been calculated after adjusting the results of Auth0 to reflect certain business combination and one-time accounting effects such as the fair value adjustment of deferred revenue, amortization expense from acquired intangible assets, stock-based compensation expense for unvested equity awards assumed, deferred commissions, release of deferred tax asset valuation allowance and acquisition costs as though the acquisition occurred as of the beginning of the Company’s fiscal 2021.

The historical consolidated financial information has been adjusted in the pro forma combined financial results to give effect to pro forma events that are directly attributable to the business combination, reasonably estimable and factually supportable.

The pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the Company’s fiscal 2021.

The total purchase price of $ 5,671 million was allocated to the tangible and identifiable intangible assets and liabilities based on their estimated fair values.

The excess of purchase consideration over the fair value of the assets acquired and liabilities assumed was $ 5,290 million and was recorded as goodwill.

Acquisition of atSpoke

On August 2, 2021, the Company acquired all issued and outstanding capital stock of Townsend Street Labs, Inc.

(“atSpoke”), a modern workplace operations platform.

The Company will incorporate atSpoke’s platform with Okta’s Identity Governance and Administration offering.

The acquisition date cash consideration for atSpoke was approximately $ 79.3 million of which $ 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.

The Company recorded $ 18.3 million for developed technology intangible assets with an estimated useful life of 3 years and preliminarily recorded $ 63.2 million of goodwill which is primarily attributed to the assembled workforce as well as the integration of atSpoke’s technology and the Company’s technology.

None of the goodwill is expected to be deductible for U.S.

federal income tax purposes.

The Company may continue to adjust the preliminary purchase price allocation after obtaining more information primarily relating to income and non-income based taxes and residual goodwill through the measurement period.

The Company incurred $ 0.9 million of acquisition-related costs, which were recorded as general and administrative expenses in its consolidated statements of operations in the quarter ended July 31, 2021.

This acquisition did not have a material impact on the Company’s consolidated financial statements;

therefore, historical and pro forma disclosures have not been presented.

On August 2, 2021, the Company acquired all issued and outstanding capital stock of privately-held atSpoke, a modern workplace operations platform.

The acquisition date cash consideration for atSpoke was approximately $ 79 million, of which $ 13 million of consideration was held back as partial security for any adjustments and indemnification obligations and was paid within 18 months of the closing date.

The Company recorded $ 18 million for developed technology intangible assets with an estimated useful life of 3 years and recorded $ 62 million of goodwill.

The Company incurred $ 1 million of acquisition-related costs, which were recorded as general and administrative expenses in its consolidated statement of operations in fiscal 2022.

Cash Equivalents and Investments

Cash Equivalents and Short-term Investments

The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash equivalents and short-term investments as of January 31, 2022 and 2021 were as follows (in thousands):

The following tables present the amortized cost, unrealized gain (loss) and estimated fair value of cash equivalents and short-term investments:

As of January 31, 2023

(dollars in millions)

Cash equivalents:

6 unchanged sentences

Total $ 2,473 $ — $ ( 24 ) $ 2,449

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of January 31, 2022

(dollars in millions)

Cash equivalents:

7 unchanged sentences

All short-term investments were designated as available-for-sale securities as of January 31, 2023 and 2022.

The following table presents the contractual maturities of the Company's short-term investments as of January 31, 2022 and 2021 (in thousands):

The following table presents the contractual maturities of the Company's short-term investments:

As of January 31, 2023

(dollars in millions)

Due within one year $ 2,097 $ 2,076

1 unchanged sentence

Total $ 2,340 $ 2,316

As of January 31, 2022 and 2021, the Company included nil of unsettled purchases of short-term investments in Accrued expenses and other current liabilities on the consolidated balance sheets and included nil and $ 31.0 million, respectively, of unsettled maturities of short-term investments in Prepaid expenses and other current assets on the consolidated balance sheets.

The Company included $ 6.0 million and $ 10.5 million of interest receivable in Prepaid expenses and other current assets on the consolidated balance sheets as of January 31, 2022 and 2021, respectively.

The Company did not recognize an allowance for credit losses against interest receivable as of January 31, 2022 and 2021 because such potential losses were not material.

The following table presents the fair values and unrealized losses related to our investments in available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position as of January 31, 2022 (in thousands):

Interest receivable of $ 10 million and $ 6 million is included in Prepaid expenses and other current assets on the consolidated balance sheets as of January 31, 2023 and 2022, respectively.

The following table presents the fair values and unrealized losses related to the Company's investments in available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position as of January 31, 2023:

Less Than 12 Months More Than 12 Months Total

2 unchanged sentences

Estimated Fair Value

(dollars in millions)

treasury securities $ 1,204 $ ( 9 ) $ 846 $ ( 13 ) $ 2,050 $ ( 22 )

2 unchanged sentences

The Company had 159 and 193 short-term investments in unrealized loss positions as of January 31, 2023 and 2022, respectively.

There were no material unrealized gains or losses from available-for-sale securities for the year ended January 31, 2020.

There were 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, 2022, 2021 and 2020.

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, 2022 and 2021.

There were no material credit or non-credit related impairments for short-term investments as of January 31, 2023 and 2022.

Strategic Investments

The Company's strategic investments include equity investments in privately held companies, which do not have a readily determinable fair value.

As of January 31, 2022 and 2021, the balances of such strategic investments were $ 15.3 million and $ 3.1 million, respectively.

During the year ended January 31, 2022, the Company recorded $ 7.6 million of realized gains and unrealized adjustments in the carrying values of strategic investments.

Realized gains and losses and unrealized adjustments recognized during the years ended January 31, 2021 and 2020 were immaterial.

All gains and losses on strategic investments, whether realized or unrealized, are recognized in Interest income and other, net on the consolidated statements of operations.

Strategic investments primarily include equity investments in privately held companies, which do not have a readily determinable fair value.

As of January 31, 2023 and 2022, the balance of strategic investments was $ 25 million and $ 15 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value Measurements

The Company measures its financial assets at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

Financial assets are measured at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

5 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets that were measured at fair value on a recurring basis using the above input categories (in thousands):

The following tables present information about financial assets that were measured at fair value on a recurring basis using the above input categories:

As of January 31, 2023

1 unchanged sentence

Level 3 Total

(dollars in millions)

Cash equivalents:

9 unchanged sentences

Level 3 Total

(dollars in millions)

Cash equivalents:

6 unchanged sentences

Total cash equivalents and short-term investments $ 152 $ 2,242 $ — $ 2,394

The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable and accounts payable approximate fair value due to their short-term maturities and are excluded from the fair value table above.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value Measurements of Other Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company's financial instruments that are not recorded at fair value on the consolidated balance sheets (in thousands):

The following table presents the principal amounts and estimated fair values of financial instruments that are not recorded at fair value on the consolidated balance sheets:

As of January 31, 2023

Net Carrying Amount (1)

2023 convertible senior notes $ 16,295 $ 68,698

Principal Amount Estimated

(dollars in millions)

2025 convertible senior notes $ 1,060 $ 933

2026 convertible senior notes $ 1,150 $ 981

(1) Before unamortized debt issuance costs.

The principal amounts of the 2023 Notes, the 2025 Notes and the 2026 Notes are $ 17.2 million, $ 1,060.0 million and $ 1,150.0 million, respectively.

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

The Notes are recorded at face value less unamortized debt issuance costs (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, 2022, 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 the Company's common stock of $ 197.89 on January 31, 2022, the if-converted values of the 2023 Notes and 2025 Notes exceeded the principal amounts of $ 17.2 million and $ 1,060.0 million by $ 53.3 million and $ 51.6 million, respectively.

The if-converted value of the 2026 Notes was less than the principal amount of $ 1,150.0 million.

Goodwill and Intangible Assets, net

As of January 31, 2023 and 2022, goodwill was $ 5,400 million and $ 5,401 million, respectively.

During the year ended January 31, 2022, the Company recorded goodwill of $ 5,290.1 million in connection with the Auth0 acquisition that was completed in May 2021 and $ 63.2 million in connection with the atSpoke acquisition that was completed in August 2021.

See Note 3 for further details.

No goodwill impairments were recorded during the years ended January 31, 2022, 2021 and 2020.

No goodwill impairments were recorded during fiscal 2023, 2022 and 2021.

Intangible Assets, net

Intangible assets consisted of the following (in thousands):

Intangible assets consisted of the following:

As of January 31, 2023

Gross Accumulated Amortization Net

(dollars in millions)

Capitalized internal-use software costs $ 48 $ ( 28 ) $ 20

6 unchanged sentences

Gross Accumulated Amortization Net

(dollars in millions)

Capitalized internal-use software costs $ 36 $ ( 24 ) $ 12

Purchased developed technology 220 ( 48 ) 172

Software licenses 126 ( 4 ) 122

Customer relationships 141 ( 26 ) 115

Trade name 21 ( 3 ) 18

$ 418 $ ( 101 ) $ 317

During the year ended January 31, 2022, the Company recorded intangible assets of $ 334.3 million and $ 18.3 million in connection with the Auth0 and atSpoke acquisitions, respectively.

See Note 3 for further details.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows:

2 unchanged sentences

Purchased developed technology 3.0 years 4.0 years

Customer relationships 4.0 years —

Trade name 4.3 years —

As of January 31, 2022, estimated remaining amortization expense for the intangible assets by fiscal year was as follows (in thousands):

Customer relationships 3.4 years 4.0 years

Trade name 3.3 years 4.3 years

As of January 31, 2023, estimated remaining amortization expense for the intangible assets by fiscal year was as follows:

Remaining Amortization

2023 $ 90,221

Thereafter 1,383

Total $ 316,968

Amortization expense of intangible assets for the years ended January 31, 2022, 2021 and 2020 was $ 69.0 million, $ 11.1 million, and $ 10.6 million, respectively.

(dollars in millions)

Amortization expense of intangible assets was $ 93 million, $ 69 million and $ 11 million in fiscal 2023, 2022 and 2021, respectively.

Balance Sheet Components

Property and Equipment, net

Property and equipment consisted of the following (in thousands):

Property and equipment consisted of the following:

As of January 31,

(dollars in millions)

Computers and equipment $ — $ 1

4 unchanged sentences

Property and equipment, net $ 59 $ 65

Depreciation expense was $ 12.1 million, $ 9.4 million and $ 8.8 million for the years ended January 31, 2022, 2021 and 2020, respectively.

The Company’s accounts receivable allowances for the years ended January 31, 2022, 2021 and 2020 were as follows (in thousands):

As of January 31,

2022 2021 2020

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

Additions (reductions) 2,898 3,252 ( 673 )

Write-offs ( 1,990 ) ( 967 ) ( 259 )

Balance, end of period $ 4,359 $ 3,451 $ 1,166

Depreciation expense was $ 12 million in fiscal 2023 and 2022, and $ 9 million in fiscal 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accrued expenses and other current liabilities consisted of the following:

As of January 31,

(dollars in millions)

Accrued expenses $ 67 $ 48

1 unchanged sentence

Operating lease liabilities 32 27

Other 7,067 3,147

Accrued expenses and other current liabilities $ 112 $ 90

Other Liabilities, Noncurrent

Other liabilities, noncurrent consisted of the following (in thousands):

Other liabilities, noncurrent consisted of the following:

As of January 31,

(dollars in millions)

Deferred tax liabilities $ 12 $ 9

Other 22,359 7,498

Other liabilities, noncurrent $ 23 $ 31

2 unchanged sentences

Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.

Subscription revenue recognized during the years ended January 31, 2022 and 2021 that was included in the deferred revenue balances at the beginning of the respective periods was $ 494.7 million and $ 361.0 million, respectively.

Professional services and other revenue recognized in the years ended January 31, 2022 and 2021 from deferred revenue balances at the beginning of the respective periods was not material.

Subscription revenue recognized during fiscal 2023 and 2022 included $ 952 million and $ 495 million, respectively, from deferred revenue balances at the beginning of the respective periods.

Professional services and other revenue recognized in fiscal 2023 and 2022 from deferred revenue balances at the beginning of the respective periods was $ 14 million and $ 7 million, respectively.

Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to the remaining performance obligations represents all future, non-cancelable contracted revenue 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.

As of January 31, 2022, total remaining non-cancelable performance obligations under the Company’s subscription contracts with customers was approximately $ 2,694.3 million.

Total remaining non-cancelable performance obligations under subscription contracts with customers was approximately $ 3,007 million as of January 31, 2023.

Of this amount, the Company expects to recognize revenue of approximately $ 1,684 million, or 56 %, over the next 12 months, with the balance to be recognized as revenue thereafter.

4 unchanged sentences

Interest is payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018.

The 2023 Notes mature on February 15, 2023 unless earlier repurchased or converted.

The Company may not redeem the 2023 Notes prior to maturity.

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 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.

The $ 260.5 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, 2022, $ 17.2 million of principal remained outstanding on the 2023 Notes.

The outstanding 2023 Notes matured on February 15, 2023.

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

Upon conversion, the 2023 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.

Upon conversion, the 2023 Notes may be settled in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 2023 Notes are convertible at an initial conversion rate of 20.6795 shares of Class A common stock per $1,000 principal amount of the 2023 Notes, which is equal to an initial conversion price of approximately $ 48.36 per share of Class A common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2023 Indenture.

Prior to the close of business on the business day immediately preceding October 15, 2022, holders of the 2023 Notes may convert all or a portion of their 2023 Notes only in multiples of $1,000 principal amount, under the following circumstances:

• during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2018 (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 2023 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 2023 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;

• upon the occurrence of specified corporate events, as described in the 2023 Indenture.

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 20 trading days during the period of 30 consecutive trading days ended January 31, 2022, 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, 2022 and were classified as current liabilities on the consolidated balance sheet as of January 31, 2022.

During the year ended January 31, 2022, the Company issued approximately 0.5 million shares of Class A common stock and paid an immaterial amount in cash to settle approximately $ 23.0 million principal amount of 2023 Notes.

The loss on early note conversion was not material.

Subsequent to January 31, 2022, the Company received conversion requests for approximately $ 2.0 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, 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 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,

Contractual interest expense $ 54 $ 180

Amortization of debt issuance costs 106 312

Amortization of debt discount 1,054 3,316

Total $ 1,214 $ 3,808

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 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):

As of January 31, 2022

As of January 31, 2023, an immaterial amount of 2023 Notes remained outstanding.

During fiscal 2023, the Company issued approximately 0.4 million shares of Class A common stock and paid an immaterial amount in cash to settle approximately $ 17 million principal amount of 2023 Notes.

As of January 31, 2023, the effective interest rate on the 2023 Notes was 0.85 %.

As of January 31, 2022 and 2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2023 Notes was 5.68 %.

Interest expense recognized related to the 2023 Notes was immaterial during fiscal 2023, 2022 and 2021.

The net carrying amount of the 2023 Notes consisted of the following:

As of January 31, 2023 As of January 31, 2022

(dollars in millions)

Liability component:

6 unchanged sentences

Carrying amount of the equity component (2)

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

(1) Subsequent to the adoption of ASU 2020-06 under the modified retrospective method, the equity component and debt discount are eliminated.

(2) Included in the January 31, 2022 consolidated balance sheet within Additional paid-in capital.

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.

The Note Hedges are purchased call options that give the Company the option to purchase shares, subject to anti-dilution adjustments substantially identical to those in the 2023 Notes, 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.

The Note Hedges will expire in 2023, if not exercised earlier.

1 unchanged sentence

The Note Hedges are separate transactions and are not part of the terms of the 2023 Notes.

The Company paid an aggregate amount of $ 80.0 million for the Note Hedges.

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 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, 2022, the Company exercised and net-share-settled Note Hedges corresponding to approximately $ 23.0 million principal amount of 2023 Notes and received approximately 0.4 million shares of Class A common stock and an immaterial cash payment.

The Note Hedges meet the criteria for classification as equity and, as such, are not remeasured each reporting period.

During fiscal 2023, the Company exercised and net-share-settled Note Hedges corresponding to approximately $ 12 million principal amount of 2023 Notes and received approximately 0.1 million shares of Class A common stock and an immaterial cash payment.

As of January 31, 2023, Note Hedges giving the Company the option to purchase approximately 0.1 million shares (subject to adjustment) remained outstanding.

In connection with the issuance of the 2023 Notes, the Company also entered into separate warrant transactions pursuant to which it sold net-share-settled (or, at the Company’s election subject to certain conditions, cash-settled) warrants to acquire, subject to anti-dilution adjustments, up to approximately 7.1 million shares over 80 scheduled trading days beginning in May 2023 of the Company’s Class A common stock at an initial exercise price of approximately $ 68.06 per share (subject to adjustment).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In connection with the issuance of the 2023 Notes, the Company entered into separate warrant transactions pursuant to which it sold net-share-settled (or, at the Company’s election subject to certain conditions, cash-settled) warrants to acquire shares, subject to anti-dilution adjustments, over 80 scheduled trading days beginning in May 2023 of the Company’s Class A common stock at an initial exercise price of approximately $ 68.06 per share (subject to adjustment).

If the Warrants are not exercised on their exercise dates, they will expire.

1 unchanged sentence

The Warrants are separate transactions and are not part of the terms of the 2023 Notes or the Note Hedges.

The Company received aggregate proceeds of $ 52.4 million from the sale of the Warrants in connection with the 2023 Notes.

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 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.

The Warrants meet the criteria for classification as equity and, as such, are not remeasured each reporting period.

As of January 31, 2023, Warrants to acquire up to approximately 1 million shares (subject to adjustment) remained outstanding.

3 unchanged sentences

The 2025 Notes mature on September 1, 2025 unless earlier redeemed, repurchased or converted.

The total net proceeds from the 2025 Notes, after deducting initial purchasers’ discounts and debt issuance costs, were $ 1,040.7 million.

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

Upon conversion, the 2025 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.

Upon conversion, the 2025 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 2025 Notes are convertible at an initial conversion rate of 5.2991 shares of Class A common stock per $1,000 principal amount of the 2025 Notes, which is equal to an initial conversion price of approximately $ 188.71 per share of Class A common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2025 Indenture.

6 unchanged sentences

During the three months ended January 31, 2023, the conditions allowing holders of the 2025 Notes to convert during the three months ending April 30, 2023 were not met, and as a result, the 2025 Notes were classified as noncurrent liabilities as of January 31, 2023.

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, 2022, the Company did not redeem any of the 2025 Notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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 2025 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 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.

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 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 2025 Notes (in thousands):

As of January 31, 2023, the effective interest rate on the 2025 Notes was 0.43 %.

As of January 31, 2022 and 2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2025 Notes was 4.10 %.

The following table sets forth total interest expense recognized related to the 2025 Notes:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Contractual interest expense $ 1 $ 1 $ 1

2 unchanged sentences

Total $ 4 $ 39 $ 37

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.

Issuance costs attributable to the liability component are being amortized to interest expense over the respective term of the 2025 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 $ 15.3 million and equity issuance costs of $ 4.0 million.

The 2025 Notes, net consisted of the following (in thousands):

As of January 31, 2022

(1) Not applicable subsequent to the adoption of ASU 2020-06.

The net carrying amount of the 2025 Notes consisted of the following:

As of January 31, 2023 As of January 31, 2022

(dollars in millions)

Liability component:

1 unchanged sentence

unamortized debt issuance costs and debt discount (1)

( 8 ) ( 149 )

Net carrying amount $ 1,052 $ 911

3 unchanged sentences

Carrying amount of the equity component (2)

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

(1) Subsequent to the adoption of ASU 2020-06 under the modified retrospective method, the equity component and debt discount are eliminated.

(2) Included in the January 31, 2022 consolidated balance sheet within Additional paid-in capital.

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.

The 2025 Capped Calls are purchased call options that give the Company the option to purchase approximately 6 million shares, subject to anti-dilution adjustments substantially identical to those in the 2025 Notes, 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.

The 2025 Capped Calls have initial cap prices of $ 255.88 per share (subject to adjustment) and will expire in 2025, if not exercised earlier.

1 unchanged sentence

The 2025 Capped Calls are separate transactions and are not part of the terms of the 2025 Notes.

The Company paid an aggregate amount of $ 74.1 million for the 2025 Capped Calls.

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

The 2025 Capped Calls meet the criteria for classification as equity and, as such, are not remeasured each reporting period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2026 Convertible Senior Notes

2 unchanged sentences

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").

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.

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 2026 Indenture.

5 unchanged sentences

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, 2022, the conditions allowing holders of the 2026 Notes to convert were not met, and as a result, the 2026 Notes were classified as noncurrent liabilities as of January 31, 2022.

During the three months ended January 31, 2023, the conditions allowing holders of the 2026 Notes to convert during the three months ending April 30, 2023 were not met, and as a result, the 2026 Notes were classified as noncurrent liabilities as of January 31, 2023.

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 the Company provides notice of redemption, during any 30 consecutive trading day period ending on and including the trading day preceding the date on which the Company provides 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, 2022, 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 2026 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 2026 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):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of January 31, 2023, the effective interest rate on the 2026 Notes was 0.60 %.

As of January 31, 2022 and 2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2026 Notes was 5.75 %.

The following table sets forth total interest expense recognized related to the 2026 Notes:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Contractual interest expense $ 4 $ 4 $ 3

2 unchanged sentences

Total $ 7 $ 51 $ 31

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, 2022

(1) Not applicable subsequent to the adoption of ASU 2020-06.

The net carrying amount of the 2026 Notes consisted of the following:

As of January 31, 2023 As of January 31, 2022

(dollars in millions)

Liability component:

1 unchanged sentence

unamortized debt issuance costs and debt discount (1)

( 9 ) ( 245 )

Net carrying amount $ 1,141 $ 905

3 unchanged sentences

Carrying amount of the equity component (2)

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

(1) Subsequent to the adoption of ASU 2020-06 under the modified retrospective method, the equity component and debt discount are eliminated.

(2) Included in the January 31, 2022 consolidated balance sheet 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 are purchased call options that give the Company the option to purchase approximately 5 million shares, subject to anti-dilution adjustments substantially identical to those in the 2026 Notes, 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.

1 unchanged sentence

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 2026 Capped Calls meet the criteria for classification as equity and, as such, are not remeasured each reporting period.

The Company has entered into various non-cancelable office space operating leases with original lease periods expiring between 2023 and 2029.

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

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

The Company's corporate headquarters lease in San Francisco has a 10 year term, which expires in October 2028.

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

Operating lease costs were as follows (in thousands):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Operating lease costs were as follows:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Operating lease costs (1)

1 unchanged sentence

(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 5.9 years and 6.8 years as of January 31, 2022 and January 31, 2021, respectively, and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.5 % and 5.6 % as of January 31, 2022 and January 31, 2021, respectively.

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

The weighted-average remaining term of operating leases was 5.1 years and 5.9 years as of January 31, 2023 and January 31, 2022, respectively, and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.3 % and 5.5 % as of January 31, 2023 and January 31, 2022, respectively.

Maturities of operating lease liabilities, which do not include short-term leases, were as follows:

As of January 31, 2023

Fiscal Year Ending January 31:

(dollars in millions)

Thereafter 24

3 unchanged sentences

Total operating lease liabilities $ 175

Cash payments included in the measurement of the Company’s operating lease liabilities were $ 39.6 million and $ 31.1 million for the years ended January 31, 2022 and January 31, 2021, respectively.

As of January 31, 2022, the Company has $ 9.9 million of undiscounted future payments under new operating lease arrangements that have not yet commenced, which is excluded from the table above.

These operating leases will commence in fiscal 2023 and have lease terms of 1.2 to 6.4 years.

Cash payments made related to operating lease liabilities were $ 44 million and $ 40 million in fiscal 2023 and 2022, respectively.

Commitments and Contingencies

2 unchanged sentences

No draws have been made under such letters of credit.

Noncurrent restricted cash of $ 6.4 million and

$ 8.6 million associated with these letters of credit is included in Other assets on the consolidated balance sheets as of January 31, 2022 and January 31, 2021, respectively.

Purchase Obligations

As of January 31, 2022, future minimum purchase obligations, such as data center operations and sales and marketing activities, were as follows (in thousands):

Purchase Obligations

Total contractual obligations $ 126,651

Noncurrent restricted cash of $ 6 million associated with these letters of credit is included in Other assets on the consolidated balance sheets as of January 31, 2023 and January 31, 2022.

Legal Matters

From time to time in the normal course of business, the Company may be subject to various legal matters such as threatened or pending claims or proceedings.

There were no such material matters as of January 31, 2022 and 2021.

On May 20, 2022, a purported shareholder filed a putative class action lawsuit in the United States District Court for the Northern District of California against the Company and certain of its executive officers, captioned In re Okta, Inc.

Securities Litigation, No.

3:22-cv-02990.

The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that the defendants made false or misleading statements or omissions concerning the Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0.

The lawsuit seeks an order certifying the lawsuit as a class action and unspecified damages.

Additionally, two purported shareholders filed derivative lawsuits on behalf of the Company in the United States District Court for the Northern District of California against certain of its current and former executive officers and directors, captioned O’Dell v.

McKinnon et al.

3:22-cv-07480 (filed Nov.

28, 2022), and LR Trust v.

McKinnon et al ., No.

3:22-cv-08627 (filed Dec.

The lawsuits allege, among other things, that the defendants breached their fiduciary duties by making false or misleading statements or omissions concerning the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Company’s cybersecurity controls, vulnerability to data breaches, and the Company’s integration of Auth0.

The lawsuits seek orders permitting the plaintiffs to maintain this action derivatively on behalf of the Company, awarding unspecified damages allegedly sustained by the Company, awarding restitution from the individual defendants, and requiring the Company to make certain reforms to its corporate governance and controls.

The Company intends to defend these lawsuits vigorously.

At this time, the Company is unable to predict the outcome or estimate the amount of loss or range of losses that could potentially result from these lawsuits.

Warranties and Indemnification

7 unchanged sentences

To date, the Company has not experienced any significant failures to meet defined levels of uptime reliability and performance as a result of those agreements and, as a result, the Company has not incurred significant costs and has not accrued any material liabilities in the accompanying consolidated financial statements as a result of these warranties.

Agreements with customers and other third parties may include indemnification or other provisions under which the Company agrees to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from the use of the Company’s platform or other acts or omissions.

The Company cannot reasonably estimate potential payment obligations as a result of indemnification claims because it cannot predict when and under what circumstances they may be incurred.

As a result, no material liabilities have been recognized in the accompanying consolidated financial statements related to these indemnification obligations.

Common Stock and Stockholders' Equity

2 unchanged sentences

Shares of Class A common stock are not convertible.

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, 2022, the Company issued approximately 0.5 million shares of Class A common stock in connection with 2023 Notes conversion requests and received approximately 0.4 million shares of Class A common stock from the settlement of Note Hedges.

See Note 9 for additional details.

As of January 31, 2023, shares of common stock reserved for future issuance were as follows:

As of January 31, 2023

(shares in thousands)

Options and unvested RSUs outstanding 15,728

1 unchanged sentence

Available for ESPP 6,831

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Awards Issued as Charitable Contributions

During the years ended January 31, 2022, 2021 and 2020, the Company issued 30,000 , 42,500 and 15,000 shares, respectively, of Class A common stock as charitable contributions and recognized $ 7.2 million, $ 9.3 million and $ 1.7 million, respectively, as general and administrative expense in the consolidated statements of operations.

During fiscal 2023, 2022 and 2021, the Company issued 41,250 , 30,000 and 42,500 shares, respectively, of Class A common stock as charitable contributions and recognized $ 4 million, $ 7 million and $ 9 million, respectively, as general and administrative expense in the consolidated statements of operations.

Employee Incentive Plans

The Company’s equity incentive plans provide for granting stock options, RSUs and restricted stock awards to employees, consultants, officers and directors.

Equity Incentive Plans

The Company has two equity incentive plans:

the 2009 Stock Plan (“2009 Plan”) and the 2017 Equity Incentive Plan (“2017 Plan”).

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

As of January 31, 2023, options to purchase 1,758,264 shares of Class A common stock and 4,594,675 shares of Class B common stock remained outstanding.

The Company’s equity incentive plans provide for granting stock options, RSUs, restricted stock awards to employees, consultants, officers and directors and RSUs with market-based vesting conditions to certain executives.

In addition, the Company offers an ESPP to eligible employees.

Stock-based compensation expense by award type was as follows (in thousands):

Stock-based compensation expense by award type was as follows:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Stock options $ 82 $ 132 $ 21

2 unchanged sentences

Restricted stock awards 112 84 —

Restricted common stock — — 101

Total $ 677 $ 566 $ 195

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

Stock-based compensation expense was recorded in the following cost and expense categories in the consolidated statements of operations:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Cost of revenue:

5 unchanged sentences

Total $ 677 $ 566 $ 195

Equity Incentive Plans

The Company has two equity incentive plans:

the 2009 Stock Plan (“2009 Plan”) and the 2017 Equity Incentive Plan (“2017 Plan”).

In addition, the Company assumed Auth0, Inc.

equity incentive plans as described below.

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

As of January 31, 2022, options to purchase 2,339,467 shares of Class A common stock and 5,644,611 shares of Class B common stock remained outstanding.

Stock Options

2 unchanged sentences

(i) authorized but unissued shares or (ii) treasury shares.

A summary of the Company’s stock option activity and related information was as follows:

Intrinsic Value

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of stock option activity and related information was as follows:

(in thousands)

Intrinsic Value

(in millions)

Outstanding as of January 31, 2022 7,984 $ 39.59 5.2 $ 1,314

Granted 2,565,055 93.95

Exercised ( 1,416 ) 11.92

Canceled ( 253,016 ) 106.41

Expired ( 26 ) 189.80

Forfeited ( 189 ) 80.67

Outstanding as of January 31, 2023 6,353 $ 43.92 4.3 $ 331

2 unchanged sentences

Vested and exercisable 5,729 $ 29.75 3.9 $ 323

The weighted-average grant-date fair value of options granted was $ 211.58 , $ 63.32 and $ 37.35 during the years ended January 31, 2022, 2021 and 2020, respectively.

The total grant-date fair value of stock options vested was $ 314.2 million, $ 19.7 million and $ 23.7 million during the years ended January 31, 2022, 2021 and 2020, respectively.

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 $ 544.8 million, $ 772.3 million and $ 558.6 million for the years ended January 31, 2022, 2021 and 2020, respectively.

No options were granted during fiscal 2023.

The weighted-average grant-date fair value of options granted was $ 211.58 and $ 63.32 during fiscal 2022 and 2021, respectively.

The total grant-date fair value of stock options vested was $ 104 million, $ 314 million and $ 20 million during fiscal 2023, 2022 and 2021, respectively.

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 $ 108 million, $ 545 million and $ 772 million during fiscal 2023, 2022 and 2021, respectively.

As of January 31, 2023 and January 31, 2022, there was a total of $ 90 million and $ 210 million, respectively, of unrecognized stock-based compensation expense related to options, which is being recognized over a weighted-average period of 1.8 years.

8 unchanged sentences

Restricted Stock Units

A summary of the Company’s RSU activity and related information was as follows:

RSUs Weighted-

A summary of RSU activity (inclusive of market-based RSUs) and related information was as follows:

(in thousands) Weighted-

Grant Date Fair Value Per Share

4 unchanged sentences

Outstanding as of January 31, 2023 9,375 $ 143.77

The Company granted 5,110,925 RSUs with an aggregate fair value of $ 1,209.1 million for the year ended January 31, 2022.

The Company granted 7,194,187 RSUs with an aggregate fair value of $ 805 million during fiscal 2023.

As of January 31, 2023 and 2022, there was a total of $ 1,200 million and $ 1,152 million, respectively, of unrecognized stock-based compensation expense related to unvested RSUs, which is being recognized over a weighted-average period of 3.0 years, based on vesting under the award service conditions.

The total fair value of RSUs vested during fiscal 2023, 2022 and 2021 was $ 229 million, $ 531 million and $ 410 million, respectively.

Equity Awards Issued in Connection with Business Combinations

In connection with the May 3, 2021 Auth0 acquisition described in Note 3, the Company assumed the Auth0, Inc.

2014 Equity Incentive Plan and the Auth0, Inc.

Phantom Unit Plan (together, the “Auth0 Plans”) and certain outstanding options to purchase Auth0 common stock, RSUs settleable into shares of Auth0 common stock, and phantom units under the Auth0 Plans.

Certain assumed securities were converted into options (which in certain instances were automatically net exercised) or RSUs, as applicable, for shares of the Company’s Class A common stock, subject to adjustment as set forth in the Merger Agreement.

Such assumed and converted options and RSUs will continue to be outstanding and will be governed by the provisions of the Auth0 Plans.

Activity under the Auth0 Plans is included in the summaries of stock option and RSU activity above.

Included in the Granted total in the stock options activity table above are 1,850,079 options assumed at a weighted-average exercise price per share of $ 24.21 .

Included in the Granted total in the RSU activity table above are 743,718 RSUs assumed at a weighted-average grant date fair value per share of $ 269.70 .

The Company entered into revesting agreements with the founders of the acquired businesses pursuant to which 1,269,008 restricted shares of Okta’s Class A common stock with a weighted-average fair value per share of $ 268.98 issued as of the respective closing dates will vest over 3 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Market-based Restricted Stock Units

In March 2022, the Company granted market-based RSUs to certain members of management.

The target number of market-based RSUs granted was 58,150 .

One-third of these market-based RSUs vest over each of a one-, two- and three-year performance period, each starting on February 1, 2022.

The number of shares that can be earned ranges from 0 % to 200 % of the target number of shares based on the relative performance of the per share price of the Company’s common stock as compared to the Nasdaq Composite Index over the respective performance periods and subject to continuous employment through the vesting dates.

The $ 244.73 grant date fair value per target market-based RSU was determined using a Monte Carlo simulation approach.

Compensation expense for awards with market conditions is recognized over the service period using the accelerated attribution method and is not reversed if the market condition is not met.

Restricted Stock Awards Issued in Connection with Business Combinations

In fiscal 2022, the Company entered into revesting agreements with the founders of the acquired businesses pursuant to which 1,269,008 restricted shares of Okta’s Class A common stock with a weighted-average fair value per share of $ 268.98 issued as of the respective closing dates will vest over 3 years.

In connection with the business combinations, as of January 31, 2023, there was $ 141 million of unrecognized stock-based compensation expense related to unvested restricted shares, which is being recognized over a weighted-average period of 1.3 years based on vesting under the award service conditions.

1 unchanged sentence

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 contains a reset provision under which the offering period resets if the fair market value of the Company’s common stock on the purchase date is less than the fair market value on the offering date.

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

7 unchanged sentences

Expected dividend yield — — —

During the year ended January 31, 2022, the Company's employees purchased 185,707 shares of its Class A common stock under the ESPP.

During fiscal 2023, the Company's employees purchased 491,965 shares of its Class A common stock under the ESPP.

The shares were purchased at a weighted-average purchase price of $ 63.97 per share, with proceeds of $ 31 million.

During the year ended January 31, 2021, the Company's employees purchased 247,142 shares of its Class A common stock under the ESPP.

During fiscal 2022, the Company's employees purchased 185,707 shares of its Class A common stock under the ESPP.

The shares were purchased at a weighted-average purchase price of $ 191.54 per share, with proceeds of $ 36 million.

As of January 31, 2023 and January 31, 2022, there was $ 26 million and $ 17 million, respectively, of unrecognized stock-based compensation expense related to the ESPP which is being recognized over a weighted-average vesting period of 0.7 years.

The domestic and foreign components of pre-tax loss for the years ended January 31, 2022, 2021 and 2020 were as follows (in thousands):

Employee Defined Contribution Plan

The Company has a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code covering eligible employees.

A portion of employee contributions are matched up to a fixed maximum dollar amount per year per employee.

The Company began matching contributions in fiscal 2023.

Matching contributions to the plan were $ 21 million during fiscal 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The domestic and foreign components of pre-tax loss for fiscal 2023, 2022 and 2021 were as follows:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Domestic $ ( 834 ) $ ( 904 ) $ ( 282 )

1 unchanged sentence

Loss before provision for (benefit from) income taxes $ ( 801 ) $ ( 850 ) $ ( 266 )

The components of the provision for (benefit from) income taxes for the years ended January 31, 2022, 2021 and 2020 were as follows (in thousands):

The components of the provision for (benefit from) income taxes for fiscal 2023, 2022 and 2021 were as follows:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Federal $ — $ — $ —

State 329 136 86

Foreign 5 4 1

3 unchanged sentences

Foreign 7 3 ( 1 )

Total deferred benefit from income taxes ( 6,086 ) ( 1,300 ) ( 2,360 )

Total deferred provision for (benefit from) income taxes 7 ( 6 ) ( 1 )

Total provision for (benefit from) income taxes $ 14 $ ( 2 ) $ —

For the tax year ended January 31, 2022, the income tax benefit resulted from the release of valuation allowance in the United States in connection with acquisitions and excess tax benefits from stock-based compensation in the United Kingdom, offset by income tax expense related to profitable foreign jurisdictions.

For the tax year ended January 31, 2021, the income tax expense from profitable jurisdictions was partially offset by 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.

These income tax benefits and expense in these years 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, 2022, 2021 and 2020:

For fiscal 2023, the income tax expense resulted primarily from income tax expense related to profitable foreign jurisdictions, the tax impact of shortfalls from stock-based compensation in the United Kingdom, and state taxes.

For fiscal 2022, the income tax benefit resulted from the release of valuation allowance in the United States in connection with acquisitions and excess tax benefits from stock-based compensation in the United Kingdom, offset by income tax expense related to profitable foreign jurisdictions.

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

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for fiscal 2023, 2022 and 2021:

Year Ended January 31,

5 unchanged sentences

Research and development credits 2.6 3.6 6.4

Non-deductible expenses ( 5.4 ) — —

Other, net ( 1.2 ) ( 0.6 ) ( 0.8 )

Effective tax rate ( 1.6 ) % 0.2 % ( 0.1 ) %

The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2022 and 2021 were as follows (in thousands):

The Tax Cuts and Jobs Act enacted on December 22, 2017 amended Internal Revenue Code Section 174 to require that specific research and experimental (“R&E”) expenditures be capitalized and amortized over five years (U.S.

R&E) or fifteen years (non-U.S.

R&E) beginning in fiscal 2023.

The capitalization of R&E expenditures resulted in a deferred tax asset of $ 189 million.

Additionally, the effective tax rate was impacted by ( 5.4 )% due to

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

certain tax deductions being disavowed, which further resulted in the utilization of federal and state tax attributes to offset this impact.

The tax effects of temporary differences and related deferred tax assets and liabilities as of January 31, 2023 and 2022 were as follows:

As of January 31,

(dollars in millions)

Deferred tax assets:

Net operating loss carryforwards $ 817 $ 955

Capitalized research expenditures 189 —

Stock-based compensation 52 48

Deferred revenue 4,630 1,144

Operating lease liabilities 43 50

1 unchanged sentence

Research and development and other credits 113 92

Disallowed interest 6,949 6,091

Total deferred tax assets 1,245 1,185

4 unchanged sentences

Deferred commissions ( 77 ) ( 68 )

Capitalized internal-use software costs ( 2,993 ) ( 2,691 )

Goodwill ( 195 ) ( 306 )

Other deferred tax liabilities ( 5 ) ( 3 )

Operating lease right-of-use assets ( 31 ) ( 37 )

1 unchanged sentence

Total deferred tax liabilities ( 169 ) ( 277 )

Net deferred tax assets $ 3,777 $ 3,521

Net deferred tax assets (liabilities) $ ( 2 ) $ 4

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.

2 unchanged sentences

deferred tax liabilities.

valuation allowance increased by $ 349.0 million and $ 193.6 million during the years ended January 31, 2022 and 2021, respectively.

valuation allowance increased by $ 174 million and $ 349 million during fiscal 2023 and 2022, respectively.

As of January 31, 2023, the Company had approximately $ 3,208 million of federal and $ 2,108 million of state net operating loss carryforwards available to offset future taxable income.

3 unchanged sentences

The federal research and development credits will start to expire in 2030 while the California research and development credits do not expire.

The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax laws.

The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax laws.

Accounting guidance for income taxes requires a deferred tax liability to be established for the U.S.

2 unchanged sentences

income tax, foreign income tax, and applicable withholding taxes on earnings of subsidiaries is insignificant.

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

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 CARES Act did not have a material impact on the consolidated financial statements.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A reconciliation of beginning and ending amount of unrecognized tax benefit was as follows:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

Gross amount of unrecognized tax benefits as of the beginning of the year $ 37 $ 22 $ 16

5 unchanged sentences

and various other state and foreign jurisdictions.

As the Company has net operating loss carryforwards for U.S.

As the Company has net operating loss carryforwards for the U.S.

federal and state jurisdictions, the statute of limitations is open for all years.

For material foreign jurisdictions, the tax years open to examination include the tax years 2017 and forward.

As of January 31, 2022, the Company has an immaterial amount of unrecognized tax benefits that if recognized would impact the effective tax rate.

As of January 31, 2021 and 2020, the Company had no unrecognized tax benefits that if recognized would impact the effective tax rate.

As of January 31, 2023 and 2022, the Company has an immaterial amount of unrecognized tax benefits that if recognized would impact the effective tax rate.

As of January 31, 2021, the Company had no unrecognized tax benefits that if recognized would impact the effective tax rate.

The Company's policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes.

3 unchanged sentences

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

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

The following table presents the calculation of basic and diluted net loss per share:

Year Ended January 31,

1 unchanged sentence

Class A Class B Class A Class B Class A

(dollars in millions, shares in thousands, except per share data)

Net loss $ ( 778 ) $ ( 37 ) $ ( 806 ) $ ( 42 ) $ ( 249 ) $ ( 17 )

1 unchanged sentence

Net loss per share, basic and diluted $ ( 5.16 ) $ ( 5.16 ) $ ( 5.73 ) $ ( 5.73 ) $ ( 2.09 ) $ ( 2.09 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

As the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive.

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in thousands):

Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

Year Ended January 31,

2023 2022 2021

(shares in thousands)

Issued and outstanding stock options 6,353 7,984 8,250

Unvested RSUs issued and outstanding 9,317 6,226 4,452

Unvested market-based RSUs issued and outstanding 116 — —

Unvested restricted stock awards issued and outstanding 627 1,269 —

Unvested shares subject to repurchase — — 5

Shares committed under the ESPP 921 253 137

5 unchanged sentences

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, 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 conversion options of the 2023 Notes, 2025 Notes 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, 2022, 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.

Restructuring and Other Charges

During the third quarter of fiscal 2023, the Company announced a real estate optimization plan which provided for closing duplicative sites and decommissioning underutilized offices and floors.

As a result, the Company recognized non-cash lease impairment charges.

The non-cash lease impairment charges represent the amount that the carrying value of the asset groups exceeded their estimated fair values.

The asset groups primarily include operating lease right-of-use assets, leasehold improvements, and related property and equipment.

To estimate the fair value of the asset group, the Company utilized a discounted cash flow approach using market participant assumptions of the expected cash flows and discount rate.

During the fourth quarter of fiscal 2023, the Company approved a restructuring plan (the “Restructuring Plan”) intended to reduce operating expenses and improve profitability.

The Restructuring Plan involves a reduction of the Company’s workforce by approximately 300 full-time employees.

The Restructuring Plan is expected to be substantially complete by the first quarter of fiscal 2024.

Aggregate restructuring costs associated with the Restructuring Plan are estimated to be approximately $ 15 million.

The charges that the Company expects to incur throughout the completion of its Restructuring Plan are subject to a number of assumptions, including local law requirements in various jurisdictions, and the actual remaining expenses may differ from the original estimates.

The following table summarizes the Company’s restructuring and other charges during the period:

Year Ended January 31,

(dollars in millions)

Severance and termination benefit costs $ 15

Lease impairment charges 14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the Company’s restructuring liability that is included in accrued expenses and other current liabilities on the consolidated balance sheet:

Severance and termination benefit costs

(dollars in millions)

Balance as of January 31, 2022 $ —

Restructuring charges 15

Cash payments —

Balance as of January 31, 2023 $ 15

Geographical Information

Revenue by location is determined by the billing address of the customer.

The following table sets forth revenue by geographic area:

Year Ended January 31,

2023 2022 2021

(dollars in millions)

United States $ 1,456 $ 1,036 $ 702

International 402 264 133

Total $ 1,858 $ 1,300 $ 835

Other than the United States, no individual country exceeded 10% of total revenue for fiscal 2023, 2022 and 2021.

Property and equipment by geographic location is based on the location of the legal entity that owns the asset.

As of January 31, 2023 and 2022, substantially all of the Company’s property and equipment was located in the United States.

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