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Item 7. Management’s Discussion and Analysis

2023-03-24 compared with 2022-04-04 · 209 added, 277 removed, 236 unchanged (67% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes for the fiscal year ended January 31, 2023 included elsewhere in this Annual Report on Form 10-K.

This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “ Special Note Regarding Forward-Looking Statements ” in this Annual Report on Form 10-K.

This discussion, particularly with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “ Special Note Regarding Forward-Looking Statements ” in this Annual Report on Form 10-K.

You should review the disclosure under the heading “ Risk Factors ” in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

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A discussion regarding our financial condition and our results of operations for fiscal year 2023 compared to fiscal year 2022 is presented below.

A discussion regarding our results of operations for fiscal year 2021 compared to fiscal year 2020 is presented in the Final Prospectus under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."

We are at the forefront of technology innovation and thought leadership in automation, creating an end-to-end platform that provides automation with user emulation at its core.

Our platform leverages computer vision and artificial intelligence ("AI") to empower software robots to emulate human behavior and execute specific business processes, eliminating the need for employees to execute certain manual and mundane tasks.

Our platform allows employees to focus on more value-added work and enables organizations to seamlessly automate business processes ranging from those in legacy information technology ("IT") systems and on-premises applications to new

cloud-native infrastructure and applications without requiring significant changes to the organization’s underlying technology infrastructure.

Our platform is purpose-built to be used by employees throughout a company and to address a wide variety of use cases, from simple tasks to long-running, complex business processes.

Our platform is designed to transform the way humans work.

We provide our customers with a robust set of capabilities to discover automation opportunities and to build, manage, run, engage, measure, and govern automations across departments within an organization.

Our platform leverages the power of AI-based computer vision to enable our robots to perform a vast array of actions as a human would when executing business processes.

These actions include, but are not limited to, logging into applications, extracting information from documents, moving folders, filling in forms, and updating information fields and databases.

Our robots’ ability to replicate humans’ steps in executing business processes drives continuous improvements in operational efficiencies and enables companies to deliver on key digital initiatives with greater speed, agility, and accuracy.

Our platform is designed to interact with and automate processes across a company’s existing enterprise stack.

As a result, our customers can leverage the power of our platform without the need to replace or change existing business applications and with lower overall IT infrastructure cost.

Our platform enables employees to quickly build automations for both existing and new processes.

Employees can seamlessly maintain and scale automations across multiple deployment options, constantly improve and evolve automations, and continuously track and measure the performance of automations, all without substantial technical experience.

At the core of our automation platform is a set of capabilities that emulates human behavior, which provides our customers with the ability to automate both simple and complex use cases.

Automations on our platform can be built, consumed, managed, and governed by any employee who interacts with computers, resulting in the potential for broad applicability of our platform across departments within an organization.

Society is at a turning point in how organizations execute work, and we believe the ability to leverage software to enrich the employee experience will unlock tremendous value and efficiency opportunities.

While we are still in the early days of a multi-year journey to the fully automated enterprise , momentum is growing as organizations across the world are only now beginning to understand the power of automation.

Founded in a Bucharest, Romania apartment in 2005, UiPath was incorporated in 2015 as a company principally focused on building automation scripts and developing computer vision technology, which remains the foundation of our platform today.

Since that time, we have developed and enhanced our robotic process automation ("RPA") capabilities, launched new products, and expanded our operations across the globe.

We now offer a comprehensive range of automation solutions via a suite of interrelated software offerings.

We generate revenue from the sale of licenses for our proprietary software, maintenance and support for our software, right to access certain products that are hosted by us (i.e., software as a service, or "SaaS"), and other services, including professional services.

Our license fees are based primarily on the number of users who access our software and the number of automations running on our platform.

Our license agreements generally have annual terms, and some of our license agreements have multi-year terms.

We generally do not sell standalone licenses with a term of less than one year.

However, during the term of an annual contract or the last year of a multi-year contract, our customers may enter into an additional license agreement with a termination date that is coterminous with the anniversary date of such annual contract.

Additionally, we provide maintenance and support for our software as well as non-recurring professional services such as training and implementation services to facilitate the adoption of our platform.

Our professional services complement the capabilities of our customers and partners as they improve customers’ time-to-market and optimize business outcomes using our platform.

Our non-recurring professional services include use case development and deployment, solutions architecting, implementation consulting, and training.

We have an efficient go-to-market model, which consists primarily of an enterprise field sales force supplemented by an inside sales team focused on small and mid-sized customers, as well as a global strategic sales team focused on the largest global customers.

We had over 10,100 and over 7,900 customers as of January 31, 2022 and 2021, respectively.

Many of our customers expand the scope and size of use cases of our platform across their organizations as they quickly realize the power of our platform.

We believe that the success of our land-and-expand business model is centered on our ability to deliver significant value in a very short time.

We grow with our customers as they identify and expand the number of business processes to automate, which increases the number of robots deployed and the number of users interacting with our robots.

A crucial component of our go-to-market strategy is our partner and channel ecosystem, which extends our local and global reach and helps to ensure that customers are able to rapidly build, deploy, and scale automations on our platform.

Our business partners include more than 5,100 global and regional system integrators, value-added resellers, and business consultants.

We provide tiering recognition through Diamond, Gold, Silver, and Registered levels for partners that meet competency requirements and deliver and maintain a specified number of satisfied customers.

These partnerships enhance our market presence and drive greater sales efficiencies.

In addition, we have built strong technology partnerships and alliances to enable a large number of connectors and other technical capabilities necessary to meet the breadth of our customer needs.

We have experienced rapid growth.

We generated revenue of $892.3 million and $607.6 million, representing a growth rate of 47%, and net losses of $525.6 million and $92.4 million for the fiscal years ended January 31, 2022 and 2021, respectively.

Our operating cash flows were $(55.0) million and $29.2 million for the fiscal years ended January 31, 2022 and 2021, respectively.

A discussion regarding our results of operations for fiscal year 2022 compared to fiscal year 2021 was presented in the 2022 Fo rm 10-K , under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."

UiPath is at the forefront of technology innovation and thought leadership in automation, as the provider of an end-to-end platform that can help customers realize the true potential of digital transformation.

The UiPath Business Automation Platform leverages AI , ML , and NLP to empower software robots that emulate human behavior, driving operational efficiencies and meaningful business outcomes without requiring significant changes to the organization's underlying technology infrastructure.

Historically, we have grown our revenue and ARR significantly by helping customers adopt automation as a tool, process by process.

Today, we continue to build on this foundation and drive the evolution of automation by inspiring customers to see automation more holistically, as not just a tool but as a whole new way of operating and innovating.

Our results of operations and financial condition are impacted by the macro factors affecting our industry, including the proliferation of cloud-based applications, the cost of skilled human capital, and the global demand for automation solutions.

While our business is influenced by these macro factors, our results of operations are more directly affected by certain Company-specific factors, including:

• our ability to attract new customers, which depends on a number of other factors, including our ability to drive awareness of the benefits and power of automation among our existing and prospective customers, the effectiveness and pricing of our products, the offerings of our competitors, and competition among resellers;

• our ability to increase sales to existing customers, which depends on factors such as our customers’ satisfaction with our platform, competition, pricing, and overall changes in our customers’ propensity to invest in automation;

• our ability to grow our p artner base, which depends on the competitiveness of our platform and the profitability of our relationship for our partners and potential partners;

• our ability to sustain innovation and automation leadership in order to maintain our competitive advantage, which depends on our capacity to invest in research and development to expand the capabilities of our platform, our ability to collaborate with other leading technology companies to develop integrations, and our ability to execute strategic acquisitions and investments in businesses and technologies to drive our product and market expansion;

• our ability to continue to grow our business over the long term, which depends on our ability to invest in scaling across all organizational functions and domestic and international operations.

For further discussion of our business , our platform , and our growth str ategies , refer to Item 1.

Fiscal Year 2023 Highlights

• Revenue of $1,058.6 million increased 19% year-over-year.

• ARR of $1,203.8 million increased 30% year-over-year.

• Gross margin was 83% for fiscal year 2023, compared to 81% in fiscal year 2022.

• Cash, cash equivalents, and marketable securities were $1,759.8 million as of January 31, 2023, compared to $1,884.7 million as of January 31, 2022.

Macroeconomic Environment and Foreign Currency Fluctuations

Macroeconomic factors have affected our business and our customers’ businesses.

Globally, we price our platform in local currency.

Accordingly, the heightened volatility of global markets has exposed us and will continue to expose us to foreign currency fluctuations, which may impact demand for our platform, our near-term results, and our ability to predict future results.

Further, cash, cash equivalents, and marketable securities represent a significant portion of our total assets;

as such, liquidity concerns in the financial services industry may have an effect on our business, financial conditions, and results of operations.

Fiscal Year 2023 Restructuring Actions

On June 24, 2022, our board of directors approved restructuring actions to manage our operating expenses.

These actions included an overall reduction of approximately 5% of our global workforce, aimed at simplifying our go-to-market approach to improve market segmentation, increase sales productivity, and provide best-in-class customer experience and outcomes.

On November 10, 2022, our board of directors approved further restructuring actions, including an additional 6% workforce reduction to further support our strategic positioning to drive increased execution velocity, operational efficiency, and customer centricity.

Refer to Note 11, Commitments and Contingencies— Workforce Restructuring included in Item 8 of this Annual Report on Form 10-K for more information.

Impact of COVID-19

When the COVID-19 pandemic began to unfold, we took decisive action across our internal and customer operations to ensure the resilience of our company and the safety of our employees.

We temporarily shut down all offices and offered our employees technology stipends to encourage remote working, postponed most of our physical conferences and other customer and promotional events, implemented global travel restrictions, reduced headcount and expenses related to event marketing, and engaged in other discretionary cost-saving measures.

Although we have recently selectively reopened certain of our offices and have begun permitting some travel and in-person meetings and events in compliance with applicable government orders and public health guidelines, the majority of our employees continue to work remotely.

We have a distributed workforce and our employees are accustomed to remote work.

Our operational rigor, digital infrastructure, and global footprint have enabled us to support our customers navigating new challenges presented by the pandemic and existing needs to automate.

Global demand for automation has continued to accelerate as automation becomes ever more critical for business execution and performance in a remote working environment, and we have continued to invest in the development and marketing of our automation platform to meet that demand.

For further information, see the section titled “ Risk Factors ” included elsewhere in this Annual Report on Form 10-K.

When the COVID-19 pandemic began to unfold, we took decisive action across our internal and customer operations to ensure the resilience of the Company and the safety of our employees.

Our operational rigor, digital infrastructure, and global footprint have enabled us to support our customers navigating new challenges presented by the pandemic as well as existing needs to automate.

Global demand for automation has continued to accelerate as automation becomes ever more critical for business execution and performance in remote working environments, and we have continued to invest in the development and marketing of our automation platform to meet that demand.

Key Performance Metric

We monitor annualized renewal run-rate ("ARR") to help us measure and evaluate the effectiveness of our operations.

ARR is the key performance metric we use in managing our business because it illustrates our ability to acquire new subscription customers and to maintain and expand our relationship with existing subscription customers.

We define ARR as annualized invoiced amounts per solution SKU from subscription licenses and maintenance obligations assuming no increases or reductions in their subscriptions.

ARR does not include the costs we may incur to obtain such subscription licenses or provide such maintenance, and does not reflect any actual or anticipated reductions in invoiced value due to contract non-renewals or service cancellations other than for specific bad debt or disputed amounts.

We monitor ARR to help us measure and evaluate the effectiveness of our operations.

We define ARR as annualized invoiced amounts per solution SKU from subscription licenses and maintenance and support obligations assuming no increases or reductions in customers' subscriptions.

ARR does not include the costs we may incur to obtain such subscription licenses or provide such maintenance and support, and does not reflect any actual or anticipated reductions in invoiced value due to contract non-renewals or service cancellations other than for specific reserves, for example those for credit losses or disputed amounts.

At January 31, 2023 and 2022, our ARR was $1,203.8 million and $925.3 million, respectively, representing a growth rate of 30%.

Approximately 25% of this growth rate was due to new customers and 75% of this growth rate was due to existing customers.

Our dollar-based net retention rate, which represents the net expansion of ARR from existing customers over the preceding 12 months, was 145% as of both January 31, 2022 and 2021.

We calculate dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end ("Prior Period ARR").

We then calculate the ARR from these same customers as of the current period-end ("Current Period ARR").

Our dollar-based net retention rate, which represents the net expansion of ARR from existing customers over the preceding 12 months, was 123% and 145% as of January 31, 2023 and 2022, respectively.

We calculate dollar-based net retention rate as of a period end by starting with Prior Period ARR , the ARR from the cohort of all customers as of 12 months prior to such period end.

We then calculate Current Period ARR , the ARR from these same customers as of the current period end.

Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months, but does not include ARR from new customers in the current period.

We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate.

Our ARR may fluctuate as a result of a number of factors, including customers’ satisfaction or dissatisfaction with our platform and professional services, pricing, competitive offerings, economic conditions, or overall changes in our customers’ spending levels.

Our ARR may fluctuate as a result of a number of factors, including customers’ satisfaction or dissatisfaction with our platform, pricing, competitive offerings, economic conditions, overall changes in our customers’ spending levels, and our ability to successfully execute on our strategic goals.

ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or to replace these items.

For clarity, we use annualized invoiced amounts per solution SKU rather than revenue calculated in accordance with accounting

principles generally accepted in the United States ("GAAP"), to calculate our ARR.

Our invoiced amounts are not matched to transfer of control of the performance obligations associated with the underlying subscription licenses and maintenance obligations as they are with respect to our GAAP revenue.

For clarity, we use annualized invoiced amounts per solution SKU rather than revenue calculated in accordance with U.S.

GAAP to calculate our ARR.

Our invoiced amounts are not matched to transfer of control of the performance obligations associated with the underlying subscription licenses and maintenance and support obligations.

This can result in timing differences between our GAAP revenue and ARR calculations.

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In contrast, for our revenue calculated in accordance with GAAP, subscription licenses revenue derived from the sale of term-based licenses hosted on-premises is recognized at the point in time when the customer is able to use and benefit from our software, which is generally upon delivery to the customer or upon the commencement of the renewal term, and maintenance, support, and SaaS revenue is recognized ratably over the term of the arrangement.

ARR is not a forecast of future revenue, which can be impacted by contract start and end dates, duration, and renewal rates, and does not include invoiced amounts reported as perpetual licenses or professional services revenue in our consolidated statements of operations.

ARR is not a forecast of future revenue.

Unlike ARR, future revenue can be impacted by contract start and end dates and duration.

The timing of recognition of ARR is determined by contract billing structure, whereas billing structure will neither accelerate nor delay recognition of future revenue.

For example, in a multi-year contract invoiced upfront, ARR is the annualized invoiced amount per solution SKU related to the final year of the contract, whereas revenue is determined by total contract value and timing of transfer of the underlying performance

ARR does not include invoiced amounts associated with perpetual licenses or professional services.

Investors should not place undue reliance on ARR as an indicator of our future or expected results.

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Annualized renewal run-rate (ARR) $ 1,203,845 $ 925,276

Incremental annualized renewal run-rate (iARR) $ 344,793 $ 229,042

Customers with ARR greater than $1 million:

Incremental ARR (1)

$ 278,569 $ 344,793

Customers with ARR ≥ $1 million:

Number of customers 229 158

Percent of fiscal year revenue 43 % 43 %

Customers with ARR greater than $100 thousand:

Customers with ARR ≥ $100 thousand:

Number of customers 1,785 1,493

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Dollar-based net retention rate 123 % 145 %

Key Factors Affecting Our Performance

While our business is influenced by these macro factors, our results of operations are more directly affected by certain Company specific factors, including:

Growing Our Global Customer Base

We believe there is a substantial opportunity to continue to grow our customer base.

Additionally, we believe that as more organizations adopt our automation platform and experience quantifiable competitive advantages, other organizations will also adopt automation as a necessary tool to compete.

While we sell to organizations of all sizes and across a broad range of industries, our go-to-market team’s key focus is on the largest organizations, including large enterprises and governments.

We also use an inside sales team focused on small and mid-sized businesses.

We plan to continue to invest in our go-to-market team to grow our customer base both domestically and internationally.

We intend to continue to grow our customer base by focusing on the top 25 countries as measured by gross domestic product.

Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth.

Our ability to attract new customers will also depend on a number of other factors, including our ability to drive awareness of the benefits and power of automation in the industry and at our existing and prospective customers, the effectiveness and pricing of our products, the offerings of our competitors, and competition among resellers.

We define our number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period indicated and include in our customer count entities to which we have sold our products either directly or through a channel partner.

Users of our free trials or tier are not included in our customer count.

A single organization with multiple divisions, segments, or subsidiaries is counted as a single customer.

Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and specifically excludes non-paying partners and resellers.

Expanding Within Our Existing Customer Base

Our customer base represents a significant opportunity for further sales expansion.

We had over 10,100 and over 7,900 customers as of January 31, 2022 and 2021, respectively.

We employ a land-and-expand business model centered around offering products that are easy to adopt and have a short time to value.

We believe there is significant opportunity for us to become a strategic partner to our customers in their automation journeys and drive further sales expansion through the following vectors:

• deploy more robots across different departments;

• provide more employees with their own robot assistants;

• increase adoption of platform products;

• expand use cases for automation in the enterprise to drive increased usage of robots and capacity consumption of our various products.

Our customers often expand the deployment of our platform across large teams and more broadly within the enterprise as they find new use cases for our platform and their employees increasingly interact with and gain confidence working with robots.

The power of our land-and-expand model is evidenced by our dollar-based net retention rate and our customers exceeding significant ARR thresholds, described in the section titled “ — Key Performance Metric ."

We intend to continue to invest in enhancing awareness of our brand and developing more products, features, and functionality, which we believe are important factors to achieve widespread adoption of our platform.

Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our solution, competition, pricing, and overall changes in our customers’ IT spending levels.

Driving Preference and Share of System Integrators, Value-Added Resellers, and Business Consultants Selling the Value Propositions and Capabilities of Digital Transformation

We are focused on maintaining and growing our ecosystem of partners that build, train, and certify skills in our technology as well as deplo y our technology on behalf of their customers.

We have built a global partner ecosystem of more than 5,100 systems integrators, value-added resellers, business consultants, technology partners and public cloud vendors.

Our partner network includes, among others, Accenture LLP, Capgemini SE, Cognizant Technology Solutions Corporation, Deloitte, EY, Infosys Limited, International Business Machines Corporation, PwC, Tata Consultancy Services Limited, and Wipro Limited.

We provide a tiering recognition through Diamond, Gold, Silver, and Registered levels for partners that meet competency requirements and d eliver and maintain a tiered number of satisfied customers.

In May 2020, we launched the UiPath Services Network ("USN") program to recognize an elite network of partners accredited with advanced delivery skills, and over 50 partners have earned USN certification.

We also offer a professional services capability that augments our partners’ efforts where necessary.

Our ability to grow our partnership base depends on the competitiveness of our platform and the profitability of our relationship for our partners and potential partners.

Sustaining Innovation and Automation Leadership

Our success is dependent on our ability to sustain innovation and automation leadership in order to maintain our competitive advantage.

We believe that we have built a differentiated automation platform and intend to continually increase the value we provide to our customers by investing in extending the capabilities of our platform.

We have made and will continue to make significant investments in research and development to bolster our existing technology and enhance usability to improve our customers’ productivity.

In May 2021, we released version 21.4 of the UiPath Platform.

Innovations included the all-new Automation Ops, designed to help customers manage

and govern high scale deployments of the UiPath Studio family of products and Attended Robots enterprise-wide.

New AI-powered capabilities were also introduced to speed the discovery and prioritization of processes to automate, led by the general availability of Task Mining.

In November 2021, we released version 21.10 of the UiPath Platform.

Innovations in this release include UiPath Integration Service, which delivers API automation to help companies optimize the technologies they already have.

Additionally, the introduction of Robot Auto-healing allows for the detection and remediation of robot issues without human intervention, and a host of other new features make our platform simpler, faster, and more gratifying for developers and end users.

We also collaborate with other leading technology companies to develop integrations that simplify the interoperability of our platform with their technology.

Examples of integrations available to our customers include integrations with offerings from Amazon Web Services Inc., Adobe Inc., Alteryx Inc., Atlassian Corp Plc, Box, Inc., Crowdstrike Inc., DocuSign Inc., Microsoft Corporation, Oracle Corporation, Qlik Technologies Inc., Salesforce.com, Inc., SAP SE, ServiceNow, Inc., Snowflake, Inc., and Workday, Inc.

These pre-built integrations can accelerate the adoption of our platform within our customers’ environment and speed the creation of automations that span multiple technologies.

We also maintain partnerships with leading cloud vendors, such as Amazon Web Services Inc., Google Inc., and Microsoft Corporation, to both simplify the deployment of our platform and extend our platform to offer customers the benefits of cloud-based AI capabilities.

We are focused on maintaining and growing our ecosystem of partners to continue to expand our market presence and drive greater sales efficiencies.

In addition, we intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion.

For example, in March 2021, we acquired Cloud Elements Inc.

("Cloud Elements"), a provider of a leading application programming interface integration platform for SaaS application providers and the digital enterprise.

This acquisition brings technology and an experienced team, which we believe will accelerate our technology roadmap in areas such as native integrations and system event automation triggers.

Our future success is dependent on our ability to successfully develop, market, and sell existing and new products to both new and existing customers and maintain and expand our relationships with leading technology partners.

Continuing to Invest to Grow and Scale Our Business

We are focused on driving our growth potential over the long term.

We believe that our market opportunity is substantial.

We intend to continue to invest in scaling across all organizational functions in order to grow our operations both domestically and internationally.

We have a history of introducing successful new products and capabilities on our platform and we believe these investments will contribute to our long-term growth.

(1) For the twelve months ended January 31, 2023 and 2022, respectively

Components of Results of Operations

We derive revenue from the sale of software licenses for use of our proprietary software, maintenance and support for our licenses, right to access certain software products we host (i.e., SaaS), and professional services.

We offer a comprehensive range of automation solutions via a suite of interrelated software offerings.

Customers can license our software and deploy our platform on-premises, in a public or private cloud, or in a hybrid environment.

In addition, we offer a managed, multi-tenant, SaaS version of certain products (i.e., our SaaS products), which enables our customers to begin automating without the need to provision infrastructure, install applications or perform additional configurations.

We also offer maintenance and support, training, and implementation services to our customers to facilitate their adoption of our platform.

In fiscal 2021, we began offering both hybrid solutions and SaaS products.

Hybrid solutions are comprised of three performance obligations, consisting of a term license, maintenance and support, and SaaS.

During the third quarter of fiscal 2022, maintenance and support revenue was renamed subscription services revenue, and services and other revenue was renamed professional services and other revenue.

We believe that that the new captions better reflect the composition of the revenue streams included in these line items on the consolidated statements of operations.

We primarily sell term licenses, which provide customers the right to use software for a specified period of time.

From time to time, we also sell perpetual licenses that provide customers the right to use software for an indefinite period of time.

For both types of licenses, revenue is recognized at the point in time at which the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon commencement of the renewal term.

We derive revenue from the sale of:

(1) software licenses for use of our proprietary software and related maintenance and support;

(2) the right to access certain software products we host (i.e., SaaS);

and (3) professional services.

In fiscal year 2023, we moved toward unifying our commercial offerings for products with both on-premise and cloud deployment options into a single offering that allows customers the choice of either deployment option throughout the term of the contract.

These Flex Offerings replaced the hybrid offerings launched in fiscal year 2021.

Flex Offerings are comprised of three types of performance obligations:

term license, maintenance and support, and SaaS.

During the current fiscal year, we saw an increase in sales of our Flex Offerings compared to sales of our legacy offerings (primarily on-premise solutions sold as term-based licenses bundled with maintenance and support).

We expect this trend to continue and, as a result, a greater portion of our revenue will be recognized over time as subscription services revenue rather than as license revenue, which is typically recognized at a point in time.

We primarily sell term licenses (including the term license portion of Flex Offerings), which provide customers the right to use software for a specified period of time.

Revenue for licenses is recognized at the point in time at which the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon commencement of the renewal term.

Subscription Services

Subscription services revenue consists of maintenance and support revenue generated through technical support and the provision of unspecified updates and upgrades on a when-and-if-available basis for both term and perpetual license arrangements.

Maintenance and support for perpetual licenses is renewable, generally on an annual basis, at the option of the customer.

Maintenance and support represents a stand-ready obligation for which revenue is recognized ratably over the term of the arrangement.

Subscription services revenue also consists of revenue related to our SaaS products, including those sold as part of our hybrid offerings.

Our SaaS products are stand-ready obligations to provide access to our software, and the associated revenue is recognized ratably over the contractual period of the arrangement beginning when or as control of the promised service begins to transfer to the customer.

We generate subscription services revenue through the provision of:

(1) maintenance and support services, which include technical support and unspecified updates and upgrades on a when-and-if-available basis for our licenses, and (2) SaaS products, including those sold as part of our Flex Offerings.

Maintenance and support and

SaaS products represent stand-ready obligations for which revenue is recognized ratably over the term of the arrangements.

Professional Services and Other

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Cost of Revenue

Cost of licenses revenue consists of all direct costs to deliver our licenses to customers, amortization of software development costs, direct costs related to third-party software resales, and amortization of acquired developed technology.

Cost of licenses revenue consists of all direct costs to deliver our licenses to customers, amortization of software development costs related to our licenses, and amortization of acquired developed technology.

Subscription Services

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In the future, we expect further expansion of our cloud-based deployments.

As cloud-based license software and services become a larger percentage of our total revenue, we expect the cloud offering to impact the timing of our recognition of revenue as well as impact our operating margins due to an increase in hosting fees and cloud infrastructure costs.

As sales of SaaS products become a larger percentage of our total revenue, we expect our gross margin to be impacted by increased hosting fees and cloud infrastructure costs.

Professional Services and Other

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Cost of professional services and other revenue also includes expenses related to third-party consulting services and allocated overhead.

Overhead is allocated to cost of professional services and other revenue based on applicable headcount.

We recognize these expenses as they are incurred.

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During fiscal years 2022 and 2021, certain operating expenses, such as travel and entertainment, decreased, primarily as a result of the COVID-19 pandemic.

We expect a resumption of travel and entertainment and related expenses during fiscal year 2023, although the timing and magnitude of these expenses will depend on a number of factors including the trend of the pandemic and potential changes to travel restrictions and stay-at-home orders.

During fiscal year 2023, we reinstated travel and in-person meetings and events, resulting in a resumption of these expenses.

Sales and Marketing

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Similar to travel and entertainment, trade show expenses also decreased in fiscal year 2021 and through the first half of fiscal year 2022, as a result of the COVID-19 pandemic.

We have since seen trade show expenses resume, largely in connection with our FORWARD IV user conference in October 2021.

We plan to increase our investment in sales and marketing in absolute dollars over the foreseeable future as we continue to hire additional personnel and invest in sales and marketing programs.

We expect that our sales and marketing expense will decrease as a percentage of our total revenue over the long term, although our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period due to the timing and extent of these expenses.

We have since seen trade show expenses resume.

We expect that over the longer term our sales and marketing expenses will decrease as a percentage of revenue, although this percentage may fluctuate from period to period due to timing and extent of expenses.

Research and Development

Research and development expenses consist primarily of personnel-related expenses, including salaries and bonuses, stock-based compensation expense, and employee benefits costs for our research and development employees.

Research and development costs are expensed as incurred, with the exception of certain software development costs which are eligible for capitalization.

We expect that our research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest in research and development efforts to develop new technology and enhance the functionality and capabilities of our existing products and platform infrastructure.

Our research and development expenses may fluctuate as a percentage of our total revenue from period to period due to the timing and extent of these expenses.

We expect that our research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest in efforts to develop new technology and enhance the functionality and capabilities of our existing products and platform infrastructure.

Our research and development expenses may fluctuate as a percentage of revenue from period to period due to the timing and extent of expenses.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries and bonuses, stock-based compensation expense, and employee benefits costs associated with our finance, legal, human resources, compliance, and other administrative teams, as well as accounting and legal professional services fees, other corporate-related expenses, and allocated overhead.

Following the completion of the IPO in April 2021, we have incurred and expect to continue to incur additional general and administrative expenses as a result of operating as a public company.

As a result, we expect the dollar amount of our general and administrative expenses to increase for the foreseeable future.

We expect that our general and administrative expenses will decrease as a percentage of our total revenue as our revenue grows over the longer term, although our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

Following the completion of the IPO in April 2021, we have incurred and expect to continue to incur additional general and administrative expenses as a result of operating as a public company, including as a result of our transition from emerging growth company to large accelerated filer status at the end of fiscal year 2023.

We expect that over the longer term our general and administrative expenses will decrease as a percentage of revenue, although this percentage may fluctuate from period to period due to timing and extent of expenses.

Interest Income

Interest income consists of interest income earned on our cash deposits, cash and cash equivalents balances, and marketable securities.

Other (Expense) Income, Net

Other (expense) inc ome, net primarily consists of foreign exchange gains and losses and gains and losses associated with foreign currency forward contracts.

Provision For (Benefit From) Income Taxes

Provision for (benefit from) income taxes consists of U.S.

federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business.

Other Income (Expense), Net

Other inc ome (expense) , net primarily consists of foreign exchange gains and losses.

Other income (expense), net also includes gains and losses associated with foreign currency forward contracts for those periods in which such contracts were outstanding.

Provision For Income Taxes

Provision for income taxes consists of U.S.

federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business.

We maintain a full valuation allowance on our U.S.

federal and state, Romanian, and U.K.

deferred tax assets, as we have concluded that it is more likely than not that these deferred tax assets will not be realized.

Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as by non-deductible expenses as permanent differences and by changes in our valuation allowances.

DTAs , as we have concluded that it is more likely than not that these DTAs will not be realized.

Over the longer term, we seek to drive durable growth while improving profitability and aligning resources to maximize return on investment through operational efficiencies.

Results of Operations

The following tables set forth selected consolidated statement of operations data and such data as a percentage of total revenue for each of the periods indicated (in thousands):

The following table sets forth selected consolidated statement of operations data for each of the periods indicated (in thousands):

Year Ended January 31,

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Cost of revenue:

10,421 11,888

Subscription services (1)(2)(3)(4)

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Interest income 27,955 3,551

Other (expense) income, net (13,488) 14,513

Other income (expense), net 2,767 (13,488)

Loss before income taxes (317,561) (510,883)

Provision for (benefit from) income taxes 14,703 (2,265)

Provision for income taxes 10,791 14,703

Net loss $ (328,352) $ (525,586)

Year Ended January 31,

(1) Includes amortization of acquired intangible assets as follows (in thousands):

Year Ended January 31,

Cost of licenses revenue $ 2,754 $ 2,521

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Total stock-based compensation expense $ 369,840 $ 515,583

(3) Includes employer payroll tax expense related to equity transactions as follows (in thousands):

(3) Includes employer payroll tax expense related to employee equity transactions as follows (in thousands):

Year Ended January 31,

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Total employer payroll tax expense related to equity transactions $ 7,762 $ 54,084

The following table sets forth our consolidated statement of operations data expressed as a percentage of revenue for the period indicated:

(4) Includes restructuring expense as follows (in thousands):

Year Ended January 31,

Cost of subscription services revenue $ 182 $ —

Cost of professional services and other revenue 710 —

Sales and marketing 19,491 —

Research and development 494 —

General and administrative 2,569 —

Total restructuring expense $ 23,446 $ —

The following table sets forth our consolidated statement of operations data expressed as a percentage of revenue for the periods indicated:

Year Ended January 31,

Licenses 47 % 54 %

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Interest income 3 % — %

Other (expense) income, net (1) % 2 %

Other income (expense), net — % (1) %

Loss before income taxes (30) % (57) %

Provision for (benefit from) income taxes 2 % (1) %

Provision for income taxes 1 % 2 %

Net loss (31) % (59) %

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Total revenue $ 1,058,581 $ 892,252 $ 166,329 19 %

Total revenue increased by $284.6 million, or 47%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021, primarily due to an increase in licenses revenue of $135.4 million and

increase in subscription services revenue of $137.3 million.

Approximately 27% of the increase in revenue was from new customers and the remainder was attributable to existing customers.

As we continued to expand our sales efforts in the United States and internationally, our revenue increased across all geographical regions.

Total revenue increased by $166.3 million, or 19%, for fiscal year 2023 compared to fiscal year 2022, primarily due to a $139.0 million increase in subscription services revenue, related in part to the transition to our Flex Offerings, and a $16.4 million increase in licenses revenue.

Approximately 34% of the increase in total revenue was from new customers and the remainder was attributable to existing customers.

As we continued to expand our sales efforts in the U.S.

and internationally, our revenue increased across all geographical regions.

Cost of Revenue and Gross Margin

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Gross margin 83 % 81 %

Total cost of revenue increased by $103.0 million, or 156%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.

Cost of licenses revenue increased primarily due to an increase in third-party software resale costs of $5.1 million, partially offset by a decrease in amortization of software development costs.

Cost of subscription services revenue increased primarily due to an increase of $26.8 million in personnel-related expenses, which included an increase of $11.7 million in stock-based compensation expense, mostly due to recognition of expense beginning in the first quarter of fiscal 2022 as a result of the satisfaction of IPO-related performance condition for restricted stock units ("RSUs"), and the remainder of which was largely due to increased headcount.

Cost of subscription services revenue was also impacted by an increase in hosting and software services of $5.5 million, an increase in depreciation and amortization expense of $2.3 million, and an increase in third-party consulting fees of $1.5 million.

Cost of professional services and other revenue increased primarily due to an increase of $46.4 million, in personnel-related expenses, which included $28.0 million in stock-based compensation expense, mostly due to recognition of expense beginning in the first quarter of fiscal 2022 as a result of the satisfaction of IPO-related performance condition for RSUs, and an increase of $4.5 million related to employer tax on settlement of equity awards, and the remainder of which was largely due to increased headcount.

Cost of professional services and other revenue was also impacted by a $15.7 million increase in third-party consulting fees.

Our gross margin decreased to 81% for the fiscal year ended January 31, 2022 compared to 89% for the fiscal year ended January 31, 2021, primarily as a result of stock-based compensation expense recognized in connection with the satisfaction of performance-based vesting conditions following our IPO.

Total cost of revenue increased by $11.2 million, or 7%, for fiscal year 2023 compared to fiscal year 2022.

Cost of licenses revenue decreased primarily due to a $1.9 million decrease in third-party software resale costs, partially offset by an increase in amortization of acquired intangible assets.

Cost of subscription services revenue grew primarily due to a $15.4 million increase in personnel-related expenses as a result of higher headcount during fiscal year 2023.

Cost of subscription services revenue was also impacted by a $7.2 million increase in hosting and software services expenses, a $1.6 million increase in third-party software resale costs, a $1.1 million increase in depreciation and amortization, and a $0.6 million increase in rent and other administrative costs.

Cost of professional services and other revenue decreased primarily due to a $23.3 million decrease in personnel-related expenses, which included an $18.0 million decrease in stock-based compensation expense mostly resulting from the satisfaction of IPO-related performance conditions for RSUs during fiscal year 2022 and a $4.3 million decrease in employer payroll tax expense related to equity transactions, partially offset by a $0.6 million increase in employee termination benefits related to our restructuring actions beginning in the second quarter of fiscal year 2023, and the remainder of which was largely due to a decrease in headcount.

Cost of professional services and other revenue was also impacted by an $8.1 million increase in costs associated with the use of third-party vendors to deliver professional services to our customers, a $0.6 million increase in software services expenses, and a $0.4 million increase in travel-related costs.

Our gross margin increased to 83% for fiscal year 2023 compared to 81% for fiscal year 2022, primarily as a result of higher stock-based compensation expense and employer payroll tax on settlement of equity awards recognized in fiscal year 2022 in connection with the satisfaction of IPO-related performance conditions for RSUs.

Operating Expenses

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Percentage of revenue 66 % 78 %

Sales and marketing expense increased by $317.5 million, or 84%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.

This increase was primarily attributable to an increase of $324.7 million in personnel-related expenses, which included an increase of $221.6 million in stock-based compensation, mostly due to recognition of expense beginning in the first quarter of fiscal 2022 as a result of the satisfaction of IPO-related performance condition for RSUs, and an increase of $39.3 million related to employer tax on settlement of equity awards, and the remainder of which was largely due to increased headcount.

Sales and marketing expense was also impacted by an increase of $22.2 million in marketing costs related to our IPO and marketing events, as well as an aggregate increase of $9.8 million related to recruiting and software service expenses.

These increases were partially offset by a decrease of $40.4 million in sales commissions expense due to the accounting impact of changes to our sales incentive plan for fiscal year 2022.

Sales and marketing expense increased by $3.9 million, or 1%, for fiscal year 2023 compared to fiscal year 2022.

This increase was primarily attributable to a $24.6 million increase in sales commissions, a $13.1 million increase in brand marketing and travel expenses due to the resumption of in-person events and user conferences (including our Forward 5 event), and an $8.2 million increase in software services costs used in sales support.

Sales and marketing expense was also impacted by an $8.2 million increase in third-party consulting fees, a $3.2 million increase in rent, a $1.8 million increase in depreciation and amortization, and a $1.6 million increase in hosting costs.

These increases were partially offset by a $57.0 million decrease in personnel-related expenses, which included an $83.1 million decrease in stock-based compensation mostly resulting from the satisfaction of IPO-related performance conditions for RSUs during fiscal 2022 and a $34.7 million decrease in employer payroll tax expense related to equity transactions, partially offset by a $38.0 million increase in salary-related expenses, a $19.0 million increase in employee termination benefits related to our restructuring actions beginning in the second quarter of fiscal year 2023, and a $3.8 million increase in general employee severance and other retirement benefits.

Research and Development

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Percentage of revenue 27 % 31 %

Research and development expense increased by $166.7 million, or 152%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.

The increase was primarily attributable to an increase of $157.6 million in personnel-related expenses, which included an increase of $124.3 million in stock-based compensation, mostly due to recognition of expense beginning in the first quarter of fiscal 2022 as a result of the satisfaction of IPO-related performance condition for RSUs, and an increase of $5.8 million related to employer tax on settlement of equity awards, and the remainder of which was largely due to increased headcount.

Research and development expense was also impacted by an increase of $8.2 million in third-party software service and hosting costs.

Research and development expense increased by $9.1 million, or 3%, for fiscal year 2023 compared to fiscal year 2022.

The increase was primarily attributable to a $5.5 million increase in third-party software service and hosting costs, a $2.3 million increase in travel-related expenses, a $1.9 million increase in third-party consulting fees, and a $1.4 million increase in depreciation and amortization and other allocated office costs.

Research and development expense was also impacted by a $2.2 million decrease in personnel-related expenses, which included a $33.2 million decrease in stock-based compensation mostly resulting from the satisfaction of IPO-related performance conditions for RSUs during fiscal 2022 and a $4.1 million decrease in employer payroll tax expense related to equity transactions, partially offset by a $26.6 million increase in salaries primarily resulting from increased headcount, a $7.5 million increase in bonuses and other employee benefits, and a $0.4 million increase in employee termination benefits related to our restructuring actions beginning in the second quarter of fiscal year 2023.

General and Administrative

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Percentage of revenue 23 % 28 %

General and administrative expense increased by $88.0 million, or 54%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.

This increase was primarily attributable to an increase of $58.2 million in personnel-related expenses, which included an increase of $43.8 million in stock-based compensation, mostly due to recognition of expense beginning in the first quarter of fiscal 2022 as a result of the satisfaction of IPO-related performance condition for RSUs, and an increase of $3.0 million related to employer tax on settlement of equity awards, and the remainder of which was largely due to increased headcount.

General and administrative expense was also impacted by an increase of $12.1 million in third-party consulting fees, an increase of $9.9 million in insurance-related expenses as a result of becoming a public company, an increase of $3.9 million related to hosted business applications, and an increase of $3.3 million related to other tax expenses, partially offset by a $4.8 million aggregate decrease in bad debt and rent expenses.

General and administrative expense decreased by $10.5 million, or 4%, for fiscal year 2023 compared to fiscal year 2022.

This decrease was primarily attributable to a $6.7 million decrease in personnel-related expenses, which included an $11.2 million decrease in stock-based compensation mostly resulting from the satisfaction of IPO-related performance conditions for RSUs during fiscal 2022 and a $2.1 million decrease in employer payroll tax expense related to equity transactions, partially offset by a $4.2 million increase in salaries largely due to increased

headcount, and a $2.2 million increase in employee termination benefits related to our restructuring actions beginning in the second quarter of fiscal year 2023.

General and administrative expense was also impacted by a $6.7 million decrease in third-party consulting fees, a $5.1 million decrease in other tax expense, and a $2.9 million decrease in hosted business applications.

These decreases were partially offset by a $4.4 million increase in charitable donations, mainly driven by our contribution of Class A common shares to a donor-advised fund during the second quarter of fiscal year 2023 in connection with our Pledge 1% commitment, a $3.0 million increase in insurance expense, a $1.6 million increase in travel-related costs, a $1.3 million increase in depreciation and amortization, and a $1.1 million increase in rent expense.

Interest Income

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Percentage of revenue 3 % — %

Interest income increased by $2.4 million, or 208%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021 as a result of the period-over-period increase in our cash and cash equivalents and marketable securities.

Other (Expense) Income, Net

Interest income increased by $24.4 million, or 687%, for fiscal year 2023 compared to fiscal year 2022 as a result of a period-over-period increase in our marketable securities and the associated impact of increased interest rates on these accounts.

Other Income (Expense), Net

Year Ended January 31,

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(dollars in thousands)

Other (expense) income, net $ (13,488) $ 14,513 $ (28,001) (193) %

Other income (expense), net $ 2,767 $ (13,488) $ 16,255 121 %

Percentage of revenue — % (1) %

Other expense, net increased by $28.0 million, or 193%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.

The change was primarily attributable to foreign exchange gains recognized in the prior period, partially offset by a decrease in interest expense in the current period.

Provision For (Benefit From) Income Taxes

Other income, net increased by $16.3 million, or 121%, for fiscal year 2023 compared to fiscal year 2022.

The change was primarily attributable to a period-over-period favorable impact from foreign exchange, a period-over-period favorable impact from amortization on marketable securities, and an increase in sublease income during the current year.

These increases were partially offset by a nonrecurring benefit recognized in the prior period from foreign currency forward contracts which were terminated at the end of fiscal year 2022.

Provision For Income Taxes

Year Ended January 31,

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(dollars in thousands)

Provision for (benefit from) income taxes $ 14,703 $ (2,265) $ 16,968 (749) %

Provision for income taxes $ 10,791 $ 14,703 $ (3,912) (27) %

Percentage of revenue 1 % 2 %

Provision for income taxes increased by $17.0 million, or 749%, for the fiscal year ended January 31, 2022 compared to the fiscal year ended January 31, 2021.

The effective tax rate was (2.9)% and 2.4% for the fiscal years ended January 31, 2022 and January 31, 2021, respectively.

The change was primarily driven by higher foreign tax expenses resulting from higher year-over-year earnings of our cost-plus margin entities.

Provision for income taxes decreased by $3.9 million, or 27%, for fiscal year 2023 compared to fiscal year 2022.

The effective tax rate was (3.4)% and (2.9)% for fiscal years 2023 and 2022, respectively.

The change was primarily driven by lower foreign tax expenses resulting from lower year-over-year earnings of our cost-plus margin entities, coupled with lower permanent differences in those jurisdictions.

Liquidity and Capital Resources

We have financed operations since our inception primarily through customer payments and net proceeds from sales of equity securities.

Our principal uses of cash in recent periods have been funding our operations, investing in capital expenditures, and engaging in various business acquisitions.

As of January 31, 2022 and 2021, our principal sources of liquidity were cash, cash equivalents, restricted cash, and marketable securities totaling $1,884.7 million and $474.0 million, respectively, and we had an accumulated deficit of $1,495.9 million and $970.4 million, respectively.

During the fiscal years ended January 31, 2022 and 2021, we had net losses of $525.6 million and $92.4 million, respectively, and net cash (used in) provided by operations of $(55.0) million and $29.2 million, respectively.

Our principal uses of cash in recent periods have been to fund our operations, invest in capital expenditures, and engage in various business acquisitions.

As of January 31, 2023 and 2022, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $1,759.8 million and $1,884.7 million, respectively, and we had an accumulated deficit of $1,824.3 million and $1,495.9 million, respectively.

During the fiscal years ended January 31, 2023 and 2022, we reported net losses of $328.4 million and $525.6 million, respectively, and net cash used in operations of $10.0 million and $55.0 million, respectively.

In April 2021, we completed our IPO , which resulted in the issuance of 13.0 million shares of our Class A common stock at a public offering price of $56.00 per share, including 3.6 million shares pursuant to the exercise in full of the underwriters’ option to purchase additional shares.

Net proceeds were $687.9 million after deducting underwriting discounts and commissions of $35.6 million and offering expenses of $4.5 million.

In July 2020, we completed our Series E preferred stock financing with gross proceeds totaling $225.9 million.

In February 2021, we completed our Series F preferred stock financing with gross proceeds totaling $750.0 million.

We have also entered into the Credit Facility (as defined below) with an available borrowing capacity of $200.0 million.

Our future capital requirements will depend on many factors, including our revenue growth rate, our product sales, license renewal activity, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of our products, expenses associated with our international expansion, and the timing and extent of additional capital expenditures to invest in existing and new office spaces.

In July 2020, we completed our Series E preferred stock financing with gross proceeds totaling $225.9 million.

In connection with our IPO, all shares of convertible preferred stock then outstanding automatically converted into shares of Class A common stock.

In October 2020, we entered into the Credit Facility (described further below) with an available borrowing capacity of $200.0 million.

In January 2020, we entered into an Amended and Restated Loan and Security Agreement with HSBC Bank USA, N.A, HSBC Ventures USA Inc., and Silicon Valley Bank, which provided a $100.0 million senior secured revolving credit facility, and which we repaid in full in July 2020.

Our future capital requirements will depend on many factors, including our revenue growth rate, sales of our products and services, license renewal activity, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of our products, expenses associated with our international expansion, and the timing and extent of capital expenditures to invest in existing and new office spaces.

We may in the future enter into arrangements to acquire or invest in complementary businesses, products, and technologies.

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If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

We believe that our existing cash, cash equivalents, marketable securities, payments from customers, and borrowing capacity will be sufficient to fund our anticipated cash requirements for the next twelve months.

Credit Facility

In January 2020, we entered into an Amended and Restated Loan and Security Agreement (the "Credit Agreement") with HSBC Bank USA, N.A, HSBC Ventures USA Inc., and Silicon Valley Bank, which provided a $100.0 million senior secured revolving credit facility.

We repaid the Credit Agreement in full in July 2020.

In October 2020, we entered into a new Senior Secured Credit Facility (the "Credit Facility") with HSBC Ventures USA Inc.,

Silicon Valley Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank, LTD, which provided a $200.0 million senior secured revolving credit facility with a maturity date of October 30, 2023.

In October 2020, we entered into th e Credit Facility with HSBC Ventures USA Inc., Silicon Valley Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank, LTD.

Our obligations under the Credit Facility are secured by substantially all of our assets, except for our intellectual property.

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The Credit Facility is subject to customary fees for loan facilities of this type, including ongoing commitment fees at a rate of 0.25% per annum on the daily amount available to be drawn.

As of January 31, 2022, we had no outstanding debt under the Credit Facility and were in compliance with our covenants thereunder.

As of January 31, 2023, we had no outstanding debt under the Credit Facility.

Although we had a banking relationship with Silicon Valley Bank as of its closure on March 10, 2023, we did not experience any adverse impact to our liquidity or to our current or projected business operations, financial condition, or results of operations as a result such closure.

However, uncertainty remains over liquidity concerns in the broader financial services industry, and there may be additional impacts to our business and our industry that we cannot predict at this time.

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

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(dollars in thousands)

Net cash (used in) provided by operating activities (1)

Net cash used in operating activities (1)

$ (9,981) $ (54,963)

Net cash used in investing activities (289,143) (35,442)

Net cash provided by financing activities $ 1,469,673 $ 250,418

Net cash (used in) provided by financing activities (60,669) 1,469,673

(1) Inclusive of:

Payments for employer payroll taxes related to employee equity transactions $ (51,693) $ —

Net receipts of employee tax withholdings on stock option exercises $ 6,382 $ —

Cash paid for employer payroll taxes related to employee equity transactions $ (9,112) $ (51,693)

Net (payments) receipts of employee tax withholdings on stock option exercises (5,394) 6,382

Cash paid for restructuring costs (19,339) —

Operating Activities

Our largest source of operating cash is cash generation from sales to our customers.

Our primary uses of cash from operating activities are for personnel-related expenses, direct costs to deliver our licenses, and marketing expenses.

Our primary uses of cash from operating activities are for personnel-related expenses, direct costs to deliver licenses and provide subscription and professional services, and marketing expenses.

To date, our operating cash flows have generally been negative and we have supplemented working capital requirements primarily through net proceeds from the sale of equity securities.

Net cash used in operating activities for the fiscal year ended January 31, 2022 of $55.0 million was driven by cash payments for operating expenditures, primarily associated with the compensation of our teams, including increased year-end fiscal 2021 sales commissions and bonuses paid in the first quarter of fiscal 2022 and employer payroll taxes related to employee equity transactions.

Other cash operating expenditures included payments for professional services, software, and office rent.

Net cash used in operating activities for fiscal year 2023 of $10.0 million was driven by cash payments for operating expenditures, primarily associated with the compensation of our teams, including bonuses paid in the first quarter of fiscal year 2023 and employer payroll taxes related to employee equity transactions.

Other cash operating expenditures included payments related to our workforce restructuring, and payments for professional services, software, and office rent.

These outflows were partially offset by cash collections from our customers, which were approximately 26% higher than in the prior year.

Net cash provided by operating activities for the fiscal year ended January 31, 2021 of $29.2 million was driven by cash collections from our customers, partially offset by cash payments for operating expenditures associated with the compensation of our teams and payments for professional services, software, and office rent.

Net cash used in operating activities for fiscal year 2022 of $55.0 million was driven by cash payments for operating expenditures, primarily associated with the compensation of our teams, including increased year-end fiscal 2021 sales commissions and bonuses paid in the first quarter of fiscal 2022 and employer payroll taxes related to employee equity transactions.

Other cash operating expenditures included payments for professional services, software, and office rent.

Investing Activities

Net cash used in investing activities for the fiscal year ended January 31, 2022 of $35.4 million was driven by $16.9 million in net purchases of marketable securities and other investments, $8.9 million in capital expenditures, $5.5 million in cash consideration associated with the acquisition of Cloud Elements, which is presented net of cash acquired, $3.0 million in capitalized software development costs, and $1.2 million in purchases of intangible assets.

Net cash used in investing activities for the fiscal year ended January 31, 2021 of $126.0 million was driven by purchases of marketable securities of $103.1 million, deferred payments related to previous business

acquisitions of $19.7 million, capital expenditures of $2.0 million, and capitalized software development costs of $1.2 million.

Net cash used in investing activities for fiscal year 2023 of $289.1 million was primarily driven by $237.0 million in net purchases of marketable securities, $29.5 million in cash consideration associated with the acquisition of Re:Infer , which is presented net of cash acquired, and $23.8 million in capital expenditures.

Net cash used in investing activities for fiscal year 2022 of $35.4 million was driven by $15.4 million in net purchases of marketable securities, capital expenditures of $8.9 million, payments related to business acquisitions of $5.5 million, capitalized software development costs of $3.0 million, and $2.7 million in other investing activities.

Financing Activities

Net cash provided by financing activities for the fiscal year ended January 31, 2022 of $1,469.7 million was primarily driven by $749.8 million in net proceeds from issuance of Series F convertible preferred stock, $692.4 million in net proceeds from our IPO after deducting underwriting expenses and commissions, proceeds from employee stock purchase plan contributions of $19.0 million, proceeds from the exercise of stock options of $12.2 million, and net receipts of tax withholdings on sell-to-cover equity award transactions of $10.4 million, partially offset by payments of tax withholdings on net settlement of equity awards of $10.5 million and payments of IPO-related costs of $3.7 million.

Net cash provided by financing activities for the fiscal year ended January 31, 2021 of $250.4 million was primarily driven by net proceeds from our Series E convertible preferred stock financing of $225.6 million and proceeds from exercises of stock options of $26.4 million.

Net cash used in financing activities for fiscal year 2023 of $60.7 million was primarily driven by payments of tax withholdings on net settlement of equity awards of $73.1 million, net payments of tax withholdings on sell-to-cover equity award transactions of $9.5 million, and $1.5 million in repurchases of unvested early exercised stock options, partially offset by proceeds from ESPP contributions of $15.0 million and proceeds from stock option exercises of $8.4 million.

Net cash provided by financing activities for fiscal year 2022 of $1,469.7 million was primarily driven by $749.8 million in net proceeds from issuance of Series F convertible preferred stock, $692.4 million in net proceeds from our IPO after deducting underwriting expenses and commissions, proceeds from ESPP contributions of $19.0

million, proceeds from stock option exercises of $12.2 million, and net receipts of tax withholdings on sell-to-cover equity award transactions of $10.4 million, partially offset by payments of tax withholdings on net settlement of equity awards of $10.5 million, and payments of IPO-related costs of $3.7 million.

Material Cash Requirements

In the normal course of business, we enter into non-cancelable purchase commitments with various parties, mainly for hosting services and software products and services.

During fiscal year 2023, we made commitments to purchase $138.1 million of cloud infrastructure services from a third-party vendor and $82.5 million of service credits toward professional services from third-party alliance partners, which together constitute the majority of the increase in our non-cancelable purchase commitments during the fiscal year.

The following table summarizes the aggregate effect that our material contractual obligations as of January 31, 2023 are expected to have on our cash flows in the periods indicated (in thousands):

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Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP.

Our consolidated financial statements are prepared in accordance with U.S.

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the amounts of assets and liabilities at the date of the consolidated financial statements and amounts of revenue and expenses reported during the period.

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Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers.

We recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers.

ASC 606 requires recognition of revenue when control of promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services.

Revenue recognition is inherently judgmental, particularly in the case of complex arrangements that include multiple performance obligations.

Our most significant judgments relate to the identification of performance obligations within a contract (including whether those obligations are distinct or should be combined), determining the standalone selling price ("SSP") for each performance obligation, and allocating the transaction price to the performance obligations, all of which impact the pattern and timing of revenue recognition.

Revenue recognition is inherently judgmental, particularly for complex arrangements that include multiple performance obligations, which are common for us.

Our most significant judgment relates to allocation of the transaction price, specifically determining the SSP for each performance obligation, which impacts the pattern and timing of revenue recognition.

At the inception of a contract with a customer, we assess the goods or services promised to identify distinct performance obligations.

The distinct performance obligations identified in our typical contracts include but are not limited to software license (term or perpetual), support and maintenance, when-and-if-available upgrades, training services, and professional services.

If a promised good or service is determined not to be distinct, we combine that

good or service with other goods or services until the combined bundle is a distinct performance obligation, or until all goods or services in the contract have been combined into a single performance obligation.

Most of our contracts contain multiple performance obligations.

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

Whenever possible, we refer to observable SSP, which is the price of the same good or service in standalone sales to similar customers in similar circumstances.

If observable SSP is not available, we next consider our prior geographical discounting practices for transactions within the preceding twelve months to determine whether a historical SSP exists.

If neither observable SSP nor historical SSP is available, we utilize information such as external market data, broader historical pricing data, or list prices, while maximizing the use of observable inputs and methodologies, or, in cases of highly variable or uncertain selling price, may use a residual approach.

The distinct performance obligations identified in our typical contracts include, but are not limited to, software licenses, SaaS , maintenance and support, and professional services.

The pattern and timing of revenue recognition for each of these performance obligations varies.

Specifically, revenue from licenses is recognized at the point in time at which the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon commencement of the renewal term;

revenue from SaaS and maintenance and support services is recognized ratably over the contract term;

and revenue from professional services is recognized over time as the services are performed.

Most of our contracts contain multiple of these performance obligations.

In such arrangements, the transaction price is allocated to the separate performance obligations on a relative SSP basis.

Since the performance obligations have different revenue recognition models, SSP estimates directly affect the timing and amount of revenue recognized during a particular period.

For example, if the SSP of a license delivered in one

period is greater than the SSP of professional services that are sold with that license but delivered in future periods, a greater portion of the transaction price will be recognized at contract inception in the current period versus over time as the services are performed in later periods.

Whenever possible, we allocate the transaction price based on observable SSP, which is the price of the same good or service in standalone sales to similar customers in similar circumstances.

If observable SSP is not available, we estimate the SSP using data that may include historical prices, discounting practices, list prices, cost data and other observable inputs.

We may have more than one SSP for individual performance obligations when our data population indicates that pricing practices vary by class of customer (for example, based on the customer’s geographic region).

We update our SSPs at least annually.

For further information about our revenue recognition, refer to Note 2, Summary of Significant Accounting Policies —Revenue Recognition and Note 3, Revenue Recognition , included in Item 8 of this Annual Report on Form 10-K.

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ASC 718 requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors, and non-employees based on the grant date fair value of the awards.

The fair value of each RSU is equal to the fair value of our Class A common stock on the grant date.

The fair value of stock options is determined using the Black-Scholes pricing model, which makes use of the following inputs:

• Fair value of our common stock.

Subsequent to the IPO, market close price of our publicly-traded Class A common stock on the valuation date is used.

Prior to the IPO, because there was no public market for our common stock, our board of directors, with the assistance of a third-party valuation specialist, determined the common stock fair value as of the valuation date.

(See below for further discussion of pre-IPO valuation of our common stock.)

• Exercise price.

Our current practice is to grant options with an exercise price of $0.10 in certain non-U.S.

During fiscal year 2023, we granted 30.0 million RSUs and 5.0 million stock options, and issued 1.2 million shares under our ESPP.

The fair values of these 30.0 million RSUs were determined based on the closing price of our publicly traded Class A common stock on the respective grant dates (with grant date being the date of approval by the compensation committee of our board or directors or its delegates), and as such were not subject to estimation uncertainty.

Stock Options

The fair values of stock options were determined using the Black-Scholes pricing model, which considers the value of our Class A common stock, exercise price, expected term, expected volatility, risk-free interest rate, and expected dividend yield.

Of the 5.0 million stock options granted, 2.9 million were granted in-the-money with an exercise price of $0.10, which is our current broad-based granting practice in certain non-U.S.

jurisdictions;

given their immaterial exercise price, the fair values of these in-the-money stock options closely approximated the closing price of our publicly traded Class A common stock on the respective grant dates and were not sensitive to the other inputs to the Black-Scholes pricing model.

The remaining 2.1 million stock options were U.S.

executive-level grants with an at-the-money exercise price, the fair values of which were sensitive to the other inputs of the Black-Scholes pricing model.

The most subjective of these inputs are as follows:

• Expected term.

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we presently use the simplified method permitted under Staff Accounting Bulletin 14, which deems the expected term to be the average of the time-to-vest and the contractual life.

The expected term for the aforementioned 2.1 million stock options ranged from 5.3 to 6.1 years.

• Expected volatility.

As a public market for our common stock did not exist prior to the IPO, we have limited trading history on which to base expectations of volatility;

we presently estimate expected volatility based on the volatility of similar publicly held entities, referred to as “guideline companies,” over a look-back period equivalent to the expected term.

we presently estimate expected volatility based on the volatility of a group of similar publicly held entities, referred to as “guideline companies,” over a look-back period equivalent to the expected term.

In evaluating the similarity of guideline companies, we consider factors such as industry, stage of life cycle, size, and degree of financial leverage.

• Risk-free interest rate .

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

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

• Estimated dividend yield .

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

Given their immaterial $0.10 exercise price, the Black-Scholes value of our recently granted stock options closely approximates intrinsic value, or fair value of common stock less exercise price;

the other aforementioned inputs (expected term, expected volatility, risk-free interest rate, and estimated dividend yield) have an insignificant impact on the results of the Black-Scholes model.

As a result, our stock-based compensation expense is predominantly sensitive to the fair value of our common stock as it relates to the valuation of stock options and RSUs.

Following our IPO, no estimates are involved in determining the fair value of our common stock because observable market prices are utilized.

Prior to the IPO, the fair value of our common stock was determined by our board of directors, using contemporaneous third-party valuations and input from management, in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .

In valuing our common stock, the fair value of our business, or enterprise value, was determined based on objective and subjective factors using various methods under the market approach:

• The subject company transaction method involves the utilization of a company’s own relevant stock transactions, such as the price at which a recent equity class was issued by the company or transacted between third parties.

• The guideline public company method estimates value based on a comparison of the company to comparable public companies in a similar line of business.

From the comparable companies, a representative market value multiple is determined and then applied to our financial results to estimate the value of the subject company.

• The rate of return method estimates value by applying a rate of return, consistent with performance and achievement of development milestones, to a previously estimated equity value, such as one determined using the other methods.

The resulting equity value was then allocated to each class of stock using the option pricing model or a hybrid method that considered both option pricing and the probability-weighted expected return method.

After the equity value was determined and allocated to the various classes of stock, a discount for lack of marketability was applied to arrive at the fair value of ordinary shares, because it is assumed that a private company stockholder has limited opportunities to sell and that any such sale would involve significant transaction costs, thereby reducing overall fair market value.

In assessing the fair value of common stock for grant dates occurring between formal valuations, we considered the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation or a straight-line interpolation between the two valuation dates.

During fiscal year 2022, we granted 3.0 million equity awards that were dependent on the subjective pre-IPO valuation techniques described above.

A hypothetical 10% change in the estimated fair value of our common stock would have resulted in a $16.0 million change in the total fair value of these equity awards, $9.5 million of which would have been recognized in expense during the fiscal year ended January 31, 2022.

For further information about our stock-based compensation, refer to Note 2 , S ummary of S ignificant Ac counting Polici es —Stock-Based Compensation and Note 13 , Equity Incentive Plans and Stock-based Compensation , included in Item 8 of this Form 10-K.

JOBS Act Accounting Election

We are an "emerging growth company", as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and, for so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

The expected volatility for the aforementioned 2.1 million stock options ranged from 59.4% to 61.8%.

Beginning in fiscal year 2024, we will include our own stock price volatility within the group and will continue to increase the weighting of our own volatility over time as sufficient trading history is established.

A ten percent change in the Black-Scholes values of these 2.1 million stock options would have impacted our fiscal year 2023 stock-based compensation expense by $0.4 million.

The fair values of ESPP awards were determined using the Black-Scholes pricing model, with the most subjective input being expected volatility.

A s a public market for our common stock did not exist prior to the IPO, we have limited trading history on which to base expectations of volatility;

until late fiscal year 2023, we estimated expected volatility based on the volatility of the same group of guideline companies used for our stock options, over a look-back period equal to the six-month term of our ESPP offering periods.

Beginning with our most recent offering period in the fourth quarter of fiscal year 2023, having established sufficient trading history, we estimated expected volatility using the volatility of our own Class A common stock over the look-back period.

The expected volatility used in valuing ESPP offering periods outstanding during fiscal year 2023 ranged from 47.4% to 84.2% .

A ten percent change in the Black-Scholes values of these ESPP awards would have impacted our fiscal year 2023 stock-based compensation expense by $0.8 million.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies —Recently Issued Accounting Pronouncements and —Recently Adopted Accounting Pronouncements, included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

See Note 2, Summary of Significant Accounting Policies —Recently Adopted Accounting Pronouncements , included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

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What changed 10-K

Item 7. Management’s Discussion and Analysis