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Item 7. Management’s Discussion and Analysis

2021-03-16 compared with 2020-03-20 · 137 added, 101 removed, 256 unchanged (48% of the section changed)

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Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled "Risk Factors" under Part I, Item 1A in this Annual Report on Form 10-K.

Yext, a search experience cloud company, puts businesses in control of their facts online by delivering brand-verified answers.

Our platform lets businesses structure the facts about their brands in a database called a Knowledge Graph.

Our platform is built to leverage the structured data stored in the Knowledge Graph to power direct answers on a business's own website, as well as across approximately 175 service and application providers, which we refer to as our Knowledge Network, and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp.

The Yext platform powers all of our key features, including Listings, Pages, and Answers, along with its other features and capabilities.

We sell our platform throughout the world and intend to continue to expand our international sales efforts.

We sell to customers of all sizes, through direct sales efforts to our customers, including third-party reseller customers.

Yext organizes a business's facts so it can provide official answers to consumer questions starting with the business's own website and then extending across search engines and voice assistants.

Our platform lets businesses structure the facts about their brands in a database called the Knowledge Graph.

Our platform is built to leverage the structured data stored in the Knowledge Graph to deliver a modern search experience on a business's or organization's own website, as well as across approximately 200 service and application providers, which we refer to as our Knowledge Network and includes Amazon Alexa, Apple Maps, Bing, Cortana, Facebook, Google, Google Assistant, Google Maps, Siri and Yelp.

Our platform powers all of our key features, including Listings, Pages, and Answers, along with its other features and capabilities.

We sell our platform throughout the world to customers of all sizes, including our enterprise, mid-size, and third-party reseller customers.

In transactions with resellers, we are only party to the transaction with the reseller and are not a party to the reseller's transaction with its customer.

Revenue is a function of the number of customers, the number of licenses with each customer, the package to which each customer subscribes, the price of the package and renewal rates.

Our business has evolved in recent years.

• in fiscal 2018, we introduced the Yext App Directory, which enables businesses to connect information from systems across the business, such as workforce management systems and customer relationship management databases and held our second annual industry and customer event, ONWARD 2017 (formerly called "LocationWorld"), in November 2017, in New York City.

• in fiscal 2019, we launched a global integration with Amazon to give businesses control over the answers Amazon Alexa provides about them and held our third annual industry and customer event, ONWARD18, in October 2018, in New York City.

• in fiscal 2020, we launched Answers, our new site-search product, and held our fourth annual industry and customer event, ONWARD19, in October 2019 in New York City.

We offer subscriptions in a discrete range of packages, with pricing based on specified feature sets and the number of licenses managed by the customer as well as on a capacity-basis.

Our fiscal year ends on January 31 st .

References to fiscal 2021, for example, are to the fiscal year ended January 31, 2021.

COVID-19 Update

In March 2020, the World Health Organization ("WHO") declared the coronavirus disease ("COVID-19") as a pandemic.

The COVID-19 pandemic has disrupted business operations for us and our customers, suppliers, and other parties with whom we do business and such disruptions are expected to continue for an indefinite period of time.

In an effort to control the spread of COVID-19, governments and municipalities around the world instituted restrictive measures, including orders to shelter-in-place, travel restrictions, and mandated business closures.

As a result of the COVID-19 pandemic, we temporarily closed our offices requiring all of our employees globally to work remotely.

We restricted non-essential business travel, and canceled in-person marketing events, including our annual industry and customer event, ONWARD20.

We continue to monitor regional developments relating to the COVID-19 pandemic to inform decisions on phased office re-openings and lifting of travel restrictions.

The uncertain duration of these measures have had and may continue to have negative effects on our sales efforts and revenue growth rates.

Despite the economic challenges brought on by the COVID-19 pandemic, we are committed to our business, the strength of our platform, and our ability to continue to execute on our strategy.

During the fiscal year ended January 31, 2021, some business highlights included our collaborations with the WHO and other government agencies to launch comprehensive information hubs powered by Yext Answers, expanding Yext Answers into additional languages, including French, German, Italian, Spanish, and Japanese, and launching Hitchhikers, a comprehensive training program and community for professionals to develop the skills to build custom search solutions for their business using our platform.

We may continue to see some existing and potential customers, in particular customers in industries highly impacted by the pandemic such as retail and food services as well as certain geographies such as Europe, reduce, suspend or delay technology spending, request to renegotiate contracts to obtain concessions such as, extended billing and payment terms;

shorten the duration of contracts;

or elect not to renew their subscriptions which could materially adversely impact our business, financial condition and results of operations in future periods.

The ultimate extent of the impact of the pandemic will depend on future developments, which continue to be highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic and the actions taken to contain and address its impact, among others.

However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not be fully reflected in our results of operations and overall financial performance until future periods.

See Part I Item 1A “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic on our business.

Components of Results of Operations

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Our contracts are typically one year in length, but may be up to three years or longer in length.

Revenue is a function of the number of customers, the number of licenses with each customer, the package to which each customer subscribes, the price of the package and renewal rates.

Revenue is a function of the number of customers, the number of licenses or capacity purchased by each customer, the package to which each customer subscribes, the price of the package and renewal rates.

Revenue is generally recognized ratably over the contract term beginning on the commencement date of each contract, which is the date our platform is made available to customers.

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Cost of Revenue

Cost of revenue consists primarily of employee-related costs which are comprised of personnel-related costs and stock-based compensation expense.

Personnel-related costs mainly consist of salaries and wages.

Cost of revenue also includes fees associated with our Knowledge Network application provider arrangements, the nature of which may be unpaid, fixed, or variable, and are unpaid with many of our larger providers.

In addition, cost of revenue includes data center expense and depreciation expense, as well as operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount.

Cost of revenue consists primarily of employee-related costs, including personnel-related costs, which mainly consist of salaries and wages, and stock-based compensation expense.

In addition, cost of revenue includes depreciation expense, including with respect to certain capitalized software development costs incurred in connection with additional functionality to our platform.

Cost of revenue also includes operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount.

In addition, cost of revenue includes software expense, which relates to licenses, professional services, and other costs associated with software for use in the operations of our business, which is also allocated based on employee headcount.

Operating Expenses

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Personnel-related costs mainly consist of salaries and wages and costs of obtaining revenue contracts.

Sales and marketing expenses also include costs related to advertising and conferences and brand awareness events, including our annual industry and customer event, ONWARD.

In addition, sales and marketing expenses include operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount.

Sales and marketing expenses also include operating and short-term lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount.

In addition, sales and marketing expenses include costs related to advertising and conferences and brand awareness events.

Research and development expenses .

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Capitalized software development costs related to additional functionality to our platform are excluded from research and development expenses as they are capitalized as a component of property and equipment, net and depreciated to cost of revenue over the term of their useful life.

Research and development expenses also include operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount.

Research and development expenses also include operating and short-term lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount.

General and administrative expenses .

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Personnel-related costs mainly consist of salaries and wages.

General and administrative expenses also include operating and short-term lease expenses associated with our office spaces, which are allocated based on employee headcount, and other professional related costs.

General and administrative expenses also include operating and short-term lease expenses associated with our office spaces, as well as software expense, each of which are allocated based on employee headcount, and other professional related costs.

Results of Operations

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Statements of Operations Data:

2021 2020 2019

Revenue $ 354,661 $ 298,829 $ 228,283

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$ (94,692) $ (121,544) $ (74,837)

(1) Results for the fiscal years ended January 31, 2020 and 2019, respectively, reflect our modified retrospective adoption of ASU 2014-09 (Topic 606).

Results for the fiscal year ended January 31, 2018, continue to be reported in accordance with historical accounting standards under ASC 605.

(1) Amounts include stock-based compensation expense as follows:

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75.6 % 74.2 %

Total revenue was $298.8 million for the fiscal year ended January 31, 2020, compared to $228.3 million for the fiscal year ended January 31, 2019, an increase of $70.5 million or 31%.

This increase was primarily due to new customers and expanded subscriptions sold to existing customers.

Revenue from our enterprise and mid-size customers, which include third-party reseller customers, grew 34% from approximately $213 million to $286 million, and excludes revenue from small business customers, which by their nature have inherently high turnover.

Total revenue was $354.7 million for the fiscal year ended January 31, 2021, compared to $298.8 million for the fiscal year ended January 31, 2020, an increase of $55.8 million or 19%, primarily driven by new customer subscriptions to our platform, and to a lesser extent included expanded subscriptions for existing customers.

Our revenue is predominately derived from our enterprise, mid-size, and third-party reseller customers.

Revenue from our small business customers represented less than 5% of total revenue for each period.

Revenue recognized from subscriptions and associated support to our platform was 93% and 95%, while revenue recognized from professional services was 7% and 5%, for the fiscal years ended January 31, 2021 and 2020, respectively.

Cost of revenue was $86.4 million for the fiscal year ended January 31, 2021, compared to $77.0 million for the fiscal year ended January 31, 2020, an increase of $9.4 million, or 12%.

This increase was primarily due to employee-related costs reflecting higher headcount, including a $9.0 million increase in personnel-related costs, which mainly consisted of salaries and wages, and a $1.2 million increase stock-based compensation expense.

In addition, there was a $2.7 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY, as well as a $2.1 million increase in costs associated with our data centers, and a $1.2 million increase in depreciation expense.

Gross margin was 74.2% for the fiscal year ended January 31, 2020, compared to 74.9% for the fiscal year ended January 31, 2019, a decrease of 70 basis points.

This overall increase primarily reflects the increases in costs associated with our data centers of $3.2 million, personnel-related costs of $1.6 million, stock-based compensation expense of $1.6 million, and software expense of $1.4 million.

These increases were partially offset by a decrease in Knowledge Network application provider costs of $1.0 million as a result of more favorable contract terms with certain providers.

Gross margin was 75.6% for the fiscal year ended January 31, 2021, compared to 74.2% for the fiscal year ended January 31, 2020 as reflected in the discussion above.

Operating Expenses

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Sales and marketing expense was $228.4 million for the fiscal year ended January 31, 2021, compared to $218.1 million for the fiscal year ended January 31, 2020, an increase of $10.3 million, or 5%.

The increase was primarily due to employee-related costs reflecting higher headcount, including a $30.7 million increase in personnel-related costs, which mainly consisted of salaries and wages and costs to obtain revenue contracts, and a $8.9 million increase in stock-based compensation expense.

In addition, there was a

$5.7 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY.

The increase was primarily due to a $23.6 million increase in personnel-related costs, reflecting higher headcount, which mainly consisted of salaries and wages and costs to obtain revenue contracts, a $2.8 million increase in software expense, a $1.4 million increase in operating and short-term lease expenses, a $1.3 million increase in depreciation expense, and a $1.2 million increase in stock-based compensation expense.

These increases were partially offset by reductions in light of the COVID-19 pandemic and leveraging costs, including a $10.8 million decrease in employee travel and a $7.6 million decrease in conferences and events.

Research and development expense was $58.1 million for the fiscal year ended January 31, 2021, compared to $49.4 million for the fiscal year ended January 31, 2020, an increase of $8.7 million, or 18%.

The increase was primarily due to employee-related costs reflecting higher headcount, including a $5.8 million increase in personnel-related costs, which mainly consisted of salaries and wages, and a $4.7 million increase in stock-based compensation expense.

In addition, there was a $1.5 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY.

General and administrative expense was $77.2 million for the fiscal year ended January 31, 2020, compared to $51.6 million for the fiscal year ended January 31, 2019, an increase of $25.7 million, or 50%.

The increase was primarily due to employee-related costs reflecting higher headcount, including a $9.5 million increase in personnel-related costs, which mainly consisted of salaries and wages, and a $8.7 million increase in stock-based compensation expense, which included a $3.6 million one-time RSU cancellation-related expense.

In addition, there was a $1.9 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY.

The increase was primarily due to a $3.9 million increase in stock-based compensation expense, a $3.0 million increase in personnel-related costs, reflecting higher headcount, which mainly consisted of salaries and wages, and a $0.8 million increase in software expense.

General and administrative expense was $76.0 million for the fiscal year ended January 31, 2021, relatively consistent compared to $77.2 million for the fiscal year ended January 31, 2020, as decreases of $2.1 million in stock-based compensation expense and $2.0 million in employee travel, were generally offset by a $1.3 million increase in the allowance for doubtful accounts and a $0.8 million increase in software expense.

Fiscal Year Ended January 31, 2020 Compared to Fiscal Year Ended January 31, 2019

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This increase was primarily due to new customers and expanded subscriptions sold to existing customers.

Revenue from our enterprise and mid-size customers, which include third-party resellers, grew from approximately $152.7 million to $213.0 million, and excludes revenue from small business customers, which by their nature have inherently high turnover.

Cost of revenue was $77.0 million for the fiscal year ended January 31, 2020, compared to $57.4 million for the fiscal year ended January 31, 2019, an increase of $19.6 million or 34%.

This increase was primarily due to a $5.2 million increase in personnel-related costs, which mainly consisted of salaries and wages.

Knowledge Network application provider fees, as well as costs associated with our data centers, each increased $1.7 million.

In addition, depreciation expense and stock-based compensation expense each increased $1.5 million.

Gross margin improved to 74.9% from 74.1%, as revenue growth outpaced the increase in cost of revenue.

Gross margin was 74.2% for the fiscal year ended January 31, 2020, compared to 74.9% for the fiscal year ended January 31, 2019, a decrease of 70 basis points.

Operating Expenses

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Sales and marketing expense was $218.1 million for the fiscal year ended January 31, 2020, compared to $158.8 million for the fiscal year ended January 31, 2019, an increase of $59.2 million, or 37%.

The increase was primarily due to a $13.1 million increase in personnel-related costs, which mainly consisted of salaries and wages, as well as an increase in stock-based compensation expense of $11.4 million.

These increases were partially offset as sales and marketing expense for the fiscal year ended January 31, 2019 benefited from the modified retrospective adoption of ASU 2014-09, effective February 1, 2019, which resulted in capitalizing more costs associated with obtaining revenue contracts, and such costs being amortized over a longer period of time than under the previous guidance.

In addition, there was a $5.7 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY.

Research and development expense was $49.4 million for the fiscal year ended January 31, 2020, compared to $36.1 million for the fiscal year ended January 31, 2019, an increase of $13.3 million, or 37%.

The increase was primarily due to a $5.4 million increase in personnel-related costs, which mainly consisted of salaries and wages, as well as a $4.7 million increase in stock-based compensation expense.

In addition, there was a $1.5 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY.

The increase was primarily due to a $4.3 million increase in stock-based compensation expense, as well as a $3.5 million increase in personnel-related costs, which mainly consisted of salaries and wages, reflecting higher headcount.

In addition, there was a $1.9 million increase in operating and short-term lease expenses, mainly as a result of our new operating lease arrangements for office space, including in New York, NY.

Net loss was $94.7 million, $121.5 million, and $74.8 million for the fiscal years ended January 31, 2021, 2020, and 2019.

Non-GAAP Net Loss

In addition to our financial results determined in accordance with GAAP, we believe that non-GAAP net loss is useful in evaluating our operating performance and our business.

Non-GAAP net loss is a financial measure that is not calculated in accordance with GAAP.

We define non-GAAP net loss as our GAAP net loss as adjusted to exclude the effects of stock-based compensation expense.

We believe non-GAAP net loss provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations.

We also believe non-GAAP net loss is useful in evaluating our operating performance compared to that of other companies in our industry, as it eliminates the effects of stock-based compensation, which may vary for reasons unrelated to overall operating performance.

We use non-GAAP net loss in conjunction with traditional GAAP net loss as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, and to evaluate the effectiveness of our business strategies.

Our definition may differ from the definitions used by other companies and therefore comparability may be limited.

addition, other companies may not publish this or similar metrics.

Thus, our non-GAAP net loss should be considered in addition to, not as a substitute for, nor superior to or in isolation from, measures prepared in accordance with GAAP.

Non-GAAP net loss may be limited in its usefulness because it does not present the full economic effect of our use of stock-based compensation.

We compensate for these limitations by providing a reconciliation of non-GAAP net loss to the most closely related GAAP financial measure.

We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view non-GAAP net loss in conjunction with GAAP net loss.

The following table provides a reconciliation of GAAP net loss to non-GAAP net loss:

Fiscal year ended January 31,

(in thousands) 2021 2020 2019

GAAP net loss $ (94,692) $ (121,544) $ (74,837)

Stock-based compensation expense 72,294 67,770 44,233

Non-GAAP net loss $ (22,398) $ (53,774) $ (30,604)

Dollar-Based Net Retention Rate

We believe that our ability to retain our customers and expand the revenue they generate for us over time is an important component of our growth strategy and reflects the long term value of our customer relationships.

We assess our performance in this respect using a metric we refer to as our dollar-based net retention rate.

Our dollar-based net retention rate was 102%, 106%, and 110% for the fiscal years ended January 31, 2021, 2020 and 2019, respectively.

The decline in the net retention rate in the fiscal year ended January 31, 2021 reflects challenges in expanding our relationships with existing customers and to a lesser extent customer retention.

We believe our ability to retain and expand relationships with existing customers, and consequently improve our net retention rate, has been and may continue to be negatively impacted by the effects of COVID-19 on our customers.

See "—Overview — COVID-19 Update" and "Risk Factors" for the impact of COVID-19 on our business.

We calculate this metric for a particular period by first establishing a cohort of the enterprise, mid-size, and third-party reseller customers, who had active contracts at the end of each month of the same period in the prior year.

We divide the single month revenue from each of those customer cohorts for the applicable month in the current year by the single month revenue of that same customer cohort for the corresponding month in the prior year.

We then determine the dollar-based weighted average of each of the monthly rates, and this average represents the dollar-based net retention rate for the period.

As a result, if a customer, in particular an enterprise customer, elects to upgrade, downgrade or cancel its subscription, the full impact on dollar-based net retention rate is realized over the subsequent twelve months, thereby mitigating the immediate effect in the quarter when such election was made.

We only consider revenue from our enterprise, mid-size, and third-party reseller customers when calculating this metric since small business customers have limited licenses, experience inherently high turnover, and continue to decline as a percentage of total revenue.

Quarterly Results of Operations

The following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters in the periods ended January 31, 2020 and 2019, respectively and reflect our modified retrospective adoption of ASU 2014-09 (Topic 606).

The following tables set forth our unaudited quarterly statements of operations data for each of the eight quarters in the periods ended January 31, 2021 and 2020, respectively.

The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this Annual Report on Form 10-K and, in the opinion of management, includes all adjustments, which consist only of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods in accordance with GAAP.

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(in thousands) Jan.

31, 2020 Oct.

31, 2019 Jul.

31, 2019 Apr.

30, 2019 Jan.

31, 2019 Oct.

31, 2018 Jul.

31, 2018 Apr.

Revenue $ 92,194 $ 89,061 $ 88,055 $ 85,351 $ 81,378 $ 76,370 $ 72,373 $ 68,708

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Total operating expenses $ 89,740 $ 89,182 $ 90,311 $ 93,356 $ 91,019 $ 98,837 $ 83,401 $ 71,495

Total operating expenses as a percentage of revenue 97 % 100 % 103 % 109 % 112 % 129 % 115 % 104 %

Loss from operations $ (19,143) $ (21,760) $ (24,240) $ (29,189) $ (30,563) $ (42,833) $ (30,297) $ (19,260)

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Quarterly Trends

Historically, a higher proportion of new subscription and renewal agreements have occurred within the fourth quarter of the fiscal year, which contributes to driving our revenue recognized for the following fiscal year.

We believe that this results from the procurement, budgeting, and deployment cycles of many of our customers, particularly our enterprise customers.

At the beginning of each subscription term we invoice our customers, typically in annual installments, but also monthly, quarterly, and semi-annually.

Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue.

As a result, accounts receivable and unearned revenue are seasonally stronger in the fourth quarter of the fiscal year.

However, the nature of our subscription agreements generally results in revenue recognition ratably over the contract term, thereby mitigating the effect of potential seasonality in our revenue.

Our quarterly revenue has increased sequentially for all periods presented.

This increase has been primarily due to new customers and expanded subscriptions sold to existing customers, which we expect to continue to be significant drivers of our revenue growth.

While unearned revenue on the consolidated balance sheet may be influenced by seasonality driven by annual invoicing in the fourth quarter, we have not historically experienced meaningful seasonality in our revenue.

The nature of our subscription agreements generally results in revenue recognition ratably over the contract term, thereby mitigating the effect of potential seasonality in our revenue.

Cost of revenue has increased sequentially for all periods presented, primarily due to increased employee-related costs which are comprised of personnel-related costs and stock-based compensation expense.

We have seen our Knowledge Network application provider costs generally decline as a percentage of revenue as our data set becomes more important to those providers such that we may be able to negotiate more favorable terms with them.

These Knowledge Network application provider costs may increase at times as we enter new international markets, or introduce new products and features.

Cost of revenue has generally increased over the periods presented, and in recent quarters has stabilized.

However, our data center costs have increased and we expect that to continue as we expand our capacity.

Our employee-related costs have generally increased, as have our operating and short-term lease expenses as we entered into new arrangements for office space including our transition to our new corporate headquarters in New York, NY.

We expect our Knowledge Network application provider costs to generally stabilize, although costs may increase at times as we enter new international markets, or introduce new products and features.

Gross margin has stabilized in recent periods, and may decrease at times as we enter new international markets, or introduce new products and features.

Operating expenses have generally increased over the periods, primarily due to employee-related costs, which include personnel-related costs and stock-based compensation expense.

The increase is also attributable to operating and short-term lease expenses.

Lease expense associated with our new corporate headquarters in New York, NY commenced in the three months ended July 31, 2019, while the lease expense associated with our current corporate headquarters at One Madison Avenue, New York, NY will conclude at the end of its lease term in December 2020.

Our quarterly results may fluctuate due to various factors affecting our performance.

Additionally, while the coronavirus has disrupted our operations and caused economic and financial disruptions in the global economy, the extent to which the coronavirus may negatively impact our financial condition or results of operations is uncertain.

However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not be

apparent as a change to our reported revenue until future periods.

Operating expenses have fluctuated as a result of increased employee-related costs, increased operating and short-term lease expenses as we entered into new arrangements for office space including our transition to our new corporate headquarters in New York, NY, and in more recent quarters increased costs associated with software for use in the operations of our business.

Employee travel and conferences and events have decreased in recent quarters in light of the COVID-19 pandemic.

Operating expenses as a percentage of revenue have decreased in recent quarters, reflecting impacts of the COVID-19 pandemic, as well as strategically leveraging costs.

Our quarterly results may fluctuate due to various factors affecting our performance including impacts of the COVID-19 pandemic.

The ultimate extent of the impact of the pandemic on our business, financial condition and results of operations will depend on future developments, which continue to be highly uncertain and cannot be predicted, including the severity and duration of the COVID-19 pandemic and the actions taken to contain and address its impact, among others.

However, because we generally recognize revenue from our customer contracts ratably over the term of the contract, changes in our contracting activity in the near term may not

be apparent as a change to our reported revenue until future periods.

Most of our expenses are recorded as period costs and thus factors affecting our cost structure may be reflected in our financial results sooner than changes to our revenue.

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We believe our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months.

Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections, lease expense and capital expenditures, significant marketing events and related expenses, and other factors.

Our cash flows, including net cash used in or provided by operating activities, may vary significantly from quarter to quarter, due to the timing of billings, cash collections, lease payments and capital expenditures, significant marketing events and related expenses, the potential effects of the COVID-19 pandemic, among other factors.

Our future capital requirements will depend on many factors, including those set forth under "Risk Factors." We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights.

We have and will continue to enter into new lease arrangements for new and expanded facilities, including a lease arrangement for office space in New York, NY, which will serve as our new corporate headquarters.

In connection with these arrangements, we expect our lease expenses and related capital expenditures to increase, which may limit our ability to take advantage of business opportunities or respond to changing business or market conditions.

In addition, we may be required to seek additional equity or debt financing.

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The price per share to the public was $21.50.

We received aggregate proceeds of $147.0 million from this offering, net of underwriters’ discounts and commissions, before deducting offering costs of approximately $0.5 million, which were recognized through additional paid in capita l.

Credit Arrangements

On March 16, 2016, we entered into a Loan and Security agreement with Silicon Valley Bank that provides for a $15.0 million revolving credit line ("Revolving Line") and a $7.0 million Letter of Credit facility (together with the Revolving Line, the "Credit Agreement").

The original Credit Agreement had a maturity date of March 16, 2018.

In March 2018, the Credit Agreement was amended to extend the maturity date to March 16, 2020.

No significant debt issuance costs were incurred in association with the amendment.

We are obligated to pay ongoing commitment fees at a rate equal to 0.25% for the Revolving Line and 1.75% for any issued letters of credit.

Subject to certain terms of the Credit Agreement, we may borrow, prepay and reborrow amounts under the Revolving Line at any time during the agreement and amounts repaid or prepaid may be reborrowed.

Interest rates on borrowings under the Revolving Line will be based on one-half of one percent (0.50%) above the prime rate.

The prime rate is defined as the rate of interest per annum from time to time published in the money rate section of the Wall Street Journal.

The Credit Agreement contains certain customary affirmative and negative covenants, including an adjusted quick ratio of at least 1.25 to 1.00, minimum revenue subject to annual updates, a limit on our ability to incur additional indebtedness, dispose of assets, make certain acquisition transactions, pay dividends or make distributions, and certain other restrictions on our activities each defined specifically in the agreement.

In April 2019, in connec tion with the leasing of office space in New York, NY, we established back-to-back standby letters of credit for $12.1 million.

The arrangement expires September 30, 2031, and is fully secured by a $12.1 million cash deposit.

As of January 31, 2020, we wer e in compliance with all debt covenants.

As of such date, the $15.0 million Revolving Line was fully available, and the $7.0 million Letter of Credit had $6.9 million allocated as security in connection with various office space.

Subsequent to the fiscal year ended January 31, 2020, on March 11, 2020, we replaced our existing Credit Agreement and entered into a new credit agreement with Silicon Valley Bank.

See Note 11, "Debt" for further information.

On March 11, 2020, we entered into a new credit agreement with Silicon Valley Bank (the “Credit Agreement”).

No significant debt issuance costs were incurred in association with the Credit Agreement.

In January 2021, we amended the Credit Agreement which modified the conditions pursuant to which subsidiaries are required to become guarantors.

The Credit Agreement provides for a senior secured revolving loan facility of up to $50.0 million that matures three years after the effective date, with the right subject to certain conditions to add an incremental revolving loan facility of up to $50.0 million in the aggregate.

The three-year revolving loan facility provides for borrowings up to the amount of the facility with sub-limits of up to (i) $30.0 million to be available for the issuance of letters of credit and (ii) $10.0 million to be available for swingline loans.

Under the Credit Agreement, loans bear interest, at our option, at an annual rate based on LIBOR or a base rate.

Loans based on LIBOR shall bear interest at a rate between LIBOR plus 2.50% and LIBOR plus 3.00%, depending on our average daily usage of the revolving loan facility.

Loans based on the base rate shall bear interest at a rate between the base rate minus 0.50% and the base rate plus 0.00%, depending on our average daily usage of the revolving loan facility.

See Part I Item 1A “Risk Factors - Our new credit facility contains restrictive covenants that may limit our operating flexibility" for discussion of LIBOR being phased out.

The obligations under the Credit Agreement are secured by a lien on substantially all of our tangible and intangible property and by a pledge of all of our equity interests of material direct and indirect domestic subsidiaries and 66% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions.

The Credit Agreement contains customary affirmative and negative covenants and restrictions, as well as financial covenants that require us to maintain the year-over-year growth rate of its ordinary course recurring revenue for a trailing four fiscal quarter period above specified rates when certain liquidity thresholds are not met and to maintain a consolidated quick ratio of at least 1.50 to 1.00 tested on a monthly basis.

As of January 31, 2020, we had back-to-back standby letters of credit for $12.1 million, which were fully secured by a $12.1 million cash deposit.

The $12.1 million was classified as restricted cash on our consolidated balance sheet.

In connection with the Credit Agreement, the $12.1 million cash deposit was released and is no longer classified as restricted cash on our consolidated balance sheet as of January 31, 2021.

As of January 31, 2021, we were in compliance with all debt covenants.

As of such date, the $50.0 million revolving loan facility had $35.7 million available and $14.3 million in letters of credit allocated as security in connection with office space.

The following table summarizes our cash flows:

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(in thousands) 2021 2020 2019

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

$ 1,204 $ (30,768) $ 5,240

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

$ (65,111) $ 39,308 $ 28,134

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Operating Activities

Net cash provided by operating activities of $1.2 million for the fiscal year ended January 31, 2021 was primarily due to positive adjustments in reconciling our net loss of $94.7 million to net cash provided by operating activities.

These adjustments included stock-based compensation expense of $72.3 million, amortization of operating lease right-of-use assets of $12.2 million, depreciation and amortization expense of $10.6 million, and bad debt expense of $2.5 million, reflecting an increase in the allowance for doubtful accounts in light of impacts from the COVID-19 pandemic.

In addition, there were changes in unearned revenue of $12.7 million, operating lease liabilities of $8.9 million, and costs to obtain revenue contracts of $2.4 million.

These increases were partially offset by changes in accounts receivable of $18.0 million, mainly due to timing of billing and cash collections during the period, changes in prepaid expenses and other current assets of $5.5 million, and changes in accounts payable, accrued expenses and other current liabilities of $2.0 million.

Net cash used in operating activities of $30.8 million for the fiscal year ended January 31, 2020 was primarily due to the net loss of $121.5 million, as well as changes in accounts receivable of $27.0 million, mainly due to timing of billing and cash collections during the period, and changes in costs to obtain revenue contracts of $18.3 million.

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These increases were partially offset by the net loss of $74.8 million, as well as changes in costs to obtain revenue contracts of $16.8 million, accounts receivable of $11.6 million, mainly due to timing of billing and cash collections during the period, and prepaid expenses and other current assets of $6.7 million.

Net cash used in operating activities of $32.4 million for the fiscal year ended January 31, 2018 was primarily due to the net loss of $66.6 million, a change in accounts receivable of $17.0 million, mainly due to timing of billing and cash collections during the period, a change in deferred commissions of $4.4 million and a change in prepaid expenses and other current assets of $4.0 million.

These decreases were partially offset by a change in deferred revenue of $31.8 million, stock-based compensation expense of $22.4 million, depreciation and amortization of $5.1 million.

Investing Activities

Net cash used in investing activities of $65.1 million for the fiscal year ended January 31, 2021 reflected capital expenditures primarily associated with our new corporate headquarters in New York, NY, and our office spaces in Rosslyn, VA and Tokyo, Japan, among others.

Net cash provided by investing activities of $39.3 million for the fiscal year ended January 31, 2020 was due to maturities of marketable securities of $51.2 million, partially offset by capital expenditures of $11.9 million.

Net cash provided by investing activities of $28.1 million for the fiscal year ended January 31, 2019 was due to maturities of marketable securities of $86.3 million, partially offset by purchases of marketable securities of $52.9 million, and capital expenditures of $5.3 million.

Net cash used in investing activities of $88.1 million for the fiscal year ended January 31, 2018 was related to purchases of marketable securities of $110.6 million and capital expenditures of $3.7 million, offset by maturities and sales associated with marketable securities of $26.2 million.

Financing Activities

Net cash provided by financing activities of $22.5 million for the fiscal year ended January 31, 2021 was primarily related to proceeds from exercise of stock options of $16.5 million, and net proceeds from employee stock purchase plan withholdings of $7.0 million, partially offset by payments of deferred financing costs of $0.9 million.

Net cash provided by financing activities of $168.4 million for the fiscal year ended January 31, 2020 was primarily related to proceeds from our common stock offering of $147.0 million, net of underwriting discounts and commissions, and to a lesser extent proceeds from exercises of stock options of $14.9 million, and $7.3 million of net proceeds from employee stock purchase plan withholdings.

Net cash provided by financing activities of $24.4 million for the fiscal year ended January 31, 2019 was primarily related to proceeds from exercises of stock options of $18.9 million, and $5.7 million of net proceeds from employee stock purchase plan withholdings.

Net cash provided by financing activities of $129.6 million for the fiscal year ended January 31, 2018 was primarily related to proceeds from our IPO of $123.5 million, net of underwriting discounts and commissions, as well as proceeds from exercises of stock options of $11.6 million, and $3.8 million of net proceeds from employee stock purchase plan withholdings.

These amounts were partially offset by the $5.0 million repayment on our Revolving Line and $4.3 million of payments related to deferred offering costs.

Contractual Obligations

We are obligated to make payments under certain non-cancelable contractual obligations in the normal course of business.

Our obligations primarily relate to our contractual operating lease arrangements for office space, as well as our other obligations, including contracts with our Knowledge Network application providers, which generally have a term of one year, and software vendors, among others.

Our obligations represent minimum contractual payments, or our best estimate for variable elements based on historical payments.

Our contractual obligations primarily relate to our operating lease arrangements for office space.

Our other contractual obligations include contracts with our Knowledge Network application providers, which generally have a term of one year, although some have a term of several years, as well as contracts with our software vendors, among others.

These obligations represent minimum contractual payments, or our best estimate for variable elements based on historical payments.

Our contractual obligations have various expiry dates between fiscal years 2022 and 2035.

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2027 and thereafter

112,238 2,860

Total $ 187,685 $ 50,934

Refer to Note 14 "Commitments and Contingencies" to our consolidated financial statements for further discussion on contractual obligations.

Performance Bond

Our operating lease arrangement associated with office space in New York, NY requires a performance bond to secure the completion of certain potential construction work, when a reasonable estimate of such work is available.

As of January 31, 2020, a performance bond had not been executed or issued, nor had any related payments been made.

See Note 13 "Commitments and Contingencies" to our consolidated financial statements for further discussion on contractual obligations.

Off-Balance Sheet Arrangements

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Amounts that have been invoiced for non-cancelable contracts are recorded in accounts receivable and unearned revenue or revenue.

Refer to Note 2 "Summary of Significant Accounting Policies" and Note 3 "Revenue" to our consolidated financial statements for further discussion on our revenue recognition.

See to Note 2 "Summary of Significant Accounting Policies" and Note 3 "Revenue" to our consolidated financial statements for further discussion on our revenue recognition.

Costs Capitalized to Obtain Revenue Contracts

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For each individual lease arrangement, we estimate an incremental borrowing rate at the commencement date.

The incremental borrowing rate is determined based on what we would estimate to pay for a collateralized loan over a similar term and economic

environment for each lease arrangement.

The incremental borrowing rate is determined based on what we would estimate to pay for a collateralized loan over a similar term and economic environment for each lease arrangement.

As of January 31, 2021, a hypothetical 100 basis point change in our estimated incremental borrowing rates for our respective leases would have a less than 10% impact to the aggregated total operating lease liability on the consolidated balance sheet.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis