What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-07 compared with 2021-03-18 · 216 added, 229 removed, 870 unchanged (34% of the section changed)

20 unchanged sentences

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of February 1, 2019, due to the adoption of Financial Accounting Standards Board’s Accounting Standards Codification (ASC) Topic 842, Leases .

Basis for Opinions

13 unchanged sentences

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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We recalculated revenue for system-generated sales transactions during the year using a software audit tool.

For a sample of transactions, we compared the amounts recognized for consistency with underlying documentation, including contracts with customers and cash receipts, and recalculated the amount of revenue recognized in the period based on the terms of the arrangement and the satisfaction of the underlying performance obligation.

For a sample of transactions, we compared the amounts recognized for consistency with underlying documentation, including contracts with customers and cash receipts.

Additionally, for the same sample of transactions, we recalculated the amount of revenue recognized in the period based on the terms of the arrangement and the satisfaction of the underlying performance obligation.

In addition, we evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed.

We have served as the Company’s auditor since 2016.

Santa Clara, California

San Francisco, California

March 7, 2022

14 unchanged sentences

Operating lease right-of-use assets 95,965 97,649

Strategic investments 367,814 18,668

Goodwill 27,607 24,340

Deferred tax assets 382,296 1,519

Other assets, noncurrent 106,761 55,766

19 unchanged sentences

Additional paid-in capital 3,749,514 3,187,168

Accumulated other comprehensive income 839 809

Accumulated other comprehensive (loss) income ( 17,902 ) 839

Retained earnings 2,048,107 672,468

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Income from operations 1,063,591 659,848 12,696

Interest income and other, net 18,186 13,666 2,182

Income before provision for income taxes 678,034 26,362 8,349

Provision for income taxes 5,718 1,057 765

Gains on strategic investments, net 43,761 2,538 —

Other (expense) income, net ( 5,720 ) 15,648 13,666

Income before (benefit from) provision for income taxes 1,101,632 678,034 26,362

(Benefit from) provision for income taxes ( 274,007 ) 5,718 1,057

Net income 1,375,639 672,316 25,305

14 unchanged sentences

Net income $ 1,375,639 $ 672,316 $ 25,305

Other comprehensive income:

Unrealized gain on available-for-sale marketable securities, net of tax 30 944 396

Other comprehensive (loss) income:

Unrealized (loss) gain on available-for-sale marketable securities, net of tax ( 18,741 ) 30 944

Comprehensive income $ 1,356,898 $ 672,346 $ 26,249

12 unchanged sentences

Balance as of January 31, 2019 152,665,804 $ 159,552 90,327,435 $ 89 $ 17,760 $ ( 135 ) $ ( 25,153 ) $ ( 7,439 )

Issuance of common stock upon exercise of stock options — — 7,717,797 9 2,302 — — 2,311

Stock-based compensation expense — — — — 8,941 — — 8,941

Other comprehensive income — — — — — 396 — 396

Net income — — — — — — 7,584 7,584

Balance as of January 31, 2019 152,665,804 $ 159,552 90,327,435 $ 89 $ 17,760 $ ( 135 ) $ ( 25,153 ) $ ( 7,439 )

Conversion of convertible preferred stock to common stock upon initial public offering ( 152,665,804 ) ( 159,552 ) 152,665,804 153 159,399 — — 159,552

17 unchanged sentences

Balance as of January 31, 2021 — $ — 293,549,223 $ 292 $ 3,187,168 $ 839 $ 672,468 $ 3,860,767

Issuance of common stock upon exercise of stock options — — 2,881,485 4 14,806 — — 14,810

Issuance of common stock upon release of restricted stock units — — 1,768,702 2 — — — 2

Issuance of common stock for employee stock purchase plan — — 838,395 1 59,330 — — 59,331

Stock-based compensation expense — — — — 488,210 — — 488,210

Other comprehensive loss — — — — — ( 18,741 ) — ( 18,741 )

Net income — — — — — — 1,375,639 1,375,639

Balance as of January 31, 2022 — $ — 299,037,805 $ 299 $ 3,749,514 $ ( 17,902 ) $ 2,048,107 $ 5,780,018

The accompanying notes are an integral part of these consolidated financial statements.

8 unchanged sentences

Stock-based compensation expense 477,287 275,818 73,109

Income tax benefit from release of valuation allowance ( 327,957 ) — —

Amortization of deferred contract acquisition costs 177,283 104,306 37,101

Provision for accounts receivable allowances 32,007 6,370 1,953

Gains on strategic investments, net ( 43,761 ) ( 2,538 ) —

Depreciation and amortization 48,188 28,857 16,449

Charitable donation of common stock 23,312 — —

Provision for accounts receivable allowances 36,747 32,007 6,370

Non-cash operating lease cost 18,387 10,887 6,885

Charitable donation of common stock — 23,312 —

Amortization on marketable securities 25,316 5,433 ( 2,041 )

Other 4,591 927 973

13 unchanged sentences

Purchases of property and equipment ( 132,590 ) ( 79,972 ) ( 38,084 )

Purchases of strategic investments ( 305,149 ) ( 13,000 ) ( 3,000 )

Cash paid for acquisition, net of cash acquired ( 3,501 ) ( 26,486 ) —

Purchase of equity investment ( 8,000 ) ( 3,000 ) —

Purchases of intangible assets ( 13,018 ) ( 5,843 ) ( 141 )

Purchase of convertible promissory note ( 5,000 ) — —

Other — 1,659 ( 1,569 )

1 unchanged sentence

Cash flows from financing activities:

Proceeds from follow-on public offering, net of underwriting discounts and commissions and other offering costs 1,979,206 — —

Proceeds from issuance of common stock for employee stock purchase plan 59,331 38,433 15,482

Proceeds from exercise of stock options, net of repurchases 14,404 28,550 9,169

Proceeds from employee equity transactions to be remitted to employees and tax authorities, net 4,088 48,547 —

Proceeds from employee equity transactions (remitted) to be remitted to employees and tax authorities, net ( 40,004 ) 4,088 48,547

Proceeds from follow-on public offering, net of underwriting discounts and commissions and other offering costs — 1,979,206 —

Proceeds from initial public offering and private placement, net of underwriting discounts and commissions and other offering costs — — 542,492

Proceeds from issuance of convertible promissory notes and derivatives — — 15,000

Principal payments on capital lease obligations — — ( 92 )

Other 337 — —

Net cash provided by financing activities 34,068 2,050,277 615,690

Net increase in cash, cash equivalents, and restricted cash 1,959,034 268,114 29,147

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 1,219,763 ) 1,959,034 268,114

Cash, cash equivalents, and restricted cash—beginning of year 2,293,116 334,082 65,968

3 unchanged sentences

Supplemental disclosures of non-cash investing and financing information

Conversion of convertible preferred stock to Class B common stock upon initial public offering $ — $ 159,552 $ —

Conversion of debt to Class A common stock $ — $ 15,344 $ —

Purchase of equipment during the period included in accounts payable and accrued expenses $ 13,728 $ 34,514 $ 1,422

Vesting of early exercised stock options and restricted stock awards $ 407 $ 558 $ 725

Deferred offering costs, accrued but not paid $ — $ — $ 1,490

Conversion of convertible preferred stock to Class B common stock upon initial public offering $ — $ — $ 159,552

Conversion of debt to Class A common stock $ — $ — $ 15,344

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

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Zoom Video Communications, Inc.

and its subsidiaries (collectively, “Zoom,” the “Company,” “we,” “us,” or “our”) provide a video-first unified communications platform that delivers happiness and fundamentally changes how people interact.

We connect people through frictionless and secure video, phone, chat, and content sharing and enable face-to-face video experiences for thousands of people in a single meeting across disparate devices and locations.

and its subsidiaries (collectively, “Zoom,” the “Company,” “we,” “us,” or “our”) connect people through our core unified communications offering, which frictionlessly brings together video, phone, chat, and webinars, and enables meaningful experiences across disparate devices and locations.

We were incorporated in the state of Delaware in April 2011, and are headquartered in San Jose, California.

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

Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, the allowance for credit losses, the useful lives of long-lived assets, the incremental borrowing rate for operating leases, stock-based compensation expense, sales and other tax liabilities, the fair value of marketable securities, equity investment, convertible promissory note, acquired intangible assets and goodwill, and the valuation of deferred income tax assets and uncertain tax positions.

Actual results could differ from those estimates.

The COVID-19 pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak and the impact on our customers and our sales cycles.

Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, the useful lives of long-lived assets, the incremental borrowing rate for operating leases, stock-based compensation expense, sales and other tax liabilities, the fair value of marketable securities, acquired intangible assets and goodwill, the valuation of deferred income tax assets and uncertain tax positions, and accruals and contingencies.

Actual results could materially differ from those estimates.

The COVID-19 pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the availability and distribution of vaccines, and their impact on our customers and our sales cycles.

During the fiscal years ended January 31, 2022 and 2021, our estimates and assumptions required increased judgment and carried a higher degree of variability and volatility.

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Cash and cash equivalents consist of cash in banks and highly liquid investments, primarily money market funds, purchased with an original maturity of three months or less.

Restricted cash consists of certificates of deposit collateralizing our operating leases, corporate credit cards, and cash from proceeds from international employees’ sales of our common stock, and is included in prepaid expenses and other current assets and other assets, noncurrent in the consolidated balance sheets.

Restricted cash consists of certificates of deposit collateralizing our operating leases and cash from proceeds from international employees’ sales of our common stock, and is included in prepaid expenses and other current assets and other assets, noncurrent in the consolidated balance sheets.

As of January 31, 2022 and 2021, we had $ 10.2 million and $ 50.5 million, respectively, of cash from proceeds from international employees’ sales of our common stock.

The amount is held in our bank account until it is remitted to the

employees and the tax authorities.

Due to the restrictions on the use of the funds in the bank account, we have classified the amount as restricted cash included in prepaid expenses and other current assets, and a corresponding amount is included in accrued expenses and other current liabilities in the consolidated balance sheets.

The amount is held in our bank account until it is remitted to the employees and the tax authorities.

Due to the restrictions on the use of the funds in the bank account, we have classified the

amount as restricted cash included in prepaid expenses and other current assets, and a corresponding amount is included in accrued expenses and other current liabilities in the consolidated balance sheets.

Allowance for Credit Losses

4 unchanged sentences

Our short-term accounts receivable consist of the following:

As of January 31, 2021

As of January 31, 2022 As of January 31, 2021

(in thousands)

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Below is a rollforward of our allowance for credit losses for the fiscal year ended January 31, 2022.

January 31, 2022 January 31, 2021

(in thousands)

Balance as of January 31, 2020 $ 5,150

Balance as of beginning of year $ 20,500 $ 5,150

Provision for credit losses 32,587 25,651

Write-offs ( 36,087 ) ( 10,301 )

Balance as of January 31, 2021 $ 20,500

Balance as of end of year $ 17,000 $ 20,500

Available-for-sale Investments

4 unchanged sentences

As a result, we classify our securities, including those with maturities beyond 12 months, as current assets in the consolidated balance sheets.

We carry these securities at fair value and record unrealized gains and losses in accumulated other comprehensive income, which is reflected as a component of stockholders’ equity.

We carry these securities at fair value and record unrealized gains and losses in accumulated other comprehensive (loss) income, which is reflected as a component of stockholders’ equity.

We evaluate our securities with unrealized loss positions as to whether the declines in fair value were due to credit losses, and record the portion of impairment relating to the credit losses through allowance for credit losses limited to the amount that fair value was less than the amortized cost basis.

Realized gains and losses from the sale of marketable securities are determined based on the specific identification method.

Realized gains and losses are reported in interest income and other, net in the consolidated statements of operations.

Realized gains and losses are reported in other (expense) income, net in the consolidated statements of operations.

Strategic Investments

We hold strategic investments in publicly held equity securities and privately held debt and equity securities in which we do not have a controlling interest.

Publicly held equity securities are measured using quoted prices in their respective active markets with changes recorded through gains on strategic investments, net in the consolidated statements of operations.

Privately held equity securities without a readily determinable fair value are recorded at cost and adjusted for impairments and observable price changes with a same or similar security from the same issuer (i.e.

using the measurement alternative) and are recorded through gains on strategic investments, net in the consolidated statements of operations.

If, based on the terms of these publicly traded and privately held securities, we determine that we exercise significant influence on the entity to which these securities relate, we will apply the equity method of accounting for such investments.

Privately held equity securities that are accounted for under the equity method are measured at cost less any impairment, plus or minus our share of equity method investee income or loss, which is reported in gains on strategic investments, net in the consolidated statements of operations.

Privately held debt securities are recorded at fair value with changes in fair value recorded through accumulated other comprehensive (loss) income on the consolidated balance sheets.

On a quarterly basis, we assess our privately held debt and equity securities in our strategic investment portfolio for indicators for impairment.

As of January 31, 2022, we have not recognized any impairments to our privately held debt and equity securities.

Fair Value Measurements

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Capitalized software development costs are amortized on a straight-line basis over the software’s estimated useful life, which is generally three years , and are recorded in cost of revenue in the consolidated statements of operations.

We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of

these assets.

We have capitalized $ 20.2 million, $ 19.4 million, and $ 3.1 million of software development costs during the fiscal years ended January 31, 2022, 2021, and 2020, respectively.

We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) and applicable updates as of February 1, 2019, using the modified retrospective method of applying the new standard at the adoption date.

Prior year comparative financial information was not recast under the new standard and continues to be presented under Accounting Standards Codification (“ASC”) 840.

All lease arrangements are generally recognized at lease commencement.

6 unchanged sentences

Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located.

ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease

incentives received.

ROU assets also include any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received.

We reassess the lease term if and when a significant event or change in circumstances occurs within our control.

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These costs are composed of co-located data center costs, third-party cloud hosting costs, integrated third-party PSTN services, personnel-related expenses, amortization of capitalized software development costs and acquired intangible assets, royalty payments, and allocated overhead costs.

Indirect overhead costs associated with corporate facilities and related depreciation is allocated to cost of revenue and operating expenses based on applicable headcount.

Indirect overhead costs associated with corporate facilities and related depreciation, health care benefits, training, and other employee benefits are allocated to cost of revenue and operating expenses based on applicable headcount.

Research and Development

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Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe it is more likely than not that they will not be realized.

We consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations.

We consider all available positive and negative evidence, including future

reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations.

We record uncertain tax positions in accordance with ASC 740, Income Taxes on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

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We calculate our net income per share attributable to Class A and Class B common stock using the two-class method required for companies with participating securities.

We consider our convertible preferred stock and unvested common stock,

which includes early exercised stock options and RSAs, to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of our declaration of a dividend for shares of common stock.

We consider our convertible preferred stock and unvested common stock, which includes early exercised stock options and RSAs, to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of our declaration of a dividend for shares of common stock.

Distributed and undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders.

14 unchanged sentences

Total property and equipment, net $ 222,354 $ 149,924

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which was subsequently amended by ASU No.

2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses , in November 2018.

Subsequently, the FASB issued ASU No.

2019-04, ASU No.

2019-05, ASU No.

2019-10, and ASU No.

2019-11 to provide additional guidance on the credit losses standard.

2016-13 and the related updates replace the existing incurred loss impairment model with an expected credit loss model, and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected.

We adopted the standard as of February 1, 2020, using the modified retrospective method of applying the new standard at the adoption date.

Our adoption did not result in any cumulative effect adjustment in our consolidated financial statements upon adoption as of February 1, 2020.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract .

The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

We adopted ASU No.

2018-15, prospectively, as of February 1, 2020, and our adoption did not have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification Topic 606.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 and early adoption is permitted.

We do not expect the adoption to have a material effect on our consolidated financial statements.

Revenue Recognition

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In some arrangements, a right to consideration for our performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled accounts receivable.

The amount of unbilled accounts receivable included within accounts receivable, net of allowances in the consolidated balance sheets was $ 24.6 million and $ 12.5 million as of January 31, 2021 and 2020, respectively.

The amount of unbilled accounts receivable included within accounts receivable, net of allowances on the consolidated balance sheets was $ 59.7 million and $ 24.6 million as of January 31, 2022 and 2021, respectively.

Contract liabilities consist of deferred revenue.

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The amount of revenue recognized during the fiscal years ended January 31, 2022, 2021, and 2020 that was included in deferred revenue at the beginning of each period was $ 858.2 million, $ 222.0 million, and $ 119.1 million, respectively.

Remaining Performance Obligation

Remaining Performance Obligations

The terms of our subscription agreements are monthly, annual, and multiyear and we may bill for the full term in advance or on an annual, quarterly, or monthly basis, depending on the billing terms with customers.

40 unchanged sentences

government agency securities 834,894 28 ( 257 ) 834,665

Treasury bills 215,902 6 ( 6 ) 215,902

Marketable securities $ 2,003,560 $ 1,226 $ ( 376 ) $ 2,004,410

2 unchanged sentences

We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the high-grade credit rating for each of our marketable securities as of the end of each fiscal year.

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

There were no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive (loss) income for the fiscal years ended January 31, 2022, 2021, and 2020.

The following table presents the contractual maturities of our marketable securities as of January 31, 2022 and 2021:

4 unchanged sentences

Total $ 4,356,446 $ 2,004,410

Strategic Investments

Strategic investments by form and measurement category as of January 31, 2022 were as follows:

Measurement Category

Fair Value Measurement Alternative Equity Method Total

(in thousands)

Equity securities $ 168,784 $ 91,399 $ 93,400 $ 353,583

Debt securities 14,231 — — 14,231

Strategic investments $ 183,015 $ 91,399 $ 93,400 $ 367,814

Strategic investments by form and measurement category as of January 31, 2021 were as follows:

Measurement Category

Fair Value Measurement Alternative Equity Method Total

(in thousands)

Equity securities $ — $ 13,538 $ — $ 13,538

Debt securities 5,130 — — 5,130

Strategic investments $ 5,130 $ 13,538 $ — $ 18,668

In the second quarter of fiscal year 2022, we made a $ 75.0 million strategic investment of common shares of a technology company in a private placement concurrent with the investee company’s initial public offering.

The shares are subject to a 180 -day lock-up agreement.

We recorded a gain of $ 26.3 million related to this investment for the fiscal year ended January 31, 2022.

As of January 31, 2022, the fair value of the investment was $ 101.3 million and our ownership interest represents approximately one percent of the economic interest of the investee’s outstanding capital stock.

In the third quarter of fiscal year 2022, we made an additional strategic investment in equity securities of a private company.

Based on the terms of these privately-held securities, we determined that we currently do not have a controlling interest but have the ability to exercise significant influence over the operating and financial policies of the investee.

Therefore this investment is currently accounted for under the equity method.

The fair value of the investment was remeasured immediately before adopting the equity method of accounting, based on the observable price from the most recent financing round.

The carrying value of this investment was also adjusted by our share of the equity method investee’s operating result for the respective period, which was immaterial for the fiscal year ended January 31, 2022.

As a result, we recognized a total gain of $ 49.9 million on the existing investment during the third quarter of fiscal year 2022.

As of January 31, 2022, the carrying amount of this investment was $ 93.4 million.

In the fourth quarter of fiscal year 2022, we made a $ 100.0 million strategic investment of common shares of a software company in a private placement concurrent with the investee company’s merger.

We recorded a loss of $ 32.5 million related to this investment for the fiscal year ended January 31, 2022.

As of January 31, 2022, the fair value of the investment was $ 67.5 million and our ownership interest represents approximately two percent of the economic interest of the investee’s outstanding capital stock.

In the fourth quarter of fiscal year 2022, we also made a $ 75.0 million strategic investment in equity securities of a private company.

Based on the terms of these privately-held securities, we determined that we do not have a controlling interest nor the ability to exercise significant influence over the operating and financial policies of the investee.

Therefore this investment is currently accounted for under the measurement alternative method.

No gain or loss was recorded related to this investment for the fiscal year ended January 31, 2022.

As of January 31, 2022, the carrying amount of this investment was $ 75.0 million .

Fair Value Measurements

6 unchanged sentences

Treasury bills 107,496 — 107,496 —

Corporate debt securities 749 — 749 —

Cash equivalents 796,967 688,722 108,245 —

5 unchanged sentences

Marketable securities 4,356,446 — 4,356,446 —

Certificate of deposit included in prepaid expenses and other current assets 100 — 100 —

Certificates of deposit included in other assets, noncurrent 297 — 297 —

Convertible note included in other assets, noncurrent 5,130 — — 5,130

Publicly held equity securities included in strategic investments 168,784 168,784 — —

Privately held debt securities included in strategic investments 14,231 — — 14,231

Total financial assets $ 5,336,725 $ 857,506 $ 4,464,988 $ 14,231

4 unchanged sentences

Money market funds $ 958,357 $ 958,357 $ — $ —

Commercial paper 4,994 — 4,994 —

Agency bonds 9,999 — 9,999 —

Treasury bills 618,498 — 618,498 —

Cash equivalents 1,576,855 958,357 618,498 —

3 unchanged sentences

government agency securities 834,665 — 834,665 —

Treasury bills 215,902 — 215,902 —

Marketable securities 2,004,410 — 2,004,410 —

1 unchanged sentence

Certificates of deposit included in other assets, noncurrent 2,238 — 2,238 —

Privately held debt securities included in strategic investments 5,130 — — 5,130

Total financial assets $ 3,588,733 $ 958,357 $ 2,625,246 $ 5,130

We classify our highly liquid money market funds within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

We classify our highly liquid money market funds and publicly held equity securities within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.

We classify our commercial paper, agency bonds, corporate and other debt securities, U.S.

government agency securities, treasury bills, and certificates of deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security, which may not be actively traded.

We classify the convertible note as Level 3 due to the lack of relevant observable market data over fair value inputs, such as the probability weighting of the various scenarios that can impact settlement of the arrangement.

We hold a non-marketable equity investment in a private company in the business of designing and developing video communications hardware.

We do not have a controlling financial interest in the investee nor the ability to exercise significant influence over the operating and financial policies of the investee.

We have elected to measure this investment, which does not have a readily determinable fair value, at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (i.e., using the measurement alternative).

As of January 31, 2021 and 2020, the carrying amount of the equity investment was $ 13.5 million and $ 3.0 million, respectively.

We classify the equity investment as Level 3 within the fair value hierarchy only if an impairment or observable adjustment is recognized during the period, as it is based on an observable transaction price at the transaction date and other unobservable inputs, such as volatility.

We classify our privately held debt securities as Level 3 due to the lack of relevant observable market data over fair value inputs, such as the probability weighting of the various scenarios that can impact settlement of the arrangement.

Business Combinations

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(“Keybase”), a secure messaging and file-sharing company, for purchase consideration of $ 42.9 million in cash.

The acquisition helps us strengthen the security of our video communications platform by providing end-to-end encryption expertise.

The acquisition helps us strengthen the security of our unified communications platform by providing end-to-end encryption expertise.

The acquisition has been accounted for as a business combination.

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Not included in the purchase consideration, we also entered into holdback agreements with certain employees for $ 20.0 million in cash payments, which are subject to such employees’ continued service with us.

The holdback amount of $ 20.0 million will be treated as compensation for research and development over the required service period ranging from one to three years .

The holdback amount of $ 20.0 million will be treated as compensation for research and development over the required service period ranging from one year to three years .

Transaction costs incurred in connection with the acquisition were immaterial.

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Accounts receivable, noncurrent $ 55,643 $ 28,008

Equity investment 13,538 3,000

Prepaid expense, noncurrent 16,120 12,386

Indefinite-lived intangible assets 8,002 2,159

Convertible note 5,130 —

Intangible assets subject to amortization, net 2,814 —

Other 34,998 15,372

6 unchanged sentences

Accrued compensation and benefits 126,322 118,640

Proceeds from employee equity transactions to be remitted to employees and tax authorities 54,174 49,287

Income tax liability 56,968 3,426

Sales and other tax liabilities 33,305 27,453

1 unchanged sentence

Operating lease liabilities, current 20,697 15,601

Proceeds from employee equity transactions to be remitted to employees and tax authorities 14,169 54,174

Other 8,412 3,507

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As leases approach maturity, we consider various factors such as market conditions and the terms of any renewal options that may exist to determine whether we are reasonably certain to exercise the options to extend the lease.

Operating lease expense for the fiscal years ended January 31, 2021 and 2020 was $ 14.5 million and $ 9.7 million , respectively, excluding short-term lease costs, variable lease costs, and sublease income, each of which was immaterial for the fiscal years ended January 31, 2021 and 2020 .

Rent expense was $ 7.2 million for the fiscal year ended January 31, 2019, u nder Topic 840.

Operating lease expense for the fiscal years ended January 31, 2022, 2021 and 2020 was $ 22.8 million, $ 14.5 million and $ 9.7 million , respectively, excluding short-term lease costs, variable lease costs, and sublease income, each of which was immaterial for the fiscal years ended January 31, 2022, 2021 and 2020 .

Supplemental balance sheet information related to operating leases was as follows:

As of January 31,

(in thousands)

(in thousands, except life and percentages)

Operating lease right-of-use assets $ 95,965 $ 97,649

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Year Ended January 31,

2022 2021 2020

(in thousands)

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In the normal course of business, we enter into non-cancelable purchase commitments with various parties to purchase primarily software-based services.

As of January 31, 2021, we had outstanding non-cancelable purchase obligations with a term of 12 months or longer of $ 498.6 million.

License Agreement

In May 2020, we entered into a license agreement with MPEGLA to obtain the rights for future use of licensed intellectual property in exchange for periodic royalty payments.

In connection with the license agreement, we made an initial

royalty payment of $ 9.8 million to use the technology until December 31, 2020 and we made an additional payment of $ 9.8 million in the fourth quarter of fiscal year 2021 to use the technology until December 31, 2021.

Both payments were amortized in cost of revenue on a straight-line basis in our consolidated statements of operations.

For the fiscal year ended January 31, 2021, we recorded $ 10.6 million of such costs.

In addition, we made a one-time payment of $ 9.8 million for past use, which was recorded in general and administrative expenses in our consolidated statements of operations for the fiscal year ended January 31, 2021.

As of January 31, 2022, we had outstanding non-cancelable purchase obligations with a term of less than 12 months of $ 227.2 million and non-cancelable purchase obligations with a term 12 months or longer of $ 159.4 million.

Indemnifications and Contingency

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Other Contingencies

Our platform and associated products are subject to various restrictions under U.S.

export control and sanctions laws and regulations, including the U.S.

Department of Commerce’s EAR and various economic and trade sanctions regulations administered by the U.S.

Treasury Department’s Office of Foreign Assets Controls (“OFAC”).

export control laws and U.S.

economic sanctions laws include restrictions or prohibitions on the sale or supply of certain products and services to U.S.

embargoed or sanctioned countries, governments, persons, and entities, and also require authorization for the export of certain encryption items.

In addition, various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements and have enacted or could enact laws that could limit our ability to distribute our platform or could limit our hosts’ ability to implement our platform in those countries.

Although we take precautions to prevent our platform and associated products from being accessed or used in violation of such laws, we have inadvertently allowed our platform and associated products to be accessed or used by some customers in apparent violation of U.S.

economic sanction laws.

In addition, we may have inadvertently made our software products available to some customers, including users in embargoed or sanctioned countries, in apparent violation of the EAR.

As a result, we have submitted initial and final voluntary self-disclosures concerning potential violations of U.S.

sanctions and export control laws and regulations to the OFAC and the U.S.

Department of Commerce’s BIS.

In June 2019, OFAC and BIS issued us warning letters as their final enforcement responses to these potential violations, but no fines or penalties were assessed.

If we are found to be in violation of U.S.

economic sanctions or export control laws in the future, it could result in fines and penalties.

In June 2020 we received a grand jury subpoena from the Department of Justice’s U.S.

Attorney’s Office for Eastern District of New York “EDNY”), which requested information regarding our interactions with foreign governments and foreign

political parties, including the Chinese government, as well as information regarding storage of and access to user data, the development and implementation of Zoom’s privacy policies, and the actions we took relating to the Tiananmen commemorations on Zoom.

Attorney’s Office for Eastern District of New York (“EDNY”), which requested information regarding our interactions with foreign governments and foreign political parties, including the Chinese government, as well as information regarding storage of and access to user data, the development and implementation of Zoom’s privacy policies, and the actions we took relating to the Tiananmen commemorations on Zoom.

In July 2020, we received subpoenas from the Department of Justice’s U.S.

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Legal Proceedings

Beginning on March 30, 2020, multiple putative class actions have been filed against us in various U.S.

federal district courts and state courts relating to our alleged privacy and security practices, including alleged data sharing with third parties (the “U.S.

Privacy Class Actions”).

We have also been sued under the DC private attorney general statute on behalf of members of the general public.

The plaintiffs claim violations of a variety of state consumer protection and privacy laws, and also assert state constitutional and common law claims such as negligence and unjust enrichment.

Privacy Class Actions seek to certify both nationwide and state-specific classes of individuals using our services in certain time periods.

The plaintiffs seek various forms of injunctive and monetary relief, including restitution, statutory and actual damages, punitive damages, and attorneys’ fees.

The federal cases have been transferred to and consolidated in the Northern District of California with our consent;

lead plaintiffs’ counsel have been appointed;

and plaintiffs filed their first amended consolidated class action complaint on October 28, 2020.

We filed a motion to dismiss the first amended consolidated class action complaint on December 2, 2020, which is pending ruling by the court, and the parties are presently engaged in discovery, with plaintiffs’ motion for class certification due on June 25, 2021.

On April 7, 2020, and April 8, 2020, securities class action complaints were filed against us and two of our officers in the United States District Court for the Northern District of California.

On April 7, 2020, and April 8, 2020, securities class action complaints were filed against us and two of our officers in the United States District Court for the NDCA.

The plaintiffs are purported stockholders of the Company.

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On December 23, 2020, the lead plaintiff filed a consolidated complaint.

The response to the complaint is currently stayed while the court considers a motion for reconsideration regarding its lead plaintiff appointment.

We filed a motion to dismiss the consolidated complaint on May 20, 2021.

Plaintiff filed an opposition to our motion to dismiss on July 9, 2021.

Our reply in support of the motion to dismiss was filed on August 9, 2021.

On February 16, the court granted in part, and denied in part, our motion to dismiss.

On June 11, 2020 and July 30, 2020, purported shareholder derivative complaints were filed in the United States District Court for the District of Delaware.

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On September 25, 2020, the derivative cases were consolidated.

The consolidated case is stayed pending resolution of a forthcoming motion to dismiss the securities class action.

The consolidated case is stayed pending resolution of the motion to dismiss the securities class action.

On October 27, 2021, a third substantially identical lawsuit was filed in the same court against the same defendants, seeking unspecified monetary damages and governance reforms.

On November 17, 2021, all three derivative lawsuits were consolidated and stayed pending resolution of the motion to dismiss the securities class action.

We believe these lawsuits are without merit, and we are vigorously defending ourselves against them.

Given the uncertainty of litigation, the preliminary stage of the cases, and the legal standards that must be met for, among other things, class certification and success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from these actions.

In September 2019, the FTC issued a CID to us requiring us to produce certain documents and materials and to answer certain interrogatories relating to our privacy and security representations and practices.

Since then, we have fully cooperated with the investigation.

In October 2020, we reached a proposed settlement agreement with the FTC staff, which would resolve the FTC’s allegations that certain of our statements and practices about our security constituted deceptive and unfair acts or practices in violation of the FTC Act.

On November 10, 2020, the FTC Commissioners voted to approve the settlement and, on November 13, 2020, the FTC published the settlement in the Federal Register for a 30-day public comment period, which ended on December 13, 2020.

On January 19, 2021, the FTC voted to finalize the settlement.

Under the terms of the settlement, we neither admit nor deny the FTC’s allegations, and the FTC does not impose any fine or penalty upon us.

We are required to implement certain injunctive provisions, including, among other things, refraining from making any misrepresentations

regarding the privacy and security of our services or how we collect, maintain, use, delete, disclose, allow access to, and protect user information.

Beginning on March 30, 2020, multiple putative class actions were filed against us in various U.S.

federal district courts and state courts relating to our alleged privacy and security practices, including alleged data sharing with third parties (the “U.S.

Privacy Class Actions”).

The plaintiffs claim violations of a variety of state consumer protection and privacy laws, and also assert state constitutional and common law claims, such as negligence and unjust enrichment.

Privacy Class Actions seek to certify both nationwide and state-specific classes of individuals using our services in certain time periods.

The plaintiffs seek various forms of injunctive and monetary relief, including restitution, statutory and actual damages, punitive damages, and attorneys’ fees.

The federal cases have been transferred to and consolidated in the NDCA with our consent;

lead plaintiffs’ counsel have been appointed;

and plaintiffs filed their first amended consolidated class action complaint on October 28, 2020.

On March 11, 2021, the court granted in part, and denied in part, our motion to dismiss, and gave plaintiffs leave to amend.

On July 30, 2021, we entered into a settlement agreement with plaintiffs to settle the action on a classwide basis, and plaintiffs filed a motion for preliminary approval of the settlement with the court on July 31, 2021.

On October 21, 2021, the court preliminarily approved the settlement.

Under the terms of the settlement, we have paid $ 85.0 million into an escrow account that will be used to pay claims filed by settlement class members, attorneys’ fees and expenses, administrative costs, and service payments to plaintiffs.

The Court has scheduled a final approval hearing to take place on April 7, 2022.

We recorded an aggregate legal settlement charge of $ 66.9 million net of amounts estimated to be covered by insurance as a general and administrative expense in our consolidated statement of operations for the fiscal year ended January 31, 2022.

On January 19, 2021, we finalized a settlement agreement with the FTC which requires us to implement certain injunctive provisions, including, among other things, refraining from making any misrepresentations regarding the privacy and security of our services or how we collect, maintain, use, delete, disclose, allow access to, and protect user information.

It also requires us to implement a detailed information security program and obtain third-party security assessments periodically.

We do not expect the settlement to have a material impact on our financial results.

We will cooperate with the FTC’s requirements and work to ensure compliance.

Any failure to comply with the settlement may increase the possibility of additional adverse consequences, including litigation, additional regulatory actions, injunctions, or monetary penalties, or require further changes to our business practices, significant management time, or the diversion of significant operational resources, all of which could result in a material loss or otherwise harm our business.

We are cooperating with the FTC’s requirements and working to ensure compliance.

In addition, from time to time, we are involved in various other legal proceedings arising from the normal course of business activities.

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We may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained.

Convertible Preferred Stock, Stockholders’ Equity (Deficit), and Equity Incentive Plans

Stockholders’ Equity and Equity Incentive Plans

Convertible Preferred Stock

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Our 2019 Plan provides for the grant of stock options, stock appreciation rights, RSAs, RSU awards, performance awards, and other forms of awards.

The awards generally vest over four years .

The plan administrator determines the term of stock options granted under the 2019 Plan, up to a maximum of 10 years.

The maximum number of shares of our Class A common stock that may be issued under our 2019 Plan will not exceed 58,300,889 shares of our Class A common stock, which is the sum of (1) 34,000,000 new shares, plus (2) an additional number of shares not to exceed 24,300,889 , consisting of (A) shares that remain available for the issuance of awards under our 2011 Plan as of immediately prior to the time our 2019 Plan becomes effective and (B) shares of Class B common stock subject to outstanding stock options or other stock awards granted under our 2011 Plan that, on or after the 2019 Plan became effective, terminate, or expire prior to exercise or settlement;

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(in thousands, except share, life and per share data)

Balance as of January 31, 2020 16,833,009 $ 5.73 7.6 $ 1,191,881

Granted — $ —

Outstanding as of January 31, 2021 9,239,504 $ 7.17 7.0 $ 3,371,457

Exercised ( 2,881,485 ) $ 5.00 $ 842,989

Canceled/forfeited/expired ( 162,814 ) $ 11.24

Balance as of January 31, 2021 9,239,504 $ 7.17 7.0 $ 3,371,457

Vested and exercisable as of January 31, 2021 4,641,908 $ 3.98 6.6 $ 1,708,663

There were no options granted for the fiscal year ended January 31, 2021.

The weighted-average grant date fair value of options granted to employees during the fiscal years ended January 31, 2020 and 2019 was $ 25.17 and $ 6.28 , respectively.

Outstanding as of January 31, 2022 6,195,205 $ 8.08 6.0 $ 905,744

Vested and expected to vest as of January 31, 2022 6,195,205 $ 8.08 6.0 $ 905,744

Exercisable as of January 31, 2022 4,898,249 $ 5.72 5.9 $ 727,701

There were no options granted for the fiscal years ended January 31, 2022 and 2021.

The weighted-average grant date fair value of options granted to employees during the fiscal year ended January 31, 2020 was $ 25.17 .

The intrinsic value of the options exercised, which represents the difference between the fair market value of our common stock on the date of exercise and the exercise price of each option, was $ 843.0 million, $ 1,786.7 million, and $ 767.3 million during the fiscal years ended January 31, 2022, 2021, and 2020, respectively.

As of January 31, 2021, unrecognized stock-based compensation expense related to outstanding unvested stock options was $ 46.7 million, which is expected to be recognized over a weighted-average period of 1.4 years.

As of January 31, 2022, unrecognized stock-based compensation expense

related to outstanding unvested stock options was $ 19.7 million, which is expected to be recognized over a weighted-average period of 0.8 years.

The Black-Scholes assumptions used to value the employee options at the grant dates are as follows:

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Expected volatility 49.9 % - 53.2 %

44.6 % - 48.2 %

Risk-free interest rate 1.6 % - 2.5 %

2.6 % - 3.1 %

Expected dividend yield —

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Unvested as of January 31, 2022 5,546,366 $ 232.58

As of January 31, 2021, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $ 734.6 million, which is expected to be recognized over a weighted-average period of 2.7 years.

In October 2021, we added a feature to new and existing stock awards that provides employees with additional awards based on certain stock price criteria.

The value of the modified RSUs began to be recognized as compensation expense in the fiscal year ended January 31, 2022 and will continue to be recognized through the remaining requisite service period for the RSUs.

This had an immaterial impact on our consolidated statement of operations for the fiscal year ended January 31, 2022.

As of January 31, 2022, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $ 1,437.2 million, including the impact of the modification, which is expected to be recognized over a weighted-average period of 2.8 years.

2019 Employee Stock Purchase Plan

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Expected dividend yield — —

Shares Reserved for Charitable Donations

During fiscal year 2020, our board of directors approved the issuance of 500,000 shares of Class A common stock for the sole purpose of being transferred to nonprofit organizations.

As of January 31, 2021, 94,844 shares of Class A common stock have been transferred to a donor advised fund through an unaffiliated nonprofit organization.

We recorded a non-cash charge of

$ 23.3 million for the fair value of the donated shares, which was recorded in general and administrative expense in the consolidated statements of operations for the fiscal year ended January 31, 2021.

Stock-Based Compensation

The stock-based compensation expense by line item in the accompanying consolidated statements of operations is summarized as follows:

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Total stock-based compensation expense 477,287 275,818 73,109

The components of the net income before the provision for income taxes were as follows:

Benefit from income taxes ( 84,245 ) — —

Total stock-based compensation expense recorded to net income $ 393,042 $ 275,818 $ 73,109

The components of the net income before the (benefit from) provision for income taxes were as follows:

Year Ended January 31,

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Total $ 1,101,632 $ 678,034 $ 26,362

The provision for income taxes was as follows:

The (benefit from) provision for income taxes was as follows:

Year Ended January 31,

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Total deferred income tax expense ( 376,061 ) 762 ( 1,183 )

Total provision for income taxes $ 5,718 $ 1,057 $ 765

The provision for income taxes differs from the amount computed by applying the statutory federal tax rate as follows:

Total (benefit from) provision for income taxes

$ ( 274,007 ) $ 5,718 $ 1,057

The (benefit from) provision for income taxes differs from the amount computed by applying the statutory federal tax rate as follows:

Year Ended January 31,

2022 2021 2020

(in thousands)

(in thousands, except percentages)

Tax at federal statutory rate $ 231,350 $ 142,387 $ 5,536

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Stock-based compensation ( 135,250 ) ( 302,362 ) ( 32,070 )

Foreign-derived intangible income deduction ( 34,131 ) — —

Permanent items 3,971 2,228 1,009

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Deferred revenue 260,322 6,565

Capitalized research expenditures 131,010 —

Operating lease liabilities 25,892 27,842

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Net deferred tax assets $ 382,114 $ 112

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, carryback potential if permitted under the tax law, and results of recent operations.

If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

Management believes it is more likely than not that some deferred tax assets will not be realized.

Accordingly, a valuation allowance has been recorded on U.S.

deferred tax assets as of January 31, 2021 and 2020.

The valuation allowance increased $ 298.7 million and $ 35.5 million during the fiscal years ended January 31, 2021 and 2020, respectively, and was primarily attributable to net operating losses generated as a result of stock-based compensation windfall benefits.

The valuation allowance decreased $ 2.3 million during the fiscal year ended January 31, 2019 and was primarily attributable to deferred tax liabilities generated from the capitalization of commissions for GAAP purposes.

We intend to continue maintaining a full valuation allowance on our deferred tax assets in the U.S.

until there is sufficient evidence to support the reversal of all or some portion of these allowances.

In our valuation allowance evaluation, we give more weight to evidence that can be objectively verified than to evidence that cannot be objectively verified.

Our consideration of the evidence requires management to make a number of significant judgments, estimates, and assumptions about highly complex and inherently uncertain matters.

Given our current earnings and anticipated future earnings, we believe that there is a reasonable possibility that in the foreseeable future, sufficient positive evidence may become available that results in a conclusion that a portion of the valuation allowance will no longer be needed.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability (pretax income adjusted for permanent differences) that we are able to actually achieve.

As of January 31, 2021, we had net operating loss carryforwards of approximately $ 1,264.3 million for federal income tax purposes, a small portion of which will begin to expire in 2032 if unused.

We had net operating loss carryforwards of approximately $ 797.0 million for state income tax purposes, which will begin to expire in the year 2027 if unused.

We review the likelihood that we will realize the benefit of our deferred tax assets and, therefore, the need for a valuation allowance on a quarterly basis.

We have maintained a valuation allowance on all our U.S.

net deferred tax assets since our inception as it was determined that it was more likely than not that we would not recognize the benefits of these assets.

We continued to record a valuation allowance through the first nine months of fiscal 2022.

In the fourth quarter of fiscal 2022, management concluded that the valuation allowance related to the U.S.

federal and state deferred tax assets was no longer needed primarily due to its assessment of income/loss in recent periods and the forecast of future taxable income.

As of January 31, 2022, based on evaluation of all positive and negative evidence, management believes it is more likely than not that the net deferred tax assets will be realized for U.S.

federal and state purposes.

Accordingly, management has recognized a non-recurring tax benefit of $ 328.0 million related to the valuation allowance reversal.

As of January 31, 2022, we continued to maintain a valuation allowance of $ 12.6 million related to net deferred tax assets of our U.K.

subsidiary and will maintain this valuation allowance until there is sufficient evidence to support the reversal of all or a portion of the valuation allowance.

As of January 31, 2022, we had net operating loss carryforwards of approximately $ 122.3 million for state income tax purposes, which will begin to expire in the year 2033 if unused.

We also had certain foreign net operating loss carryforwards of $ 44.2 million, which have an indefinite life.

As of January 31, 2021, we also had research and development credit carryforwards of approximately $ 13.6 million for federal income tax and $ 11.4 million for state income tax purposes.

The federal research and development tax credit will begin to expire in 2036 if unused.

State research and development tax credits carry forward indefinitely.

The federal and state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986 and similar provisions under state law.

The Tax Reform Act of 1986 contains provisions that limit the federal net operating loss carryforwards that may be used in any given year in the event of special occurrences, including significant ownership changes.

As of January 31, 2022, we also had research and development credit carryforwards of approximately $ 18.4 million for state income tax purposes.

The state research and development tax credits carry forward indefinitely.

The state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986 and similar provisions under state law.

Such provisions limit the net operating loss carryforwards that may be used in any given year in the event of special occurrences, including significant ownership changes.

We have completed a Section 382 review and determined that none of our operating losses will expire solely due to Section 382 limitation(s).

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A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows:

Unrecognized Tax Benefits

(in thousands)

Balance - January 31, 2018 $ 1,976

Increases related to current year’s tax positions 802

Balance - January 31, 2019 2,778

Increases related to current year’s tax positions 5,328

Balance - January 31, 2020 8,106

Increases related to current year’s tax positions 6,001

Increases related to prior year’s tax positions 314

Current year acquisitions 885

Unrecognized Tax Benefits (in thousands) Year Ended January 31,

2022 2021 2020

Balance, beginning of year $ 14,884 $ 8,106 $ 2,778

Tax Positions taken in prior year:

Gross increases — 314 —

Gross decreases ( 3,764 ) — —

Tax Positions taken in current year:

Gross increases 8,211 6,001 5,328

Gross decreases — — —

Lapse of Statute of Limitations ( 160 ) ( 422 ) —

Balance - January 31, 2021 $ 14,884

Included in the balance of unrecognized tax benefits as of January 31, 2021, 2020, and 2019, are $ 2.0 million, $ 2.0 million, and $ 1.0 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

We recognize interest and penalties related to unrecognized tax benefits as income tax expense.

During the fiscal year ended January 31, 2021, we recognized interest and penalties of $ 0.1 million, and had a cumulative liability of $ 0.2 million as of January 31, 2021.

During the fiscal year ended January 31, 2020, we recognized interest and penalties of $ 0.3 million, and had a cumulative liability of $ 0.3 million as of January 31, 2020.

During the fiscal year ended January 31, 2019, we recognized no interest and penalties.

Acquisitions — 885 —

Balance, end of year $ 19,171 $ 14,884 $ 8,106

As of January 31, 2022, gross unrecognized tax benefits related to uncertain tax positions were $ 19.2 million ($ 19.6 million total, including $ 0.4 million associated with interest and penalties).

As of January 31, 2021, gross unrecognized tax benefits related to uncertain tax positions were $ 14.9 million ($ 15.0 million total, including $ 0.1 million associated with interest and penalties).

As of January 31, 2020, gross unrecognized tax benefits related to uncertain tax positions were $ 8.1 million ($ 8.4 million total, including $ 0.3 million associated with interest and penalties).

We recognized approximately $ 0.4 million, $ 0.1 million, and $ 0.3 million in potential interest and penalties associated with uncertain tax positions during fiscal years ended January 31, 2022, 2021, and 2020, respectively.

To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties) will be reduced and reflected as a reduction of the overall income tax provision.

Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision.

We file income tax returns in the U.S.

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Although the timing of the resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act was passed into law.

On December 27, 2020, the Consolidated Appropriations Act (2021) was passed into law.

Both amended portions of relevant tax law and did not have a significant impact on the provision for income taxes for the fiscal year ended January 31, 2021.

We will continue to monitor future guidance regarding these acts and other similar stimulus measures to determine any future impacts.

On March 11, 2021, the American Rescue Plan Act of 2021 (“American Rescue Plan Act”) was passed into law and amended portions of relevant tax laws.

The American Rescue Plan Act did not have a significant impact on the provision for income taxes for the fiscal year ended January 31, 2022.

Net Income Per Share Attributable to Common Stockholders

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Total 1,256,967 — 165,336 — 1,929,417 —

The table above does not include 405,156 and 500,000 shares of issued Class A common stock held by us as of January 31, 2021 and 2020, respectively, that are reserved for the sole purpose of being transferred to nonprofit organizations.

In October 2018, we entered into a strategic partnership with Dropbox, Inc.

(“Dropbox”), a global collaboration platform company, which involves the development of technology enabling integrated workflows for users between our platform and the Dropbox platform, as well as a strategic partnership with Atlassian, Inc.

(“Atlassian”), a collaboration software company, which involves the development of technology enabling integrated workflows for users between our platform and Atlassian’s Jira Ops and Jira Service Desk products.

As of January 31, 2019, we had issued unsecured three-year convertible promissory notes in the principal amounts of $ 5.0 million and $ 10.0 million to Dropbox and Atlassian, respectively, which accrued simple interest at 2.75 % and 5.0 % per annum, respectively.

The convertible promissory notes are contingently convertible (convertible upon completion of an IPO or a qualified financing event), and the conditions for the convertible feature were not satisfied as of January 31, 2019.

For fiscal year ended January 31, 2019, we have excluded these potential dilutive shares from the calculation of diluted net income per share attributable to common stockholders.

Selected Quarterly Financial Data (Unaudited)

Selected summarized quarterly financial information for the fiscal years 2021 and 2020 is as follows:

Three Months Ended

January 31, 2021 October 31, 2020 July 31, 2020 April 30, 2020 January 31, 2020 October 31, 2019 July 31, 2019 April 30, 2019

(in thousands)

Revenue $ 882,485 $ 777,196 $ 663,520 $ 328,167 $ 188,251 $ 166,593 $ 145,826 $ 121,988

Gross profit $ 615,201 $ 518,469 $ 471,249 $ 224,460 $ 155,704 $ 135,748 $ 117,926 $ 97,884

Income (loss) from operations $ 256,117 $ 192,242 $ 188,104 $ 23,385 $ 10,553 $ ( 1,679 ) $ 2,265 $ 1,557

Net income attributable to common stockholders $ 260,393 $ 198,440 $ 185,742 $ 27,036 $ 15,313 $ 2,207 $ 5,521 $ 198

Net income per share attributable to common stockholders:

Basic $ 0.91 $ 0.70 $ 0.66 $ 0.10 $ 0.06 $ 0.01 $ 0.02 $ 0.00

Diluted $ 0.87 $ 0.66 $ 0.63 $ 0.09 $ 0.05 $ 0.01 $ 0.02 $ 0.00

The table above does not include 405,156 for both January 31, 2022 and 2021, and 500,000 shares of issued Class A common stock held by us as of January 31, 2020, that are reserved for the sole purpose of being transferred to nonprofit organizations.

Subsequent Events

We have evaluated subsequent events from the balance sheet date through March 7, 2022, the date at which the consolidated financial statements were available to be issued.

In February 2022, our Board of Directors authorized a stock repurchase program of up to $ 1.0 billion of our Class A common stock, which expires in February 2024.

Repurchases of our Class A common stock may be effected from time to time, either on the open market (including pre-set trading plans), in privately negotiated transactions, and other transactions in accordance with applicable securities laws.

The timing and the amount of any repurchased Class A common stock will be determined by our management based on its evaluation of market conditions and other factors, and the repurchase program will be funded using our working capital.

The program may be modified, suspended or discontinued at any time.

As of March 6, 2022, $ 997.1 million of the repurchase authorization remained available.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data