What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-03 compared with 2022-03-07 · 202 added, 200 removed, 886 unchanged (31% of the section changed)

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Consolidated Statements of Comprehensive Income

Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Zoom Video Communications, Inc.

and subsidiaries (the Company) as of January 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, convertible preferred stock and stockholders’ (deficit) equity, and cash flows for each of the years in the three-year period ended January 31, 2022, and the related notes and financial statement schedule II:

and subsidiaries (the Company) as of January 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended January 31, 2023, and the related notes and financial statement schedule II:

valuation and qualifying accounts (collectively, the consolidated financial statements).

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Additional paid-in capital 4,104,880 3,749,514

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

Accumulated other comprehensive loss ( 50,385 ) ( 17,902 )

Retained earnings 2,151,818 2,048,107

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Income from operations 245,429 1,063,591 659,848

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

(Losses) gains on strategic investments, net ( 37,571 ) 43,761 2,538

Other income (expense), net 41,418 ( 5,720 ) 15,648

Income before provision for (benefit from) income taxes 249,276 1,101,632 678,034

Provision for (benefit from) income taxes 145,565 ( 274,007 ) 5,718

Net income 103,711 1,375,639 672,316

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Other comprehensive (loss) income:

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

Unrealized (loss) gain on available-for-sale marketable securities, net of tax effect of $ 9,834 , $ 6,003 , and $ 0 during the fiscal years ended January 31, 2023, 2022 and 2021, respectively

( 32,483 ) ( 18,741 ) 30

Comprehensive income $ 71,228 $ 1,356,898 $ 672,346

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ZOOM VIDEO COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Accumulated

Comprehensive

(Loss) Income (Accumulated

Deficit) Retained Earnings Total

Income (Loss) Retained Earnings Total

Stockholders’

(Deficit) Equity

Shares Amount Shares Amount

Shares Amount

Balance as of January 31, 2020 278,731,143 $ 277 $ 832,705 $ 809 $ 152 $ 833,943

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

Conversion of convertible promissory notes and accrued interest to common stock upon initial public offering — — 426,223 — 15,344 — — 15,344

Issuance of common stock upon initial public offering and private placement, net of underwriting discounts and commissions and other offering costs — — 15,819,646 16 541,483 — — 541,499

Issuance of common stock upon exercise of stock options, net of repurchases and release of restricted stock units — — 18,501,767 19 9,752 — — 9,771

Issuance of common stock reserved for charitable donations — — 500,000 — — — — —

Issuance of common stock upon follow-on public offering, net of underwriting discounts and commissions and other offering costs 5,882,353 6 1,979,538 — — 1,979,544

Issuance of common stock upon exercise of stock options 7,378,477 7 29,100 — — 29,107

Issuance of common stock upon release of restricted stock units 633,697 1 — 1

Charitable donation of common stock — — 23,312 — — 23,312

Issuance of common stock for employee stock purchase plan 923,553 1 38,432 — — 38,433

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

Issuance of common stock upon follow-on public offering, net of underwriting discounts and commissions and other offering costs — — 5,882,353 6 1,979,538 — — 1,979,544

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

Charitable donation of common stock — — — — 23,312 — — 23,312

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

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Issuance of common stock upon release of restricted stock units 3,977,915 4 ( 4 ) — — —

Repurchase of common stock ( 11,170,907 ) ( 11 ) ( 999,992 ) — — ( 1,000,003 )

Issuance of common stock for employee stock purchase plan 678,279 1 53,709 — — 53,710

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Stock-based compensation expense 1,285,752 477,287 275,818

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

Deferred income taxes ( 160,961 ) ( 327,957 ) —

Amortization of deferred contract acquisition costs 259,368 177,283 104,306

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

Losses (gains) on strategic investments, net 37,571 ( 43,761 ) ( 2,538 )

Depreciation and amortization 82,321 48,188 28,857

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Charitable donation of common stock — — 23,312

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

Amortization of discount/premium on marketable securities 1,206 25,316 5,433

Other 14,913 4,591 927

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Cash flows from financing activities:

Cash paid for repurchases of common stock ( 1,000,003 ) — —

Proceeds from issuance of common stock for employee stock purchase plan 53,710 59,331 38,433

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

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

Proceeds from exercise of stock options 8,577 14,404 28,550

Proceeds from employee equity transactions to be remitted (remitted) to employees and tax authorities, net 774 ( 40,004 ) 4,088

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

Other — 337 —

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

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

Net cash (used in) provided by financing activities ( 936,942 ) 34,068 2,050,277

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 8,108 ) — —

Net increase (decrease) in cash, cash equivalents, and restricted cash 26,890 ( 1,219,763 ) 1,959,034

Cash, cash equivalents, and restricted cash—beginning of year 1,073,353 2,293,116 334,082

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Purchase of equipment during the period included in accounts payable and accrued expenses $ 11,946 $ 13,728 $ 34,514

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

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

Vesting of early exercised stock options $ 238 $ 407 $ 558

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”) 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.

and its subsidiaries (collectively, “Zoom,” the “Company,” “we,” “us,” or “our”) connect people through our platform of core unified communications and collaboration platform, 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 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.

Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, stock-based compensation expense, 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.

As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Concentration of Risks

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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.

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

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We estimate returns from sales to customers based on historical chargebacks and return rates.

For the fiscal year ended January 31, 2022, our assessment considered business and market disruptions caused by COVID-19 and estimates of credit and collectibility trends.

The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict, causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

For the fiscal year ended January 31, 2023, our assessment considered the recent changes in macroeconomic conditions such as inflation, recessionary and uncertain environments, and fluctuations in foreign currency exchange rates has on our estimates of credit and collectibility trends.

Below is a rollforward of our allowance for credit losses for the fiscal year ended January 31, 2023.

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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.

using the measurement alternative) and are recorded through (losses) 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 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 (losses) 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.

As of January 31, 2023, we recognized an immaterial amount of impairment to our privately held debt and equity securities.

Fair Value Measurements

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Software Development Costs

We capitalize certain development costs related to our unified communications platform during the application development stage as long as it is probable the project will be completed, and the software will be used to perform the function intended.

We capitalize certain development costs related to our unified communications and collaboration platform during the application development stage as long as it is probable the project will be completed, and the software will be used to perform the function intended.

Capitalized software development costs are recorded as part of property and equipment, net.

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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 $ 18.0 million, $ 20.2 million, and $ 19.4 million of software development costs during the fiscal years ended January 31, 2023, 2022, and 2021, respectively.

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ROU assets represent our right to use an underlying asset during the reasonably certain lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Our lease terms may include options to extend or terminate the lease when it is

reasonably certain that we will exercise that option.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of fixed payments not yet paid over the lease term.

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Finite-lived intangible assets are initially recorded at fair value and are amortized on a straight-line basis over their estimated useful lives.

Amortization expense of developed technology is recorded within cost of revenue in the consolidated statements of operations.

We routinely evaluate the estimated remaining useful lives of our finite-lived intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.

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Revenue Recognition

We derive our revenue primarily from subscription agreements with customers for access to our unified communications platform and services.

We also provide other services, which include professional services, consulting services, and online event hosting, which were immaterial to our consolidated financial statements.

We derive our revenue primarily from subscription agreements with customers for access to our unified communications and collaboration platform and services.

We also provide other services, which include professional services, consulting

services, and online event hosting, which were immaterial to our consolidated financial statements.

Revenue is recognized when a customer obtains control of promised services.

The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these services.

The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these services over the contract term which can include a free period discount.

We determine revenue recognition through the following steps:

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Promised services or products under which both of these two criteria are not met are recognized as a combined, single performance obligation.

Our performance obligations primarily relate to access to our unified communications platform, which consists of one or more software-based services.

Our performance obligations primarily relate to access to our unified communications and collaboration platform, which consists of one or more software-based services.

Our customers do not have the ability to take possession of our software, and through access to our platform, we provide a series of distinct software-based services that are satisfied over the term of the subscription.

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Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes).

Our unified communications platform and related services are typically warranted to perform in a professional manner that will comply with the terms of the subscription agreements.

Our unified communications and collaboration platform and related services are typically warranted to perform in a professional manner that will comply with the terms of the subscription agreements.

In addition, we include service-level commitments to our customers warranting certain levels of uptime reliability and performance and permitting those customers to receive credits in the event that we fail to meet those service levels.

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Revenue is recognized in an amount that reflects the consideration that we expect to receive in exchange for those services.

Fees for access to our unified communications platform and related services are subscription revenue and are considered one performance obligation, and the related revenue is recognized ratably over the subscription period as we satisfy the performance obligation.

Fees for access to our unified communications and collaboration platform and related services are subscription revenue and are considered one performance obligation, and the related revenue is recognized ratably over the subscription period as we satisfy the performance obligation.

Professional services are time-based arrangements and revenue is recognized as these services are performed.

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Cost of Revenue

Cost of revenue primarily consists of costs related to hosting our unified communications platform and providing general operating support services to our customers.

Cost of revenue primarily consists of costs related to hosting our unified communications and collaboration platform and providing general operating support services to our customers.

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.

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Research and Development

Research and development costs include personnel-related expenses associated with our engineering personnel and consultants responsible for the design, development, and testing of our unified communications platform, depreciation of equipment used in research and development, and allocated overhead costs.

Research and development costs include personnel-related expenses associated with our engineering personnel and consultants responsible for the design, development, and testing of our unified communications and collaboration platform, depreciation of equipment used in research and development, and allocated overhead costs.

Research and development costs are expensed as incurred.

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Stock-Based Compensation

Stock-based compensation expense related to stock awards (including stock options, restricted stock awards (“RSAs”), RSUs, and ESPP) is measured based on the fair value of the awards granted and recognized as an expense on a straight-line basis over the requisite service period.

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

The fair value of each option and ESPP award is estimated on the grant date using the Black-Scholes option pricing model.

The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the award, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock.

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

The Black-Scholes option pricing model requires the use of assumptions, including the fair value of the underlying common stock, the expected term of the award, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock.

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

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

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dollars at the exchange rates in effect at the reporting date, non-monetary assets and liabilities are remeasured at historical rates, and revenue and expenses are remeasured at average exchange rates in effect during each reporting period.

Foreign currency related gains and losses have been immaterial during the periods presented.

We use the asset and liability method of accounting for income taxes.

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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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The resolution of these uncertain tax positions in a manner inconsistent with management's expectations could have a material impact on our consolidated financial statements.

We recognize interest and penalties related to uncertain tax positions as a component of our provision for income taxes.

We recognize interest and penalties related

to uncertain tax positions as a component of our provision for income taxes.

Accrued interest and penalties are included with the related tax liability.

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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, 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.

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Total property and equipment, net $ 252,821 $ 222,354

Recent Accounting Pronouncements Not Yet Adopted

Recent Adopted Accounting Pronouncements

In June 2022, the FASB issued ASU No.

2022-03, Fair Value Measurements (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions , which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities.

The guidance will be effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years.

We early adopted ASU No.

2022-03 for the fiscal year ending January 31, 2023.

Adoption of the ASU did not have a material impact on our consolidated financial statements.

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

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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.

We early adopted ASU No.

2021-08 for the fiscal year ending January 31, 2023.

Adoption of the ASU did not have a material impact 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 on the consolidated balance sheets was $ 59.7 million and $ 24.6 million as of January 31, 2022 and 2021, respectively.

The amount of unbilled accounts receivable included within accounts receivable, net of allowances on the consolidated balance sheets was $ 91.6 million and $ 59.7 million as of January 31, 2023 and 2022, respectively, and the amount of unbilled accounts receivable included within other assets, noncurrent on the consolidated balance sheets was immaterial as of January 31, 2023 and 2022.

Contract liabilities consist of deferred revenue.

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Amortization is recognized on a straight-line basis commensurate with the pattern of revenue recognition.

We determine the period of benefit for commissions paid for the acquisition of the initial customer contract by taking into consideration the initial estimated customer life and the technological life of our unified communications platform and related significant features.

Amortization of deferred contract acquisition costs is included in sales and marketing expense in the consolidated statements of operations.

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Marketable securities $ 4,380,350 $ 35 $ ( 23,939 ) $ 4,356,446

Unrealized losses for securities that have been in an unrealized loss position for less than 12 months were $ 24.8 million and $ 23.3 million as of January 31, 2023 and 2022, respectively.

Unrealized losses for securities that have been in an unrealized loss position for 12 months or longer were $ 42.0 million as of January 31, 2023 and were immaterial as of January 31, 2022.

We review the individual securities that have unrealized losses on a regular basis to evaluate whether or not any security has experienced, or is expected to experience, credit losses resulting in the decline in fair value.

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

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 .

In the second quarter of fiscal year 2023, we made a strategic investment of $ 40.0 million for common shares in a private placement by a company in the B2B software and services travel space.

We recorded an unrealized loss of $ 11.7 million related to this investment for the year ended January 31, 2023.

As of January 31, 2023, the fair value of the investment was $ 28.3 million and our ownership interest represents less than 1 % percent of the economic interest of the investee's outstanding capital stock.

Fair Value Measurements

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Money market funds $ 310,571 $ 310,571 $ — $ —

Treasury bills 107,496 — 107,496 —

Corporate debt securities 749 — 749 —

Cash equivalents 310,571 310,571 — —

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Treasury bills 107,496 — 107,496 —

Corporate debt securities 749 — 749 —

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

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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 —

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

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

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Business Combinations

On May 7, 2020, we acquired 100 % of the issued and outstanding share capital of Keybase, Inc.

(“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 unified communications platform by providing end-to-end encryption expertise.

On May 19, 2022, we acquired 100 % of the issued and outstanding share capital of Solvvy, Inc., a private technology company specializing in customer support automation, for an all-cash purchase consideration of $ 121.2 million.

The acquisition adds to our customer service capabilities and enhances our integrated platform by providing conversational AI capabilities.

The acquisition has been accounted for as a business combination.

In allocating the purchase consideration, $ 24.3 million was attributed to goodwill, $ 3.3 million to intangible assets, and $ 15.3 million to other net assets acquired primarily consisting of cash and cash equivalents of $ 16.4 million.

In allocating the purchase consideration, $ 95.0 million was attributed to goodwill, $ 26.7 million to intangible assets (consisting of $ 12.0 million to developed technology and $ 14.7 million to customer relationships), and $ 0.5 million to other net liabilities acquired.

The goodwill amount represents synergies related to our existing products expected to be realized from the acquisition and assembled workforce.

The associated goodwill is not deductible for tax purposes.

Acquired intangible assets consisted of developed technology with an estimated useful life of five years .

The developed technology had a remaining useful life of 3.3 years as of January 31, 2022, and is amortized using the straight-line method over its estimated useful life.

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 year to three years .

At the date of the acquisition, the developed technology and customer relationships both had an estimated useful life of 5.0 years, and both are amortized using the straight-line method over their respective estimated useful lives.

Amortization expense of developed technology is recorded within cost of revenue in the consolidated statements of operations and amortization expense of customer relationships is recorded within sales and marketing in the consolidated statements of operations.

As of January 31, 2023, the developed technology and customer relationships both had a remaining useful life of 4.3 years.

Transaction costs incurred in connection with the acquisition were immaterial.

The results of operations of Keybase have been included in our consolidated financial statements from the date of the acquisition.

Pro forma and historical results of operations of Keybase have not been presented, as the results do not have a material effect on any of the periods presented in our consolidated statements of operations.

The results of operations of Solvvy, Inc., which are not material, have been included in our consolidated financial statements from the date of the acquisition.

Pro forma and historical results of operations of the company have not been presented, as the results do not have a material effect on any of the periods presented in our consolidated statements of operations.

Balance Sheet Components

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(in thousands)

Servers $ 249,776 $ 185,491

Computer and office equipment $ 48,325 $ 39,410

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Prepaid expense, noncurrent 9,695 16,120

Indefinite-lived intangible assets 25,239 21,020

Intangible assets subject to amortization, net 31,420 2,972

Other 19,489 11,006

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Accrued compensation and benefits 139,105 126,322

Income tax liability 56,968 3,426

Sales and other tax liabilities 33,305 27,453

Income tax liabilities 46,441 56,968

Sales and other non-income tax liabilities 33,859 33,305

Customer deposit liabilities 33,640 20,884

Operating lease liabilities, current 22,790 20,697

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

Other 21,692 22,581

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(in thousands)

Sales and other tax liabilities $ 53,916 $ 58,133

Sales and other non-income tax liabilities $ 42,321 $ 53,916

Other 24,874 14,194

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Operating Leases

We have entered into various operating lease agreements for office space, with remaining contractual periods of up to 8 years.

We also enter into equipment operating lease agreements related to our HaaS offering.

As a practical expedient, we account for HaaS with customers as a combined performance obligation with the right to access our unified communications platform under ASC 606, Revenue from Contracts with Customers .

We have entered into various operating lease agreements for office space, with remaining contractual periods of up to six years .

We also enter into equipment operating lease agreements related to our Hardware-as-a-Service (“HaaS”) offering.

We elect to apply the lessor practical expedient per ASC 842 and account for HaaS with customers as a combined performance obligation with the right to access our unified communications and collaboration platform under ASC 606, Revenue from Contracts with Customers .

HaaS was immaterial to our consolidated financial statements.

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Total operating lease liabilities $ 96,477

Goodwill and Intangible Assets

The following table summarizes the changes in the carrying amount of goodwill during the years:

As of January 31,

(in thousands)

Balance, beginning of the year $ 27,607 $ 24,340

Increase in goodwill related to business combinations 95,034 3,267

Balance, ending of the year $ 122,641 $ 27,607

In the first half of the fiscal year ending January 31, 2023, we acquired Solvvy, Inc., and recorded $ 95.0 million of goodwill.

See Note 5 for additional information related to the purchase of Solvvy, Inc.

The following table summarizes intangible assets with a finite useful life included within other asset, noncurrent on the consolidated balance sheet:

As of January 31,

Gross Carrying Amount Accumulated Amortization Net Value Gross Carrying Amount Accumulated Amortization Net Value

(in thousands)

Customer relationships $ 14,700 $ ( 2,078 ) $ 12,622 $ — $ — $ —

Technology 16,190 ( 3,752 ) 12,438 4,190 ( 1,218 ) 2,972

Assembled workforce 7,034 ( 674 ) 6,360 — — —

Total $ 37,924 $ ( 6,504 ) $ 31,420 $ 4,190 $ ( 1,218 ) $ 2,972

Intangible asset amortization expense was $ 5.3 million for the year ended January 31, 2023 and less than $ 1.0 million for the years ended January 31, 2022 and 2021.

Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows:

As of January 31, 2023

(in thousands)

Year Ending January 31,

Total amortization expense 31,420

The following table summarizes intangible assets with an indefinite useful life included within other asset, noncurrent on the consolidated balance sheet:

As of January 31,

(in thousands)

Domain and IP Addresses $ 20,232 $ 17,020

Patents and Tradenames 5,007 4,000

Total $ 25,239 $ 21,020

For the years ended January 31, 2023, 2022 and 2021, there were no intangible assets impairment losses.

Commitments and Contingencies

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Although we are diligent in collecting and remitting such taxes, there is uncertainty as to what constitutes sufficient presence for a jurisdiction to levy taxes, fees, and surcharges for sales made over the Internet.

As of January 31, 2022 and 2021, we recorded sales and other tax liabilities of $ 87.2 million and $ 85.6 million, respectively, of which $ 33.3 million and $ 27.5 million are included in accrued expenses and other current liabilities, respectively, and $ 53.9 million and $ 58.1 million are included in other liabilities, noncurrent, respectively, in our consolidated balance sheets, based on our best estimate of the probable liability for the loss contingency incurred as of those dates.

As of January 31, 2023 and 2022, we recorded sales and other tax liabilities of $ 76.2 million and $ 87.2 million, respectively, of which $ 33.9 million and $ 33.3 million are included in accrued expenses and other current liabilities, respectively, and $ 42.3 million and $ 53.9 million are included in other liabilities, noncurrent, respectively, in our consolidated

balance sheets, based on our best estimate of the probable liability for the loss contingency incurred as of those dates.

Our estimate of a probable outcome under the loss contingency is based on analysis of our sales and marketing activities, revenue subject to sales tax, and applicable regulations in applicable jurisdictions in each period.

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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.

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

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These investigations are ongoing, and we do not know when they will be completed, which facts we will ultimately discover as a result of the investigations, or what actions the government may or may not take.

We cannot predict the outcome of these investigations, and a negative outcome in any or all of these matters could cause us to incur substantial fines, penalties, or other financial exposure.

We cannot predict the outcome of these investigations, and a negative outcome in any or all of these matters could cause us to incur substantial fines, penalties, or other financial exposure, as well as reputational harm.

Legal Proceedings

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.

The complaints allege, among other things, that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 by making false and misleading statements and omissions of material fact about our data privacy and security measures.

The plaintiffs are purported stockholders of ours.

The complaints allege, among other things, that we violated Sections 10(b) and 20(a) of the Exchange Act of 1934, and Rule 10b-5 by making false and misleading statements and omissions of material fact about our data privacy and security measures.

The complaints seek unspecified damages, interest, fees, and costs.

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On February 16, 2022, the court granted in part, and denied in part, our motion to dismiss.

On March 14, 2022, we moved for reconsideration of the court’s ruling on the motion to dismiss.

On March 22, 2022, the court ordered plaintiff to respond to our motion, which plaintiff did on March 29, 2022.

On April 22, 2022, we answered the complaint.

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 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.

On November 17, 2021, all three derivative lawsuits were consolidated and remain 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.

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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 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;

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

On April 22, 2022, the Court granted final approval of the settlement.

On May 19, 2022, two objectors to the settlement appealed the Court's final approval order.

On May 20, 2022, a third objector appealed the Court’s final approval order.

On October 17, 2022, we, plaintiffs, and all three objector-appellants agreed to settle the appeals, and on December 16, 2022, the Court approved the settlements.

On January 13, 2023, an appeal of the order approving the objector-appellant settlements was filed, which is still pending.

On May 30, 2022, a new class action was filed against us in the NDCA raising privacy claims similar to those raised in the U.S.

Privacy Class Actions on behalf of a putative class of users of Zoom who reside in Australia, New Zealand, Canada, and the United Kingdom and who are not members of the settlement class in the U.S.

Privacy Class Actions.

On July 12, 2022, we moved to dismiss this new class action and on February 14, 2023, the Court granted the motion to dismiss but allowed plaintiffs leave to amend.

We believe this lawsuit is without merit, and we are vigorously defending ourselves against it.

Given the uncertainty of litigation, the preliminary stage of the case, and the legal standard 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 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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Stockholders’ Equity and Equity Incentive Plans

Convertible Preferred Stock

Upon completion of the IPO in April 2019, all shares of convertible preferred stock outstanding, totaling 152,665,804 shares, were automatically converted into an equivalent number of shares of Class B common stock on a one -to-one basis and their carrying value of $ 159.6 million was reclassified into stockholders’ equity.

Preferred Stock

In connection with the IPO in April 2019, our amended and restated certificate of incorporation became effective, which authorized the issuance of 200,000,000 shares of undesignated preferred stock with a par value of $ 0.001 with rights and preferences, including voting rights, designated from time to time by our board of directors.

As of January 31, 2023 and 2022, there were no shares of convertible preferred stock issued and outstanding.

In connection with the IPO, our amended and restated certificate of incorporation became effective, which authorized the issuance of 200,000,000 shares of undesignated preferred stock with a par value of $ 0.001 with rights and preferences, including voting rights, designated from time to time by our board of directors.

Dual-Class Common Stock Structure

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In connection with the implementation of the dual-class common stock structure, each then-outstanding share of our convertible preferred stock became convertible into one share of Class B common stock, and all outstanding options to purchase shares of common stock became options to purchase an equivalent number of shares of Class B common stock.

Upon the effectiveness of the amended and restated certificate of incorporation in November 2018, the number of shares of common stock that is authorized to be issued consisted of 320,000,000 shares of Class A common stock, $ 0.001 par value per share and 300,000,000 shares of Class B common stock, $ 0.001 par value per share.

Upon the effectiveness of the amended and restated certificate of incorporation in November 2018, the number of shares of common stock that are authorized to be issued consisted of 320,000,000 shares of Class A common stock, $ 0.001 par value per share and 300,000,000 shares of Class B common stock, $ 0.001 par value per share.

Class A and Class B common stock are collectively referred to as “common stock” throughout the notes to the consolidated financial statements, unless otherwise noted.

Equity Financing

On April 23, 2019, we completed our IPO, in which we issued and sold 9,911,434 shares of our Class A common stock at $ 36.00 per share.

On April 18, 2019, the underwriters exercised their option to purchase an additional 3,130,435 shares of our Class A common stock at $ 36.00 per share.

We received aggregate proceeds of $ 447.9 million, net of underwriters’ discounts and commissions.

In connection with the IPO:

• all of the shares of convertible preferred stock outstanding automatically converted into an aggregate of 152,665,804 shares of Class B common stock;

• outstanding convertible promissory notes and accrued interest automatically converted into 426,223 shares of Class A common stock based on the IPO price of $ 36.00 per share;

• Salesforce Ventures LLC purchased 2,777,777 shares of Class A common stock from us at $ 36.00 per share in a concurrent private placement.

We received aggregate proceeds of $ 100.0 million and did not pay any underwriting discounts or commissions with respect to the shares of Class A common stock that were sold in this private placement.

Deferred offering costs consist primarily of accounting, legal, and other fees related to our IPO.

Prior to the IPO, all deferred offering costs were capitalized in other assets, noncurrent in the consolidated balance sheets.

After the IPO, $ 6.4 million of deferred offering costs were reclassified into stockholders’ equity (deficit) as a reduction of the IPO proceeds in the consolidated balance sheets.

We capitalized $ 2.4 million of deferred offering costs within other assets, noncurrent in the consolidated balance sheet as of January 31, 2019, which were reclassified into additional paid-in capital upon the completion of the IPO.

On January 15, 2021, we completed our follow-on public offering, in which we issued and sold 5,882,353 shares of our Class A common stock, including 735,294 shares pursuant to the full exercise of the underwriter's option to purchase additional shares, at $ 340.00 per share.

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Total shares of Class A common stock reserved 92,819,161 80,832,845

Stock Repurchase Plan

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 was completed in December 2022.

During the year ended January 31, 2023, we purchased and subsequently retired 11,170,907 shares of our Class A common stock for an aggregate amount of $ 1.0 billion.

Equity Incentive Plans

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In April 2019, we adopted the 2019 Plan, which became effective in connection with our IPO.

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

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

The awards generally vest over four years .

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There were no options granted for the fiscal years ended January 31, 2023, 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 $ 121.5 million, $ 843.0 million, and $ 1,786.7 million during the fiscal years ended January 31, 2023, 2022, and 2021, respectively.

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:

Year Ended January 31, 2020

Expected term (years) 5.0 - 6.1

Expected volatility 49.9 % - 53.2 %

Risk-free interest rate 1.6 % - 2.5 %

Expected dividend yield —

These assumptions and estimates were determined as follows:

• Fair Value of Common Stock.

Prior to our IPO, the fair value was determined by our board of directors, with input from management and valuation reports prepared by third-party valuation specialists.

Stock-based compensation for financial reporting purposes is measured based on updated estimates of fair value when appropriate, such as when additional relevant information related to the estimate becomes available in a valuation report issued as of a subsequent date.

After our initial public offering, the fair value of each share of underlying common stock was based on the closing price of our Class A common stock as reported on the date of the grant.

• Risk-Free Interest Rate.

The risk-free interest rate for the expected term of the options was based on the U.S.

Treasury yield curve in effect at the time of the grant.

• Expected Term.

The expected term of options represents the period of time that options are expected to be outstanding.

Our historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term due to a lack of sufficient data.

For stock options granted to employees, we estimate the expected term by using the simplified method.

The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the stock options.

For stock options granted to nonemployees, the expected term equals the contractual term of the stock option.

• Expected Volatility.

As we have a short trading history for our common stock, the expected volatility was estimated by taking the average historic price volatility for industry peers, consisting of several public companies in our industry that are similar in size, stage of life cycle, or financial leverage, over a period equivalent to the expected term of the awards.

• Expected Dividend Yield.

We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future.

As a result, an expected dividend yield of zero percent was used.

As of January 31, 2023, unrecognized stock-based compensation expense related to outstanding unvested stock options was $ 1.2 million, which is expected to be recognized over a weighted-average period of 0.3 years.

Restricted Stock Units

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Vested ( 3,977,915 ) $ 173.22

Canceled/forfeited ( 391,611 ) $ 250.92

Forfeited ( 1,836,578 ) $ 148.82

Unvested as of January 31, 2023 21,868,533 $ 109.31

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.

In October 2021, we added a feature that modified certain existing RSU awards to provide for a supplemental award based on certain future stock price criteria.

The feature was subsequently modified in March and October 2022 to provide potential additional supplemental awards.

The features and resulting modifications resulted in incremental stock-based compensation expense that is being recognized from the respective modification dates through the remaining requisite service period for each of the original awards.

In November 2022, we cancelled one of the features related to a sub-population of the modified awards.

As a result, the amount of the unrecognized compensation cost as calculated using a Monte Carlo valuation approach related to the cancelled awards of $ 207.7 million was recognized during the quarter ended January 31, 2023.

As of January 31, 2023, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $ 2,579.0 million, including the impact of the modification, which is expected to be recognized over a weighted-average period of 2.8 years.

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Year Ended January 31,

2023 2022 2021

Expected term (years) 0.5 - 2.0

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40.3 % - 75.0 %

Risk-free interest rate 2.2 % - 4.8 %

0.0 % - 2.5 %

0.1 % - 2.5 %

Expected dividend yield — — —

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Total stock-based compensation expense recorded to net income $ 1,085,781 $ 393,042 $ 275,818

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

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

Year Ended January 31,

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Total $ 249,276 $ 1,101,632 $ 678,034

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

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

Year Ended January 31,

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Total deferred income tax expense ( 160,961 ) ( 376,061 ) 762

Total (benefit from) provision for income taxes

Total provision for (benefit from) income taxes

$ 145,565 $ ( 274,007 ) $ 5,718

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

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

Year Ended January 31,

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Foreign rate differential 1,017 1,830 89

Non-deductible compensation 10,231 — —

Stock-based compensation 124,631 ( 135,250 ) ( 302,362 )

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

Permanent Items 9,090 3,971 2,228

Foreign-derived intangible income deduction ( 76,686 ) ( 34,131 ) —

Research and development credits ( 38,127 ) ( 42,973 ) ( 3,170 )

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Change in valuation allowance 39,288 ( 322,231 ) 165,869

Deferred rate change 2,014 — —

Other 5,868 ( 1,658 ) 648

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Net deferred tax assets $ 557,116 $ 382,114

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.

The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable.

Based on the available objective evidence during the year ended January 31, 2023, we continue to believe that it is more likely than not that the tax benefits of the U.K.

net deferred tax assets may not be realized.

Accordingly, we maintained a full valuation allowance against the tax benefits of these net deferred tax assets.

Based on the available objective evidence during the year ended January 31, 2023, we believe that it is more likely than not that the tax benefits relating to U.S.

losses that are capital in nature may not be realized prior to expiration.

Accordingly, we have maintained a valuation allowance against these deferred tax assets.

Based on the available objective evidence during the year ended January 31, 2023, we believe that it is more likely than not that the tax benefits of certain state net deferred tax assets may not be realized.

Management applied significant judgement in assessing the positive and negative evidence available in the determination of the amount of certain state deferred tax assets that were more likely than not to be realized in the future.

Accordingly, given our current earnings, anticipated future earnings, and continued accumulation of certain state tax credits, we have recorded a full valuation allowance against the tax benefits of these deferred tax assets.

We intend to maintain the applicable valuation allowance until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance.

As of January 31, 2023, we had net operating loss carryforwards of approximately $ 22.9 million for federal income tax purposes, $ 26.9 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 $ 32.5 million, which have an indefinite life.

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.

As of January 31, 2023, we also had research and development credit carryforwards of approximately $ 1.2 million for federal income tax purposes and $ 22.8 million for state income tax purposes.

The federal research and development tax credits have a twenty-year carryover period while the 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.

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).

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

We indefinitely reinvest earnings from our foreign subsidiaries and therefore no deferred tax liability has been recognized on the basis difference created by such earnings.

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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 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.

As required by the 2017 Tax Cuts and Jobs Act, we are capitalizing research and development expenses incurred in fiscal year 2023.

These expenses are capitalized and amortized over five years for domestic research and fifteen years for international research.

The mandatory capitalization requirement increased our cash tax liabilities but also decreased our effective tax rate due to increasing the foreign-derived intangible income deduction.

The cash flow impact may decrease over time as capitalized research and development expenditures continue to amortize.

The Inflation Reduction Act was signed into law in August 2022.

The act included tax provisions for a 15% corporate book income minimum tax effective for tax years beginning after December 31, 2022.

We do not expect the Inflation Reduction Act to have a material impact on our consolidated financial statements.

Net Income Per Share Attributable to Common Stockholders

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Total 10,991,505 — 1,256,967 — 165,336 —

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.

For the years ended January 31, 2023, 2022, and 2021, the table above does not include 405,156 of issued Class A common stock held by us 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.

On February 7, 2023, we announced a restructuring plan (the “Plan”) intended to reduce operating costs and continue advancing our ongoing commitment to profitable growth.

The Plan includes a reduction of our current workforce by approximately 15 %.

Decisions regarding the elimination of positions are subject to local law and consultation requirements in certain countries, as well as our business needs.

We estimate that we will incur approximately $ 50 million to $ 68 million in charges in connection with the Plan, which will be substantially incurred in the first quarter of fiscal year 2024.

These charges primarily relate to employee transition, severance payments, employee benefits, and stock-based compensation.

Of the aggregate amount of charges that we estimate we will incur in connection with the Plan, we expect that approximately $ 43 million to $ 59 million will be in future cash expenditures.

The actions associated with the employee restructuring under the Plan are expected to be substantially complete by the first quarter of fiscal year 2024, subject to local law and consultation requirements.

The estimates of the charges and expenditures that we expect to incur in connection with the Plan, and the timing thereof, are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual amounts may differ materially from estimates.

In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Plan.

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