What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-04 compared with 2023-03-03 · 154 added, 116 removed, 972 unchanged (22% of the section changed)

101 unchanged sentences

Additional paid-in capital 5,228,756 4,104,880

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

Accumulated other comprehensive income (loss)

1,063 ( 50,385 )

Retained earnings 2,789,280 2,151,818

16 unchanged sentences

Income from operations 525,279 245,429 1,063,591

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

Gains (losses) on strategic investments, net

109,770 ( 37,571 ) 43,761

Other income (expense), net 197,263 41,418 ( 5,720 )

17 unchanged sentences

Net income $ 637,462 $ 103,711 $ 1,375,639

Other comprehensive (loss) income:

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

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale marketable securities, net of income tax (expense) benefit of $( 15,501 ), $ 9,834 , and $ 6,003 during the fiscal years ended January 31, 2024, 2023 and 2022, respectively

51,448 ( 32,483 ) ( 18,741 )

11 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 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

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

Other comprehensive income — — — 30 — 30

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

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

2 unchanged sentences

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

Stock-based compensation expense — — 1,292,839 — — 1,292,839

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

Other comprehensive loss — — — ( 32,483 ) — ( 32,483 )

Net income — — — — 103,711 103,711

2 unchanged sentences

Issuance of common stock upon release of restricted stock units 11,349,453 11 ( 11 ) — — —

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

Issuance of common stock for employee stock purchase plan 921,892 1 54,096 — — 54,097

Stock-based compensation expense — — 1,059,597 — — 1,059,597

Other comprehensive loss — — — ( 32,483 ) — ( 32,483 )

Other comprehensive income — — — 51,448 — 51,448

Net income — — — — 637,462 637,462

12 unchanged sentences

Amortization of deferred contract acquisition costs 270,701 259,368 177,283

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

(Gains) losses on strategic investments, net ( 109,770 ) 37,571 ( 43,761 )

Depreciation and amortization 104,451 82,321 48,188

Provision for accounts receivable allowances 35,244 50,285 36,747

Unrealized foreign exchange losses (gains) 12,259 13,266 —

Non-cash operating lease cost 21,066 28,933 18,387

Charitable donation of common stock — — 23,312

Amortization of discount/premium on marketable securities ( 50,770 ) 1,206 25,316

15 unchanged sentences

Purchases of strategic investments ( 70,527 ) ( 69,050 ) ( 305,149 )

Proceeds from strategic investments 170,067 300 —

Cash paid for acquisition, net of cash acquired ( 204,918 ) ( 120,553 ) ( 3,501 )

Purchases of intangible assets — ( 11,268 ) ( 13,018 )

Other 300 — 1,659

Net cash used in investing activities ( 1,183,689 ) ( 318,322 ) ( 2,859,097 )

3 unchanged sentences

Proceeds from exercise of stock options 10,195 8,577 14,404

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 employee equity transactions (remitted) to be remitted to employees and tax authorities, net ( 4,106 ) 774 ( 40,004 )

Other — — 337

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

Net cash provided by (used in) financing activities 60,186 ( 936,942 ) 34,068

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 10,196 ) ( 8,108 ) —

18 unchanged sentences

Zoom Video Communications, Inc.

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.

and its subsidiaries (collectively, “Zoom,” the “Company,” “we,” “us,” or “our”) provide a unified communications and collaboration platform that connects people through frictionless and secure meetings, phone, chat, content sharing and more.

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

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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 (loss) 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 income (loss), 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 other (expense) income, net in the consolidated statements of operations.

Realized gains and losses are reported in other income (expense), 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.

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

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

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 (losses) 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 income (loss) 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.

140 unchanged sentences

We operate in one operating segment.

Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is our Chief Executive Officer (“CEO”), in deciding how to allocate resources and assessing performance.

Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is our CEO, in deciding how to allocate resources and assessing performance.

Our chief operating decision maker allocates resources and assesses performance based upon consolidated financial information.

7 unchanged sentences

Total property and equipment, net $ 293,704 $ 252,821

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):

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.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which aims to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis to enable investors to develop more decision-useful financial analyses.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We are currently evaluating the impact from the adoption of this ASU on our consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which aims to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted.

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.

We are currently evaluating the impact from the adoption of this ASU on our consolidated financial statements.

Revenue Recognition

29 unchanged sentences

Sales commissions paid upon the initial acquisition of a customer contract are amortized over an estimated period of benefit of three years , which is typically greater than the contractual terms of the customer contracts.

We do not pay sales commissions upon contract renewal.

Generally we do not pay sales commissions upon contract renewal.

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

34 unchanged sentences

Unrealized losses for securities that have been in an unrealized loss position for less than 12 months were $ 6.0 million and $ 24.8 million as of January 31, 2024 and 2023, 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.

Unrealized losses for securities that have been in an unrealized loss position for 12 months or longer were $ 4.8 million and $ 42.0 million as of January 31, 2024 and 2023, respectively.

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.

23 unchanged sentences

Strategic investments $ 186,375 $ 118,763 $ 93,854 $ 398,992

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.

During the fiscal year ended January 31, 2024, we made a total of $ 70.5 million of strategic investments in equity securities of private companies.

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 investees.

Therefore these investments are currently accounted for under the measurement alternative method.

In addition, during the fiscal year ended January 31, 2024, we recorded a $ 85.6 million net unrealized gain on our investments accounted for under the measurement alternative method, mainly driven by changes in the fair value of these investments.

During the fiscal year ended January 31, 2024, we sold a total of $ 169.9 million of strategic investments in equity securities of public companies.

The net gains on sale, which were not material, were recorded through gains (losses) on strategic investments, net in the consolidated statements of operations.

Fair Value Measurements

5 unchanged sentences

Money market funds $ 851,100 $ 851,100 $ — $ —

Treasury bills 100,629 — 100,629 —

Corporate debt securities 2,715 — 2,715 —

government agency securities 20,155 — 20,155 —

Cash equivalents 974,599 851,100 123,499 —

14 unchanged sentences

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

Treasury bills 107,496 — 107,496 —

Corporate debt securities 749 — 749 —

Cash equivalents 310,571 310,571 — —

26 unchanged sentences

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.

Workvivo Limited

On April 21, 2023, we acquired 100 % of the issued and outstanding share capital of Workvivo Limited (“Workvivo”), a private technology company that provides an employee experience platform, for an all-cash purchase consideration of $ 221.8 million.

The acquisition extends our platform and offers our customers new ways to keep employees informed, engaged, and connected.

The acquisition has been accounted for as a business combination.

In allocating the purchase consideration, $ 184.7 million was attributed to goodwill, $ 28.0 million to intangible assets (primarily consisting of $ 10.8 million to developed technology and $ 17.0 million to customer relationships), and $ 9.1 million to other net assets 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.

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, 2024, the developed technology and customer relationships both had a remaining useful life of 4.2 years.

Transaction costs incurred in connection with the acquisition were immaterial.

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

Balance Sheet Components

47 unchanged sentences

Sales and other non-income tax liabilities $ 42,254 $ 42,321

Uncertain tax position liabilities

33,864 23,140

Other 5,260 1,734

1 unchanged sentence

Operating Leases

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

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

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

35 unchanged sentences

Balance, ending of the year $ 307,295 $ 122,641

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.

During the fiscal year ended January 31, 2024, we acquired Workvivo, and recorded goodwill of $ 184.7 million.

During the fiscal year ended January 31, 2023, we acquired Solvvy, Inc., and recorded goodwill of $ 95.0 million.

See Note 5 for additional information related to these acquisitions.

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

6 unchanged sentences

Total $ 65,725 $ ( 18,790 ) $ 46,935 $ 37,924 $ ( 6,504 ) $ 31,420

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.

Intangible asset amortization expense was $ 12.5 million and $ 5.3 million for the years ended January 31, 2024 and 2023, respectively, and less than $ 1.0 million for the year ended January 31, 2022.

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

25 unchanged sentences

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, 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.

As of January 31, 2024 and 2023, we recorded sales and other tax liabilities of $ 77.7 million and $ 76.2 million, respectively, of which $ 35.5 million and $ 33.9 million are included in accrued expenses and other current liabilities, respectively, and $ 42.3 million and $ 42.3 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.

3 unchanged sentences

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 videoconference commemorations of the crackdown on the 1989 Tiananmen Square democracy protests.

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 responding to law enforcement requests from the Chinese government.

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

7 unchanged sentences

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 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.

On May 18, 2020, the actions were consolidated.

On November 4, 2020, the court appointed a lead plaintiff.

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

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, 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.

4 unchanged sentences

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

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 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.

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

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

On April 11, 2023, the court entered a stipulated order that requires defendants to answer, move, or otherwise respond to the operative complaint by June 12, 2023.

On June 12, 2023, defendants filed a motion to dismiss the consolidated case.

On August 11, 2023, the plaintiff in the consolidated case filed an amended complaint.

On October 18, 2023, defendants filed their motion to dismiss the amended complaint.

On December 22, 2023, plaintiff filed her opposition to the motion to dismiss, and on January 26, 2024, defendants filed their reply in support of the motion to dismiss.

We are vigorously defending ourselves against these lawsuits.

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.

4 unchanged sentences

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;

8 unchanged sentences

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.

On October 17, 2022, we, plaintiffs, and all three objector-appellants agreed to settle the appeals, and on October 27, 2022, we and plaintiffs initiated proceedings in the district court to obtain Court approval of the settlements, which the district court approved on December 16, 2022.

On January 13, 2023, a new objector appealed the court’s December 16, 2022 approval of the settlements of the prior appeals, and on March 31, 2023, the Ninth Circuit dismissed the new appeal.

With the appeals resolved, the class action settlement is final and the settlement administrator is in the process of making payments to claimants.

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 ours.

The complaints allege, among other things, that we violated Sections 10(b) and 20(a) of the Exchange Act, 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.

On May 18, 2020, the actions were consolidated.

On November 4, 2020, the court appointed a lead plaintiff.

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

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, 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 March 8, 2023, the court denied our motion for reconsideration.

On April 6, 2023, the court entered a scheduling order.

On July 17, 2023, the parties entered into a stipulation and agreement of settlement (the “Stipulation”) to resolve this matter.

Under the terms of the stipulation, in exchange for the release and dismissal with prejudice of all claims against all defendants in the matter, we have agreed to pay and/or cause our insurance carriers to pay a total of $ 150.0 million.

The Stipulation and settlement remain subject to preliminary and final approval by the court.

On July 25, 2023, the court entered an order staying further proceedings in the matter pending the filing of a motion for preliminary approval of the settlement.

On October 17, 2023, lead plaintiff filed a motion for preliminary approval of the settlement.

A hearing on the motion for preliminary approval of the settlement is not currently scheduled.

As a result of the settlement, we made net

payments of $ 60.0 million ($ 150.0 million for the settlement net of $ 90.0 million covered by insurance) during the year ended January 31, 2024, of which $ 7.5 million had been accrued during the year ended January 31, 2023 and $ 52.5 million was recorded as a general and administrative expense in our consolidated statement of operations for the year ended January 31, 2024.

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

3 unchanged sentences

Stockholders’ Equity and Equity Incentive Plans

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.

Dual-Class Common Stock Structure

9 unchanged sentences

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 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.

We received aggregate proceeds of $ 1,980.0 million, net of underwriters’ discounts and commissions.

The other related offering costs were immaterial.

Upon the completion of the IPO in April 2019, our amended and restated certificate of incorporation became effective, which also authorized the issuance of 2,000,000,000 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.

10 unchanged sentences

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.

In February 2024, our Board of Directors authorized a new stock repurchase program of up to $ 1.5 billion of our Class A common stock.

See Note 14, "Subsequent Events" for additional information related to the authorized stock repurchase program.

Equity Incentive Plans

20 unchanged sentences

Canceled/forfeited/expired ( 22,230 ) $ 92.95

Outstanding as of January 31, 2023 4,800,616 $ 8.22 4.9 $ 322,929

Vested and expected to vest as of January 31, 2023 4,800,616 $ 8.22 4.9 $ 322,929

Exercisable as of January 31, 2023 4,747,885 $ 7.77 4.9 $ 321,287

Outstanding and Exercisable as of January 31, 2024 3,314,228 $ 8.21 3.9 $ 189,921

There were no options granted for the fiscal years ended January 31, 2024, 2023 and 2022.

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 $ 90.0 million, $ 121.5 million, and $ 843.0 million during the fiscal years ended January 31, 2024, 2023, and 2022, respectively.

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.

As of January 31, 2024, all options have vested and there is no unrecognized stock-based compensation expense remaining.

Restricted Stock Units

11 unchanged sentences

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, 2024, unrecognized stock-based compensation expense related to outstanding unvested RSUs was $ 1,782.2 million, including the impact of the modification, which is expected to be recognized over a weighted-average period of 2.5 years.

32 unchanged sentences

Total stock-based compensation expense recorded to net income $ 860,093 $ 1,085,781 $ 393,042

Restructuring Activities

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 included a reduction of our then-current workforce by approximately 15 %.

The execution of the Plan was completed as of July 31, 2023.

For the year ended January 31, 2024, we recorded net restructuring costs of $ 73.0 million, which consisted of $ 54.4 million related to employee transition, severance payments, and employee benefits;

$ 17.3 million related to stock-based compensation awards;

and $ 1.3 million for other related expenses.

The following table summarizes our restructuring expenses that were recorded as an operating expense in the consolidated statement of operations for the year ended January 31, 2024:

Year Ended January 31, 2024

(in thousands)

Cost of revenue $ 7,119

Research and development 19,629

Sales and marketing 32,930

General and administrative 13,315

Total restructuring expenses $ 72,993

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

Severance and termination benefits Other

(in thousands)

Balance as of January 31, 2023 $ — $ —

Restructuring expenses 54,361 1,339

Cash payments ( 54,361 ) ( 1,339 )

Balance as of January 31, 2024

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

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Foreign 9,159 18,473 12,027

Total current income tax expense 306,526 102,054 4,956

Total current income tax expense (benefit)

311,529 306,526 102,054

Federal ( 88,110 ) ( 173,941 ) ( 293,704 )

1 unchanged sentence

Foreign ( 8,368 ) ( 3,693 ) 204

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

Total deferred income tax expense (benefit)

( 116,679 ) ( 160,961 ) ( 376,061 )

Total provision for (benefit from) income taxes

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Operating right-of-use assets ( 14,396 ) ( 19,352 )

Other liabilities

( 35,480 ) ( 13,054 )

Total deferred tax liabilities ( 168,745 ) ( 158,519 )

1 unchanged sentence

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.

As of January 31, 2024, management concluded that the valuation allowance related to the U.K.

net 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.

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.K.

Accordingly, management has recognized a non-recurring tax benefit of $ 10.7 million related to the valuation allowance release.

Based on the available objective evidence during the year ended January 31, 2024, 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.

losses that are capital in nature and certain state and other foreign deferred tax assets may not be realized prior to expiration.

Accordingly, we have maintained a valuation allowance against these deferred tax assets and 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, 2024, we had net operating loss carryforwards of approximately $ 12.3 million for federal income tax purposes, $ 14.2 million for state income tax purposes, which will begin to expire in the year 2033 if unused.

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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.

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

As required by the 2017 Tax Cuts and Jobs Act, we started capitalizing research and development expenses incurred beginning 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.

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

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

Net Income Per Share Attributable to Common Stockholders

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Subsequent Events

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.

We have evaluated subsequent events from the balance sheet date through March 1, 2024, the date at which the consolidated financial statements were available to be issued.

In February 2024, our Board of Directors authorized a stock repurchase program of up to $ 1.5 billion of our Class A common stock.

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.

The repurchase program will be funded using our working capital.

Any repurchased shares of Class A common stock will be retired.

The repurchase program does not obligate us to acquire any particular amount of Class A common stock, and the repurchase program may be suspended or discontinued at any time at our discretion.

As of March 1, 2024, there have been no repurchases made.

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