UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware | 32-0410665 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer | |||||||
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(Title of each class) | Trading Symbol(s) | (Name of each exchange on which registered) |
Class A Common Stock, par value $0.000015 per share | HCP | The Nasdaq Global Select Market |
Large accelerated filer |
| Accelerated filer | ☐ | ||||||||
Non-accelerated filer |
| Smaller reporting company | ☐ | ||||||||
Emerging growth company |
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☐
2023
Page | ||||||||
Part I. | ||||||||
Item 1. |
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3 | ||||||||
Condensed Consolidated Statements of Stockholders' Equity |
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Item 2. |
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Item 3. |
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Item 4. |
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Part II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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As of | |||||||||||
October 31, 2023 | January 31, 2023 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 729,826 | $ | 1,286,134 | |||||||
Short-term investments | 525,825 | — | |||||||||
Accounts receivable, net of allowance | 108,183 | 162,369 | |||||||||
Deferred contract acquisition costs | 45,508 | 42,812 | |||||||||
Prepaid expenses and other current assets | 29,248 | 17,683 | |||||||||
Total current assets | 1,438,590 | 1,508,998 | |||||||||
Deferred contract acquisition costs, non-current | 79,676 | 81,286 | |||||||||
Acquisition-related intangible assets, net | 12,319 | — | |||||||||
Goodwill | 12,265 | — | |||||||||
Other assets, non-current | 43,419 | 38,056 | |||||||||
Total assets | $ | 1,586,269 | $ | 1,628,340 | |||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 6,111 | $ | 12,450 | |||||||
Accrued expenses and other current liabilities | 13,210 | 10,163 | |||||||||
Accrued compensation and benefits | 51,974 | 58,628 | |||||||||
Deferred revenue | 264,422 | 272,909 | |||||||||
Customer deposits | 22,173 | 26,699 | |||||||||
Total current liabilities | 357,890 | 380,849 | |||||||||
Deferred revenue, non-current | 25,780 | 29,335 | |||||||||
Other liabilities, non-current | 10,876 | 12,806 | |||||||||
Total liabilities | 394,546 | 422,990 | |||||||||
Commitments and contingencies (Note 11) | |||||||||||
Stockholders’ equity: | |||||||||||
Class A common stock, par value of $0.000015 per share; 1,000,000 and 1,000,000 shares authorized as of October 31, 2023 and January 31, 2023, respectively; 115,432 and 88,823 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively | 1 | 1 | |||||||||
Class B common stock, par value of $0.000015 per share; 200,000 and 200,000 shares authorized as of October 31, 2023 and January 31, 2023, respectively; 80,096 and 101,145 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively | 2 | 2 | |||||||||
Additional paid-in capital | 2,132,382 | 1,985,747 | |||||||||
Accumulated other comprehensive loss | (1,216) | — | |||||||||
Accumulated deficit | (939,446) | (780,400) | |||||||||
Total stockholders’ equity | 1,191,723 | 1,205,350 | |||||||||
Total liabilities and stockholders’ equity | $ | 1,586,269 | $ | 1,628,340 |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
License | $ | 15,973 | $ | 17,823 | $ | 47,855 | $ | 43,505 | |||||||||||||||
Support | 106,098 | 89,500 | 312,008 | 252,965 | |||||||||||||||||||
Cloud-hosted services | 19,863 | 12,875 | 54,779 | 32,344 | |||||||||||||||||||
Total subscription revenue | 141,934 | 120,198 | 414,642 | 328,814 | |||||||||||||||||||
Professional services and other | 4,191 | 5,143 | 12,712 | 11,287 | |||||||||||||||||||
Total revenue | 146,125 | 125,341 | 427,354 | 340,101 | |||||||||||||||||||
Cost of revenue: | |||||||||||||||||||||||
Cost of license | 293 | 393 | 1,376 | 1,146 | |||||||||||||||||||
Cost of support | 13,356 | 12,149 | 44,503 | 35,259 | |||||||||||||||||||
Cost of cloud-hosted services | 7,692 | 5,849 | 22,339 | 16,378 | |||||||||||||||||||
Total cost of subscription revenue | 21,341 | 18,391 | 68,218 | 52,783 | |||||||||||||||||||
Cost of professional services and other | 4,264 | 4,157 | 13,509 | 10,694 | |||||||||||||||||||
Total cost of revenue | 25,605 | 22,548 | 81,727 | 63,477 | |||||||||||||||||||
Gross profit | 120,520 | 102,793 | 345,627 | 276,624 | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Sales and marketing | 87,320 | 92,872 | 279,019 | 260,798 | |||||||||||||||||||
Research and development | 54,349 | 53,887 | 168,504 | 148,947 | |||||||||||||||||||
General and administrative | 34,424 | 33,372 | 104,083 | 101,278 | |||||||||||||||||||
Total operating expenses | 176,093 | 180,131 | 551,606 | 511,023 | |||||||||||||||||||
Loss from operations | (55,573) | (77,338) | (205,979) | (234,399) | |||||||||||||||||||
Interest income | 16,765 | 8,584 | 48,045 | 13,126 | |||||||||||||||||||
Other expense, net | (407) | (2,882) | (632) | (2,922) | |||||||||||||||||||
Loss before income taxes | (39,215) | (71,636) | (158,566) | (224,195) | |||||||||||||||||||
Provision for income taxes | 258 | 322 | 480 | 744 | |||||||||||||||||||
Net loss | $ | (39,473) | $ | (71,958) | $ | (159,046) | $ | (224,939) | |||||||||||||||
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted | $ | (0.20) | $ | (0.38) | $ | (0.83) | $ | (1.22) | |||||||||||||||
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted | 194,600 | 187,080 | 192,693 | 185,124 |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net loss | $ | (39,473) | $ | (71,958) | $ | (159,046) | $ | (224,939) | |||||||||||||||
Other comprehensive loss, net of tax: | |||||||||||||||||||||||
Available-for-sale investments: | |||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale investments | 38 | — | (895) | — | |||||||||||||||||||
Foreign currency forward contracts: | |||||||||||||||||||||||
Unrealized losses on foreign currency forward contracts | (226) | — | (321) | — | |||||||||||||||||||
Other comprehensive loss, net of tax | (188) | — | (1,216) | — | |||||||||||||||||||
Total comprehensive loss | $ | (39,661) | $ | (71,958) | $ | (160,262) | $ | (224,939) |
Class A and Class B Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance as of January 31, 2023 | 189,968 | $ | 3 | $ | 1,985,747 | $ | — | $ | (780,400) | $ | 1,205,350 | ||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 513 | — | 1,013 | — | — | 1,013 | |||||||||||||||||||||||||||||
Issuance of common stock upon settlement of restricted stock units | 1,071 | — | — | — | — | — | |||||||||||||||||||||||||||||
Tax withholdings on settlement of restricted stock units | — | — | (9) | — | — | (9) | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 41,266 | — | — | 41,266 | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (66) | — | (66) | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | (53,258) | (53,258) | |||||||||||||||||||||||||||||
Balance as of April 30, 2023 | 191,552 | $ | 3 | $ | 2,028,017 | $ | (66) | $ | (833,658) | $ | 1,194,296 | ||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 366 | — | 442 | — | — | 442 | |||||||||||||||||||||||||||||
Issuance of common stock upon settlement of restricted stock units | 1,307 | — | — | — | — | — | |||||||||||||||||||||||||||||
Tax withholdings on settlement of restricted stock units | (5) | — | (215) | — | — | (215) | |||||||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | 426 | — | 10,195 | — | — | 10,195 | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 47,471 | — | — | 47,471 | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (962) | — | (962) | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | (66,315) | (66,315) | |||||||||||||||||||||||||||||
Balance as of July 31, 2023 | 193,646 | $ | 3 | $ | 2,085,910 | $ | (1,028) | $ | (899,973) | $ | 1,184,912 | ||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 407 | — | 1,488 | — | — | 1,488 | |||||||||||||||||||||||||||||
Issuance of common stock upon settlement of restricted stock units | 1,477 | — | — | — | — | — | |||||||||||||||||||||||||||||
Tax withholdings on settlement of restricted stock units | (2) | — | (12) | — | — | (12) | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 44,996 | — | — | 44,996 | |||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (188) | — | (188) | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | (39,473) | (39,473) | |||||||||||||||||||||||||||||
Balance as of October 31, 2023 | 195,528 | $ | 3 | $ | 2,132,382 | $ | (1,216) | $ | (939,446) | $ | 1,191,723 |
Class A and Class B Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance as of January 31, 2022 | 182,167 | $ | 3 | $ | 1,788,390 | $ | (506,102) | $ | 1,282,291 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 839 | — | 521 | — | 521 | ||||||||||||||||||||||||
Vesting of early exercised stock options | — | — | 3 | — | 3 | ||||||||||||||||||||||||
Issuance of common stock for restricted stock awards | 710 | — | — | — | — | ||||||||||||||||||||||||
Tax withholdings on settlement of restricted stock units | (8) | — | (125) | — | (125) | ||||||||||||||||||||||||
Stock-based compensation | — | — | 47,141 | — | 47,141 | ||||||||||||||||||||||||
Net loss | — | — | — | (78,217) | (78,217) | ||||||||||||||||||||||||
Balance as of April 30, 2022 | 183,708 | $ | 3 | $ | 1,835,930 | $ | (584,319) | $ | 1,251,614 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 786 | — | 1,645 | 1,645 | |||||||||||||||||||||||||
Vesting of early exercised stock options | — | — | 2 | — | 2 | ||||||||||||||||||||||||
Issuance of common stock upon settlement of restricted stock units | 1,477 | — | — | — | — | ||||||||||||||||||||||||
Tax withholdings on settlement of restricted stock units | (2) | — | (77) | — | (77) | ||||||||||||||||||||||||
Issuance of common stock under employee stock purchase plan | 351 | — | 8,501 | — | 8,501 | ||||||||||||||||||||||||
Stock-based compensation | — | — | 43,309 | — | 43,309 | ||||||||||||||||||||||||
Net loss | — | — | — | (74,764) | (74,764) | ||||||||||||||||||||||||
Balance as of July 31, 2022 | 186,320 | $ | 3 | $ | 1,889,310 | $ | (659,083) | $ | 1,230,230 | ||||||||||||||||||||
Issuance of common stock upon exercise of stock options | 491 | — | 989 | 989 | |||||||||||||||||||||||||
Vesting of early exercised stock options | — | — | 1 | — | 1 | ||||||||||||||||||||||||
Issuance of common stock upon settlement of restricted stock units | 1,032 | — | — | — | — | ||||||||||||||||||||||||
Tax withholdings on settlement of restricted stock units | (2) | — | (20) | — | (20) | ||||||||||||||||||||||||
Stock-based compensation | — | — | 47,964 | — | 47,964 | ||||||||||||||||||||||||
Net loss | — | — | — | (71,958) | (71,958) | ||||||||||||||||||||||||
Balance as of October 31, 2022 | 187,841 | $ | 3 | $ | 1,938,244 | $ | (731,041) | $ | 1,207,206 |
Nine Months Ended October 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities | |||||||||||
Net loss | $ | (159,046) | $ | (224,939) | |||||||
Adjustments to reconcile net loss to cash from operating activities: | |||||||||||
Stock-based compensation expense, net of amounts capitalized | 130,048 | 135,372 | |||||||||
Depreciation and amortization expense | 6,586 | 3,178 | |||||||||
Non-cash operating lease cost | 2,222 | 2,135 | |||||||||
Accretion of discounts on marketable securities | (8,505) | — | |||||||||
Deferred income taxes | (482) | — | |||||||||
Other | 67 | (8) | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | 54,116 | 11,541 | |||||||||
Deferred contract acquisition costs | (1,086) | (21,491) | |||||||||
Prepaid expenses and other assets | (11,843) | 3,391 | |||||||||
Accounts payable | (6,589) | 2,100 | |||||||||
Accrued expenses and other liabilities | (3,403) | (2,663) | |||||||||
Accrued compensation and benefits | (6,654) | (3,735) | |||||||||
Deferred revenue | (12,042) | 10,893 | |||||||||
Customer deposits | (4,526) | (1,814) | |||||||||
Net cash used in operating activities | (21,137) | (86,040) | |||||||||
Cash flows from investing activities | |||||||||||
Business combination, net of cash acquired | (20,860) | — | |||||||||
Purchases of property and equipment | (491) | (140) | |||||||||
Capitalized internal-use software | (8,536) | (6,174) | |||||||||
Purchases of short-term investments | (691,220) | — | |||||||||
Proceeds from sales of short-term investments | 26,372 | — | |||||||||
Proceeds from maturities of short-term investments | 146,662 | — | |||||||||
Net cash used in investing activities | (548,073) | (6,314) | |||||||||
Cash flows from financing activities | |||||||||||
Taxes paid related to net share settlement of equity awards | (236) | (222) | |||||||||
Proceeds from issuance of common stock upon exercise of stock options | 2,943 | 3,155 | |||||||||
Proceeds from issuance of common stock under employee stock purchase plan | 10,195 | 8,501 | |||||||||
Net cash provided by financing activities | 12,902 | 11,434 | |||||||||
Net decrease in cash, cash equivalents, and restricted cash | (556,308) | (80,920) | |||||||||
Cash, cash equivalents, and restricted cash beginning of period | 1,286,134 | 1,357,613 | |||||||||
Cash, cash equivalents, and restricted cash end of period | $ | 729,826 | $ | 1,276,693 | |||||||
Supplemental disclosure of cash flow information | |||||||||||
Cash paid for income taxes, net of refunds received | $ | 1,406 | $ | 1,090 | |||||||
Cash paid for operating lease liabilities | $ | 2,912 | $ | 2,827 | |||||||
Supplemental disclosure of noncash investing and financing activities | |||||||||||
Capitalized stock-based compensation expense | $ | 3,685 | $ | 3,042 | |||||||
Acquisition holdback | $ | 4,100 | $ | — |
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| As of |
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| October 31, 2022 |
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| January 31, 2022 |
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Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 1,274,901 |
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| $ | 1,355,828 |
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Accounts receivable, net |
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| 115,279 |
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| 126,812 |
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Deferred contract acquisition costs |
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| 37,317 |
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| 32,205 |
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Prepaid expenses and other current assets |
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| 14,437 |
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| 17,744 |
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Total current assets |
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| 1,441,934 |
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| 1,532,589 |
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Deferred contract acquisition costs, non-current |
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| 73,505 |
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| 57,126 |
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Other assets, non-current |
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| 37,926 |
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| 33,960 |
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Total assets |
| $ | 1,553,365 |
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| $ | 1,623,675 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
| $ | 16,367 |
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| $ | 14,267 |
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Accrued expenses and other current liabilities |
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| 7,309 |
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| 7,672 |
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Accrued compensation and benefits |
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| 53,204 |
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| 56,939 |
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Deferred revenue |
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| 220,579 |
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| 206,416 |
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Customer deposits |
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| 21,569 |
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| 23,383 |
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Total current liabilities |
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| 319,028 |
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| 308,677 |
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Deferred revenue, non-current |
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| 13,603 |
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| 16,873 |
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Other liabilities, non-current |
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| 13,528 |
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| 15,834 |
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Total liabilities |
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| 346,159 |
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| 341,384 |
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Commitments and contingencies (note 8) |
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Stockholders’ equity |
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Class A common stock, par value of $0.000015 per share; 1,000,000 and 1,000,000 shares authorized as of October 31, 2022 and January 31, 2022, respectively; 77,447 and 30,597 shares issued and outstanding as of October 31, 2022 and January 31, 2022, respectively |
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| 1 |
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| 1 |
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Class B common stock, par value of $0.000015 per share; 200,000 and 200,000 shares authorized as of October 31, 2022 and January 31, 2022, respectively; 110,394 and 151,570 shares issued and outstanding as of October 31, 2022 and January 31, 2022, respectively |
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| 2 |
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| 2 |
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Additional paid-in capital |
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| 1,938,244 |
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| 1,788,390 |
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Accumulated deficit |
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| (731,041 | ) |
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| (506,102 | ) |
Total stockholders’ equity |
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| 1,207,206 |
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| 1,282,291 |
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Total liabilities and stockholders’ equity |
| $ | 1,553,365 |
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| $ | 1,623,675 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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| Three Months Ended October 31, |
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| Nine Months Ended October 31, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Revenue: |
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License |
| $ | 17,823 |
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| $ | 9,892 |
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| $ | 43,505 |
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| $ | 31,850 |
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Support |
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| 89,500 |
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| 64,894 |
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| 252,965 |
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| 175,782 |
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Cloud-hosted services |
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| 12,875 |
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| 5,357 |
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| 32,344 |
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| 11,699 |
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Total subscription revenue |
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| 120,198 |
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| 80,143 |
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| 328,814 |
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| 219,331 |
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Professional services and other |
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| 5,143 |
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| 2,078 |
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| 11,287 |
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| 4,915 |
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Total revenue |
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| 125,341 |
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| 82,221 |
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| 340,101 |
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| 224,246 |
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Cost of revenue: |
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Cost of license |
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| 393 |
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| 37 |
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| 1,146 |
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| 167 |
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Cost of support |
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| 12,149 |
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| 6,884 |
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| 35,259 |
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| 23,568 |
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Cost of cloud-hosted services |
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| 5,849 |
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| 2,526 |
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| 16,378 |
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| 7,723 |
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Total cost of subscription revenue |
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| 18,391 |
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| 9,447 |
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| 52,783 |
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| 31,458 |
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Cost of professional services and other |
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| 4,157 |
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| 1,692 |
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| 10,694 |
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| 5,276 |
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Total cost of revenue |
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| 22,548 |
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| 11,139 |
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| 63,477 |
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| 36,734 |
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Gross profit |
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| 102,793 |
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| 71,082 |
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| 276,624 |
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| 187,512 |
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Operating expenses: |
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Sales and marketing |
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| 92,872 |
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| 53,511 |
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| 260,798 |
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| 142,380 |
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Research and development |
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| 53,887 |
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| 25,655 |
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| 148,947 |
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| 68,703 |
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General and administrative |
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| 33,372 |
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| 13,450 |
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|
| 101,278 |
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|
| 38,478 |
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Total operating expenses |
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| 180,131 |
|
|
| 92,616 |
|
|
| 511,023 |
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|
| 249,561 |
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Loss from operations |
|
| (77,338 | ) |
|
| (21,534 | ) |
|
| (234,399 | ) |
|
| (62,049 | ) |
Interest income |
|
| 8,584 |
|
|
| 17 |
|
|
| 13,126 |
|
|
| 216 |
|
Other expenses, net |
|
| (2,882 | ) |
|
| (16 | ) |
|
| (2,922 | ) |
|
| (126 | ) |
Loss before income taxes |
|
| (71,636 | ) |
|
| (21,533 | ) |
|
| (224,195 | ) |
|
| (61,959 | ) |
Provision for income taxes |
|
| 322 |
|
|
| 418 |
|
|
| 744 |
|
|
| 479 |
|
Net loss |
| $ | (71,958 | ) |
| $ | (21,951 | ) |
| $ | (224,939 | ) |
| $ | (62,438 | ) |
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted |
| $ | (0.38 | ) |
| $ | (0.33 | ) |
| $ | (1.22 | ) |
| $ | (0.94 | ) |
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted |
|
| 187,080 |
|
|
| 66,782 |
|
|
| 185,124 |
|
|
| 66,313 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
HASHICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)
| Redeemable Convertible Preferred Stock |
|
|
| Class A and Class B |
| Additional Paid-in |
|
| Accumulated |
| Total Stockholders' |
| ||||||||||||
| Shares |
| Amount |
|
|
| Shares |
|
| Amount |
| Capital |
|
| Deficit |
| Equity |
| |||||||
Balance as of January 31, 2022 |
| - |
| $ | - |
|
|
|
| 182,167 |
|
| $ | 3 |
| $ | 1,788,390 |
|
| $ | (506,102 | ) | $ | 1,282,291 |
|
Issuance of common stock upon exercise of stock options |
| - |
|
| - |
|
|
|
| 839 |
|
|
| - |
|
| 521 |
|
|
| - |
|
| 521 |
|
Vesting of early exercised stock options |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 3 |
|
|
| - |
|
| 3 |
|
Issuance of common stock upon settlement of restricted stock units |
| - |
|
| - |
|
|
|
| 710 |
|
|
| - |
|
| - |
|
|
| - |
|
| - |
|
Tax withholdings on settlement of restricted stock units |
| - |
|
| - |
|
|
|
| (8 | ) |
|
| - |
|
| (125 | ) |
|
| - |
|
| (125 | ) |
Stock-based compensation |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 47,141 |
|
|
| - |
|
| 47,141 |
|
Net loss |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| - |
|
|
| (78,217 | ) |
| (78,217 | ) |
Balance as of April 30, 2022 |
| - |
| $ | - |
|
|
|
| 183,708 |
|
| $ | 3 |
| $ | 1,835,930 |
|
| $ | (584,319 | ) | $ | 1,251,614 |
|
Issuance of common stock upon exercise of stock options |
| - |
|
| - |
|
|
|
| 786 |
|
|
| - |
|
| 1,645 |
|
|
| - |
|
| 1,645 |
|
Vesting of early exercised stock options |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 2 |
|
|
| - |
|
| 2 |
|
Issuance of common stock upon settlement of restricted stock units |
| - |
|
| - |
|
|
|
| 1,477 |
|
|
| - |
|
| - |
|
|
| - |
|
| - |
|
Tax withholdings on settlement of restricted stock units |
| - |
|
| - |
|
|
|
| (2 | ) |
|
| - |
|
| (77 | ) |
|
| - |
|
| (77 | ) |
Issuance of common stock under employee stock purchase plan |
| - |
|
| - |
|
|
|
| 351 |
|
|
| - |
|
| 8,501 |
|
|
| - |
|
| 8,501 |
|
Stock-based compensation |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 43,309 |
|
|
| - |
|
| 43,309 |
|
Net loss |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| - |
|
|
| (74,764 | ) |
| (74,764 | ) |
Balance as of July 31, 2022 |
| - |
| $ | - |
|
|
|
| 186,320 |
|
| $ | 3 |
| $ | 1,889,310 |
|
| $ | (659,083 | ) | $ | 1,230,230 |
|
Issuance of common stock upon exercise of stock options |
| - |
|
| - |
|
|
|
| 491 |
|
|
| - |
|
| 989 |
|
|
| - |
|
| 989 |
|
Vesting of early exercised stock options |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 1 |
|
|
| - |
|
| 1 |
|
Issuance of common stock upon settlement of restricted stock units |
| - |
|
| - |
|
|
|
| 1,032 |
|
|
| - |
|
| - |
|
|
| - |
|
| - |
|
Tax withholdings on settlement of restricted stock units |
| - |
|
| - |
|
|
|
| (2 | ) |
|
| - |
|
| (20 | ) |
|
| - |
|
| (20 | ) |
Stock-based compensation |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 47,964 |
|
|
| - |
|
| 47,964 |
|
Net loss |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
|
|
|
| (71,958 | ) |
| (71,958 | ) | |
Balance as of October 31, 2022 |
| - |
| $ | - |
|
|
|
| 187,841 |
|
| $ | 3 |
| $ | 1,938,244 |
|
| $ | (731,041 | ) | $ | 1,207,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements. |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
HASHICORP, INC. |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Redeemable Convertible Preferred Stock |
|
|
| Class A and Class B |
| Additional Paid-in |
|
| Accumulated |
| Total Stockholders' |
| ||||||||||||
| Shares |
| Amount |
|
|
| Shares |
|
| Amount |
| Capital |
|
| Deficit |
| Deficit |
| |||||||
Balance as of January 31, 2021 |
| 94,128 |
| $ | 349,113 |
|
|
|
| 65,578 |
|
| $ | 1 |
| $ | 94,159 |
|
| $ | (215,964 | ) | $ | (121,804 | ) |
Issuance of common stock upon exercise of stock options |
| - |
|
| - |
|
|
|
| 841 |
|
|
| - |
|
| 1,851 |
|
|
| - |
|
| 1,851 |
|
Vesting of early exercised stock options |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 9 |
|
|
| - |
|
| 9 |
|
Issuance of common stock for restricted stock awards |
| - |
|
| - |
|
|
|
| 5 |
|
|
| - |
|
| - |
|
|
| - |
|
| - |
|
Stock-based compensation |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 1,726 |
|
|
| - |
|
| 1,726 |
|
Net loss |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| - |
|
|
| (15,586 | ) |
| (15,586 | ) |
Balance as of April 30, 2021 |
| 94,128 |
| $ | 349,113 |
|
|
|
| 66,424 |
|
| $ | 1 |
| $ | 97,745 |
|
| $ | (231,550 | ) | $ | (133,804 | ) |
Issuance of common stock upon exercise of stock options |
| - |
|
| - |
|
|
|
| 228 |
|
|
| - |
|
| 487 |
|
|
| - |
|
| 487 |
|
Vesting of early exercised stock options |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 4 |
|
|
| - |
|
| 4 |
|
Stock-based compensation |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 1,498 |
|
|
| - |
|
| 1,498 |
|
Net loss |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| - |
|
|
| (24,901 | ) |
| (24,901 | ) |
Balance as of July 31, 2021 |
| 94,128 |
| $ | 349,113 |
|
|
|
| 66,652 |
|
| $ | 1 |
| $ | 99,734 |
|
| $ | (256,451 | ) | $ | (156,716 | ) |
Issuance of common stock upon exercise of stock options |
| - |
|
| - |
|
|
|
| 457 |
|
|
| - |
|
| 1,038 |
|
|
| - |
|
| 1,038 |
|
Vesting of early exercised stock options |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 2 |
|
|
| - |
|
| 2 |
|
Issuance of common stock upon settlement of restricted stock units |
| - |
|
| - |
|
|
|
| 5 |
|
|
| - |
|
| - |
|
|
| - |
|
| - |
|
Stock-based compensation |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| 1,542 |
|
|
| - |
|
| 1,542 |
|
Net loss |
| - |
|
| - |
|
|
|
| - |
|
|
| - |
|
| - |
|
|
| (21,951 | ) |
| (21,951 | ) |
Balance as of October 31, 2021 |
| 94,128 |
| $ | 349,113 |
|
|
|
| 67,114 |
|
| $ | 1 |
| $ | 102,316 |
|
| $ | (278,402 | ) | $ | (176,085 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
HASHICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
| Nine Months Ended October 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net loss |
| $ | (224,939 | ) |
| $ | (62,438 | ) |
Adjustments to reconcile net loss to cash from operating activities: |
|
|
|
|
|
| ||
Stock-based compensation expense, net of amounts capitalized |
|
| 135,372 |
|
|
| 4,766 |
|
Depreciation and amortization expense |
|
| 3,178 |
|
|
| 1,478 |
|
Non-cash operating lease cost |
|
| 2,135 |
|
|
| 1,685 |
|
Other |
|
| (8 | ) |
|
| 69 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable |
|
| 11,541 |
|
|
| 7,919 |
|
Deferred contract acquisition costs |
|
| (21,491 | ) |
|
| (22,397 | ) |
Prepaid expenses and other assets |
|
| 3,391 |
|
|
| (4,327 | ) |
Accounts payable |
|
| 2,100 |
|
|
| 3,818 |
|
Accrued expenses and other liabilities |
|
| (2,663 | ) |
|
| (2,162 | ) |
Accrued compensation and benefits |
|
| (3,735 | ) |
|
| 12,838 |
|
Deferred revenue |
|
| 10,893 |
|
|
| 12,770 |
|
Customer deposits |
|
| (1,814 | ) |
|
| (3,236 | ) |
Net cash used in operating activities |
|
| (86,040 | ) |
|
| (49,217 | ) |
Cash flows from investing activities |
|
|
|
|
|
| ||
Purchases of property and equipment |
|
| (140 | ) |
|
| (86 | ) |
Capitalized internal-use software |
|
| (6,174 | ) |
|
| (4,652 | ) |
Net cash used in investing activities |
|
| (6,314 | ) |
|
| (4,738 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||
Taxes paid related to net share settlement of equity awards |
|
| (222 | ) |
|
| - |
|
Proceeds from issuance of common stock upon exercise of stock options |
|
| 3,155 |
|
|
| 3,376 |
|
Proceeds from issuance of common stock under employee stock purchase plan |
|
| 8,501 |
|
|
| - |
|
Payments of deferred offering costs |
|
| - |
|
|
| (2,028 | ) |
Net cash provided by financing activities |
|
| 11,434 |
|
|
| 1,348 |
|
Net decrease in cash, cash equivalents, and restricted cash |
|
| (80,920 | ) |
|
| (52,607 | ) |
Cash, cash equivalents, and restricted cash beginning of period |
|
| 1,357,613 |
|
|
| 272,576 |
|
Cash, cash equivalents, and restricted cash end of period |
| $ | 1,276,693 |
|
| $ | 219,969 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
| ||
Cash paid for income taxes |
| $ | 1,090 |
|
| $ | 655 |
|
Cash paid for operating lease liabilities |
| $ | 2,827 |
|
| $ | 2,364 |
|
Supplemental disclosure of noncash investing and financing activities |
|
|
|
|
|
| ||
Operating lease right-of-use assets obtained in exchange for new lease obligations |
| $ | - |
|
| $ | 2,036 |
|
Unpaid deferred offering costs |
| $ | - |
|
| $ | 1,818 |
|
Capitalized stock-based compensation expense |
| $ | 3,042 |
|
| $ | - |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
HASHICORP, INC.
Basis of Presentation
Principles of Consolidation
Use of Estimates
Accumulated Other Comprehensive Loss
Comprehensive loss consists of other comprehensive loss and net loss. Other comprehensive loss refers to revenue, expenses, gains, and losses that are recorded as an element of stockholders’ deficit but are excluded from net loss. The Company did not have any other comprehensive loss transactions during the period presented. Accordingly, comprehensive loss is equal to net loss.
Restricted Cash
Restricted cash constitutes letters of credit established according to the requirements under certain non-cancellable operating lease agreements and is included in other assets, non-current in the condensed consolidated balance sheets. As of October 31, 20222023, accumulated other comprehensive loss was comprised of unrealized gain (losses) from available-for-sale investments and January 31, 2022,unrealized losses related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges.
There
Recent Accounting Pronouncements Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform—Facilitation
Net liabilities | $ | (224) | |||
Developed technology | 12,500 | ||||
Customer relationship | 1,000 | ||||
Deferred tax liabilities | (482) | ||||
Goodwill | 12,265 | ||||
Total purchase consideration | $ | 25,059 |
Balance as of January 31, 2023 | $ | — | |||
BluBracket, Inc. (Note 3) | 12,265 | ||||
Balance as of October 31, 2023 | $ | 12,265 |
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Useful Life
(in years)Developed technology $ 12,500 $ 1,042 $ 11,458 4.6 Customer relationship $ 1,000 $ 139 $ 861 2.6
Year ending January 31, | Amount | |||||||
2024 (remaining three months) | $ | 708 | ||||||
2025 | 2,833 | |||||||
2026 | 2,833 | |||||||
2027 | 2,612 | |||||||
2028 | 2,500 | |||||||
2029 and thereafter | 833 | |||||||
Total | $ | 12,319 |
The following table presents revenue by category (dollars in thousands)(in thousands, except percentages):
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||
Amount | % of Total Revenue | Amount | % of Total Revenue | Amount | % of Total Revenue | Amount | % of Total Revenue | ||||||||||||||||||||||||||||||||||||||||
License | $ | 15,973 | 11 | % | $ | 17,823 | 14 | % | $ | 47,855 | 11 | % | $ | 43,505 | 13 | % | |||||||||||||||||||||||||||||||
Support | 106,098 | 72 | 89,500 | 72 | 312,008 | 73 | 252,965 | 74 | |||||||||||||||||||||||||||||||||||||||
Cloud-hosted services | 19,863 | 14 | 12,875 | 10 | 54,779 | 13 | 32,344 | 10 | |||||||||||||||||||||||||||||||||||||||
Total subscription revenue | 141,934 | 97 | 120,198 | 96 | 414,642 | 97 | 328,814 | 97 | |||||||||||||||||||||||||||||||||||||||
Professional services and other | 4,191 | 3 | 5,143 | 4 | 12,712 | 3 | 11,287 | 3 | |||||||||||||||||||||||||||||||||||||||
Total revenue | $ | 146,125 | 100 | % | $ | 125,341 | 100 | % | $ | 427,354 | 100 | % | $ | 340,101 | 100 | % |
| Three Months Ended October 31, |
| Nine Months Ended October 31, | ||||||||||||||||||||||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||||||||||||||||||||||
| Amount |
|
| % of Total |
| Amount |
|
| % of Total |
| Amount |
|
| % of Total |
| Amount |
|
| % of Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
License | $ | 17,823 |
|
|
| 14 |
| % |
| $ | 9,892 |
|
|
| 12 |
| % |
| $ | 43,505 |
|
|
| 13 |
| % |
| $ | 31,850 |
|
|
| 14 |
| % |
Support |
| 89,500 |
|
|
| 72 |
|
|
|
| 64,894 |
|
|
| 78 |
|
|
|
| 252,965 |
|
|
| 74 |
|
|
|
| 175,782 |
|
|
| 79 |
|
|
Cloud-hosted services |
| 12,875 |
|
|
| 10 |
|
|
|
| 5,357 |
|
|
| 7 |
|
|
|
| 32,344 |
|
|
| 10 |
|
|
|
| 11,699 |
|
|
| 5 |
|
|
Total subscription revenue |
| 120,198 |
|
|
| 96 |
|
|
|
| 80,143 |
|
|
| 97 |
|
|
|
| 328,814 |
|
|
| 97 |
|
|
|
| 219,331 |
|
|
| 98 |
|
|
Professional services and other |
| 5,143 |
|
|
| 4 |
|
|
|
| 2,078 |
|
|
| 3 |
|
|
|
| 11,287 |
|
|
| 3 |
|
|
|
| 4,915 |
|
|
| 2 |
|
|
Total revenue | $ | 125,341 |
|
|
| 100 |
| % |
| $ | 82,221 |
|
|
| 100 |
| % |
| $ | 340,101 |
|
|
| 100 |
| % |
| $ | 224,246 |
|
|
| 100 |
| % |
The following table summarizes the revenue by region based on the billing address of customers who have contracted to use the Company's products and services (dollars in thousands)(in thousands, except percentages):
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||
Amount | % of Total Revenue | Amount | % of Total Revenue | Amount | % of Total Revenue | Amount | % of Total Revenue | ||||||||||||||||||||||||||||||||||||||||
United States | $ | 102,365 | 70 | % | $ | 91,503 | 73 | % | $ | 300,979 | 70 | % | $ | 247,695 | 73 | % | |||||||||||||||||||||||||||||||
Rest of the world | 43,760 | 30 | 33,838 | 27 | 126,375 | 30 | 92,406 | 27 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 146,125 | 100 | % | $ | 125,341 | 100 | % | $ | 427,354 | 100 | % | $ | 340,101 | 100 | % |
| Three Months Ended October 31, |
| Nine Months Ended October 31, | ||||||||||||||||||||||||||||||||
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||||||||||||||||||||||
| Amount |
|
| % of Total |
| Amount |
|
| % of Total |
| Amount |
|
| % of Total |
| Amount |
|
| % of Total | ||||||||||||||||
|
|
|
|
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United States | $ | 91,503 |
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| 73 |
| % |
| $ | 60,975 |
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| 74 |
| % |
| $ | 247,695 |
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| 73 |
| % |
| $ | 163,785 |
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| 73 |
| % |
Rest of the world |
| 33,838 |
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| 27 |
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| 21,246 |
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| 26 |
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| 92,406 |
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| 27 |
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| 60,461 |
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| 27 |
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Total | $ | 125,341 |
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| 100 |
| % |
| $ | 82,221 |
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| 100 |
| % |
| $ | 340,101 |
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| 100 |
| % |
| $ | 224,246 |
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| 100 |
| % |
Changes in deferred revenue and unbilled accounts receivable were as follows (in thousands): Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Balance, beginning of period $ 226,812 $ 146,105 $ 223,289 $ 147,297 Deferred revenue billings including reclassification to deferred revenue from customer deposits 131,351 95,957 350,879 236,077 Recognition of revenue, net of change in unbilled accounts receivable* (123,981 ) (81,995 ) (339,986 ) (223,307 ) Balance, end of period $ 234,182 $ 160,067 $ 234,182 $ 160,067 * Reconciliation to revenue reported per consolidated statements of operations: Revenue billed as of the end of the period $ 123,981 $ 81,995 $ 339,986 $ 223,307 Increase in total unbilled accounts receivable 1,360 226 115 939 Revenue reported per consolidated statements of operations $ 125,341 $ 82,221 $ 340,101 $ 224,246 As of October 31, 2022 January 31, 2022 Within the next 12 months $ 19,102 $ 20,324 After the next 12 months 2,467 3,059 Total $ 21,569 $ 23,383 The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy on a recurring basis and indicates the fair value hierarchy of the valuation inputs used to determine such fair value (in thousands): Fair Value Measurement Level 1 Level 2 Level 3 Total Cash and cash equivalents Money market funds $ 217,559 $ - $ - $ 217,559 Total cash and cash equivalents 217,559 - - 217,559 Total assets measured at fair value $ 217,559 $ - $ - $ 217,559 Included in cash and cash equivalents $ 217,559 Fair Value Measurement Level 1 Level 2 Level 3 Total Cash and cash equivalents Money market funds $ 1,129,436 $ - $ - $ 1,129,436 Total cash and cash equivalents 1,129,436 - - 1,129,436 Total assets measured at fair value $ 1,129,436 $ - $ - $ 1,129,436 Included in cash and cash equivalents $ 1,129,436 Other assets, non-current are comprised of the following (in thousands): As of October 31, 2022 January 31, 2022 Property and equipment, net $ 22,136 $ 15,897 Operating lease right-of-use assets 13,285 15,420 Other 2,505 2,643 Total other assets, non-current $ 37,926 $ 33,960 Property and equipment, net are included in other assets, non-current in the condensed consolidated balance sheets and are comprised of the following (in thousands): Estimated As of Useful life October 31, 2022 January 31, 2022 Furniture and fixtures 5 years $ 1,278 $ 1,266 Computers, equipment and software 3 years 534 532 Capitalized internal-use software development costs 5 years 22,080 12,209 Leasehold improvements Shorter of useful life or lease term 5,119 5,008 Construction in progress(1) 15 655 Total property and equipment 29,026 19,670 Less: accumulated depreciation and amortization (6,890 ) (3,773 ) Property and equipment, net $ 22,136 $ 15,897 Accrued expenses and other current liabilities are comprised of the following (in thousands): As of October 31, 2022 January 31, 2022 Accrued expenses $ 1,557 $ 3,925 Operating lease liabilities 3,302 3,130 Other current liabilities 2,450 617 Total accrued expenses and other current liabilities $ 7,309 $ 7,672 Accrued compensation and benefits are comprised of the following (in thousands): As of October 31, 2022 January 31, 2022 Accrued commissions $ 12,165 $ 15,993 Accrued vacation 19,795 15,970 Accrued payroll and withholding taxes 9,928 18,885 ESPP employee contributions 8,135 2,709 Accrued bonus 2,219 2,632 Other 962 750 Total accrued compensation and benefits $ 53,204 $ 56,939 The following table summarizes the activity of deferred contract acquisition costs As of October 31, 2022 October 31, 2021 Beginning balance $ 89,331 $ 50,245 Capitalization of contract acquisition costs 53,002 39,125 Amortization of deferred contract acquisition costs (31,511 ) (16,728 ) Ending balance 110,822 72,642 Deferred contract acquisition costs, current $ 37,317 $ 23,571 Deferred contract acquisition costs, non-current 73,505 49,071 Total deferred contract acquisition costs $ 110,822 $ 72,642 As of October 31, 2022 January 31, 2022 Operating lease liabilities, non-current $ 12,983 $ 15,483 Other 545 351 Total other liabilities, non-current $ 13,528 $ 15,834 Lease costs were as follows (in thousands): Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Short-term lease costs $ 39 $ 81 $ 184 $ 243 Operating lease costs 878 781 2,634 2,228 Total lease costs $ 917 $ 862 $ 2,818 $ 2,471 Lease term and discount rate information are summarized as follows: As of October 31, Weighted average remaining lease terms (in years) 3.4 Weighted average discount rate 3.8 % Years Ending January 31, Amount 2023 (remaining three months) $ 955 2024 3,924 2025 4,150 2026 3,734 2027 3,737 Thereafter 1,277 Total minimum lease payments 17,777 Less imputed interest (1,492 ) Present value of future minimum lease payments 16,285 Less current lease liabilities (3,302 ) Operating lease liabilities, non-current $ 12,983 2023. The Company reserved shares of common stock for future issuance as follows (in thousands): As of October 31, 2022 January 31, 2022 Options outstanding 10,078 12,381 Restricted stock units outstanding 12,155 10,406 Remaining shares available for future issuance under the 2021 Equity Incentive Plan 21,900 17,561 2021 Employee Stock Purchase Plan 3,370 1,900 Total 47,503 42,248 The following table summarizes stock option activity for the 2021 Plan (shares and aggregate intrinsic value in thousands): Options Outstanding Number of Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value Balance as of January 31, 2022 12,381 $ 1.93 5.7 $ 798,374 Stock options exercised (2,116 ) $ 1.47 $ 74,101 Stock options cancelled/forfeited/expired (187 ) $ 3.56 Balance as of October 31, 2022 10,078 $ 2.00 5.0 $ 289,668 Exercisable as of October 31, 2022 9,557 $ 1.70 4.9 $ 277,511 The Company’s summary of restricted stock units ("RSUs") activity under the Number of Awards Weighted-Average Grant Date Fair Value Outstanding and unvested at January 31, 2022 10,406 $ 37.46 RSUs granted 6,264 $ 43.99 RSUs released (3,219 ) $ 32.65 RSUs cancelled (1,296 ) $ 36.42 Outstanding and unvested at October 31, 2022 12,155 $ 42.21 Total stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations is as follows (in thousands): Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Cost of support $ 2,152 $ 193 $ 6,332 $ 378 Cost of cloud-hosted services 792 1 2,118 6 Cost of professional services and other 722 12 2,102 36 Sales and marketing 15,398 525 44,212 1,748 Research and development 14,988 436 40,233 1,272 General and administrative 12,658 375 40,375 1,326 Stock-based compensation expense, net of amounts capitalized $ 46,710 $ 1,542 $ 135,372 $ 4,766 Capitalized stock-based compensation 1,254 - 3,042 - Total stock-based compensation expense $ 47,964 $ 1,542 $ 138,414 $ 4,766 The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data): Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Numerator: Net loss $ (71,958 ) $ (21,951 ) $ (224,939 ) $ (62,438 ) Denominator: Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted 187,080 66,782 185,124 66,313 Net loss per share attributable to Class A and Class B common stockholders, basic and diluted $ (0.38 ) $ (0.33 ) $ (1.22 ) $ (0.94 ) The following outstanding potentially dilutive shares of common stock were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because the impact of including them would have been antidilutive (in thousands): Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Redeemable convertible preferred stock - 94,128 - 94,128 Outstanding stock options and restricted stock units 22,233 26,666 22,233 26,666 Share purchase rights under the ESPP 1,491 - 1,239 - Class A and Class B common stock subject to repurchase - 7 - 7 Total 23,724 120,801 23,472 120,801 . We also intend to continue to grow our base of large enterprises around the world. launches, including the launch of HCP in fiscal 2021, As of October 31, 2022 January 31, 2022 (dollars in millions) Total customers 3,899 2,715 Total customers with $100,000 or greater ARR 760 655 Subscription revenue from HCP (and its predecessor cloud offerings)(1) $ 32.3 $ 18.5 RPOs $ 531.8 $ 428.8 Non-GAAP RPOs(2) $ 553.4 $ 452.2 As of October 31, 2022 January 31, 2022 GAAP RPOs GAAP short-term RPOs $ 322,406 $ 268,911 GAAP long-term RPOs 209,383 159,923 Total GAAP RPOs $ 531,789 $ 428,834 Add: Customer deposits Customer deposits expected to be recognized within the next 12 months $ 19,102 $ 20,324 Customer deposits expected to be recognized after the next 12 months 2,467 3,059 Total customer deposits $ 21,569 $ 23,383 Non-GAAP RPOs Non-GAAP short-term RPOs $ 341,508 $ 289,235 Non-GAAP long-term RPOs 211,850 162,982 Total Non-GAAP RPOs $ 553,358 $ 452,217 Nine Months Ended October 31, 2022 2021 (in thousands) GAAP net cash used in operating activities $ (86,040 ) $ (49,217 ) Add: purchases of property and equipment (140 ) (86 ) Add: capitalized internal-use software (6,174 ) (4,652 ) Free cash flow $ (92,354 ) $ (53,955 ) GAAP net cash used in operating activities as a percentage of revenue (25 ) % (22 ) % Free cash flow as a percentage of revenue (27 ) % (24 ) % delivered. Professional services are services utilized by some of our self-managed customers to accelerate the deployment of our products. research and development expenses to decrease as a percentage of revenue over the long term due to this business growth, our research and development expenses may fluctuate as a percentage of revenue from period to period due to the timing and extent of these expenses. losses from foreign currency transactions, and realized gains and losses on short-term investments. Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Revenue: License $ 17,823 $ 9,892 $ 43,505 $ 31,850 Support 89,500 64,894 252,965 175,782 Cloud-hosted services 12,875 5,357 32,344 11,699 Total subscription revenue 120,198 80,143 328,814 219,331 Professional services and other 5,143 2,078 11,287 4,915 Total revenue 125,341 82,221 340,101 224,246 Cost of revenue: Cost of license 393 37 1,146 167 Cost of support 12,149 6,884 35,259 23,568 Cost of cloud-hosted services 5,849 2,526 16,378 7,723 Total cost of subscription revenue(1) 18,391 9,447 52,783 31,458 Cost of professional services and other(1) 4,157 1,692 10,694 5,276 Total cost of revenue(1) 22,548 11,139 63,477 36,734 Gross profit 102,793 71,082 276,624 187,512 Operating expenses: Sales and marketing(1) 92,872 53,511 260,798 142,380 Research and development(1) 53,887 25,655 148,947 68,703 General and administrative(1) 33,372 13,450 101,278 38,478 Total operating expenses 180,131 92,616 511,023 249,561 Loss from operations (77,338 ) (21,534 ) (234,399 ) (62,049 ) Interest income 8,584 17 13,126 216 Other expenses, net (2,882 ) (16 ) (2,922 ) (126 ) Loss before income taxes (71,636 ) (21,533 ) (224,195 ) (61,959 ) Provision for income taxes 322 418 744 479 Net loss $ (71,958 ) $ (21,951 ) $ (224,939 ) $ (62,438 ) Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 (in thousands) Cost of revenue: Cost of support $ 2,152 $ 193 $ 6,332 $ 378 Cost of cloud-hosted services 792 1 2,118 6 Total cost of subscription revenue 2,944 194 8,450 384 Cost of professional services and other 722 12 2,102 36 Total cost of revenue 3,666 206 10,552 420 Sales and marketing 15,398 525 44,212 1,748 Research and development 14,988 436 40,233 1,272 General and administrative 12,658 375 40,375 1,326 Total stock-based compensation expense, net of amounts capitalized $ 46,710 $ 1,542 $ 135,372 $ 4,766 Three Months Ended October 31, Nine Months Ended October 31, 2022 2021 2022 2021 Revenue: License 14 % 12 % 13 % 14 % Support 72 79 74 79 Cloud-hosted services 10 7 10 5 Total subscription revenue 96 97 97 98 Professional services and other 4 3 3 2 Total revenue 100 100 100 100 Cost of revenue: Cost of license - - - - Cost of support 10 8 11 11 Cost of cloud-hosted services 5 3 5 3 Total cost of subscription revenue 15 11 16 14 Cost of professional services and other 3 3 3 2 Total cost of revenue 18 14 19 16 Gross profit 82 86 81 84 Operating expenses: Sales and marketing 74 65 76 64 Research and development 43 31 44 31 General and administrative 27 16 30 17 Total operating expenses 144 112 150 112 Loss from operations (62 ) (26 ) (69 ) (28 ) Interest income 7 - 4 - Other expenses, net (2 ) - (1 ) - Loss before income taxes (57 ) (26 ) (66 ) (28 ) Provision for income taxes - 1 - - Net loss (57 ) % (27 ) % (66 ) % (28 ) % Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Revenue: License $ 17,823 $ 9,892 $ 7,931 80 Support 89,500 64,894 24,606 38 Cloud-hosted services 12,875 5,357 7,518 140 Total subscription revenue 120,198 80,143 40,055 50 Professional services and other 5,143 2,078 3,065 147 Total revenue $ 125,341 $ 82,221 $ 43,120 52 Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Cost of revenue: Cost of license $ 393 $ 37 $ 356 962 Cost of support 12,149 6,884 5,265 76 Cost of cloud-hosted services 5,849 2,526 3,323 132 Total cost of subscription revenue 18,391 9,447 8,944 95 Cost of professional services and other 4,157 1,692 2,465 146 Total cost of revenue $ 22,548 $ 11,139 $ 11,409 102 Three Months Ended October 31, 2022 2021 Gross margin License 98 % 100 % Support 86 % 89 % Cloud-hosted services 55 % 53 % Total subscription margin 85 % 88 % Professional services and other 19 % 19 % Total gross margin 82 % 86 % $0.5 million increase in software expenses. Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Sales and marketing $ 92,872 $ 53,511 $ 39,361 74 Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Research and development $ 53,887 $ 25,655 $ 28,232 110 Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) General and administrative $ 33,372 $ 13,450 $ 19,922 148 Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Interest income $ 8,584 $ 17 $ 8,567 * Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Other expenses, net $ (2,882 ) $ (16 ) $ (2,866 ) * Three Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Provision for income taxes $ 322 $ 418 $ (96 ) (23 ) Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Revenue: License $ 43,505 $ 31,850 $ 11,655 37 Support 252,965 175,782 77,183 44 Cloud-hosted services 32,344 11,699 20,645 176 Total subscription revenue 328,814 219,331 109,483 50 Professional services and other 11,287 4,915 6,372 130 Total revenue $ 340,101 $ 224,246 $ 115,855 52 Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Cost of revenue: Cost of license $ 1,146 $ 167 $ 979 586 Cost of support 35,259 23,568 11,691 50 Cost of cloud-hosted services 16,378 7,723 8,655 112 Total cost of subscription revenue 52,783 31,458 21,325 68 Cost of professional services and other 10,694 5,276 5,418 103 Total cost of revenue $ 63,477 $ 36,734 $ 26,743 73 Nine Months Ended October 31, 2022 2021 Gross margin License 97 % 99 % Support 86 % 87 % Cloud-hosted services 49 % 34 % Total subscription margin 84 % 86 % Professional services and other 5 % (7 ) % Total gross margin 81 % 84 % Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Sales and marketing $ 260,798 $ 142,380 $ 118,418 83 Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Research and development $ 148,947 $ 68,703 $ 80,244 117 Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) General and administrative $ 101,278 $ 38,478 $ 62,800 163 Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Interest income $ 13,126 $ 216 $ 12,910 * Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Other expenses, net $ (2,922 ) $ (126 ) $ (2,796 ) * Nine Months Ended October 31, Change 2022 2021 $ % (in thousands, except percentages) Provision for income taxes $ 744 $ 479 $ 265 55 Nine Months Ended October 31, 2022 2021 (in thousands) Net cash used in operating activities $ (86,040 ) $ (49,217 ) Net cash used in investing activities $ (6,314 ) $ (4,738 ) Net cash provided by financing activities $ 11,434 $ 1,348 encounter risks and difficulties frequently experienced by rapidly growing companies in evolving industries. If we do not address these risks successfully, our business and results of operations will be adversely affected. could produce substantial variation in the revenue we recognize. Further, our gross margins and operating results could be harmed by changes in revenue affected. Our failure to provide and maintain high-quality support services would have an adverse effect on our business, financial condition, and results of operations. results. processing of data, loss of business, reputational damage adversely affecting customer or investor confidence, regulatory investigations and orders, litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, significant costs for remediation, and other liabilities. others and wait until the following quarter to recognize revenue for those orders we are unable to complete on time. In such cases, we will not be able to recognize as much revenue for the quarter as we otherwise would have if we had processed and delivered software for all orders we received before the quarter ended, which may lower our revenue customers, both with respect to our use of third-party open-source as well as our distribution of our own software under patents, trademarks, copyrights, service marks, trade secret laws, infringement, misappropriation, or violation of proprietary rights, particularly patent rights, and to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement, misappropriation, or violation claims. Further, the software industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets, and other intellectual and proprietary rights. Companies in the software industry are often required to defend against litigation claims based on allegations of infringement, misappropriation, or other violations of intellectual property rights. Our technologies may not be able to withstand any third-party claims against their use. In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. result, our business is subject to a variety of government and industry regulations, as well as other obligations, related to privacy, data protection, and data security. liability authorities. The EU-U.S. Privacy Shield program administered by the U.S. Department of Commerce, to which we have self-certified, was invalidated and reduce the overall demand for, our products. Privacy, data protection, and data security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and countries outside of the United States. If we are not able to adjust to changing laws, regulations, and standards related to the internet, our business may be harmed. management’s attention and resources and significant defense costs and other professional fees.. collecting such taxes from our end-customers, we could be held liable for such costs. Such tax assessments, penalties and interest, or future requirements may adversely affect our results of operations. common stock even when the shares of Class B common stock represent as little as 10% of all outstanding shares of our Class A common stock and Class B common stock. This concentrated control will limit your ability to influence corporate matters for the foreseeable future, and, as a result, the market price of our Class A common stock could be adversely affected. Incorporated by Reference Exhibit Description Form File No. Exhibit Filing Date Number 3.1 Amended and Restated Certificate of Incorporation of the Registrant. 8-K 001-41121 3.1 12/13/2021 3.2 8-K 001-41121 3.2 12/13/2021 31.1* 31.2* 32.1*† 32.2*† 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). Date: December 7, By: /s/ David McJannet David McJannet Date: December 7, By: /s/ Navam Welihinda Navam WelihindaThree Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Balance, beginning of period $ 293,441 $ 226,812 $ 302,244 $ 223,289 Deferred revenue billings including reclassification to deferred revenue from customer deposits 142,390 131,351 415,646 350,879 Recognition of revenue, net of change in unbilled accounts receivable* (145,629) (123,981) (427,688) (339,986) Balance, end of period $ 290,202 $ 234,182 $ 290,202 $ 234,182 * Reconciliation to revenue reported per consolidated statements of operations: Revenue billed as of the end of the period $ 145,629 $ 123,981 $ 427,688 $ 339,986 Increase (decrease) in total unbilled accounts receivable 496 1,360 (334) 115 Revenue reported per consolidated statements of operations $ 146,125 $ 125,341 $ 427,354 $ 340,101 representrepresents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date. The unbilled accounts receivable balance is due within one year.year. As of October 31, 20222023 and January 31, 2022,2023, unbilled accounts receivable of approximately $3.0$4.6 million and $2.9$4.9 million, respectively, were included in accounts receivable on the Company’s condensed consolidated balance sheets.years.years. RPOs include both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. As of October 31, 20222023 and January 31, 2022,2023, the Company had $531.8$678.2 million and $428.8$647.1 million, respectively, of remaining performance obligations, which is comprised of product and services revenue not yet delivered. As of October 31, 20222023 and January 31, 2022,2023, the Company expected to recognize approximately 61%59% and 63%58%, respectively, of its remaining performance obligations as revenue over the next 12 months and the remainder thereafter.days'days written notice. The customer deposit balance is amortized to revenue over the term of the underlying contract as the customer’s right to cancel expires. If no contracts with customers are cancelled, the existing customer deposit balance will beAs of October 31, 2023 January 31, 2023 Within the next 12 months $ 18,728 $ 22,657 After the next 12 months 3,445 4,042 Total $ 22,173 $ 26,699 As of October 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Fair Value U.S. treasury securities $ 277,357 $ 6 $ (404) $ 276,959 U.S. agency obligations 73,465 — (146) 73,319 Corporate notes and bonds 100,611 4 (355) 100,260 Commercial paper 43,758 — — 43,758 Certificates of deposit 31,529 — — 31,529 Total short-term investments $ 526,720 $ 10 $ (905) $ 525,825 As of October 31, 2023 Amortized Cost Fair Value Due within one year $ 473,940 $ 473,254 Due after one year through three years 52,780 52,571 Total $ 526,720 $ 525,825 4. 7. Fair Value MeasurementsFair Value Measurement As of October 31, 2023 Fair Value Level Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Assets: Cash and cash equivalents: Money market funds Level 1 13,221 — — 13,221 U.S. treasury securities Level 2 19,847 — — 19,847 Corporate notes and bonds Level 2 995 — — 995 Commercial paper Level 2 9,675 — — 9,675 Total assets measured at fair value included in cash and cash equivalents $ 43,738 $ — $ — $ 43,738 Short-term Investments: U.S. treasury securities Level 2 $ 277,357 6 (404) $ 276,959 U.S. agency obligations Level 2 73,465 — (146) 73,319 Corporate notes and bonds Level 2 100,611 4 (355) 100,260 Commercial paper Level 2 43,758 — — 43,758 Certificates of deposit Level 2 31,529 — — 31,529 Total short-term investments $ 526,720 $ 10 $ (905) $ 525,825 Total assets measured at fair value $ 570,458 $ 10 $ (905) $ 569,563 Liabilities: Derivative instruments: Foreign currency forward contracts Level 2 $ — $ — $ 321 $ 321 Total derivative instruments — — 321 321 Total liabilities measured at fair value $ — $ — $ 321 $ 321
As of October 31, 2022Fair Value Measurement As of January 31, 2023 Fair Value Level Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Assets: Cash and cash equivalents: Money market funds Level 1 $ 169,904 $ — $ — $ 169,904 Total cash and cash equivalents 169,904 — — 169,904 Total assets measured at fair value $ 169,904 $ — $ — $ 169,904
As of January 31, 2022Moneycash equivalents with remaining maturities of three months or less at the date of purchase. The Company usesvalued based on quoted market prices in active markets for identical assets to determinemarkets. The Company classifies its corporate notes and bonds, U.S. treasury securities, U.S. agency obligations, commercial paper, certificate of deposits and foreign currency forward contracts within Level 2 of the fair value hierarchy because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security that may not be actively traded.its Level 1 investments in money market funds.ContentsThe unaudited condensed consolidated financial statements as20222023, the declines in the market value of the Company's short-term investment portfolio were not driven by credit related factors. As of October 31, 2023, the Company determined that it does not intend to sell any securities with a decline in market value, and Januaryit is more likely than not that the Company will be able to hold these securities until the entire principal has been recovered. Therefore, the Company did not recognize any losses on short-term investments due to credit related factors. As of October 31, 2022 do not include any nonrecurring fair value measurements relating to assets or liabilities. 2023, the total unrealized losses on short-term investments were $0.9 million.Balance Sheet Location Fair Value
at October 31, 2023Derivative Liabilities: Foreign currency forward contracts designated as hedging instruments Accrued expenses and other liabilities $ 321 Total derivative liabilities $ 321 Nine Months Ended October 31, Beginning balance $ — Net gains (losses) recognized in other comprehensive income (483) Net (gains) losses reclassified from AOCI to earnings 162 Ending balance $ (321) 22023.5.9. Balance Sheet ComponentsAs of October 31, 2023 January 31, 2023 Property and equipment, net $ 31,973 $ 24,594 Operating lease right-of-use assets 10,338 12,560 Other 1,108 902 Total other assets, non-current $ 43,419 $ 38,056 12Estimated
Useful lifeOctober 31, 2023 January 31, 2023 Furniture and fixtures 5 years $ 1,329 $ 1,292 Computers, equipment and software 3 years 580 581 Capitalized internal-use software development costs 5 years 38,038 25,817 Leasehold improvements Shorter of useful life or lease term 5,563 5,138 Construction in progress 76 47 Total property and equipment 45,586 32,875 Less: accumulated depreciation and amortization (13,613) (8,281) Property and equipment, net $ 31,973 $ 24,594 (1) This represents internal-use software not yet available for general release. property and equipment depreciation and amortization expense for property and equipment for the three months ended October 31, 2023 and 2022 and 2021 was $1.2$2.0 million and $0.6$1.2 million, respectively. Total property and equipment depreciation and amortization expense for property and equipment for the nine months ended October 31, 2023 and 2022 and 2021 was $3.1$5.4 million and $1.5$3.1 million, respectively.$3.9$4.1 million and $1.8$3.9 million in internal-use software development costs for the three months ended October 31, 2023 and 2022, and 2021, respectively, and $9.2$12.2 million and $4.7$9.2 million for the nine months ended October 31, 20222023 and 2021,2022, respectively. Amortization expense associated with internal-use software development costs totaled $0.9$1.7 million and $0.3$0.9 million for the three months ended October 31, 20222023 and 2021,2022, respectively, and $2.3$4.5 million and $0.7$2.3 million for the nine months ended October 31, 20222023 and 2021, respectively.2022. As of October 31, 2023 January 31, 2023 Operating lease liabilities $ 3,683 $ 3,380 Acquisition holdback, current 3,554 — Accrued expenses 3,262 4,222 Sales tax payable 1,470 1,480 Accrued income taxes payable 920 1,081 Derivative liabilities 321 — Total accrued expenses and other current liabilities $ 13,210 $ 10,163 As of October 31, 2023 January 31, 2023 Accrued commissions $ 10,113 $ 16,932 Accrued vacation 22,078 20,614 Accrued payroll and withholding taxes 5,679 11,574 ESPP employee contributions 7,992 4,247 Accrued bonus 3,342 3,220 Other 2,769 2,041 Total accrued compensation and benefits $ 51,974 $ 58,628 13for nine months ended October 31, 2022 and 2021 (in thousands):Nine Months Ended October 31, 2023 2022 Beginning balance $ 124,098 $ 89,331 Capitalization of contract acquisition costs 41,272 53,002 Amortization of deferred contract acquisition costs (40,186) (31,511) Ending balance $ 125,184 $ 110,822 Deferred contract acquisition costs, current $ 45,508 $ 37,317 Deferred contract acquisition costs, non-current 79,676 73,505 Total deferred contract acquisition costs $ 125,184 $ 110,822 20222023 and 2021.2022.OtherThe following table summarizes the activity of other liabilities, non-current are comprised of the following (in thousands):146. Credit FacilityOn November 23, 2020, the Company entered into a loan and security agreement with HSBC Ventures USA Inc., (the "Loan Agreement"). This Loan Agreement provided the Company a revolving line of credit, which expires on November 23, 2023. Under the Loan Agreement, the Company was able to borrow up to $50.0 million. Interest on any drawdown under the revolving line of credit would accrue at the adjusted LIBOR rate plus 3.00%. The Company would also incur a commitment fee of 0.30% for any unused portion of the credit facility. On July 28, 2022, the Company terminated the Loan Agreement in accordance with the terms of such agreement. As of the date of termination and January 31, 2022, the Company had no balance outstanding under the Loan Agreement.As of October 31, 2023 January 31, 2023 Operating lease liabilities, non-current $ 9,301 $ 12,093 Acquisition holdback, non-current 546 — Accrued commissions, non-current 1,029 713 Total other liabilities, non-current $ 10,876 $ 12,806 7. Leases2027.2028. The Company is required to pay property taxes, insurance, and normal maintenance costs for certain of these facilities. Operating lease cost for these leases is recognized on a straight-line basis over the lease term, with variable lease costs recognized in the period incurred. These lease agreements do not contain residual value guarantees or restrictive covenants.Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Short-term lease costs $ 174 $ 39 $ 514 $ 184 Operating lease costs 878 878 2,634 2,634 Total lease costs $ 1,052 $ 917 $ 3,148 $ 2,818 20222023 and 2021.2022. There were no other lease components for the periods presented.202220234.43.820222023 are as follows (in thousands):Years Ending January 31, 2024 (remaining three months) $ 1,012 2025 4,150 2026 3,734 2027 3,737 2028 1,277 Total minimum lease payments 13,910 Less imputed interest (926) Present value of future minimum lease payments 12,984 Less current lease liabilities (3,683) Operating lease liabilities, non-current $ 9,301 Current operatingOperating lease liabilities are included in accrued expenses and other current liabilities, and non-current operating lease liabilities are included in other liabilities, non-current, in the condensed consolidated balance sheets. There were no lease related operating right-of-use asset impairment losses in the three and nine months ended October 31, 20222023 and 2021.2022.8.$1.8$1.8 million in letters of credit outstanding as security deposits for the Company’s leased office spaces as of October 31, 20222023 and January 31, 2022.2022.2023.9. (Deficit)Common StockThe Company has two classes of common stock: Class A common stock and Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, converting, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes.Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Upon exercise, release, or transfer to a broker, equity plan administrator or other nominee, holders of shares of Class B common stock can convert Class B common stock to Class A common stock. Once converted or transferred and converted into Class A common stock, the Class B common stock may not be reissued. For the nine months ended October 31, 2022, a total of 41,176,043 shares of Class B common stock have been converted into Class A common stock.All the outstanding shares of our Class B common stock will convert automatically into shares of Class A common stock upon the earlier of the tenth anniversary of the Company's filing and effectiveness of the amended and restated certificate of incorporation in connection with the IPO or the affirmative vote of the holders of 66-2/3% of the voting power of outstanding Class B common stock. Following such conversion, each share of Class A common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical.16As of October 31, 2023 January 31, 2023 Options outstanding 8,011 9,315 Restricted stock units outstanding 13,491 11,588 Remaining shares available for future issuance under the 2021 Equity Incentive Plan ("2021 Plan") 25,231 21,466 2021 Employee Stock Purchase Plan ("ESPP") 4,481 3,008 Total 51,214 45,377 A total of 21,900,058 shares of the Company’s Class A common stock shares are available for issuance under the 2021 Equity Incentive Plan ("2021 Plan") as of October 31, 2022.Options Outstanding Number of Options Outstanding Weighted- Average Exercise Price Weighted- Average Remaining Contractual
Term (in Years)Aggregate Intrinsic Value Balance as of January 31, 2023 9,315 $ 1.92 4.6 $ 281,837 Stock options exercised (1,286) 2.29 33,922 Stock options cancelled/forfeited/expired (18) 22.39 Balance as of October 31, 2023 8,011 1.82 3.8 143,570 Exercisable as of October 31, 2023 7,984 $ 1.75 3.8 $ 143,442 No options were granted during the three and nine months ended October 31, 2022.Exercisable shares consist of 9,557,057 shares that are vested as of October 31, 2022. All shares with an early exercise provision have fully vested as of October 31, 2022.$3.8$1.0 million and $4.9$3.8 million during the nine months ended October 31, 20222023 and 2021, respectively.2022.and 2021 were $74.1$33.9 million and $61.4$74.1 million, respectively.2014 Stock Plan ("2014 Plan") and the 2021 Plan is as follows (shares in(in thousands):Weighted-Average Grant Date Fair Value Outstanding and unvested at January 31, 2023 11,588 $ 42.48 RSUs granted 7,679 $ 28.92 RSUs released (3,855) $ 34.77 RSUs cancelled (1,921) $ 37.53 Outstanding and unvested at October 31, 2023 13,491 $ 37.66 17$105.1$134.0 million and $105.1 million during the nine months ended October 31, 2022. There were no RSUs released during the nine months ended October 31, 2021 as the Company was private2023 and the performance condition for these RSUs was not met during the nine months ended October 31, 2021.2022.In December 2021, the Company adopted the 2021 Employee Stock Purchase Plan (“ESPP”), which became effective upon completion of the Company's IPO. 3,370,3294,480,939 shares of Class A common stock are available for salefuture issuance under the ESPP.ESPP as of October 31, 2023. For the nine months ended October 31, 2023 and 2022, the Company recognized $9.1$9.6 million and $9.1 million of stock-based compensation expense related to the ESPP.ESPP, respectively. As of October 31, 2022,2023, unrecognized stock-based compensation expense related to the ESPP was approximately $18.3$12.2 million, which is expected to be recognized over a weighted-average period of approximately 1.1 years.1.6 years. The Company’s current offering period began June 16, 2022 and is expected to end June 15, 2024.During the nine months ended October 31, 2022, employees purchased 351,284 shares of our common stock under the ESPP at a purchase price of $24.20 per share, resulting in total cash proceeds of $8.5 million. 2022 and January 31, 20222023 were $8.1$8.0 million and $2.7 million, respectively, and are reported within accrued compensation and benefits in the condensed consolidated balance sheets. Payroll contributions accrued as of October 31, 20222023 will be used to purchase shares at the end of the current purchase period ending on December 15, 2022.2023. Payroll contributions ultimately used to purchase shares will be reclassified as stockholders’ equity on the purchase date.The ESPP offers a two-year look-back feature as well as a rollover feature that provides for an offering period to be rolled over to a new lower-priced offering if the offering priceTable of the new offering period is less than that of the current offering period. An ESPP rollover occurred when the Company’s closing stock price on ContentsJune 15, 2022 was below the closing stock price on December 8, 2021, triggering a new 24-month offering period through June 15, 2024. This rollover was accounted for as a modification to the original offering and resulted in incremental compensation cost of $4.9 million. The unrecognized compensation cost from the original offering plus the incremental compensation cost as a result of the modification is recognized over the requisite service period of the new 24-month offering through June 15, 2024.Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Cost of support $ 2,411 $ 2,152 $ 7,511 $ 6,332 Cost of cloud-hosted services 601 792 1,767 2,118 Cost of professional services and other 734 722 1,947 2,102 Sales and marketing 13,923 15,398 41,365 44,212 Research and development 12,674 14,988 37,347 40,233 General and administrative 13,423 12,658 40,111 40,375 Stock-based compensation expense, net of amounts capitalized $ 43,766 $ 46,710 $ 130,048 $ 135,372 Capitalized stock-based compensation 1,230 1,254 3,685 3,042 Total stock-based compensation expense $ 44,996 $ 47,964 $ 133,733 $ 138,414 and RSUs was approximately $2.1$0.3 million and $389.1$2.1 million, respectively. This unrecognized stock-based compensation expense isrespectively, which are expected to be recognized over a weighted-average period of approximately 1.3 1.0 year and 2.91.3 years, respectively.1810.shares of Class A and Class B common stockshares outstanding, the rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical, except with respect to voting, converting, and transfer rights. Our Class B common stock has ten votes per share, and our Class A common stock has one vote per share. As the liquidation and dividend rights were identical for Class A and Class B common stock, the undistributed earnings would be allocated on a proportionate basis and the resulting net loss per share would, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Numerator: Net loss $ (39,473) $ (71,958) $ (159,046) $ (224,939) Denominator: Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted 194,600 187,080 192,693 185,124 Net loss per share attributable to Class A and Class B common stockholders, basic and diluted $ (0.20) $ (0.38) $ (0.83) $ (1.22) 11.Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Outstanding stock options and restricted stock units 21,502 22,233 21,502 22,233 Share purchase rights under the ESPP 1,205 1,491 1,077 1,239 Total 22,707 23,724 22,579 23,472 determineddetermines its income tax provision for interim periods using an estimate of ourits annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between ourthe effective tax rate and the federal statutory rate is unrealized federal and staterelated to nonrecognition of tax benefits due to the full valuation allowance we have established in these jurisdictions. for US federal and state deferred tax assets.provisionCompany recorded income tax expenses of $0.5 million and $0.7 million for income taxes recorded in the nine months ended October 31, 2023 and 2022, and 2021 consists primarilyrespectively. The tax expense for the nine months ended October 31, 2023 included a partial release of income taxes in foreign jurisdictions invaluation allowance, of which $0.5 million tax benefit was directly related to the acquisition of BluBracket, Inc. In connection with the BluBracket acquisition, the Company conducts business. recorded a net deferred tax liability which provides an additional source of taxable income to support the realization of the pre-existing deferred tax assets and, accordingly, during the nine months ended October 31, 2023, the Company released a total of $0.5 million of its U.S. valuation allowance. The Company continues to maintain a valuation allowance for its U.S. Federal and state net deferred tax assets. The tax expense for the nine months ended October 31, 2023 was primarily due to foreign and US state income tax expense.COVID-19 or other public health crises;epidemics;20 and unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in Part I, Item IA of our Annual Report on Form 10-K filed with the SEC on March 25, 202227, 2023 and elsewhere in this Quarterly Report on Form 10-Q. You should carefully review the risks described in our Annual Report filed with the SEC on March 25, 2022,27, 2023, in this Quarterly Report on Form 10-Q, and in other documents we file from time to time with the SEC. You should review the risk factors for a more complete understanding of the risks associated with an investment in our securities. We disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31. Our fiscal year ended January 31, 20222023 is referred to as fiscal 2022,2023, and our fiscal year ending January 31, 20232024 is referred to as fiscal 2023.2024.Overviewopen-sourcefree, source available community products and our proprietary software. We are committed to an open-sourcea model in which we maintain free open-sourcecommunity offerings while developing proprietary features for paid tiers of our software. These proprietary features include collaboration modules, governance and policy modules, enterprise use cases, and premium support and services. We provide our software under a licensing model that protects our intellectual property, grows our adoption, and supports our business.("HCP"),or HCP, is our fully-managed cloud platform. These two core offerings can be leveraged independently or together, spanning the various public cloud, private cloud, and on-premises environments in which our customers operate.Customers of our fully-managed cloud platform, HCP can eithercustomers use our offering on a consumption-based model, or can purchase annual subscription contracts. Customers who are on consumption-based contracts are predominantly billed in advance for committed consumption and revenue from them is recognized based on actual consumption of resources. Customers with annual subscriptions are typically billed annually in advance for their subscriptions and we typically recognize revenue from such subscriptions ratably over the subscription term. Our pricing schedule lists the hourly rate when deploying HCP for our various products, and actual usage is metered and calculated on a per-hour basis for increased accuracy.amountnumber of business-critical processes, applications, and large volumes of data to the cloud. Ultimately, we believe all enterprises will need to transition to the cloud to reduce operational burden, improve scalability and elasticity, and increase agility. We plan to continue to invest in our direct sales force to grow our large enterprise base domestically and internationally.open-sourcesource available model allows developers and individuals focused on operations, IT, and security, or practitioners, to engage with and evaluate our software in a frictionless manner, which we believe has contributed to our software’s popularity. This open-source leadership and the wider ecosystem around us, compels practitioners to adopt and implement our software in the enterprise. As organizations recognize the value of our products, our inside and field sales teams can nurture leads and develop direct relationships with key stakeholders across all segments. HCP has accelerated our self-service approach, as practitioners can now quickly deploy and experiment with our paid offering with a fully-managed cloud solution and no minimum commitments.open-sourcesource available engagement and self-serve cloud motion help us identify and accelerate initial product adoption and use cases in an account. Our enterprise sales teams land these customers with subscription contracts for our software. Our expansion motion focuses on up-selling additional modules and increasing the footprint of usage of a given product, including across multiple buying centers within our customers’ organizations. The multiple capabilities of our deep product portfolio allow us to extend by cross-selling additional integrated products to our customers. For example, a company may initially adopt an open-sourcea free community version use case of Terraform. After initial use of the open-sourcesource available product, we frequently land their first paid use of Terraform to add enterprise functionality and support mission-critical cloud workloads. As customers grow their cloud presence to support additional cloud-based workloads, they frequently expand the amount of Terraform they consume. In addition to this increased Terraform usage, customers also frequently extend into additional products such as Vault or Consul. This combination of adopt, land, expand, and extend affords us considerable growth opportunities within our customer base, and we focus our go-to-market strategy on developing and cultivating long-term customer relationships. The increased use of our platform by our customers is evidenced by our high net dollar retention rate. As of October 31, 2023 and 2022, and 2021, our trailinglast four-quarter average net dollar retention rate was 134%119% and 127%134%, respectively.open-sourcesource available distribution model and by continuing to cultivate our open-sourcesource available community.by continuing to invest significantlythrough strategic targeted investments in sales and marketing and to increase brand awareness. HCP has also improved our self-service model, and we expect HCP to continue to support our sales model and drive paid adoption. As of October 31, 2022,2023, we served 3,899 customersover 4,300 customers spanning organizations of a broad range of sizes and industries, compared to over 2,3923,600 as of October 31, 2021.2022 (subsequent to the issuance of our Form 10-K for the fiscal year ended January 31, 2023, we identified an immaterial error in the calculation of our total customers count related to our self-service, or "pay as you use," customers, which we have corrected accordingly)open-sourcedeveloper community, and effectiveness of our marketing and community-building efforts. As of October 31, 2022, over 4202023, 472 of the Forbes Global 2000 were our customers. We believe this demonstrates that our products have been adopted by many of the largest enterprises, and that there is a substantial opportunity to further cultivate these large customers. both do more with existing use cases and realize new use cases. At the same time, we often see customers extend to multiple products across our wider product portfolio as they realize the potential of integrating more of our products to better solve use cases. We intend to continue to invest in enhancing awareness of our brand and developing more products, features, and functionality, which we believe are important factors in achieving widespread adoption of our offerings. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our products, the technical capabilities and security of our products, our customers’ progress on their cloud journey, competition, pricing, and overall changes in our customers’ spending levels.20222023 and 2021,2022, our trailinglast four-quarter average net dollar retention rate was 119% and 134% and 127%, respectively. We believe this demonstrates the stickiness of our products and our offerings as a whole.platform,platform, they will continue to adopt HCP. We expect HCP to continue to grow and represent an increasing percentage of our total revenue over time. For the three months ended October 31, 20222023 and 2021,2022, HCP subscription revenue was $19.9 million and $12.9 million, and $5.4 million.respectively. For the nine months ended October 31, 20222023 and 2021,2022, HCP subscription revenue was $54.8 million and $32.3 million and $11.7 million.is dependentdepends on our ability to sustain innovation and technology leadership in order toand maintain our competitive advantage. We have built highly differentiated products that we believe have the ability tocan adapt and evolve with the support of ouropen-sourcedeveloper community, and our ecosystem of partners. HashiCorp is a critical part of the daily operations of practitioners and our free products make HashiCorp frictionless to adopt. We have proven initial success of our modular approach with multiple innovations and product24and launch of Boundary and Waypoint in September 2020.2020, launch of HCP Boundary in June, 2022, launch of HCP Consul in October, 2022, and launch of HCP Vault in June 2023. We see continued adoption from our customers in our new products and innovations and, as of October 31, 2022,2023, 46% of our customers with $100,000 or greater ARR were licensing more than one product.expandexpand usage of our products outside of the United States as enterprises globally look to take advantage of cloud computing and look to adopt a cloud operating model across multiple clouds. For the three months ended October 31, 20222023 and 2021,2022, 30% and 27% and 26% of our revenue, respectively, was generated by customers outside of the United States. For the nine months ended October 31, 20222023 and 2021,2022, 30% and 27% of our revenue, in both periods,respectively, was generated by customers outside of the United States. In addition, we have made and plan to continue to make investments in geographic expansion in Europe, the Middle East, Africa, and the Asia-Pacific region.As of October 31, 2023 January 31, 2023 (dollars in millions) Total customers 4,354 3,870 (3) Total customers with $100,000 or greater ARR 877 798 Subscription revenue from HCP (and its predecessor cloud offerings) $ 54.8 (1) $ 46.9 (1) GAAP Remaining Performance Obligations (RPOs) $ 678.2 $ 647.1 $ 700.4 (2) $ 673.8 20222023 and for the twelve months ended January 31, 2022inat the end of the period indicated. Users of our free products are not included in the total customers. A single organization with multiple divisions, segments, or subsidiaries is generally counted as a single customer.customer, however, in some cases we may count separate divisions, segments, or subsidiaries as multiple customers in cases where they have separate billing terms. Our customer count may also fluctuate due to acquisitions, consolidations, spin-offs, and other market activity.attractattract large enterprise customers to our product offerings. For each applicable financial reporting period, we calculate revenue from customers with $100,000 or greater ARR by aggregating the quarterly revenue attributable to such customers within such period. Customers with $100,000 or greater ARR represented 89% and 87% of revenue for the three months ended October 31, 20222023 and 2021, respectively.2022. Customers with $100,000 or greater ARR represented 88%89% and 87%88% of revenue for the nine months ended October 31, 2023 and 2022, and 2021, respectively.25RevenueRevenue from HCP20222023 and January 31, 2022,2023, our RPOs were $531.8$678.2 million, and $428.8$647.1 million, respectively. As of October 31, 2022,2023, we expect to recognize approximately 61%59% of RPOs as revenue over the next 12 months, and the remainder thereafter. The portion of RPOs that is expected to be recognized as revenue over the next 12 months represents an estimated minimum level of revenue for the applicable period and is not necessarily indicative of future product revenue growth because it does not account for revenue from customer renewals or new customer contracts. Moreover, RPOs are influenced by a number of factors, including the timing of renewals, average contract terms, seasonality, and dollar amounts of customer contracts. Due to these factors, it is important to review RPOs in conjunction with revenue and other financial metrics disclosed elsewhere herein. For a further discussion of RPOs, seesee Note 35 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.20222023 and January 31, 2022,2023, non-GAAP RPOs were $553.4$700.4 million and $452.2$673.8 million, respectively. As of October 31, 2022,2023, we expect to recognize 62%60% of our non-GAAP RPOs as revenue over the next 12 months, and the remainder thereafter.non-GAAPGAAP RPOs to our GAAPnon-GAAP RPOs for the periods presented (in thousands): As of October 31, 2023 January 31, 2023 GAAP RPOs GAAP short-term RPOs $ 402,056 $ 375,072 GAAP long-term RPOs 276,168 271,992 Total GAAP RPOs $ 678,224 $ 647,064 Add: Customer deposits Customer deposits expected to be recognized within the next 12 months $ 18,728 $ 22,657 Customer deposits expected to be recognized after the next 12 months 3,445 4,042 Total customer deposits $ 22,173 $ 26,699 Non-GAAP RPOs Non-GAAP short-term RPOs $ 420,784 $ 397,729 Non-GAAP long-term RPOs 279,613 276,034 Total Non-GAAP RPOs $ 700,397 $ 673,763 GAAP:GAAP (in thousands):Nine Months Ended October 31, 2023 2022 GAAP net cash used in operating activities $ (21,137) $ (86,040) Add: purchases of property and equipment (491) (140) Add: capitalized internal-use software (8,536) (6,174) Free cash flow outflow $ (30,164) $ (92,354) GAAP net cash used in operating activities as a percentage of revenue (5)% (25)% Free cash flow outflow as a % of revenue (7)% (27)% 27Impact of COVID-19The ongoing COVID-19 pandemic has caused business disruption worldwide. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, cash flows, financial condition, or our customers will depend on many factors, including the duration and continued spread of COVID-19; public health measures; national, state, and local government responses; and the impact of the pandemic on the global economy, all of which remain uncertain.Beginning in 2020 and through the date of this Quarterly Report on Form 10-Q, we experienced, and may continue to experience, adverse impacts on certain parts of our business as a result of the pandemic and our responsive measures. In recent months we have re-opened our offices and slowly began to hold events and conferences in person.The pandemic was a contributing factor that also led to existing and potential customers accelerating transitions to the cloud. As a result, we believe the value of our offering has become increasingly relevant during the course of the pandemic, which may result in a positive impact on our business over the long term. The global impact of COVID-19 continues to rapidly evolve, and while the broader implications of the ongoing COVID-19 pandemic remain uncertain, we will continue to monitor the situation and the effects on our business and operations.RevenueHashiCorp Cloud Platform, or HCP, our fully-managed cloud platform for multiple products.condensed consolidated statements of operations) are not sold on a stand-alone basis. Our self-managed Subscription Revenue is disaggregated into License Revenue and Support Revenue in the consolidated statement of operations. The Company does not have observable standalone sales to determine the Standalone Selling Price (SSP)("SSP"), for its licenses or its support as they are not sold separately. The CompanyHashiCorp developed a model to estimate relative SSP for each performance obligation using an “expected cost-plus margin” approach. This model uses observable data points to develop the main assumptions including the estimated useful life of the intellectual property and appropriate margins.consistsconsist of revenue from professional services, training services, which are predominantly sold on a fixed-fee basis and any other services provided to our customers. Revenue for professional services, training services, and other is recognized as these services are28other.other revenue. Cost of professional services and other revenue primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with our professional services, and other, costs of third-party contractors, and allocated overhead. We expect our cost of professional services and other revenue to increase as our professional services and other revenue increases.Marketing.MarketingDevelopment.Development29 primarily of interest earned on our cash, equivalents.cash equivalents and short-term investments, and amortization of premiums and accretion of discounts on short-term investments.Expenses,Expense, Netexpenses,expense, net, consists primarily of interest expense, and foreign exchange gains and losses. (benefit from) income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business, as well as state income taxes in the United States. We have recorded deferred tax assets and we provide a full valuation allowance on our U.S., Canada, and United Kingdom deferred tax assets, which includes net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance on our U.S. deferred tax assets for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.presented (in thousands, except percentages).presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.periods (in thousands).31Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Revenue: License $ 15,973 $ 17,823 $ 47,855 $ 43,505 Support 106,098 89,500 312,008 252,965 Cloud-hosted services 19,863 12,875 54,779 32,344 Total subscription revenue 141,934 120,198 414,642 328,814 Professional services and other 4,191 5,143 12,712 11,287 Total revenue 146,125 125,341 427,354 340,101 Cost of revenue: Cost of license 293 393 1,376 1,146 Cost of support 13,356 12,149 44,503 35,259 Cost of cloud-hosted services 7,692 5,849 22,339 16,378 Total cost of subscription revenue 21,341 18,391 68,218 52,783 Cost of professional services and other 4,264 4,157 13,509 10,694 Total cost of revenue 25,605 22,548 81,727 63,477 Gross profit 120,520 102,793 345,627 276,624 Operating expenses: Sales and marketing 87,320 92,872 279,019 260,798 Research and development 54,349 53,887 168,504 148,947 General and administrative 34,424 33,372 104,083 101,278 Total operating expenses 176,093 180,131 551,606 511,023 Loss from operations (55,573) (77,338) (205,979) (234,399) Interest income 16,765 8,584 48,045 13,126 Other expense, net (407) (2,882) (632) (2,922) Loss before income taxes (39,215) (71,636) (158,566) (224,195) Provision for income taxes 258 322 480 744 Net loss $ (39,473) $ (71,958) $ (159,046) $ (224,939) Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Cost of revenue: Cost of support $ 2,411 $ 2,152 $ 7,511 $ 6,332 Cost of cloud-hosted services 601 792 1,767 2,118 Total cost of subscription revenue 3,012 2,944 9,278 8,450 Cost of professional services and other 734 722 1,947 2,102 Total cost of revenue 3,746 3,666 11,225 10,552 Sales and marketing 13,923 15,398 41,365 44,212 Research and development 12,674 14,988 37,347 40,233 General and administrative 13,423 12,658 40,111 40,375 Total stock-based compensation expense, net of amounts capitalized $ 43,766 $ 46,710 $ 130,048 $ 135,372 Three Months Ended October 31, Nine Months Ended October 31, 2023 2022 2023 2022 Revenue: License 11 % 14 % 11 % 13 % Support 72 72 74 74 Cloud-hosted services 14 10 13 10 Total subscription revenue 97 96 98 97 Professional services 3 4 2 3 Total revenue 100 100 100 100 Cost of revenue: Cost of support 10 10 11 11 Cost of cloud-hosted services 5 5 5 5 Total cost of subscription revenue 15 15 16 16 Cost of professional services 3 3 3 3 Total cost of revenue 18 18 19 19 Gross profit 82 82 81 81 Operating expenses: Sales and marketing 60 74 65 76 Research and development 37 43 39 44 General and administrative 24 27 24 30 Total operating expenses 121 144 130 150 Loss from operations (38) (62) (49) (69) Interest income 12 7 12 4 Other expenses, net - (2) - (1) Loss before income taxes (27) (57) (37) (66) Provision for income taxes — — — — Net loss (27) % (57) % (37) % (66) % 3220222023 and 20212022RevenueThree Months Ended October 31, Change 2023 2022 $ % Revenue: License $ 15,973 $ 17,823 $ (1,850) (10) % Support 106,098 89,500 16,598 19 % Cloud-hosted services 19,863 12,875 6,988 54 % Total subscription revenue 141,934 120,198 21,736 18 % Professional services and other 4,191 5,143 (952) (19) % Total revenue $ 146,125 $ 125,341 $ 20,784 17 % $40.1$21.7 million, or 50%18%, for the three months ended October 31, 20222023 compared to the same period of the prior year. This increase is attributable to the addition of new customers, which contributed $14.0$11.6 million for the three months ended October 31, 2022,2023, as we increased our customer base by 63%19% from October 31, 20212022, to October 31, 2022.2023. The remaining $26.1$10.1 million of this increase in revenue is attributable to expanded product adoption among existing customers, as reflected by our average net dollar retention rate of 134%119% for the trailingtrailing four quarters ended October 31, 2022.2023.and other revenue increaseddecreased by $3.1$1.0 million, or 147%19%, for the three months ended October 31, 20222023 compared to the same period of the prior year. This increaseThe decrease is mainly attributable to a $2.0 million ofdecrease related to revenue recognized from a resale contract commitment. The remainingcommitment for the three months ended October 31, 2022, offset by a $1.2 million increase was primarily duerelated to increased delivery of professional services and the completion of certain professional services projects.services.Three Months Ended October 31, Change 2023 2022 $ % Cost of revenue: Cost of license $ 293 $ 393 $ (100) (25) % Cost of support 13,356 12,149 1,207 10 % Cost of cloud-hosted services 7,692 5,849 1,843 32 % Total cost of subscription revenue 21,341 18,391 2,950 16 % Cost of professional services and other 4,264 4,157 107 3 % Total cost of revenue $ 25,605 $ 22,548 $ 3,057 14 % Three Months Ended October 31, 2023 2022 Gross margin License 98 % 98 % Support 87 % 86 % Cloud-hosted services 61 % 55 % Total subscription margin 85 % 85 % Professional services and other (2) % 19 % Total gross margin 82 % 82 % $8.9$3.0 million, or 95%16%, for the three months ended October 31, 20222023 compared to the same period of the prior year. The increase in cost of subscription revenue was driven by an increase in employee-related expenses of $7.2$0.7 million due to increases in headcount in our customer support organization. These employee-related expenses include a $2.8 million increase related to stock-based compensation expense. The increase in stock-based compensation expense is primarily related to RSUs subject to service-basedorganization and performance-based vesting conditions, which conditions were satisfied in connection with our IPO, and related to the ESPP which commenced in the fourth quarter of fiscal 2022.cloud hosted service organization. The increase in cost of subscription revenue was also attributable to a $0.2$1.1 million increase in spending on software and external services, a $0.8 million in cloud hosting fees, and a $0.6 million increase in amortization of internal-use software. We launched cloud-hosted versionssoftware, a $0.6 million increase in amortization of our products during fiscal 2020acquired developed technology, and 2021. As cloud becomes a larger portion of our revenue, our gross margin profile will change because we have a lower gross margin on cloud-hosted services due to headcount related to our cloud offering operations and cloud hosting fees.and other revenue increased by $2.5$0.1 million, or 146%3%, for the three months ended October 31, 20222023 compared to the same period of the prior year. The increase in cost of professional services and other33revenue was mainly driven by a $2.3$0.2 million increase in employee-related expenses due to higher headcount. These employee-related expenses included a $0.7 million increase in stock-based compensation expense. Our professional services and other margin was 19% for the three months ended October 31, 2022 and 2021. Our professional services and other gross margin was positive for the three months ended October 31, 2022 and 2021.provided.Gross margin was 82% and 86% for the three months ended October 31, 2022 and 2021, respectively, primarily due to the slight decrease in our subscription margin.Three Months Ended October 31, Change 2023 2022 $ % Sales and marketing $ 87,320 $ 92,872 (5,552) (6) % increaseddecreased by $39.4$5.6 million, or 74%6%, for the three months ended October 31, 20222023 compared to the same period of the prior year. The decrease was primarily driven by a $5.2 million decrease in employee-related costs, which is primarily attributable to a 17% decrease in headcount. There was a $4.0 million decrease in payroll, commission, and benefits, and a $1.5 million decrease in stock-based compensation expense. Travel and entertainment expenses decreased by $0.9 million, which was offset by $0.6 million higher software costs.Three Months Ended October 31, Change 2023 2022 $ % Research and development $ 54,349 $ 53,887 462 1 % Three Months Ended October 31, Change 2023 2022 $ % General and administrative $ 34,424 $ 33,372 1,052 3 % $32.3$0.6 million increase in employee-related costs which includes a $0.8 million increase in stock-based compensation offset by a $0.1 million decrease in payroll expenses. The remaining increase includes a $0.3 million increase in software expense, and a $0.2 million increase in professional services.Three Months Ended October 31, Change 2023 2022 $ % Interest income $ 16,765 $ 8,584 8,181 95 % Three Months Ended October 31, Change 2023 2022 $ % Other expense, net $ (407) $ (2,882) 2,475 (86)% Three Months Ended October 31, Change 2023 2022 $ % Provision for income taxes $ 258 $ 322 (64) (20) % 35%full valuation allowance on our U.S. deferred tax assets, and the significant components of the tax expense recorded are current cash tax expenses in various jurisdictions. Current cash tax expenses are impacted by each jurisdiction’sNine Months Ended October 31, Change 2023 2022 $ % Revenue: License $ 47,855 $ 43,505 $ 4,350 10 % Support 312,008 252,965 59,043 23 % Cloud-hosted services 54,779 32,344 22,435 69 % Total subscription revenue 414,642 328,814 85,828 26 % Professional services and other 12,712 11,287 1,425 13 % Total revenue $ 427,354 $ 340,101 $ 87,253 26 % Nine Months Ended October 31, Change 2023 2022 $ % Cost of revenue: Cost of license $ 1,376 $ 1,146 $ 230 20 % Cost of support 44,503 35,259 9,244 26 % Cost of cloud-hosted services 22,339 16,378 5,961 36 % Total cost of subscription revenue 68,218 52,783 15,435 29 % Cost of professional services and other 13,509 10,694 2,815 26 % Total cost of revenue $ 81,727 $ 63,477 $ 18,250 29 % Nine Months Ended October 31, 2023 2022 Gross margin License 97 % 97 % Support 86 % 86 % Cloud-hosted services 59 % 49 % Total subscription margin 84 % 84 % Professional services and other (6) % 5 % Total gross margin 81 % 81 % organization fromexpenses (in thousands, except percentages):Nine Months Ended October 31, Change 2023 2022 $ % Sales and marketing $ 279,019 $ 260,798 18,221 7 % 20212023 compared to October 31, 2022. These employee-related costs includedthe same period of the prior year. The increase was primarily driven by a $14.9$13.6 million increase in stock-based compensation expense. Thenet increase in employee-related costs, alsowhich includes a $3.9$8.6 million net increase in amortization of deferred contract acquisition costs driven by our increase in revenue. Companyrevenue, a $4.6 million increase in severance expense, a $3.0 million increase in payroll expense, offset by a $2.8 million decrease in commissions. The remaining increase is attributable to a $3.0 million increase in marketing expenses, a $1.1 million increase in software expenses, a $0.3 million increase in company events, and marketing expenses increased $3.6a $0.2 million driven primarily by increasesincrease in advertising, sponsorships and internal and external conference costs. Software and subscription expenses and travel and entertainment increased by $0.5 million, and $2.1 million, respectively, driven by increased headcount and revenue growth.expenses.Nine Months Ended October 31, Change 2023 2022 $ % Research and development $ 168,504 $ 148,947 19,557 13 % $28.2$19.6 million, or 110%13% for the threenine months ended October 31, 20222023 compared to the same period of the prior year, as we continued to develop and enhance the functionality of our existing products and release new products. This increase was primarily driven by a $24.8$22.7 million net increase indue tois offset by a 45% increase$1.7 million decrease in research and development headcount from October 31, 2021 to October 31, 2022. These employee-related costs includedfacility expense, a $14.5$0.5 million increasedecrease in stock-based compensation expense net of amounts capitalized to internal-use software. The remainder of the increase was attributable to increased software and subscription expenses of $1.2 million, and increased spending on company events, professional services, travel and entertainmenta $0.3 million decrease in software expenses.officeAdministrativeof $1.2 million.expenses (in thousands, except percentages):Nine Months Ended October 31, Change 2023 2022 $ % General and administrative $ 104,083 $ 101,278 2,805 3 % General and Administrative$19.9$2.8 million, or 148%3%, for the threenine months ended October 31, 2022 compared2023 compared to the same period of the prior year. The increase was primarily driven by a $17.0$1.1 million net increase in employee-related costs due to a 46% increaseincreases in general and administrative headcount from October 31, 20212022, prior to Octoberthe reduction in workforce in the quarter ended July 31, 2022,2023, which includedis mainly attributable to a $12.3$0.7 million increase in payroll expense, a $0.5 million increase in severance, offset by a $0.3 million decrease in stock-based compensation expense.expense. The remainder of the increase was attributable to $2.0a $1.1 million increase in software expenses, and a $0.5 million increase of insurance costs increase, due to the insurance cost associated with being a public company.in company events.Nine Months Ended October 31, 2023 Change 2023 2022 $ % Interest income $ 48,045 $ 13,126 34,919 266 34* Not meaningful$8.6$34.9 million, or 266% for the threenine months ended October 31, 20222023 compared to the same period of the prior year. The increase was primarily dueattributable to the interest income earned from cash equivalents and available-for-sale investments, and increases in the yields resulting from the Federal Reserve's interest rate increases. DuringNine Months Ended October 31, Change 2023 2022 $ % Other expense, net $ (632) $ (2,922) 2,290 (78)% threenine months ended October 31, 2022, the Company has redeemed its money market funds and re-invested these funds into interests bearing saving accounts.Other Expenses, Net* Not meaningfulOther expenses, net, increased by $2.9 million for the three months ended October 31, 20222023 compared to the same period of the prior year. The increase waschanges were primarily due to strengthening of the US dollar against other currencies, resulting in FXforeign currency losses on our cash balances in foreign jurisdictions.jurisdictions due to movements of the US dollar against other currencies.Nine Months Ended October 31, Change 2023 2022 $ % Provision for income taxes $ 480 $ 744 (264) (35) % $0.1$0.3 million, or 23%(35)%, for the threenine months ended October 31, 2022 compared to the same period of the prior year, primarily due to change in effective tax rate. We determine our income tax provision for interim periods using an estimate of our annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between our effective tax rate and the federal statutory rate is unrealized federal and state tax benefits due to the full valuation allowance we have established in these jurisdictions. The provision for income taxes recorded in the nine months ended October 31, 2022 and 2021 consists primarily of income taxes in foreign jurisdictions in which the Company conducts business. The Company is subject to income tax in the United States and various foreign countries. Due to the history of net operating losses, the Company is subject to United States federal, state, and local examinations by tax authorities for all years since incorporation.35Comparison of Nine Months Ended October 31, 2022 and 2021RevenueSubscription revenue increased by $109.5 million, or 50%, for the nine months ended October 31, 2022 compared to the same period of the prior year. This increase is attributable to the addition of new customers, which contributed $39.9 million for the nine months ended October 31, 2022, as we increased our customer base by 63% from October 31, 2021 to October 31, 2022. The remaining $69.6 million of this increase in revenue is attributable to expanded product adoption among existing customers, as reflected by our average net dollar retention rate of 134% for the trailing four quarters ended October 31, 2022.Professional services revenue increased by $6.4 million, or 130%, for the nine months ended October 31, 2022 compared to the same period of the prior year. This increase is mainly attributable to $3.5 million of revenue recognized from a resale contract commitment. The remaining increase was primarily due to increased delivery of professional services and the completion of certain professional services projects.Cost of Revenue and Gross MarginCost of subscription revenue increased by $21.3 million, or 68%, for the nine months ended October 31, 20222023 compared to the same period of the prior year. The increase in cost of subscription revenue was driven by an increase in employee-related expenses of $16.8 millionchanges were primarily due to increases in headcount in our customer support organization. These employee-related expenses include a $8.1partial release of valuation allowance, of which $0.5 million increase related to stock-based compensation expense. The increase in stock-based compensation expense is primarily related to RSUs subject to service-based and performance-based vesting conditions, which conditions were satisfied in connection with our IPO, andtax benefit was directly related to the ESPPacquisition of BluBracket, Inc. In connection with the BluBracket acquisition, we recorded a net deferred tax liability which commenced inprovides an additional source of taxable income to support the fourth quarterrealization of fiscal 2022. The increase in cost of subscription revenue was also attributable to a $1.1 million increase in spending on softwarethe pre-existing deferred tax assets and, external services, a $2.1 million increase in cloud hosting fees, and a $1.3 million increase in amortization of internal-use software. We launched cloud-hosted versions of our productsaccordingly, during fiscal 2020 and 2021. As cloud becomes a larger portion of our revenue, our gross margin profile will change because we have a lower gross margin on cloud-hosted services due to headcount related to our cloud offering operations and cloud hosting fees.36Cost of professional services and other increased by $5.4 million, or 103%, for the nine months ended October 31, 2022 compared to the same period2023, we released a total of the prior year. The increase in cost of professional services and other was driven by a $5.0 million increase in employee-related expenses due to higher headcount and including a $2.1 million increase in stock-based compensation expense. The increases were also attributed to a $0.4 million increase in partner costs due to higher partner service hours. Our professional services and other gross margin has been negative in past, but are positive for the three months ended October 31, 2022 and 2021, and nine months ended October 31, 2022. Our professional services and other are generally priced at a low margin as compared to total subscription margin which, combined with allocated overhead, has resulted in a negative margin.Gross margin was 81% and 84% for the nine months ended October 31, 2022 and 2021, respectively, primarily due to the decrease in our subscription margin and offset by a decrease in the negative margin from professional services and other.Operating ExpensesSales and MarketingSales and marketing expenses increased by $118.4 million, or 83%, for the nine months ended October 31, 2022 compared to the same period of the prior year. The increase was primarily driven by a $97.2 million increase in employee-related costs due to a 35% increase in headcount in our sales and marketing organization from October 31, 2021 to October 31, 2022. These employee-related costs included a $42.5 million increase in stock-based compensation expense. The increase in employee-related costs also includes a $12.7 million net increase in amortization of deferred contract acquisition costs driven by our increase in revenue. Company events and marketing expenses increased $10.3 million, driven primarily by increases in advertising, sponsorships and internal and external conference costs. Travel and entertainment, allocated expenses for facilities and IT, software and subscription expenses, and office and administrative expenses increased by $4.5 million, $3.2 million, $2.6 million, and $0.5 million respectively, driven by increased headcount and revenue growth.Research and DevelopmentResearch and development expenses increased by $80.2 million, or 117% for the nine months ended October 31, 2022 comparedof its U.S. valuation allowance. We continue to the same period of the prior year, as we continued to develop and enhance the functionality of our existing products and release new products. This increase was primarily driven bymaintain a $71.7 million increase in employee-related costs due to a 45% increase in research and development headcount from October 31, 2021 to October 31, 2022. These employee related costs included a $39.0 million increase in stock-based compensation expense net of amounts capitalized to internal-use software. The remainder of the increase in research and development expenses was attributable to increased software and subscription expenses of $5.0 million, increased spending on company events, professional services, and travel and entertainment of $2.1 million total, and increased depreciation and amortization expenses of $1.0 million.General and AdministrativeGeneral and administrative expenses increased by $62.8 million, or 163%, for the nine months ended October 31, 2022 compared to the same period of the prior year. The increase was primarily driven by a $57.1 million increase in employee-related costs due to a 46% increase in general and administrative headcount from October 31, 2021 to October 31, 2022. These employee-related costs included a $39.0 million increase in stock-based compensation expense. Insurance costs increased by $5.9 million, due to the insurance cost associated with being a public company. Software and subscription expenses also increased by $2.2 million. The increases are offset by a $1.6 million decrease in spending in37professional services due to the completion of our IPO and a $1.0 million decrease in spending on annual all-hands employee summit as this in-person event was cancelled for fiscal year 2023 due to COVID-19.Interest Income* Not meaningfulInterest income increased by $12.9 million, for the nine months ended October 31, 2022 compared to the same period of the prior year. The increase was primarily due to increases in the yields resulting from the Federal Reserve's interest rate increases. During the nine months ended October 31, 2022, the Company has redeemed its money market funds and re-invested these funds into interests bearing saving accounts.Other Expenses, Net* Not meaningfulOther expenses, net, increased by $2.8 million, for the nine months ended October 31, 2022 compared to the same period of the prior year. The increase was primarily due to strengthening of the US dollar against other currencies, resulting in FX losses on our cash balances in foreign jurisdictions.Provision for Income TaxesProvision for income taxes increased by $0.3 million, for the nine months ended October 31, 2022 compared to the same period of the prior year, primarily due to change in effective tax rate and increase in profits from our subsidiaries. We determine our income tax provision for interim periods using an estimate of our annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between our effective tax rate and the federal statutory rate is unrealized federal and state tax benefits due to the full valuation allowance we have establishedon our U.S. deferred tax assets, and the significant components of the tax expense recorded are current cash tax expenses in thesevarious jurisdictions. The provision for income taxes recorded inCurrent cash tax expenses are impacted by each jurisdiction’s individual tax rates, laws on the nine months ended October 31, 2022 and 2021 consists primarilytiming of recognition of income taxes in foreign jurisdictions in which the Company conducts business. The Company is subject to income tax in the United States and various foreign countries. Due to the historydeductions, and availability of net operating losses and tax credits. Our effective tax rate may fluctuate significantly on a quarterly basis and could be adversely affected to the Company is subject to United States federal, state,extent earnings are lower than anticipated in countries that have lower statutory rates and local examinations by tax authorities for all years since incorporation.higher than anticipated in countries that have higher statutory rates.Prior to December 2021, we financed our operations principally through private placements of our equity securities, as well as payments received from customers using our products and services. In December 2021, we completed our IPO, which resulted in proceeds of $1.2 billion, after deducting underwriting discounts and commissions of $69.4 million and offering expenses of $6.0 million.2022,2023, we had cash, and cash equivalents, and short-term investments of $1,274.9 million and restricted cash of $1.8$1,255.7 million. Our cash and cash equivalents primarily consist of cash on hand, and highly liquid investments in money market funds.funds, and available-for-sale investments with an original maturity date of three months or less. Our restricted cash constitutes cash on deposit with financial institutions in supportshort-term investments consist of lettersU.S. treasury securities, corporate notes and bonds, U.S. agency obligations, commercial paper, and certificates of credit in favor of landlords for non-cancelable operating lease agreements.deposit. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $731.0$939.4 million as of October 31, 2022, and negative cash flows from operations for the nine months ended October 31, 2022. We2023. We expect to continue to incur operating losses and may generate negative cash flows from operations for the foreseeable future due to the investments we intend to make as described above, and as a result we may require additional capital resources to execute strategic initiatives to grow our business.38On November 23, 2020, we entered into a loan and security agreement with HSBC Ventures USA Inc, (the "Loan Agreement"). The Loan Agreement provided us a revolving line of credit, which expired November 23, 2023. Under the Loan Agreement, we were able to borrow up to $50.0 million. Interest on any drawdown under the revolving line of credit would accrue at the adjusted LIBOR plus 3.00%. We would also incur a commitment fee of 0.30% for any unused portion of the credit facility. On July 28, 2022, we terminated the Loan Agreement in accordance with the terms of the agreement and had no balance outstanding upon termination. actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results, and financial condition would be adversely affected.presented:presented (in thousands):Nine Months Ended October 31, 2023 2022 Net cash used in operating activities $ (21,137) $ (86,040) Net cash used in investing activities $ (548,073) $ (6,314) Net cash provided by financing activities $ 12,902 $ 11,434 multi-yearmulti-years in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets in deferred revenue and customer deposits. We generally experience seasonality in terms of when we enter into agreements with our customers, particularly in our fourth fiscal quarter due to increased buying patterns of our enterprise customers and in our second fiscal quarter due to the summer vacation slowdown that impacts many of our customers. Given the seasonality in our business as discussed above, the operating cash flow benefit from increased collections from our customers generally occurs in the subsequent one to two quarters after billing. We expect seasonality, timing of billings, and collections from our customers to have a material impact on our cash flow from operating activities from period to period. Our primary uses of cash from operating activities are for personnel-related expenses, software and subscription expenses, sales and marketing expenses, third-party cloud infrastructure costs, professional services expenses, and overhead expenses.$21.5$21.5 million increase in deferred contract acquisition costs as our sales commission payments increased due to addition of new customers and expansion of our existing customer subscriptions, a $3.7$3.7 million decrease in accrued compensation and benefits primarily due to payment of accrued payroll taxes and accrued sales commissions, and an increase in accrued employee stock participation plan contributions, a $2.7$2.7 million decrease in accrued expenses and other liabilities, and a $1.8$1.8 million decrease in customer deposits from advance invoicing in accordance with our subscription contracts. The cash outflow was partially offset by a $11.5$11.5 million decrease in accounts receivable due to timing of billings and collections from our customers, a $10.9 million increase in deferred revenue due to increased billings, a $3.4$3.4 million decrease in prepaid expenses and other assets, and a $2.1 million increase in accounts payable due to the payment of costs related to our initial public offering and timing of payments to vendors.operatinginvesting activities during the nine months ended October 31, 20212023 of $548.1 million was $49.2 million, which resulted from a net loss of $62.4 million, adjusted for non-cash charges of $8.0 million and net cash inflow of $5.2 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $4.8 million for stock-based39compensation expense, $1.7 million for non-cash operating lease costs, and $1.5 million for depreciation and amortization expense. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $12.8 million increase in deferred revenue from advance invoicing in accordance with our subscription contracts, a $12.8 million increase in accrued compensation and benefits primarily due to accrued sales commissions and accrued payroll taxes and our transition to a PTO model$691.2 million cash outflow in the United States,purchases of short-term investments, a $7.9$20.9 million decreasecash outflow in accounts receivable due to timing of collections from our customers,a business combination, and a $3.8$8.5 million increaseoutflow in accounts payable. The cash inflow was partiallycapitalized internal-use software for our cloud platform, offset by a $22.4$146.7 million increase in deferred contract acquisition costs as ourand $26.4 million cash inflows from maturities and sales commission payments increased due to addition of new customers and expansion of our existing customer subscriptions, a $4.3 million increase in prepaid expenses and other assets, a $0.3 million decrease in accrued expenses and other liabilities, a $1.8 million decrease in operating lease liabilities, and a $3.2 million decrease in customer deposits.investments, respectively.Investing Activitiescomprised ofattributable to $6.2 million capitalized internal-use software for our cloud platform and $0.1 million in purchases of property and equipment.platform.used in investingprovided by financing activities of $12.9 million during the nine months ended October 31, 20212023 was due to $10.2 million proceeds from stock purchased by employees under the employee stock purchase plan, and $2.9 million proceeds from the exercise of $4.7stock options, offset by $0.2 million resulted primarily from $0.1 million in purchasesoutflow for payment of property and equipment and $4.7 million in capital expenditures for our cloud platform.tax related to net share settlement.Financing Activitynet proceeds from the exercise of stock options, offset by $0.2 million outflow for payment of tax related to net share settlement.Net cash provided by financing activities of $1.3 million during the nine months ended October 31, 2021 was due to $3.4 million of proceeds from the exercise of stock options offset by $2.0 million of payments for deferred offering costs in anticipation of an initial public offering.Policies and Estimates policies and estimates are those accounting policies and estimates that are both most important to the portrayal of our net assets and results of operations and require the most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Critical accounting estimates are accounting estimates where the nature of the estimates is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimates on financial condition or operating performance is material.policies and estimates as compared to the critical accounting policies and estimates described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our fiscal 20222023 Form 10-K.Recent Accounting PronouncementsSee Note 2, Summary of Significant Accounting Policies, in our Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.4020222023 as compared to those discussed in our fiscal 20222023 Form 10-K.cash equivalentsshort-term investments are subject to market risk, primarily consistinterest rate and credit risk. Our investments are managed by outside professional managers within investment guidelines set by management and approved by the Audit Committee of cashthe Board of Directors. Such guidelines include security type, credit quality, and maturity and are intended to limit market risk by restricting our investments to high quality debt instruments with relatively short-term maturities. Based on hand and highly liquid investments in money market funds. Asour investment positions as of October 31, 2022, we had cash and cash equivalents of $1,274.9 million and restricted cash of $1.8 million. The carrying amount of our cash equivalents reasonably approximates fair value due to the short maturities of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs, and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio and type of investments included in portfolio,2023, we do not believe an immediatea hypothetical 10% relative increase or decrease in interest rates would have resulted a material effect onimpact to our operating results.fair market value of our portfolio.investments prior to maturity. We therefore, do not expectuse derivative financial instruments in our operating results or cash flows to be materially affected by a sudden change in market interest rates. Declines in interest rates, however, would reduce our future interest income.investment portfolio.Dollar, Singaporean Dollar, Swedish Krona, Costa Rican Colon, Japanese Yen, and Indian Rupee.Dollar. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our condensed consolidated statements of operations. AsIf the impactU.S. dollar weakened by 10%, our operating expense could increase by approximately 2%.exchange rates has not been material to our historical operating results, to date we have notrisk management program and entered into foreign currency forward contracts to hedge a portion of our forecasted foreign currency-denominated expenses. These foreign currency derivative contracts have a maturity up to 12 months or hedging transactions; we may do so in the future ifless and are designated as cash flow hedges to protect our exposureearnings subjected to foreign currency becomes more significant.risk. We also use foreign currency forward contracts to mitigate variability in gains and losses generated from the remeasurement of certain monetary assets and liabilities denominated in foreign currencies. We expect that the effect of a hypothetical 10% relative change in foreign exchange rates, after considering our hedging program, would not have a material impact on our financial condition, results of operations, or cash flows for the periods presented. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign exchange rates.2022,2023, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (a) reported within the same periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.422022fiscal 2023 Form 10-K and Note 8, "Commitments11. Commitments and Contingencies"Contingencies in this Quarterly Report on Form 10-Q.Risk FactorsRISK FACTORS of the information that may be important to you, and you should read this risk factors summary together with the more detailed discussion of risks and uncertainties set forth following this summary. A summary of our risks includes, but is not limited to, the following:Because ofWe adopted a new license for our free community edition products in August 2023 that places certain limits on competitive use, but the permissive rights accordedunder our open source licenses prior to the change makes it possible for third parties underto offer and build upon open source versions of our open-source and source available licenses, there are limited technological barriers to entry intoproducts as they existed when we made the markets in which we compete andlicense change. Those competing versions could make it is, and may continue to be, relatively easy for competitors, including public cloud operators, to enter our markets and compete with us.•to useusing our products and renewrenewing their subscriptions, it could have an adverse effect on our business and results of operations.operations will suffer.•ability to increase salescustomers’ usage of our products is highly dependent on the quality of our customer support, and our failure to offer high-quality support would have an adverse effect on our business, reputation, and results of operations.•If we do not effectively focus our product development efforts, our business, results of operations, and financial condition could be adversely affected.•We have limited experience with respect to determining the optimal prices for our products.•We target enterprise customers, and sales to these customers involve risks that differ from risks associated with sales to smaller entities.•The length of our sales cycles can be unpredictable, and our sales effortsrenewal rates may require considerable time and expense.44•Our revenue growth depends in part on the success of our strategic relationships with our ecosystem of partners and the continued performance of these partners.•The estimates of market opportunity and forecasts of market growth included in our public disclosures may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.•The markets for some of our products are new, unproven, and evolving, and our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving markets.•We face competition that we expect to become more intense over time, and which could adversely affect our business, financial condition, and results of operations.•Problems with our internal systems, networks,decline or data, including actual or perceived breaches or failures by us or our partners, could cause our products to be perceived as insecure, underperforming, or unreliable, our reputation to be damaged, and our financial results to be negatively impacted.•If our self-managed offerings do not meet our customers’ performance or support expectations or if we fail to meet service-level availability commitments made to our cloud platform customers, we could face subscription terminations and a reduction in renewals, which could significantly affect our current and future revenue.•If we are not able to keep pace with technological and competitive developments or fail to integrate our products with a variety of technologies that are developed by others, our products may become less marketable, less competitive, or obsolete, and our results of operations may be adversely affected.•Failure of our products to satisfy customer demands or to achieve increased market acceptance could adversely affect our business, results of operations, financial condition, and growth prospects.•Unfavorable conditions in our industry or the global economy or reductions in spending for products like ours could limit our ability to grow our business and negatively affect our results of operations.•Uncertainty regarding ongoing hostility between Russia and Ukraine and the related impact on macroeconomic conditionsfluctuate as a result of such conflict.•If we are not able to maintaina number of factors, including their satisfaction with our products and enhance our brand, especially among practitioners, our business and operating results may be adversely affected.•We depend on cooperating with public cloud operators. Changes to arrangements with such operators may significantly harm our customer retention, new customer acquisition, and product extension or expansion, or require us to changesupport, our business models, operations, practices, or advertising activities, which could restrict ourproducts’ ability to maintainintegrate with new and changing technologies, the frequency and severity of product outages, our platform through these cloudsproduct uptime or latency, the pricing of our products and would adversely impactthat of our business.•We rely upon public cloud operators to operate our platform and any disruption of or interference with our use of these operators’ services would adversely affect our business, results of operations, and financial condition.•Interruptions or performance problems associated with our technology and infrastructure,competitors, and our reliancecustomers’ own budget priorities and fluctuations in spending. Even if our customers renew their subscriptions, they may renew for shorter subscription terms or on technologies from third parties,other terms that are less economically beneficial to us. We have limited historical data with respect to rates of customer renewals, so we may adversely affectnot accurately predict future renewal trends. If our business operationscustomers do not renew their subscriptions, or renew on less favorable terms, our revenue may grow slower than expected or decline and financial results.our net expansion rate may decline.45Risks Related to Our Business and Operationsand 2021 were $125.3$146.1 million and $82.2$125.3 million, respectively, representing an annual growth rate of 52%17% from the third quarter of fiscal 20222023 to the third quarter of fiscal 2023.2024. Our total revenues for the nine months ended October 31, 2023 and 2022 and 2021 were $340.1$427.4 million and $224.2$340.1 million, respectively, representing an annual growth rate of 52%26% from the thirdsecond quarter of fiscal 2022 to the third quarter of fiscal 2023. You should not rely on the revenue growth of any prior quarterly or annual period or combined periods as an indication of our future performance. Even if our revenue continues to increase, we expect our revenue growth rate to decline in future periods. We expect to continue growing our headcount in the future. The growth and expansion of our business and products place a continuous significant strain on our management, operational, and financial resources. In addition, as customers use more of our products for an increasing number of use cases, we have had to support more complex commercial relationships. We must continue to improve and expand our information technology and financial infrastructure, our operating and administrative systems, our relationships with various partners and other third parties, and our ability to manage headcount and processes in an efficient manner to manage any future growth effectively.rapid growth and the complexity of our multi-product business may make it difficult to evaluate our future prospects. Our ability to forecast our future results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future growth. We have encountered in the past, and may encounter in the future, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If we fail to achieve the necessary level of efficiency in our organization as it grows, or if we are not able to accurately forecast future growth, our business would be harmed. Moreover, if the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market or business, or we are unable to maintain consistent revenue or revenue growth, our share price could be volatile, and it may be difficult to achieve and maintain profitability.future.future, or as quickly as we expect. If we cannot achieve or sustain profitability or positive cash flows, or are slow to do so, our business, financial condition, and results of operations may suffer.$72.0$39.5 million, and $22.0$72.0 million for the three months ended October 31, 20222023 and 2021,2022, respectively. We incurred a net loss of $224.9$159.0 million, and $62.4$224.9 million for the nine months ended October 31, 20222023 and 2021,2022, respectively. We had an accumulated deficit of $731.0$939.4 million as of October 31, 20222023 and $506.1$780.4 million as of January 31, 2022.2023. We anticipate that our operating expenses will increase in the foreseeable future as we continue to enhance our products, grow our relationships with existing customers, broaden our customer base, expand our sales and marketing activities, expand our operations, hire additional employees, and continue to develop our technology. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. Because the markets for our products are rapidly evolving, it is difficult for us to predict our future results of operations. Revenue growth may slow or revenue may decline for a number of possible reasons, including slowing demand for our products or increasing competition. Any failure to increase our revenue as we grow our business could prevent us from achieving consistent profitability or positive cash flow at all, or on a consistent basis,in the time frame we expect, which could cause our business, financial condition, and results of operations to suffer.2013. Because we2013, but only began commercializing our software in 2016,2016. Consequently, much of our growth has occurred in recent years. Our limited operating history makes it difficult to evaluate our current business and our future prospects, including our ability to plan for and model future growth. We have encountered and will continue to46introduceenter our markets with new products or services, that compete with ours, we may be unable to attract new customers or convert open-source users to paying customers on terms or based on pricing models that we have used historically. In the future, we may be required to reduce our prices or be unable to increase our prices, or it may be necessary for us to increase ourprovide more products without additional revenue to remain competitive, all of which could harm our results of operations and financial condition.and retain new customers;47Because ofaccorded to third parties under our open-source licenses prior to the change makes it possible for third parties to offer and source available licenses, there are limited technological barriers to entry intobuild upon open-source versions of our products as they existed before the markets in which we compete andlicense change. Those competing versions could make it is, and may continue to be, relatively easy for competitors, including public cloud operators, to enter our markets and compete with us.One ofcharacteristics of open-source is that the governing license terms generally allow liberal modifications of the code and distribution thereof to a wide group of companies and/or individuals. Our open-source licenses allowMozilla Public License, which allows anyone, subject to compliance with the conditions of the applicable license, to redistribute our software and share certain source code components in modified or unmodified form and use it to build products that compete in our markets. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies, due to the rights granted to licensees of open-source and source availablesource-available software. ItUnder our historical Mozilla Public License, it is possible for competitors and new entrants to develop their own software, including software based on open-source or our products, and for public cloud operators to expand their offerings to compete directly with ours, potentially reducing the demand for our products and putting pricing pressure on our subscriptions. For example, a new or existing competitor may dedicate its developers to building competing offerings based on open-source and source-available software provided by us or third parties, and such offerings may reduce the demand for our offerings.open-sourcesource available nature of our products to compete against us, or that we will be able to effectively enforce licensing restrictions on the competitive use of our source available community versions, or that competitive pressure or the availability of new software will not result in price reductions, reduced operating margins, andor loss of market share, any one of which would harm our business, financial condition, results of operations, and cash flows.a number ofseveral factors, including the mix of our subscriptions for different products and our professional services and other revenue. For example, while Terraform and Vault are our most established products with commercial offerings at scale and make up the majority of our revenues, generating collectively over 85% of our revenues for each of fiscalthe nine months ended October 31, 2023 and 2022, and 2021,respectively, we believe that our emerging and community products represent a significant growth opportunity. Currently, our self-managed offerings represent the majority of our revenues. However, we believe that HCP, our fully managed cloud platform, represents a significant growth opportunity for our business, particularly as an increasing number of our customers look for a fully managed offering. Shifts in our business mix from quarter to quarter48mixcomposition and costs as we shift further to cloud models, together with numerous other factors, including entry into new markets or growth in lower margin markets; entry into markets with different pricing and cost structures; pricing discounts; and increased price competition. Any one of these factors or the cumulative effects ofIf we are unable to increase sales of subscriptions to our products to new customers, sell additional subscriptions to our products to our existing customers, or expand the value of our existing customers’ subscriptions to our products, our future revenue and results of operations will be harmed.We offer certain features of our products as open-source software with no payment required. Customers purchase subscriptions to our products in order to gain access to additional functionality and support. Our future success depends on our ability to sell our subscriptions to new customers and to extend the deployment of our products with existing customers by selling paid subscriptions to our existing users and expanding the value and number of existing customers’ subscriptions. Our ability to sell new subscriptions depends on a number of factors, including the prices of our products, prices offered by our competitors, and the budgets of our customers, as well as their desire and ability to create new features and perform their own support relying on our publicly available open-source software products. We also face competition from public cloud operators, who may use our open-source software products to provide and support hosted offerings that compete with our own. We rely in large part on our customers to identify new use cases for our products and new products to meet a broader set of their needs in order to expand such deployments and grow our business. If our customers do not recognize the potential of our products, our business would be materially and adversely affected. If our efforts to sell subscriptions to new customers and to expand deployments at existing customers are not successful, our total revenue and revenue growth rate may decline and our business will suffer.If our existing customers do not continue to use our products and renew their subscriptions, it could have an adverse effect on our business and results of operations.We expect to derive a significant portion of our revenue from renewals of existing subscriptions for our products. As a result, achieving a high renewal rate of our subscriptions will be critical to our business. Our customers have no contractual obligation to renew their subscriptions after the completion of their subscription term. Terms of our subscriptions typically range from one to three years.Our customers’ usage of our products and renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction with our products and our customer support, our products’ ability to integrate with new and changing technologies, the frequency and severity of product outages, our product uptime or latency, the pricing of our, or competing, products, and our customers’ own budget priorities and fluctuations in spending. Even if our customers renew their subscriptions, they may renew for shorter subscription terms or on other terms that are less economically beneficial to us. We have limited historical data with respect to rates of customer renewals, so we may not accurately predict future renewal trends. If our customers do not renew their subscriptions, or renew on less favorable terms, our revenue may grow slower than expected or decline and our net expansion rate may decline.grow salesretain them or expand our relationship with them.49the significant number of our currentmultiple products and advancing theour new product pipeline may overextend our workforce and negatively affect product quality and development schedules. Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products, or may not achieve the broad market acceptance necessary to generate significant revenue. Not allSome new products we develop may becomefail commercially, successful, and we may prioritize the development of products that do not become commercially successful over products which may have had a better chance of attaining commercial success. Workforce productivity spent on theseunsuccessful product development efforts may not be recouped in the form of sales to customers.recovered. Furthermore, our ability to increase the usage of our products depends, in part, on the development of new use cases for our products, which is typically driven by our developer community and may be outside of our control. In addition, adoption of new products or enhancements may put additional strain on our customer support team, which could shift the team’s resources away from supporting our current products or require us to make additional expenditures related to further hiring and training. If we are unable to timely and successfully enhance our existing products to meet evolving customer requirements, increase adoption and usage of our products, develop new products, or if our efforts do not render the outcomes we expect, then our business, results of operations, and financial condition wouldwill be adversely affected.products.products or resistance to our pricing models. In the past, we have sometimes reduced our prices either for individual customers in connection with long-term agreements or for a particular product. We may also face increasing costs which we may be unable or unwilling to pass through to our customers given pricing pressure, which could adversely impact our business, results of operations, and financial condition.model,models, which could adversely affectmaterially harm our business, results of operations, and financial condition.involvecarry risks that may not be present or that are present to a lesser extentexceed those associated with sales to smaller entities, such as longer sales cycles, more complex and demanding customer requirements and contract negotiations, substantial upfront sales costs, and less predictability in completing some of our sales. For example, enterprise customers may require considerable time to evaluate and test our solutions and those of our competitors prior tobefore making a purchase decision and placing an order. A number ofMultiple factors influence the length and variability of our sales cycle, including the need to educate potential customers about the uses and benefits of our solutions, economic pressure or uncertainty that prompts customers to seek cost savings on software purchases, the discretionary nature of purchasing and budget cycles, and the competitive nature of evaluation and purchasing approval processes. As a result, the length of our sales cycle, from identification of the opportunity to deal closure, may vary significantly from customer to customer, with sales to large enterprises typically taking longer to complete. Moreover, large enterprise customers often begin to deploy our products on a limited basis, but nevertheless demand integration services and pricing negotiations, with no guarantee that they will deploy our products widely across their organization.Contentsfeatures and compliance capabilities to satisfy customer requirements. Our inability to meet those requirements could limit the revenue growth we achieve from our cloud offerings.subsequent to thosethan we anticipated,expected, or have not occurred at all. The loss or delay of one or more large transactions in a quarter could affect our cash flows and results of operations for that quarter and for future quarters. Customers often view a subscription to our products as a strategic decision and significant investment and, as a result, frequently require considerable time to evaluate, test, and qualify our products before entering intopurchasing or expanding a subscription. During the sales cycle, we expend significant time and money on sales and marketing and contract negotiation activities which may not result in a sale. Because a substantial proportion of our expenses are relatively fixed in the short term, our results of operations will suffer if revenue falls below our expectations in a particular quarter. with our partners are generally non-exclusive, meaning our partners may offer customers the offerings of several different companies, including offerings that compete with ours, or may themselves be or become competitors. If our partners do not effectively market and sell our offerings, choose to use greater efforts to market and sell their own offerings or those of our competitors, or fail to meet the needs of our customers, our ability to grow our business and sell our offerings may be harmed. Our partners may cease marketing our offerings with limited or no notice and with little or no penalty. The loss of a substantial number of our partners, our possible inability to replace them, or the failure to recruit additional partners could harm our results of operations. Likewise, because the success of our products depends on integrations with partners’ technologies, if partners decide to no longer implement or support such integrations, or if they partner with our competitors and devote greater resources to implement and support the products of competitors, our business may be harmed.achieve revenue growth in the future will depend in partacquire and retain customers depends heavily on our success in developing and maintaining successful relationships with our partners and in helping our partners enhance their ability to marketoffer effective professional services to customers, and sell our subscriptions.effectiveness in cultivating a sufficient network of partners to provide high quality professional services for our products. At times we have had trouble meeting customer demand for professional services. If we are unable to build and maintain enough professional services capacity to meet customer demand, either directly or through our relationships with these partners, we will be at risk of increased customer attrition, slowing sales, and reputational damage from failed implementations, all of which could materially damage our business results of operations,and our financial condition, or cash flows could be harmed. to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.not prove to be accurate,inaccurate, including the risks described herein. Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.any particular number or percentageestimates of addressable users or companies covered by our market opportunity estimates will purchasecorrespond to actual sales of our products at all or generate any particular level of revenue for us.revenue. For example, negative conditions in the general economy both in the United States and abroad, including conditions resulting from uncertain interest rates, inflation, and geopolitical tensions, could diminish growth expectations in the U.S. economy and our market opportunity estimates. Any expansion in our market depends on a number ofmultiple factors, including the cost, performance, and perceived value associated with our products and the products provided by our competitors. Even if the market in which we compete meets the size estimates and growth forecasts included in our public disclosures, our business could fail to grow at similar rates, if at all. Our growth is subject to many factors,variables, including our success in implementing our business strategy, which is subject tocarries many assumptions, risks and uncertainties. Accordingly, the forecasts of market growth included in our public disclosures shouldmay not be taken as indicative of our future growth.51evolving markets.them. for these products, customers’ demand for these products, the size, growth rate, expansion, and longevity of these markets, the entry of competitive products, or the success of existing competitive products. Our ability to penetrate these new and evolving markets depends on a number of factors, including the cost, performance, and perceived value associated with our products. If these markets do not continue to grow as expected, or if we are unable to anticipate or react to changes in these markets, our competitive position would weaken, which would adversely affect our business and results of operations.become more intenseintensify over time, and which could adversely affect our business, financial condition, and results of operations.open-sourcesource available software. While individuals and small teams can sometimes use our open-sourcecommunity products to solve their technical problems, larger enterprises face more complex needs that require our commercial products. For select companies adopting a single-cloud solution, we compete with the well-established public cloud providers such as Amazon Web Services, or AWS, and their in-house offerings. We also compete with similar in-house offerings from Microsoft Azure, Google Cloud Platform, and other cloud providers; legacy providers with point products such as CyberArk, VMware, and IBM; and alternative open-source projects, such as Google Istio.cases supported;cases; ability to integrate with existing IT infrastructure, cloud platforms, and on-premises environments; offering consistency across clouds; ability to implement multi-cloud provisioning, security, networking, and application deployment; speed of implementation and time to achieving value; ability to scale up and down dynamically on demand; robustness of professional services and customer support; price and total cost of ownership; adherence to certifications; size of customer base and level of user adoption; strength of sales and marketing efforts; offering an ecosystem of vendors integrated with the products; creating new products and expanding the existing platform; ability to innovate around a cloud-delivered architecture; brand awareness, recognition, and reputation, particularly within the open-sourcedeveloper community; and ability to engage the community of open-source users and partners. If we fail to innovate and improve our products and professional services to address these factors, we may become vulnerable to increased competition and therefore fail to attract new customers or lose or fail to renew existing customers, which would causeharm our business and results of operations to suffer.operations.our offerings.ours. These companies may have advantages over us, such as longer operating histories, more established relationships with current and potential customers and commercial partners, significantly greater financial, technical, marketing, or other resources, stronger brand recognition, larger intellectual property portfolios, and broader global distribution and presence. OurIn addition, our business model alsolargely assumes that our customers are committed to a multi-cloud strategy and will not bundle their cloud services.services with a single provider. However, if this assumption does not accurately reflectinaccurately reflects the decisions of our customers, our business maywill suffer. Some of our larger potential competitors and other cloud providers have substantially greater resources than we do and therefore may afford to bundle competitively priced related products and services, which may allow them to leverage existing commercial relationships, incorporate functionality into existing products, sell products with which we compete at zero or negative margins, offer fee waivers and reductions or other economic and non-economic concessions, maintain closed technology platforms, or render our products unable to interoperate with such platforms. Our actual or potential customers may prefer to bundle their cloud services with one of our potential competitors even if such competitors’ individual products have more limited functionality compared to our software. These larger potential competitors are also often in a better position to withstand any significant reduction in technology spending and will therefore not be as susceptible to competition or economic downturns. Our potential competitors may also be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. In addition, some potential competitors may offer products or services that address one or a limited number of functions at lower prices, with greater depth than our products or in geographies where we do not operate. With the introduction of new technologies and new market entrants, we expect competition to grow in the future.of these reasons, we may not be able to compete successfully against our current or potential competitors. to be damaged, and our financial results to be negatively impacted.results.our or our customers’ or other third parties’ highly sensitive, proprietary, and confidential information. information we receive from our customers, our employees, and third parties.In addition to threats from traditional attackers and insider threats, we also face security threats from malicious third parties, including individual hackers, sophisticated criminal groups, nation states, and state-sponsored organizations, that could disrupt or interrupt, or introduce ransomware, viruses, or other malicious code into our products, services, systems, or networks, obtain unauthorized access to our internal systems, networks, and data, as well as systems of organizations using our cloud products and services, and the information they store and process. Users and organizations using our services may also disclose or leak their passwords, API keys, or secrets that could lead to unauthorized access to their accounts and data within our products. Such incidents have become more prevalent in our industry, particularly against cloud services, and may in the future result in unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss or other unauthorized processing of the sensitive, proprietary, and confidential information that we own, process, or control, such as customer information and proprietary data and information, including source code and trade secrets. It is virtually impossible for us to entirely mitigate the risk of these security threats. While we have implemented security measures internally and have integrated security measures into our products, these measures may not function as expected and may not detect or prevent all unauthorized activity, prevent all security breaches and incidents, mitigate all security breaches or incidents, or protect against all attacks or incidents. Moreover, our products incorporate a variety of third-party components (including open-sourcesource available software components) which may expose us to additional security threats, and vulnerabilities in those components may be difficult or impossible to detect, control, and manage. We may also experience security breaches and other incidents that may remain undetected for an extended period and, therefore, may have a greater impact on our products, the networks and systems used in our business, and the proprietary and other confidential data contained on such networks and systems. We expect to incur significant costs in our efforts to detect and prevent security breaches and other security-related incidents, and we may face increased costs in the event of an actual or perceived security breach or other security-related incident. These cybersecurity risks pose a particularly significant risk to a business like ours that is focused on providing highly secure products to customers. Additionally, as a remote-first company, much of our workforce functions in a remote work environment that requires remote access to our corporate network, which in turn imposes additional risks to our business, including increased risk of industrial espionage, theft of assets, phishing, and other cybersecurity attacks, and inadvertent or unauthorized access to or dissemination of sensitive, proprietary, or confidential information.53Ourour Vault and our other products, we believe that such products could be targets for hackers and others, and that an actual or perceived breach of, or security incident affecting, our security products and customers, could be especiallyparticularly detrimental to our reputation, customer confidence in our security products, and our business. The potential for an attack is compounded now that our Vault product is includedoffered as a cloud offering.service. Additionally, our products are designed to operate with little or no downtime. If a breach or security incident were to impact the availability of our products, our business, results of operations, and financial condition, as well as our reputation, could be adversely affected.increasingly largeincreasing amounts of data.Additionally, we cannot be certain that our insurance coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, penalties, business loss, data loss, litigation, regulatory actions, or other impacts arising from security breaches, or that such coverage will continue to be available on acceptable terms or at all. Any of these results could adversely affect our business, financial condition, and results of operations.54open-sourcedeveloper community, and growth or contraction in our market or the overall economy. We expect the growth and proliferation of data to lead to an increase in the data analyses demands of our customers and we may not be able to scale and perform to meet those demands or may not be chosen by users for those needs. If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of our products, our business operations, financial results, and growth prospects will be materially and adversely affected.5527%30% and 26%27% of our revenue outside of the United States for the three months ended October 31, 20222023, and 2021,2022, respectively. We generated 30 and 27% of our revenue outside of the United States for the nine months ended October 31, 20222023, and 2021,2022, respectively. Our ability to expand internationally involves various risks, including the need to invest significant resources in such expansion, and the possibility that returns on such investments will not be achieved in the near future or at all in these less familiar competitive environments. We may also choose to conduct our international business through565758open-sourcesource available software and reliance on other third-party services may increase this risk. For example, we are dependent on our relationship with a third-party processor for installation and packaging solutions in one of our products. If our website is unavailable or our users are unable to download our products or order subscriptions or services within a reasonable amount of time or at all, our business could be harmed. We expect to continue to make significant investments to maintain and improve website performance and to enable rapid releases of new features and applications for our products. To the extent that we do not effectively upgrade our systems as needed and continually develop our technology to accommodate actual and anticipated changes in technology, our business and results of operations may be harmed.ContentsAI in our offerings and in our business may result in reputational harm or liability.Any failure to successfully attract, integrate, train, or retain qualified personnel to fulfill our current or future needs could materially and adversely affect our business, results of operations, and financial condition.remote-firsthybrid remote company may make it difficult for us to preserve our corporate culture, have a negative impact on workforce morale and productivity, and harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, and execute on our business strategy.remote-firstremote company since incorporation. This subjects us to heightened operational risks. For example, technologies in our employees’ and service providers’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees and service providers to be more limited or less reliable than in our offices. Further, because the security systems in place at our employees’ and service providers’ homes may be less secure than those used in our offices, we may be subject to increased cybersecurity risk, which could expose us to risks of data or financial loss and disrupt our business operations. There is no guarantee that our data security and privacy safeguards will be completely effective or that we will not encounter risks associated with employees and service providers accessing company data and systems remotely.as a remote-first companyhybrid work environment may make it more difficult for us to preserve our corporate culture, and our employees may have decreased opportunities to collaborate in meaningful ways. Further, we cannot guarantee that many employees working remotely will not have a negative impact on workforce morale and productivity. Any failure to preserve our corporate culture and foster collaboration could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, and execute on our business strategy.providing services toworking in a remote-firsthybrid remote company allows employees to move freely while undertaking their work responsibilities. On occasion, employees have and may continue to fail to inform us of changes to their work location in a timely manner. Conducting business in certain geographies may expose use to risks associated with that location, including compliance with local laws and regulations or exposure to compromised internet infrastructure. If employees failCOVID-19 pandemic and uncertainties about the future,macroeconomic environment, including the effectiveness of vaccines against various strains of the virus and macroeconomic impacts of the Russia/Ukraine military conflict, inflationary pressures, or recessionary economic cycles. Episodic experiences may also contribute to fluctuations in our quarterly results of operations. As our business matures, other seasonal trends may develop, or existing seasonal trends may become more extreme.pre-requisiteprerequisite to recognizing revenue under applicable software accounting rules. If we are unable to deliver our software to a new customer before the quarter ends, we cannot recognize any revenue from the sale during the quarter in which the customer placed its order. Instead, we must wait until the quarter in which we actually delivered the software to begin recognizing revenue. In quarters where we have a high volume of late-quarter sales, we may be unable to sign or process a significant number of the orders we receive or deliver the purchased software before the quarter ends. As a result, we may need to prioritize some orders over61such revised certification or updated the necessary certifications. Government demand and payment for our products may be affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our products. Additionally, any actual or perceived privacy, data protection, or data security incident, or even any perceived defect with regard toregarding our practices or measures in these areas, may negatively impact public sector demand for our products.in doing socould restrict our ability to sell into the government sector until we have met government-mandated requirements, which may require significant upfront cost, time, and resources. If we do not achieve and maintain government requirements, it may harm our competitive position against larger enterprises whose competitive offerings are able to meet these requirements. ThereWe also can also beprovide no assurance that we will secure commitments or contracts with government entities even following efforts toif we meet government requirements, which could harm our margins, business, financial condition, and results of operations. Further, government demand and payment for our offerings are affected by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offering.open-sourcesource available and proprietary technologies incorporate third-party open-source software, and we expect to continue to incorporateusing third-party open-source software in our products in the future, and itwhich may be necessary to utilizerequire using new and upgraded versions of these software applications. There can be no assurance that new versions of the third-party open-source projects we currently use will continue to be licensed under open-source licenses, or that necessarynew versions will not contain different open-source licenses will be availablethat carry unacceptable limitations on distribution. In addition, where buying proprietary licenses is they only way to avoid onerous open-source distribution limitations, we may not succeed in obtaining those proprietary licenses on acceptable terms or under open-source licenses permitting redistribution in our open-source and proprietary offerings, if at all. Theterms. Our inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms, could result in delays in product releases until equivalent technology can be identified, licensed, or developed, if at all, and integrated into our products, andwhich may have a material adverse effect on our business, results of operations, and financial condition. In addition, third parties may allege that additional licenses are required for our use of their software or intellectual property, and we may be unable to obtain such licenses on commercially reasonable terms or at all.that these licenses could be construed in a manner that could adversely impact our interests and the interests of our62open-sourcesource available licenses, including by imposing unanticipated conditions or restrictions on our ability to commercialize our products, or limiting our ability to enforce our rights in the manner we had anticipated. Moreover, we cannot ensure that our software does not include open-source software that we are unaware of, or that we have not incorporated additional open-source software in our software in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures, including requiring us to make some or all of our software available under an open-source license that is unacceptable to us or to our customers. If we incorporate third-party open-source software into our software products, then in certain circumstances, we and our customers may be subject to certain requirements, including requirements that we offer our solutions that incorporate such third-party open-source software under license terms that are inconsistent with our intended license, such as requiring portions of our products we create based upon, derived from, incorporating, or using such open-source software (and in turn, portions of our customers’ products that they create which are based upon, derived from, incorporating, or using our products) be made available for no cost and for the purpose of making and redistributing such software (including in source code form) and derivatives thereof. If an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our products that contained the open-source software, and required to comply with onerous conditions or restrictions on these products, which could disrupt the distribution and sale of these products.wereis made with respect to a third-party open-source component included in our products, we and our customers could be required to seek licenses from third parties in order to continue offering our products, and to re-engineer our respective products or discontinue the sale of our respective products in the event re-engineering cannot be accomplished on a timely basis. We and our customers may also be subject to suits by parties claiming infringement, misappropriation or violation due to the reliance by our solutions on certain open-source software, and such litigation could be costly for us to defend or subject us to certain types of equitable remedies, such as an injunction. Some open-source projects have known vulnerabilities and architectural instabilities and are provided on an as-is basis, which, if not properly addressed, could negatively affect the performance of our product. Any of the foregoing could require us to devote additional research and development resources to re-engineer our solutions, provide an advantage to our competitors or other entrants to the market, create new security vulnerabilities, or highlight existing security vulnerabilities in products, result in customer dissatisfaction, and may adversely affect our business, results of operations, and financial condition. We cannot ensure that our processes for identifying and controlling our use of open-source software in our platform and products will be effective.use third-party open-sourcedevelop our products in a source available software environment, which could negatively affect our ability to sell our offerings, or make it easier for competitors, some of whom may have greater resources than we have, to enter our markets and compete with us.is developed in open-source,has its source code available, allowing our partners and third parties to give feedback directly, report issues, contribute features, and fix bugs, which we accept and integrate into our products. Our partners are able to integrate their technology solutions and validate their integrations with continuous development. We plan to continue to develop our products in this open-sourcesource available environment, and enabling third-party contributions, and the integration of open-source software from third parties into our codebase. While these open-source software licenses state that any work of authorship licensed under it may be reproduced and distributed provided that certain conditions are met, we may nevertheless be subject to suits by parties claiming ownership rights in what we believe to be permissively licensed open-source software or claiming non-compliance with the applicable open-source licensing terms.63 patents, contractual restrictions, and other intellectual property laws and confidentiality procedures to establish and protect our proprietary rights. However, the steps we take to obtain, maintain, protect, and enforce our intellectual property rights may be inadequate. Our intellectual property rights may not protect our competitive position if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property rights, or if others are successful in designing around the protections our intellectual property rights afford. If we fail to protect our intellectual property rights adequately, our competitors may gain access to our proprietary technology, develop and commercialize substantially identical products, services, or technologies, and our business may be harmed. In addition, defending our intellectual property rights might entail significant expense.64as a result of anydue to intellectual property infringement, misappropriation, or violation claims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.65gainsell more traction with our cloud offerings.offerings We process certain personal data as part of our business operations, and our Vault product is specifically designed to assist our customers with management of their private and sensitive information. As we develop our cloud offerings and are able to process more data in the cloud, these issues become more significant. The regulatory frameworks for privacy, data protection, and data security issues worldwide are rapidly evolving and are likely to remain uncertain for the foreseeable future, particularly for data processed in the cloud. Federal, state, and non-U.S. government bodies or agencies have in the past adopted, and may in the future adopt, new laws and regulations or may make amendments to existing laws and regulations affecting data protection, data privacy, and/or data security and/or regulating the use of the internet as a commercial medium. Industry organizations also regularly adopt and advocate for new standards in these areas, and we are bound by certain contractual obligations relating to our use, storage, security, and other processing of personal data and other personally identifiable information. We also post privacy policies and have made, and may make, other representations regarding our privacy and data security practices. If we fail to comply with any of these laws, regulations, standards, or other obligations, or such public representations, or are alleged to have done so, we may be subject to investigations, enforcement actions, civil litigation, fines, and other penalties, all of which may generate negative publicity and have a negative impact on our business.adoptedamended and expanded the CCPA with a new law, the California Privacy Rights Act of 2020, or CPRA, that will substantially expand the CCPA effectivewhich came into effect as of January 1, 2023. Additionally, other U.S. states continue to propose, and in certain cases adopt, privacy-focused legislation such aslegislation. For example, Virginia, Colorado, Virginia, Utah, and Connecticut.Connecticut have enacted comprehensive privacy legislation that has gone, or will go, into effect in 2023; Florida, Montana, Oregon, and Texas have enacted similar legislation that will go into effect in 2024; Delaware Iowa, and Tennessee have enacted similar legislation that will go into effect in 2025; and Indiana has enacted similar legislation that will go into effect in 2026. Aspects of these state laws remain unclear, resulting in further uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply. A patchwork of differing state privacy and data security requirements wouldwill increase the cost and complexity of operating our business and increase our exposure to liability.66in the “Schrems II” decision issued by the Court of Justice of the European Union, or CJEU, on July 16, 2020. On September 8, 2020, theThe Swiss Federal Data Protection and Information Commissioner invalidated the Swiss-U.S. Privacy Shield on similar grounds. In its July 16, 2020 opinion, the CJEU imposed additional obligations on companies when relying on SCCs to transfer personal data. The CJEU decision may result in European data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe to the U.S. The European Commission has published revised SCCs addressing the CJEU concerns on June 4, 2021, that are required to be implemented over time.implemented. The United Kingdom also has adopted new standard contractual clauses, or the UK SCCs, becomethat became effective as of March 21, 2022, and which also are required to be implemented over time.implemented. The United States and European Union announced an “agreement in principle” to replace the EU-U.S. Privacy Shield transfer framework with the Trans-Atlantic Data Privacy Framework, or EU-U.S. DPF, on March 25, 2022. On July 10, 2023, the European Commission adopted an adequacy decision in relation to the EU-U.S. DPF, allowing the EU-U.S. DPF to be utilized as a means of legitimizing EU-U.S. personal data transfers for participating entities, including us. The CJEU’s Schrems II decision, the revised SCCs and UK SCCs, guidance and opinions of regulators, and other developments relating to cross-border data transfer, including the EU-U.S. DPF, may be subject to challenges, future reviews, suspension, amendment, repeal, or limitations, and may require us to implement additional contractual and technical safeguards for any personal data transferred out of Europe, which may increase compliance costs, lead to increased regulatory scrutiny or liability, and which may adversely impact our business, financial condition and operating results. in May 2018 that substantially implements the GDPR, and has implemented legislation referred to as the “UK GDPR”GDPR,” that generally provides forsubstantially implements the GDPR to be implemented in the United Kingdom following Brexit and the transition period that ended on December 31, 2020. This legislation provides for substantial penalties for noncompliance of up to the greater of £17.567 were to fail to comply with such U.S. export controls laws and regulations, U.S. economic sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges. Obtaining the necessary export license for a particular sale or offering may not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the export of products to certain U.S. embargoed or sanctioned countries governments and persons, as well as for prohibited end-uses. For example, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus and could impose wider sanctions and export restrictions and take other actions should the conflict continue to escalate. While we currently do not have any significant exposure, any exports or sales of our software or services into Russia and Belarus may be impacted by these restrictions. Monitoring and ensuring compliance with these complex U.S. export control laws is particularly challenging because our offerings are widely distributed throughout the world and are available for download without registration. Even though we take precautions to ensure that we and our partners comply with all relevant export control laws and regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations, and penalties.68the use of the internet is reduced as a result ofby these or other issues, then demand for our products could decline, which could adversely affect our business, results of operations, and financial condition.torts,employment, securities, employment, contractual rights, torts, or other legal claims. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability, or require us to change our business practices. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritoriousagreeing toentering into settlement agreements. Any of the foregoing could adversely affect our business, financial condition, and results of operations.OctoberJanuary 31, 2022,2023, we had U.S. federal and state net operating loss carryforwards of $652.1$659.9 million and $486.5$538.3 million, respectively, which may be utilized against future income taxes and begin to expire in 2034 and 2025 for U.S. federal and state purposes, respectively. Limitations imposed by the applicable jurisdictions on our ability to utilize net operating loss carryforwards could cause income taxes to be paid earlier than would be paid if such limitations were not in effect and could cause such net operating loss carryforwards to expire unused, in each case reducing or eliminating the benefit of such net operating loss carryforwards. Furthermore, we may not be able to generate sufficient taxable income to utilize our net operating loss carryforwards before they expire. If any of these events occur, we may not derive some or all of the expected benefits from our net operating loss carryforwards.utilize the aforementioneduse our net operating loss carryforwards and other tax attributes may be limited.utilize suchuse those carryforwards in tax years beginning after December 31, 2020, to 80% of taxable income for the tax years beginning after December 31, 2020.year. Net operating loss carryforwards generated before January 1, 2018, (which represent the substantial majority of our net operating losses as of January 31, 2021) will not be subject to the Tax Act’s 80% taxable income limitation, andbut will continue to have a twenty-year carryforward period. Nevertheless,As such, our net operating loss carryforwards and other tax assets could expire before utilization and could be subject to limitations, which could harm our business, revenue, and financial results.as a result ofdue to changes in the applicable tax principles, including increased tax rates, new tax laws, or revised interpretations of existing tax laws and precedents. In addition, the authorities in the jurisdictions in which we operate through our subsidiaries could review our tax returns or require us to file tax returns in jurisdictions in which we are not currently filing, and could impose additional tax, interest, and penalties. These authorities could also claim that various withholding requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing. The relevant taxing authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences. If such a disagreement was to occur, and our position was not sustained, we could be required to pay additional taxes, and interest and penalties. Such authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries. Any increase in the amount of taxes we pay or that are imposed on us could increase our worldwide effective tax rate and harm our business and results of operations.of taxation of international business activitiesand other jurisdictions or the adoption of other tax reform policies could materially impact our financial position and results of operations.U.S. tax laws including those that increaseof the U.S. corporate tax rate,United States and other jurisdictions could impact the tax treatment of our earnings. TheFor example, the Tax Act has eliminated the option to deduct research and development expenditures currently and instead requires taxpayers to capitalize and amortize such expenditures over five or fifteen years, for U.S.-based and non-U.S. based research expenditures, respectively, beginning in 2022. Further, the United States recently enacted the Inflation Reduction Act of 2022, or the IRA, which introduced a 15% minimum tax on adjusted book income over one billion, and a 1% excise tax on stock buybacks. We do not currently expect the IRA will have a material impact on our income tax liability. Further, the Organization for Economic Cooperation and Development has proposed implementing a global minimum tax of 15%, which has been agreed to by over 136 countries, and is expected to be implemented in EU member countries by the end of 2023. Due to expansion of our international business activities, such proposed changes, as well as regulations and legal decisions interpreting and applying these changes may increase our worldwide effective tax rate and adversely affect our financial position and results of operations.70could affect the reporting of transactions completed before the announcement of a change. Additionally, if there are changes to certain of our facts-and-circumstances or if regulators changed their interpretation, we might be required to change the way we report our financial results.are able to completeclose may not result in the synergies or other benefits we expect to achieve, including the introduction of new products or enhancements to existing products, which could result in substantial impairment charges. These transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations.71or prevent fraud, or comply with applicable regulations, and investor confidence may, therefore, be adversely affected.72the aforementionedthese risks may beincrease further increased if our course of action in response to catastrophic events prove to beproves inadequate. including the COVID-19 pandemic, have had, and could in the future have an adverse impact on our business, operations, and the markets and communities in which we, our partners, and customers operate. including the COVID-19 pandemic, impacting the markets and communities in which we, our partners, and customers operate. The ongoing global COVID-19 pandemic has adversely impacted, and may continue to adversely impact, certain parts of our business.The pandemic wasalso ledcould lead to existing and potential customers accelerating transitions for some customers to the cloud. As a result, we believe the value of our offering has become increasingly relevant during the course of the pandemic, which may result in a positive impact on our business over the long term. However, if customers do not transition to the cloud at anticipated rates, we may not experience these anticipated benefits.the COVID-19 pandemichealth epidemics on our customers and our customers’ response to the COVID-19 pandemicepidemics is difficult to assess or predict, and we may be unable to accurately forecast our revenues or financial results, especially given thatwhen the long-term impact of the pandemic remainsepidemic is uncertain. Our results of operations could be materially above or below our forecasts, which could adversely affect our results of operations, disappoint analysts and investors, and/or cause our stock price to decline.the COVID-19 pandemic or a similar health epidemicepidemics is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, operations, ability to access capital, or the global economy as a whole. There is also no guarantee that a future outbreak of COVID-19 or any other widespread epidemics will not occur, or that the global economy will recover, either of which could harm our business.73the expiration of contractual lock-up agreements and sales of shares of our Class A common stock by us or our stockholders;•2022,2023, our executive officers and directors and their affiliates together hold and/or control approximately 42% 41% of the voting power of our outstanding common stock, and Armon Dadgar and Mitchell Hashimoto, our co-founders, together hold and/or control approximately 28%31% of the voting power of our outstanding common stock. As a result, our executive officers, directors, and other affiliates have significant influence over our management and affairs and over all matters requiring stockholder approval, including election of directors and significant corporate transactions, such as a merger or other sale of the company or our assets, for the foreseeable future.74utilizingwith dual or multi-class capital structures to be included in their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Also, in 2017, MSCI, a leading stock index provider, opened public consultations on its treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under the announced policies, our dual-class capital structure makes us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to passively track these indices will not be investing in our stock. In addition, we cannot assure you that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and would make our Class A common stock less attractive to other investors. As a result, the trading price, volume, and liquidity of our Class A common stock could be adversely affected.theour initial public offering, or IPO have substantial unrecognized gains on the value of the equity they hold based on recent market prices of our shares of Class A common stock, and therefore, they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares. We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our Class A common stock.2022,2023, up to 6,283,438to 5,468,918 shares of our Class B common stock and up to 15,949,60416,033,096 shares of our Class A common stock may be issued upon exercise of outstanding stock options or vesting and settlement of outstanding restricted stock units, or RSUs, and 25,270,38729,712,721 shares of our Class A common stock are available for future issuance under our 2021 Equity Incentive Plan and 2021 Employee Stock Purchase Plan, and will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, exercise limitations, and Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or the Securities Act. We have registered all of the shares of Class A common stock issuable upon exercise of outstanding options and all of the shares of Class A common stock issuable upon vesting and settlement of RSUs, as well as other equity incentive awards we may grant in the future for public resale under the Securities Act. Shares of Class A common stock will become eligible for sale in the public market to the extent such options are exercised and RSUs settle, subject to compliance with applicable securities laws. If these additional shares of Class A common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our Class A common stock could decline.76We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.We are an “emerging growth company,” as defined in the JOBS Act, and have the option to utilize certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (A) following the fifth anniversary of our IPO, (B) in which we have total annual revenue of at least $1.07 billion, or (C) in which we are deemed to be a large accelerated filer, with at least $700 million of equity securities held by non-affiliates as of the prior July 31st, and (ii) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. However, we may take advantage of some of the other reduced regulatory and reporting requirements that will be available to us so long as we qualify as an emerging growth company.77Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected. Likewise, so long as we qualify as an emerging growth company, we may elect not to provide you with certain information, including certain financial information and certain information regarding compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate our company. As a result, investor confidence in our company and the market price of our Class A common stock may be adversely affected. Further, we cannot predict if investors will find our Class A common stock less attractive because we will rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.None.78Exhibit Description Form File No. Exhibit Filing Date Number 3.1 8-K 001-41121 3.1 12/13/2021 3.2 8-K 001-41121 3.2 12/13/2021 10.1* 31.1* 31.2* 32.1*† 32.2*† 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). 2022202280