ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
__________
Delaware | 20-5530976 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
3050 South Delaware Street, Suite 301, San Mateo, California | 94403 | |
(Address of principal executive offices) | (Zip Code) |
☐
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ý | Smaller reporting company | ☐ | |||
Emerging growth company |
Page | ||||||
PART I. | ||||||
Item 1. | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
PART II. | ||||||
Item 1. | ||||||
Item 1A. | ||||||
Item 2. | ||||||
Item 6. | ||||||
1
Item 1. | Financial Statements |
April 30, 2018 | January 31, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 202,514 | $ | 48,208 | ||||
Accounts receivable, net of allowance for doubtful accounts of $2,914 and $3,292 as of April 30, 2018 and January 31, 2018, respectively | 45,388 | 49,764 | ||||||
Restricted cash, current portion | 220 | — | ||||||
Prepaid expenses and other current assets | 8,780 | 9,302 | ||||||
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Total current assets | 256,902 | 107,274 | ||||||
Property and equipment, net | 10,923 | 10,204 | ||||||
Restricted cash, net of current portion | 4,935 | 5,155 | ||||||
Purchased intangibles, net | 10,610 | 11,292 | ||||||
Goodwill | 20,614 | 20,614 | ||||||
Other assets | 2,822 | 827 | ||||||
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Total assets | $ | 306,806 | $ | 155,366 | ||||
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Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,466 | $ | 2,572 | ||||
Accrued expenses and other current liabilities | 27,825 | 24,496 | ||||||
Accrued employee liabilities | 17,383 | 17,701 | ||||||
Lease obligation, current portion | 967 | 1,066 | ||||||
Debt, current portion | 4,167 | 2,917 | ||||||
Deferred revenue, current portion | 67,605 | 66,058 | ||||||
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Total current liabilities | 121,413 | 114,810 | ||||||
Debt, net of current portion | 10,803 | 12,052 | ||||||
Deferred revenue, net of current portion | 424 | 346 | ||||||
Lease obligation, net of current portion | 187 | 324 | ||||||
Other long-term liabilities | 1,717 | 1,168 | ||||||
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Total liabilities | 134,544 | 128,700 | ||||||
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Commitments and contingencies (note 13) | ||||||||
Stockholders’ equity: | ||||||||
Convertible preferred stock | — | 6 | ||||||
Class A common stock | 1 | — | ||||||
Class B common stock | 10 | 3 | ||||||
Additionalpaid-in capital | 455,610 | 286,152 | ||||||
Related party receivable | (5,619 | ) | (1,281 | ) | ||||
Accumulated comprehensive loss | 392 | 471 | ||||||
Accumulated deficit | (278,132 | ) | (258,685 | ) | ||||
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Total stockholders’ equity | 172,262 | 26,666 | ||||||
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Total liabilities and stockholders’ equity | $ | 306,806 | $ | 155,366 | ||||
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October 31, 2018 | January 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 77,883 | $ | 48,208 | |||
Short-term investments | 97,034 | — | |||||
Accounts receivable, net of allowance for doubtful accounts of $4,170 and $3,292 as of October 31, 2018 and January 31, 2018, respectively | 51,379 | 49,764 | |||||
Restricted cash, current portion | 4,350 | — | |||||
Prepaid expenses and other current assets | 9,195 | 9,302 | |||||
Total current assets | 239,841 | 107,274 | |||||
Property and equipment, net | 18,388 | 10,204 | |||||
Restricted cash, net of current portion | 2,084 | 5,155 | |||||
Purchased intangibles, net | 9,545 | 11,292 | |||||
Goodwill | 20,861 | 20,614 | |||||
Other assets | 2,524 | 827 | |||||
Total assets | $ | 293,243 | $ | 155,366 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 2,678 | $ | 2,572 | |||
Accrued expenses and other current liabilities | 13,484 | 24,496 | |||||
Accrued employee liabilities | 24,516 | 17,701 | |||||
Lease obligation, current portion | 2,287 | 1,066 | |||||
Debt, current portion | 1,852 | 2,917 | |||||
Deferred revenue, current portion | 76,313 | 66,058 | |||||
Total current liabilities | 121,130 | 114,810 | |||||
Debt, net of current portion | 11,530 | 12,052 | |||||
Deferred revenue, net of current portion | 795 | 346 | |||||
Lease obligation, net of current portion | — | 324 | |||||
Other long-term liabilities | 3,194 | 1,168 | |||||
Total liabilities | 136,649 | 128,700 | |||||
Commitments and contingencies (note 14) | |||||||
Stockholders’ equity: | |||||||
Convertible preferred stock | — | 6 | |||||
Class A common stock | 7 | — | |||||
Class B common stock | 4 | 3 | |||||
Additional paid-in capital | 472,093 | 286,152 | |||||
Related party receivable | — | (1,281 | ) | ||||
Accumulated comprehensive income | 98 | 471 | |||||
Accumulated deficit | (315,608 | ) | (258,685 | ) | |||
Total stockholders’ equity | 156,594 | 26,666 | |||||
Total liabilities and stockholders’ equity | $ | 293,243 | $ | 155,366 |
2
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Revenue: | ||||||||
Subscription | $ | 36,114 | $ | 26,055 | ||||
Professional services | 15,630 | 6,284 | ||||||
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Total revenue | 51,744 | 32,339 | ||||||
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Cost of revenue: | ||||||||
Subscription | 9,865 | 6,035 | ||||||
Professional services | 16,153 | 6,774 | ||||||
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Total cost of revenue | 26,018 | 12,809 | ||||||
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Gross profit | 25,726 | 19,530 | ||||||
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Operating expenses: | ||||||||
Research and development | 12,062 | 7,877 | ||||||
Sales and marketing | 22,837 | 14,952 | ||||||
General and administrative | 9,411 | 4,679 | ||||||
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Total operating expenses | 44,310 | 27,508 | ||||||
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Loss from operations | (18,584 | ) | (7,978 | ) | ||||
Interest and other (expense) income, net | (673 | ) | (16 | ) | ||||
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Loss before income taxes | (19,257 | ) | (7,994 | ) | ||||
Income tax provision | (190 | ) | (132 | ) | ||||
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Net loss | (19,447 | ) | (8,126 | ) | ||||
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Comprehensive loss: | ||||||||
Foreign currency translation adjustment | (78 | ) | 166 | |||||
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Comprehensive loss | $ | (19,525 | ) | $ | (7,960 | ) | ||
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Net loss per share attributable to common stockholders, basic and diluted | $ | (0.43 | ) | $ | (0.33 | ) | ||
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Weighted-average shares outstanding used in calculating net loss per share attributable to common stockholders, basic and diluted | 44,886 | 24,986 | ||||||
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Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Subscription | $ | 44,485 | $ | 31,007 | $ | 122,069 | $ | 85,859 | |||||||
Professional services | 17,152 | 15,352 | 49,066 | 32,251 | |||||||||||
Total revenue | 61,637 | 46,359 | 171,135 | 118,110 | |||||||||||
Cost of revenue: | |||||||||||||||
Subscription | 10,987 | 8,195 | 31,273 | 22,301 | |||||||||||
Professional services | 19,190 | 13,912 | 53,569 | 33,238 | |||||||||||
Total cost of revenue | 30,177 | 22,107 | 84,842 | 55,539 | |||||||||||
Gross profit | 31,460 | 24,252 | 86,293 | 62,571 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 14,282 | 9,977 | 39,667 | 27,622 | |||||||||||
Sales and marketing | 25,896 | 18,625 | 74,162 | 52,056 | |||||||||||
General and administrative | 9,579 | 5,560 | 27,553 | 15,790 | |||||||||||
Total operating expenses | 49,757 | 34,162 | 141,382 | 95,468 | |||||||||||
Loss from operations | (18,297 | ) | (9,910 | ) | (55,089 | ) | (32,897 | ) | |||||||
Interest and other income (expense), net | 633 | (421 | ) | (1,218 | ) | (30 | ) | ||||||||
Loss before income taxes | (17,664 | ) | (10,331 | ) | (56,307 | ) | (32,927 | ) | |||||||
Income tax provision | (225 | ) | (34 | ) | (616 | ) | (405 | ) | |||||||
Net loss | (17,889 | ) | (10,365 | ) | (56,923 | ) | (33,332 | ) | |||||||
Comprehensive loss: | |||||||||||||||
Foreign currency translation adjustment | (681 | ) | 73 | (341 | ) | 394 | |||||||||
Unrealized loss on available-for-sale securities | (32 | ) | — | (32 | ) | — | |||||||||
Comprehensive loss | $ | (18,602 | ) | $ | (10,292 | ) | $ | (57,296 | ) | $ | (32,938 | ) | |||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.17 | ) | $ | (0.35 | ) | $ | (0.66 | ) | $ | (1.27 | ) | |||
Weighted-average shares outstanding used in calculating net loss per share attributable to common stockholders, basic and diluted | 106,049 | 29,314 | 85,820 | 26,145 |
3
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (19,447 | ) | $ | (8,126 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 1,953 | 1,427 | ||||||
Stock-based compensation | 4,601 | 1,154 | ||||||
Provision for doubtful accounts | 1,195 | 345 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 3,181 | (363 | ) | |||||
Prepaid expenses and other current assets | (1,932 | ) | (242 | ) | ||||
Other assets | (1,995 | ) | (25 | ) | ||||
Accounts payable | 1,030 | (1,105 | ) | |||||
Accrued expenses and other current liabilities | 1,936 | 932 | ||||||
Accrued employee liabilities | (318 | ) | 266 | |||||
Deferred revenue | 1,625 | 1,435 | ||||||
Other long-term liabilities | 345 | (56 | ) | |||||
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Net cash used in operating activities | (7,826 | ) | (4,358 | ) | ||||
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Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (1,764 | ) | (711 | ) | ||||
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Net cash used in investing activities | (1,764 | ) | (711 | ) | ||||
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Cash flows from financing activities: | ||||||||
Payments under capital leases | (236 | ) | (535 | ) | ||||
Proceeds from issuance of common stock upon exercise of stock options | 5,749 | 1,305 | ||||||
Payments of offering costs | (1,892 | ) | — | |||||
Proceeds from initial public offering costs, net of underwriters’ discounts and commissions | 164,703 | — | ||||||
Payments under related party notes receivable | (4,344 | ) | — | |||||
Repurchases of unvested common stock | (6 | ) | — | |||||
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Net cash provided by financing activities | 163,974 | 770 | ||||||
Effect of exchange rates on cash and cash equivalents and restricted cash | (78 | ) | 166 | |||||
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Net increase (decrease) in cash and cash equivalents and restricted cash | 154,306 | (4,133 | ) | |||||
Cash and cash equivalents and restricted cash, beginning of period | 53,363 | 77,882 | ||||||
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Cash and cash equivalents and restricted cash, end of period | $ | 207,669 | $ | 73,749 | ||||
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Supplemental disclosure ofnon-cash investing and financing activities: | ||||||||
Property and equipment acquired under capital leases | $ | — | $ | 488 | ||||
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Lapse in restrictions on early exercised common stock options | $ | 833 | $ | 156 | ||||
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Property and equipment purchases in accounts payable | $ | 35 | $ | 31 | ||||
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Deferred offering costs payable or accrued but not paid | $ | 2,181 | $ | — | ||||
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Reconciliation of cash and cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above: | ||||||||
Cash and cash equivalents | $ | 202,514 | $ | 68,594 | ||||
Restricted cash, current | 220 | — | ||||||
Restricted cash, net of current portion | 4,935 | 5,155 | ||||||
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Total cash and cash equivalents and restricted cash | $ | 207,669 | $ | 73,749 | ||||
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Nine Months Ended October 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (56,923 | ) | $ | (33,332 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation and amortization | 6,628 | 5,016 | |||||
Stock-based compensation | 17,722 | 5,995 | |||||
Loss on disposal of assets | 144 | — | |||||
Provision for doubtful accounts | 4,518 | 2,764 | |||||
Accretion of discount on short-term investments | (76 | ) | — | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (6,133 | ) | (9,198 | ) | |||
Prepaid expenses and other current assets | (2,226 | ) | (107 | ) | |||
Other assets | (1,697 | ) | (567 | ) | |||
Accounts payable | 26 | (3,070 | ) | ||||
Accrued expenses and other current liabilities | 2,926 | 3,626 | |||||
Accrued employee liabilities | 6,815 | 3,228 | |||||
Deferred revenue | 10,704 | 7,876 | |||||
Other long-term liabilities | 980 | (108 | ) | ||||
Net cash used in operating activities | (16,592 | ) | (17,877 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (10,621 | ) | (2,480 | ) | |||
Purchases of short-term investments | (97,118 | ) | — | ||||
Business combination, net of cash acquired | (247 | ) | (11,420 | ) | |||
Net cash used in investing activities | (107,986 | ) | (13,900 | ) | |||
Cash flows from financing activities: | |||||||
Payments under capital leases | (1,336 | ) | (1,426 | ) | |||
Proceeds from issuance of common stock upon exercise of stock options | 9,026 | 2,631 | |||||
Payments of offering costs | (4,399 | ) | (35 | ) | |||
Proceeds from initial public offering, net of underwriters’ discounts and commissions | 164,703 | — | |||||
Payments under related party notes receivable | (4,344 | ) | — | ||||
Repayments of related party notes receivable | 5,625 | — | |||||
Repurchases of unvested common stock | (10 | ) | — | ||||
Principal payments on long-term debt | (834 | ) | — | ||||
Payments related to business combination | (12,558 | ) | — | ||||
Proceeds from long-term debt, net of issuance costs | — | 14,949 | |||||
Net cash provided by financing activities | 155,873 | 16,119 | |||||
Effect of exchange rates on cash and cash equivalents and restricted cash | (341 | ) | 394 | ||||
Net increase (decrease) in cash and cash equivalents and restricted cash | 30,954 | (15,264 | ) | ||||
Cash and cash equivalents and restricted cash, beginning of period | 53,363 | 77,882 | |||||
Cash and cash equivalents and restricted cash, end of period | $ | 84,317 | $ | 62,618 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Property and equipment acquired under capital leases | $ | 2,392 | $ | 488 | |||
Lapse in restrictions on early exercised common stock options | $ | 228 | $ | 426 | |||
Property and equipment purchases accrued or in accounts payable | $ | 367 | $ | 64 | |||
Deferred offering costs payable or accrued but not paid | $ | 210 | $ | 247 | |||
Accrued acquisition-related payments | $ | — | $ | 12,558 | |||
Reconciliation of cash and cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above: | |||||||
Cash and cash equivalents | $ | 77,883 | $ | 57,462 | |||
Restricted cash, current | 4,350 | — | |||||
Restricted cash, net of current portion | 2,084 | 5,156 | |||||
Total cash and cash equivalents and restricted cash | $ | 84,317 | $ | 62,618 |
4
5
6
and expanded disclosure requirements. ASU2014-09, as amended, became effective for public companies for the fiscal year beginning after December 15, 2017 and interim periods within that year. Private companies have an additional year to adopt the standard. The two permitted transition methods under the new standard are the full retrospective method, under which ASU2014-09 would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, under which the cumulative effect of applying ASU2014-09 would be recognized at the date of initial application. The Company plans to adopt the new revenue standard when it becomes effective for the Company for the fiscal year ending January 31, 2020 (i.e., effective February 1, 2019). The Company is currently in the process of determining what method of adoption it plans to use. The Company is currently assessing the effect the guidance will have on its condensed consolidated financial statements.
The adoption also affects the deferral of incremental commission costs of obtaining subscription contracts, which previously were expensed as incurred. Under the new standard, the Company will defer all incremental commission costs to obtain the contract and amortize them over the expected period of benefit. The Company is currently assessing the expected period of benefit.
In addition, the new standard will expand the disclosures to be made in the Company’s consolidated financial statements, including disaggregation of revenue, information on contract balances, deferred contract acquisition costs, performance obligations, and remaining performance obligations.
7
and interim periods within those fiscal years. Early adoption in any period is permitted. The Company’s provisional adjustments recorded in the fiscal year ended January 31, 2018 to account for the impact of the Tax Act did not result in stranded tax effects. The Company has not yet adopted ASU2018-02 and does not expect the adoption to have a significant impact on its condensed consolidated financial statements.
8
October 31, 2018 | |||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
U.S. government securities | $ | 17,853 | $ | 1 | $ | — | $ | 17,854 | |||||||
Corporate bonds | 34,224 | — | (33 | ) | 34,191 | ||||||||||
Commercial paper | 44,989 | — | — | 44,989 | |||||||||||
Total short-term investments | $ | 97,066 | $ | 1 | $ | (33 | ) | $ | 97,034 |
Note 3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
As of | ||||||||
April 30, 2018 | January 31, 2018 | |||||||
Prepaid software subscriptions | $ | 3,210 | $ | 3,239 | ||||
Capitalized offering costs | — | 2,460 | ||||||
Prepaid rent | 472 | 657 | ||||||
Taxes | 374 | 533 | ||||||
Prepaid hosting costs | 882 | 486 | ||||||
Short-term deposits | 484 | 480 | ||||||
Prepaid insurance | 1,758 | 445 | ||||||
Prepaid employee-related costs | 286 | 132 | ||||||
Other | 1,314 | 870 | ||||||
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Total | $ | 8,780 | $ | 9,302 | ||||
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The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, other accrued expenses, debt and capital lease obligations, approximate their fair values due to their relatively short maturity, and in the case of leases, market interest rates.
Level input | Input definition | |
Level 1 | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets | |
Level 2 | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date | |
Level 3 | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date |
October 31, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents: | |||||||||||||||
Money market funds | $ | 60,657 | $ | — | $ | — | $ | 60,657 | |||||||
Commercial paper | — | 10,459 | — | 10,459 | |||||||||||
Total cash equivalents | $ | 60,657 | $ | 10,459 | $ | — | $ | 71,116 | |||||||
Short-term investments: | |||||||||||||||
U.S. government securities | $ | — | $ | 17,854 | $ | — | $ | 17,854 | |||||||
Corporate bonds | — | 34,191 | — | 34,191 | |||||||||||
Commercial paper | — | 44,989 | — | 44,989 | |||||||||||
Total short-term investments | $ | — | $ | 97,034 | $ | — | $ | 97,034 | |||||||
Restricted cash: | |||||||||||||||
Money market funds | $ | 6,434 | $ | — | $ | — | $ | 6,434 |
9
The carrying amounts of certain financial instruments, including cash held in bank accounts, accounts receivable, accounts payable, accrued expenses and capital lease obligations, approximate fair value due to their relatively short maturity. The carrying amount of debt approximates fair value due to its floating interest rate.
PropertyOther Current Assets
As of | ||||||||
April 30, 2018 | January 31, 2018 | |||||||
Servers | $ | 11,602 | $ | 11,283 | ||||
Computer equipment | 7,755 | 6,885 | ||||||
Software | 7,765 | 7,148 | ||||||
Leasehold improvements | 2,023 | 1,968 | ||||||
Furniture and fixtures | 1,576 | 1,446 | ||||||
Vehicles | 24 | 25 | ||||||
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30,745 | 28,755 | |||||||
Less accumulated depreciation and amortization | (19,822 | ) | (18,551 | ) | ||||
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Total | $ | 10,923 | $ | 10,204 | ||||
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Depreciation and amortization expense was $1.3 million and $1.2 million for the three months ended April 30, 2018 and 2017, respectively, and is included in operating expenses and cost of revenue in the accompanying unaudited condensed consolidated statements of comprehensive loss.Internal-use software amortization recorded to cost of subscription revenue was $0.3 million for the three months ended April 30, 2018 and 2017.
October 31, 2018 | January 31, 2018 | ||||||
Prepaid software subscriptions | $ | 4,032 | $ | 3,239 | |||
Prepaid insurance | 1,347 | 445 | |||||
Prepaid hosting costs | 1,211 | 486 | |||||
Prepaid rent | 867 | 657 | |||||
Taxes | 456 | 533 | |||||
Short-term deposits | 300 | 480 | |||||
Prepaid employee-related costs | 369 | 132 | |||||
Capitalized offering costs | — | 2,460 | |||||
Other | 613 | 870 | |||||
Total | $ | 9,195 | $ | 9,302 |
October 31, 2018 | January 31, 2018 | ||||||
Servers | $ | 14,520 | $ | 11,283 | |||
Computer equipment | 9,776 | 6,885 | |||||
Software | 10,345 | 7,148 | |||||
Leasehold improvements | 4,428 | 1,968 | |||||
Furniture and fixtures | 2,728 | 1,446 | |||||
Vehicles | 22 | 25 | |||||
41,819 | 28,755 | ||||||
Less accumulated depreciation and amortization | (23,431 | ) | (18,551 | ) | |||
Total | $ | 18,388 | $ | 10,204 |
As of April 30, 2018 | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Developed technology | $ | 7,697 | $ | (3,130 | ) | $ | 4,567 | |||||
Customer relationships | 5,933 | (680 | ) | 5,253 | ||||||||
Trade names | 909 | (119 | ) | 790 | ||||||||
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Total | $ | 14,539 | $ | (3,929 | ) | $ | 10,610 | |||||
As of January 31, 2018 | ||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
Developed technology | $ | 7,697 | $ | (2,666 | ) | $ | 5,031 | |||||
Customer relationships | 5,933 | (494 | ) | 5,439 | ||||||||
Trade names | 909 | (87 | ) | 822 | ||||||||
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Total | $ | 14,539 | $ | (3,247 | ) | $ | 11,292 |
As of October 31, 2018 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
Developed technology | $ | 7,697 | $ | (3,759 | ) | $ | 3,938 | ||||
Customer relationships | 5,933 | (1,051 | ) | 4,882 | |||||||
Trade names | 909 | (184 | ) | 725 | |||||||
Total | $ | 14,539 | $ | (4,994 | ) | $ | 9,545 |
As of January 31, 2018 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
Developed technology | $ | 7,697 | $ | (2,666 | ) | $ | 5,031 | ||||
Customer relationships | 5,933 | (494 | ) | 5,439 | |||||||
Trade names | 909 | (87 | ) | 822 | |||||||
Total | $ | 14,539 | $ | (3,247 | ) | $ | 11,292 |
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Note 7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
As of | ||||||||
April 30, 2018 | January 31, 2018 | |||||||
Accrued acquisition-related payments | $ | 12,558 | $ | 12,558 | ||||
Accrued goods and services taxes | 2,488 | 2,488 | ||||||
Accrued outside services and consulting | 2,697 | 2,006 | ||||||
AccruedIPO-related costs | 1,274 | 1,120 | ||||||
Accrued legal fees | 324 | 828 | ||||||
Employee early exercised stock options | 1,222 | 556 | ||||||
Accrued sales and use tax liability | 477 | 431 | ||||||
Accrued foreign income taxes | 351 | 221 | ||||||
Other accrued expenses | 6,434 | 4,288 | ||||||
|
|
|
| |||||
Total | $ | 27,825 | $ | 24,496 | ||||
|
|
|
|
October 31, 2018 | January 31, 2018 | ||||||
Accrued goods and services taxes | $ | 3,135 | $ | 2,488 | |||
Accrued outside services and consulting | 2,722 | 2,006 | |||||
Employee early exercised stock options | 670 | 556 | |||||
Accrued sales and use tax liability | 845 | 431 | |||||
Deferred rent, current | 297 | 604 | |||||
Accrued legal fees | 170 | 828 | |||||
Accrued IPO-related costs | 210 | 1,120 | |||||
Accrued foreign income taxes | 464 | 221 | |||||
Accrued acquisition-related payments | — | 12,558 | |||||
Other accrued expenses | 4,971 | 3,684 | |||||
Total | $ | 13,484 | $ | 24,496 |
As of | ||||||||
April 30, 2018 | January 31, 2018 | |||||||
Long-term income taxes payable | $ | 469 | $ | 472 | ||||
Deferred rent, net of current portion | 682 | 356 | ||||||
Early exercised common stock options | 344 | 139 | ||||||
Other | 222 | 201 | ||||||
|
|
|
| |||||
Total | $ | 1,717 | $ | 1,168 | ||||
|
|
|
|
October 31, 2018 | January 31, 2018 | ||||||
Deferred rent, net of current portion | $ | 2,149 | $ | 356 | |||
Long-term income taxes payable | 426 | �� | 472 | ||||
Early exercised common stock options | 253 | 139 | |||||
Other | 366 | 201 | |||||
Total | $ | 3,194 | $ | 1,168 |
On
loan.
11
outstanding amounts drawn down under the term loan accrue interest at the WSJ Prime rate plusminus 1.00%., which is due monthly through June 2019. The interest rate was 5.75%4.25% as of April 30,October 31, 2018. TheBeginning with the term loan payment due on July 1, 2019, the Company is required to make monthly payments of interest with respect to any amounts borrowed until June 2018 and subsequently must make equal monthly payments of principal and interest over 36 months until the following 36 months.term loan is repaid. The Company may prepay all outstanding principal and accrued interest at any time without penalty. The Company will incur a facility fee of 1.5% of the original principal amount of the term loan, or $225,000, upon the earlier to occur of prepayment or the termination of the facility. As of April 30,October 31, 2018, the Company had $15.0$13.4 million outstanding under the term loan.
Note 11. Stockholders’ Equity
Convertible Preferred Stock
Immediately prior to the completion of the IPO, all shares of convertible preferred stock then outstanding were converted into 62.0 million shares of Class B common stock ona one-to-one basis. As of April 30, 2018, there were no shares of convertible preferred stock issued and outstanding.
Common Stock
Prior to the IPO, all shares of common stock then outstanding were reclassified into Class B common stock. Shares offered and sold in the IPO consisted of newly authorized shares of Class A common stock.
12
As of April 30, 2018, the Company had authorized 500.0 million shares of Class A common stock and 500.0 million shares of Class B common stock, each with a par value of $0.0001 per share. As of April 30, 2018, 12.7 million shares of Class A common stock and 94.5 million shares of Class B common stock were issued and outstanding.
Holders of Class A and Class B common stock are entitled to one vote per share and ten votes per share, respectively, and the shares of Class A common stock and Class B common stock are identical, except for voting and conversion rights.
Foreign currency items | Unrealized loss on available-for-sale securities | Total | |||||||||
Balance, February 1, 2018 | $ | 471 | $ | — | $ | 471 | |||||
Foreign currency translation adjustment | (341 | ) | — | (341 | ) | ||||||
Unrealized loss on available-for-sale securities | — | (32 | ) | (32 | ) | ||||||
Balance, October 31, 2018 | $ | 130 | $ | (32 | ) | $ | 98 |
Shares Subject To Outstanding Stock Options | Weighted Average Exercise Price | Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
Balance as of January 31, 2018 | 15,401 | $ | 3.56 | 7.91 | $ | 83,322 | ||||||||||
Granted | 3,550 | 7.94 | — | |||||||||||||
Exercised | (1,968 | ) | 2.94 | — | 12,003 | |||||||||||
Forfeited | (139 | ) | 4.88 | — | ||||||||||||
|
| |||||||||||||||
Balance as of April 30, 2018 | 16,844 | 4.55 | 8.23 | 247,813 | ||||||||||||
|
| |||||||||||||||
Exercisable as of April 30, 2018 | 16,067 | 4.50 | 8.18 | 237,074 | ||||||||||||
Vested and expected to vest as of April 30, 2018 | 14,657 | 4.40 | 8.11 | 217,787 |
Shares Subject To Outstanding Stock Options | Weighted Average Exercise Price | Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||
Balance as of January 31, 2018 | 15,401 | $ | 3.56 | 7.91 | $ | 83,322 | ||||||
Granted | 3,663 | 8.41 | ||||||||||
Exercised | (2,913 | ) | 3.10 | |||||||||
Forfeited | (506 | ) | 5.40 | |||||||||
Balance as of October 31, 2018 | 15,645 | 4.72 | 7.73 | 245,957 | ||||||||
Exercisable as of October 31, 2018 | 15,389 | 4.59 | 7.75 | 243,660 | ||||||||
Vested and expected to vest as of October 31, 2018 | 14,977 | $ | 4.64 | 7.68 | $ | 236,536 |
13
The Company used the Black-Scholes option-pricing model to estimate the fair value of its stock options granted with the following assumptions:
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Fair value of common stock | $ | 12.28 | $ | 3.28 - 3.58 | ||||
Expected volatility | 39.23% - 40.86% | 40.00% - 42.62% | ||||||
Expected term (years) | 5.06 - 6.44 | 5.14 - 6.99 | ||||||
Risk-free interest rate | 2.62% - 2.73% | 1.89% - 2.26% | ||||||
Expected dividend yield | — | — |
Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Fair value of common stock | $27.86 | $5.54 - $5.88 | $12.28 - $27.86 | $3.28 - $5.88 | ||||||||
Expected volatility | 32.4% | 40.0% - 42.3% | 39.2% - 40.9% | 40.0% - 42.6% | ||||||||
Expected term (years) | 5.9 - 6.0 | 4.3 - 6.9 | 5.1 - 6.4 | 4.3 - 7.0 | ||||||||
Risk-free interest rate | 2.82% | 1.67% - 2.18% | 2.62% - 2.87% | 1.67% - 2.26% | ||||||||
Expected dividend yield | — | — | — | — |
The Company did not grant any RSUs orand restricted stock duringaward activity and related information for the threenine months ended April 30, 2018. October 31, 2018 (in thousands except grant date fair value):
Number of RSU and Restricted Shares Outstanding | Weighted-Average Grant Date Fair Value | |||||
Balance as of January 31, 2018 | 3,037 | $ | 5.37 | |||
Granted | 1,116 | 26.25 | ||||
Vested | (1,028 | ) | 5.47 | |||
Forfeited | (64 | ) | 12.77 | |||
Balance as of October 31, 2018 | 3,061 | $ | 12.80 |
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The Company estimated the fair value of ESPP purchase rights using a Black-Scholes option pricing model with the following assumptions:
Three Months Ended April 30, 2018 | ||||
Fair value of common stock | $ | 14.00 | ||
Expected volatility | 26.64% - 29.93% | |||
Expected term (in years) | 0.68 - 2.18 | |||
Risk-free interest rate | 2.01% - 2.36% | |||
Expected dividend yield | — |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Fair value of common stock | $ | — | $ | — | $ | 14.00 | $ | — | |||||||
Expected volatility | — | — | 24.6% - 29.9% | — | |||||||||||
Expected term (in years) | — | — | 0.7 - 2.2 | — | |||||||||||
Risk-free interest rate | — | — | 2.01% - 2.36% | — | |||||||||||
Expected dividend yield | — | — | — | — |
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Cost of subscription revenue | $ | 323 | $ | 88 | ||||
Cost of professional services revenue | 1,031 | 140 | ||||||
Research and development | 1,048 | 329 | ||||||
Sales and marketing | 1,590 | 406 | ||||||
General and administrative | 609 | 191 | ||||||
|
|
|
| |||||
Total stock-based compensation expense | $ | 4,601 | $ | 1,154 | ||||
|
|
|
|
Note 13. Commitments and Contingencies
(a) Leases
The Company periodically leases facilities and equipment under noncancelable capital and operating leases. The terms of the lease agreements may provide for rental payments on a graduated basis, and accordingly, the Company recognizes related rent expense on a straight-line basis over the entire lease term, and has accrued for rent expense incurred but not paid.
The Company has capital lease agreements with a lender to use data center equipment and related software. The lease agreements provide the Company the ability to finance its equipment purchases over an extended period of time. At the end of the term, the Company must return the equipment to the lender. In some cases, the Company has the ability to purchase the equipment at its then current fair market value. In connection with the equipment financing agreement, the Company’s bank issued letters of credit of $4.4 million as of April 30, 2018, classified as restricted cash on its unaudited condensed consolidated balance sheet.
As of April 30, 2018, the Company had operating leases for its offices in the United States and other locations around the world. The Company also had operating leases for facilities related to its U.S. data centers in Las Vegas, Nevada and Santa Clara, California. The initial lease term for these facilities ranged from three to seven years and includes approximately 124,000 square feet of space. In connection with these leased facilities, the Company’s bank issued irrevocable letters of credit on the leases of $0.8 million as of April 30, 2018, classified as restricted cash on the Company’s unaudited condensed consolidated balance sheet.
Certain facility lease agreements contain allowances, rent holidays, and escalation provisions. For these leases, the Company recognizes the related rental expense on a straight-line basis over the lease period of the
15
facility and records the difference between amounts charged to operations and amounts paid as deferred rent. Deferred rent was $0.9 million and $1.0 million as of April 30, 2018 and January 31, 2018, respectively, and is included in accrued expenses and other current liabilities and other long-term liabilities in the condensed consolidated balance sheets. Rent expense was $1.8 million and $1.3 million for the three months ended April 30, 2018 and 2017, respectively.
In April 2018, the Company entered into a new operating lease agreement for 9,611 square feet of office space located in London, England. Total lease payments are approximately $4.9 million over a contractual term of five years.
(b) Legal Matters
The Company may be subject to legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of such matters will not have a material adverse effect on the Company’s results of operations or financial condition.
(c) Other Contractual Obligations
As of April 30, 2018, the Company had a contractual obligation to pay $12.6 million in connection with the acquisition of Leeyo that was paid in May 2018. The Company also has a contractual obligation to purchase $2.2 million in web hosting services from one of its vendors by September 30, 2018.
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of subscription revenue | $ | 555 | $ | 239 | $ | 1,311 | $ | 490 | |||||||
Cost of professional services revenue | 1,685 | 733 | 4,115 | 1,229 | |||||||||||
Research and development | 1,902 | 729 | 4,366 | 1,537 | |||||||||||
Sales and marketing | 2,205 | 1,012 | 5,317 | 1,975 | |||||||||||
General and administrative | 1,112 | 328 | 2,613 | 763 | |||||||||||
Total stock-based compensation expense | $ | 7,459 | $ | 3,041 | $ | 17,722 | $ | 5,994 |
Capital Leases | Operating Leases | ||||||
Remainder of 2019 | $ | 2,287 | $ | 1,531 | |||
2020 | — | 7,543 | |||||
2021 | — | 5,783 | |||||
2022 | — | 5,908 | |||||
2023 | — | 5,790 | |||||
Thereafter | — | 4,308 | |||||
Total future lease commitments | $ | 2,287 | $ | 30,863 |
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Numerator: | ||||||||
Net loss | $ | (19,447 | ) | $ | (8,126 | ) | ||
Denominator: | ||||||||
Weighted-average common shares outstanding, basic and diluted | 44,886 | 24,986 | ||||||
|
|
|
| |||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.43 | ) | $ | (0.33 | ) | ||
|
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|
|
16
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Numerator: | |||||||||||||||
Net loss | $ | (17,889 | ) | $ | (10,365 | ) | $ | (56,923 | ) | $ | (33,332 | ) | |||
Denominator: | |||||||||||||||
Weighted-average common shares outstanding, basic and diluted | 106,049 | 29,314 | 85,820 | 26,145 | |||||||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.17 | ) | $ | (0.35 | ) | $ | (0.66 | ) | $ | (1.27 | ) |
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Conversion of convertible preferred stock | — | 61,984 | ||||||
Issued and outstanding stock options | 16,844 | 15,401 | ||||||
Unvested restricted stock issued and outstanding | 1,967 | 2,203 | ||||||
Unvested RSUs issued and outstanding | 828 | 834 | ||||||
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|
|
| |||||
Total | 19,639 | 80,422 | ||||||
|
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|
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Note 15. Related Party Transactions
Certain members of the Company’s Board of Directors serve or are closely affiliated with people who serve on the Board of Directors of companies that are customers or vendors of the Company. Certain of the Company’s executive officers also serve on the Board of Directors of companies that are customers or vendors of the Company. Related party transactions were not material as of and for the three months ended April 30, 2018.
In April 2018, the Company paid $4.4 million of taxes owed in connection with restricted stock granted to two employees in exchange for full-recourse promissory notes. The notes are secured by 4.6 million shares of restricted common stock. The notes accrue interest at a rate of 2.72% and will become payable in full upon the earlier of: (i) a change in control or (ii) January 12, 2019. Consistent with ASC505-10-45, the notes receivable balance is presented as a deduction from stockholders’ equity. This is also consistent with Rule5-02.30 RegulationS-X of the Code of Federal Regulations. No principal or interest payments were made on the notes during the three months ended April 30, 2018.
Note 16. Subsequent Events
Office Lease
In May 2018, the Company entered into a new operating lease agreement for 34,487 square feet of office space located in San Francisco, California that will replace its existing office in San Francisco. Total lease payments are approximately $15.2 million over a contractual term of six years.
Contractual Obligations and Debt Borrowings
As of April 30, 2018, the Company had a contractual obligation to pay $12.6 million in connection with the acquisition of Leeyo. In May 2018, the Company paid this obligation in full.
17
October 31, | |||||
2018 | 2017 | ||||
Conversion of convertible preferred stock | — | 61,984 | |||
Issued and outstanding stock options | 15,645 | 14,971 | |||
Unvested restricted stock issued and outstanding | 1,495 | 2,439 | |||
Unvested RSUs issued and outstanding | 1,566 | 839 | |||
Shares committed under ESPP | 398 | — | |||
Total | 19,104 | 80,233 |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Form10-Q and our Prospectus. As discussed in the section titled “Special Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” under Part II, Item 1A in thisForm 10-Q and in our Prospectus. Our fiscal year ends January 31.OverviewWe provide cloud-based software on a subscription basis that enables any company in any industry to successfully launch, manage, and transform into a subscription business. Architected specifically for dynamic, recurring subscription business models, our solution functions as an intelligent subscription management hub that automates and orchestrates the subscriptionorder-to-cash process, including quoting, billing, collections, analytics, and revenue recognition. We offer businesses the ability to meet the constantly-evolving needs of their subscribers, capitalize on new revenue opportunities, and accelerate business growth.An increasing number of industries are undergoing a transformation in business models as part of a broader shift to the Subscription Economy. Success in the Subscription Economy requires companies with legacy product-centric businesses to undertake a large-scale systemic shift in how they operate, reorienting themselves around their subscribers.This new business model is inherently dynamic, with multiple interactions and constantly-changing relationships and events. The capabilities to launch, price, and bill for products, facilitate and record cash receipts, process and recognize revenue, and produce the data required to close their books and drive key decisions are mission critical and particularly complex for companies with subscription business models. As a result, as companies launch or grow a subscription business, they often conclude that traditionalERP-centric systems are inadequate.We began operations in 2007 with a vision of providing the cloud-based software necessary to bring about, and enable companies to succeed in, the Subscription Economy. Since our inception, we have continued to innovate and have made significant investments to deliver a comprehensive solution for a broad array of use cases in the Subscription Economy. In April, 2018, we completed our initial public offering, in which we sold approximately 12.7 million shares of our Class A common stock, including shares sold pursuant to the underwriters’ option to purchase additional shares. The shares were sold at a price to the public of $14.00 per share for aggregate net proceeds of approximately $162.2 million, after underwriting discounts and commissions and payments of offering costs through April 30, 2018.We generated subscription revenue of $36.1 million and total revenue of $51.7 million for the three months ended April 30, 2018, increases of 39% and 60% year-over-year, respectively. We have continued to make significant expenditures and investments, including personnel-related costs, infrastructure, operations and innovation, and have incurred net losses in each period since our inception, including net losses of $19.4 million and $8.1 million for the three months ended April 30, 2018 and 2017, respectively.Key Operational and Financial MetricsWe monitor the following key operational and financial metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions:18
Customers with Annual Contract Value (ACV) Equal to or Greater than $100,000
We believe our ability to enter into larger contracts is indicative of broader adoption of our solution by larger organizations. It also reflects our ability to expand our revenue footprint within our current customer base. We define ACV as the subscription revenue we would contractually expect to recognize from that customer over the next twelve months, assuming no increases or reductions in their subscriptions. We define the number of customers at the end of any particular period as the number of parties or organizations that have entered into a distinct subscription contract with us for which the term has not ended. Each party with which we have entered into a distinct subscription contract is considered a unique customer, and in some cases, there may be more than one customer within a single organization. We have increased the number of customers with ACV equal to or greater than $100,000 to 441 as of April 30, 2018, as compared to 415 customers as of January 31, 2018.
Dollar-Based Retention Rate
We believe our dollar-based retention rate is a key measure of our ability to retain and expand revenue from our customer base over time. We calculate our dollar-based retention rate as of a period end by starting with the sumCertain members of the ACV from allCompany’s Board of Directors serve or are closely affiliated with people who serve on the board of directors of companies that are customers as of twelve months prior to such period end, or prior period ACV. We then calculate the sumvendors of the ACV from these same customers asCompany. Certain of the current period end,Company’s executive officers also serve on the board of directors of companies that are customers or current period ACV. Current period ACV includes any upsells and also reflects contraction or attrition over the trailing twelve months, but excludes revenue from new customers added in the current period. We then divide the current period ACV by the prior period ACV to arrive at our dollar-based retention rate. We have increased our dollar-based retention rate to 112% as of April 30, 2018, as compared to 110% as of January 31, 2018.
Components of Our Results of Operations
Revenue
Subscription revenue. Subscription revenue consists of fees for access to, and use of, our products, as well as customer support. We generate subscription fees pursuant tonon-cancelable subscription agreements with terms that typically range from one to three years. Subscription revenue is primarily based on fees to access our services platform over the subscription term. We typically invoice customers in advance in either annual or quarterly installments. Customers can also elect to purchase additional volume blocks or products during the termvendors of the contract. We recognize subscription revenue ratably over the term of the subscription period, beginning on the date that access to our platform is provided, which is generally on or about the date the subscription agreement is signed.
Professional services revenue. Professional services revenue consists of fees for servicesCompany. The Company had no related to helping our customers deploy, configure, and optimize the use of our solutions. These services include system integration, data migration, process enhancement, and training. Professional services projects generally take three to twelve months to complete. Once the contract is signed, we generally invoice for professional services on a time and materials basis, although we occasionally engage in fixed-price service engagements and invoice for those based upon agreed milestone payments. We recognize revenue as services are performed for time and materials engagements and on a proportional performance method as the services are performed for fixed fee engagements.
Impact of ASC 606 Adoption. In May 2014, the FASB issued ASC 606, and has modified the standard thereafter. This standard replaces existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. This new revenue standard became effective for public companies for the fiscal year beginning after December 15, 2017, and interim periods within that year. Private companies have an additional year to adopt the standard. The two permitted transition methods under the new standard are the full retrospective method, under which ASC 606 would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, under which the cumulative effect of applying ASC 606 would be
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recognized at the date of initial application. We plan to adopt ASC 606 when it becomes effective for us for the fiscal year ending January 31, 2020 (i.e., effective February 1, 2019). We are currently in the process of determining what method of adoption we plan to use and we are assessing the effect the guidance will have on our condensed consolidated financial statements.
Deferred Revenue
Deferred revenue consists of customer billings in advance of revenue being recognized from our subscription and support services and professional services arrangements. We primarily invoice our customers for subscription services arrangements annually or quarterly in advance. Amounts anticipated to be recognized within one year of the balance sheet date are recorded as deferred revenue, current portion, and the remaining portion is recorded as deferred revenue, net of current portion in the unaudited condensed consolidated balance sheets.
Overhead Allocation and Employee Compensation Costs
We allocate shared costs, such as facilities costs (including rent, utilities, and depreciation on capital expenditures related to facilities shared by multiple departments), information technology costs, and certain administrative personnel costs to all departments based on headcount and location. As such, allocated shared costs are reflected in each cost of revenue and operating expenses category. Employee compensation costs consist of salaries, bonuses, commissions, benefits, and stock-based compensation.
Cost of Revenue, Gross Profit and Gross Margin
Cost of subscription revenue. Cost of subscription revenue consists primarily of costs related to hosting our platform and providing customer support. These costs include data center costs and third-party hosting fees, employee compensation costs associated with our cloud-based infrastructure and our customer support organizations, amortization expense associated with capitalizedinternal-use software and purchased technology, allocated overhead, software and maintenance costs, and outside services associated with the delivery of our subscription services. We intend to continue to invest in our platform infrastructure, including third-party hosting capacity, and support organizations. However, the level and timing of investment in these areas could fluctuate and affect our cost of subscription revenue in the future.
Cost of professional services revenue. Cost of professional services revenue consists primarily of costs related to the deployment of our platform. These costs include employee compensation costs for our professional services team, allocated overhead, travel costs, and costs of outside services associated with supplementing our internal staff. Cost of providing professional services has historically been similar to the associated professional services revenue, and we expect this to continue for the foreseeable future.
Gross profit and gross margin. Our gross profit and gross margin may fluctuate from period to period as our revenue fluctuates, and as a result of the timing and amount of investments to expand hosting capacity, including through third party cloud providers, our continued efforts to build platform support and professional services teams, as well as the amortization expense associated with capitalizedinternal-use software and acquired technology.
Operating Expenses
Sales and marketing. Sales and marketing expense consists primarily of employee compensation costs, including commissions for our sales personnel, allocated overhead, costs of general marketing and promotional activities, and travel costs. We currently expense sales commissions in the period of sale. Once we adopt ASC 606, commissions will be amortized in sales and marketing expense over the period of benefit. Our sales and marketing expense as a percentage of total revenue has decreased in recent periods. We expect to continue to
20
make significant investments as we expand our customer acquisition and retention efforts and, therefore, expect sales and marketing expense to increase in absolute dollars but may vary as a percentage of total revenue for the foreseeable future.
Research and development. Research and development expense consists primarily of employee compensation costs, allocated overhead, and travel costs. We capitalize research and development costs associated with the development ofinternal-use software. As of April 30, 2018, capitalized costs forinternal-use software were $3.7 million, and we expect to amortize these costs over a remaining period of approximately two to three years into cost of subscription revenue. All other research and development costs are expensed as incurred. We believe that continued investment in our platform is important for our growth, and as such, expect our research and development expense to continue to increase in absolute dollars for the foreseeable future but may increase or decrease as a percentage of revenue.
General and administrative. General and administrative expense consists primarily of employee compensation costs, allocated overhead, and travel costs for finance, accounting, legal, human resources, and recruiting personnel. In addition, general and administrative expense includes non-personnel costs, such as accounting fees, legal fees, and all other supporting corporate expenses not allocated to other departments.
We expect to incur additional costs as a result of operating as a public company, including costs related to compliance and reporting obligations of public companies, and increased costs for insurance, investor relations, and professional services. As a result, we expect our general and administrative expense to continue to increase in absolute dollars for the foreseeable future but may vary as a percentage of revenue.
Interest and Other (Expense) Income, net
Interest and other (expense) income, net primarily consists of interest income from our investment holdings, interest expense associated with our Loan and Security Agreement (Debt Agreement), and foreign exchange fluctuations.
Income Tax Provision (Benefit)
Provision for income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred assets will be utilized.
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Results of Operations
The following tables set forth our unaudited condensed consolidated results of operations data for the periods presented in dollars and as a percentage of our total revenue (in thousands):
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Revenue: | ||||||||
Subscription | $ | 36,114 | $ | 26,055 | ||||
Professional services | 15,630 | 6,284 | ||||||
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| |||||
Total revenue | 51,744 | 32,339 | ||||||
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| |||||
Cost of revenue: | ||||||||
Subscription* | 9,865 | 6,035 | ||||||
Professional services* | 16,153 | 6,774 | ||||||
|
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|
| |||||
Total cost of revenue | 26,018 | 12,809 | ||||||
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| |||||
Gross profit | 25,726 | 19,530 | ||||||
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| |||||
Operating expenses: | ||||||||
Research and development* | 12,062 | 7,877 | ||||||
Sales and marketing* | 22,837 | 14,952 | ||||||
General and administrative* | 9,411 | 4,679 | ||||||
|
|
|
| |||||
Total operating expenses | 44,310 | 27,508 | ||||||
|
|
|
| |||||
Loss from operations | (18,584 | ) | (7,978 | ) | ||||
Interest and other (expense) income, net | (673 | ) | (16 | ) | ||||
|
|
|
| |||||
Loss before income taxes | (19,257 | ) | (7,994 | ) | ||||
Income tax provision | (190 | ) | (132 | ) | ||||
|
|
|
| |||||
Net loss | $ | (19,447 | ) | $ | (8,126 | ) | ||
|
|
|
|
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Subscription | $ | 323 | $ | 88 | ||||
Professional services | 1,031 | 140 | ||||||
Research and development | 1,048 | 329 | ||||||
Sales and marketing | 1,590 | 406 | ||||||
General and administrative | 609 | 191 | ||||||
|
|
|
| |||||
Total stock-based compensation expense | $ | 4,601 | $ | 1,154 | ||||
|
|
|
|
22
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
Revenue: | ||||||||
Subscription | 70 | % | 81 | % | ||||
Professional services | 30 | 19 | ||||||
|
|
|
| |||||
Total revenue | 100 | 100 | ||||||
Cost of revenue: | ||||||||
Subscription | 19 | 19 | ||||||
Professional services | 31 | 21 | ||||||
|
|
|
| |||||
Total cost of revenue | 50 | 40 | ||||||
|
|
|
| |||||
Gross profit | 50 | 60 | ||||||
|
|
|
| |||||
Operating expenses: | ||||||||
Research and development | 23 | 24 | ||||||
Sales and marketing | 44 | 46 | ||||||
General and administrative | 18 | 14 | ||||||
|
|
|
| |||||
Total operating expenses | 86 | 85 | ||||||
|
|
|
| |||||
Loss from operations | (36 | ) | (25 | ) | ||||
Interest and other (expense) income, net | (1 | ) | — | |||||
|
|
|
| |||||
Loss before income taxes | (37 | ) | (25 | ) | ||||
Income tax provision | — | — | ||||||
|
|
|
| |||||
Net loss | (38 | )% | (25 | )% | ||||
|
|
|
|
Comparison of the Three Months Ended April 30, 2018 and 2017
Revenue
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Revenue: | ||||||||||||||||
Subscription | $ | 36,114 | $ | 26,055 | $ | 10,059 | 39 | % | ||||||||
Professional services | 15,630 | 6,284 | 9,346 | 149 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Total revenue | $ | 51,744 | $ | 32,339 | $ | 19,405 | 60 | % | ||||||||
|
|
|
|
|
| |||||||||||
Percentage of revenue | ||||||||||||||||
Subscription | 70 | % | 81 | % | ||||||||||||
Professional services | 30 | % | 19 | % | ||||||||||||
|
|
|
| |||||||||||||
Total revenue | 100 | % | 100 | % | ||||||||||||
|
|
|
|
Subscription revenue increased by $10.1 million, or 39%, for the three months ended April 30, 2018 compared to the three months ended April 30, 2017. The increase in subscription revenue was attributable to new customers acquired during the period and an increase in usage and sales of additional products to our existing customers. The expansion in usage by, and sale of additional products to, our existing customers was reflected in our dollar-based retention rate of 112% at April 30, 2018. The number of customers with ACV equal to or greater than $100,000 increased by 26 in April 30, 2018 from January 31, 2018. Subscription revenue for the three months ended April 30, 2018 included
23
revenue attributable to ourZuora RevPro product. There was no revenue attributable to ourZuora RevPro producttransactions during the three months ended October 31, 2018.
Professional services revenue increased by $9.4 million, or 149%, for2018, the three months ended April 30, 2018 compared to the three months ended April 30, 2017, due primarily to professional services revenue attributable to ourZuora RevPro product and increased revenue from customer deployment of our other products, compared to the three months ended April 30, 2017.
Cost of Revenue and Gross Margin
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Cost of revenue: | ||||||||||||||||
Subscription | $ | 9,865 | $ | 6,035 | $ | 3,830 | 63 | % | ||||||||
Professional services | 16,153 | 6,774 | 9,379 | 138 | % | |||||||||||
|
|
|
|
|
| |||||||||||
Total cost of revenue | $ | 26,018 | $ | 12,809 | $ | 13,209 | 103 | % | ||||||||
|
|
|
|
|
| |||||||||||
Gross margin: | ||||||||||||||||
Subscription | 73 | % | 77 | % | ||||||||||||
Professional services | (3 | )% | (8 | )% | ||||||||||||
Total gross margin | 50 | % | 60 | % |
Cost of subscription revenue increased by $3.8 million, or 63%, for the three months ended April 30, 2018 compared to the three months ended April 30, 2017, primarily due toCompany paid an increase of $1.3 million in employee compensation costs related to increased headcount, an increase of $1.1 million in third-party data center costs to support customer growth, an increase in $0.6aggregate $5.6 million of consulting costs, an increase of $0.4 million relatedtaxes owed in connection with restricted stock granted to the amortization of purchased technology and amortization ofinternal-use software, an increase of $0.2 milliontwo employees in software license costs, and an increase of $0.2 million in allocated overhead. Cost of subscription revenueexchange for the three months ended April 30, 2018 included costs attributable to ourZuoraRevProproduct. Therefull-recourse promissory notes, which notes were no cost of subscription revenue attributable to ourZuoraRevProproduct during the three months ended April 30, 2017 as our acquisition of Leeyo occurred in May 2017.
Our gross margin for subscription revenue decreased to 73% for the three months ended April 30, 2018 from 77% for the three months ended April 30, 2017 due to stock-based compensation and amortization of purchased intangibles, infrastructure investments in international markets and the impact of the acquisition accounting related to ourZuora RevPro product, partially offsetsecured by increased efficiencies from greater scale.
Cost of professional services revenue increased by $9.4 million for the three months ended April 30, 2018 compared to the three months ended April 30, 2017, due to a greater number of customer deployments. Cost of professional services included costs attributable to ourZuora RevPro product. There were no cost of professional services revenue attributable to ourZuora RevPro product during the three months ended April 30, 2017 as our acquisition of Leeyo occurred in May 2017.
Our gross margin for professional services revenue improved to (3)% for the three months ended April 30, 2018 from (8)% for the three months ended April 30, 2017. This increase was primarily attributable to the timing of an internal professional services training event that took place in the three months ended April 30, 2017 but did not take place in the three months ended April 30, 2018. We expect this event to be held in our second quarter of fiscal 2019.
24
Operating Expenses
Research and Development
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Research and development | $ | 12,062 | $ | 7,877 | $ | 4,185 | 53 | % | ||||||||
Percentage of total revenue: | 23 | % | 24 | % |
Research and development expense increased by $4.2 million, or 53%, for the three months ended April 30, 2018 compared to the three months ended April 30, 2017, primarily due to an increase of $3.5 million in employee compensation costs due to increased headcount, an increase of $0.6 million in allocated overhead and an increase of $0.2 million in travel costs, partially offset by a decrease of $0.4 million in costs related to higher capitalizedinternal-use software costs. Research and development expense for the three months ended April 30, 2018 included costs attributable to ourZuora RevProproduct. There were no research and development costs attributable to ourZuora RevProproduct during the three months ended April 30, 2017 as our acquisition of Leeyo occurred in May 2017.
Sales and Marketing
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Sales and marketing | $ | 22,837 | $ | 14,952 | $ | 7,885 | 53 | % | ||||||||
Percentage of total revenue: | 44 | % | 46 | % |
Sales and marketing expense increased by $7.9 million, or 53%, for the three months ended April 30, 2018 compared to the three months ended April 30, 2017, primarily due to an increase of $5.3 million in employee compensation costs related to increased headcount, an increase of $1.3 million in marketing and event costs, an increase of $0.6 million in allocated overhead costs, and an increase of $0.6 million in travel costs. Sales and marketing expense for the three months ended April 30, 2018 included costs attributable to ourZuora RevProproduct. There were no sales and marketing costs attributable to ourZuora RevProproduct during the three months ended April 30, 2017 as our acquisition of Leeyo occurred in May 2017.
General and Administrative
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
General and administrative | $ | 9,411 | $ | 4,679 | $ | 4,732 | 101 | % | ||||||||
Percentage of total revenue: | 18 | % | 14 | % |
General and administrative expense increased by $4.7 million, or 101%, for the three months ended April 30, 2018 compared to the three months ended April 30, 2017, primarily due to an increase of $1.8 million in employee compensation costs related to increased headcount, an increase of $1.5 million in professional services primarily related to accounting, tax and legal initiatives, an increase of $0.8 million in sales tax costs, an increase of $0.4 million in allocated overhead costs, and an increase of $0.2 million in software license costs. General and administrative expense for the three months ended April 30, 2018 included costs attributable to ourZuora RevProproduct and costs related to becoming a publicly traded company. There were no general and administrative costs attributable to ourZuora RevProproduct during the three months ended April 30, 2017 as our acquisition of Leeyo occurred in May 2017.
25
Interest and Other (Expense) Income, net
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(in thousands) | ||||||||||||||||
Interest and other (expense) income, net | $ | (673 | ) | $ | (16 | ) | $ | (657 | ) | not meaningful |
Interest and other (expense) income, net changed by $0.7 million for the three months ended April 30, 2018 compared to the three months ended April 30, 2017. The change was primarily due to an increase of $0.7 million in currency translation losses resulting from foreign operations.
Income Tax Provision
Three Months Ended April 30, | ||||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||||
(in thousands) | ||||||||||||||||
Income tax provision | $ | (190 | ) | $ | (132 | ) | $ | (58 | ) | 44 | % |
We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. For the three months ended April 30, 2018 and 2017, we recorded a tax provision of $0.2 million and $0.1 million on losses before income taxes of $19.3 million and $8.0 million, respectively. The effective tax rates for the three month periods ended April 30, 2018 and 2017 were (1.0)% and (1.7)%, respectively. The effective tax rates differ from the statutory rates primarily as a result of providing no benefit on pre tax losses incurred in the United States, as we have determined that the benefit of the losses is not more likely than not to be realized.
Liquidity and Capital Resources
As of April 30, 2018, we had cash and cash equivalents and restricted cash of $207.7 million. Since inception, we have financed our operations primarily through the net proceeds we received through private sales of equity securities, payments received from customers for subscription and professional services, and borrowings from our Debt Agreement. Additionally, in April 2018, we completed our IPO, in which we issued and sold an aggregate of 12.74.6 million shares of Class A common stock at a price of $14.00 per share. We received aggregate net proceeds of $162.2 million from the IPO, after underwriting discounts and commissions and payments of offering costs through April 30, 2018.
We believe our existing cash and cash equivalents and restricted cash balances, funds available under our Debt Agreement, and cash provided by subscriptions to our platform and related professional services will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors, including the rate of our revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and the continuing market adoption of our platform. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. We may elect to or may be required to seek additional equity or debt financing. Sales of additional equity could result in dilution to our stockholders. 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 or generate cash flows necessary to expand our operations and invest in new technologies, it could reduce our ability to compete successfully and harm our results of operations.
Debt Agreement
In June 2017, we entered into a Debt Agreement with Silicon Valley Bank.stock. The Debt Agreement established a revolving loan and a term loan facility of $10.0 million and $30.0 million, respectively.
26
Revolving Loan.The Debt Agreement allows us to borrow up to $10.0 million until June 2019 in revolving loans. Advances drawn down under the revolving loan incur interest at the prime rate as published by the Wall Street Journal (WSJ Prime Rate), which is due monthly on any amounts drawn down, with the principal due at maturity. Any outstanding amounts must be fully repaid before June 14, 2019. We are required to pay an annual fee of $20,000 on this revolving loan, regardless of any amounts drawn down. As of April 30, 2018, we had not drawn down any amounts under this revolving loan.
Term Loan. The Debt Agreement allows us to borrow up to $30.0 million in term loans. In June 2017, we drew down $15.0 million of the proceeds to partially finance the acquisition of Leeyo Software, Inc. (Leeyo), and the remaining $15.0 million is available for draw-down until June 14, 2018. Any outstanding amounts drawn down under the term loan accrue interest at the WSJ Prime rate plus 1.00%. The interest rate was 5.75% as of April 30, 2018. We are required to make monthly payments of interest with respect to any amounts drawn down until June 2018 and subsequently must make equal monthly payments of principal and interest over the following 36 months. We may prepay all outstanding principal andnotes accrued interest at any time without penalty. We will incur a facility fee of 1.5%rates ranging from 1.85% to 2.72% and were payable in full upon the earlier to occur of prepaymentof: (i) a change in control or the termination of the facility. As of April 30, 2018, we had $15.0 million outstanding under the term loan. Both the revolving loan and the term loan are subject to certain covenants, including a requirement to maintain an adjusted quick ratio of no less than 1.10:1.00. As of April 30, 2018, we were in compliance(ii) January 12, 2019. Consistent with the covenants under the Debt Agreement.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Three Months Ended April 30, | ||||||||
2018 | 2017 | |||||||
(in thousands) | ||||||||
Net cash used in operating activities | $ | (7,826 | ) | $ | (4,358 | ) | ||
Net cash used in investing activities | (1,764 | ) | (711 | ) | ||||
Net cash provided by financing activities | 163,974 | 770 | ||||||
Effects of changes in foreign currency exchange rates on cash and cash equivalents | (78 | ) | 166 | |||||
|
|
|
| |||||
Net increase (decrease) in cash and cash equivalents and restricted cash | $ | 154,306 | $ | (4,133 | ) | |||
|
|
|
|
Operating Activities
Our largest source of operating cash is cash collections from our customers for subscription and professional services. Our primary uses of cash from operating activities are for employee-related expenditures, marketing expenses, third-party consulting expenses, and third-party hosting costs.
For the three months ended April 30, 2018, cash used in operating activities was $7.8 million, which consisted of a net loss of $19.4 million, adjusted fornon-cash charges of $7.7 million and net cash inflows of $3.9 million provided by changes in our operating assets and liabilities.Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment and intangible assets, and provision for doubtful accounts. The changes in operating assets and liabilities were primarily due to a $3.2 million decrease in accounts receivable, net, an increase in accrued expenses and other current liabilities and accounts payable of $3.0 million and an increase in deferred revenue of $1.6 million, partially offset by a $3.9 million increase in other assets and prepaid expenses and other current assets.
For the three months ended April 30, 2017, cash used in operating activities was $4.4 million, which consisted of a net loss of $8.1 million, adjusted fornon-cash charges of $2.9 million and net cash inflows of
27
$0.8 million provided by changes in our operating assets and liabilities.Non-cash charges primarily consisted of stock-based compensation, depreciation and amortization of property and equipment and intangible assets and provision for doubtful accounts. The changes in operating assets and liabilities were primarily due to a $1.4 million increase in deferred revenue, partially offset by a $1.1 million increase in accounts payable and a $1.2 million decrease in accrued liabilities.
Investing Activities
Net cash used in investing activities for the three months ended April 30, 2018 of $1.8 million was due to purchases of property and equipment and capitalizedinternal-use software.
Net cash used in investing activities for the three months ended April 30, 2017 of $0.7 million was due to purchases of property and equipment and capitalizedinternal-use software.
Financing Activities
Cash provided by financing activities for the three months ended April 30, 2018 of $164.0 million was primarily the result of net IPO proceeds of $162.8 million and $5.7 million in proceeds from the issuance of common stock upon exercise of employee stock options, partially offset by loans made to related parties in connection with the Leeyo acquisition of $4.3 million.
Cash provided by financing activities for the three months ended April 30, 2017 of $0.8 million was primarily the result of $1.3 million in proceeds from the issuance of common stock upon exercise of employee stock options, partially offset by payments made on capital leases of equipment of $0.5 million.
Off-Balance Sheet Arrangements
As of April 30, 2018, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitatingoff-balance sheet arrangements or other contractually narrow or limited purposes.
Obligations and Other Commitments
There were no material changes in our contractual obligations and commitments during the three months ended April 30, 2018 from the contractual obligations and commitments disclosed in the Prospectus, except for those described under Note 13 ofASC 505-10-45, the notes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form10-Q.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with accounting principles generally accepted inreceivable balance is presented as a deduction from stockholders’ equity. In August 2018, the United States (U.S. GAAP). In the preparation of these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which we discuss below.
The Company’s significant accounting policies are discussed in “Index to Consolidated Financial Statements-Note 1. Summary of Business and Significant Accounting Policies” in the Prospectus. There have
28
been no significant changes to these policies for the three months ended April 30, 2018, except as noted in Note 2 of our unaudited condensed consolidated financial statements “Summary of Significant Accounting Policies and Recent Accounting Pronouncements.” See Note 2 of our unaudited condensed consolidated financial statements for more information.
Recent Accounting Pronouncements
See “Summary of Significant Accounting Policies and Recent Accounting Pronouncements” in Note 2 of our unaudited condensed consolidated financial statements for more information.
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Subscription | $ | 44,485 | $ | 31,007 | $ | 122,069 | $ | 85,859 | |||||||
Professional services | 17,152 | 15,352 | 49,066 | 32,251 | |||||||||||
Total revenue | 61,637 | 46,359 | 171,135 | 118,110 | |||||||||||
Cost of revenue: | |||||||||||||||
Subscription¹ | 10,987 | 8,195 | 31,273 | 22,301 | |||||||||||
Professional services¹ | 19,190 | 13,912 | 53,569 | 33,238 | |||||||||||
Total cost of revenue | 30,177 | 22,107 | 84,842 | 55,539 | |||||||||||
Gross profit | 31,460 | 24,252 | 86,293 | 62,571 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development¹ | 14,282 | 9,977 | 39,667 | 27,622 | |||||||||||
Sales and marketing¹ | 25,896 | 18,625 | 74,162 | 52,056 | |||||||||||
General and administrative¹ | 9,579 | 5,560 | 27,553 | 15,790 | |||||||||||
Total operating expenses | 49,757 | 34,162 | 141,382 | 95,468 | |||||||||||
Loss from operations | (18,297 | ) | (9,910 | ) | (55,089 | ) | (32,897 | ) | |||||||
Interest and other (expense) income, net | 633 | (421 | ) | (1,218 | ) | (30 | ) | ||||||||
Loss before income taxes | (17,664 | ) | (10,331 | ) | (56,307 | ) | (32,927 | ) | |||||||
Income tax provision | (225 | ) | (34 | ) | (616 | ) | (405 | ) | |||||||
Net loss | $ | (17,889 | ) | $ | (10,365 | ) | $ | (56,923 | ) | $ | (33,332 | ) |
(1) | Includes stock-based compensation expense as follows: |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cost of subscription revenue | $ | 555 | $ | 239 | $ | 1,311 | $ | 490 | |||||||
Cost of professional services revenue | 1,685 | 733 | 4,115 | 1,229 | |||||||||||
Research and development | 1,902 | 729 | 4,366 | 1,537 | |||||||||||
Sales and marketing | 2,205 | 1,012 | 5,317 | 1,975 | |||||||||||
General and administrative | 1,112 | 328 | 2,613 | 763 | |||||||||||
Total stock-based compensation expense | $ | 7,459 | $ | 3,041 | $ | 17,722 | $ | 5,994 |
Three Months Ended October 31, | Nine Months Ended October 31, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
Revenue: | |||||||||||
Subscription | 72 | % | 67 | % | 71 | % | 73 | % | |||
Professional services | 28 | 33 | 29 | 27 | |||||||
Total revenue | 100 | 100 | 100 | 100 | |||||||
Cost of revenue: | |||||||||||
Subscription | 18 | 18 | 18 | 19 | |||||||
Professional services | 31 | 30 | 31 | 28 | |||||||
Total cost of revenue | 49 | 48 | 50 | 47 | |||||||
Gross profit | 51 | 52 | 50 | 53 | |||||||
Operating expenses: | |||||||||||
Research and development | 23 | 22 | 23 | 23 | |||||||
Sales and marketing | 42 | 40 | 43 | 44 | |||||||
General and administrative | 16 | 12 | 16 | 13 | |||||||
Total operating expenses | 81 | 74 | 83 | 81 | |||||||
Loss from operations | (30 | ) | (21 | ) | (32 | ) | (28 | ) | |||
Interest and other (expense) income, net | 1 | (1 | ) | (1 | ) | — | |||||
Loss before income taxes | (29 | ) | (22 | ) | (33 | ) | (28 | ) | |||
Income tax provision | — | — | — | — | |||||||
Net loss | (29 | )% | (22 | )% | (33 | )% | (28 | )% |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Revenue: | ||||||||||||||
Subscription | $ | 44,485 | $ | 31,007 | $ | 13,478 | 43 | % | ||||||
Professional services | 17,152 | 15,352 | 1,800 | 12 | % | |||||||||
Total revenue | $ | 61,637 | $ | 46,359 | $ | 15,278 | 33 | % | ||||||
Percentage of revenue: | ||||||||||||||
Subscription | 72 | % | 67 | % | ||||||||||
Professional services | 28 | 33 | ||||||||||||
Total revenue | 100 | % | 100 | % |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Cost of revenue: | ||||||||||||||
Subscription | $ | 10,987 | $ | 8,195 | $ | 2,792 | 34 | % | ||||||
Professional services | 19,190 | 13,912 | 5,278 | 38 | % | |||||||||
Total cost of revenue | $ | 30,177 | $ | 22,107 | $ | 8,070 | 37 | % | ||||||
Gross margin: | ||||||||||||||
Subscription | 75 | % | 74 | % | ||||||||||
Professional services | (12 | ) | 9 | |||||||||||
Total gross margin | 51 | % | 52 | % |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Research and development | $ | 14,282 | $ | 9,977 | $ | 4,305 | 43 | % | ||||||
Percentage of total revenue | 23 | % | 22 | % |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Sales and marketing | $ | 25,896 | $ | 18,625 | $ | 7,271 | 39 | % | ||||||
Percentage of total revenue | 42 | % | 40 | % |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
General and administrative | $ | 9,579 | $ | 5,560 | $ | 4,019 | 72 | % | ||||||
Percentage of total revenue | 16 | % | 12 | % |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Interest and other income (expense), net | $ | 633 | $ | (421 | ) | $ | 1,054 | (250 | )% |
Three Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Income tax provision | $ | (225 | ) | $ | (34 | ) | $ | (191 | ) | 562 | % |
Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Revenue: | ||||||||||||||
Subscription | $ | 122,069 | $ | 85,859 | $ | 36,210 | 42 | % | ||||||
Professional services | 49,066 | 32,251 | 16,815 | 52 | % | |||||||||
Total revenue | $ | 171,135 | $ | 118,110 | $ | 53,025 | 45 | % | ||||||
Percentage of revenue: | ||||||||||||||
Subscription | 71 | % | 73 | % | ||||||||||
Professional services | 29 | % | 27 | % | ||||||||||
Total revenue | 100 | % | 100 | % |
Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Cost of revenue: | ||||||||||||||
Subscription | $ | 31,273 | $ | 22,301 | $ | 8,972 | 40 | % | ||||||
Professional services | 53,569 | 33,238 | 20,331 | 61 | % | |||||||||
Total cost of revenue | $ | 84,842 | $ | 55,539 | $ | 29,303 | 53 | % | ||||||
Gross margin: | ||||||||||||||
Subscription | 74 | % | 74 | % | ||||||||||
Professional services | (9 | )% | (3 | )% | ||||||||||
Total gross margin | 50 | % | 53 | % |
Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Research and development | $ | 39,667 | $ | 27,622 | $ | 12,045 | 44 | % | ||||||
Percentage of total revenue | 23 | % | 23 | % |
Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
Sales and marketing | $ | 74,162 | $ | 52,056 | $ | 22,106 | 42 | % | ||||||
Percentage of total revenue | 43 | % | 44 | % |
Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(dollars in thousands) | ||||||||||||||
General and administrative | $ | 27,553 | $ | 15,790 | $ | 11,763 | 74 | % | ||||||
Percentage of total revenue | 16 | % | 13 | % |
Nine Months Ended October 31, | |||||||||||||
2018 | 2017 | $ Change | % Change | ||||||||||
(in thousands) | |||||||||||||
Interest and other (expense) income, net | $ | (1,218 | ) | $ | (30 | ) | $ | (1,188 | ) | nm |
Nine Months Ended October 31, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
(in thousands) | ||||||||||||||
Income tax provision | $ | (616 | ) | $ | (405 | ) | $ | (211 | ) | 52 | % |
Nine Months Ended October 31, 2018 | |||||||
2018 | 2017 | ||||||
Net cash used in operating activities | $ | (16,592 | ) | $ | (17,877 | ) | |
Net cash used in investing activities | (107,986 | ) | (13,900 | ) | |||
Net cash provided by financing activities | 155,873 | 16,119 | |||||
Effect of exchange rates on cash and cash equivalents and restricted cash | (341 | ) | 394 | ||||
Net increase (decrease) in cash and cash equivalents and restricted cash | $ | 30,954 | $ | (15,264 | ) |
Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Operating lease obligations¹ | $ | 30,863 | $ | 7,275 | $ | 12,063 | $ | 10,050 | $ | 1,475 | |||||||||
Debt principal and interest² | 14,733 | 1,953 | 12,780 | — | — | ||||||||||||||
Capital lease obligations³ | 2,287 | 2,287 | — | — | — | ||||||||||||||
$ | 47,883 | $ | 11,515 | $ | 24,843 | $ | 10,050 | $ | 1,475 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. | Controls and Procedures |
April 30,October 31, 2018. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of April 30,October 31, 2018, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding its required disclosure.April 30,October 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.30
Item 1. Legal Proceedings
Item 1A. | Risk Factors |
$19.4$56.9 million for the threenine months ended April 30, 2018.October 31, 2018. We expect to incur net losses for the foreseeable future. As of April 30,October 31, 2018, we had an accumulated deficit of $278.1$315.6 million. We expect to make significant future expenditures related to the development and expansion of our business, including increasing our overall customer base, expanding relationships with existing customers, entering new vertical markets, expanding our global footprint, leveraging global systems integrators (GSIs) to accelerate our growth, optimizing pricing and packaging, and expanding our operations and infrastructure, both domestically and internationally, and in connection with legal, accounting, and other administrative expenses related to operating as a public company. 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 increased expenses. While our revenue has grown in recent years, if our revenue declines or fails to grow at a rate faster than these increases in our operating expenses, we will not be able to achieve and maintain profitability in future periods. As a result, we may continue to generate losses. We cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will be able to sustain profitability.31
integrate traditional enterprise software into their businesses as they shift to subscription or subscription business models and may be reluctant or unwilling to switch to different applications. Accordingly, it is difficult to predict customer adoption rates and demand for our solution, the future growth rate and size of the market for subscription management software, or the entry of competitive solutions. Factors that may affect market acceptance of our solution include:
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If our security measures are breached, if unauthorized access to customer data, our data, or our solution is otherwise obtained, or if our solution is perceived as not being secure, customers may reduce the use of or stop using our solution, and we may incur significant liabilities.
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by our competitors, changes in accounting standards, policies, guidelines, interpretations, or principles that would impact the functionality and use of our solution, and technological change. We expect that an increasing transition to disaggregated solutions that focus on addressing specific customer use cases would continue to disrupt the enterprise software space, enabling new competitors to emerge. We cannot assure you that our solutions and future enhancements to our solution will be able to address future advances in technology or the requirements of enterprise customers. If we are unable to meet customer demands in creating a flexible solution designed to address all these needs or otherwise achieve more widespread market acceptance of our solution, our business, operating results, financial condition, and growth prospects would be adversely affected.
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Our operating results may fluctuate from quarter to quarter, which makes our future results difficult to predict.
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The impact of one or more of the foregoing and other factors may cause our operating results to vary significantly. As such, we believe thatquarter-to-quarter comparisons of our operating results may not be meaningful and should not be relied upon as an indication of future performance. If we fail to meet or exceed the expectations of investors or securities analysts, then the trading price of our Class A common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.
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service. In addition, we may lose existing customers who choose a competitor’s products and services or choose to utilize internally developed applications instead of our products and services. This could result in a temporary or permanent revenue shortfall and adversely affect our business.
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The market in which we participate is competitive, and our operating results could be harmed if we do not compete effectively our operating results could be harmed.
effectively.
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compete successfully against current and future competitors, our business, operating results, and financial condition could be adversely impacted.
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The market for our revenue recognition automation software product, Zuora RevPro, is rapidly evolving as a result of the effectiveness of ASC 606, which makes it difficult to forecast adoption rates and demand for this product, and could have a material adverse effect on our business and operating results.
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performance, increases in
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cultures, customs, legal systems, regulatory systems, and commercial infrastructures. International expansion will require us to invest significant funds and other resources. Our operations in international markets may not develop at a rate that supports our level of investment. Expanding internationally may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with:
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Any disruption of service at our third-party data centers or Amazon Web Services could interrupt or delay our ability to deliver our services to our customers.
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to help correct the problem. Accordingly, any errors, defects, or disruptions to our solution could adversely impact our brand and reputation, revenue, and operating results.
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If we fail to integrate our solution with a variety of operating systems, software applications, and hardware platforms that are developed by others, our solution may become less marketable, less competitive, or obsolete, and our operating results may be adversely affected.
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provide user-based support to our other customers. If we fail to promote and maintain our brand successfully or to maintain loyalty among our customers, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract new customers and partners or retain our existing customers and partners and our business and financial condition may be adversely affected. Any negative publicity relating to our employees, partners, or others associated with these parties, may also tarnish our own reputation simply by association and may reduce the value of our brand. Damage to our brand and reputation may result in reduced demand for our solution and increased risk of losing market share to our competitors. Any efforts to restore the value of our brand and rebuild our reputation may be costly and may not be successful.
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We may need to spend significant resources securing and monitoring our intellectual property rights, and we may or may not be able to detect infringement by third parties. Our competitive position may be harmed if we cannot detect infringement and enforce our intellectual property rights quickly or at all. In some circumstances, we may choose to not pursue enforcement because an infringer has a dominant intellectual property position or for other business reasons. In addition, competitors might avoid infringement by designing around our intellectual property rights or by developingnon-infringing competing technologies. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property. Further, our
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Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved could expose us to monetary damages or limit our ability to operate our business.
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There is typically no support available for open source software, and we cannot assure you that the authors of such open source software will not abandon further development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have established processes to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source software, but we cannot be sure that all open source software is identified or submitted for approval prior to use in our solution.
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and may face additional challenges by national regulators or additional private parties. Additionally, the GDPR became effective in May 2018. The GDPR establishes, and the pending European Union ePrivacy Regulation is expected to establish, new requirements applicable to the handling of personal data and imposes penalties fornon-compliance of up to the greater of €20 million or 4% of worldwide revenue. Additionally, in June 2018, California passed the California Consumer Privacy Act (CCPA) which provides new data privacy rights for consumers and new operational requirements for companies effective in 2020. The costs of compliance with, and other burdens imposed by, the GDPR, CCPA and other U.S., European Union and worldwide laws may limit the use and adoption of our products and services and could have an adverse impact on our business.
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Any violation of the FCPA, other applicable anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, or severe criminal or civil sanctions, which could have a materially adverse effect on our reputation, business, operating results, and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources, significant defense costs, and other professional fees.
We may be limited in the portion of net operating loss (NOL) carryforwards that we can use in the future to offset taxable income for U.S. federal and state income tax purposes. If not utilized, our NOL carryforwards will begin to expire for federal and state tax purposes beginning in 2027 and 2028, respectively.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (Code), a corporation that undergoes an “ownership change” under Section 382 of the Code is subject to limitations on its ability to utilize
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its NOLs to offset future taxable income. A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. We have not completed a Section 382 study, and therefore, if we earn net taxable income, our ability to use our current NOLs, and any NOLs of companies we have acquired, may be subject to limitations, thereby increasing our overall tax liability. In addition, future changes in our stock ownership, including as a result of future offerings of our capital stock, as well as other changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of state law. We have recorded a full valuation allowance related to our NOLs and other net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets. Our NOLs may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
Furthermore, underUnder the Tax ReformCuts and Jobs Act (Tax Act), although the treatment of tax losses generated in taxable years ending before December 31, 2017 has generally not changed, tax losses generated in taxable years beginning after December 31, 2017 may be utilized to offset no more than 80% of taxable income annually. This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years.
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future tax benefits of our deferred tax assets as a result of the reduction in the corporate tax rate. However, since we have recorded a full valuation allowance against our deferred tax assets, we do not currently anticipate that these changes will have a material impact on our accompanying unaudited condensed consolidated financial statements. The impact of the Tax Reform Act will likely be subject to ongoing technical guidance and accounting interpretation, which we will continue to monitor and assess. Provisional accounting impacts may change in future reporting periods until the accounting analysis is finalized, which will occur no later than one year from the date the Tax Reform Act was enacted. As we expand the scale of our international business activities, any changes in the U.S. or foreign taxation of such activities may increase our worldwide effective tax rate and harm our business, results of operations, and financial condition.
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Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
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potentially vary based on the number of billable days in the given quarter, which is impacted by holidays and vacations. To the extent we experience this seasonality, it may cause fluctuations in our operating results and financial metrics and make forecasting our future operating results and financial metrics more difficult.
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We also expect that being a public company and these rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
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public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form10-K.
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Our Debt Agreement also prohibits us from exceeding an adjusted quick ratio. Our ability to comply with this and other covenants is dependent upon a number of factors, some of which are beyond our control.
Exchange Act.
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power shortages, pandemics, and other events beyond our control. In addition, acts of terrorism and other geopolitical unrest could cause disruptions in our business or the businesses of our partners or the economy as a whole. In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our solution, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results. For example, our corporate headquarters is located in California, a state that frequently experiences earthquakes. Additionally, all of the aforementioned risks may be further increased if we do not implement a disaster recovery plan or our partners’ disaster recovery plans prove to be inadequate.
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In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies, and technology companies in particular, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the
With respect to our outstanding shares of common stock not sold in the IPO, subject to certain exceptions, we, all of our directors and executive officers, and all of the holders of our common stock and securities exercisable for or convertible into our common stock outstanding immediately prior to our IPO, are subjectwere not permitted to marketstand-offtrade in our securities for a certain period of time after our IPO pursuant to certain agreements, with us or haveincluding market stand-off and lock-up agreements entered intolock-up agreements with the underwriters of our IPO under which they have agreed, subject to specific exceptions, not to sell, directly or indirectly, anyIPO. On October 9, 2018, these trading restrictions fully expired, and all currently outstanding shares of common stock without the permission of our IPO underwriters,became eligible for a period of 180 days from April 11, 2018, the date of the Prospectus used in connection with our IPO; provided that such restricted period will end with respect to 25% of the shares subject to eachlock-up agreement if at any time beginning 90 days after the date of the Prospectus (i) we have filed at least one quarterly report on Form10-Q or annual report on Form10-K, and (ii) the last reported closing price of our Class A common stock is at least 33% greater than the initial public offering price of our Class A common stock for 10 out of any 15 consecutive trading days ending on or after the 90th day after the date of the Prospectus (which 15 trading day period may begin prior to such 90th day); provided further, that if such restricted period ends during a trading blackout period, the restricted period will end one business day following the date that we announce our earnings results for the previous quarter. When thelock-up period expires, we and our securityholders subject to alock-up agreement or market standoff agreement will be able to sell our sharessale in the public market. In addition, the underwriters may, in their sole discretion, release all or some portionmarket, subject to trading limitations on shares held by affiliates, restrictions under our insider trading policy, and continued vesting of the shares subject tolock-up agreements prior to the expiration of thelock-up period.any unvested equity awards. Sales of a substantial number of such shares upon expiration of thelock-up and marketstand-off agreements, or the perception that such sales may occur or early release of these agreements, could cause our market price to fall or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.
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We may also issue our shares of common stock or securities convertible into shares of our common stock from time to time in connection with a financing, acquisition, investments, or otherwise. We also expect to grant equity awards to employees, directors, and consultants under our 2018 Equity Incentive Plan (2018 Plan) and rights to purchase our Class A Common Stock under our ESPP. Any such issuances could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline.
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or unfavorable research about our business, the price of our Class A common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
From February 1, 2018 through April 12, 2018 (the date of the filing of our registration statement on FormS-8), we granted options to purchase an aggregate of 3.5 million shares of Class B common stock under our 2015 Plan, with a per share exercise price of $12.28, and we issued 1.8 million shares of Class B common stock upon exercise of stock options under our 2006 Plan and 2015 Plan. These shares were issued pursuant to benefit plans and contracts related to compensation in reliance upon the exemption from registration requirements of Rule 701 of the Securities Act. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.64
of the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement onForm S-1 (FileNo. 333-223722), which was declared effective by the SEC on April 11, 2018. We raised aggregate net proceeds of $162.2 million from the IPO, after underwriting discounts and commissions and payments of offering costs throughas of April 30, 2018. There has been no material change in the planned use of proceeds from our IPO as described in the Prospectus. The managing underwriters of our IPO were Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and tonon-employee directors pursuant to our director compensation policy.
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Incorporated By Reference Exhibit Description Form File No. Exhibit 10.1 X 31.1 X 31.2 X 32.1* X 32.2* X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X * The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
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ZUORA, INC. | ||||||
Date: | By: | /s/ Tyler Sloat | ||||
Tyler Sloat | ||||||
| ||||||
Chief Financial Officer (Principal Accounting and Financial Officer) |