EDGAR 10-K Filing

Company CIK: 1720671
Filing Year: 2022
Filename: 1720671_10-K_2022_0000950170-22-004668.json

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ITEM 1. BUSINESS
Item 1.
Business

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ITEM 1A. RISK FACTORS
Item 1A.
Risk Factors

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B.
Unresolved Staff Comments

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ITEM 2. PROPERTIES
Item 2. Properties
Our principal executive office and world headquarters is located in San Francisco, California and consists of approximately 37,000 square feet of space under a lease that expires in May 2027. We are a remote-first company with a global distributed workforce.
We lease all of our facilities and do not own any real property. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
The information called for by this Item is incorporated herein by reference to Item 8, "Financial Statements and Supplementary Data," and Note 7, "Commitments and Contingencies" each included elsewhere in this Annual Report on Form 10-K.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our Class A common stock shares began trading on the Nasdaq Global Select Market, or Nasdaq, under the symbol “HCP” on December 9, 2021. Prior to that date, there was no public trading market for our Class A common stock.
Holders of Record
As of March 21, 2022, there were 597 stockholders of record of our common stock, and the closing price of our common stock was $48.44 per share as reported on the Nasdaq Global Select Market. Because many shares of our Class A common stock are held by brokers and other institutions as record holders and on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have never declared or paid any dividends on our Class A common stock, and we do not anticipate declaring or paying dividends in the foreseeable future.
Use of Proceeds
On December 13, 2021, we closed our IPO of 15,300,000 shares of Class A common stock at a public offering price of $80.00 per share, and of an additional 1,230,000 shares of Class A common stock pursuant to the exercise of the underwriters' option to purchase additional shares of our Class A common stock, resulting in gross proceeds to us of $1.2 billion, net of the underwriting discounts, commissions and offering expenses. All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-260757), which was declared effective by the SEC on December 8, 2021. Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC acted as representatives of the underwriters. There has been no material change in the planned use of proceeds from our IPO as described in our prospectus relating to our IPO, dated as of December 8, 2021 and filed with the SEC pursuant to Rule 424(b)(4) on December 9, 2021.
Recent Sales of Unregistered Securities
None.
Stock Performance Graph
The performance graph below shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act.
The performance graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on the S&P 500 Index and the S&P 500 Information Technology Index. The graph assumes $100 was invested at the market close on December 9, 2021, which was our initial trading day, in our Class A common stock. Data for the S&P 500 Index and the S&P 500 Information Technology Index assume reinvestment of dividends. Our offering price of our Class A common stock in our IPO, which had a closing stock price of $85.19 on December 9, 2021, was $80.00 per share.
Comparison of Cumulative Total Returns
The comparisons in the graph above are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. [Reserved].
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such difference include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. Our fiscal year end is January 31, and our fiscal quarters end on April 30, July 31, October 31, and January 31.
Overview
Our foundational technologies solve the core infrastructure challenges of cloud adoption by enabling an operating model that unlocks the full potential of modern public and private clouds. Our cloud operating model provides consistent workflows and a standardized approach to automating the critical processes involved in delivering applications in the cloud: infrastructure provisioning, security, networking, and application deployment. With our solutions, companies of all sizes and in all industries can accelerate their time to market, reduce their cost of operations, and improve their security and governance of complex infrastructure deployments.
Organizations today are undergoing a digital transformation across every business function, driven by competition and ever-increasing consumer expectations. Underlying this digital transformation is a re-platforming of static on-premises infrastructure to dynamic and distributed cloud infrastructure. In this dynamic world, existing procedures are too inefficient to scale with distributed, multi-cloud infrastructure. Inconsistent, fragmented technologies and processes are time consuming and resource intensive to manage, exacerbated by inefficient, linear ticket-driven workflows that cannot facilitate scaled, real-time operations. This digital transformation demands a new cloud operating model for enterprise IT requiring automation to provision, secure, connect, and run infrastructure at scale and in real time. At HashiCorp, we build industry-leading products that enable this cloud operating model and accelerate cloud adoption. Our primary commercial products are Terraform, Vault, Consul, and Nomad.
Our products can be adopted individually and are also designed to work together as a stack in order to solve larger, more complex challenges. For instance, deploying Vault and Consul is the basis for a complete Zero Trust security architecture with identity-driven controls, offering a full range of authentication, authorization, and access management for human users or machines, like servers or applications. We continue to innovate and deliver additional emerging products to supplement these core capabilities and provide adjacent solutions.
Our Business Model
Our primary products are based on a combination of our open-source and proprietary software. We are committed to an open-source model in which we maintain free open-source offerings while developing proprietary features for paid tiers of our software. These proprietary features include collaboration modules, governance and policy modules, enterprise use cases, and premium support and services. We provide our software under a licensing model that protects our intellectual property, grows our adoption, and supports our business.
We generate revenue primarily from sales of subscriptions to our software. We offer an enterprise-ready, self-managed software offering that can be deployed in our customers’ public cloud, private cloud, and on-premises environments. HCP is our fully-managed cloud platform, available on all of the leading cloud providers. These two core offerings can be leveraged independently or together, spanning the various public cloud, private cloud, and on-premises environments in which our customers operate.
For our self-managed offerings, we offer various tiers that provide different levels of access to our proprietary products, modules, and support. Our licenses for self-managed deployments typically have terms of one to three years. We bill for one-year licenses upfront, and we primarily bill for multi-year term licenses annually in advance, with a multi-year payment schedule. The substantial majority of our revenue is recognized ratably over the subscription term. Each product is sold as a base module, with additional optional modules available that address needs like governance and policy, and a tiered pricing system that scales pricing with increased product usage. The unit of value for product usage varies by product, and generally scales with customer cloud adoption as workloads managed by our products move to cloud-based infrastructure.
Customers of our fully-managed cloud platform, HCP, can either use our offering with no minimum commitment where they pay based on the consumption of resources, or can purchase annual subscription contracts with a minimum commitment. Customers who are on no-minimum commitment contracts are billed, and revenue from them is recognized, based on usage. Today, customers with minimum commitments are typically billed annually in advance for their subscriptions and we recognize all revenue from such subscriptions ratably over the subscription term. We intend to transition a segment of our new contracts to a usage-based model. Our pricing schedule lists the hourly rate when deploying HCP for our various products, and actual usage is metered and calculated on a per-hour basis for increased accuracy.
We sell to organizations of all sizes across a broad range of industries, with a particular focus on enterprises that are managing and moving an increasing amount of business-critical processes, applications, and large volumes of data to the cloud. Ultimately, we believe all enterprises will need to transition to the cloud to reduce operational burden, improve scalability and elasticity, and increase agility. We plan to continue to invest in our direct sales force to grow our large enterprise base both domestically and internationally.
Our sales and marketing strategy combines the best of customer self-service with our direct sales approach. Our open-source model allows developers and individuals focused on operations, IT, and security, or practitioners, to engage with and evaluate our software in a frictionless manner, which we believe has contributed to our software’s popularity. This open-source leadership and the wider ecosystem around us, compels practitioners to adopt and implement our software in the enterprise. As organizations recognize the value of our products, our inside and field sales teams can nurture leads and develop direct relationships with key stakeholders across all segments. HCP has accelerated our self-service approach, as practitioners can now quickly deploy and experiment with our paid offering with a fully-managed cloud solution and no minimum commitments.
As adoption grows, our marketing organization is focused on building our brand reputation and awareness, and engages with prospective customers through our user conferences, email marketing, digital advertising, and other public relations activities. This sales and marketing strategy allows us to not only acquire new customers, but also drive increased usage within existing customers.
We operate an adopt, land, expand, and extend motion. Our open-source engagement and self-serve cloud motion help us identify and accelerate initial product adoption and use cases in an account. Our enterprise sales teams land these customers with subscription contracts for our software. Our expansion motion focuses on up-selling additional modules and increasing the footprint of usage of a given product, including across multiple buying centers within our customers’ organizations. The multiple capabilities of our deep product portfolio allow us to extend by cross-selling additional integrated products to our customers. For example, a company may initially adopt an open-source use case of Terraform. After initial use of the open-source product, we frequently land their first paid use of Terraform to add enterprise functionality and support mission-critical cloud workloads. As customers grow their cloud presence to support additional cloud-based workloads, they frequently expand the amount of Terraform they consume. In addition to this increased Terraform usage, customers also frequently extend into additional products such as Vault or Consul. This combination of adopt, land, expand, and extend affords us considerable growth opportunities within our customer base, and we focus our go-to-market strategy on developing and cultivating long-term customer relationships. The increased use of our platform by our customers is evidenced by our high net dollar retention rate. As of January 31, 2022, January 31, 2021, and January 31, 2020, our last four quarter average net dollar retention rate was 131%, 123%, and 131%, respectively.
Factors Affecting Our Performance
We believe that the growth and future success of our business depends on a number of key factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations.
Adoption of Our Products and Landing New Customers
We believe there is substantial opportunity to continue to grow our product adoption and our customer base. We intend to drive product adoption through our open-source distribution model and by continuing to cultivate our open-source community. We estimate that approximately 12,000 organizations have downloaded at least one of our products since HashiCorp’s inception.
We intend to drive paid customer growth by continuing to invest significantly in sales and marketing and to increase brand awareness. HCP has also improved our self-service model, and we expect HCP to continue to support our sales model and drive paid adoption. As of January 31, 2022, we served over 2,700 customers spanning organizations of a broad range of sizes and industries, compared to over 1,400 and over 800 customers as of January 31, 2021 and 2020, respectively.
We also intend to continue to grow our base of large enterprises around the world.
Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our products, development of new products and features, offerings of our competitors, engagement with the open-source community, and effectiveness of our marketing and community-building efforts. As of January 31, 2022, over 375 of the Forbes Global 2000 were our customers. We believe this demonstrates that our products have been adopted by many of the largest enterprises, and that there is substantial opportunity to further cultivate these large customers.
Expanding and Extending Within Existing Customer Base
Our large base of customers represents a significant opportunity for further sales growth. Our customers often expand the deployment of our products across larger teams and more broadly within the enterprise as they both do more with existing use cases and realize new use cases. At the same time, we often see customers extend to multiple products across our wider product portfolio as they realize the potential of integrating more of our products to better solve use cases. We intend to continue to invest in enhancing awareness of our brand and developing more products, features, and functionality, which we believe are important factors in achieving widespread adoption of our offerings. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our products, the technical capabilities and security of our products, our customers’ progress on their cloud journey, competition, pricing, and overall changes in our customers’ spending levels.
Historically, we have experienced significant expansion after initial deployment of our products by our customers, with customers expanding usage as well as extending to additional products. We define ARR as the annualized value of all recurring subscription contracts with active entitlements as of the end of the applicable period, and in the case of our monthly, or consumption-based customers the annual value of their last month’s spend. A further indication of the propensity of customer relationships to expand over time is our dollar-based net retention rate, which compares ARR from the same set of customers in one period relative to the prior year period. We define dollar-based net retention rate as the ARR at the end of a period for a base set of customers from which we generated ARR in the year prior to the date of calculation, divided by the ARR one year prior to the date of the calculation for that same set of customers. As of January 31, 2022, January 31, 2021, and January 31, 2020, our last four quarter average net dollar retention rate was 131%, 123%, and 131%, respectively. We believe this demonstrates the stickiness of our products, and our offerings as a whole.
Increasing Adoption of HashiCorp Cloud Platform
We believe HCP represents a significant growth opportunity for our business. Since launching HCP in fiscal 2021, usage and sales of HCP have grown rapidly and has allowed us to better address the needs of potential customers looking for a fully-managed offering. We believe that as organizations increasingly look for a fully-managed cloud infrastructure platform, they will continue to adopt HCP. We expect HCP to continue to grow and represent an increasing percentage of our total revenue over time. For the fiscal year ended January 31, 2022, HCP subscription revenue was $18.5 million.
Accelerating Technology Leadership and Product Expansion
Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We have built highly differentiated products that we believe have the ability to adapt and evolve with the support of our engineering expertise, our approach to innovation, our open-source community, and our ecosystem of partners. HashiCorp is a critical part of the daily operations of practitioners and our free products make HashiCorp frictionless to adopt. We have proven initial success of our modular approach with multiple innovations and product launches, including the launch of HCP in fiscal 2021, and launch of Boundary and Waypoint in September 2020. We see continued adoption from our customers in our new products and innovations and, as of January 31, 2022, 45% of our customers with $100,000 or greater ARR were licensing more than one product.
We intend to continue to invest in building additional products, features, and functionality to expand our products to new use cases. Our future success is dependent on our ability to successfully develop, market, and sell existing and new products to new and existing customers.
Expanding Internationally
We believe there is a significant opportunity to expand usage of our products outside of the United States as enterprises globally look to take advantage of cloud computing and look to adopt a cloud operating model across multiple clouds. For fiscal 2022, 2021 and 2020, 27%, 25%, and 23% of our revenue, respectively, was generated by customers outside of the United States. In addition, we have made and plan to continue to make investments in geographic expansion in Europe, the Middle East, Africa, and the Asia-Pacific region.
Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics, to measure our performance, identify trends, formulate business plans, and make strategic decisions. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors. We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure our performance, and make strategic decisions. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.
As of January 31,
(dollars in millions)
Total customers
2,715
1,473
Total customers with $100,000 or greater ARR
Subscription revenue from HCP (and its predecessor cloud offerings)
$
18.5
(1)
$
2.9
(1)
$
0.3
(1)
Remaining performance obligations (RPOs)
$
428.8
$
263.9
$
152.1
Non-GAAP RPOs(2)
$
452.2
$
286.1
$
171.0
(1)Represents subscription revenue for the year ended January 31, 2022, January 31, 2021, and January 31, 2020
(2)Non-GAAP RPOs is a non-GAAP financial measure. For more information regarding our use of this measure and a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP, see the subsection titled “Non-GAAP Remaining Performance Obligations” elsewhere in this section.
Total Customers
We define total customers as the number of customers we have at the end of each fiscal quarter. We define the number of customers we have at the end of each fiscal quarter as the number of accounts with a unique account identifier for which we have an active contract in the period indicated. Users of our free products are not included in total customers. A single organization with multiple divisions, segments, or subsidiaries is counted as a single customer. Our customer count may also fluctuate due to acquisitions, consolidations, spin-offs, and other market activity.
Total Customers with $100,000 or Greater ARR
We define ARR as the annualized value of all recurring subscription contracts with active entitlements as of the end of the applicable period, and in the case of our monthly, or consumption-based customers, the annual value of their last month’s spend. Relationships with large enterprise customers lead to scale and operating leverage in our business model, as large enterprise customers present a greater opportunity for us to sell additional usage and modules because they have larger budgets, a wider range of potential use cases, and greater potential for expanding to other products in our offering. As such, we count the number of customers contributing $100,000 or greater ARR as a measure of our ability to scale with our customers and attract large enterprise customers to our product offerings. For each applicable financial reporting period, we calculate revenue from customers with $100,000 or greater ARR by aggregating the quarterly revenue attributable to such customers within such period. Customers with $100,000 or greater ARR represented 88%, 83%, and 71% of revenue for fiscal 2022, 2021, and 2020, respectively.
Quarterly Revenue from HCP
We believe that HCP represents an important growth opportunity for our business. As organizations continue their transition to the cloud, many will begin seeking fully-managed platforms and will begin to adopt HCP. We will continue to track the revenue generated by HCP (and its predecessor cloud offerings) as a way of measuring the adoption of our platform.
Non-GAAP Remaining Performance Obligations
Remaining performance obligations, or RPOs, represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. RPOs exclude customer deposits, which are refundable amounts that are expected to be recognized as revenue in future periods. As of January 31, 2022 and January 31, 2021, our RPOs were $428.8 million, and $263.9 million, respectively. As of January 31, 2022, we expect to recognize approximately 63% of RPOs as revenue over the next 12 months, and the remainder thereafter. The portion of RPOs that is expected to be recognized as revenue over the next 12 months represents an estimated minimum level of revenue for the applicable period and is not necessarily indicative of future product revenue growth because it does not account for revenue from customer renewals or new customer contracts. Moreover, RPOs are influenced by a number of factors, including the timing of renewals, average contract terms, seasonality and dollar amounts of customer contracts. Due to these factors, it is important to review RPOs in conjunction with revenue and other financial metrics disclosed elsewhere herein. For a further discussion of RPOs, see Note 3 to our consolidated financial statements included elsewhere in Annual Report on Form 10-K.
We calculate non-GAAP RPOs as RPOs plus customer deposits, which are refundable pre-paid amounts, based on the timing of when these customer deposits are expected to be recognized as revenue in future periods. As of January 31, 2022 and January 31, 2021, non-GAAP RPOs were $452.2 million, and $286.1 million, respectively. As of January 31, 2022, we expect to recognize 64% of our non-GAAP RPOs as revenue over the next 12 months, and the remainder thereafter.
We use non-GAAP RPOs in conjunction with RPOs as part of our overall assessment of our performance, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our business and financial performance. Our management believes that presenting non-GAAP RPOs is useful to investors because the portion of non-GAAP RPOs that is expected to be recognized as revenue over the next 12 months represents an estimated minimum level of revenue for the applicable period, including customer deposits that are expected to be recognized as revenue in future periods but are not included in GAAP RPOs. Our definitions of non-GAAP RPOs may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Non-GAAP RPOs should be considered in addition to, not as substitutes for, or in isolation from, RPOs prepared in accordance with GAAP. We compensate for the limitations in the use of non-GAAP RPOs by providing a reconciliation of non-GAAP RPOs to RPOs. We encourage investors and others to review our results of operations and financial information in its entirety, not to rely on any single financial measure, and to view non-GAAP RPOs with RPOs and revenue.
The following table presents a reconciliation of our non-GAAP RPOs to our GAAP RPOs for the periods presented (in thousands):
As of
January 31, 2022
January 31, 2021
GAAP RPOs
GAAP short-term RPOs
$
268,911
$
165,798
GAAP long-term RPOs
159,923
98,131
Total GAAP RPOs
$
428,834
$
263,929
Add:
Customer deposits
Customer deposits expected to be recognized within the next 12 months
$
20,324
$
20,421
Customer deposits expected to be recognized after the next 12 months
3,059
1,798
Total customer deposits
$
23,383
$
22,219
Non-GAAP RPOs
Non-GAAP short-term RPOs
$
289,235
$
186,219
Non-GAAP long-term RPOs
162,982
99,929
Total Non-GAAP RPOs
$
452,217
$
286,148
Free Cash Flow and Free Cash Flow Margin
Free cash flow is a non-GAAP financial measure that we define as net cash provided by (used in) operating activities less purchases of property and equipment and capitalized internal-use software costs. Free cash flow margin is calculated as free cash flow divided by total revenue. We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our core operations that, after the purchases of property and equipment, can be used for strategic initiatives, including investing in our business and selectively pursuing acquisitions and strategic investments. We further believe that historical and future trends in free cash flow and free cash flow margin, even if negative, provide useful information about the amount of net cash provided by (used in) operating activities that is available (or not available) to be used for strategic initiatives. For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of free cash flow and free cash flow margin is that they do not reflect our future contractual commitments. Additionally, free cash flow does not represent the total increase or decrease in our cash balance for a given period.
The following table presents our cash flows for the periods presented and a reconciliation of free cash flow and free cash flow margin to net cash provided by (used in) operating activities, the most directly comparable financial measure calculated in accordance with GAAP:
Year Ended January 31,
(in thousands)
GAAP net cash used in operating activities
$
(56,215
)
$
(39,623
)
$
(28,365
)
Add: purchases of property and equipment
(214
)
(4,304
)
(980
)
Add: capitalized internal-use software
(6,382
)
(2,920
)
-
Free cash flow (used in)
$
(62,811
)
$
(46,847
)
$
(29,345
)
GAAP net cash used in operating activities as a percentage of revenue
(18
)
%
(19
)
%
(23
)
%
Free cash flow as a % of revenue
(20
)
%
(22
)
%
(24
)
%
Impact of COVID-19
The ongoing COVID-19 pandemic has caused business disruption worldwide. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, cash flows, financial condition or our customers will depend on many factors, including the duration and continued spread of COVID-19; public health measures; national, state, and local government responses; and the impact of the pandemic on the global economy, all of which remain uncertain.
During 2020, 2021, and through the date of this Annual Report on Form 10-K, we experienced, and may continue to experience, adverse impacts on certain parts of our business as a result of the pandemic and our responsive measures. In industries that were heavily impacted by the pandemic, such as travel and hospitality, we experienced a slowdown in customer spending on our products. Additionally, we also took responsive measures to the pandemic that impacted our business. For example, we suspended non-essential travel by our employees, required events to be held virtually, and temporarily closed our offices. These responsive measures negatively impacted our in-person conferences, the length and variability of our sales cycles, the rate of sales to new customers, our international operations, and the hiring and onboarding of new employees across the organization.
The pandemic was a contributing factor that also led to existing and potential customers accelerating transitions to the cloud. As a result, we believe the value of our offering has become increasingly relevant during the course of the pandemic, which may result in a positive impact on our business over the long term. The global impact of COVID-19 continues to rapidly evolve, and while the broader implications of the ongoing COVID-19 pandemic remain uncertain, we will continue to monitor the situation and the effects on our business and operations.
Key Components of Results of Operations
Revenue
We generate revenue primarily from subscriptions and, to a lesser extent, professional services.
Subscription revenue. We generate revenue primarily from subscriptions which include licenses of proprietary features, support and maintenance revenue, and cloud-hosted services. Licenses for self-managed software consist of term licenses and provide the customer with a right to use the software for a fixed term commencing upon delivery to the customer. Support and maintenance revenue (collectively referred to as Support Revenue in the consolidated statements of operations) are bundled with each license subscription for the term of the license period. Cloud-hosted services are provided on a subscription basis and give customers access to our cloud solutions, which include related customer support.
Subscription revenue on self-managed software includes both upfront revenue recognized when the license is delivered as well as revenue recognized ratably over the contract period for support and maintenance. The substantial majority of our revenue is recognized ratably over the subscription term. Revenue on committed cloud-hosted services is recognized ratably when we satisfy the performance obligation over the contract period, whereas revenue from non-committed, pay-as-you-go cloud-hosted services are recognized when usage occurs.
We generate subscription revenue from contracts with typical durations ranging from one to three years. We typically invoice our customers annually in advance and, to a lesser extent, multi-year in advance. Amounts that have been invoiced and are nonrefundable are recorded in deferred revenue, or they are recorded in revenue if the revenue recognition criteria have been met. Our current and non-current deferred revenue represents contracts that are invoiced annually in advance or multi-year in advance. Customer payments that are contractually refundable are recorded as customer deposits.
Professional services. Professional services revenue consists of revenue from professional services and training services, which were generally sold on a time-and-materials basis prior to fiscal 2021. Commencing in fiscal 2021 we began to sell professional services on a predominantly fixed-fee basis. Revenue for professional services and training services is recognized as these services are delivered. Professional services are services utilized by some of our self-managed customers to accelerate the deployment of our products.
Support and maintenance revenue and cloud-hosted services make up the majority of our revenue and are typically recognized ratably over the terms of our subscription contracts. Therefore, a substantial portion of the revenue that we report in each period is attributable to the recognition of deferred revenue relating to agreements that we entered into during
previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Any downturn in sales, however, may negatively affect our revenue in future periods. Accordingly, the effect of downturns in sales and market acceptance of our products, and potential changes in our rate of renewals, may not be fully reflected in our results of operations until future periods.
Cost of Revenue
Cost of Subscription Revenue. Cost of subscription revenue primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with customer support and maintenance, third-party cloud infrastructure costs, amortization of internal-use software, and allocated overhead. We expect our cost of subscription revenue to increase as our subscription revenue increases.
Cost of Professional Services. Cost of professional services primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with our professional services, costs of third-party contractors, and allocated overhead. We expect our cost of professional services to increase as our professional services revenue increases.
Gross Profit and Margin
Gross profit is revenue less cost of revenue.
Gross margin is gross profit expressed as a percentage of revenue. Our gross margin has been, and will continue to be affected by, a number of factors, including the average sales price of our subscriptions and professional services, changes in our revenue mix, the timing and extent of our investments in our global customer support personnel, hosting-related costs, and the amortization of internal-use software. We expect our gross margin to fluctuate over time depending on the factors described above. We expect our revenue from cloud-hosted services to increase as a percentage of total revenue, which we expect to lead to an increase in associated hosting and managing costs, which, in turn, would be expected to adversely impact our gross margin.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs, which consist of salaries, bonuses, benefits, stock-based compensation and, with regard to sales and marketing expenses, sales commissions, are the most significant component of our operating expenses. We also incur other non-personnel costs such as software and subscription services and an allocation of our general overhead costs for facilities, IT, and depreciation expenses.
Sales and Marketing. Sales and marketing expenses consist primarily of personnel-related costs, such as salaries, sales commissions that are recognized as expenses over the period of benefit, bonuses, benefits, stock-based compensation, costs related to marketing programs, travel-related costs, software and subscription services, and allocated overhead. Marketing programs consist of advertising, events, corporate communications, brand-building, and developer-community activities. We expect our sales and marketing expenses will increase over time and continue to be our largest operating expense for the foreseeable future as we expand our sales force, increase our marketing efforts, and expand into new markets. While we expect our sales and marketing expenses to decrease as a percentage of revenue over the long term due to business growth, our sales and marketing expenses may fluctuate as a percentage of revenue from period to period due to the timing and extent of these expenses.
Research and Development. Research and development expenses consist primarily of personnel-related costs, such as salaries, bonuses, benefits, and stock-based compensation, net of capitalized amounts, contractor and professional services fees, software and subscription services dedicated for use by our research and development organization and allocated overhead. We continue to focus our research and development efforts on the addition of new features and products and enhancing the functionality and ease of use of our existing products. We expect our research and development expenses will continue to increase as our business grows and we continue to invest in our offering. While we expect our research and development expenses to decrease as a percentage of revenue over the long term due to this business growth, our research and development expenses may fluctuate as a percentage of revenue from period to period due to the timing and extent of these expenses.
General and Administrative. General and administrative expenses for administrative functions including finance, legal, and human resources, consist primarily of personnel-related costs, such as salaries, bonuses, benefits, and stock-based compensation, as well as software and subscription services, and legal and other professional fees. We incur additional general and administrative expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for investor relations and professional services. We expect that our general and administrative expenses will increase as our business grows. However, we expect our general and administrative expenses to decrease as a percentage of revenue over the long term due to this business growth, our general and administrative expenses may fluctuate as a percentage of revenue from period to period due to the timing and extent of these expenses.
Other Income, Net
Other income, net consists primarily of interest income, interest expense, and foreign exchange gains and losses.
Provision for Income Taxes
Provision for income taxes consists primarily of income taxes in certain foreign jurisdictions in which we conduct business, as well as state income taxes in the United States. We have recorded deferred tax assets and we provide a full valuation allowance on our U.S. deferred tax assets, which includes net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance on our U.S. deferred tax assets for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.
Results of Operations
The following tables summarize our consolidated statements of operations data for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.
Year Ended January 31,
(in thousands)
Consolidated Statements of Operations Data:
Revenue:
License
$
47,504
$
36,208
$
18,503
Support
247,566
165,607
96,820
Cloud-hosted services
18,613
4,092
2,339
Total subscription revenue
313,683
205,907
117,662
Professional services
7,086
5,947
3,599
Total revenue
320,769
211,854
121,261
Cost of revenue:
Cost of license(1)
Cost of support(1)
38,080
27,194
17,704
Cost of cloud-hosted services(1)
14,031
4,811
1,390
Total cost of subscription revenue(1)
52,332
32,541
19,388
Cost of professional services(1)
11,108
8,511
4,527
Total cost of revenue(1)
63,440
41,052
23,915
Gross profit
257,329
170,802
97,346
Operating expenses:
Sales and marketing(1)
269,504
141,018
89,308
Research and development(1)
165,031
65,248
40,118
General and administrative(1)
112,108
48,545
24,137
Total operating expenses
546,643
254,811
153,563
Loss from operations
(289,314
)
(84,009
)
(56,217
)
Other income, net
3,382
Loss before income taxes
(289,152
)
(83,253
)
(52,835
)
Provision for income taxes
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
(1)Includes stock-based compensation expense as follows:
Year Ended January 31,
(in thousands)
Cost of revenue:
Cost of license
$
-
$
-
$
-
Cost of support
8,073
1,056
Cost of cloud-hosted services
2,482
-
-
Total cost of subscription revenue
10,555
1,056
Cost of professional services
3,367
Total cost of revenue
13,922
1,364
Sales and marketing
64,991
11,286
2,466
Research and development
67,865
5,974
1,507
General and administrative
53,790
20,599
4,998
Total stock-based compensation expense
$
200,568
*
$
39,223
**
$
9,461
**
* Fiscal 2022 stock-based compensation expense includes the initial expense related to RSUs subject to service-based and performance-based vesting conditions, which conditions were satisfied in connection with our IPO, and stock-based compensation expense related to the ESPP which commenced in the quarter ended January 31, 2022. See Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
** In connection with tender offers and secondary sales of our common stock, stock-based compensation expense for fiscal 2021 and fiscal 2020 included $32.1 million and $1.5 million of expense, respectively, related to the amount paid in excess of the estimated fair value of common stock as of the date of the transactions. There were no tender offers or secondary sales for fiscal 2022. See Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:
Year Ended January 31,
Revenue:
License
%
%
%
Support
Cloud-hosted services
Total subscription revenue
Professional services
Total revenue
Cost of revenue:
Cost of license
-
-
-
Cost of support
Cost of cloud-hosted services
Total cost of subscription revenue
Cost of professional services
Total cost of revenue
Gross profit
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total operating expenses
Loss from operations
(90
)
(40
)
(46
)
Other income, net
-
Loss before income taxes
(90
)
(39
)
(44
)
Provision for income taxes
-
-
-
Net loss
(90
)
%
(39
)
%
(44
)
%
Comparison of Fiscal 2022 and 2021
Revenue
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
Revenue:
License
$
47,504
$
36,208
11,296
Support
247,566
165,607
81,959
Cloud-hosted services
18,613
4,092
14,521
Total subscription revenue
313,683
205,907
107,776
Professional services
7,086
5,947
1,139
Total revenue
$
320,769
$
211,854
108,915
Subscription revenue increased by $107.8 million, or 52%, for fiscal 2022 compared to fiscal 2021. This increase is attributable to the addition of new customers, which contributed $45.1 million for fiscal 2022, as we increased our customer base by 84% from January 31, 2021 to January 31, 2022. The remainder of this increase in revenue is attributable to expanded product adoption among existing customers, as reflected by our average net dollar retention rate of 131% for the trailing four quarters ended January 31, 2022.
Professional services revenue increased by $1.1 million, or 19%, for fiscal 2022 compared to fiscal 2021. This was primarily due to increased delivery of professional services and the completion of certain professional services projects.
Cost of Revenue and Gross Margin
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
Cost of revenue:
Cost of license
$
$
(315
)
(59
)
Cost of support
38,080
27,194
10,886
Cost of cloud-hosted services
14,031
4,811
9,220
Total cost of subscription revenue
52,332
32,541
19,791
Cost of professional services
11,108
8,511
2,597
Total cost of revenue
$
63,440
$
41,052
22,388
Year Ended January 31,
Gross margin
License
%
%
Support
%
%
Cloud-hosted services
%
(18
)
%
Total subscription margin
%
%
Professional services
(57
)
%
(43
)
%
Total gross margin
%
%
Cost of subscription revenue increased by $19.8 million, or 61%, for fiscal 2022 compared to fiscal 2021. The increase in cost of subscription revenue was driven by an increase in employee-related expenses of $15.7 million due to a 13% increase in headcount in our customer support organization from January 31, 2021 to January 31, 2022, a $9.5 million increase in stock-based compensation expense, and a $1.2 million one-time accrual of paid time off, or PTO, balances as we transitioned to a PTO model in the United States. The increase in stock-based compensation expense is primarily related to RSUs subject to service-based and performance-based vesting conditions, which conditions were satisfied in connection with our IPO, and related to the ESPP which commenced in the quarter ended January 31, 2022. The increase in stock-based compensation expense is net of a $0.7 million decrease in stock-based compensation expense from secondary sales of our common stock during fiscal 2021. The increase in headcount reflects the net increase after certain roles transitioned from a technical support function to a sales relationship management function, which resulted in expenses being classified as sales and marketing compared to cost of revenue in the prior period resulting in support margins increasing by 6%, total subscription margins increasing by 4%, and total gross margins increasing by 4% for the period. These percentages include stock-based compensation expense which increased support margins by 2%, total subscription margins by 1%, and total gross margins by 1% for the period. The increase in cost of subscription revenue was also attributable to a $2.4 million increase in cloud hosting fees as well as a $1.4 million increase in amortization of internal-use software. We launched cloud-hosted versions of our products during fiscal 2020 and 2021. As cloud becomes a larger portion of our revenue, our gross
margin profile will change because we have a lower gross margin on cloud-hosted services due to headcount related to our cloud offering operations and cloud hosting fees.
Cost of professional services increased by $2.6 million, or 31%, for fiscal 2022 compared to fiscal 2021. The increase in cost of professional services was driven by a $3.6 million increase in employee-related expenses due to a $3.1 million increase in stock-based compensation expense primarily related to RSUs subject to service-based and performance-based vesting conditions which were satisfied in connection with our IPO, and related to the ESPP which commenced in the quarter ended January 31, 2022. The increase in stock-based compensation expense includes a $0.2 million decrease in stock-based compensation expense from secondary sales of our common stock during fiscal 2021. The increases were partially offset by fewer partner service hours driving a $1.0 million decrease in partner costs. Our professional services gross margin has been negative, and will continue to be negative for the near-term. Our professional services are generally priced at a low margin which, combined with allocated overhead, has resulted in a negative margin.
Gross margin decreased to 80% for fiscal 2022 from 81% for fiscal 2021, primarily due to the increase in stock-based compensation expense, partially offset by the 4% increase due to the impact of certain roles transitioning from a technical support function to a sales relationship management function, as noted above.
Operating Expenses
Sales and Marketing
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
Sales and marketing
$
269,504
$
141,018
128,486
Sales and marketing expenses increased by $128.5 million, or 91%, for fiscal 2022 compared to fiscal 2021. The increase was primarily driven by a $121.0 million increase in employee-related costs due to a 72% increase in headcount in our sales and marketing organization from January 31, 2021 to January 31, 2022 partially attributable to certain roles transitioning from a technical support function to a sales relationship management function, which resulted in expenses being classified as sales and marketing compared to cost of revenue in the prior period, a $53.7 million increase in stock-based compensation expense, and a $4.8 million one-time accrual of PTO balances as we transitioned to a PTO model in the United States. The increase in stock-based compensation expense is primarily related to RSUs subject to service-based and performance-based vesting conditions which were satisfied in connection with our IPO, and related to the ESPP which commenced in the quarter ended January 31, 2022. The increase in stock-based compensation expense includes a decrease of $8.9 million from secondary sales of our common stock during fiscal 2021. The increase in employee-related costs also includes a $11.2 million net increase in amortization of deferred contract acquisition costs driven by our increase in revenue. Marketing expenses increased $3.2 million, driven primarily by increases in advertising and sponsorships. The remainder of the increase was attributable to a $2.2 million increase in software expenses and a $1.5 million increase in allocated overhead due to increased headcount and partially offset by a $0.8 million decrease in employee development primarily due to company events being held virtually during the COVID-19 pandemic.
Research and Development
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
Research and development
$
165,031
$
65,248
99,783
Research and development expenses increased by $99.8 million, or 153% for fiscal 2022 compared to fiscal 2021 as we continued to develop and enhance the functionality of our existing products and release new products. This increase was primarily driven by a $102.5 million increase in employee-related costs due to a 63% increase in research and development headcount from January 31, 2021 to January 31, 2022, a $61.9 million increase in stock-based compensation expense net of amounts capitalized to internal-use software, and a $3.6 million one-time accrual of PTO balances as we transitioned to a PTO model in the United States. The increase in stock-based compensation expense is primarily related to RSUs subject to service-based and performance-based vesting conditions which were satisfied in connection with our IPO, and related to the ESPP which commenced in the quarter ended January 31, 2022. The increase in stock-based compensation expense was partially offset by $4.2 million from secondary sales of our common stock during fiscal 2021. The remainder of the increase was attributable to increased software and subscription expenses of $3.0 million and a $0.8
million increase in allocated overhead driven primarily by the increase in headcount, partially offset by $7.0 million in higher research and development costs capitalized to internal-use software for our cloud platform compared to fiscal 2021, of which $3.6 million was capitalized stock-based compensation.
General and Administrative
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
General and administrative
$
112,108
$
48,545
63,563
General and administrative expenses increased by $63.6 million, or 131%, for fiscal 2022 compared to fiscal 2021. The increase was primarily driven by a $51.4 million increase in employee-related costs due to a 166% increase in general and administrative headcount from January 31, 2021 to January 31, 2022, a $33.2 million increase in stock-based compensation expense, and a $1.1 million one-time accrual of PTO balances as we transitioned to a PTO model in the United States. The increase in stock-based compensation expense is primarily related to RSUs subject to service-based and performance-based vesting conditions which were satisfied in connection with our IPO, and related to the ESPP which commenced in the quarter ended January 31, 2022. The increase in stock-based compensation expense includes a decrease of $18.1 million from secondary sales of our common stock during fiscal 2021. Professional service and consulting fees increased $5.0 million, net of capitalized costs related to our IPO. Software expenses increased $2.4 million and employee development expenses increased $3.0 million due to increased headcount and costs related to events.
Other Income, Net
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
Other income, net
$
$
(594
)
(79
)
Other income, net decreased by $0.6 million, or 79%, for fiscal 2022 compared to fiscal 2021. The decrease was primarily attributed to a change in the mix of our investment portfolio coupled with lower yields on balances invested in money market funds and the weakening of the U.S. dollar against other major currencies.
Provision for Income Taxes
Year Ended January 31,
Change
$
%
(in thousands, except percentages)
Provision for income taxes
$
$
Provision for income taxes increased by $0.7 million, or 276%, for fiscal 2022 compared to fiscal 2021, primarily due to income in foreign tax jurisdictions. We maintain a full valuation allowance on our U.S. deferred tax assets, and the significant components of the tax expense recorded are current cash tax expenses in various jurisdictions. Current cash tax expenses are impacted by each jurisdiction’s individual tax rates, laws on the timing of recognition of income and deductions, and availability of net operating losses and tax credits. Our effective tax rate may fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.
Liquidity and Capital Resources
To date, we have financed our operations principally through private placements of our equity securities, as well as payments received from customers using our products and services. In December 2021, we completed our IPO, which resulted in proceeds of $1.2 billion, after deducting underwriting discounts and commissions of $69.4 million and offering expenses of $6.0 million.
As of January 31, 2022, we had cash and cash equivalents of $1.4 billion and restricted cash of $1.8 million. Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments in money market funds. Our restricted cash constitutes cash on deposit with financial institutions in support of letters of credit in favor of landlords for non-cancelable operating lease agreements. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $506.1 million as of January 31, 2022, and negative cash flows from operations in fiscal 2022,
fiscal 2021, and fiscal 2020. We expect to continue to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments we intend to make as described above, and as a result we may require additional capital resources to execute strategic initiatives to grow our business.
On November 23, 2020, we entered into a loan and security agreement with HSBC Ventures USA Inc, or the Loan Agreement. The Loan Agreement provides us a revolving line of credit, which expires November 23, 2023. Under the Loan Agreement, we are able to borrow up to $50.0 million. Interest on any drawdown under the revolving line of credit accrues at the adjusted LIBOR plus 3.00%. We also incur a commitment fee of 0.30% for any unused portion of the credit facility. As of January 31, 2022, we had no balance outstanding under the Loan Agreement. The Loan Agreement includes customary restrictive covenants and in the event we borrow amounts under the agreement, we will become subject to a number of covenants that may limit our ability to, among other things, transfer or dispose of assets, pay dividends or make distributions, incur additional indebtedness, create liens, make investments, loans and acquisitions, engage in transactions with affiliates, merge or consolidate with other companies, and sell substantially all of our assets. We are currently in compliance with all covenants under the Loan Agreement.
We believe that our existing cash and cash equivalents will be sufficient to fund our operating and capital needs for at least the next 12 months. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of, and our future capital requirements, both near-term and long-term, will depend on many factors, including our growth rate, the timing and extent of spending to support our research and development efforts, the expansion of sales and marketing and international operating activities, the timing of new introductions of solutions or features, and the continuing market acceptance of our services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.
To satisfy tax withholding obligations associated with the vesting and settlement of outstanding RSUs for which the service-based vesting condition was satisfied and for which the liquidity-based vesting condition was satisfied in connection with our IPO, we withheld the number of shares necessary to satisfy the tax obligations based on the IPO price. We used a portion of the net proceeds we received from the IPO to satisfy the minimum anticipated tax withholding and remittance obligations of $111.0 million during the fourth quarter of fiscal 2022 related to the RSU Settlement based upon the IPO price per share of $80.00.
The following table summarizes our cash flows for the periods presented:
Year Ended January 31,
(in thousands)
Net cash used in operating activities
$
(56,215
)
$
(39,623
)
$
(28,365
)
Net cash provided by (used in) investing activities
$
(6,596
)
$
22,776
$
46,020
Net cash provided by financing activities
$
1,147,846
$
177,124
$
1,071
Operating Activities
We typically invoice our customers annually in advance and to a lesser extent, multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets in deferred revenue and customer deposits. We generally experience seasonality in terms of when we enter into agreements with our customers, particularly in our fourth fiscal quarter due to increased buying patterns of our enterprise customers and in our second fiscal quarter due to the summer vacation slowdown that impacts many of our customers. Given the seasonality in our business as discussed above, the operating cash flow benefit from increased collections from our customers generally occurs in the subsequent one to two quarters after billing. We expect seasonality, timing of billings, and collections from our customers to have a material impact on our cash flow from operating activities from period to period. Our primary uses of cash from operating activities are for personnel-related expenses, software and subscription expenses, sales and marketing expenses, third-party cloud infrastructure costs, and overhead expenses.
Net cash used in operating activities during fiscal 2022 was $56.2 million, which resulted from a net loss of $290.1 million, adjusted for non-cash charges of $205.5 million and net cash inflow of $28.5 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $200.6 million for stock-based compensation expense, $2.5 million for depreciation and amortization expense, and $2.4 million for non-cash operating lease costs. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $76.0 million increase in deferred revenue and $1.2 million increase in customer deposits from advance invoicing in accordance with our subscription contracts, a $32.4 million increase in accrued compensation and benefits primarily due to accrued sales commissions and accrued payroll taxes, and a $8.5 million increase in accounts payable. The cash inflow was partially offset by a $33.4 million increase in accounts receivable due to higher billings and timing of collections from our customers, a $39.1 million increase in deferred contract acquisition costs as our sales commission payments increased due to addition of new customers and expansion of our existing customer subscriptions, a $13.6 million increase in prepaid expenses and other assets, a $0.9 million decrease in accrued expenses and other liabilities, and a $2.6 million decrease in operating lease liabilities.
Net cash used in operating activities during fiscal 2021 was $39.6 million, which resulted from a net loss of $83.5 million, adjusted for non-cash charges of $42.3 million and net cash inflow of $1.6 million from changes in operating assets and liabilities. Non-cash charges primarily consisted of $39.2 million for stock-based compensation expense, $0.9 million for depreciation and amortization expense, and $2.1 million for non-cash operating lease costs. The net cash inflow from changes in operating assets and liabilities was primarily the result of a $46.9 million increase in deferred revenue and $3.3 million increase in customer deposits from advance invoicing in accordance with our subscription contracts, a $7.5 million increase in accrued compensation and benefits primarily due to accrued sales commissions and accrued payroll taxes, a $3.3 million increase in accrued expenses and other liabilities, a $2.7 million decrease in prepaid expenses and other assets, and a $1.1 million increase in accounts payable. The cash inflow was partially offset by a $41.4 million increase in accounts receivable due to higher billings and timing of collections from our customers, a $20.0 million increase in deferred contract acquisition costs as our sales commission payments increased due to addition of new customers and expansion of our existing customer subscriptions, and a $1.8 million decrease in operating lease liabilities.
Investing Activities
Net cash used in investing activities during fiscal 2022 of $6.6 million resulted primarily from $0.2 million in purchases of property and equipment and $6.4 million in capitalized internal-use software for our cloud platform.
Net cash provided by investing activities during fiscal 2021 of $22.8 million resulted primarily from $80.0 million in proceeds from maturity of short-term investments net of $50.0 million in purchases of short-term investments, and offset by $4.3 million in purchases of property and equipment and $2.9 million in capital expenditures for our cloud platform.
Financing Activity
Net cash provided by financing activities of $1.1 billion during fiscal 2022 was due to $1.3 billion of proceeds from our IPO, net of underwriting discounts and commissions, and $5.0 million of proceeds from the exercise of stock options. The cash inflow was partially offset by $105.6 million of taxes paid related to net share settlement of equity awards, and $4.5 million of payments for capitalized costs related to the IPO.
Net cash provided by financing activities of $177.1 million during fiscal 2021 was primarily due to $174.7 million in proceeds from the issuance of redeemable convertible preferred stock, net of issuance costs, $2.6 million from the exercise of stock options, and offset by $0.2 million used for payments of loan issuance costs for our credit facility.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of January 31, 2022:
Payment Due By Period
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
(in thousands)
Operating leases
$
20,603
$
3,781
$
8,074
$
7,471
$
1,277
Hosting Infrastructure Commitments
29,638
6,569
23,069
-
-
Non-cancelable purchase obligations
29,883
16,820
13,063
-
-
Total
$
80,124
$
27,170
$
44,206
$
7,471
$
1,277
The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in the table above. Purchase orders issued in the ordinary course of business are not included in the table above, as our purchase orders represent authorizations to purchase rather than binding agreements.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations.
Revenue Recognition
We generate revenue primarily from subscriptions which include licenses of proprietary features, support and maintenance revenue, and cloud-hosted services. Licenses for self-managed software consist of term licenses and provide the customer with a right to use the software upon delivery to the customer. Revenue on committed cloud-hosted services is recognized ratably when we satisfy the performance obligation over the contract period, whereas revenue from non-committed, pay-as-you-go cloud-hosted services are recognized when usage occurs. Support and maintenance are bundled with the license subscription for the term of the license period. Cloud-hosted services are provided on a committed basis or non-committed basis and give customers access to our cloud solutions, which include related customer support. We also generate revenue from professional services revenue which consist of professional services and training.
We recognize revenue when our customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements, we perform the following steps:
(i) identification of the contract with a customer;
We contract with our customers typically through order forms or purchase orders which in most cases are governed by master sales agreements. At contract inception we evaluate whether two or more contracts should be combined and accounted for as a single contract and identify the different performance obligations accordingly.
(ii) determination of whether the promised goods or services are performance obligations;
Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct and distinct in the context of the contract.
Our self-managed subscriptions include both an obligation to provide the customer with the right to use our proprietary software, as well as an obligation to provide support (on both open-source and proprietary software) and maintenance. Certain arrangements with customers include a renewal option that is separately evaluated for a material right.
Our cloud-hosted services products provide access to hosted software as well as support, which we consider to be a single performance obligation.
Professional services are not integral to the functionality of the subscription services and are generally distinct from the other performance obligations.
We have concluded that our contracts with customers do not contain warranties that give rise to a separate performance obligation.
(iii) measurement of the transaction price;
The transaction price is determined based on the consideration to which we expect to be entitled in exchange for transferring services and products to the customer. We record our revenue net of any value added or sales tax.
Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of our contracts contain a significant financing component.
(iv) allocation of the transaction price to the performance obligations; and
We measure the transaction price with reference to the standalone selling price, or SSP, of the various performance obligations inherent within a contract. Management determines the SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to customers, discounting practices, and overall pricing objectives, while maximizing observable inputs.
We do not have observable SSP for our licenses or our support as they are not sold separately. We developed a model to estimate relative SSP for each performance obligation using an “expected cost-plus margin” approach. This model uses observable data points to develop the main assumptions including the estimated useful life of the intellectual property and appropriate margins.
If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, we allocate the transaction price to each performance obligation based on their relative SSP. We also consider if there are any additional material rights inherent in a contract, and if so, we allocate a portion of the transaction price to such rights based on its relative SSP.
For our contracts with customers which include a material right of renewal each month, we use the practical alternative to allocate value to the future optional renewal of software and related mandatory support services. As we expect renewals over the full contractually stated term, the entire transaction price is allocated evenly to each monthly renewal option.
(v) recognition of revenue when we satisfy each performance obligation.
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to the customer. Our self-managed subscriptions include both upfront revenue recognition when the license is delivered as well as revenue recognized ratably over the contract period for support and maintenance based on the stand-ready nature of these elements. When arrangements include material rights associated with monthly renewal options, we recognize revenue each month equal to the allocated value of a one-month term license and one-month support and maintenance services.
In the event that the customer cancels support, the customer receives a refund for the remaining contractual balance of support while any remaining nonrefundable software balance is immediately recognized as revenue. The amount of refundable contractual balance is included in customer deposits within the consolidated balance sheets.
Revenue on our cloud-hosted services product is recognized ratably over the contract period when we satisfy the performance obligation. Cloud-hosted contracts are generally nonrefundable.
Revenue from professional services and training are recognized as these services are performed.
We sell directly through our sales team and through our channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all the revenue recognition criteria above are met.
Deferred Contract Acquisition Costs
Deferred contract acquisition costs represent costs that are incremental to the acquisition of customer contracts, which consist mainly of sales commissions and associated payroll taxes. We determine whether costs should be deferred based on sales compensation plans by determining if the commissions are in fact incremental and would not have occurred absent the customer contract.
Sales commissions for the renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over an estimated period of benefit of five years while commissions paid for renewal contracts are amortized over the contractual term of the renewals. Amortization of deferred contract acquisition costs is recognized commensurate with the pattern of revenue recognition and included in sales and marketing expense in the consolidated statements of operations.
We determine the period of benefit for commissions paid for the acquisition of the initial contract by taking into consideration the expected contract term and expected renewals of customer contracts, the duration of relationships with our customers, customer retention data, our technology development lifecycle, and other factors. Management periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs.
Stock-Based Compensation
We estimate the fair value of share-based awards on the date of grant. For service-based awards, the related stock-based compensation expense is recognized over the vesting period of the entire award using the straight-line attribution method. For awards that include both a performance and service condition, we amortize stock-based compensation expense on a graded vesting basis over the vesting period, after assessing the probability of achieving requisite performance. We recognize forfeitures as they occur.
We selected the Black-Scholes option-pricing model as the method for determining the estimated fair value for stock options. The Black-Scholes option-pricing model requires the use of management assumptions, which determine the fair value of share-based awards, including the fair value of common stock, the option’s expected term and the price volatility of the underlying stock. The assumptions used in our option-pricing model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
We recognize excess tax benefits from stock-based compensation in our provision for income taxes as a discrete item in the reporting period in which they occur.
These assumptions are estimated as follows:
•Fair Value of Common Stock. Prior to our IPO, our board of directors considered numerous objective and subjective factors to determine the fair value of our common stock at each meeting in which awards were approved as discussed in more detail under “-Common Stock Valuations” below. After our IPO, the fair value of our common stock is determined by the closing price of our common stock on the date of grant, which is traded on the Nasdaq Global Select Market.
•Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” we determine the expected term using the simplified method as provided by the SEC. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the option.
•Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
•Expected Volatility. The expected volatility is based on the historical and implied volatility of similar companies whose stock or option prices are publicly available, after considering the industry, stage of life cycle, size, market capitalization, and financial leverage of the other companies.
•Dividend Rate. The expected dividend is assumed to be zero, as we have never paid dividends and have no current plans to do so.
The following table summarizes the assumptions used in the Black-Scholes option pricing model to determine the fair value of our stock options:
Year Ended January 31,
Expected volatility
49.0% - 50.2%
50.0% - 51.4%
47.3% - 54.1%
Expected term (in years)
6.08
6.08
6.08
Risk-free interest rate
0.9% - 1.04%
0.5% - 0.6%
1.4% - 2.6%
Dividend yield
0%
0%
0%
We also assess the need to record stock-based compensation expense when certain of our affiliated stockholders purchase shares from our employees and founders in excess of fair value. We recognize any such excess fair value as stock-based compensation expense in our consolidated statements of operations at the time of purchase. We recorded 32.1 million and $1.5 million of stock-based compensation expense in fiscal 2021, and fiscal 2020, respectively, related to tender offers and secondary sales of our common stock. There were no tender offers or secondary sales included in stock-based compensation expense for fiscal 2022.
Common Stock Valuations
Prior to our IPO, the fair value of the common stock underlying our stock-based awards had historically been determined by our board of directors, with input from management and reference to contemporaneous independent third-party valuations. We believed that our board of directors had the relevant experience and expertise to determine the fair value of our common stock. Given the absence of a public trading market of our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, our board of directors exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock at each grant date. These factors included:
•the prices, rights, preferences, and privileges of our redeemable convertible preferred stock relative to those of our common stock;
•the prices paid for common or redeemable convertible preferred stock sold to third-party investors by us and prices paid in tender offers or secondary transactions;
•lack of marketability of our common stock;
•our operating and financial performance;
•current business conditions and projections;
•hiring of key personnel and the experience of our management;
•the history of our company and the introduction of new products;
•our stage of development;
•likelihood of achieving a liquidity event, such as an initial public offering, a merger, or acquisition of our company given prevailing market conditions;
•the market performance of comparable publicly traded companies; and
•U.S. and global capital market conditions.
The fair value of our common stock was determined using various valuation methods, including a combination of the income and market approach. The income approach estimated value based on the expectation of future cash flows that we would generate. These future cash flows were discounted to their present values using a discount rate that was derived from an analysis of the cost of capital of comparable publicly traded companies in our industry or those with similar business operations and was adjusted to reflect the risks inherent in our cash flows. The market approach estimated value based on a comparison of our company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple was determined and then applied to our financial forecasts to estimate the value of our company.
For each valuation, the fair value, or equity value, of our business determined by the income and market approaches was then allocated to the common stock using either the option-pricing method, or OPM, or the probability-weighted
expected return method, or PWERM, or both. Our valuations prior to July 31, 2019 were allocated based on the OPM. Beginning July 31, 2019, our valuations were allocated based on the PWERM and the OPM.
In addition, we also considered any secondary transactions involving our capital stock. In our evaluation of those transactions, we considered the facts and circumstances of each transaction to determine the extent to which they represented a fair value exchange. Factors considered include transaction volume, timing, whether the transactions occurred among willing and unrelated parties, and whether the transactions involved investors with access to our financial information. When affiliated stockholders acquire shares from our employees at a price in excess of fair value, we recognized such excess value as stock-based compensation expense.
Application of these approaches and methodologies involves the use of estimates, judgments, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses, and future cash flows, discount rates, market multiples, the selection of comparable public companies, and the probability of and timing associated with possible future events.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recently Issued Accounting Pronouncements
Refer to Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding recent accounting pronouncements adopted.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We have operations in the United States and internationally, and we are exposed to market risk in the ordinary course of our business.
Interest Rate Risk
Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments in money market funds. As of January 31, 2022, we had cash and cash equivalents of $1.4 billion and restricted cash of $1.8 million. The carrying amount of our cash equivalents reasonably approximates fair value due to the short maturities of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs, and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income. Due to the short-term nature of our investment portfolio and type of investments included in portfolio, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We, therefore, do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
Foreign Currency Risk
All of our sales contracts are denominated in U.S. dollars. A portion of our operating expenses are incurred outside of the United States, denominated in foreign currencies, and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound, Euro, Canadian Dollar, Australian Dollar, Singaporean Dollar, Japanese Yen, and Indian Rupee. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of operations. As the impact of foreign currency exchange rates has not been material to our historical operating results, to date we have not entered into derivative or hedging transactions; we may do so in the future if our exposure to foreign currency becomes more significant. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign exchange rates.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations.
Item 8. Financial Statements and Supplementary Data
HASHICORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
INDEPENDENT AUDITORS’ REPORT (PCAOB ID 34)
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of HashiCorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of HashiCorp, Inc. and subsidiaries (the "Company") as of January 31, 2022 and 2021, the related consolidated statements of operations, consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended January 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
San Jose, California
March 25, 2022
We have served as the Company’s auditor since 2019.
HASHICORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
As of January 31,
Assets
Current assets
Cash and cash equivalents
$
1,355,828
$
270,793
Accounts receivable, net of allowance of $20 and $36, respectively
126,812
93,462
Deferred contract acquisition costs
32,205
15,275
Prepaid expenses and other current assets
17,744
4,574
Total current assets
1,532,589
384,104
Property and equipment, net
15,897
8,235
Operating lease right-of-use assets
15,420
15,766
Deferred contract acquisition costs, non-current
57,126
34,970
Other assets, non-current
2,643
2,189
Total assets
$
1,623,675
$
445,264
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable
$
14,267
$
5,203
Accrued expenses and other current liabilities
4,542
2,138
Accrued compensation and benefits
56,939
19,213
Operating lease liabilities
3,130
2,389
Deferred revenue
206,416
136,091
Customer deposits
23,383
22,219
Total current liabilities
308,677
187,253
Deferred revenue, non-current
16,873
11,206
Operating lease liabilities, non-current
15,483
16,755
Other liabilities, non-current
2,741
Total liabilities
341,384
217,955
Commitments and contingencies (note 8)
Redeemable convertible preferred stock
Redeemable convertible preferred stock; $0.000015 par value; 0 and 94,127,984 shares authorized as of January 31, 2022 and 2021, respectively; 0 and 94,127,984 shares issued and outstanding as of January 31, 2022 and 2021, respectively; aggregate liquidation preference of $0 and $349,760 as of January 31, 2022 and 2021, respectively
-
349,113
Stockholders’ equity (deficit)
Preferred stock; $0.000015 par value; 100,000,000 and 0 shares authorized as of January 31, 2022 and 2021, respectively; 0 and 0 shares issued and outstanding as of January 31, 2022 and 2021, respectively
-
-
Class A common stock, par value of $0.000015 per share; 1,000,000,000 and 0 shares authorized as of January 31, 2022 and 2021, respectively; 30,596,695 and 0 shares issued and outstanding as of January 31, 2022 and 2021, respectively
-
Class B common stock, par value of $0.000015 per share; 200,000,000 and 192,000,000 shares authorized as of January 31, 2022 and 2021, respectively; 151,569,865 and 65,577,877 shares issued and outstanding as of January 31, 2022 and 2021, respectively
Additional paid-in capital
1,788,390
94,159
Accumulated deficit
(506,102
)
(215,964
)
Total stockholders’ equity (deficit)
1,282,291
(121,804
)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)
$
1,623,675
$
445,264
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Year Ended January 31,
Revenue:
License
$
47,504
$
36,208
$
18,503
Support
247,566
165,607
96,820
Cloud-hosted services
18,613
4,092
2,339
Total subscription revenue
313,683
205,907
117,662
Professional services
7,086
5,947
3,599
Total revenue
320,769
211,854
121,261
Cost of revenue:
Cost of license
Cost of support
38,080
27,194
17,704
Cost of cloud-hosted services
14,031
4,811
1,390
Total cost of subscription revenue
52,332
32,541
19,388
Cost of professional services
11,108
8,511
4,527
Total cost of revenue
63,440
41,052
23,915
Gross profit
257,329
170,802
97,346
Operating expenses:
Sales and marketing
269,504
141,018
89,308
Research and development
165,031
65,248
40,118
General and administrative
112,108
48,545
24,137
Total operating expenses
546,643
254,811
153,563
Loss from operations
(289,314
)
(84,009
)
(56,217
)
Other income, net
3,382
Loss before income taxes
(289,152
)
(83,253
)
(52,835
)
Provision for income taxes
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
Net loss per share attributable to common stockholders, basic and diluted
$
(3.48
)
$
(1.32
)
$
(0.90
)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
83,276,526
63,375,470
59,161,264
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
Redeemable Convertible Preferred Stock
Class A and Class B
Common Stock
Additional Paid-in
Accumulated
Total Stockholders'
Shares
Amount
Shares
Amount
Capital
Deficit
Equity (Deficit)
Balance as of February 1, 2019
88,076,852
$
174,389
58,967,390
$
$
41,509
$
(79,079
)
$
(37,569
)
Issuance of common stock upon exercise of stock options
-
-
2,289,774
-
1,048
-
1,048
Issuance of common stock related to early exercised stock options
-
-
190,000
-
-
-
-
Vesting of early exercised stock options
-
-
-
-
-
Stock-based compensation
-
-
-
-
9,461
-
9,461
Net loss
-
-
-
-
-
(53,370
)
(53,370
)
Balance as of January 31, 2020
88,076,852
$
174,389
61,447,164
$
$
52,208
$
(132,449
)
$
(80,240
)
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $276
6,051,132
174,724
-
-
-
-
-
Issuance of common stock upon exercise of stock options
-
-
4,130,713
-
2,629
-
2,629
Vesting of early exercised stock options
-
-
-
-
-
Stock-based compensation
-
-
-
-
39,223
-
39,223
Net loss
-
-
-
-
(83,515
)
(83,515
)
Balance as of January 31, 2021
94,127,984
$
349,113
65,577,877
$
$
94,159
$
(215,964
)
$
(121,804
)
Conversion of redeemable convertible preferred stock to common stock upon initial public offering
(94,127,984
)
$
(349,113
)
94,127,984
349,112
-
349,113
Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs
-
-
16,530,000
1,246,924
-
1,246,925
Issuance of common stock for restricted stock awards
-
-
10,564
-
-
-
-
Issuance of common stock upon exercise of stock options
-
-
2,961,753
-
5,036
-
5,036
Vesting of early exercised stock options
-
-
-
-
-
Issuance of common stock upon settlement of restricted stock units
-
-
4,355,635
-
-
-
-
Tax withholdings on settlement of restricted stock units
-
-
(1,397,253
)
-
(110,989
)
-
(110,989
)
Stock-based compensation
-
-
-
-
204,130
-
204,130
Net loss
-
-
-
-
-
(290,138
)
(290,138
)
Balance as of January 31, 2022
-
$
-
182,166,560
$
$
1,788,390
$
(506,102
)
$
1,282,291
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended January 31,
Cash flows from operating activities
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
Adjustments to reconcile net loss to cash from operating activities:
Stock-based compensation expense
200,568
39,223
9,461
Depreciation and amortization expense
2,498
Non-cash operating lease cost
2,382
2,098
1,263
Other
Changes in operating assets and liabilities:
Accounts receivable
(33,364
)
(41,407
)
(27,698
)
Deferred contract acquisition costs
(39,086
)
(19,984
)
(15,920
)
Prepaid expenses and other assets
(13,626
)
2,653
(3,436
)
Accounts payable
8,464
1,093
2,423
Accrued expenses and other liabilities
(895
)
3,277
Accrued compensation and benefits
32,379
7,536
6,646
Operating lease liabilities
(2,567
)
(1,789
)
(801
)
Deferred revenue
75,992
46,911
45,605
Customer deposits
1,164
3,336
6,862
Net cash used in operating activities
(56,215
)
(39,623
)
(28,365
)
Cash flows from investing activities
Purchases of property and equipment
(214
)
(4,304
)
(980
)
Capitalized internal-use software
(6,382
)
(2,920
)
-
Purchase of short-term investments
-
(50,000
)
(120,000
)
Proceeds from maturities of short-term investments
-
80,000
167,000
Net cash (used in) provided by investing activities
(6,596
)
22,776
46,020
Cash flows from financing activities
Proceeds from initial public offering, net of underwriting discounts and commissions
1,252,974
-
-
Taxes paid related to net share settlement of equity awards
(105,642
)
-
-
Payments of loan issuance costs
-
(229
)
-
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs
-
174,724
-
Proceeds from issuance of common stock upon exercise of stock options
5,036
2,629
1,048
Proceeds from issuance of common stock related to early exercised stock options
-
-
Payments of deferred offering costs
(4,522
)
-
-
Net cash provided by financing activities
1,147,846
177,124
1,071
Net increase in cash, cash equivalents, and restricted cash
1,085,035
160,277
18,726
Cash, cash equivalents, and restricted cash beginning of period
272,576
112,299
93,573
Cash, cash equivalents, and restricted cash end of period
$
1,357,611
$
272,576
$
112,299
Supplemental disclosure of cash flow information
Cash paid for income taxes
$
$
$
Cash paid for operating lease liabilities
$
3,291
$
2,479
$
1,379
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment included in accounts payable
$
-
$
-
$
1,283
Operating lease right-of-use assets obtained in exchange for new lease obligations
$
2,036
$
-
$
10,829
Tenant allowance included in prepaid expenses and other current assets
$
-
$
-
$
1,666
Unpaid deferred offering costs
$
1,527
$
-
$
-
Unpaid taxes related to net share settlement of equity awards
$
5,347
$
-
$
-
Conversion of convertible preferred stock to common stock upon initial public offering
$
349,113
$
-
$
-
Capitalized stock-based compensation expense
$
3,562
$
-
$
-
Vesting of early exercised stock options
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Description of Business
HashiCorp, Inc. was incorporated in Delaware in May 2013. HashiCorp, Inc. is headquartered in San Francisco, California and has wholly owned subsidiaries around the world, or collectively, the Company. The Company’s foundational technologies solve the core infrastructure challenges of cloud adoption by enabling an operating model that unlocks the full potential of modern public and private clouds. The Company’s cloud operating model provides consistent workflows and a standardized approach to automating the critical processes involved in delivering applications in the cloud: infrastructure provisioning, security, networking, and application deployment. The Company’s primary commercial products are HashiCorp Terraform, Vault, Consul, and Nomad. The Company’s software is predominantly self-managed by users and customers who deploy it across public, private, and hybrid cloud environments. The Company also offers a fully managed cloud platform for multiple products that further accelerates enterprise cloud migration by addressing resource and skills gaps, improving operational efficiency and speeding up deployment time for customers. Additionally, the Company provides premium support and services.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP.
Initial Public Offering
In December 2021, the Company completed its initial public offering, or IPO, in which the Company issued and sold 16,530,000 of its Class A common stock at a public offering price of $80.00 per share, which included 1,230,000 shares issued upon the exercise of the underwriters' overallotment option to purchase additional shares in January 2022. The Company received net proceeds of $1,247 million after deducting underwriting discounts and commissions of $69.4 million and offering expenses of $6.0 million. Immediately prior to the closing of the IPO, all 94,127,984 shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into an equal number of shares of Class B common stock.
Upon the consummation of the IPO:
•$349.1 million of redeemable convertible preferred stock were reclassified into Class B common stock and additional paid-in capital.
•$6.0 million of deferred offering costs were reclassified into stockholders’ equity (deficit) as an offset against the IPO proceeds.
•$190.5 million in cumulative stock-based compensation expense related to the outstanding RSUs through January 31, 2022 was recognized.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year ended January 31, 2022.
Foreign Currency Transactions
The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are remeasured at the average exchange rate in effect during the reporting period. At the end of each reporting period all monetary assets and liabilities of the Company’s subsidiaries are remeasured at the current U.S. dollar exchange rate at the end of the reporting period. Nonmonetary assets and liabilities denominated in foreign currencies have been remeasured into U.S. dollar using historical exchange rates. Remeasurement gains and losses are included within other income, net in the accompanying consolidated statements of operations. Remeasurement gains and losses were not material to the consolidated financial statements for fiscal 2022, 2021, and 2020.
Stock Split
On November 1, 2020, the Company effected a 2-for-1 stock split of its capital stock. All of the share and per share information referenced throughout the consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect this stock split.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense during the reporting period. Such management estimates include the determination of standalone selling prices of the Company’s performance obligations, the discount rates used for operating leases, the fair value of share-based awards, software development costs, the estimated period of benefit of deferred contract acquisition costs, and accounting for income taxes, including the valuation allowance on deferred tax assets and uncertain tax positions. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates.
COVID-19
The novel coronavirus, or COVID-19, pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions. The full extent to which the COVID-19 pandemic will directly or indirectly impact the global economy, the lasting social effects, and impact on the Company’s business, results of operations, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. As of the date of issuance of the consolidated financial statements, the Company is not aware of any specific event or circumstance related to COVID-19 that would require it to update its estimates or judgments or adjust the carrying value of its assets or liabilities. Actual results could differ from those estimates and any such differences may be material to the consolidated financial statements. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value.
Restricted Cash
Restricted cash constitutes letters of credit established according to the requirements under certain non-cancellable operating lease agreements and is included in other assets, non-current in the consolidated balance sheets. As of January 31, 2022, January 31, 2021, and January 31, 2020, the Company maintained $1.8 million, $1.8 million, and $1.8 million in restricted cash, respectively.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
As of January 31,
Cash and cash equivalents
$
1,355,828
$
270,793
$
110,519
Restricted cash included in other assets, non-current
1,783
1,783
1,780
Cash, cash equivalents, and restricted cash
$
1,357,611
$
272,576
$
112,299
Accounts Receivable and Allowance for Doubtful Accounts
Trade Accounts receivable primarily consists of amounts billed currently due from customers. The Company’s accounts receivable are subject to collection risk. Gross accounts receivable are reduced for this risk by an allowance for doubtful accounts. This allowance is for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company determines the need for an allowance for doubtful accounts based upon various factors, including past collection experience, credit quality of the customer, age of the receivable balance, and current economic conditions, as well as specific circumstances arising with individual customers.
The allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the Company’s receivables portfolio. Activity related to the Company’s allowance for doubtful accounts was as follows (in thousands):
Year Ended January 31,
Beginning balance
$
$
$
Bad debt expense
(62
)
Write-offs
(30
)
(99
)
-
Ending balance
$
$
$
When management determines a balance is uncollectible and the Company no longer actively pursues collection of the receivable, both the gross accounts receivable and the full allowance on that receivable are written off.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and trade accounts receivable. Although the Company deposits its cash with multiple financial institutions, the deposits, at times, may exceed federally insured limits. The Company invests its excess cash in highly-rated money market funds. The Company extends credit to customers in the normal course of business. The Company monitors for uncollectible accounts on an ongoing basis. There were no customers that individually exceeded 10% of the Company’s revenue for fiscal 2022, 2021, and 2020. As of January 31, 2022 and 2021, no customer represented 10% or more of accounts receivable, net.
Property and Equipment, net
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally ranging from three to five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the respective assets or the lease term. Expenditures for maintenance and repairs are expensed as incurred and significant improvements and betterments that substantially enhance the life of an asset are capitalized.
Revenue Recognition
The Company generates revenue primarily from subscriptions and, to a lesser extent, professional services.
Subscription revenue. The Company generates revenue primarily from subscriptions which include licenses of proprietary features, support and maintenance revenue, and cloud-hosted services. Licenses for self-managed software consist of term licenses and provide the customer with a right to use the software for a fixed term commencing upon delivery to the customer. Support and maintenance revenue (collectively referred to as Support Revenue in the consolidated statements of operations) are bundled with each license subscription for the term of the license period. Cloud-hosted services are provided on a subscription basis and give customers access to the Company’s cloud solutions, which include related customer support.
Professional services. Professional services revenue consists of revenue from professional services and training services, which were generally sold on a time and materials basis prior to fiscal 2021. Commencing in fiscal 2021 the Company began to sell professional services on a fixed fee basis.
The Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:
(i) identification of the contract with a customer;
The Company contracts with its customers typically through order forms or purchase orders which in most cases are governed by master sales agreements. At contract inception the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and identifies the different performance obligations accordingly.
(ii) determination of whether the promised goods or services are performance obligations;
Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct and distinct in the context of the contract.
The Company’s self-managed subscriptions include both an obligation to provide the customer with the right to use its proprietary software, as well as an obligation to provide support (on both open-source and proprietary software) and maintenance. Support is contractually mandatory in order for the customer to legally use the proprietary software. Certain arrangements with customers include a renewal option that is separately evaluated for a material right.
The Company’s cloud-hosted services products provide access to hosted software as well as support, which the Company considers to be a single performance obligation. Professional services are not integral to the functionality of the subscription services and are generally distinct from the other performance obligations.
The Company has concluded that its contracts with customers do not contain warranties that give rise to a separate performance obligation.
(iii) measurement of the transaction price;
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services and products to the customer. The Company records revenue net of any value added or sales tax.
Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component.
(iv) allocation of the transaction price to the performance obligations; and
The Company measures the transaction price with reference to the standalone selling price, or SSP, of the various performance obligations inherent within a contract. Management determines the SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to customers, discounting practices, and overall pricing objectives, while maximizing observable inputs.
The Company does not have observable SSP for its licenses or its support as they are not sold separately. The Company developed a model to estimate relative SSP for each performance obligation using an “expected cost-plus margin” approach. This model uses observable data points to develop the main assumptions including the estimated useful life of the intellectual property and appropriate margins.
If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on their relative SSP. The Company also considers if there are any additional material rights inherent in a contract, and if so, the Company allocates a portion of the transaction price to such rights based on its relative SSP.
For the Company’s contracts with customers which include a material right of renewal each month, the Company uses the practical alternative to allocate value to the future optional renewal of software and related mandatory support services. As the Company expects renewals over the full contractually stated term, the entire transaction price is allocated evenly to each monthly renewal option.
(v) recognition of revenue when the Company satisfies each performance obligation.
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to the customer. The Company’s self-managed subscriptions include both upfront revenue recognition when the license is delivered as well as revenue recognized ratably over the contract period for support and maintenance based on the stand-ready nature of these elements. When arrangements include material rights associated with monthly renewal options, the Company recognizes revenue each month equal to the allocated value of a one-month term license and one-month support and maintenance services.
In the event that the customer cancels support, the customer receives a refund for the remaining contractual balance of support while any remaining nonrefundable software balance is immediately recognized as revenue. The amount of potentially refundable contractual balance is included in customer deposits within the consolidated balance sheets.
Revenue on committed cloud-hosted services is recognized ratably when performance obligations are satisfied over the contract period, whereas revenue from non-committed, pay-as-you-go cloud-hosted services are recognized when usage occurs.
Revenue for professional services and training services is recognized as these services are delivered. Professional services are services utilized by some self-managed customers to accelerate the deployment of the Company’s products.
The Company sells directly through its sales team and through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all the revenue recognition criteria above are met.
Support and maintenance revenue and cloud-hosted services make up the majority of our revenue and are typically recognized ratably over the terms of our subscription contracts. Therefore, a substantial portion of the revenue reported in each period is attributable to the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Any downturn in sales, however, may negatively affect revenue in future periods. Accordingly, the effect of downturns in sales and market acceptance of the Company’s products, and potential changes in the Company’s rate of renewals, may not be fully reflected in the Company’s results of operations until future periods.
Contract Balances
The Company generates subscription revenue from contracts with typical stated durations ranging from one to three years. Customers are typically invoiced annually in advance and, to a lesser extent, multiple years in advance.
The Company receives payments from customers based upon contractual billing schedules; accounts receivable is recorded when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 to 60 days. Contract assets include amounts related to the Company’s contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced. Contract assets were $2.9 million and $1.3 million as of January 31, 2022 and January 31, 2021, respectively, and are included in accounts receivable, net in the consolidated balance sheets.
Contract liabilities include payments received in advance of performance under the contract and are recorded to deferred revenue and deferred revenue, non-current in the consolidated balance sheets. Customer refundable prepayments are recorded as customer deposits in the consolidated balance sheets.
Deferred Contract Acquisition Costs
Deferred contract acquisition costs represent costs that are incremental to the acquisition of customer contracts, which consist mainly of sales commissions and associated payroll taxes. The Company determines whether costs should be deferred based on sales compensation plans, by determining if the commissions are in fact incremental and would not have occurred absent the customer contract.
Sales commissions for the renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over an estimated period of benefit of five years while commissions paid for renewal contracts are amortized over the contractual term of the renewals. Amortization of deferred contract acquisition costs is recognized commensurate with the same pattern of revenue recognition and included in sales and marketing expense in the consolidated statements of operations.
The Company determines the period of benefit for commissions paid for the acquisition of the initial contract by taking into consideration the expected contract term and expected renewals of customer contracts, the duration of relationships with the Company’s customers, customer retention data, the Company’s technology development lifecycle and other factors. Management periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs.
Leases
Leases consist of the Company’s contractual obligations that convey the right to use office spaces for a period of time in exchange for consideration. The Company determines whether a contract contains a lease at inception. Operating leases are included in operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current on the Company’s consolidated balance sheets. The Company currently does not have any financing leases. A right-of-use asset represents the Company’s right to use an underlying asset and a lease liability represents the Company’s obligation to make payments during the lease term. The operating lease right-of-use asset also includes any advance lease payments made and excludes lease incentives. Lease payments include fixed payments and variable payments based on an index or rate, if any, and are recognized as lease expense on a straight-line basis over the term of the lease. The lease term includes options to extend or terminate the lease when it is reasonably certain they will be exercised. Variable lease payments not based on a rate or index are expensed as incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease components and non-lease components as a single lease component. The Company applies the practical expedient to not recognize lease assets and lease liabilities for leases with an original term of 12 months or less.
The lease liability is measured as the present value of the remaining lease payments over the lease term upon the lease commencement date. The right-of-use asset is initially measured as the present value of the lease payments, adjusted for initial direct costs, prepaid lease payments and lease incentives. The discount rate used to determine the present value is the Company’s incremental borrowing rate unless the interest rate implicit in the lease is readily determinable. The Company estimates its incremental borrowing rate based on the information available at lease commencement date for collateralized borrowings with a similar term.
Deferred Offering Costs
Deferred offering costs consist of direct incremental legal, accounting, consulting, and other fees related to the Company’s IPO which were included in other assets, non-current before the IPO. Upon consummation of the IPO in December 2021, $6.0 million of deferred offering costs were reclassified to stockholders' equity (deficit) and recorded against the proceeds from the offering.
Cost of Revenue
Cost of subscription revenue primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with customer support and maintenance, third-party cloud infrastructure costs, amortization of internal-use software, and allocated overhead.
Cost of professional services primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with our professional services, costs of third-party contractors, and allocated overhead.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related costs, such as salaries, sales commissions that are recognized as expenses over the period of benefit, bonuses, benefits, stock-based compensation, costs related to marketing programs, travel-related costs, software and subscription services, and allocated overhead.
Research and Development
Research and development expenses consist primarily of personnel-related costs, such as salaries, bonuses, benefits, and stock-based compensation, net of capitalized amounts, contractor and professional services fees, software and subscription services dedicated for use by our research and development organization and allocated overhead.
General and Administrative
General and administrative expenses for administrative functions including finance, legal, and human resources, consist primarily of personnel-related costs, such as salaries, bonuses, benefits, and stock-based compensation, as well as software and subscription services, and legal and other professional fees.
Capitalized Software Development Costs
Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. There is generally no significant passage of time between achievement of technological feasibility and the availability of the Company’s enterprise software for general release, and the majority of the Company’s software is open-source. Therefore, the Company has not capitalized any software costs through fiscal 2022, 2021, and 2020. All software development costs have been charged to research and development expense in the consolidated statements of operations as incurred.
Costs related to software acquired, developed, or modified solely to meet the Company’s internal requirements, with no substantive plans to market such software at the time of development, or costs related to development of web-based products are capitalized. Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. Capitalized costs are recorded as part of property and equipment, net. Maintenance and training costs are expensed as incurred. Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally five years, and is recorded as cost of cloud-hosted services in the consolidated statements of operations. No amounts were capitalized for fiscal 2020 as internal-use software costs were immaterial. The Company capitalized $9.9 million and $2.9 million, in internal-use software for fiscal 2022 and 2021, respectively. Amortization expense was $1.4 million and de minimis for fiscal 2022 and 2021, respectively. There was no amortization expense for fiscal 2020.
Advertising Costs
Advertising costs, which are expensed and included in sales and marketing expense in the consolidated statements of operations when incurred, were $6.3 million, $2.2 million, and $2.6 million for fiscal 2022, 2021, and 2020, respectively.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment and capitalized software development costs subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to its carrying value. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals. There was no impairment charge recorded during fiscal 2022, 2021, and 2020.
Stock-Based Compensation
The Company estimates the fair value of stock-based awards on the date of grant (including stock options, restricted stock awards ("RSA"), restricted stock units ("RSU") and ESPP participation). For awards with a service-based vesting condition, the related stock-based compensation expense is recognized over the vesting period of the entire award using the straight-line attribution method. For awards that include both a performance and service condition, the Company amortizes stock-based compensation expense on a graded vesting basis over the vesting period, after assessing the probability of achieving requisite performance. The Company recognizes forfeitures as they occur.
The Company selected the Black-Scholes option-pricing model as the method for determining the estimated fair value for stock options. The Black-Scholes option-pricing model requires the use of management assumptions, which determine the fair value of stock-based awards, including the fair value of common stock, the option’s expected term, and the price volatility of the underlying stock.
The fair value of each RSA and RSU award is based on the fair value of the underlying common stock as of the grant date.
The fair value of each option and stock purchase right granted under the ESPP is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the award, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock.
The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited.
Net Loss per Share Attributable to Common Stockholders
The Company computes net loss per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company considers convertible redeemable preferred stock and unvested common stock, which includes early exercised stock options, to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of the declaration of a dividend for shares of common stock. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses. As such, net loss for the periods presented was not allocated to participating securities.
Basic and diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding. Net loss is allocated based on the weighted-average shares outstanding for each class of common stock. As the Company has net losses for the periods presented, all potentially dilutive common stock, which are comprised of convertible redeemable preferred stock, stock options, RSUs, and early exercised options are anti-dilutive. Diluted net loss per share is calculated by giving effect to all potentially dilutive securities
outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive.
Comprehensive Loss
Comprehensive loss consists of other comprehensive loss and net loss. Other comprehensive loss refers to revenue, expenses, gains and losses that are recorded as an element of stockholders’ deficit but are excluded from net loss. The Company did not have any other comprehensive loss transactions during the period presented. Accordingly, comprehensive loss is equal to net loss.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker, or CODM. The Company’s Chief Executive Officer is its CODM. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment. Substantially all of the Company’s long-lived assets were held in the United States as of January 31, 2022 and 2021. The Company presents revenue by region in Note 3 to the consolidated financial statements.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of January 31, 2022 and 2021, the Company has recorded a full valuation allowance against its net U.S. federal and state deferred tax assets.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company recognizes interest and penalties related to income tax matters as a component of the income tax provision
Fair Value Measurements
Fair value accounting is applied for all assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows the established framework for measuring fair value in accordance with GAAP.
Employee Benefit Plan
The Company sponsors a qualified 401(k) defined contribution plan covering eligible employees. Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service. There have been no employer contributions under this plan to date.
Recent Accounting Pronouncements Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income taxes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2020. The Company adopted this guidance in the first quarter of fiscal 2022, and the impact of this ASU on its consolidated financial statements was not material as the Company records a full valuation allowance on its U.S. deferred tax assets.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform-Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate, or SOFR. This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. The Company will adopt this guidance in fiscal 2023. The Company is currently evaluating the impact and applicability of this new standard.
3. Revenue and Performance Obligations
Disaggregation of revenue
The following table presents revenue by category (dollars in thousands):
Year Ended January 31,
Amount
% of Total
Revenue
Amount
% of Total
Revenue
Amount
% of Total Revenue
License
$
47,504
%
$
36,208
%
$
18,503
%
Support
247,566
165,607
96,820
Cloud-hosted services
18,613
4,092
2,339
Total subscription revenue
313,683
205,907
117,662
Professional services
7,086
5,947
3,599
Total revenue
$
320,769
%
$
211,854
%
$
121,261
%
The following table summarizes the revenue by region based on the billing address of customers who have contracted to use the Company products and services (dollars in thousands):
Year Ended January 31,
Amount
% of Total
Revenue
Amount
% of Total Revenue
Amount
% of Total Revenue
United States
$
235,428
%
$
157,916
%
$
92,771
%
Rest of the world
85,341
53,938
28,490
Total
$
320,769
%
$
211,854
%
$
121,261
%
No other country, outside of the United States, exceeded 10% of total revenue during the periods presented.
Contract Balance
Changes in deferred revenue and unbilled accounts receivable were as follows (in thousands):
Year Ended January 31,
Balance, beginning of period
$
147,297
$
100,386
$
54,781
Billings, excluding billings for customer deposits
364,365
228,498
149,139
Reclassification to deferred revenue from customer deposits
30,788
29,046
18,331
Recognition of revenue, net of change in unbilled accounts receivable*
(319,161
)
(210,633
)
(121,865
)
Balance, end of period
$
223,289
$
147,297
$
100,386
* Reconciliation to Revenue Reported per Consolidated Statements of Operations:
Revenue billed as of the end of the period
$
319,161
$
210,633
$
121,865
Increase (decrease) in total unbilled accounts receivable
1,608
1,221
(604
)
Revenue Reported per Consolidated Statements of Operations
$
320,769
$
211,854
$
121,261
Remaining Performance Obligations (RPOs)
The typical stated customer contract term is one year but can range up to three years. RPOs include both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. As of January 31, 2022 and 2021, the Company had $428.8 million, and $263.9 million, respectively, of remaining performance obligations, which is comprised of product and services revenue not yet delivered. As of January 31, 2022 and January 31, 2021, the Company expected to recognize approximately 63% and 63%, respectively, of its remaining performance obligations as revenue over the next 12 months and the remainder thereafter.
RPOs exclude customer deposits, which are refundable pre-paid amounts that are expected to be recognized as revenue in future periods. These balances are included in customer deposits in the consolidated balance sheets and are classified as current because contractually customers can cancel these obligations with 30 days written notice. The customer deposit balance is amortized to revenue over the term of the underlying contract as the customer’s right to cancel expires. If no contracts with customers are cancelled, the existing customer deposit balance will be recognized to revenue over the remaining stated term of the underlying contract which may be over the next 12 months or longer as follows (in thousands):
As of January 31,
Within the next 12 months
$
20,324
$
20,421
After the next 12 months
3,059
1,798
Total
$
23,383
$
22,219
4. Fair Value Measurements
The Company reports all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
•	Level 1-Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
•	Level 2-Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
•	Level 3-Inputs are unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.
The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy on a recurring basis using the above input categories (in thousands):
As of January 31, 2022
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
Money market funds
$
1,129,436
$
-
$
-
$
1,129,436
Total cash and cash equivalents
1,129,436
-
-
1,129,436
Total assets measured at fair value
$
1,129,436
$
-
$
-
$
1,129,436
Included in cash and cash equivalents
$
1,129,436
As of January 31, 2021
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
Money market funds
$
151,657
$
-
$
-
$
151,657
Total cash and cash equivalents
151,657
-
-
151,657
Total assets measured at fair value
$
151,657
$
-
$
-
$
151,657
Included in cash and cash equivalents
$
151,657
Money market funds are cash equivalents with remaining maturities of three months or less at the date of purchase. The Company uses quoted prices in active markets for identical assets to determine the fair value of its Level 1 investments in money market funds.
The consolidated financial statements as of January 31, 2022 and January 31, 2021, do not include any nonrecurring fair value measurements relating to assets or liabilities. There were no transfers between fair value measurement levels during the year ended January 31, 2022. During the year ended January 31, 2021, the certificates of deposit matured and the Company transferred $30.0 million to cash and cash equivalents in the consolidated balance sheets.
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net are comprised of the following (in thousands):
Estimated
As of January 31,
Useful life
Furniture and fixtures
5 years
$
1,266
$
1,224
Computers, equipment and software
3 years
Capitalized internal-use software development costs
5 years
12,209
2,920
Leasehold improvements
Shorter of useful life or lease term
5,008
4,979
Construction in progress(1)
-
Total property and equipment
19,670
9,512
Less: accumulated depreciation and amortization
(3,773
)
(1,277
)
Property and equipment - net
$
15,897
$
8,235
(1) This represents internal-use software not yet available for general release.
Total depreciation and amortization expense for fiscal 2022, 2021, and 2020 was $2.5 million, $0.9 million, and $0.2 million, respectively.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities are comprised of the following (in thousands):
As of January 31,
Accrued expenses
$
3,925
$
Accrued income taxes payable
Liability for early exercise of unvested stock options
Sales tax payable
-
1,191
Total accrued expenses and other liabilities
$
4,542
$
2,138
Accrued Compensation and Benefits
Accrued compensation and benefits are comprised of the following (in thousands):
As of January 31,
Accrued commissions
$
15,993
$
9,862
Accrued bonus
2,632
1,725
Accrued vacation
15,970
1,900
Accrued payroll and withholding taxes
18,885
5,296
ESPP employee contribution
2,709
-
Other
Total accrued compensation and benefits
$
56,939
$
19,213
Deferred Contract Acquisition Costs
The following table summarizes the activity of the deferred contract acquisition costs (in thousands):
Year Ended January 31,
Beginning balance
$
50,245
$
30,261
$
14,341
Capitalization of contract acquisition costs
64,834
33,821
22,668
Amortization of deferred contract acquisition costs
(25,748
)
(13,837
)
(6,748
)
Ending balance
$
89,331
$
50,245
$
30,261
Deferred contract acquisition costs, current
$
32,205
$
15,275
$
8,754
Deferred contract acquisition costs, non-current
57,126
34,970
21,507
Total deferred contract acquisition costs
$
89,331
$
50,245
$
30,261
There were no impairment losses recognized for deferred contract acquisition costs during fiscal 2022, 2021, and 2020.
6. Credit Facility
On November 23, 2020, the Company entered into a loan and security agreement with HSBC Ventures USA Inc., or the Loan Agreement. This Loan Agreement provides the Company a revolving line of credit, which expires on November 23, 2023. Under the Loan Agreement, the Company is able to borrow up to $50.0 million. Interest on any drawdown under the revolving line of credit accrues at the adjusted LIBOR rate plus 3.00%. The Company also incurs a commitment fee of 0.30% for any unused portion of the credit facility. As of January 31, 2022 and 2021, the Company had no balance outstanding under the Loan Agreement. The Loan Agreement includes customary restrictive covenants and in the event the Company borrows amounts under the agreement, the Company will become subject to a number of covenants that may limit the Company’s ability to, among other things, transfer or dispose of assets, pay dividends or make distributions, incur additional indebtedness, create liens, make investments, loans and acquisitions, engage in transactions with affiliates, merge or consolidate with other companies, and sell substantially all of the Company’s assets. The Company is in compliance with all covenants as of January 31, 2022.
7. Leases
The Company leases office spaces under noncancelable operating lease agreements, which expire at various dates through 2027. The Company is required to pay property taxes, insurance, and normal maintenance costs for certain of these facilities. These lease agreements do not contain residual value guarantees or restrictive covenants.
In September 2021, the Company entered into a sublessee agreement with a minimum lease commitment of $2.1 million over 3.5 years.
Lease costs
Lease costs were as follows (in thousands):
Year Ended January 31,
Short-term lease costs
$
$
$
Operating lease costs
3,106
2,898
1,842
Total lease costs
$
3,439
$
3,125
$
1,940
The variable lease cost was not significant for the years ended January 31, 2022, 2021, and 2020. There were no other lease components for the periods presented.
Lease term and discount rate information are summarized as follows:
As of January 31,
Weighted average remaining lease terms (in years)
5.1
6.3
7.3
Weighted average discount rate
3.8
%
3.9
%
3.9
%
Future lease payments under noncancelable operating leases on an undiscounted cash flow basis as of January 31, 2022 are as follows (in thousands):
Years Ending January 31,
Amount
$
3,781
3,924
4,150
3,734
3,737
Thereafter
1,277
Total minimum lease payments
20,603
Less imputed interest
(1,990
)
Present value of future minimum lease payments
18,613
Less current lease liabilities
(3,130
)
Operating lease liabilities, non-current
$
15,483
8. Commitments and Contingencies
Letter of credit
The Company has a total of $1.8 million in letters of credit outstanding as security deposits for the Company’s leased office spaces as of January 31, 2022 and 2021.
Purchase commitments
In the normal course of business, the Company enters into non-cancelable purchase commitments with various parties to purchase products and services such as software subscriptions and corporate events. As of January 31, 2022, the Company had outstanding non-cancelable office lease, hosting infrastructure commitments, and other commitments with a term of 12 months or longer as follows (in thousands):
Years Ending January 31,
Minimum
Lease
Payments
Hosting
Infrastructure
Commitments
Other
Commitments
Total
(in thousands)
$
3,781
$
6,569
$
7,386
$
17,736
3,924
9,246
7,076
20,246
4,150
9,656
4,823
18,629
3,734
4,167
-
7,901
3,737
-
-
3,737
Thereafter
1,277
-
-
1,277
Total
$
20,603
$
29,638
$
19,285
$
69,526
Litigation
From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims.
In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim.
Although the results of litigation and claims are inherently unpredictable, the Company believes that there was not a reasonable possibility that the Company had incurred a material loss with respect to such loss contingencies, as of January 31, 2022 and 2021.
9. Redeemable Convertible Preferred Stock
In March 2020, the Company entered into a Series E redeemable convertible preferred stock purchase agreement, which provided for the sale and issuance of up to 6,051,132 shares of Series E redeemable convertible preferred stock at a price of $28.9202 per share. The Company sold 6,051,132 shares of Series E redeemable convertible preferred stock for total gross proceeds of $175.0 million and included related issuance costs of $0.3 million.
Upon completion of the IPO in December 2021, all of the Company's redeemable convertible preferred stock outstanding, totaling 94,127,984 shares, were automatically converted into an equivalent number of class B common stock on a one-to-one basis and their carrying value of $349.1 million was reclassified into stockholders’ equity (deficit). As of January 31, 2022, there were no shares of redeemable convertible preferred stock issued and outstanding.
Redeemable convertible preferred stock consisted of the following as of January 31, 2021 (in thousands except share and per share data):
Shares Authorized
Issued and Outstanding
Carrying Value
Liquidation Preference
Issue Price per Share
Series Seed
8,418,228
8,418,228
$
$
$
0.07
Series A
23,575,316
23,575,316
10,114
10,200
$
0.43
Series B
34,434,922
34,434,922
23,927
24,000
$
0.70
Series C
12,625,844
12,625,844
39,909
40,000
$
3.17
Series D
9,022,542
9,022,542
99,879
100,000
$
11.08
Series E
6,051,132
6,051,132
174,724
175,000
$
28.92
Total
94,127,984
94,127,984
$
349,113
$
349,760
The holders of Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock had various rights and preferences as follows:
Voting
Each share of redeemable convertible preferred stock had voting rights equal to an equivalent number of shares of common stock into which it is convertible and votes together as one class with the common stock, except as below:
As long as at least 9,000,000 shares (as adjusted for stock splits, stock dividends, reclassification and the like) of preferred stock were outstanding, holders of Series Seed, Series A, Series B, Series C, Series D, and Series E preferred stock, voting together as a single class on an as-converted basis, were entitled to certain protective provisions which required a majority of holders of preferred stock to approve, among other actions, a liquidation event, an amendment, waiver, or repeal of provisions of the Company’s Certificate of Incorporation or Bylaws, a change to the number of authorized directors of the Company, and a declaration or payment of a dividend with respect to any shares of the Company.
As long as at least 6,750,000 shares (as adjusted for stock splits, stock dividends, reclassification and the like) of Series A preferred stock were outstanding, the holders of a majority of such then-outstanding shares of Series A preferred stock, voting together as a separate series, were entitled to elect one member of the board of directors.
As long as at least 3,945,670 shares (as adjusted for stock splits, stock dividends, reclassification and the like) of Series B preferred stock were outstanding, the holders of a majority of such then-outstanding shares of Series B preferred stock, voting together as a separate series, were entitled to elect one member of the board of directors.
Holders of common stock, voting as a separate class, were entitled to elect three members to the board of directors.
Dividends
Each holder of Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock were entitled to receive, out of any funds legally available, noncumulative dividends at the rate of $0.005323335, $0.034612335, $0.055757335, $0.253448000, $0.886668, and $2.3136 per share, respectively, per annum, payable in preference and priority to any payment of any dividends on common stock when and as declared by the board of directors. After payment of such dividends, any additional dividends or distributions were to be distributed among all holders of common stock and preferred stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of preferred stock were converted to common stock at the then-effective conversion rate. No dividends were ever declared or paid.
Liquidation Preference
In the event of any liquidation, dissolution, or winding-up of the Company, the holders of preferred stock were entitled to receive, prior and in preference to any distribution of the assets or funds of the Company to the holders of the common stock, an amount equal to the issuance price per share of $0.0665335, $0.4326665, $0.6969665, $3.1681, $11.08335, and $28.92015 for Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock, respectively, as adjusted for stock splits, stock dividends, combinations, recapitalizations, and similar transactions, plus any declared but unpaid dividends, or the Liquidation Preference. If the Company had insufficient assets to permit payment of the Liquidation Preference in full to all holders of preferred stock, then the assets of the Company were to be distributed ratably to the holders of preferred stock in proportion to the Liquidation Preference such holders would otherwise be entitled to receive.
After payment of the Liquidation Preference to the holders of preferred stock, the remaining assets of the Company were to be distributed ratably to the holders of common stock. If the holders of preferred stock would have been entitled to a larger distribution had they converted their shares to common stock, then the preferred stock was to be deemed to have converted to common stock.
Redemption
Series Seed, Series A, Series B, Series C, Series D, and Series E convertible preferred stock did not have mandatory redemption provisions.
Conversion
Each share of preferred stock is convertible, at the option of its holder, into the number of fully paid and non-assessable shares of common stock at the applicable conversion price per share on the date that the share certificate was surrendered for conversion. As of January 31, 2021, the conversion prices per share for all shares of preferred stock were equal to the original issue prices, and the rate at which each share converted into common stock was one-for-one. As discussed above, upon completion of the IPO, all outstanding shares of convertible preferred stock were automatically converted to common stock.
Antidilution Protections
Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock had antidilution protection. If the antidilution protection for the preferred stock was triggered, the conversion price would be subject to a broad-based weighted-average adjustment to reduce dilution.
Classification of Redeemable Convertible Preferred Stock
Although the Company’s redeemable convertible preferred stock was not mandatorily redeemable, it was classified outside of stockholders’ equity (deficit) because it was contingently redeemable upon certain events outside of the Company’s control. Accordingly, redeemable convertible preferred stock was presented outside of permanent equity in the mezzanine section of the consolidated balance sheets.
10. Common Stock and Stockholders' Equity (Deficit)
Preferred Stock
In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 100,000,000 shares of undesignated preferred stock with a par value of $0.000015 per share with rights and preferences, including voting rights, designated from time to time by the board of directors.
Common Stock
The Company has two classes of common stock: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 1,000,000,000 shares of Class A common stock and 200,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, converting, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes. Class A and Class B common stock have a par value of $0.000015 per share, and are referred to as common stock throughout the notes to the consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.
Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Future transfers by holders of shares of Class B common stock will generally result in those shares converting to Class A common stock (including any transfer to a broker, equity plan administrator, or other nominee regardless of whether there is a corresponding change in beneficial ownership), subject to limited exceptions, including, but not limited to, certain transfers effected for estate planning purposes, and transfers among affiliates, to the extent the transferor continues to remain an affiliate. Once converted or transferred and converted into Class A common stock, the Class B common stock may not be reissued.
All the outstanding shares of our Class B common stock will convert automatically into shares of Class A common stock upon the earlier of the tenth anniversary of the Company's filing and effectiveness of the amended and restated certificate of incorporation in connection with the IPO or the affirmative vote of the holders of 66-2/3% of the voting power of outstanding Class B common stock. Following such conversion, each share of Class A common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical.
Common Stock Reserved for Future Issuance
The Company reserved shares of common stock for future issuance as follows:
As of January 31,
Series Seed convertible preferred stock
-
8,418,228
Series A convertible preferred stock
-
23,575,316
Series B convertible preferred stock
-
34,434,922
Series C convertible preferred stock
-
12,625,844
Series D convertible preferred stock
-
9,022,542
Series E convertible preferred stock
-
6,051,132
2014 Stock Plan:
Options outstanding
-
15,575,113
Restricted stock units outstanding
-
8,616,594
Remaining shares available for future issuance under the 2014 Plan
-
637,212
2021 Equity Incentive Plan:
Options outstanding
12,381,134
-
Restricted stock units outstanding
10,406,294
-
Remaining shares available for future issuance under the 2021 Plan
17,560,879
-
2021 Employee Stock Purchase Plan
1,900,000
-
Total
42,248,307
118,956,903
Stock Awards
In June 2014, the Company adopted the 2014 Stock Plan, or the 2014 Plan, pursuant to which the board of directors may grant incentive stock options to purchase shares of the Company’s common stock, nonstatutory stock options to purchase shares of the Company’s common stock, restricted stock awards, or RSAs, unrestricted stock awards, and
restricted stock units, or RSUs. As of January 31, 2022, the 2014 Plan was replaced by the 2021 Equity Incentive Plan, or the 2021 Plan, and any remaining shares available for future issuance under the 2014 Plan were terminated.
In November 2021, in connection with the IPO, the board of directors adopted, and the stockholders approved, the 2021 Plan as a successor to the 2014 Plan. Under the 2021 Plan:
•18,330,000 shares of Class A common stock are reserved for future issuance, which includes certain RSUs issued prior to the IPO, as well as any automatic increases in the number of shares of Class A common stock reserved for future issuance under the 2021 Plan.
•1,900,000 shares of Class A common stock are reserved for future issuance under the 2021 Employee Stock Purchase Plan, or the ESPP, as well as any automatic increases in the number of shares of Class A common stock reserved for future issuance under the ESPP.
•Any shares subject to stock options, RSUs or similar awards granted under the 2014 Plan that, on or after the date that the 2014 Plan is terminated, are cancelled, expire or otherwise terminate without having been exercised or issued in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest.
The equity awards available for grant for the 2014 and 2021 Plans for the periods presented are as follows:
As of January 31,
Available at beginning of period
637,212
208,924
Awards authorized
23,051,200
5,654,722
Options granted
(69,700
)
(54,500
)
Options cancelled
301,926
269,326
RSUs granted
(7,106,578
)
(5,858,686
)
RSUs cancelled
961,243
417,426
Termination of the 2014 Plan
(1,611,677
)
-
Shares withheld related to net share settlement of RSUs
1,397,253
-
Available at end of period
17,560,879
637,212
4,721,200 shares were authorized under the 2014 Plan and 18,330,000 shares were authorized under the 2021 Plan for fiscal 2022.
Stock Options
Stock options must be granted with an exercise price equal to the fair market value of a share of common stock at the date of grant. Stock options generally have a 10-year contractual term and vest over a four-year period starting from the date specified in each agreement.
The following table summarizes stock option activity for the 2014 and 2021 Plans (aggregate intrinsic value in thousands):
Options Outstanding
Number of Options Outstanding
Weighted- Average Exercise Price
Weighted- Average Remaining Contractual Term (in Years)
Aggregate Intrinsic Value
Balance as of January 31, 2021
15,575,113
$
1.77
6.7
$
372,671
Stock options granted
69,700
$
28.34
Stock options exercised
(2,961,753
)
$
1.68
$
168,258
Stock options cancelled/forfeited/expired
(301,926
)
$
2.12
Balance as of January 31, 2022
12,381,134
$
1.93
5.7
$
798,374
Exercisable as of January 31, 2022
10,536,517
$
1.39
5.5
$
684,903
The aggregate intrinsic value of options exercised represents the difference between the estimated fair value of common stock on the date of exercise and the exercise price of the options.
Exercisable shares consist of 10,531,267 shares that are vested and 5,250 shares with an early exercise provision that are unvested as of January 31, 2022.
The weighted-average grant-date fair values of option awards granted during fiscal 2022, 2021 and 2020 were $18.46, $10.10, and $3.45 per share, respectively.
The total grant-date fair value of stock options vested was $6.5 million, $10.5 million and $4.5 million during fiscal 2022, 2021 and 2020, respectively.
The total intrinsic value of options exercised during fiscal 2022, 2021 and 2020 were $168.3 million, $81.5 million and $19.3 million, respectively.
Early Exercise of Employee Options
The 2014 Plan allows for the early exercise of stock options for certain individuals as determined by the board of directors. The consideration received for the early exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability and reflected as accrued expenses and other current liabilities in the consolidated balance sheets. This liability is reclassified to additional paid-in capital and common stock as the awards vest. If a stock option is early exercised, the unvested shares may be repurchased by the Company in case of employment termination for any reason, including death and disability, at the price paid by the purchaser for such shares. In fiscal 2020 the Company issued 190,000 shares of common stock for total proceeds of $0.2 million and less than $0.1 million related to early exercised stock options. There were no early exercises in fiscal 2022 and 2021. There were no shares repurchased during any periods presented. As of January 31, 2022 and 2021, the number of shares of common stock subject to repurchase was 5,250 and 40,052 shares with an aggregate repurchase price of de minimis.
Restricted Stock Units
For RSUs, the board of directors determines their vesting conditions, the period over which RSUs will vest, and the settlement. RSUs generally vest over a four-year period starting from the date specified in each agreement. The fair value of RSUs is estimated based on the fair value of the Company’s common stock on the date of grant. RSUs convert into common stock when they vest and settle.
RSUs granted prior to the IPO contained both service and performance conditions. The service-based vesting condition is subject to continuous service with the Company while the performance condition was satisfied in connection with the IPO. The performance-based vesting condition was not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO, the performance-based condition became probable and the Company recognized a cumulative $190.5 million stock-based compensation expense related to the outstanding RSUs through January 31, 2022, inclusive of the RSU modifications discussed below.
The Company’s summary of RSUs activity under the 2014 Plan and the 2021 Plan is as follows:
Number of Awards
Weighted-Average Grant Date Fair Value
Outstanding and unvested at January 31, 2021
8,616,594
$
15.78
RSUs granted
7,106,578
$
48.88
RSUs released
(4,355,635
)
$
16.32
RSUs cancelled
(961,243
)
$
23.33
Outstanding and unvested at January 31, 2022
10,406,294
$
37.46
The total grant-date fair value of RSUs vested was $71.1 million during the year ended January 31, 2022.
Restricted Stock Awards
The fair value of RSAs is estimated based on the fair value of the Company’s common stock on the date of grant. RSAs convert into common stock when they vest and settle.
In March 2021, the Company granted 5,314 shares of RSAs outside of the 2014 Stock Plan at a weighted-average grant date fair value of $28.94 to certain employees. In August 2021, the Company granted 5,250 shares of RSAs outside of the 2014 Stock Plan at a weighted-average grant date fair value of $47.07 to certain employees. Stock-based compensation related to RSAs was not material as of January 31, 2022.
Modification
On November 20, 2019, the Company amended the 2014 Stock Plan to restrict the ability of a successor entity in a change in control transaction to cancel unvested awards. The amendment modified 3,208,340 RSUs in which the Company have reassessed the original grant date fair value as of the modification date. The weighted-average grant date fair value before modification was $7.24 and after modification was $9.13. The Company recognized approximately $22.0 million of stock-based compensation expense during fiscal 2022, and will recognize an additional $1.6 million over the remaining life of such RSUs through the fiscal year ending January 31, 2024.
In November 2021, the Company modified certain RSUs by adding a vesting acceleration condition in the event of employee termination upon a change in control. The amendment modified 414,632 RSUs in which the Company have reassessed the original grant date fair value as of the modification date. The weighted-average grant-date fair value before modification was $23.95 and after modification was $80.00. The Company recognized approximately $21.8 million of stock-based compensation expense during fiscal 2022, and will recognize an additional $11.3 million over the remaining life of such RSUs through the fiscal year ending January 31, 2025.
Employee Stock Purchase Plan
In December 2021, the Company adopted the 2021 Employee Stock Purchase Plan ("ESPP"), which became effective upon completion of the IPO. A total of 1,900,000 shares of Class A common stock are available for sale under the ESPP. In addition, subject to the adjustment provisions of the ESPP, the ESPP also provides for annual increases in the number of shares of Class A common stock that will be available for sale under the ESPP on the first day of each fiscal year beginning on the first day of fiscal 2023 and ending on (and inclusive of) the first day of fiscal 2032, equal to the least of:
•5,700,000 shares of Class A common stock;
•1% of the outstanding shares of all classes of common stock as of the last day of the immediately preceding fiscal year; or
•such other amount as the administrator may determine as of no later than the last day or our immediately preceding fiscal year.
The ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and is comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 15 and December 15 of each year. The first offering period commenced on December 23, 2021 and is scheduled to end on the first trading day on or after June 15, 2022. As of January 31, 2022, no shares of common stock have been issued under the ESPP.
Under our current ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lesser of (1) 85% of the fair market value of a share of our Class A common stock on the first date of an offering or (2) 85% of the fair market value of a share of our Class A common stock on the date of purchase. No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our Class A common stock based on the fair market value per share of our Class A common stock at the beginning of an offering for each calendar year such purchase right is outstanding or 2,000 shares. The 2021 ESPP provides for, at maximum, 24 months offering periods with four offering dates, generally in June and December of each year.
The fair value of the purchase rights granted under the ESPP was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Year Ended January 31,
Expected term (in years)
0.5 - 2.0
Expected volatility
44.49% - 54.92%
Risk-free interest rate
0.16% - 0.68%
Dividend yield
0%
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations is as follows (in thousands):
Year Ended January 31,
Cost of license
$
-
$
-
$
-
Cost of support
8,073
1,056
Cost of cloud-hosted services
2,482
-
-
Cost of professional services
3,367
Sales and marketing
64,991
11,286
2,466
Research and development
67,865
5,974
1,507
General and administrative
53,790
20,599
4,998
Stock-based compensation expenses
$
200,568
$
39,223
$
9,461
Capitalized stock-based compensation
3,562
-
-
Total stock-based compensation expense
$
204,130
$
39,223
$
9,461
There were no secondary transactions in fiscal 2022. In fiscal 2021 and 2020, the Company recorded $32.1 million and $1.5 million of stock-based compensation expense in the consolidated statements of operations associated with secondary stock purchase transactions, respectively. These transactions were executed among certain employees, non-employees, non-related investors and certain affiliated stockholders of the Company. The Company concluded that affiliated stockholders acquired shares from its employees at a price in excess of fair value. Accordingly, the Company recognized such excess value as stock-based compensation expense.
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations for these secondary transactions is as follows (in thousands):
Year Ended January 31,
Cost of license
$
-
$
-
$
-
Cost of support
-
-
Cost of cloud-hosted services
-
-
-
Cost of professional services
-
-
Sales and marketing
-
8,895
-
Research and development
-
4,199
-
General and administrative
-
18,097
1,524
Stock-based compensation expense
$
-
$
32,051
$
1,524
Capitalized stock-based compensation
-
-
-
Total stock-based compensation
$
-
$
32,051
$
1,524
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations exclusive of charges related to secondary sales is as follows (in thousands):
Year Ended January 31,
Cost of license
$
-
$
-
$
-
Cost of support
8,073
Cost of cloud-hosted services
2,482
-
-
Cost of professional services
3,367
Sales and marketing
64,991
2,391
2,466
Research and development
67,865
1,775
1,507
General and administrative
53,790
2,502
3,474
Stock-based compensation expense
$
200,568
$
7,172
$
7,937
Capitalized stock-based compensation
3,562
-
-
Total stock-based compensation
$
204,130
$
7,172
$
7,937
As of January 31, 2022 and 2021, total unrecognized stock-based compensation expense related to the RSUs was approximately $287.7 million and $136.0 million, respectively. This unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately 2.5 years and 1.9 years, respectively.
As of January 31, 2022 and 2021, unrecognized stock-based compensation expense related to outstanding unvested stock options for employees that are expected to vest was approximately $5.2 million and 10.3 million, respectively, which are expected to be recognized over a weighted-average period of approximately 1.6 years and 1.9 years, respectively.
As of January 31, 2022, unrecognized stock-based compensation expense related to ESPP was approximately $21.1 million, which are expected to be recognized over a weighted-average period of approximately 1.9 years.
Stock Option Valuation
The Company estimates the fair value of stock options to employees on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which greatly affect the fair value of each stock option. The assumptions used to estimate the fair value of stock options granted were as follows: `
Year Ended January 31,
Fair value of common stock
$28.94 - $47.07
$16.52-$23.37
$5.44 - $10.34
Expected volatility
49.0% - 50.2%
50.0% - 51.4%
47.3% - 54.1%
Expected term (in years)
6.08
6.08
6.08
Risk-free interest rate
0.9% - 1.04%
0.5% - 0.6%
1.4% - 2.6%
Dividend yield
0%
0%
0%
Fair Value of Common Stock-The fair value of the common stock underlying the Company’s stock options is determined by our board of directors. The board of directors, with input from management, exercises significant judgment and considers numerous objective and subjective factors to determine the fair value of common stock at each grant date.
Expected Term-The expected term represents the period that the stock-based awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method as provided by the Securities and Exchange Commission. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.
Risk-Free Interest Rate-The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
Expected Volatility-Since the Company’s stock is not publicly traded, the expected volatility is based on the historical and implied volatility of similar companies whose stock or option prices are publicly available, after considering the industry, stage of life cycle, size, market capitalization, and financial leverage of the other companies.
Dividend Rate-The expected dividend is assumed to be zero, as the Company has never paid dividends and has no current plans to do so.
There were no option grants to nonemployees and stock-based compensation was not significant for nonemployees during the years ended January 31, 2022, 2021, and 2020.
11. Net Loss Per Share Attributable to Common Stockholders
For periods in which there were Class A and Class B shares outstanding, the rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical, except with respect to voting, converting, and transfer rights. As the liquidation and dividend rights were identical for Class A and Class B common stock, the undistributed earnings were allocated on a proportionate basis and the resulting net loss per share would, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):
Year Ended January 31,
Numerator:
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
Denominator:
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted
83,276,526
63,375,470
59,161,264
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted
$
(3.48
)
$
(1.32
)
$
(0.90
)
The following outstanding potentially dilutive shares of common stock were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because the impact of including them would have been antidilutive:
Year Ended January 31,
Redeemable convertible redeemable preferred stock
-
94,127,984
88,076,852
Stock awards
22,787,428
24,191,707
23,095,986
Share purchase rights under the ESPP
703,862
-
-
Class A and Class B common stock subject to repurchase
5,250
40,052
397,910
Total
23,496,540
118,359,743
111,570,748
12. Income Taxes
The Company’s loss before income taxes was as follows (in thousands):
Year Ended January 31,
Domestic
$
(294,299
)
$
(86,845
)
$
(54,236
)
International
5,147
3,592
1,401
Loss before income taxes
$
(289,152
)
$
(83,253
)
$
(52,835
)
The components of the provision for income taxes are as follows (in thousands):
Year Ended January 31,
Current provisions for income taxes:
Federal
$
-
$
-
$
-
State
Foreign
1,125
Total current tax expense
1,173
Deferred tax expense:
Federal
-
-
-
State
-
-
-
Foreign
(187
)
(148
)
-
Total deferred tax expense
(187
)
(148
)
-
Provision for income taxes
$
$
$
The reconciliation of the statutory federal income tax and the Company's effective income tax is as follows:
Year Ended January 31,
U.S. federal tax benefit at statutory rate
21.0
%
21.0
%
21.0
%
State income taxes, net of federal benefit
8.2
6.9
4.8
Foreign earnings taxed at different rate
0.6
0.6
(0.4
)
Stock-based compensation
13.1
8.0
(0.7
)
Non-deductible expenses and other
(0.7
)
(0.2
)
(1.1
)
Research and development credits
2.9
1.9
2.0
Change in valuation allowance, net
(45.4
)
(38.5
)
(26.6
)
Effective tax rate
(0.3
)
%
(0.3
)
%
(1.0
)
%
The components of the Company’s net deferred tax assets and liabilities were as follows (in thousands):
Year Ended January 31,
Deferred tax assets:
Net operating losses
$
167,218
$
62,279
$
28,920
Deferred revenue
2,687
3,493
3,279
Lease liability
4,772
4,943
5,449
Other accruals
5,542
2,436
Stock-based compensation
25,772
1,963
1,459
Credit carryforwards
18,883
6,468
4,829
Total deferred tax assets
$
224,874
$
81,582
$
44,415
Year Ended January 31,
Deferred tax liabilities:
Fixed assets
$
(2,837
)
$
(943
)
$
(489
)
Right-of-use asset
(3,953
)
(4,071
)
(4,650
)
Deferred commissions
(22,900
)
(12,974
)
(7,877
)
Total deferred tax liabilities
$
(29,690
)
$
(17,988
)
$
(13,016
)
Net deferred tax assets
$
195,184
$
63,594
$
31,399
Valuation allowance
(194,850
)
(63,446
)
(31,399
)
Deferred tax assets, net of valuation allowance
$
$
$
-
Due to its history of operating losses, the Company has not recorded any income tax expense for the year ended January 31, 2022 except for $1.1 million of tax expense for its foreign subsidiaries which are profitable as a result of intercompany compensation, immaterial state minimum taxes, and $0.1 million of deferred tax benefits. Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. A valuation allowance has been provided by the Company against federal and state deferred tax assets. Overall, the valuation allowance increased by $131.4 million and $32.0 million for fiscal 2022 and 2021, respectively.
As of January 31, 2022, the Company has U.S. federal and state net operating loss carryforwards of approximately $647.8 million and $498.3 million respectively, which begin to expire in 2034 and 2025 for federal and state purposes, respectively. The Company also has federal and state research credit carryforwards of $17.7 million and $6.6 million respectively. The federal tax credit carryforwards will begin to expire in 2033, if not utilized. The state credit carryforwards have no expiration date. 	 	
A limitation may apply to the use of the net operating loss and credit carryforwards, under provisions of the Internal Revenue Code of 1986, as amended, and similar state tax provisions that are applicable if the Company experiences an “ownership change.” An ownership change may occur, for example, as a result of issuance of new equity. Should these limitations apply, the carryforwards would be subject to an annual limitation, resulting in a potential reduction in the gross deferred tax assets before considering the valuation allowance.
The Company is subject to income taxes in the United States, California, and other various domestic and international jurisdictions. Carryover attributes beginning January 2016 remain open to adjustment by the U. S. and state authorities. The U.S., state, and foreign jurisdictions have statutes of limitations that generally range from three to five years. Fiscal years outside of the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized. There are no ongoing examinations.	
Unrecognized Tax Benefits
The Company’s reconciliation of the total amounts of unrecognized tax benefits was as follows (in thousands):
Year Ended January 31,
Unrecognized tax benefits as of the beginning of the year
$
1,730
$
1,236
Increases related to prior year tax provisions
-
Decrease related to prior year tax provisions
-
(56
)
Increase related to current year tax provisions
2,644
Unrecognized tax benefits as of the end of the year
$
4,849
$
1,730
The Company had unrecognized tax benefits of approximately $4.8 million and $1.7 million, respectively, as of January 31, 2022 and 2021 which are attributable to federal and state research credits. These unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. The Company has not accrued any interest or penalties.
Recognition of the unrecognized tax benefits would not have an impact on the effective tax because they would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. The Company does not anticipate any significant change in the Company’s uncertain tax positions within 12 months of this date.
13. Related Party Transactions
Certain members of the Company’s board of directors serve on the board of directors of and/or are executive officers of, and, in some cases, are investors in, companies that are customers or vendors of the Company. Aggregate revenue from sales to these companies was $0.5 million, $0.4 million, and $0.2 million for fiscal 2022, 2021, and 2020, respectively. There was $0.1 million of accounts receivable due from these companies as of January 31, 2022 compared to $0.4 million as of January 31, 2021. An aggregate of $0.4 million, $0.1 million, and $0.2 million in expenses related to purchases from these companies was recorded during fiscal 2022, 2021 and 2020, respectively. There were $0.3 million accounts payable due to these companies as of January 31, 2022 compared to de minimis as of January 31, 2021.
14. Subsequent Events
The Company evaluated subsequent events through March 25, 2022, which is the date the audited consolidated financial statements were available to be issued.
In February 2022, the number of shares reserved under the 2021 Plan and ESPP were increased by 9,108,328 and 1,821,665, respectively, pursuant to the annual evergreen increases under each such plan.
In March 2022, the Company granted RSUs for an aggregate of 702,526 shares of common stock to its employees with service-based conditions. The service-based vesting condition is generally met over a four-year period.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of January 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was (a) reported within the same periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Management's Report on Internal Control Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item will be included in our definitive proxy statement for our 2022 annual general meeting of stockholders (the "Proxy Statement"), which will be filed with the SEC within 120 days after the end of our year ended January 31, 2022, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) Financial Statements
See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedule
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the financial statements or the notes to those financial statements.
(a)(3) Exhibits
We have filed or incorporated by reference the exhibits listed on the accompanying Exhibit Index.
EXHIBIT INDEX
Exhibit
Description
Form
File No.
Exhibit
Filing Date
Number
3.1
Amended and Restated Certificate of Incorporation of the Registrant.
8-K
001-41121
3.1
12/13/2021
3.2
Amended and Restated Bylaws of the Registrant.
8-K
001-41121
3.2
12/13/2021
4.1
Fifth Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its stockholders, dated March 6, 2020, as amended.
S-1
333-260757
4.1
11/04/2021
4.2
Form of Class A common stock certificate of the Registrant.
S-1/A
333-260757
4.2
11/17/2021
4.3*
Description of the Registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1+
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.
S-1
333-260757
10.1
11/4/2021
10.2+
2014 Stock Plan, as amended, and forms of agreement thereunder.
S-1
333-260757
10.2
11/4/2021
10.3+
2021 Equity Incentive Plan and forms of agreement thereunder.
S-1
333-260757
10.3
11/4/2021
10.4+
2021 Employee Stock Purchase Plan.
S-1
333-260757
10.4
11/4/2021
10.5+
Confirmatory Offer Letter between the Registrant and Armon Dadgar.
S-1
333-260757
10.5
11/4/2021
10.6+
Confirmatory Offer Letter between the Registrant and Marc Holmes.
S-1
333-260757
10.6
11/4/2021
10.7+
Confirmatory Offer Letter between the Registrant and David McJannet.
S-1
333-260757
10.7
11/4/2021
10.8+
Confirmatory Offer Letter between the Registrant and Brandon Sweeney.
S-1
333-260757
10.8
11/4/2021
10.9+
Confirmatory Offer Letter between the Registrant and Navam Welihinda.
S-1
333-260757
10.9
11/4/2021
10.10+
Executive Incentive Compensation Plan.
S-1
333-260757
10.10
11/4/2021
10.11+
Form of Change in Control and Severance Agreement between the Registrant and each of its executive officers.
S-1/A
333-260757
10.10
11/17/2021
10.12+
Outside Director Compensation Policy.
S-1
333-260757
10.11
11/04/2021
10.13
Loan and Security Agreement between the Registrant and HSBC Ventures USA Inc., dated November 23, 2020.
S-1
333-260757
10.12
11/04/2021
21.1*
List of Subsidiaries of the Registrant.
23.1*
Consent of Deloitte & Touche LLP, independent registered public accounting firm.
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
* Filed herewith
+ Indicates management contract or compensatory plan.
 The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: March 25, 2022
By:
/s/ Navam Welihinda
Navam Welihinda
Chief Financial Officer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David McJannet and Navam Welihinda, and each one of them, as his or her true and lawful attorney-in-fact and agent, with the power of substitution and re-substitution, for him or her and in their name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ David McJannet
Chief Executive Officer and Chairman of the Board
March, 25, 2022
David McJannet
(Principal Executive Officer)
/s/ Navam Welihinda
Chief Financial Officer
March, 25, 2022
Navam Welihinda
(Principal Financial and Accounting Officer)
/s/ Armon Dadgar
Co-Founder, Chief Technology Officer and Director
March, 25, 2022
Armon Dadgar
/s/ Todd Ford
Director
March, 25, 2022
Todd Ford
/s/ Susan St. Ledger
Director
March, 25, 2022
Susan St. Ledger
/s/ Glenn Solomon
Director
March, 25, 2022
Glenn Solomon
/s/ Sigal Zarmi
Director
March, 25, 2022
Sigal Zarmi

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We have operations in the United States and internationally, and we are exposed to market risk in the ordinary course of our business.
Interest Rate Risk
Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments in money market funds. As of January 31, 2022, we had cash and cash equivalents of $1.4 billion and restricted cash of $1.8 million. The carrying amount of our cash equivalents reasonably approximates fair value due to the short maturities of these instruments. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs, and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income. Due to the short-term nature of our investment portfolio and type of investments included in portfolio, we do not believe an immediate 10% increase or decrease in interest rates would have a material effect on the fair market value of our portfolio. We, therefore, do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
Foreign Currency Risk
All of our sales contracts are denominated in U.S. dollars. A portion of our operating expenses are incurred outside of the United States, denominated in foreign currencies, and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound, Euro, Canadian Dollar, Australian Dollar, Singaporean Dollar, Japanese Yen, and Indian Rupee. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of operations. As the impact of foreign currency exchange rates has not been material to our historical operating results, to date we have not entered into derivative or hedging transactions; we may do so in the future if our exposure to foreign currency becomes more significant. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign exchange rates.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
HASHICORP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
INDEPENDENT AUDITORS’ REPORT (PCAOB ID 34)
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of HashiCorp, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of HashiCorp, Inc. and subsidiaries (the "Company") as of January 31, 2022 and 2021, the related consolidated statements of operations, consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended January 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
San Jose, California
March 25, 2022
We have served as the Company’s auditor since 2019.
HASHICORP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
As of January 31,
Assets
Current assets
Cash and cash equivalents
$
1,355,828
$
270,793
Accounts receivable, net of allowance of $20 and $36, respectively
126,812
93,462
Deferred contract acquisition costs
32,205
15,275
Prepaid expenses and other current assets
17,744
4,574
Total current assets
1,532,589
384,104
Property and equipment, net
15,897
8,235
Operating lease right-of-use assets
15,420
15,766
Deferred contract acquisition costs, non-current
57,126
34,970
Other assets, non-current
2,643
2,189
Total assets
$
1,623,675
$
445,264
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable
$
14,267
$
5,203
Accrued expenses and other current liabilities
4,542
2,138
Accrued compensation and benefits
56,939
19,213
Operating lease liabilities
3,130
2,389
Deferred revenue
206,416
136,091
Customer deposits
23,383
22,219
Total current liabilities
308,677
187,253
Deferred revenue, non-current
16,873
11,206
Operating lease liabilities, non-current
15,483
16,755
Other liabilities, non-current
2,741
Total liabilities
341,384
217,955
Commitments and contingencies (note 8)
Redeemable convertible preferred stock
Redeemable convertible preferred stock; $0.000015 par value; 0 and 94,127,984 shares authorized as of January 31, 2022 and 2021, respectively; 0 and 94,127,984 shares issued and outstanding as of January 31, 2022 and 2021, respectively; aggregate liquidation preference of $0 and $349,760 as of January 31, 2022 and 2021, respectively
-
349,113
Stockholders’ equity (deficit)
Preferred stock; $0.000015 par value; 100,000,000 and 0 shares authorized as of January 31, 2022 and 2021, respectively; 0 and 0 shares issued and outstanding as of January 31, 2022 and 2021, respectively
-
-
Class A common stock, par value of $0.000015 per share; 1,000,000,000 and 0 shares authorized as of January 31, 2022 and 2021, respectively; 30,596,695 and 0 shares issued and outstanding as of January 31, 2022 and 2021, respectively
-
Class B common stock, par value of $0.000015 per share; 200,000,000 and 192,000,000 shares authorized as of January 31, 2022 and 2021, respectively; 151,569,865 and 65,577,877 shares issued and outstanding as of January 31, 2022 and 2021, respectively
Additional paid-in capital
1,788,390
94,159
Accumulated deficit
(506,102
)
(215,964
)
Total stockholders’ equity (deficit)
1,282,291
(121,804
)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)
$
1,623,675
$
445,264
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Year Ended January 31,
Revenue:
License
$
47,504
$
36,208
$
18,503
Support
247,566
165,607
96,820
Cloud-hosted services
18,613
4,092
2,339
Total subscription revenue
313,683
205,907
117,662
Professional services
7,086
5,947
3,599
Total revenue
320,769
211,854
121,261
Cost of revenue:
Cost of license
Cost of support
38,080
27,194
17,704
Cost of cloud-hosted services
14,031
4,811
1,390
Total cost of subscription revenue
52,332
32,541
19,388
Cost of professional services
11,108
8,511
4,527
Total cost of revenue
63,440
41,052
23,915
Gross profit
257,329
170,802
97,346
Operating expenses:
Sales and marketing
269,504
141,018
89,308
Research and development
165,031
65,248
40,118
General and administrative
112,108
48,545
24,137
Total operating expenses
546,643
254,811
153,563
Loss from operations
(289,314
)
(84,009
)
(56,217
)
Other income, net
3,382
Loss before income taxes
(289,152
)
(83,253
)
(52,835
)
Provision for income taxes
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
Net loss per share attributable to common stockholders, basic and diluted
$
(3.48
)
$
(1.32
)
$
(0.90
)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
83,276,526
63,375,470
59,161,264
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
Redeemable Convertible Preferred Stock
Class A and Class B
Common Stock
Additional Paid-in
Accumulated
Total Stockholders'
Shares
Amount
Shares
Amount
Capital
Deficit
Equity (Deficit)
Balance as of February 1, 2019
88,076,852
$
174,389
58,967,390
$
$
41,509
$
(79,079
)
$
(37,569
)
Issuance of common stock upon exercise of stock options
-
-
2,289,774
-
1,048
-
1,048
Issuance of common stock related to early exercised stock options
-
-
190,000
-
-
-
-
Vesting of early exercised stock options
-
-
-
-
-
Stock-based compensation
-
-
-
-
9,461
-
9,461
Net loss
-
-
-
-
-
(53,370
)
(53,370
)
Balance as of January 31, 2020
88,076,852
$
174,389
61,447,164
$
$
52,208
$
(132,449
)
$
(80,240
)
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $276
6,051,132
174,724
-
-
-
-
-
Issuance of common stock upon exercise of stock options
-
-
4,130,713
-
2,629
-
2,629
Vesting of early exercised stock options
-
-
-
-
-
Stock-based compensation
-
-
-
-
39,223
-
39,223
Net loss
-
-
-
-
(83,515
)
(83,515
)
Balance as of January 31, 2021
94,127,984
$
349,113
65,577,877
$
$
94,159
$
(215,964
)
$
(121,804
)
Conversion of redeemable convertible preferred stock to common stock upon initial public offering
(94,127,984
)
$
(349,113
)
94,127,984
349,112
-
349,113
Issuance of common stock upon initial public offering, net of underwriting discounts and issuance costs
-
-
16,530,000
1,246,924
-
1,246,925
Issuance of common stock for restricted stock awards
-
-
10,564
-
-
-
-
Issuance of common stock upon exercise of stock options
-
-
2,961,753
-
5,036
-
5,036
Vesting of early exercised stock options
-
-
-
-
-
Issuance of common stock upon settlement of restricted stock units
-
-
4,355,635
-
-
-
-
Tax withholdings on settlement of restricted stock units
-
-
(1,397,253
)
-
(110,989
)
-
(110,989
)
Stock-based compensation
-
-
-
-
204,130
-
204,130
Net loss
-
-
-
-
-
(290,138
)
(290,138
)
Balance as of January 31, 2022
-
$
-
182,166,560
$
$
1,788,390
$
(506,102
)
$
1,282,291
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended January 31,
Cash flows from operating activities
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
Adjustments to reconcile net loss to cash from operating activities:
Stock-based compensation expense
200,568
39,223
9,461
Depreciation and amortization expense
2,498
Non-cash operating lease cost
2,382
2,098
1,263
Other
Changes in operating assets and liabilities:
Accounts receivable
(33,364
)
(41,407
)
(27,698
)
Deferred contract acquisition costs
(39,086
)
(19,984
)
(15,920
)
Prepaid expenses and other assets
(13,626
)
2,653
(3,436
)
Accounts payable
8,464
1,093
2,423
Accrued expenses and other liabilities
(895
)
3,277
Accrued compensation and benefits
32,379
7,536
6,646
Operating lease liabilities
(2,567
)
(1,789
)
(801
)
Deferred revenue
75,992
46,911
45,605
Customer deposits
1,164
3,336
6,862
Net cash used in operating activities
(56,215
)
(39,623
)
(28,365
)
Cash flows from investing activities
Purchases of property and equipment
(214
)
(4,304
)
(980
)
Capitalized internal-use software
(6,382
)
(2,920
)
-
Purchase of short-term investments
-
(50,000
)
(120,000
)
Proceeds from maturities of short-term investments
-
80,000
167,000
Net cash (used in) provided by investing activities
(6,596
)
22,776
46,020
Cash flows from financing activities
Proceeds from initial public offering, net of underwriting discounts and commissions
1,252,974
-
-
Taxes paid related to net share settlement of equity awards
(105,642
)
-
-
Payments of loan issuance costs
-
(229
)
-
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs
-
174,724
-
Proceeds from issuance of common stock upon exercise of stock options
5,036
2,629
1,048
Proceeds from issuance of common stock related to early exercised stock options
-
-
Payments of deferred offering costs
(4,522
)
-
-
Net cash provided by financing activities
1,147,846
177,124
1,071
Net increase in cash, cash equivalents, and restricted cash
1,085,035
160,277
18,726
Cash, cash equivalents, and restricted cash beginning of period
272,576
112,299
93,573
Cash, cash equivalents, and restricted cash end of period
$
1,357,611
$
272,576
$
112,299
Supplemental disclosure of cash flow information
Cash paid for income taxes
$
$
$
Cash paid for operating lease liabilities
$
3,291
$
2,479
$
1,379
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment included in accounts payable
$
-
$
-
$
1,283
Operating lease right-of-use assets obtained in exchange for new lease obligations
$
2,036
$
-
$
10,829
Tenant allowance included in prepaid expenses and other current assets
$
-
$
-
$
1,666
Unpaid deferred offering costs
$
1,527
$
-
$
-
Unpaid taxes related to net share settlement of equity awards
$
5,347
$
-
$
-
Conversion of convertible preferred stock to common stock upon initial public offering
$
349,113
$
-
$
-
Capitalized stock-based compensation expense
$
3,562
$
-
$
-
Vesting of early exercised stock options
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
HASHICORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
Description of Business
HashiCorp, Inc. was incorporated in Delaware in May 2013. HashiCorp, Inc. is headquartered in San Francisco, California and has wholly owned subsidiaries around the world, or collectively, the Company. The Company’s foundational technologies solve the core infrastructure challenges of cloud adoption by enabling an operating model that unlocks the full potential of modern public and private clouds. The Company’s cloud operating model provides consistent workflows and a standardized approach to automating the critical processes involved in delivering applications in the cloud: infrastructure provisioning, security, networking, and application deployment. The Company’s primary commercial products are HashiCorp Terraform, Vault, Consul, and Nomad. The Company’s software is predominantly self-managed by users and customers who deploy it across public, private, and hybrid cloud environments. The Company also offers a fully managed cloud platform for multiple products that further accelerates enterprise cloud migration by addressing resource and skills gaps, improving operational efficiency and speeding up deployment time for customers. Additionally, the Company provides premium support and services.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP.
Initial Public Offering
In December 2021, the Company completed its initial public offering, or IPO, in which the Company issued and sold 16,530,000 of its Class A common stock at a public offering price of $80.00 per share, which included 1,230,000 shares issued upon the exercise of the underwriters' overallotment option to purchase additional shares in January 2022. The Company received net proceeds of $1,247 million after deducting underwriting discounts and commissions of $69.4 million and offering expenses of $6.0 million. Immediately prior to the closing of the IPO, all 94,127,984 shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into an equal number of shares of Class B common stock.
Upon the consummation of the IPO:
•$349.1 million of redeemable convertible preferred stock were reclassified into Class B common stock and additional paid-in capital.
•$6.0 million of deferred offering costs were reclassified into stockholders’ equity (deficit) as an offset against the IPO proceeds.
•$190.5 million in cumulative stock-based compensation expense related to the outstanding RSUs through January 31, 2022 was recognized.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
The Company’s fiscal year ends on January 31. References to fiscal 2022, for example, refer to the fiscal year ended January 31, 2022.
Foreign Currency Transactions
The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. Transactions denominated in currencies other than the functional currency are remeasured at the average exchange rate in effect during the reporting period. At the end of each reporting period all monetary assets and liabilities of the Company’s subsidiaries are remeasured at the current U.S. dollar exchange rate at the end of the reporting period. Nonmonetary assets and liabilities denominated in foreign currencies have been remeasured into U.S. dollar using historical exchange rates. Remeasurement gains and losses are included within other income, net in the accompanying consolidated statements of operations. Remeasurement gains and losses were not material to the consolidated financial statements for fiscal 2022, 2021, and 2020.
Stock Split
On November 1, 2020, the Company effected a 2-for-1 stock split of its capital stock. All of the share and per share information referenced throughout the consolidated financial statements and notes to the consolidated financial statements have been retroactively adjusted to reflect this stock split.
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense during the reporting period. Such management estimates include the determination of standalone selling prices of the Company’s performance obligations, the discount rates used for operating leases, the fair value of share-based awards, software development costs, the estimated period of benefit of deferred contract acquisition costs, and accounting for income taxes, including the valuation allowance on deferred tax assets and uncertain tax positions. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates.
COVID-19
The novel coronavirus, or COVID-19, pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions. The full extent to which the COVID-19 pandemic will directly or indirectly impact the global economy, the lasting social effects, and impact on the Company’s business, results of operations, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. As of the date of issuance of the consolidated financial statements, the Company is not aware of any specific event or circumstance related to COVID-19 that would require it to update its estimates or judgments or adjust the carrying value of its assets or liabilities. Actual results could differ from those estimates and any such differences may be material to the consolidated financial statements. As events continue to evolve and additional information becomes available, the Company’s estimates and assumptions may change materially in future periods.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value.
Restricted Cash
Restricted cash constitutes letters of credit established according to the requirements under certain non-cancellable operating lease agreements and is included in other assets, non-current in the consolidated balance sheets. As of January 31, 2022, January 31, 2021, and January 31, 2020, the Company maintained $1.8 million, $1.8 million, and $1.8 million in restricted cash, respectively.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):
As of January 31,
Cash and cash equivalents
$
1,355,828
$
270,793
$
110,519
Restricted cash included in other assets, non-current
1,783
1,783
1,780
Cash, cash equivalents, and restricted cash
$
1,357,611
$
272,576
$
112,299
Accounts Receivable and Allowance for Doubtful Accounts
Trade Accounts receivable primarily consists of amounts billed currently due from customers. The Company’s accounts receivable are subject to collection risk. Gross accounts receivable are reduced for this risk by an allowance for doubtful accounts. This allowance is for estimated losses resulting from the inability of the Company’s customers to make required payments. The Company determines the need for an allowance for doubtful accounts based upon various factors, including past collection experience, credit quality of the customer, age of the receivable balance, and current economic conditions, as well as specific circumstances arising with individual customers.
The allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the Company’s receivables portfolio. Activity related to the Company’s allowance for doubtful accounts was as follows (in thousands):
Year Ended January 31,
Beginning balance
$
$
$
Bad debt expense
(62
)
Write-offs
(30
)
(99
)
-
Ending balance
$
$
$
When management determines a balance is uncollectible and the Company no longer actively pursues collection of the receivable, both the gross accounts receivable and the full allowance on that receivable are written off.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and trade accounts receivable. Although the Company deposits its cash with multiple financial institutions, the deposits, at times, may exceed federally insured limits. The Company invests its excess cash in highly-rated money market funds. The Company extends credit to customers in the normal course of business. The Company monitors for uncollectible accounts on an ongoing basis. There were no customers that individually exceeded 10% of the Company’s revenue for fiscal 2022, 2021, and 2020. As of January 31, 2022 and 2021, no customer represented 10% or more of accounts receivable, net.
Property and Equipment, net
Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally ranging from three to five years. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the respective assets or the lease term. Expenditures for maintenance and repairs are expensed as incurred and significant improvements and betterments that substantially enhance the life of an asset are capitalized.
Revenue Recognition
The Company generates revenue primarily from subscriptions and, to a lesser extent, professional services.
Subscription revenue. The Company generates revenue primarily from subscriptions which include licenses of proprietary features, support and maintenance revenue, and cloud-hosted services. Licenses for self-managed software consist of term licenses and provide the customer with a right to use the software for a fixed term commencing upon delivery to the customer. Support and maintenance revenue (collectively referred to as Support Revenue in the consolidated statements of operations) are bundled with each license subscription for the term of the license period. Cloud-hosted services are provided on a subscription basis and give customers access to the Company’s cloud solutions, which include related customer support.
Professional services. Professional services revenue consists of revenue from professional services and training services, which were generally sold on a time and materials basis prior to fiscal 2021. Commencing in fiscal 2021 the Company began to sell professional services on a fixed fee basis.
The Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps:
(i) identification of the contract with a customer;
The Company contracts with its customers typically through order forms or purchase orders which in most cases are governed by master sales agreements. At contract inception the Company evaluates whether two or more contracts should be combined and accounted for as a single contract and identifies the different performance obligations accordingly.
(ii) determination of whether the promised goods or services are performance obligations;
Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct and distinct in the context of the contract.
The Company’s self-managed subscriptions include both an obligation to provide the customer with the right to use its proprietary software, as well as an obligation to provide support (on both open-source and proprietary software) and maintenance. Support is contractually mandatory in order for the customer to legally use the proprietary software. Certain arrangements with customers include a renewal option that is separately evaluated for a material right.
The Company’s cloud-hosted services products provide access to hosted software as well as support, which the Company considers to be a single performance obligation. Professional services are not integral to the functionality of the subscription services and are generally distinct from the other performance obligations.
The Company has concluded that its contracts with customers do not contain warranties that give rise to a separate performance obligation.
(iii) measurement of the transaction price;
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services and products to the customer. The Company records revenue net of any value added or sales tax.
Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the Company’s contracts contain a significant financing component.
(iv) allocation of the transaction price to the performance obligations; and
The Company measures the transaction price with reference to the standalone selling price, or SSP, of the various performance obligations inherent within a contract. Management determines the SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to customers, discounting practices, and overall pricing objectives, while maximizing observable inputs.
The Company does not have observable SSP for its licenses or its support as they are not sold separately. The Company developed a model to estimate relative SSP for each performance obligation using an “expected cost-plus margin” approach. This model uses observable data points to develop the main assumptions including the estimated useful life of the intellectual property and appropriate margins.
If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation based on their relative SSP. The Company also considers if there are any additional material rights inherent in a contract, and if so, the Company allocates a portion of the transaction price to such rights based on its relative SSP.
For the Company’s contracts with customers which include a material right of renewal each month, the Company uses the practical alternative to allocate value to the future optional renewal of software and related mandatory support services. As the Company expects renewals over the full contractually stated term, the entire transaction price is allocated evenly to each monthly renewal option.
(v) recognition of revenue when the Company satisfies each performance obligation.
Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised product or service to the customer. The Company’s self-managed subscriptions include both upfront revenue recognition when the license is delivered as well as revenue recognized ratably over the contract period for support and maintenance based on the stand-ready nature of these elements. When arrangements include material rights associated with monthly renewal options, the Company recognizes revenue each month equal to the allocated value of a one-month term license and one-month support and maintenance services.
In the event that the customer cancels support, the customer receives a refund for the remaining contractual balance of support while any remaining nonrefundable software balance is immediately recognized as revenue. The amount of potentially refundable contractual balance is included in customer deposits within the consolidated balance sheets.
Revenue on committed cloud-hosted services is recognized ratably when performance obligations are satisfied over the contract period, whereas revenue from non-committed, pay-as-you-go cloud-hosted services are recognized when usage occurs.
Revenue for professional services and training services is recognized as these services are delivered. Professional services are services utilized by some self-managed customers to accelerate the deployment of the Company’s products.
The Company sells directly through its sales team and through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all the revenue recognition criteria above are met.
Support and maintenance revenue and cloud-hosted services make up the majority of our revenue and are typically recognized ratably over the terms of our subscription contracts. Therefore, a substantial portion of the revenue reported in each period is attributable to the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, increases or decreases in new sales or renewals in any one period may not be immediately reflected as revenue for that period. Any downturn in sales, however, may negatively affect revenue in future periods. Accordingly, the effect of downturns in sales and market acceptance of the Company’s products, and potential changes in the Company’s rate of renewals, may not be fully reflected in the Company’s results of operations until future periods.
Contract Balances
The Company generates subscription revenue from contracts with typical stated durations ranging from one to three years. Customers are typically invoiced annually in advance and, to a lesser extent, multiple years in advance.
The Company receives payments from customers based upon contractual billing schedules; accounts receivable is recorded when the right to consideration becomes unconditional. Payment terms on invoiced amounts are typically 30 to 60 days. Contract assets include amounts related to the Company’s contractual right to consideration for both completed and partially completed performance obligations that may not have been invoiced. Contract assets were $2.9 million and $1.3 million as of January 31, 2022 and January 31, 2021, respectively, and are included in accounts receivable, net in the consolidated balance sheets.
Contract liabilities include payments received in advance of performance under the contract and are recorded to deferred revenue and deferred revenue, non-current in the consolidated balance sheets. Customer refundable prepayments are recorded as customer deposits in the consolidated balance sheets.
Deferred Contract Acquisition Costs
Deferred contract acquisition costs represent costs that are incremental to the acquisition of customer contracts, which consist mainly of sales commissions and associated payroll taxes. The Company determines whether costs should be deferred based on sales compensation plans, by determining if the commissions are in fact incremental and would not have occurred absent the customer contract.
Sales commissions for the renewal of a contract are not considered commensurate with the commissions paid for the acquisition of the initial contract given the substantive difference in commission rates in proportion to their respective contract values. Commissions paid upon the initial acquisition of a contract are amortized over an estimated period of benefit of five years while commissions paid for renewal contracts are amortized over the contractual term of the renewals. Amortization of deferred contract acquisition costs is recognized commensurate with the same pattern of revenue recognition and included in sales and marketing expense in the consolidated statements of operations.
The Company determines the period of benefit for commissions paid for the acquisition of the initial contract by taking into consideration the expected contract term and expected renewals of customer contracts, the duration of relationships with the Company’s customers, customer retention data, the Company’s technology development lifecycle and other factors. Management periodically reviews the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred costs.
Leases
Leases consist of the Company’s contractual obligations that convey the right to use office spaces for a period of time in exchange for consideration. The Company determines whether a contract contains a lease at inception. Operating leases are included in operating lease right-of-use assets, operating lease liabilities and operating lease liabilities, non-current on the Company’s consolidated balance sheets. The Company currently does not have any financing leases. A right-of-use asset represents the Company’s right to use an underlying asset and a lease liability represents the Company’s obligation to make payments during the lease term. The operating lease right-of-use asset also includes any advance lease payments made and excludes lease incentives. Lease payments include fixed payments and variable payments based on an index or rate, if any, and are recognized as lease expense on a straight-line basis over the term of the lease. The lease term includes options to extend or terminate the lease when it is reasonably certain they will be exercised. Variable lease payments not based on a rate or index are expensed as incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease components and non-lease components as a single lease component. The Company applies the practical expedient to not recognize lease assets and lease liabilities for leases with an original term of 12 months or less.
The lease liability is measured as the present value of the remaining lease payments over the lease term upon the lease commencement date. The right-of-use asset is initially measured as the present value of the lease payments, adjusted for initial direct costs, prepaid lease payments and lease incentives. The discount rate used to determine the present value is the Company’s incremental borrowing rate unless the interest rate implicit in the lease is readily determinable. The Company estimates its incremental borrowing rate based on the information available at lease commencement date for collateralized borrowings with a similar term.
Deferred Offering Costs
Deferred offering costs consist of direct incremental legal, accounting, consulting, and other fees related to the Company’s IPO which were included in other assets, non-current before the IPO. Upon consummation of the IPO in December 2021, $6.0 million of deferred offering costs were reclassified to stockholders' equity (deficit) and recorded against the proceeds from the offering.
Cost of Revenue
Cost of subscription revenue primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with customer support and maintenance, third-party cloud infrastructure costs, amortization of internal-use software, and allocated overhead.
Cost of professional services primarily includes personnel-related costs, such as salaries, bonuses and benefits, and stock-based compensation for employees associated with our professional services, costs of third-party contractors, and allocated overhead.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related costs, such as salaries, sales commissions that are recognized as expenses over the period of benefit, bonuses, benefits, stock-based compensation, costs related to marketing programs, travel-related costs, software and subscription services, and allocated overhead.
Research and Development
Research and development expenses consist primarily of personnel-related costs, such as salaries, bonuses, benefits, and stock-based compensation, net of capitalized amounts, contractor and professional services fees, software and subscription services dedicated for use by our research and development organization and allocated overhead.
General and Administrative
General and administrative expenses for administrative functions including finance, legal, and human resources, consist primarily of personnel-related costs, such as salaries, bonuses, benefits, and stock-based compensation, as well as software and subscription services, and legal and other professional fees.
Capitalized Software Development Costs
Capitalization of software development costs for products to be sold to third parties begins upon the establishment of technological feasibility and ceases when the product is available for general release. There is generally no significant passage of time between achievement of technological feasibility and the availability of the Company’s enterprise software for general release, and the majority of the Company’s software is open-source. Therefore, the Company has not capitalized any software costs through fiscal 2022, 2021, and 2020. All software development costs have been charged to research and development expense in the consolidated statements of operations as incurred.
Costs related to software acquired, developed, or modified solely to meet the Company’s internal requirements, with no substantive plans to market such software at the time of development, or costs related to development of web-based products are capitalized. Costs incurred during the preliminary planning and evaluation stage of the project and during the post implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. Capitalized costs are recorded as part of property and equipment, net. Maintenance and training costs are expensed as incurred. Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally five years, and is recorded as cost of cloud-hosted services in the consolidated statements of operations. No amounts were capitalized for fiscal 2020 as internal-use software costs were immaterial. The Company capitalized $9.9 million and $2.9 million, in internal-use software for fiscal 2022 and 2021, respectively. Amortization expense was $1.4 million and de minimis for fiscal 2022 and 2021, respectively. There was no amortization expense for fiscal 2020.
Advertising Costs
Advertising costs, which are expensed and included in sales and marketing expense in the consolidated statements of operations when incurred, were $6.3 million, $2.2 million, and $2.6 million for fiscal 2022, 2021, and 2020, respectively.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment and capitalized software development costs subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset to its carrying value. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals. There was no impairment charge recorded during fiscal 2022, 2021, and 2020.
Stock-Based Compensation
The Company estimates the fair value of stock-based awards on the date of grant (including stock options, restricted stock awards ("RSA"), restricted stock units ("RSU") and ESPP participation). For awards with a service-based vesting condition, the related stock-based compensation expense is recognized over the vesting period of the entire award using the straight-line attribution method. For awards that include both a performance and service condition, the Company amortizes stock-based compensation expense on a graded vesting basis over the vesting period, after assessing the probability of achieving requisite performance. The Company recognizes forfeitures as they occur.
The Company selected the Black-Scholes option-pricing model as the method for determining the estimated fair value for stock options. The Black-Scholes option-pricing model requires the use of management assumptions, which determine the fair value of stock-based awards, including the fair value of common stock, the option’s expected term, and the price volatility of the underlying stock.
The fair value of each RSA and RSU award is based on the fair value of the underlying common stock as of the grant date.
The fair value of each option and stock purchase right granted under the ESPP is estimated on the grant date using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the fair value of the underlying common stock, the expected term of the award, the expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock.
The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. We account for forfeitures as they occur instead of estimating the number of awards expected to be forfeited.
Net Loss per Share Attributable to Common Stockholders
The Company computes net loss per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company considers convertible redeemable preferred stock and unvested common stock, which includes early exercised stock options, to be participating securities as holders of such securities have non-forfeitable dividend rights in the event of the declaration of a dividend for shares of common stock. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses. As such, net loss for the periods presented was not allocated to participating securities.
Basic and diluted net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding. Net loss is allocated based on the weighted-average shares outstanding for each class of common stock. As the Company has net losses for the periods presented, all potentially dilutive common stock, which are comprised of convertible redeemable preferred stock, stock options, RSUs, and early exercised options are anti-dilutive. Diluted net loss per share is calculated by giving effect to all potentially dilutive securities
outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. Diluted net loss per share is the same as basic net loss per share in periods when the effects of potentially dilutive shares of common stock are anti-dilutive.
Comprehensive Loss
Comprehensive loss consists of other comprehensive loss and net loss. Other comprehensive loss refers to revenue, expenses, gains and losses that are recorded as an element of stockholders’ deficit but are excluded from net loss. The Company did not have any other comprehensive loss transactions during the period presented. Accordingly, comprehensive loss is equal to net loss.
Segments
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker, or CODM. The Company’s Chief Executive Officer is its CODM. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates in one operating and one reportable segment. Substantially all of the Company’s long-lived assets were held in the United States as of January 31, 2022 and 2021. The Company presents revenue by region in Note 3 to the consolidated financial statements.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of January 31, 2022 and 2021, the Company has recorded a full valuation allowance against its net U.S. federal and state deferred tax assets.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company recognizes interest and penalties related to income tax matters as a component of the income tax provision
Fair Value Measurements
Fair value accounting is applied for all assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company follows the established framework for measuring fair value in accordance with GAAP.
Employee Benefit Plan
The Company sponsors a qualified 401(k) defined contribution plan covering eligible employees. Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service. There have been no employer contributions under this plan to date.
Recent Accounting Pronouncements Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies and eliminates certain exceptions to the general principles of ASC 740, Income taxes. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2020. The Company adopted this guidance in the first quarter of fiscal 2022, and the impact of this ASU on its consolidated financial statements was not material as the Company records a full valuation allowance on its U.S. deferred tax assets.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform-Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates such as the Secured Overnight Financing Rate, or SOFR. This guidance is effective upon issuance and generally can be applied through the end of calendar year 2022. The Company will adopt this guidance in fiscal 2023. The Company is currently evaluating the impact and applicability of this new standard.
3. Revenue and Performance Obligations
Disaggregation of revenue
The following table presents revenue by category (dollars in thousands):
Year Ended January 31,
Amount
% of Total
Revenue
Amount
% of Total
Revenue
Amount
% of Total Revenue
License
$
47,504
%
$
36,208
%
$
18,503
%
Support
247,566
165,607
96,820
Cloud-hosted services
18,613
4,092
2,339
Total subscription revenue
313,683
205,907
117,662
Professional services
7,086
5,947
3,599
Total revenue
$
320,769
%
$
211,854
%
$
121,261
%
The following table summarizes the revenue by region based on the billing address of customers who have contracted to use the Company products and services (dollars in thousands):
Year Ended January 31,
Amount
% of Total
Revenue
Amount
% of Total Revenue
Amount
% of Total Revenue
United States
$
235,428
%
$
157,916
%
$
92,771
%
Rest of the world
85,341
53,938
28,490
Total
$
320,769
%
$
211,854
%
$
121,261
%
No other country, outside of the United States, exceeded 10% of total revenue during the periods presented.
Contract Balance
Changes in deferred revenue and unbilled accounts receivable were as follows (in thousands):
Year Ended January 31,
Balance, beginning of period
$
147,297
$
100,386
$
54,781
Billings, excluding billings for customer deposits
364,365
228,498
149,139
Reclassification to deferred revenue from customer deposits
30,788
29,046
18,331
Recognition of revenue, net of change in unbilled accounts receivable*
(319,161
)
(210,633
)
(121,865
)
Balance, end of period
$
223,289
$
147,297
$
100,386
* Reconciliation to Revenue Reported per Consolidated Statements of Operations:
Revenue billed as of the end of the period
$
319,161
$
210,633
$
121,865
Increase (decrease) in total unbilled accounts receivable
1,608
1,221
(604
)
Revenue Reported per Consolidated Statements of Operations
$
320,769
$
211,854
$
121,261
Remaining Performance Obligations (RPOs)
The typical stated customer contract term is one year but can range up to three years. RPOs include both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. As of January 31, 2022 and 2021, the Company had $428.8 million, and $263.9 million, respectively, of remaining performance obligations, which is comprised of product and services revenue not yet delivered. As of January 31, 2022 and January 31, 2021, the Company expected to recognize approximately 63% and 63%, respectively, of its remaining performance obligations as revenue over the next 12 months and the remainder thereafter.
RPOs exclude customer deposits, which are refundable pre-paid amounts that are expected to be recognized as revenue in future periods. These balances are included in customer deposits in the consolidated balance sheets and are classified as current because contractually customers can cancel these obligations with 30 days written notice. The customer deposit balance is amortized to revenue over the term of the underlying contract as the customer’s right to cancel expires. If no contracts with customers are cancelled, the existing customer deposit balance will be recognized to revenue over the remaining stated term of the underlying contract which may be over the next 12 months or longer as follows (in thousands):
As of January 31,
Within the next 12 months
$
20,324
$
20,421
After the next 12 months
3,059
1,798
Total
$
23,383
$
22,219
4. Fair Value Measurements
The Company reports all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
•	Level 1-Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
•	Level 2-Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
•	Level 3-Inputs are unobservable inputs for the asset or liability.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.
The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy on a recurring basis using the above input categories (in thousands):
As of January 31, 2022
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
Money market funds
$
1,129,436
$
-
$
-
$
1,129,436
Total cash and cash equivalents
1,129,436
-
-
1,129,436
Total assets measured at fair value
$
1,129,436
$
-
$
-
$
1,129,436
Included in cash and cash equivalents
$
1,129,436
As of January 31, 2021
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
Money market funds
$
151,657
$
-
$
-
$
151,657
Total cash and cash equivalents
151,657
-
-
151,657
Total assets measured at fair value
$
151,657
$
-
$
-
$
151,657
Included in cash and cash equivalents
$
151,657
Money market funds are cash equivalents with remaining maturities of three months or less at the date of purchase. The Company uses quoted prices in active markets for identical assets to determine the fair value of its Level 1 investments in money market funds.
The consolidated financial statements as of January 31, 2022 and January 31, 2021, do not include any nonrecurring fair value measurements relating to assets or liabilities. There were no transfers between fair value measurement levels during the year ended January 31, 2022. During the year ended January 31, 2021, the certificates of deposit matured and the Company transferred $30.0 million to cash and cash equivalents in the consolidated balance sheets.
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net are comprised of the following (in thousands):
Estimated
As of January 31,
Useful life
Furniture and fixtures
5 years
$
1,266
$
1,224
Computers, equipment and software
3 years
Capitalized internal-use software development costs
5 years
12,209
2,920
Leasehold improvements
Shorter of useful life or lease term
5,008
4,979
Construction in progress(1)
-
Total property and equipment
19,670
9,512
Less: accumulated depreciation and amortization
(3,773
)
(1,277
)
Property and equipment - net
$
15,897
$
8,235
(1) This represents internal-use software not yet available for general release.
Total depreciation and amortization expense for fiscal 2022, 2021, and 2020 was $2.5 million, $0.9 million, and $0.2 million, respectively.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities are comprised of the following (in thousands):
As of January 31,
Accrued expenses
$
3,925
$
Accrued income taxes payable
Liability for early exercise of unvested stock options
Sales tax payable
-
1,191
Total accrued expenses and other liabilities
$
4,542
$
2,138
Accrued Compensation and Benefits
Accrued compensation and benefits are comprised of the following (in thousands):
As of January 31,
Accrued commissions
$
15,993
$
9,862
Accrued bonus
2,632
1,725
Accrued vacation
15,970
1,900
Accrued payroll and withholding taxes
18,885
5,296
ESPP employee contribution
2,709
-
Other
Total accrued compensation and benefits
$
56,939
$
19,213
Deferred Contract Acquisition Costs
The following table summarizes the activity of the deferred contract acquisition costs (in thousands):
Year Ended January 31,
Beginning balance
$
50,245
$
30,261
$
14,341
Capitalization of contract acquisition costs
64,834
33,821
22,668
Amortization of deferred contract acquisition costs
(25,748
)
(13,837
)
(6,748
)
Ending balance
$
89,331
$
50,245
$
30,261
Deferred contract acquisition costs, current
$
32,205
$
15,275
$
8,754
Deferred contract acquisition costs, non-current
57,126
34,970
21,507
Total deferred contract acquisition costs
$
89,331
$
50,245
$
30,261
There were no impairment losses recognized for deferred contract acquisition costs during fiscal 2022, 2021, and 2020.
6. Credit Facility
On November 23, 2020, the Company entered into a loan and security agreement with HSBC Ventures USA Inc., or the Loan Agreement. This Loan Agreement provides the Company a revolving line of credit, which expires on November 23, 2023. Under the Loan Agreement, the Company is able to borrow up to $50.0 million. Interest on any drawdown under the revolving line of credit accrues at the adjusted LIBOR rate plus 3.00%. The Company also incurs a commitment fee of 0.30% for any unused portion of the credit facility. As of January 31, 2022 and 2021, the Company had no balance outstanding under the Loan Agreement. The Loan Agreement includes customary restrictive covenants and in the event the Company borrows amounts under the agreement, the Company will become subject to a number of covenants that may limit the Company’s ability to, among other things, transfer or dispose of assets, pay dividends or make distributions, incur additional indebtedness, create liens, make investments, loans and acquisitions, engage in transactions with affiliates, merge or consolidate with other companies, and sell substantially all of the Company’s assets. The Company is in compliance with all covenants as of January 31, 2022.
7. Leases
The Company leases office spaces under noncancelable operating lease agreements, which expire at various dates through 2027. The Company is required to pay property taxes, insurance, and normal maintenance costs for certain of these facilities. These lease agreements do not contain residual value guarantees or restrictive covenants.
In September 2021, the Company entered into a sublessee agreement with a minimum lease commitment of $2.1 million over 3.5 years.
Lease costs
Lease costs were as follows (in thousands):
Year Ended January 31,
Short-term lease costs
$
$
$
Operating lease costs
3,106
2,898
1,842
Total lease costs
$
3,439
$
3,125
$
1,940
The variable lease cost was not significant for the years ended January 31, 2022, 2021, and 2020. There were no other lease components for the periods presented.
Lease term and discount rate information are summarized as follows:
As of January 31,
Weighted average remaining lease terms (in years)
5.1
6.3
7.3
Weighted average discount rate
3.8
%
3.9
%
3.9
%
Future lease payments under noncancelable operating leases on an undiscounted cash flow basis as of January 31, 2022 are as follows (in thousands):
Years Ending January 31,
Amount
$
3,781
3,924
4,150
3,734
3,737
Thereafter
1,277
Total minimum lease payments
20,603
Less imputed interest
(1,990
)
Present value of future minimum lease payments
18,613
Less current lease liabilities
(3,130
)
Operating lease liabilities, non-current
$
15,483
8. Commitments and Contingencies
Letter of credit
The Company has a total of $1.8 million in letters of credit outstanding as security deposits for the Company’s leased office spaces as of January 31, 2022 and 2021.
Purchase commitments
In the normal course of business, the Company enters into non-cancelable purchase commitments with various parties to purchase products and services such as software subscriptions and corporate events. As of January 31, 2022, the Company had outstanding non-cancelable office lease, hosting infrastructure commitments, and other commitments with a term of 12 months or longer as follows (in thousands):
Years Ending January 31,
Minimum
Lease
Payments
Hosting
Infrastructure
Commitments
Other
Commitments
Total
(in thousands)
$
3,781
$
6,569
$
7,386
$
17,736
3,924
9,246
7,076
20,246
4,150
9,656
4,823
18,629
3,734
4,167
-
7,901
3,737
-
-
3,737
Thereafter
1,277
-
-
1,277
Total
$
20,603
$
29,638
$
19,285
$
69,526
Litigation
From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims.
In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products when used for their intended purposes infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim.
Although the results of litigation and claims are inherently unpredictable, the Company believes that there was not a reasonable possibility that the Company had incurred a material loss with respect to such loss contingencies, as of January 31, 2022 and 2021.
9. Redeemable Convertible Preferred Stock
In March 2020, the Company entered into a Series E redeemable convertible preferred stock purchase agreement, which provided for the sale and issuance of up to 6,051,132 shares of Series E redeemable convertible preferred stock at a price of $28.9202 per share. The Company sold 6,051,132 shares of Series E redeemable convertible preferred stock for total gross proceeds of $175.0 million and included related issuance costs of $0.3 million.
Upon completion of the IPO in December 2021, all of the Company's redeemable convertible preferred stock outstanding, totaling 94,127,984 shares, were automatically converted into an equivalent number of class B common stock on a one-to-one basis and their carrying value of $349.1 million was reclassified into stockholders’ equity (deficit). As of January 31, 2022, there were no shares of redeemable convertible preferred stock issued and outstanding.
Redeemable convertible preferred stock consisted of the following as of January 31, 2021 (in thousands except share and per share data):
Shares Authorized
Issued and Outstanding
Carrying Value
Liquidation Preference
Issue Price per Share
Series Seed
8,418,228
8,418,228
$
$
$
0.07
Series A
23,575,316
23,575,316
10,114
10,200
$
0.43
Series B
34,434,922
34,434,922
23,927
24,000
$
0.70
Series C
12,625,844
12,625,844
39,909
40,000
$
3.17
Series D
9,022,542
9,022,542
99,879
100,000
$
11.08
Series E
6,051,132
6,051,132
174,724
175,000
$
28.92
Total
94,127,984
94,127,984
$
349,113
$
349,760
The holders of Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock had various rights and preferences as follows:
Voting
Each share of redeemable convertible preferred stock had voting rights equal to an equivalent number of shares of common stock into which it is convertible and votes together as one class with the common stock, except as below:
As long as at least 9,000,000 shares (as adjusted for stock splits, stock dividends, reclassification and the like) of preferred stock were outstanding, holders of Series Seed, Series A, Series B, Series C, Series D, and Series E preferred stock, voting together as a single class on an as-converted basis, were entitled to certain protective provisions which required a majority of holders of preferred stock to approve, among other actions, a liquidation event, an amendment, waiver, or repeal of provisions of the Company’s Certificate of Incorporation or Bylaws, a change to the number of authorized directors of the Company, and a declaration or payment of a dividend with respect to any shares of the Company.
As long as at least 6,750,000 shares (as adjusted for stock splits, stock dividends, reclassification and the like) of Series A preferred stock were outstanding, the holders of a majority of such then-outstanding shares of Series A preferred stock, voting together as a separate series, were entitled to elect one member of the board of directors.
As long as at least 3,945,670 shares (as adjusted for stock splits, stock dividends, reclassification and the like) of Series B preferred stock were outstanding, the holders of a majority of such then-outstanding shares of Series B preferred stock, voting together as a separate series, were entitled to elect one member of the board of directors.
Holders of common stock, voting as a separate class, were entitled to elect three members to the board of directors.
Dividends
Each holder of Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock were entitled to receive, out of any funds legally available, noncumulative dividends at the rate of $0.005323335, $0.034612335, $0.055757335, $0.253448000, $0.886668, and $2.3136 per share, respectively, per annum, payable in preference and priority to any payment of any dividends on common stock when and as declared by the board of directors. After payment of such dividends, any additional dividends or distributions were to be distributed among all holders of common stock and preferred stock in proportion to the number of shares of common stock that would be held by each such holder if all shares of preferred stock were converted to common stock at the then-effective conversion rate. No dividends were ever declared or paid.
Liquidation Preference
In the event of any liquidation, dissolution, or winding-up of the Company, the holders of preferred stock were entitled to receive, prior and in preference to any distribution of the assets or funds of the Company to the holders of the common stock, an amount equal to the issuance price per share of $0.0665335, $0.4326665, $0.6969665, $3.1681, $11.08335, and $28.92015 for Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock, respectively, as adjusted for stock splits, stock dividends, combinations, recapitalizations, and similar transactions, plus any declared but unpaid dividends, or the Liquidation Preference. If the Company had insufficient assets to permit payment of the Liquidation Preference in full to all holders of preferred stock, then the assets of the Company were to be distributed ratably to the holders of preferred stock in proportion to the Liquidation Preference such holders would otherwise be entitled to receive.
After payment of the Liquidation Preference to the holders of preferred stock, the remaining assets of the Company were to be distributed ratably to the holders of common stock. If the holders of preferred stock would have been entitled to a larger distribution had they converted their shares to common stock, then the preferred stock was to be deemed to have converted to common stock.
Redemption
Series Seed, Series A, Series B, Series C, Series D, and Series E convertible preferred stock did not have mandatory redemption provisions.
Conversion
Each share of preferred stock is convertible, at the option of its holder, into the number of fully paid and non-assessable shares of common stock at the applicable conversion price per share on the date that the share certificate was surrendered for conversion. As of January 31, 2021, the conversion prices per share for all shares of preferred stock were equal to the original issue prices, and the rate at which each share converted into common stock was one-for-one. As discussed above, upon completion of the IPO, all outstanding shares of convertible preferred stock were automatically converted to common stock.
Antidilution Protections
Series Seed, Series A, Series B, Series C, Series D, and Series E redeemable convertible preferred stock had antidilution protection. If the antidilution protection for the preferred stock was triggered, the conversion price would be subject to a broad-based weighted-average adjustment to reduce dilution.
Classification of Redeemable Convertible Preferred Stock
Although the Company’s redeemable convertible preferred stock was not mandatorily redeemable, it was classified outside of stockholders’ equity (deficit) because it was contingently redeemable upon certain events outside of the Company’s control. Accordingly, redeemable convertible preferred stock was presented outside of permanent equity in the mezzanine section of the consolidated balance sheets.
10. Common Stock and Stockholders' Equity (Deficit)
Preferred Stock
In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 100,000,000 shares of undesignated preferred stock with a par value of $0.000015 per share with rights and preferences, including voting rights, designated from time to time by the board of directors.
Common Stock
The Company has two classes of common stock: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 1,000,000,000 shares of Class A common stock and 200,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting, converting, and transfer rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes. Class A and Class B common stock have a par value of $0.000015 per share, and are referred to as common stock throughout the notes to the consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.
Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. Future transfers by holders of shares of Class B common stock will generally result in those shares converting to Class A common stock (including any transfer to a broker, equity plan administrator, or other nominee regardless of whether there is a corresponding change in beneficial ownership), subject to limited exceptions, including, but not limited to, certain transfers effected for estate planning purposes, and transfers among affiliates, to the extent the transferor continues to remain an affiliate. Once converted or transferred and converted into Class A common stock, the Class B common stock may not be reissued.
All the outstanding shares of our Class B common stock will convert automatically into shares of Class A common stock upon the earlier of the tenth anniversary of the Company's filing and effectiveness of the amended and restated certificate of incorporation in connection with the IPO or the affirmative vote of the holders of 66-2/3% of the voting power of outstanding Class B common stock. Following such conversion, each share of Class A common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical.
Common Stock Reserved for Future Issuance
The Company reserved shares of common stock for future issuance as follows:
As of January 31,
Series Seed convertible preferred stock
-
8,418,228
Series A convertible preferred stock
-
23,575,316
Series B convertible preferred stock
-
34,434,922
Series C convertible preferred stock
-
12,625,844
Series D convertible preferred stock
-
9,022,542
Series E convertible preferred stock
-
6,051,132
2014 Stock Plan:
Options outstanding
-
15,575,113
Restricted stock units outstanding
-
8,616,594
Remaining shares available for future issuance under the 2014 Plan
-
637,212
2021 Equity Incentive Plan:
Options outstanding
12,381,134
-
Restricted stock units outstanding
10,406,294
-
Remaining shares available for future issuance under the 2021 Plan
17,560,879
-
2021 Employee Stock Purchase Plan
1,900,000
-
Total
42,248,307
118,956,903
Stock Awards
In June 2014, the Company adopted the 2014 Stock Plan, or the 2014 Plan, pursuant to which the board of directors may grant incentive stock options to purchase shares of the Company’s common stock, nonstatutory stock options to purchase shares of the Company’s common stock, restricted stock awards, or RSAs, unrestricted stock awards, and
restricted stock units, or RSUs. As of January 31, 2022, the 2014 Plan was replaced by the 2021 Equity Incentive Plan, or the 2021 Plan, and any remaining shares available for future issuance under the 2014 Plan were terminated.
In November 2021, in connection with the IPO, the board of directors adopted, and the stockholders approved, the 2021 Plan as a successor to the 2014 Plan. Under the 2021 Plan:
•18,330,000 shares of Class A common stock are reserved for future issuance, which includes certain RSUs issued prior to the IPO, as well as any automatic increases in the number of shares of Class A common stock reserved for future issuance under the 2021 Plan.
•1,900,000 shares of Class A common stock are reserved for future issuance under the 2021 Employee Stock Purchase Plan, or the ESPP, as well as any automatic increases in the number of shares of Class A common stock reserved for future issuance under the ESPP.
•Any shares subject to stock options, RSUs or similar awards granted under the 2014 Plan that, on or after the date that the 2014 Plan is terminated, are cancelled, expire or otherwise terminate without having been exercised or issued in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest.
The equity awards available for grant for the 2014 and 2021 Plans for the periods presented are as follows:
As of January 31,
Available at beginning of period
637,212
208,924
Awards authorized
23,051,200
5,654,722
Options granted
(69,700
)
(54,500
)
Options cancelled
301,926
269,326
RSUs granted
(7,106,578
)
(5,858,686
)
RSUs cancelled
961,243
417,426
Termination of the 2014 Plan
(1,611,677
)
-
Shares withheld related to net share settlement of RSUs
1,397,253
-
Available at end of period
17,560,879
637,212
4,721,200 shares were authorized under the 2014 Plan and 18,330,000 shares were authorized under the 2021 Plan for fiscal 2022.
Stock Options
Stock options must be granted with an exercise price equal to the fair market value of a share of common stock at the date of grant. Stock options generally have a 10-year contractual term and vest over a four-year period starting from the date specified in each agreement.
The following table summarizes stock option activity for the 2014 and 2021 Plans (aggregate intrinsic value in thousands):
Options Outstanding
Number of Options Outstanding
Weighted- Average Exercise Price
Weighted- Average Remaining Contractual Term (in Years)
Aggregate Intrinsic Value
Balance as of January 31, 2021
15,575,113
$
1.77
6.7
$
372,671
Stock options granted
69,700
$
28.34
Stock options exercised
(2,961,753
)
$
1.68
$
168,258
Stock options cancelled/forfeited/expired
(301,926
)
$
2.12
Balance as of January 31, 2022
12,381,134
$
1.93
5.7
$
798,374
Exercisable as of January 31, 2022
10,536,517
$
1.39
5.5
$
684,903
The aggregate intrinsic value of options exercised represents the difference between the estimated fair value of common stock on the date of exercise and the exercise price of the options.
Exercisable shares consist of 10,531,267 shares that are vested and 5,250 shares with an early exercise provision that are unvested as of January 31, 2022.
The weighted-average grant-date fair values of option awards granted during fiscal 2022, 2021 and 2020 were $18.46, $10.10, and $3.45 per share, respectively.
The total grant-date fair value of stock options vested was $6.5 million, $10.5 million and $4.5 million during fiscal 2022, 2021 and 2020, respectively.
The total intrinsic value of options exercised during fiscal 2022, 2021 and 2020 were $168.3 million, $81.5 million and $19.3 million, respectively.
Early Exercise of Employee Options
The 2014 Plan allows for the early exercise of stock options for certain individuals as determined by the board of directors. The consideration received for the early exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded as a liability and reflected as accrued expenses and other current liabilities in the consolidated balance sheets. This liability is reclassified to additional paid-in capital and common stock as the awards vest. If a stock option is early exercised, the unvested shares may be repurchased by the Company in case of employment termination for any reason, including death and disability, at the price paid by the purchaser for such shares. In fiscal 2020 the Company issued 190,000 shares of common stock for total proceeds of $0.2 million and less than $0.1 million related to early exercised stock options. There were no early exercises in fiscal 2022 and 2021. There were no shares repurchased during any periods presented. As of January 31, 2022 and 2021, the number of shares of common stock subject to repurchase was 5,250 and 40,052 shares with an aggregate repurchase price of de minimis.
Restricted Stock Units
For RSUs, the board of directors determines their vesting conditions, the period over which RSUs will vest, and the settlement. RSUs generally vest over a four-year period starting from the date specified in each agreement. The fair value of RSUs is estimated based on the fair value of the Company’s common stock on the date of grant. RSUs convert into common stock when they vest and settle.
RSUs granted prior to the IPO contained both service and performance conditions. The service-based vesting condition is subject to continuous service with the Company while the performance condition was satisfied in connection with the IPO. The performance-based vesting condition was not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO, the performance-based condition became probable and the Company recognized a cumulative $190.5 million stock-based compensation expense related to the outstanding RSUs through January 31, 2022, inclusive of the RSU modifications discussed below.
The Company’s summary of RSUs activity under the 2014 Plan and the 2021 Plan is as follows:
Number of Awards
Weighted-Average Grant Date Fair Value
Outstanding and unvested at January 31, 2021
8,616,594
$
15.78
RSUs granted
7,106,578
$
48.88
RSUs released
(4,355,635
)
$
16.32
RSUs cancelled
(961,243
)
$
23.33
Outstanding and unvested at January 31, 2022
10,406,294
$
37.46
The total grant-date fair value of RSUs vested was $71.1 million during the year ended January 31, 2022.
Restricted Stock Awards
The fair value of RSAs is estimated based on the fair value of the Company’s common stock on the date of grant. RSAs convert into common stock when they vest and settle.
In March 2021, the Company granted 5,314 shares of RSAs outside of the 2014 Stock Plan at a weighted-average grant date fair value of $28.94 to certain employees. In August 2021, the Company granted 5,250 shares of RSAs outside of the 2014 Stock Plan at a weighted-average grant date fair value of $47.07 to certain employees. Stock-based compensation related to RSAs was not material as of January 31, 2022.
Modification
On November 20, 2019, the Company amended the 2014 Stock Plan to restrict the ability of a successor entity in a change in control transaction to cancel unvested awards. The amendment modified 3,208,340 RSUs in which the Company have reassessed the original grant date fair value as of the modification date. The weighted-average grant date fair value before modification was $7.24 and after modification was $9.13. The Company recognized approximately $22.0 million of stock-based compensation expense during fiscal 2022, and will recognize an additional $1.6 million over the remaining life of such RSUs through the fiscal year ending January 31, 2024.
In November 2021, the Company modified certain RSUs by adding a vesting acceleration condition in the event of employee termination upon a change in control. The amendment modified 414,632 RSUs in which the Company have reassessed the original grant date fair value as of the modification date. The weighted-average grant-date fair value before modification was $23.95 and after modification was $80.00. The Company recognized approximately $21.8 million of stock-based compensation expense during fiscal 2022, and will recognize an additional $11.3 million over the remaining life of such RSUs through the fiscal year ending January 31, 2025.
Employee Stock Purchase Plan
In December 2021, the Company adopted the 2021 Employee Stock Purchase Plan ("ESPP"), which became effective upon completion of the IPO. A total of 1,900,000 shares of Class A common stock are available for sale under the ESPP. In addition, subject to the adjustment provisions of the ESPP, the ESPP also provides for annual increases in the number of shares of Class A common stock that will be available for sale under the ESPP on the first day of each fiscal year beginning on the first day of fiscal 2023 and ending on (and inclusive of) the first day of fiscal 2032, equal to the least of:
•5,700,000 shares of Class A common stock;
•1% of the outstanding shares of all classes of common stock as of the last day of the immediately preceding fiscal year; or
•such other amount as the administrator may determine as of no later than the last day or our immediately preceding fiscal year.
The ESPP provides for consecutive offering periods that will typically have a duration of approximately 24 months in length and is comprised of four purchase periods of approximately six months in length. The offering periods are scheduled to start on the first trading day on or after June 15 and December 15 of each year. The first offering period commenced on December 23, 2021 and is scheduled to end on the first trading day on or after June 15, 2022. As of January 31, 2022, no shares of common stock have been issued under the ESPP.
Under our current ESPP, Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the lesser of (1) 85% of the fair market value of a share of our Class A common stock on the first date of an offering or (2) 85% of the fair market value of a share of our Class A common stock on the date of purchase. No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our Class A common stock based on the fair market value per share of our Class A common stock at the beginning of an offering for each calendar year such purchase right is outstanding or 2,000 shares. The 2021 ESPP provides for, at maximum, 24 months offering periods with four offering dates, generally in June and December of each year.
The fair value of the purchase rights granted under the ESPP was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Year Ended January 31,
Expected term (in years)
0.5 - 2.0
Expected volatility
44.49% - 54.92%
Risk-free interest rate
0.16% - 0.68%
Dividend yield
0%
Stock-Based Compensation Expense
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations is as follows (in thousands):
Year Ended January 31,
Cost of license
$
-
$
-
$
-
Cost of support
8,073
1,056
Cost of cloud-hosted services
2,482
-
-
Cost of professional services
3,367
Sales and marketing
64,991
11,286
2,466
Research and development
67,865
5,974
1,507
General and administrative
53,790
20,599
4,998
Stock-based compensation expenses
$
200,568
$
39,223
$
9,461
Capitalized stock-based compensation
3,562
-
-
Total stock-based compensation expense
$
204,130
$
39,223
$
9,461
There were no secondary transactions in fiscal 2022. In fiscal 2021 and 2020, the Company recorded $32.1 million and $1.5 million of stock-based compensation expense in the consolidated statements of operations associated with secondary stock purchase transactions, respectively. These transactions were executed among certain employees, non-employees, non-related investors and certain affiliated stockholders of the Company. The Company concluded that affiliated stockholders acquired shares from its employees at a price in excess of fair value. Accordingly, the Company recognized such excess value as stock-based compensation expense.
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations for these secondary transactions is as follows (in thousands):
Year Ended January 31,
Cost of license
$
-
$
-
$
-
Cost of support
-
-
Cost of cloud-hosted services
-
-
-
Cost of professional services
-
-
Sales and marketing
-
8,895
-
Research and development
-
4,199
-
General and administrative
-
18,097
1,524
Stock-based compensation expense
$
-
$
32,051
$
1,524
Capitalized stock-based compensation
-
-
-
Total stock-based compensation
$
-
$
32,051
$
1,524
Total stock-based compensation expense recognized in the Company’s consolidated statements of operations exclusive of charges related to secondary sales is as follows (in thousands):
Year Ended January 31,
Cost of license
$
-
$
-
$
-
Cost of support
8,073
Cost of cloud-hosted services
2,482
-
-
Cost of professional services
3,367
Sales and marketing
64,991
2,391
2,466
Research and development
67,865
1,775
1,507
General and administrative
53,790
2,502
3,474
Stock-based compensation expense
$
200,568
$
7,172
$
7,937
Capitalized stock-based compensation
3,562
-
-
Total stock-based compensation
$
204,130
$
7,172
$
7,937
As of January 31, 2022 and 2021, total unrecognized stock-based compensation expense related to the RSUs was approximately $287.7 million and $136.0 million, respectively. This unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately 2.5 years and 1.9 years, respectively.
As of January 31, 2022 and 2021, unrecognized stock-based compensation expense related to outstanding unvested stock options for employees that are expected to vest was approximately $5.2 million and 10.3 million, respectively, which are expected to be recognized over a weighted-average period of approximately 1.6 years and 1.9 years, respectively.
As of January 31, 2022, unrecognized stock-based compensation expense related to ESPP was approximately $21.1 million, which are expected to be recognized over a weighted-average period of approximately 1.9 years.
Stock Option Valuation
The Company estimates the fair value of stock options to employees on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires estimates of highly subjective assumptions, which greatly affect the fair value of each stock option. The assumptions used to estimate the fair value of stock options granted were as follows: `
Year Ended January 31,
Fair value of common stock
$28.94 - $47.07
$16.52-$23.37
$5.44 - $10.34
Expected volatility
49.0% - 50.2%
50.0% - 51.4%
47.3% - 54.1%
Expected term (in years)
6.08
6.08
6.08
Risk-free interest rate
0.9% - 1.04%
0.5% - 0.6%
1.4% - 2.6%
Dividend yield
0%
0%
0%
Fair Value of Common Stock-The fair value of the common stock underlying the Company’s stock options is determined by our board of directors. The board of directors, with input from management, exercises significant judgment and considers numerous objective and subjective factors to determine the fair value of common stock at each grant date.
Expected Term-The expected term represents the period that the stock-based awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method as provided by the Securities and Exchange Commission. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options.
Risk-Free Interest Rate-The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
Expected Volatility-Since the Company’s stock is not publicly traded, the expected volatility is based on the historical and implied volatility of similar companies whose stock or option prices are publicly available, after considering the industry, stage of life cycle, size, market capitalization, and financial leverage of the other companies.
Dividend Rate-The expected dividend is assumed to be zero, as the Company has never paid dividends and has no current plans to do so.
There were no option grants to nonemployees and stock-based compensation was not significant for nonemployees during the years ended January 31, 2022, 2021, and 2020.
11. Net Loss Per Share Attributable to Common Stockholders
For periods in which there were Class A and Class B shares outstanding, the rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical, except with respect to voting, converting, and transfer rights. As the liquidation and dividend rights were identical for Class A and Class B common stock, the undistributed earnings were allocated on a proportionate basis and the resulting net loss per share would, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share data):
Year Ended January 31,
Numerator:
Net loss
$
(290,138
)
$
(83,515
)
$
(53,370
)
Denominator:
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted
83,276,526
63,375,470
59,161,264
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted
$
(3.48
)
$
(1.32
)
$
(0.90
)
The following outstanding potentially dilutive shares of common stock were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because the impact of including them would have been antidilutive:
Year Ended January 31,
Redeemable convertible redeemable preferred stock
-
94,127,984
88,076,852
Stock awards
22,787,428
24,191,707
23,095,986
Share purchase rights under the ESPP
703,862
-
-
Class A and Class B common stock subject to repurchase
5,250
40,052
397,910
Total
23,496,540
118,359,743
111,570,748
12. Income Taxes
The Company’s loss before income taxes was as follows (in thousands):
Year Ended January 31,
Domestic
$
(294,299
)
$
(86,845
)
$
(54,236
)
International
5,147
3,592
1,401
Loss before income taxes
$
(289,152
)
$
(83,253
)
$
(52,835
)
The components of the provision for income taxes are as follows (in thousands):
Year Ended January 31,
Current provisions for income taxes:
Federal
$
-
$
-
$
-
State
Foreign
1,125
Total current tax expense
1,173
Deferred tax expense:
Federal
-
-
-
State
-
-
-
Foreign
(187
)
(148
)
-
Total deferred tax expense
(187
)
(148
)
-
Provision for income taxes
$
$
$
The reconciliation of the statutory federal income tax and the Company's effective income tax is as follows:
Year Ended January 31,
U.S. federal tax benefit at statutory rate
21.0
%
21.0
%
21.0
%
State income taxes, net of federal benefit
8.2
6.9
4.8
Foreign earnings taxed at different rate
0.6
0.6
(0.4
)
Stock-based compensation
13.1
8.0
(0.7
)
Non-deductible expenses and other
(0.7
)
(0.2
)
(1.1
)
Research and development credits
2.9
1.9
2.0
Change in valuation allowance, net
(45.4
)
(38.5
)
(26.6
)
Effective tax rate
(0.3
)
%
(0.3
)
%
(1.0
)
%
The components of the Company’s net deferred tax assets and liabilities were as follows (in thousands):
Year Ended January 31,
Deferred tax assets:
Net operating losses
$
167,218
$
62,279
$
28,920
Deferred revenue
2,687
3,493
3,279
Lease liability
4,772
4,943
5,449
Other accruals
5,542
2,436
Stock-based compensation
25,772
1,963
1,459
Credit carryforwards
18,883
6,468
4,829
Total deferred tax assets
$
224,874
$
81,582
$
44,415
Year Ended January 31,
Deferred tax liabilities:
Fixed assets
$
(2,837
)
$
(943
)
$
(489
)
Right-of-use asset
(3,953
)
(4,071
)
(4,650
)
Deferred commissions
(22,900
)
(12,974
)
(7,877
)
Total deferred tax liabilities
$
(29,690
)
$
(17,988
)
$
(13,016
)
Net deferred tax assets
$
195,184
$
63,594
$
31,399
Valuation allowance
(194,850
)
(63,446
)
(31,399
)
Deferred tax assets, net of valuation allowance
$
$
$
-
Due to its history of operating losses, the Company has not recorded any income tax expense for the year ended January 31, 2022 except for $1.1 million of tax expense for its foreign subsidiaries which are profitable as a result of intercompany compensation, immaterial state minimum taxes, and $0.1 million of deferred tax benefits. Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. A valuation allowance has been provided by the Company against federal and state deferred tax assets. Overall, the valuation allowance increased by $131.4 million and $32.0 million for fiscal 2022 and 2021, respectively.
As of January 31, 2022, the Company has U.S. federal and state net operating loss carryforwards of approximately $647.8 million and $498.3 million respectively, which begin to expire in 2034 and 2025 for federal and state purposes, respectively. The Company also has federal and state research credit carryforwards of $17.7 million and $6.6 million respectively. The federal tax credit carryforwards will begin to expire in 2033, if not utilized. The state credit carryforwards have no expiration date. 	 	
A limitation may apply to the use of the net operating loss and credit carryforwards, under provisions of the Internal Revenue Code of 1986, as amended, and similar state tax provisions that are applicable if the Company experiences an “ownership change.” An ownership change may occur, for example, as a result of issuance of new equity. Should these limitations apply, the carryforwards would be subject to an annual limitation, resulting in a potential reduction in the gross deferred tax assets before considering the valuation allowance.
The Company is subject to income taxes in the United States, California, and other various domestic and international jurisdictions. Carryover attributes beginning January 2016 remain open to adjustment by the U. S. and state authorities. The U.S., state, and foreign jurisdictions have statutes of limitations that generally range from three to five years. Fiscal years outside of the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized. There are no ongoing examinations.	
Unrecognized Tax Benefits
The Company’s reconciliation of the total amounts of unrecognized tax benefits was as follows (in thousands):
Year Ended January 31,
Unrecognized tax benefits as of the beginning of the year
$
1,730
$
1,236
Increases related to prior year tax provisions
-
Decrease related to prior year tax provisions
-
(56
)
Increase related to current year tax provisions
2,644
Unrecognized tax benefits as of the end of the year
$
4,849
$
1,730
The Company had unrecognized tax benefits of approximately $4.8 million and $1.7 million, respectively, as of January 31, 2022 and 2021 which are attributable to federal and state research credits. These unrecognized tax benefits, if recognized, would not affect the effective tax rate and would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. The Company has not accrued any interest or penalties.
Recognition of the unrecognized tax benefits would not have an impact on the effective tax because they would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. The Company does not anticipate any significant change in the Company’s uncertain tax positions within 12 months of this date.
13. Related Party Transactions
Certain members of the Company’s board of directors serve on the board of directors of and/or are executive officers of, and, in some cases, are investors in, companies that are customers or vendors of the Company. Aggregate revenue from sales to these companies was $0.5 million, $0.4 million, and $0.2 million for fiscal 2022, 2021, and 2020, respectively. There was $0.1 million of accounts receivable due from these companies as of January 31, 2022 compared to $0.4 million as of January 31, 2021. An aggregate of $0.4 million, $0.1 million, and $0.2 million in expenses related to purchases from these companies was recorded during fiscal 2022, 2021 and 2020, respectively. There were $0.3 million accounts payable due to these companies as of January 31, 2022 compared to de minimis as of January 31, 2021.
14. Subsequent Events
The Company evaluated subsequent events through March 25, 2022, which is the date the audited consolidated financial statements were available to be issued.
In February 2022, the number of shares reserved under the 2021 Plan and ESPP were increased by 9,108,328 and 1,821,665, respectively, pursuant to the annual evergreen increases under each such plan.
In March 2022, the Company granted RSUs for an aggregate of 702,526 shares of common stock to its employees with service-based conditions. The service-based vesting condition is generally met over a four-year period.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of January 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was (a) reported within the same periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Management's Report on Internal Control Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item will be included in our definitive proxy statement for our 2022 annual general meeting of stockholders (the "Proxy Statement"), which will be filed with the SEC within 120 days after the end of our year ended January 31, 2022, and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
The information required by this item will be set forth in the 2022 Proxy Statement and is incorporated herein by reference.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) Financial Statements
See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedule
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the financial statements or the notes to those financial statements.
(a)(3) Exhibits
We have filed or incorporated by reference the exhibits listed on the accompanying Exhibit Index.
EXHIBIT INDEX
Exhibit
Description
Form
File No.
Exhibit
Filing Date
Number
3.1
Amended and Restated Certificate of Incorporation of the Registrant.
8-K
001-41121
3.1
12/13/2021
3.2
Amended and Restated Bylaws of the Registrant.
8-K
001-41121
3.2
12/13/2021
4.1
Fifth Amended and Restated Investors’ Rights Agreement among the Registrant and certain of its stockholders, dated March 6, 2020, as amended.
S-1
333-260757
4.1
11/04/2021
4.2
Form of Class A common stock certificate of the Registrant.
S-1/A
333-260757
4.2
11/17/2021
4.3*
Description of the Registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1+
Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.
S-1
333-260757
10.1
11/4/2021
10.2+
2014 Stock Plan, as amended, and forms of agreement thereunder.
S-1
333-260757
10.2
11/4/2021
10.3+
2021 Equity Incentive Plan and forms of agreement thereunder.
S-1
333-260757
10.3
11/4/2021
10.4+
2021 Employee Stock Purchase Plan.
S-1
333-260757
10.4
11/4/2021
10.5+
Confirmatory Offer Letter between the Registrant and Armon Dadgar.
S-1
333-260757
10.5
11/4/2021
10.6+
Confirmatory Offer Letter between the Registrant and Marc Holmes.
S-1
333-260757
10.6
11/4/2021
10.7+
Confirmatory Offer Letter between the Registrant and David McJannet.
S-1
333-260757
10.7
11/4/2021
10.8+
Confirmatory Offer Letter between the Registrant and Brandon Sweeney.
S-1
333-260757
10.8
11/4/2021
10.9+
Confirmatory Offer Letter between the Registrant and Navam Welihinda.
S-1
333-260757
10.9
11/4/2021
10.10+
Executive Incentive Compensation Plan.
S-1
333-260757
10.10
11/4/2021
10.11+
Form of Change in Control and Severance Agreement between the Registrant and each of its executive officers.
S-1/A
333-260757
10.10
11/17/2021
10.12+
Outside Director Compensation Policy.
S-1
333-260757
10.11
11/04/2021
10.13
Loan and Security Agreement between the Registrant and HSBC Ventures USA Inc., dated November 23, 2020.
S-1
333-260757
10.12
11/04/2021
21.1*
List of Subsidiaries of the Registrant.
23.1*
Consent of Deloitte & Touche LLP, independent registered public accounting firm.
31.1*
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
* Filed herewith
+ Indicates management contract or compensatory plan.
 The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.