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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission File Number: 001-37901
COUPA SOFTWARE INCORPORATED
(Exact name of Registrant as specified in its charter)
 
Delaware20-4429448
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1855 S. Grant Street
San Mateo, CA 94402
(Address of principal executive offices, including zip code)
 
(650) 931-3200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareCOUP
The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer¨
Non-accelerated filer¨Smaller reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨ 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
As of June 2, 2022, the Registrant had 75,550,814 shares of common stock, $0.0001 par value per share, outstanding. 





TABLE OF CONTENTS

Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
  

i


NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial position, the expected impact of the COVID-19 pandemic on our business, results of operations and financial condition, customer lifetime value, strategy and plans, market size and opportunity, competitive position, industry environment, potential growth opportunities, product capabilities, expected impact of business acquisitions, our expectations for future operations and our convertible senior notes, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would” or the negative version of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-and long-term business operations and objectives, and financial needs. The forward-looking statements are contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors.”
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
 

1


PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
April 30,
2022
January 31,
2022
Assets
Current assets:
Cash and cash equivalents
$493,889 $506,459 
Marketable securities
292,321 223,032 
Accounts receivable, net of allowances
186,625 226,191 
Prepaid expenses and other current assets
41,301 38,270 
Deferred commissions, current portion
21,722 21,096 
Total current assets
1,035,858 1,015,048 
Property and equipment, net31,333 30,576 
Deferred commissions, net of current portion48,062 48,562 
Goodwill1,514,550 1,514,550 
Intangible assets, net477,955 510,663 
Operating lease right-of-use assets39,501 42,659 
Other assets28,736 31,121 
Total assets
$3,175,995 $3,193,179 
Liabilities, Redeemable Non-Controlling Interests, and Stockholders’ Equity
Current liabilities:
Accounts payable
$7,835 $4,610 
Accrued expenses and other current liabilities
87,989 79,160 
Deferred revenue, current portion
460,862 468,783 
Current portion of convertible senior notes, net (Note 8)
1,744 1,639 
Operating lease liabilities, current portion
12,896 12,760 
Total current liabilities
571,326 566,952 
Convertible senior notes, net (Note 8)2,157,855 1,614,257 
Deferred revenue, net of current portion22,070 22,655 
Operating lease liabilities, net of current portion27,525 31,172 
Other liabilities46,774 52,481 
Total liabilities
2,825,550 2,287,517 
Commitments and contingencies (Note 9)
Redeemable non-controlling interests (Note 3)14,164 12,084 
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 25,000,000 shares authorized at April 30, 2022 and January 31, 2022; zero shares issued and outstanding at April 30, 2022 and January 31, 2022
  
Common stock, $0.0001 par value per share; 625,000,000 shares authorized at April 30, 2022 and January 31, 2022; 75,541,575 and 75,060,139 shares issued and outstanding at April 30, 2022 and January 31, 2022, respectively
7 7 
Additional paid-in capital
1,102,962 1,778,840 
Accumulated other comprehensive income
7,635 9,643 
Accumulated deficit
(774,323)(894,912)
Total stockholders’ equity
336,281 893,578 
Total liabilities, redeemable non-controlling interests, and stockholders’ equity
$3,175,995 $3,193,179 

See Notes to Condensed Consolidated Financial Statements.

2


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
April 30,
20222021
Revenues:
Subscription
$178,470 $140,104 
Professional services and other
17,901 26,825 
Total revenues
196,371 166,929 
Cost of revenues:
Subscription
58,129 51,025 
Professional services and other
22,699 28,702 
Total cost of revenues
80,828 79,727 
Gross profit
115,543 87,202 
Operating expenses:
Research and development
43,710 43,837 
Sales and marketing
100,953 77,843 
General and administrative
42,138 39,377 
Total operating expenses
186,801 161,057 
Loss from operations(71,258)(73,855)
Interest expense(3,476)(29,103)
Other income (expense), net(3,716)535 
Loss before provision for (benefit from) income taxes(78,450)(102,423)
Provision for (benefit from) income taxes2,751 (2,066)
Net loss(81,201)(100,357)
Net loss attributable to redeemable non-controlling interests(204) 
Adjustment attributable to redeemable non-controlling interests476  
Net loss attributable to Coupa Software Incorporated$(81,473)$(100,357)
Net loss per share, basic and diluted, attributable to Coupa Software Incorporated
$(1.08)$(1.38)
Weighted-average number of shares used in computing net loss per share, basic and diluted
75,183 72,865 
 
See Notes to Condensed Consolidated Financial Statements.

3


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
 
Three Months Ended
April 30,
20222021
Net loss$(81,201)$(100,357)
Other comprehensive gain in relation to defined benefit plans, net of tax872 268 
Changes in unrealized loss on marketable securities and non-marketable debt securities, net of tax(2,586)(30)
Foreign currency translation adjustments, net of tax(597)(384)
Comprehensive loss$(83,512)$(100,503)
Less comprehensive loss attributable to redeemable non-controlling interests:
Net loss attributable to redeemable non-controlling interests(204) 
Foreign currency translation adjustments, net of tax, attributable to redeemable non-controlling interests(303) 
Comprehensive loss attributable to redeemable non-controlling interests(507) 
Comprehensive loss attributable to Coupa Software Incorporated$(83,005)$(100,503)
 
See Notes to Condensed Consolidated Financial Statements.

4


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
 
Three Months Ended April 30, 2022
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at January 31, 202275,060,139 $7 $1,778,840 $9,643 $(894,912)$893,578 
Cumulative adjustment due to adoption of ASU No. 2020-06— — (738,892)— 201,790 (537,102)
Issuance of common stock for employee share purchase plan161,728 — 9,973 — — 9,973 
Exercise of stock options
57,235 — 695 — — 695 
Stock-based compensation expense
— — 52,618 — — 52,618 
Vested restricted stock units
262,473 — — — — — 
Other comprehensive loss
— — — (2,008)— (2,008)
Net loss attributable to Coupa Software Incorporated, including adjustment to redeemable non-controlling interests
— — (272)— (81,201)(81,473)
Balance at April 30, 202275,541,575 $7 $1,102,962 $7,635 $(774,323)$336,281 
 
Three Months Ended April 30, 2021
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at January 31, 202172,753,659 $7 $1,556,865 $9,165 $(525,806)$1,040,231 
Issuance of common stock for acquisitions22,370 —  — —  
Issuance of common stock for employee share purchase plan82,462 — 10,477 — — 10,477 
Exercise of stock options
202,912 — 2,248 — — 2,248 
Stock-based compensation expense
— — 47,504 — — 47,504 
Vested restricted stock units
346,450 — — — — — 
Settlement of convertible senior notes (Note 8)56,927 — (240)— — (240)
Temporary equity reclassification— — 369 — — 369 
Other comprehensive loss
— — — (146)— (146)
Net loss
— — — — (100,357)(100,357)
Balance at April 30, 202173,464,780 $7 $1,617,223 $9,019 $(626,163)$1,000,086 
 
See Notes to Condensed Consolidated Financial Statements.

5


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended
April 30,
20222021
Cash flows from operating activities
Net loss attributable to Coupa Software Incorporated$(81,473)$(100,357)
Net loss and adjustment attributable to redeemable non-controlling interests (Note 3)272  
Net loss(81,201)(100,357)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
36,242 36,539 
Amortization (accretion) of premium (discount) on marketable securities, net
(419)326 
Amortization of deferred commissions
5,555 4,213 
Amortization of debt discount and issuance costs
1,765 27,390 
Stock-based compensation
52,392 47,292 
Loss on conversion of convertible senior notes
 129 
Repayments of convertible senior notes attributable to debt discount (Note 8)
 (516)
Other
(1,779)(1,586)
Changes in operating assets and liabilities net of effects from acquisitions:
Accounts receivable
39,634 47,750 
Prepaid expenses and other current assets
(2,525)(7,011)
Other assets
5,461 4,836 
Deferred commissions
(5,749)(4,706)
Accounts payable
3,411 2,799 
Accrued expenses and other liabilities
5,217 (5,872)
Deferred revenue
(8,262)(19,144)
Net cash provided by operating activities
49,742 32,082 
Cash flows from investing activities
Purchases of marketable securities
(113,593)(48,787)
Maturities of marketable securities
38,760 41,013 
Sales of marketable securities
4,597 52,643 
Acquisitions, net of cash acquired
 (45,095)
Purchases of other investments (2,500)
Purchases of property and equipment
(4,113)(2,754)
Net cash used in investing activities
(74,349)(5,480)
Cash flows from financing activities
Investment from redeemable non-controlling interests2,111 2,223 
Repayments of convertible senior notes
 (2,439)
Proceeds from the exercise of common stock options
693 2,261 
Proceeds from issuance of common stock for employee stock purchase plan
9,973 10,477 
Net cash provided by financing activities
12,777 12,522 
Effects of foreign currency exchange rates on cash, cash equivalents, and restricted cash(864)(13)
Net (decrease) increase in cash, cash equivalents, and restricted cash(12,694)39,111 
Cash, cash equivalents, and restricted cash at beginning of year510,339 327,589 
Cash, cash equivalents, and restricted cash at end of period$497,645 $366,700 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents
$493,889 $362,509 
Restricted cash included in other assets
3,756 4,191 
Total cash, cash equivalents, and restricted cash$497,645 $366,700 

See Notes to Condensed Consolidated Financial Statements.

6


COUPA SOFTWARE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended
April 30,
20222021
Supplemental disclosure of cash flow data
Cash paid for income taxes$1,087 $1,622 
Supplemental disclosure of non-cash investing and financing activities
Property and equipment included in accounts payable and accrued expenses and other current liabilities$611 $149 
 
See Notes to Condensed Consolidated Financial Statements.

7


COUPA SOFTWARE INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1. Organization and Description of Business
Coupa Software Incorporated (the “Company”) was incorporated in the state of Delaware in 2006. The Company provides a comprehensive, cloud-based business spend management (or “BSM”) platform that provides greater visibility into and control over how companies spend money. The BSM platform enables businesses to achieve savings that drive profitability. The Company is based in San Mateo, California.
The Company’s fiscal year ends on January 31.

 Note 2. Significant Accounting Policies

Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2022 filed with the SEC on March 16, 2022 (the “Form 10-K”). The condensed consolidated financial statements include the results of the Company, its wholly-owned subsidiaries, as well as subsidiaries in which the Company has a controlling interest. All significant intercompany transactions and balances have been eliminated during consolidation.
The condensed consolidated balance sheet as of January 31, 2022, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results to be expected for the full fiscal year or any other period.
There have been no changes to the significant accounting policies described in the Form 10-K for the year ended January 31, 2022, other than the adoption of accounting pronouncements as described in the “Recently Adopted Accounting Pronouncements” section below.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity 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 as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its significant estimates including, but not limited to, the valuation of accounts receivable, the lives of tangible and intangible assets, the fair value of certain equity awards, the valuation of acquired intangible assets and the recoverability or impairment of intangible assets, including goodwill, revenue recognition, redemption value of redeemable non-controlling interests, convertible senior notes fair value, the benefit period of deferred commissions, and provision for (benefit from) income taxes. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates and such differences could be material to the financial position and results of operations.
Foreign Currency Translation
The functional currency of the Company's foreign operations is primarily the U.S. dollar, while a few of its subsidiaries use the local currency as their functional currency for the three months ended April 30, 2022. In cases where the Company uses a foreign functional currency, the Company translates the foreign functional currency financial statements to U.S. dollars using the exchange rates at the balance sheet date for assets and liabilities, the period average exchange rates for revenues and expenses, and the historical exchange rates for equity. The effects of foreign currency translation adjustments are recorded in other comprehensive income as a component of stockholders' equity and the related periodic movements are presented in the condensed consolidated statements of comprehensive loss. Foreign currency transaction gains and losses are included in other income (expense), net, in the condensed consolidated statements of operations for the period.

8


Concentration of Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, marketable securities, and accounts receivable. Cash deposits may, at times, exceed amounts insured by the Federal Deposit Insurance Corporation and the Securities Investor Protection Corporation (“SIPC”). Marketable securities balances may, at times, also exceed SIPC limits. The Company has not experienced any losses on its deposits of cash and cash equivalents to date. Refer to Note 14, “Significant Customers and Geographic Information” for additional information on significant customers during the period.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss consists of net loss, other comprehensive gain (loss) in relation to defined benefits plans, net of tax, changes in unrealized gain (loss) on marketable debt securities and non-marketable debt securities, net of tax, and foreign currency translation adjustments, net of tax. The other comprehensive gain (loss) in relation to defined benefits plans represents net deferred gains and losses and prior service costs and credits for the defined benefit pension plans.
Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive loss when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than quoted price in active markets for identical assets or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the assets or liabilities.
Revenue Recognition
The Company derives its revenues primarily from subscription fees, professional services fees and other. Revenues are recognized when control of these services are transferred to the Company’s customers in an amount that reflects the consideration expected to be entitled to in exchange for those services. Revenues are recognized net of applicable taxes imposed on the related transaction. The Company’s revenue recognition policy follows guidance from Accounting Standards Codification 606, Revenue from Contracts with Customers (Topic 606).

The Company determines revenue recognition through the following five-step framework:

Identification of the contract, or contracts, with a customer;

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract; and

Recognition of revenue when, or as, the Company satisfies a performance obligation.


9


Subscription Revenues
The Company offers subscriptions to its cloud-based business spend management platform, including procurement, invoicing, expense management and payment solutions. Subscription revenues consist primarily of fees to provide the Company’s customers access to its cloud-based platform, which includes routine customer support. Subscription contracts do not provide customers with the right to take possession of the software, are in general non-cancelable, and do not contain general rights of return. Generally, subscription revenues are recognized ratably over the contractual term of the arrangement, beginning on the date that the service is made available to the customer. Subscription contracts typically have a term of three years with invoicing occurring in annual installments at the beginning of each year in the subscription period.
Term-based licenses are sold as bundled arrangements that include the rights to a term license and post-contract customer support (“PCS”). Accordingly, the Company allocates the transaction price to each performance obligation. The revenues related to the amount allocated to PCS are included in subscription revenue, which are recognized ratably over the contract term beginning on the license delivery date.

Professional Services Revenues and Other
The Company offers professional services which primarily include deployment services, optimization services, and training. Professional services are generally sold on a fixed-fee or time-and-materials basis. For services billed on a fixed-fee basis, invoicing typically occurs in advance, and revenue is recognized over time based on the proportion performed. For services billed on a time-and-materials basis, revenue is recognized over time as services are performed.
Term-based licenses are sold as bundled arrangements that include the rights to a term license and PCS. Accordingly, the Company allocates the transaction price to each performance obligation. The revenues related to the amount allocated to term-based licenses are included in other revenue, which is recognized at the start of the license term when delivery is complete.

Significant Judgments
The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. Subscription services, professional services, term-based licenses, and related PCS are distinct performance obligations that are accounted for separately. In contracts with multiple performance obligations, the transaction price is allocated to separate performance obligations on a relative standalone selling price (“SSP”) basis.
The determination of SSP for each distinct performance obligation requires judgment. The Company determines SSP for performance obligations based on overall pricing objectives, which take into consideration market conditions and entity-specific factors. This includes a review of historical data related to the size of arrangements, the applications being sold, customer demographics and the numbers and types of users within the arrangements. The Company uses a range of amounts to estimate SSP for performance obligations. There is typically more than one SSP for individual products and services due to the stratification of those products and services by considerations such as size and sales regions.

Contract Balances
The timing of revenue recognition may differ from the timing of invoicing for contracts with customers. The Company records a receivable when revenue is recognized prior to invoicing. Deferred revenue primarily consists of billings or payments received in advance of revenue recognition. Subscription and fixed-fee professional services arrangements are commonly billed in advance, recognized as deferred revenue, and then amortized into revenue over time. The Company's term-based license contracts are billed annually in advance, recognized as deferred revenue, and then recognized as revenues upfront for the license component and ratably over the term license for the PCS component. However, other professional services arrangements, primarily those recognized on a time-and-materials basis, are billed in arrears following services that have been rendered. In addition, for multi-year term-based license contracts, the revenue allocated to license component is recognized upfront while the billing is on annual basis. This may result in revenue recognition greater than invoiced amounts which results in a receivable balance. Receivables represent an unconditional right to payment. As of April 30, 2022 and January 31, 2022, the balance of accounts receivable, net of the allowance for credit losses, was $186.6 million and $226.2 million, respectively. Of these balances, $11.3 million and $13.9 million represent unbilled receivable amounts as of April 30, 2022 and January 31, 2022, respectively. In addition, as of April 30, 2022 and January 31, 2022, the balance of long-term unbilled receivables was approximately $1.2 million and $1.9 million, respectively, which were included in other assets on the Company's condensed consolidated balance sheet.

10


When the timing of revenue recognition differs from the timing of invoicing, the Company uses judgment to determine whether the contract includes a significant financing component requiring adjustment to the transaction price. Various factors are considered in this determination including the duration of the contract, payment terms, and other circumstances. Generally, the Company determined that contracts do not include a significant financing component. The Company applies the practical expedient for instances where, at contract inception, the expected timing difference between when promised goods or services are transferred and associated payment will be one year or less. Payment terms vary by contract type, however arrangements typically stipulate a requirement for the customer to pay within 30 days.
At any point in the contract term, the transaction price may be allocated to performance obligations that are unsatisfied or are partially unsatisfied. These amounts relate to remaining performance obligations on non-cancelable contracts which include both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods. As of April 30, 2022, approximately $1,316.2 million of the transaction price from contracts with customers is allocated to the remaining performance obligations. The Company expects to recognize revenue on approximately three-fourths of these remaining performance obligations within the next 24 months and the remainder thereafter. The Company applies the practical expedient to exclude remaining performance obligations that are part of contracts with an original expected duration of one year or less and contracts where revenue is being recognized under the as-invoiced method. During the three months ended April 30, 2022, the revenue recognized from performance obligations satisfied in prior periods was approximately $1.7 million.
Accounts Receivable and Allowances for Credit Losses
The Company extends credit to its customers in the normal course of business and does not require cash collateral or other security to support the collection of customer receivables. The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period and provides a reserve when needed based on an assessment of various factors including the aging of the receivable balance, historical experience, and expectations of forward-looking loss estimates. When developing the expectations of forward-looking loss estimates, the Company takes into consideration forecasts of future economic conditions, information about past events, such as historical trends of write-offs, and customer-specific circumstances, such as bankruptcies and disputes. Accounts receivable are written off when deemed uncollectible. The allowances for credit losses were not material at April 30, 2022 and January 31, 2022.
Marketable Securities
Marketable securities consist of financial instruments such as U.S. treasury securities, U.S. agency obligations, corporate notes and bonds, commercial paper, asset backed securities and certificates of deposit. The Company classifies marketable securities as available-for-sale at the time of purchase and reevaluates such classification as of each balance sheet date. All marketable securities are recorded at estimated fair value. Credit losses related to the marketable securities are recorded in other income (expense), net in the condensed consolidated statements of operations through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. No credit losses related to marketable securities were recorded by the Company during the three months ended April 30, 2022. Any remaining unrealized losses, or any unrealized gains, for marketable securities are included in accumulated other comprehensive income, a component of stockholders’ equity.
If quoted prices for identical instruments are available in an active market, marketable securities are classified within Level 1 of the fair value hierarchy. If quoted prices for identical instruments in active markets are not available, fair values are estimated using quoted prices of similar instruments and are classified within Level 2 of the fair value hierarchy.
Other Investments
Other investments consist of non-marketable debt and equity investments in privately-held companies without readily determinable fair values in which the Company does not have a controlling interest or significant influence.
The Company records non-marketable debt investments at their estimated fair value on a recurring basis with changes in fair value recorded in accumulated other comprehensive income, a component of stockholders’ equity.
The Company elected to apply the measurement alternative for non-marketable equity securities, measuring them at cost, less any impairment, and adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
These non-marketable debt and equity investments are included in other assets on the Company’s condensed consolidated balance sheets.

11


Deferred Revenue
Deferred revenue consists of non-cancelable customer billings or payments received in advance of the recognition of revenue and is recognized as revenue as the revenue recognition criteria are met. The Company generally invoices its customers annually for the forthcoming year of service. Accordingly, the Company’s deferred revenue balance does not include revenue for future years of multiple year non-cancelable contracts that have not yet been billed. During the three months ended April 30, 2022 and 2021, the Company recognized revenue of $167.2 million and $133.5 million that was included in the deferred revenue balance as of January 31, 2022 and 2021, respectively.
Deferred Commissions
Commissions are earned by sales personnel upon the execution of the sales contract by the customer, and commission payments are made shortly after they are earned. Commission costs can be associated specifically with subscription, professional services and license arrangements. Commissions earned by the Company’s sales personnel are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit of five years. The Company determined the period of benefit by taking into consideration its past experience with customers, future cash flows expected from customers, industry peers and other available information.

For commissions earned from the sale of term-based license contracts, the Company allocates the costs of commission in proportion to the allocation of transaction price of license and PCS performance obligations. Commissions associated with the license component are expensed at the time the related revenue is recognized. Commissions allocated to PCS are deferred and then amortized over five years.
The Company capitalized commission costs of $5.7 million and $4.7 million, and amortized $5.6 million and $4.2 million to sales and marketing expense in the accompanying condensed consolidated statements of operations during the three months ended April 30, 2022 and 2021, respectively.
Redeemable Non-Controlling Interests
During the quarter ended April 30, 2021, the Company established a joint venture in Japan (“Coupa K.K.”), which is a variable interest entity, obtaining a 51% controlling interest. Accordingly, the Company consolidated the financial results of the joint venture.

The agreements with the minority investors of Coupa K.K. contain redemption features whereby the interest held by the minority investors is redeemable either (i) at the option of the minority investors or (ii) at the option of the Company, both beginning on the tenth anniversary of the initial capital contribution. The balance of the redeemable non-controlling interest is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest's share of earnings or losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded with corresponding adjustments against additional paid-in-capital due to the absence of retained earnings. The carrying amount of the redeemable non-controlling interests is recorded on the Company's condensed consolidated balance sheets as temporary equity.
Leases
Leases arise from contracts that convey the right to control the use of identified property or equipment for a period of time in exchange for consideration. The Company’s leasing arrangements are primarily for office space used to conduct operations.

Leases are classified at commencement as either operating or finance leases. As of April 30, 2022, all of the Company’s leases were classified as operating leases. Rent expense for operating leases is recognized using the straight-line method over the term of the agreement beginning on the lease commencement date.


12


At commencement, the Company records a lease liability at the present value of future lease payments, net of any future lease incentives to be received. Lease agreements may include options to renew the lease term, which is not included in the lease periods to calculate future lease payments unless it is reasonably certain the Company will renew the lease. The Company estimates its incremental borrowing rate (“IBR”) based on the information available at the lease commencement date in determining the present value of lease payments. In determining the appropriate IBR, the Company considers information including, but not limited to, the lease term and the currency in which the arrangement is denominated.

At commencement, the Company also records a corresponding right-of-use asset, which is calculated based on the amount of the lease liability, adjusted for any advance lease payments made and initial direct costs incurred. Right-of-use assets are subject to evaluation for impairment or disposal on a basis consistent with other long-lived assets.
As of April 30, 2022, the Company was not a material lessor in leasing arrangements or a party to material sublease arrangements.
Recent Accounting Guidance
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies the accounting for convertible instruments. The guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or for convertible debt issued at a substantial premium. The ASU removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, permitting more contracts to qualify for it. In addition, the guidance eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method.

The Company adopted the new guidance effective on February 1, 2022, using the modified retrospective approach. The adoption of this new guidance resulted in an increase of $541.9 million to the total carrying value of the Convertible Notes to reflect the full principal amount of the Convertible Notes outstanding net of unamortized issuance costs, a decrease of $738.9 million to additional paid-in capital to remove the equity component separately recorded for the conversion features associated with the convertible notes, a decrease of $201.8 million to accumulated deficit, and a decrease of $4.8 million to deferred tax liabilities. The adoption of this new guidance also decreased the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the debt discount associated with the equity component.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805). The amendments in this ASU require that an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company early adopted this new guidance effective on February 1, 2022, using the prospective approach, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

13



Note 3. Redeemable Non-Controlling Interests
In March 2021, the Company established a joint venture with Japan Cloud Computing L.P. and M30 LLC (the “Investors”) in Japan (“Coupa K.K.”), which is a variable interest entity. This joint venture is intended to enable the Company to support the growing number of Japanese companies looking to gain greater efficiency and agility through BSM. On March 15, 2021, the Company initially contributed approximately $2.4 million in cash in exchange for a 51% controlling interest, and the Investors initially contributed approximately $2.2 million. Accordingly, the Company consolidated the financial results of the joint venture. On March 11, 2022, the Company contributed approximately $2.2 million in cash, and the Investors contributed approximately $2.1 million. The share of the loss in the joint venture attributable to the redeemable non-controlling interests was not material during both the three months ended April 30, 2022 and 2021, respectively.
The following table summarizes the activity in the redeemable non-controlling interest for the period indicated below (in thousands):
Three Months Ended
April 30,
20222021
Balance at beginning of period$12,084 $ 
Investment by redeemable non-controlling interests2,111 2,223 
Net loss attributable to redeemable non-controlling interests(204) 
Foreign currency translation adjustments, net of tax(303) 
Adjustment to redeemable non-controlling interest476  
Balance at end of period$14,164 $2,223 

Note 4. Marketable Securities
The following is a summary of available-for-sale marketable securities, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets (in thousands):
 
April 30, 2022
Amortized CostsUnrealized GainsUnrealized LossesFair Value
U.S. treasury securities$294,538 $46 $(2,263)$292,321 
Total marketable securities
$294,538 $46 $(2,263)$292,321 
 
January 31, 2022
Amortized CostsUnrealized GainsUnrealized LossesFair Value
U.S. treasury securities$223,950 $23 $(941)$223,032 
Total marketable securities
$223,950 $23 $(941)$223,032 
 
 
As of April 30, 2022, the fair values of available-for-sale marketable securities, by remaining contractual maturity, were as follows (in thousands):
 
Due within one year$215,308 
Due in one year through five years77,013 
Total
$292,321 

The Company’s marketable securities consist of U.S. treasury securities only. The Company views its marketable securities as available to support its current operations, therefore these marketable securities have been classified as short-term available-for-sale securities.
During the three months ended April 30, 2022 and 2021, there were no material gross realized gains or losses from the sale of certain available-for-sale marketable securities that were reclassified out of accumulated other comprehensive loss.

14


The Company regularly reviews the changes to the rating of its debt securities by rating agencies as well as reasonably monitors the surrounding economic conditions to assess the risk of expected credit losses. As of April 30, 2022, the unrealized losses and the related risk of expected credit losses were insignificant.
Note 5. Fair Value Measurements
The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at April 30, 2022 (in thousands):
 
Level 1Level 2Level 3Total
Cash equivalents:(1)
Money market funds
$144,474 $ $ $144,474 
Marketable securities:
U.S. treasury securities
 292,321  292,321 
Other investments:
Non-marketable debt investments
  2,603 2,603 
Total assets
$144,474 $292,321 $2,603 $439,398 

(1)Included in cash and cash equivalents.
The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis at January 31, 2022 (in thousands):
 
Level 1Level 2Level 3Total
Cash equivalents:(1)
Money market funds
$233,705 $ $ $233,705 
Marketable securities:
U.S. treasury securities
 223,032  223,032 
Other investments:
Non-marketable debt investments
  6,434 6,434 
Total assets
$233,705 $223,032 $6,434 $463,171 

(1)Included in cash and cash equivalents.
Other Investments
The Company’s non-marketable debt investments are recorded at fair value on a recurring basis. The estimation of fair value for non-marketable debt investments is based on valuation methods using an observable transaction price, if available and other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds; as a result, the Company classifies these assets as Level 3 within the fair value hierarchy.
As of April 30, 2022, the balance of non-marketable debt investments was $2.6 million. There have been no impairments to the amortized cost of the non-marketable debt investments during the three months ended April 30, 2022.

The table above does not include the Company’s non-marketable equity investments. The non-marketable equity investments are measured under the measurement alternative on a non-recurring basis. As of April 30, 2022 and January 31, 2022, the carrying value of the Company’s non-marketable equity investments was $8.9 million and $5.0 million, respectively. There have been no impairments or adjustments to the carrying amount of the equity investments during the year ended April 30, 2022.

During the quarter ended April 30, 2022, the Company’s investment in a non-marketable convertible note converted to preferred stock, which is classified as a non-marketable equity investment. At the time of conversion, the Company recognized a gain of $1.3 million.

15


Convertible Senior Notes
The Company has $1,380.0 million in aggregate principal amount of 0.375% convertible senior notes due in 2026 (the “2026 Notes”), $805.0 million in aggregate principal amount of 0.125% convertible senior notes due in 2025 (the “2025 Notes”) and $1.8 million in aggregate principal amount of 0.375% convertible senior notes due in 2023 (the “2023 Notes” and, together with the 2025 Notes and 2026 Notes, the “Convertible Notes”) outstanding as of April 30, 2022. Refer to Note 8, “Convertible Senior Notes” for further details on the Convertible Notes.
The estimated fair value of the 2026 Notes, 2025 Notes and 2023 Notes, based on a market approach as of April 30, 2022, was approximately $1,155.6 million, $746.6 million and $3.4 million, respectively, which represents a Level 2 valuation estimate. The estimated fair value of the 2026 Notes, 2025 Notes and 2023 Notes, based on a market approach as of January 31, 2022, was approximately $1,277.1 million, $895.0 million and $5.3 million, respectively, which represents a Level 2 valuation estimate. The estimated fair value was determined based on the estimated or actual bids and offers of the Convertible Notes in an over-the-counter market on the last trade completed prior to the end of the period.
Note 6. Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
 
April 30,
2022
January 31,
2022
Furniture and equipment$16,554 $15,584 
Software development costs58,998 55,733 
Leasehold improvements7,221 7,193 
Construction in progress1,128 471 
Total property and equipment
83,901 78,981 
Less: accumulated depreciation and amortization(52,568)(48,405)
Property and equipment, net
$31,333 $30,576 
 
Depreciation and amortization expense related to property and equipment, excluding software development costs, was approximately $1.4 million and $1.3 million for the three months ended April 30, 2022 and 2021, respectively.
 
Amortization expense related to software development costs was approximately $2.8 million and $2.2 million for the three months ended April 30, 2022 and 2021, respectively.
  
Note 7. Goodwill and Other Intangible Assets
Goodwill
There have been no changes to the Company's goodwill balance during the three months ended April 30, 2022.
 
Other Intangible Assets
The following table summarizes the other intangible assets balances (in thousands):
 
As of
April 30, 2022January 31, 2022
Weighted
Average
Remaining
Useful
Lives
(in Years)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Developed technology4.9$484,510 $(170,872)$313,638 $484,510 $(150,910)$333,600 
Customer relationships3.4256,082 (91,765)164,317 256,082 (79,019)177,063 
Trademarks0.02,419 (2,419) 2,419 (2,419) 
Total other intangible assets
$743,011 $(265,056)$477,955 $743,011 $(232,348)$510,663 
 
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Amortization expense related to other intangible assets was approximately $32.7 million and $33.5 million for the three months ended April 30, 2022 and 2021, respectively.
 
As of April 30, 2022, the future amortization expense of other intangible assets is as follows (in thousands):
 
Year Ending January 31,
2023 (remaining nine months)$95,403 
2024121,994 
2025102,849 
202678,559 
202745,157 
Thereafter
33,993 
Total
$477,955 
 
Note 8. Convertible Senior Notes
2026 Notes
In June 2020, the Company issued the 2026 Notes in aggregate principal amount of $1,380.0 million in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the 2026 Notes were $1,162.3 million, net of debt issuance costs, including the underwriting discount and the cash used to purchase the capped call discussed below. The 2026 Notes have an initial conversion rate of 3.3732 shares of common stock per $1,000 principal (equivalent to an initial conversion price of approximately $296.45 per share of common stock). The interest rate is fixed at 0.375% per annum for the 2026 Notes and is payable semi-annually in arrears on June 15 and December 15 of each year, which commenced on December 15, 2020. Refer to the Company’s consolidated financial statements for the year ended January 31, 2021 for details of the issuance and accounting of 2026 Notes.
The 2026 Notes were not convertible at April 30, 2022, as none of the 2026 Notes conversion conditions were met. Accordingly, the 2026 Notes were classified as noncurrent liabilities on the condensed consolidated balance sheet as of April 30, 2022.
The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on or after June 20, 2023 and prior to the 21st scheduled trading day immediately preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.
2025 Notes
In June 2019, the Company issued the 2025 Notes in aggregate principal amount of $805.0 million in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the 2025 Notes were $667.4 million, net of debt issuance costs, including the underwriting discount and the cash used to purchase the capped call, discussed below. The 2025 Notes have an initial conversion rate of 6.2658 shares of common stock per $1,000 principal (equivalent to an initial conversion price of approximately $159.60 per share of common stock). The interest rate is fixed at 0.125% per annum for the 2025 Notes and is payable semi-annually in arrears on June 15 and December 15 of each year, which commenced on December 15, 2019. The accounting for 2025 Notes was substantially consistent with the accounting for 2026 Notes as described in the Company’s consolidated financial statements for the year ended January 31, 2022. Refer to the Company’s consolidated financial statements for the year ended January 31, 2020 for details of the issuance and accounting of 2025 Notes.
The 2025 Notes were convertible from August 1, 2020 through January 31, 2022 as a result of meeting the conversion condition for the respective periods. Beginning with the three months ended January 31, 2022, the conversion condition was not met and continued to not be met during the three months ended April 30, 2022. Therefore, it has not been convertible commencing on February 1, 2022 and for the quarter ended April 30, 2022. Accordingly, the 2025 Notes were classified as noncurrent liabilities on the condensed consolidated balance sheet as of April 30, 2022.
As of April 30, 2022, approximately $805.0 million principal amount of 2025 Notes remained outstanding.

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The Company may redeem for cash all or any portion of the 2025 Notes, at its option, on or after June 20, 2022, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date.
2023 Notes
In January 2018, the Company issued the 2023 Notes in aggregate principal amount of $230.0 million in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the 2023 Notes were $200.4 million, net of debt issuance costs, including the underwriting discount and the cash used to purchase the capped call, discussed below. The 2023 Notes have an initial conversion rate of 22.4685 shares of common stock per $1,000 principal (equivalent to an initial conversion price of approximately $44.5068 per share of common stock). The interest rate is fixed at 0.375% per annum for the 2023 Notes and is payable semi-annually in arrears on July 15 and January 15 of each year, which commenced on July 15, 2018. The accounting for 2023 Notes was substantially consistent with the accounting for 2026 Notes as described in the Company’s consolidated financial statements for the year ended January 31, 2022. Refer to the Company’s consolidated financial statements for the year ended January 31, 2019 for details of the issuance of 2023 Notes.
The conversion condition for the 2023 Notes was initially met during the three months ended July 31, 2018, and has been met for each subsequent fiscal quarter. As a result, the 2023 Notes were convertible at the option of the holders and remained classified as current liabilities on the condensed consolidated balance sheet as of April 30, 2022. For the three months ended April 30, 2022, the Company did not receive any conversion requests.
As of April 30, 2022, approximately $1.8 million principal amount of 2023 Notes remained outstanding. In addition, from May 1, 2022 to the date of this filing, the Company has not received any conversion requests for the 2023 Notes.
The Company may redeem for cash all or any portion of the 2023 Notes, at its option, on or after January 20, 2021, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the 2023 Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. During the three months ended April 30, 2022, the Company did not redeem any of the 2023 Notes.
The Company adopted ASU 2020-06 on February 1, 2022, using the modified retrospective approach. Prior to the adoption of the standard, in accounting for the issuance of the Convertible Notes, the Company separated each series of notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Convertible Notes. This difference represented a debt discount that was amortized to interest expense over the term of the Convertible Notes using the effective interest rate method. The gross carrying amount of the equity component for the Convertible Notes was included in additional paid-in capital on the condensed consolidated balance sheets upon issuance. The effective interest rate of the liability component of the 2026 Notes, 2025 Notes and 2023 Notes were 8.83%, 7.05% and 7.66%, respectively. Additionally, the Company separated the total issuance costs incurred into liability and equity components in proportion to the allocation of the initial proceeds. Issuance costs attributable to the liability component were amortized on a straight-line basis, which approximated the effective interest rate method, to interest expense over the respective terms of the Convertible Notes. The issuance costs attributable to the equity component were netted against the equity component in additional paid-in capital.
Upon adoption of ASU 2020-06, the Company recombined the liability and equity components for each of the Convertible Notes, assuming that the instrument was accounted for as a single liability component from inception to the date of adoption. The Company similarly recombined the liability and equity components of the debt issuance costs. The Company reversed the allocation of the issuance costs to the equity component and accounted for the entire amount as debt issuance cost that will be amortized as interest expense for each of the respective terms of the Convertible Notes, with a cumulative adjustment to retained earnings on the adoption date.

18


The Convertible Notes consisted of the following (in thousands):
 
As of
April 30, 2022
2026 Notes2025 Notes2023 Notes
Liability:
Principal
$1,380,000 $804,990 $1,752 
Unamortized debt issuance costs (1)
(17,263)(9,872)(8)
Net carrying amount
$1,362,737 $795,118 $1,744 

As of
January 31, 2022
2026 Notes2025 Notes2023 Notes
Liability:
Principal
$1,380,000 $804,990 $1,752 
Unamortized debt discount and issuance costs (1)
(408,467)(162,266)(113)
Net carrying amount
$971,533 $642,724 $1,639 
Carrying amount of the equity component (2)
$501,053 $246,966 $460 
(1)Included in the condensed consolidated balance sheets within Convertible senior notes, net and amortized over the remaining lives of the convertible senior notes. The 2026 Notes and 2025 Notes were classified as noncurrent liabilities, and the 2023 Notes were classified as current liabilities.
(2)Included in the condensed consolidated balance sheets within additional paid-in capital and temporary equity.
After the adoption of ASU No. 2020-06, the effective interest rate for the 2026 Notes, 2025 Notes, and 2023 Notes was 0.68%, 0.52%, and 1.00%, respectively. As of April 30, 2022 and January 31, 2022, the if-converted value of the 2026 Notes and 2025 Notes did not exceed the principal amount. As of April 30, 2022 and January 31, 2022, the if-converted value of the 2023 Notes exceeded the principal amount by $1.6 million and $3.5 million, respectively.
During the three months ended April 30, 2022, the Company recognized $1.8 million of interest expense related to the amortization of debt issuance costs. During the three months ended April 30, 2021 the Company recognized $27.4 million of interest expense related to the amortization debt discount and issuance costs. During both the three months ended April 30, 2022 and 2021, the Company recognized $1.5 million of coupon interest expense.
As of April 30, 2022, the remaining life of the 2026 Notes, 2025 Notes and 2023 Notes is approximately 4.1 years, 3.1 years and 0.7 years, respectively.
Capped Calls
In conjunction with the issuance of the 2026 Notes, 2025 Notes and 2023 Notes, the Company entered into capped call transactions (the “Capped Calls”) on the Company’s common stock with certain counterparties at a price of $192.8 million, $118.7 million and $23.3 million, respectively.
The Capped Calls exercise price is equal to the initial conversion price of each of the Convertible Notes, and the cap price is $503.415 per share for 2026 Notes, $295.550 per share for 2025 Notes and $63.821 per share for 2023 Notes, each subject to certain adjustments under the terms of the Capped Call transactions. If any tranche of convertible notes’ conversion option is exercised, the corresponding convertible note capped call will become exercisable on the same date. As of the date of filing, the Company has not exercised the Capped Calls in relation to the conversion of 2023 Notes, and the Capped Calls relating to the 2025 Notes and 2026 Notes were not exercisable.
By entering into the Capped Calls, the Company expects to reduce the potential dilution to its common stock (or, in the event the conversion is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion its stock price exceeds the conversion price.
The cost of the Capped Calls is not expected to be tax-deductible as the Company did not elect to integrate the Capped Calls into the respective convertible notes for tax purposes. The cost of the Capped Calls was recorded as a reduction of the Company’s additional paid-in capital in the accompanying condensed consolidated financial statements.
 

19


Note 9. Commitments and Contingencies
Commitments
The Company leases office space under non-cancelable operating leases with various expiration dates through February 2030. For the three months ended April 30, 2022 and 2021, lease costs in relation to long-term leases were approximately $3.8 million and $3.5 million, respectively. For the three months ended April 30, 2022 and 2021, short-term lease costs were approximately $700,000 and $600,000, respectively. Variable lease costs were immaterial for the three months ended April 30, 2022 and 2021. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments or the lease right-of-use asset/lease liability.
For the three months ended April 30, 2022 and 2021, cash paid for operating lease liabilities was approximately $3.8 million and $3.6 million, respectively. For the three months ended April 30, 2022 and 2021, right-of-use assets obtained in exchange of lease obligations was approximately $100,000 and $900,000, respectively. As of April 30, 2022, the weighted-average remaining lease term was 3.5 years, and the weighted-average discount rate was 7.5%.
As of April 30, 2022, the remaining maturities of operating lease liabilities and future purchase obligations are as follows (in thousands):
 
Year Ending January 31,Operating Lease ObligationsFuture Purchase Obligations
2023 (remaining nine months)$11,632 $29,302 
202414,515 48,191 
20259,076 58,534 
20265,892 53,883 
20274,517  
Thereafter474  
Total payments
46,106 $189,910 
Less imputed interest(5,685)
Total
$40,421 
The Company's future purchase obligations in the table above primarily includes contractual purchase obligations for hosting services and other services to support the Company's business operations.
Contingencies
On June 10, 2021, the Company was served with notice of a complaint filed in U.S. District Court for the Southern District of Florida by DCR Workforce, Inc., as plaintiff, against Coupa Software Incorporated, as defendant. The complaint alleged breach of contract and other claims, and sought various damages from the Company including 206,065 shares of the Company’s common stock. The complaint related to the Company’s purchase of DCR’s vendor management software (VMS) business in August 2018. Under the purchase agreement, the Company agreed to issue additional stock to DCR as contingent (earn-out) consideration if the VMS business achieved certain revenue-related milestones during three measurement periods that continue through December 31, 2022. The VMS business met the target for the first measurement period and DCR was issued stock. It did not meet the target for the second measurement period. After DCR was notified, it filed the complaint.
    
On August 4, 2021, pursuant to a forum selection provision in the purchase agreement, the district court granted the Company’s motion to transfer venue to the U.S. District Court for the Northern District of California. On October 13, 2021, the court granted the Company’s motion to dismiss in its entirety and dismissed the case with prejudice. On November 11, 2021, DCR filed a notice of appeal of the district court’s decision. Given the early stage of the appeal, the amount of any loss or range of loss that may occur cannot be reasonably estimated as of the date of this filing.
In addition, the Company may become involved in other legal proceedings or be subject to claims arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these current matters will not have a material adverse effect on the Company’s business, operating results, financial condition or cash flows. The Company accrues estimates for resolution of legal and other contingencies when losses are probable and estimable. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

20


Warranties and Indemnifications
The Company’s cloud-based software platform and applications are typically warranted against material decreases in functionality and to perform in a manner consistent with general industry standards and in accordance with the Company’s online documentation under normal use and circumstances.
The Company includes service level commitments to its customers, typically regarding certain levels of uptime reliability and performance and if the Company fails to meet those levels, customers can receive credits and, in some cases, terminate their relationship with the Company. To date, the Company has not incurred any material costs as a result of such commitments.
The Company generally agrees to defend and indemnify its customers against legal claims that the Company’s platform infringes patents, copyrights or other intellectual property rights of third parties. To date, the Company has not been required to make any payment resulting from such infringement claims and has not recorded any related liabilities. In addition, the Company has indemnification agreements with its directors and certain of its officers that require the Company to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. To date, the Company has not incurred any material costs, and not accrued any liabilities in its condensed consolidated financial statements, as a result of these obligations.
  
Note 10. Common Stock and Stockholders’ Equity
Common Stock
Each share of common stock has the right to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors of the Company (the “Board of Directors”), subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid since inception.
Preferred Stock 
As of April 30, 2022, the Company had authorized 25,000,000 shares of preferred stock, par value $0.0001, of which no shares were issued and outstanding.
2016 Equity Incentive Plan
The 2016 Equity Incentive Plan (the “2016 Plan”) provides for the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights and performance cash awards. The 2016 Plan replaced the Company’s 2006 Stock Plan; however, awards outstanding under the 2006 Stock Plan will continue to be governed by their existing terms. As of April 30, 2022, the Company had 13,698,823 shares of its common stock available for future issuance under the 2016 Plan.
In addition, the Company has the 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of common stock through payroll deductions and is intended to qualify under Section 423 of the Internal Revenue Code. The purchase price for each share of common stock purchased under the ESPP will be 85% of the lower of the fair market value per share on the first day of the applicable offering period or the fair market value per share on the applicable purchase date. As of April 30, 2022, the Company had 2,915,413 shares of its common stock available for future issuances under the ESPP. As of April 30, 2022, the total unrecognized compensation cost related to the 2016 ESPP was $19.8 million, which will be amortized over a weighted-average period of approximately 1.9 years.

Restricted Stock Units (“RSUs”)
The following table summarizes the activity related to the Company’s RSUs during the three months ended April 30, 2022:
Number of
RSUs
Outstanding
Weighted-
Average
Grant Date
Fair Value
Awarded and unvested at January 31, 20222,124,649$184.56 
Awards granted2,926,967$122.85 
Awards vested(262,473)$130.07 
Awards forfeited(177,466)$170.52 
Awarded and unvested at April 30, 20224,611,677$149.03 
(1)The above table includes restricted share units with market and service-based conditions.

21


As of April 30, 2022, there was approximately $624.8 million of total unrecognized compensation cost related to unvested restricted stock units granted to employees under the 2016 Plan. This unrecognized compensation cost is expected to be recognized over an estimated weighted-average amortization period of approximately 3.2 years.
Market-based Options and Awards
 
In March 2022, the Board of Directors of the Company granted market-based restricted stock unit awards (the “2022 PSU Grant”) to certain members of management. The target number of market-based restricted stock unit awards granted was 172,814. The number of shares that could be earned will range from 0% to 200% of the target number of shares, based on the relative growth of the per share price of the Company’s common stock as compared to the Nasdaq Composite Index over the three-year performance period ending on the third anniversary of the date of grant and subject to continuous employment through such date. The fair value of the 2022 PSU Grant was determined using a Monte Carlo simulation approach. The Company amortizes the fair value of the 2022 PSU Grant using the straight-line method over the three-year performance term.

In March 2021, the Board of Directors of the Company granted market-based restricted stock unit awards (the “2021 PSU Grant”) to certain members of management. In March 2020, the Board of Directors of the Company granted market-based restricted stock unit awards (the “2020 PSU Grant”) to certain members of management. As of April 30, 2022, the three-year performance period related to the 2020 PSU Grant and 2021 PSU Grant had not been completed. Refer to the Company’s fiscal 2022 Form 10-K for further information.

In September 2016 and March 2018, certain service and market-based options were granted to the Chief Executive Officer. Refer to the Company's fiscal 2021 Form 10-K for further information. As of April 30, 2022, all market-based milestones of the stock options granted to the Chief Executive Officer were achieved.

Stock-based compensation expense recognized for market-based awards was approximately $3.4 million and $2.5 million for the three months ended April 30, 2022 and 2021, respectively.
Stock Options
The following table summarizes stock option activity under the Company’s 2006 Stock Plan and the 2016 Plan during the three months ended April 30, 2022 (aggregate intrinsic value in thousands):
 
Options Outstanding
Outstanding
Stock
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Life
(in Years)
Aggregate
Intrinsic
Value
Balance at January 31, 20221,840,947 $23.82 4.7$203,339 
Option grants $ — $— 
Options exercised(57,235)$12.15 
Options forfeited(6,192)$13.91 
Balance at April 30, 20221,777,520 $24.23 4.6$111,147 
Exercisable at April 30, 20221,749,905 $23.12 4.5$111,147 

(1)The above table includes 711,839 stock options with market and service based conditions.

22


The aggregate intrinsic value of exercised options was $5.0 million and $57.4 million for the three months ended April 30, 2022 and 2021, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.
As of April 30, 2022, there was approximately $900,000 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over an estimated weighted-average amortization period of approximately 0.9 years.
Stock Based Compensation
The Company’s total stock-based compensation expense was as follows (in thousands):