10-Q 1 hcp-20231031.htm 10-Q hcp-20231031
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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 October 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
File Number: 001-41121
HashiCorp, Inc.
(Exact name of Registrant as specified in its charter)
Delaware32-0410665
(State or other jurisdiction of
 incorporation or organization)
(I.R.S. Employer
Identification Number)
101 Second Street, Suite 700
San Francisco, CA 94105
(Address of principal executives offices, including zip code)
(415) 301-3250
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:


(Title of each class)Trading Symbol(s)(Name of each exchange on which registered)
Class A Common Stock, par value $0.000015 per shareHCPThe 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 ☒ 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 ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filerAccelerated filer
Non-accelerated filerSmaller 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
As of December 1, 2023, the number of registrant’s issued and outstanding shares of Class A common stock and Class B common stock was 117,341,034 and 78,523,167, respectively.



HashiCorp, Inc.
Form 10-Q
For the Quarterly Period Ended October 31, 2023
TABLE OF CONTENTS

Page
Part I.
Item 1.
1
Condensed Consolidated Balance Sheets as of October 31, 2023 and January 31, 2023
1
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2023 and 2022
2
Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31, 2023 and 2022
3
Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 31, 2023 and 2022
4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2023 and 2022
6
7
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HASHICORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)

As of
October 31, 2023January 31, 2023
Assets
Current assets:
Cash and cash equivalents$729,826 $1,286,134 
Short-term investments525,825  
Accounts receivable, net of allowance 108,183 162,369 
Deferred contract acquisition costs45,508 42,812 
Prepaid expenses and other current assets29,248 17,683 
Total current assets1,438,590 1,508,998 
Deferred contract acquisition costs, non-current79,676 81,286 
Acquisition-related intangible assets, net12,319  
Goodwill12,265  
Other assets, non-current43,419 38,056 
Total assets$1,586,269 $1,628,340 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$6,111 $12,450 
Accrued expenses and other current liabilities13,210 10,163 
Accrued compensation and benefits51,974 58,628 
Deferred revenue264,422 272,909 
Customer deposits22,173 26,699 
Total current liabilities357,890 380,849 
Deferred revenue, non-current25,780 29,335 
Other liabilities, non-current10,876 12,806 
Total liabilities394,546 422,990 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Class A common stock, par value of $0.000015 per share; 1,000,000 and 1,000,000 shares authorized as of October 31, 2023 and January 31, 2023, respectively; 115,432 and 88,823 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively
1 1 
Class B common stock, par value of $0.000015 per share; 200,000 and 200,000 shares authorized as of October 31, 2023 and January 31, 2023, respectively; 80,096 and 101,145 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively
2 2 
Additional paid-in capital2,132,382 1,985,747 
Accumulated other comprehensive loss(1,216) 
Accumulated deficit(939,446)(780,400)
Total stockholders’ equity1,191,723 1,205,350 
Total liabilities and stockholders’ equity$1,586,269 $1,628,340 

The accompanying notes are an integral part of these condensed consolidated financial statements.
1

HASHICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Revenue:
License$15,973 $17,823 $47,855 $43,505 
Support106,098 89,500 312,008 252,965 
Cloud-hosted services19,863 12,875 54,779 32,344 
Total subscription revenue141,934 120,198 414,642 328,814 
Professional services and other4,191 5,143 12,712 11,287 
Total revenue146,125 125,341 427,354 340,101 
Cost of revenue:
Cost of license293 393 1,376 1,146 
Cost of support13,356 12,149 44,503 35,259 
Cost of cloud-hosted services7,692 5,849 22,339 16,378 
Total cost of subscription revenue21,341 18,391 68,218 52,783 
Cost of professional services and other4,264 4,157 13,509 10,694 
Total cost of revenue25,605 22,548 81,727 63,477 
Gross profit120,520 102,793 345,627 276,624 
Operating expenses:
Sales and marketing87,320 92,872 279,019 260,798 
Research and development54,349 53,887 168,504 148,947 
General and administrative34,424 33,372 104,083 101,278 
Total operating expenses176,093 180,131 551,606 511,023 
Loss from operations(55,573)(77,338)(205,979)(234,399)
Interest income16,765 8,584 48,045 13,126 
Other expense, net(407)(2,882)(632)(2,922)
Loss before income taxes(39,215)(71,636)(158,566)(224,195)
Provision for income taxes258 322 480 744 
Net loss$(39,473)$(71,958)$(159,046)$(224,939)
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted$(0.20)$(0.38)$(0.83)$(1.22)
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted194,600 187,080 192,693 185,124 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

HASHICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Net loss$(39,473)$(71,958)$(159,046)$(224,939)
Other comprehensive loss, net of tax:
Available-for-sale investments:
Unrealized gains (losses) on available-for-sale investments38  (895) 
Foreign currency forward contracts:
Unrealized losses on foreign currency forward contracts(226) (321) 
Other comprehensive loss, net of tax(188) (1,216) 
Total comprehensive loss$(39,661)$(71,958)$(160,262)$(224,939)
                

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

HASHICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)

 Class A and Class B
Common Stock
 
Additional Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total Stockholders'
Equity
 
Shares
 Amount  
Balance as of January 31, 2023189,968$3 $1,985,747 $ $(780,400)$1,205,350 
Issuance of common stock upon exercise of stock options513— 1,013 — — 1,013 
Issuance of common stock upon settlement of restricted stock units1,071— — — — — 
Tax withholdings on settlement of restricted stock units— (9)— — (9)
Stock-based compensation— 41,266 — — 41,266 
Other comprehensive loss— — (66)— (66)
Net loss— — — (53,258)(53,258)
Balance as of April 30, 2023191,552 $3  $2,028,017 $(66) $(833,658)$1,194,296 
Issuance of common stock upon exercise of stock options366 — 442 — — 442 
Issuance of common stock upon settlement of restricted stock units1,307 — — — — — 
Tax withholdings on settlement of restricted stock units(5)— (215)— — (215)
Issuance of common stock under employee stock purchase plan426 — 10,195 — — 10,195 
Stock-based compensation— — 47,471 — — 47,471 
Other comprehensive loss— — — (962)— (962)
Net loss— — — — (66,315)(66,315)
Balance as of July 31, 2023193,646$3 $2,085,910 $(1,028)$(899,973)$1,184,912 
Issuance of common stock upon exercise of stock options407— 1,488 — — 1,488 
Issuance of common stock upon settlement of restricted stock units1,477— — — — — 
Tax withholdings on settlement of restricted stock units(2)— (12)— — (12)
Stock-based compensation— 44,996 — — 44,996 
Other comprehensive loss— — (188)— (188)
Net loss— — — (39,473)(39,473)
Balance as of October 31, 2023195,528$3 $2,132,382 $(1,216)$(939,446)$1,191,723 
4

Class A and Class B
Common Stock
Additional Paid-in
Capital
Accumulated
Deficit
Total Stockholders'
Equity
SharesAmount
Balance as of January 31, 2022182,167$3 $1,788,390 $(506,102)$1,282,291 
Issuance of common stock upon exercise of stock options839— 521 — 521 
Vesting of early exercised stock options— — 3 — 3 
Issuance of common stock for restricted stock awards710— — — — 
Tax withholdings on settlement of restricted stock units(8)— (125)— (125)
Stock-based compensation— — 47,141 — 47,141 
Net loss— — — (78,217)(78,217)
Balance as of April 30, 2022183,708$3 $1,835,930 $(584,319)$1,251,614 
Issuance of common stock upon exercise of stock options 786 — 1,645 1,645 
Vesting of early exercised stock options — — 2 — 2 
Issuance of common stock upon settlement of restricted stock units1,477 — — — — 
Tax withholdings on settlement of restricted stock units(2)— (77)— (77)
Issuance of common stock under employee stock purchase plan351 — 8,501 — 8,501 
Stock-based compensation — — 43,309 — 43,309 
Net loss — — — (74,764)(74,764)
Balance as of July 31, 2022186,320 $3 $1,889,310 $(659,083)$1,230,230 
Issuance of common stock upon exercise of stock options491 — 989 989 
Vesting of early exercised stock options— — 1 — 1 
Issuance of common stock upon settlement of restricted stock units1,032 — — — — 
Tax withholdings on settlement of restricted stock units(2)— (20)— (20)
Stock-based compensation— — 47,964 — 47,964 
Net loss— — — (71,958)(71,958)
Balance as of October 31, 2022187,841 $3 $1,938,244 $(731,041)$1,207,206 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

HASHICORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended October 31,
20232022
Cash flows from operating activities
Net loss$(159,046)$(224,939)
Adjustments to reconcile net loss to cash from operating activities:
Stock-based compensation expense, net of amounts capitalized130,048 135,372 
Depreciation and amortization expense6,586 3,178 
Non-cash operating lease cost2,222 2,135 
Accretion of discounts on marketable securities(8,505) 
Deferred income taxes(482) 
Other67 (8)
Changes in operating assets and liabilities:
Accounts receivable54,116 11,541 
Deferred contract acquisition costs(1,086)(21,491)
Prepaid expenses and other assets(11,843)3,391 
Accounts payable(6,589)2,100 
Accrued expenses and other liabilities(3,403)(2,663)
Accrued compensation and benefits(6,654)(3,735)
Deferred revenue(12,042)10,893 
Customer deposits(4,526)(1,814)
Net cash used in operating activities(21,137)(86,040)
Cash flows from investing activities
Business combination, net of cash acquired(20,860) 
Purchases of property and equipment(491)(140)
Capitalized internal-use software(8,536)(6,174)
Purchases of short-term investments (691,220) 
Proceeds from sales of short-term investments26,372  
Proceeds from maturities of short-term investments146,662  
Net cash used in investing activities(548,073)(6,314)
Cash flows from financing activities
Taxes paid related to net share settlement of equity awards(236)(222)
Proceeds from issuance of common stock upon exercise of stock options2,943 3,155 
Proceeds from issuance of common stock under employee stock purchase plan10,195 8,501 
Net cash provided by financing activities12,902 11,434 
Net decrease in cash, cash equivalents, and restricted cash(556,308)(80,920)
Cash, cash equivalents, and restricted cash beginning of period1,286,134 1,357,613 
Cash, cash equivalents, and restricted cash end of period$729,826 $1,276,693 
Supplemental disclosure of cash flow information
Cash paid for income taxes, net of refunds received$1,406 $1,090 
Cash paid for operating lease liabilities$2,912 $2,827 
Supplemental disclosure of noncash investing and financing activities
Capitalized stock-based compensation expense$3,685 $3,042 
Acquisition holdback$4,100 $ 

The accompanying notes are an integral part of these condensed consolidated financial statements.
6

HASHICORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Description of Business
Description of Business
HashiCorp, Inc., (“HashiCorp” or the “Company”) was incorporated in Delaware in May 2013. The Company is headquartered in San Francisco, California and has wholly owned subsidiaries around the world. 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 condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America ("U.S. GAAP" or "GAAP") and include the accounts of the Company and its wholly owned subsidiaries. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission (the "SEC"). The condensed balance sheet data as of January 31, 2023 was derived from the Company’s audited financial statements included in its Annual Report on Form 10-K for the fiscal year ended January 31, 2023 (the fiscal “2023 Form 10-K”), but does not include all disclosures required by U.S. GAAP. Therefore, these interim condensed consolidated financial statements and accompanying footnotes should be read in conjunction with the Company’s annual consolidated financial statements and related footnotes included in the fiscal 2023 Form 10-K.

The accompanying condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of the Company’s financial position, results of operations, cash flows, and stockholders’ equity for the interim periods presented. The results of operations for the three and nine months ended October 31, 2023 shown in this report are not necessarily indicative of the results to be expected for the full year ending January 31, 2024 or any other period.

Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates
The preparation of condensed 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, but are not limited to, the determination of standalone selling prices of the Company’s performance obligations, the estimated period of benefit of deferred contract acquisition costs, the fair value of share-based awards, software development costs, discount rates used for operating leases, goodwill and acquisition-related intangible assets, and the valuation allowance on deferred tax assets and uncertain tax positions. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates.

7

Accumulated Other Comprehensive Gain (Loss)
As of October 31, 2023, accumulated other comprehensive loss was comprised of unrealized gain (losses) from available-for-sale investments and unrealized losses related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment, acquired intangible assets, 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, as considered necessary. For the fiscal years presented, there were no impairment losses recognized for any long-lived assets.

Significant Accounting Policies
Other than the business combinations, goodwill, short-term investments and derivative instruments and hedging policies described below, there have been no changes to the Company’s significant accounting policies described in the fiscal 2023 Form 10-K that have had a material impact on these condensed consolidated financial statements and related notes.

Business Combinations

The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date fair value. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that the Company identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. There has been no such adjustment as of October 31, 2023.

Goodwill

Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets. Goodwill is evaluated for impairment annually in the fourth quarter of the Company’s fiscal year, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill, or a significant decrease in expected cash flows.

As of October 31, 2023, the Company has not had any goodwill impairments.

Short-term Investments

The Company’s short-term investments consist of U.S. treasury securities, corporate notes and bonds, U.S. agency obligations, commercial paper, and certificates of deposit. The Company determines the appropriate classification of its short-term investments at the time of purchase and reevaluates such determination at each balance sheet date. The Company has classified and accounted for its short-term investments as available-for-sale securities. The Company may
8

sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. As a result, the Company classifies its short-term investments, including those with maturities beyond twelve months, as current assets in the consolidated balance sheets.

Available-for-sale securities are recorded at fair value each reporting period, and are adjusted for amortization of premiums and accretion of discounts to maturity and such amortization and accretion are included in interest income in the condensed consolidated statements of operations. Realized gains and losses are determined based on the specific identification method and are reported in other expense, net in the condensed consolidated statements of operations. Unrealized gains are reported as a separate component of accumulated other comprehensive loss on the condensed consolidated balance sheets until realized.

For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell the security or it is more likely than not that the Company will be required to sell the security before the recovery of its entire amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through other expense, net in the condensed consolidated statements of operations. If neither of these criteria is met, the Company evaluates whether the decline in fair value below amortized cost is due to credit or non-credit related factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors. Credit related unrealized losses are recognized as an allowance for expected credit losses of available-for-sale debt securities on the condensed consolidated balance sheets with a corresponding charge in other expense, net, net in the condensed consolidated statements of operations. Non-credit related unrealized losses are included in accumulated other comprehensive loss.

As of October 31, 2023, the Company did not identify any credit losses on short-term investments. Realized gains and losses on the sale of short-term investments are determined on a specific identification method and are recorded in other expense, net in the consolidated statements of operations. For the three and nine months ended October 31, 2023, the realized gains or losses on the sale of short-term investments were not material.
Derivative Instruments and Hedging

The Company enters into foreign currency forward contracts with certain financial institutions to mitigate the impact of foreign currency fluctuations on future cash flows and earnings. All of the Company’s foreign currency forward contracts are designated as cash flow hedges. The foreign currency forward contracts generally have maturities of 12 months or less.

The Company recognizes all forward contracts as either assets or liabilities on the consolidated balance sheets at fair value. Gains and losses on each forward contract are initially reported as a component of accumulated other comprehensive income (loss) (“AOCI”), and subsequently reclassified into cost of revenue or operating expense in the same period, or periods, during which the hedged transaction affects earnings. The Company evaluates the effectiveness of its cash flow hedges on a quarterly basis and does not exclude any component of the changes in fair value of the derivative instruments for effectiveness testing purposes. The Company classifies cash flows related to its cash flow hedges as operating activities in its consolidated statements of cash flows.

The Company does not have collateral requirements with any of its counterparties. The Company does not use derivative instruments for trading or speculative purposes.

3. Business Combinations

On June 2, 2023 (the "Closing"), the Company acquired all outstanding share capital of BluBracket, Inc. (“BluBracket acquisition”). BluBracket was a Palo Alto-based security startup that developed a code security solution that identifies, prevents, and resolves potential risks in source code, development environments, and pipelines. The Company expects that the BluBracket technology will enable our customers to have full visibility into their entire secrets inventory, complementing our Vault product offering. The aggregate purchase price was $25.1 million settled in cash (the "Purchase Price") of which the Company held back approximately $4.0 million for 14 months after the Closing and $0.2 million within one year following the Closing to satisfy indemnification obligations of BluBracket (the "Holdback"). As of October 31, 2023, $0.1 million of the remaining Holdback has been paid, $3.6 million is accrued as a current liability, and $0.5 million
9

is accrued as a non-current liability in the condensed consolidated balance sheet. The purchase price excludes retention agreements entered into with certain employees of BluBracket, pursuant to which the Company will pay up to an aggregate of $5.0 million in cash (the “Retention Payments”). The vesting and payout of the Retention Payments is subject to continued employment and achievement of certain semi-annual milestones over two years following the Closing. The Retention Payment is recorded as post-combination compensation expense within research and development in the condensed consolidated statements of operations over the requisite service period. During the three and nine months ended October 31, 2023, the Company recognized compensation expense of $0.6 million and $1.0 million, respectively, related to the Retention Payment agreements.

The acquisition was accounted for as a business combination. A portion of the Purchase Price was allocated to the fair value of the developed technology and customer relationship acquired, net liabilities assumed and a deferred tax liability related to developed technology, as set forth below. The useful lives for these acquired developed technology and the customer relationship were estimated to be five and three years, respectively. The remainder of the Purchase Price was recorded as goodwill, as set forth below. Goodwill generated from the acquisition was attributable to expected synergies from future growth and was not deductible for tax purposes. See “Note 4. Goodwill and Acquisition-related Intangible Assets, Net” for additional information.

The following table presents the purchase price allocation related to the acquisition (in thousands):

Net liabilities$(224)
Developed technology12,500 
Customer relationship1,000 
Deferred tax liabilities(482)
Goodwill12,265 
Total purchase consideration$25,059 

The estimated fair value of developed technology and customer relationship acquired of $12.5 million and $1.0 million were determined using a replacement cost approach methodology, which is based on the cost that a market participant would incur to reconstruct a substitute asset of comparable utility and generate the acquired portfolio of customers, respectively. There were no measurement period adjustments during the reporting period ended October 31, 2023. The financial results of BluBracket are included in the Company's consolidated financial statements from the date of acquisition. The business combination did not have a material impact on the consolidated financial statements and therefore historical and pro forma disclosures have not been presented.

The direct transaction costs of the acquisition were accounted for separately from the business combination and expensed as incurred. The Company incurred $0.5 million in acquisition-related costs which were recorded in general and administrative expense in the condensed consolidated statements of operations for the nine months ended October 31, 2023. There were no acquisition costs incurred in the three months ended October 31, 2023.

4. Goodwill and Acquisition-related Intangible Assets, Net

Goodwill

Goodwill as of October 31, 2023 was $12.3 million. No goodwill was recorded as of January 31, 2023. During the nine months ended October 31, 2023, changes in goodwill consisted of the following (in thousands):

Balance as of January 31, 2023$ 
BluBracket, Inc. (Note 3)12,265 
Balance as of October 31, 2023$12,265 

Acquisition-related Intangible Assets, Net

10

Acquisition-related intangible assets, net consisted of the following as of October 31, 2023 (in thousands except for useful life):

Gross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Remaining Useful Life
(in years)
Developed technology$12,500 $1,042 $11,458 4.6
Customer relationship$1,000 $139 $861 2.6

Acquired intangible assets are recorded at cost, net of accumulated amortization, and are amortized on a straight-line basis over their estimated useful lives. Amortization expense of acquired developed technology was included in cost of cloud-hosted services in the condensed consolidated statements of operations and was $0.6 million and $1.0 million for the three and nine months ended October 31, 2023, respectively. Amortization expense of customer relationship was included in sales and marketing in the condensed consolidated statements of operations, and was not significant for the three and nine months ended October 31, 2023.

Estimated future amortization expense as of October 31, 2023 is as follows (in thousands):

Year ending January 31,Amount
2024 (remaining three months)$708 
20252,833 
20262,833 
20272,612 
20282,500 
2029 and thereafter833 
Total$12,319 
5. Revenue and Performance Obligations

Disaggregation of revenue

The following table presents revenue by category (in thousands, except percentages):

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Amount% of Total
Revenue
Amount% of Total
Revenue
Amount% of Total
Revenue
Amount% of Total
Revenue
License$15,973 11 %$17,823 14 %$47,855 11 %$43,505 13 %
Support106,098 72 89,500 72 312,008 73 252,965 74 
Cloud-hosted services19,863 14 12,875 10 54,779 13 32,344 10 
Total subscription revenue141,934 97 120,198 96 414,642 97 328,814 97 
Professional services and other4,191 3 5,143 4 12,712 3 11,287 3 
Total revenue$146,125 100 %$125,341 100 %$427,354 100 %$340,101 100 %

The following table summarizes the revenue by region based on the billing address of customers who have contracted to use the Company's products and services (in thousands, except percentages):

11

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Amount% of Total
Revenue
Amount% of Total
Revenue
Amount% of Total
Revenue
Amount% of Total
Revenue
United States$102,365 70 %$91,503 73 %$300,979 70 %$247,695 73 %
Rest of the world43,760 30 33,838 27 126,375 30 92,406 27 
Total$146,125 100 %$125,341 100 %$427,354 100 %$340,101 100 %

No other country, outside of the United States, exceeded 10% of total revenue during the periods presented.

Contract Balances

Changes in deferred revenue and unbilled accounts receivable were as follows (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Balance, beginning of period$293,441 $226,812 $302,244 $223,289 
Deferred revenue billings including reclassification to deferred revenue from customer deposits142,390 131,351 415,646 350,879 
Recognition of revenue, net of change in unbilled accounts receivable*(145,629)(123,981)(427,688)(339,986)
Balance, end of period$290,202 $234,182 $290,202 $234,182 
* Reconciliation to revenue reported per consolidated statements of operations:
Revenue billed as of the end of the period$145,629 $123,981 $427,688 $339,986 
Increase (decrease) in total unbilled accounts receivable496 1,360 (334)115 
Revenue reported per consolidated statements of operations$146,125 $125,341 $427,354 $340,101 

Unbilled accounts receivable represents revenue recognized on contracts for which billings have not yet been presented to customers because the amounts were earned but not contractually billable as of the balance sheet date. The unbilled accounts receivable balance is due within one year. As of October 31, 2023 and January 31, 2023, unbilled accounts receivable of approximately $4.6 million and $4.9 million, respectively, were included in accounts receivable on the Company’s condensed consolidated balance sheets.

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 October 31, 2023 and January 31, 2023, the Company had $678.2 million and $647.1 million, respectively, of remaining performance obligations, which is comprised of product and services revenue not yet delivered. As of October 31, 2023 and January 31, 2023, the Company expected to recognize approximately 59% and 58%, 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 condensed 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
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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
October 31, 2023January 31, 2023
Within the next 12 months$18,728 $22,657 
After the next 12 months3,445 4,042 
Total$22,173 $26,699 

6. Short-term Investments

The following tables summarize the fair values of the Company’s short-term investments (in thousands):

As of October 31, 2023
Amortized CostUnrealized GainsUnrealized LossesFair Value
U.S. treasury securities$277,357 $6 $(404)$276,959 
U.S. agency obligations73,465  (146)73,319 
Corporate notes and bonds100,611 4 (355)100,260 
Commercial paper43,758   43,758 
Certificates of deposit31,529   31,529 
Total short-term investments$526,720 $10 $(905)$525,825 

The Company does not hold any marketable securities that have been in a continuous unrealized loss position for over 12 months. For short-term investments with an unrealized loss at October 31, 2023, the unrealized losses were not due to credit-related factors, the Company does not intend to sell these short-term investments and it is more likely than not that the Company will hold these short-term investments until maturity or a recovery of the cost basis. Therefore no allowance for expected credit losses was recorded as of October 31, 2023. Realized gains (losses) were not material for the three and nine months ended October 31, 2023.

The following table summarizes the contractual maturities of the Company’s short-term investments (in thousands):

As of October 31, 2023
Amortized CostFair Value
Due within one year$473,940 $473,254 
Due after one year through three years52,780 52,571 
Total$526,720 $525,825 

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7. Fair Value Measurements

The following table sets forth the financial assets, measured at fair value, by level within the fair value hierarchy on a recurring basis and indicates the fair value hierarchy of the valuation inputs used to determine such fair value (in thousands):

Fair Value Measurement As of October 31, 2023
Fair Value LevelAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Assets:
Cash and cash equivalents:
Money market fundsLevel 113,221   13,221 
U.S. treasury securitiesLevel 219,847   19,847 
Corporate notes and bondsLevel 2995   995 
Commercial paperLevel 29,675   9,675 
Total assets measured at fair value included in cash and cash equivalents$43,738 $ $ $43,738 
Short-term Investments:
U.S. treasury securitiesLevel 2$277,357 6 (404)$276,959 
U.S. agency obligationsLevel 273,465  (146)73,319 
Corporate notes and bondsLevel 2100,611 4 (355)100,260 
Commercial paperLevel 243,758   43,758 
Certificates of depositLevel 231,529   31,529 
Total short-term investments$526,720 $10 $(905)$525,825 
Total assets measured at fair value$570,458 $10 $(905)$569,563 
Liabilities:
Derivative instruments:
Foreign currency forward contractsLevel 2$— $— $321 $321 
Total derivative instruments— — 321 321 
Total liabilities measured at fair value$— $— $321 $321 

The following table summarizes the respective fair value and the classification by level within the fair value hierarchy (in thousands):

Fair Value Measurement As of January 31, 2023
Fair Value LevelAmortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Assets:
Cash and cash equivalents:
Money market fundsLevel 1$169,904 $ $ $169,904 
Total cash and cash equivalents169,904   169,904 
Total assets measured at fair value$169,904 $ $ $169,904 

The Company classifies its highly liquid money market funds within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The Company classifies its corporate notes and bonds, U.S. treasury securities, U.S. agency obligations, commercial paper, certificate of deposits and foreign currency forward contracts within Level 2 of the fair value hierarchy because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security that may not be actively traded.

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As of October 31, 2023, the declines in the market value of the Company's short-term investment portfolio were not driven by credit related factors. As of October 31, 2023, the Company determined that it does not intend to sell any securities with a decline in market value, and it is more likely than not that the Company will be able to hold these securities until the entire principal has been recovered. Therefore, the Company did not recognize any losses on short-term investments due to credit related factors. As of October 31, 2023, the total unrealized losses on short-term investments were $0.9 million.

There were no transfers between fair value measurement levels during the nine months ended October 31, 2023.
8. Derivative Instruments and Hedging

In June 2023, the Company began entering into foreign currency forward contracts to manage its exposure to certain foreign currency exchange risks. The Company’s derivative instruments generally have maturities of 12 months or less. The Company does not use derivative instruments for trading or speculative purposes.

As of October 31, 2023, the Company’s foreign currency forward contracts had an aggregate notional amount of $6.0 million.
The Company does not have collateral requirements with any of its counterparties. The following table summarizes the fair value of the Company’s derivative instruments on the condensed consolidated balance sheets (in thousands):

Balance Sheet LocationFair Value
at October 31, 2023
Derivative Liabilities:
Foreign currency forward contracts designated as hedging instrumentsAccrued expenses and other liabilities$321 
Total derivative liabilities$321 

The following table presents the activity of foreign currency forward contracts designated as hedging instruments and the impact of these derivatives on AOCI (in thousands):
Nine Months Ended October 31,
Beginning balance$ 
Net gains (losses) recognized in other comprehensive income(483)
Net (gains) losses reclassified from AOCI to earnings162 
Ending balance$(321)

As of October 31, 2023, net unrealized loss included in the balance of accumulated other comprehensive loss related to foreign currency forward contracts designated as hedging instruments was $0.3 million, all of which the Company expects to reclassify from accumulated other comprehensive loss into earnings over the next 12 months. The effect of foreign currency forward contracts were not material to the condensed consolidated financials for the three and nine months ended October 31, 2023.
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9. Balance Sheet Components

Other Assets, Non-Current

Other assets, non-current are comprised of the following (in thousands):
As of
October 31, 2023January 31, 2023
Property and equipment, net$31,973 $24,594 
Operating lease right-of-use assets10,338 12,560 
Other1,108 902 
Total other assets, non-current$43,419 $38,056 

Property and Equipment, Net

Property and equipment, net are included in other assets, non-current in the condensed consolidated balance sheets and are comprised of the following (in thousands):

Estimated
Useful life
As of
October 31, 2023January 31, 2023
Furniture and fixtures5 years$1,329 $1,292 
Computers, equipment and software3 years580 581 
Capitalized internal-use software development costs5 years38,038 25,817 
Leasehold improvementsShorter of useful life or lease term5,563 5,138 
Construction in progress
76 47 
Total property and equipment45,586 32,875 
Less: accumulated depreciation and amortization(13,613)(8,281)
Property and equipment, net$31,973 $24,594 

Total depreciation and amortization expense for property and equipment for the three months ended October 31, 2023 and 2022 was $2.0 million and $1.2 million, respectively. Total depreciation and amortization expense for property and equipment for the nine months ended October 31, 2023 and 2022 was $5.4 million and $3.1 million, respectively.
The Company capitalized $4.1 million and $3.9 million in internal-use software development costs for the three months ended October 31, 2023 and 2022, and $12.2 million and $9.2 million for the nine months ended October 31, 2023 and 2022, respectively. Amortization expense associated with internal-use software development costs totaled $1.7 million and $0.9 million for three months ended October 31, 2023 and 2022, respectively, and $4.5 million and $2.3 million for the nine months ended October 31, 2023 and 2022.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following (in thousands):
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 As of
 October 31, 2023 January 31, 2023
Operating lease liabilities$3,683 $3,380 
Acquisition holdback, current3,554  
Accrued expenses3,262 4,222 
Sales tax payable1,470 1,480 
Accrued income taxes payable920 1,081 
Derivative liabilities321  
Total accrued expenses and other current liabilities$13,210 $10,163 
Accrued Compensation and Benefits
Accrued compensation and benefits are comprised of the following (in thousands):
As of
October 31, 2023January 31, 2023
Accrued commissions$10,113 $16,932 
Accrued vacation22,078 20,614 
Accrued payroll and withholding taxes5,679 11,574 
ESPP employee contributions7,992 4,247 
Accrued bonus3,342 3,220 
Other2,769 2,041 
Total accrued compensation and benefits$51,974 $58,628 

Deferred Contract Acquisition Costs

The following table summarizes the activity of deferred contract acquisition costs (in thousands):

Nine Months Ended October 31,
20232022
Beginning balance$124,098 $89,331 
Capitalization of contract acquisition costs41,272 53,002 
Amortization of deferred contract acquisition costs(40,186)(31,511)
Ending balance$125,184 $110,822 
Deferred contract acquisition costs, current$45,508 $37,317 
Deferred contract acquisition costs, non-current79,676 73,505 
Total deferred contract acquisition costs$125,184 $110,822 

There were no impairment losses recognized for deferred contract acquisition costs during the three and nine months ended October 31, 2023 and 2022.

Other Liabilities, Non-Current

The following table summarizes the activity of other liabilities, non-current (in thousands):

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As of
October 31, 2023January 31, 2023
Operating lease liabilities, non-current$9,301 $12,093 
Acquisition holdback, non-current546  
Accrued commissions, non-current1,029 713 
Total other liabilities, non-current$10,876 $12,806 
10. Leases

The Company leases office spaces under noncancelable operating lease agreements, which expire at various dates through 2028. The Company is required to pay property taxes, insurance, and normal maintenance costs for certain of these facilities. Operating lease cost for these leases is recognized on a straight-line basis over the lease term, with variable lease costs recognized in the period incurred. These lease agreements do not contain residual value guarantees or restrictive covenants.
Lease costs

Lease costs were as follows (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Short-term lease costs$174 $39 $514 $184 
Operating lease costs878 878 2,634 2,634 
Total lease costs$1,052 $917 $3,148 $2,818 

Variable lease cost was not significant for the three and nine months ended October 31, 2023 and 2022. There were no other lease components for the periods presented.

Lease term and discount rate information are summarized as follows:

As of October 31, 2023
Weighted average remaining lease terms (in years)3.4
Weighted average discount rate3.8 %

Future lease payments under noncancelable operating leases on an undiscounted cash flow basis as of October 31, 2023 are as follows (in thousands):

Years Ending January 31,
Amount
2024 (remaining three months)$1,012 
20254,150 
20263,734 
20273,737 
20281,277 
Total minimum lease payments13,910 
Less imputed interest(926)
Present value of future minimum lease payments12,984 
Less current lease liabilities(3,683)
Operating lease liabilities, non-current$9,301 
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Operating lease liabilities are included in accrued expenses and other current liabilities, and non-current lease liabilities are included in other liabilities, non-current, in the condensed consolidated balance sheets. There were no lease related operating right-of-use asset impairment losses in the three and nine months ended October 31, 2023 and 2022.

11. 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 October 31, 2023 and January 31, 2023.
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 October 31, 2023.
12. Common Stock and Stockholders' Equity

Common Stock Reserved for Future Issuance

The Company reserved shares of common stock for future issuance as follows (in thousands):

As of
October 31, 2023January 31, 2023
Options outstanding8,0119,315
Restricted stock units outstanding13,49111,588
Remaining shares available for future issuance under the 2021 Equity Incentive Plan ("2021 Plan")25,23121,466
2021 Employee Stock Purchase Plan ("ESPP")4,4813,008
Total51,21445,377
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Stock Options

The following table summarizes stock option activity for the 2021 Plan (shares and aggregate intrinsic value in thousands):

Options Outstanding
Number of Options OutstandingWeighted- Average Exercise PriceWeighted- Average Remaining Contractual
Term (in Years)
Aggregate Intrinsic Value
Balance as of January 31, 20239,315$1.92 4.6$281,837 
Stock options exercised(1,286)2.29 33,922 
Stock options cancelled/forfeited/expired(18)22.39 
Balance as of October 31, 20238,0111.82 3.8143,570 
Exercisable as of October 31, 20237,984$1.75 3.8$143,442 

The total grant-date fair value of stock options vested was $1.0 million and $3.8 million during the nine months ended October 31, 2023 and 2022.

The total intrinsic value of options exercised during the nine months ended October 31, 2023 and 2022 were $33.9 million and $74.1 million, respectively.

Restricted Stock Units

The Company’s summary of restricted stock units ("RSUs") activity under the 2021 Plan is as follows (in thousands):

Number of Awards
Weighted-Average Grant Date Fair Value
Outstanding and unvested at January 31, 202311,588$42.48 
RSUs granted7,679$28.92 
RSUs released(3,855)$34.77 
RSUs cancelled(1,921)$37.53 
Outstanding and unvested at October 31, 202313,491$37.66 

The total grant-date fair value of RSUs vested was $134.0 million and $105.1 million during the nine months ended October 31, 2023 and 2022.

Employee Stock Purchase Plan

A total of 4,480,939 shares of Class A common stock are available for future issuance under the ESPP as of October 31, 2023. For the nine months ended October 31, 2023 and 2022, the Company recognized $9.6 million and $9.1 million of stock-based compensation expense related to the ESPP, respectively. As of October 31, 2023, unrecognized stock-based compensation expense related to the ESPP was approximately $12.2 million, which is expected to be recognized over a weighted-average period of approximately 1.1 years.

ESPP employee payroll contributions accrued as of October 31, 2023 were $8.0 million and are reported within accrued compensation and benefits in the consolidated balance sheets. Payroll contributions accrued as of October 31, 2023 will be used to purchase shares at the end of the current purchase period ending on December 15, 2023. Payroll contributions ultimately used to purchase shares will be reclassified as stockholders’ equity on the purchase date.

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Stock-Based Compensation Expense

Total stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations is as follows (in thousands):

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Cost of support$2,411 $2,152 $7,511 $6,332 
Cost of cloud-hosted services601 792 1,767 2,118 
Cost of professional services and other734 722 1,947 2,102 
Sales and marketing13,923 15,398 41,365 44,212 
Research and development12,674 14,988 37,347 40,233 
General and administrative13,423 12,658 40,111 40,375 
Stock-based compensation expense, net of amounts capitalized$43,766 $46,710 $130,048 $135,372 
Capitalized stock-based compensation1,230 1,254 3,685 3,042 
Total stock-based compensation expense$44,996 $47,964 $133,733 $138,414 

As of October 31, 2023 and 2022, total unrecognized stock-based compensation expense related to RSUs was approximately $376.4 million and $389.1 million, respectively, which are expected to be recognized over a weighted-average period of approximately 2.9 years and 2.9 years, respectively.

As of October 31, 2023, and 2022, total unrecognized stock-based compensation expense related to unvested stock options was approximately $0.3 million and $2.1 million, respectively, which are expected to be recognized over a weighted-average period of approximately 1.0 year and 1.3 years, respectively.
13. 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. Class B common stock has ten votes per share, and Class A common stock has one vote per share. As the liquidation and dividend rights were identical for Class A and Class B common stock, the undistributed earnings would be allocated on a proportionate basis and the resulting net loss per share would, therefore, be the same for both Class A and Class B common stock on an individual or combined basis.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except per share data):

Three Months Ended October 31,Nine Months Ended October 31,
2023202220232022
Numerator:
Net loss$(39,473)$(71,958)$(159,046)$(224,939)
Denominator:
Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted194,600187,080192,693185,124
Net loss per share attributable to Class A and Class B common stockholders, basic and diluted$(0.20)$(0.38)$(0.83)$(1.22)

The following outstanding potentially dilutive shares of common stock were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because the impact of including them would have been antidilutive (in thousands):
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Three Months Ended October 31,Nine Months Ended October 31,