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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 July 31, 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: 001-38044
_____________________________________ 
Okta, Inc.
(Exact Name of Registrant as Specified in Its Charter)
_____________________________________ 
Delaware
100 First Street, Suite 600
26-4175727
(State or Other Jurisdiction of
Incorporation or Organization)
San Francisco
(I.R.S. Employer
Identification Number)
California
94105
(Address of Principal executive offices)
Registrant’s telephone number, including area code: (888) 722-7871
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001 per share
OKTA
The Nasdaq Stock Market LLC

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, 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 filer
Accelerated 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  ☒
As of August 29, 2022, the number of shares of registrant’s Class A common stock outstanding was 151,853,906 and the number of shares of the registrant’s Class B common stock outstanding was 7,018,918.



Okta, Inc.
Table of Contents
Page No.




FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook, product development, business strategy, plans, market trends, opportunities, positioning, the anticipated impact on our business of the COVID-19 pandemic and related public health measures, and the macroeconomic environment. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” “shall” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements, although not all forward-looking statements include these identifying words. The forward-looking statements are contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”
Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about:
our future financial performance, including our revenue, costs of revenue, gross profits, margins and operating expenses;
the impact of macroeconomic conditions, including the inflation and interest rate environment, and political, economic and social instability;
our ability to successfully integrate and realize the benefits of strategic acquisitions or investments, including our acquisition of Auth0, Inc. (“Auth0“);
trends in our key business metrics;
the impact of the global COVID-19 pandemic on our business and operations;
the sufficiency of our cash and cash equivalents, investments and cash provided by sales of our products and services to meet our liquidity needs;
market or other opportunities arising from business combinations; and
the impact of recent accounting pronouncements on our financial statements.
Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond our control. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in “Risk Factors” in this Quarterly Report on Form 10-Q as well as other documents that may be filed by us from time to time with the Securities and Exchange Commission. 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.




PART I
Item. 1 Financial Statements
4


OKTA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
July 31,
2022
January 31,
2022
(unaudited)
Assets 
Current assets: 
Cash and cash equivalents$216,022 $260,134 
Short-term investments2,260,956 2,241,657 
Accounts receivable, net of allowances of $4,195 and $4,359
323,377 397,509 
Deferred commissions80,657 74,728 
Prepaid expenses and other current assets64,490 66,605 
Total current assets2,945,502 3,040,633 
Property and equipment, net66,958 65,488 
Operating lease right-of-use assets141,940 147,940 
Deferred commissions, noncurrent191,309 191,029 
Intangible assets, net281,470 316,968 
Goodwill5,400,275 5,401,343 
Other assets46,553 42,294 
Total assets$9,074,007 $9,205,695 
Liabilities and stockholders' equity 
Current liabilities: 
Accounts payable$43,708 $20,203 
Accrued expenses and other current liabilities106,477 89,315 
Accrued compensation87,094 143,805 
Convertible senior notes, net5,209 16,194 
Deferred revenue994,097 973,289 
Total current liabilities1,236,585 1,242,806 
Convertible senior notes, net, noncurrent2,190,110 1,815,714 
Operating lease liabilities, noncurrent158,577 170,611 
Deferred revenue, noncurrent17,187 22,933 
Other liabilities, noncurrent18,532 31,775 
Total liabilities3,620,991 3,283,839 
Commitments and contingencies (Note 11)
Stockholders’ equity: 
Preferred stock, par value $0.0001 per share; 100,000 shares authorized; no shares issued and outstanding as of July 31, 2022 and January 31, 2022
  
Class A common stock, par value $0.0001 per share; 1,000,000 shares authorized; 151,808 and 149,624 shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively
15 15 
Class B common stock, par value $0.0001 per share; 120,000 shares authorized; 7,019 and 6,978 shares issued and outstanding as of July 31, 2022 and January 31, 2022, respectively
1 1 
Additional paid-in capital7,607,382 7,749,716 
Accumulated other comprehensive loss(41,186)(12,009)
Accumulated deficit(2,113,196)(1,815,867)
Total stockholders’ equity5,453,016 5,921,856 
Total liabilities and stockholders' equity$9,074,007 $9,205,695 
See Notes to Condensed Consolidated Financial Statements.
5



OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
 Three Months Ended
July 31,
Six Months Ended
July 31,
 2022202120222021
Revenue:  
Subscription$435,384 $303,121 $833,325 $543,179 
Professional services and other16,423 12,379 33,425 23,327 
Total revenue451,807 315,500 866,750 566,506 
Cost of revenue:  
Subscription116,342 84,457 227,218 136,855 
Professional services and other21,352 16,649 41,641 30,374 
Total cost of revenue137,694 101,106 268,859 167,229 
Gross profit314,113 214,394 597,891 399,277 
Operating expenses:  
Research and development155,836 122,407 317,487 191,270 
Sales and marketing264,653 198,350 517,126 344,871 
General and administrative101,686 157,077 211,029 217,257 
Total operating expenses522,175 477,834 1,045,642 753,398 
Operating loss(208,062)(263,440)(447,751)(354,121)
Interest expense(2,915)(22,872)(5,783)(45,632)
Interest income and other, net4,721 2,211 6,425 6,566 
Loss on conversion of debt  (43) (179)
Interest and other, net1,806 (20,704)642 (39,245)
Loss before provision for (benefit from) income taxes(206,256)(284,144)(447,109)(393,366)
Provision for (benefit from) income taxes4,216 (7,462)6,076 (7,452)
Net loss$(210,472)$(276,682)$(453,185)$(385,914)
  
Net loss per share, basic and diluted$(1.34)$(1.83)$(2.89)$(2.72)
  
Weighted-average shares used to compute net loss per share, basic and diluted157,400 151,357 156,650 141,720 

See Notes to Condensed Consolidated Financial Statements.

6


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(unaudited)
 Three Months Ended
July 31,
Six Months Ended
July 31,
 2022202120222021
Net loss$(210,472)$(276,682)$(453,185)$(385,914)
Other comprehensive loss:
Net change in unrealized gains or losses on available-for-sale securities (1,497)(353)(18,699)(1,166)
Foreign currency translation adjustments(3,541)(882)(10,478)151 
Other comprehensive loss(5,038)(1,235)(29,177)(1,015)
Comprehensive loss$(215,510)$(277,917)$(482,362)$(386,929)
See Notes to Condensed Consolidated Financial Statements.

7


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(unaudited)
 Three Months Ended
July 31,
Six Months Ended
July 31,
 2022202120222021
Common stock and additional paid-in capital:
Balance, beginning of period$7,411,566 $1,753,856 $7,749,732 $1,656,109 
Adjustments from adoption of ASU 2020-06— — (527,444)— 
Issuance of common stock and value of equity awards assumed in connection with business combination— 5,409,344 — 5,409,344 
Issuance of common stock upon exercise of stock options and other activity, net23,184 34,697 29,951 52,911 
Stock-based compensation172,647 187,923 343,224 252,035 
Settlement of convertible senior notes— 5,364 11,934 20,784 
Proceeds from hedges related to convertible senior notes1 1 1 2 
Balance, end of period7,607,398 7,391,185 7,607,398 7,391,185 
Accumulated deficit:
Balance, beginning of period(1,902,724)(1,076,688)(1,815,867)(967,456)
Adjustments from adoption of ASU 2020-06— — 155,856 — 
Net loss(210,472)(276,682)(453,185)(385,914)
Balance, end of period(2,113,196)(1,353,370)(2,113,196)(1,353,370)
Accumulated other comprehensive income:
Balance, beginning of period(36,148)5,610 (12,009)5,390 
Other comprehensive loss(5,038)(1,235)(29,177)(1,015)
Balance, end of period(41,186)4,375 (41,186)4,375 
Total stockholders’ equity$5,453,016 $6,042,190 $5,453,016 $6,042,190 

See Notes to Condensed Consolidated Financial Statements.

8


OKTA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Six Months Ended
July 31,
 20222021
Cash flows from operating activities:
Net loss$(453,185)$(385,914)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation340,702 251,826 
Depreciation, amortization and accretion59,748 44,903 
Amortization of debt discount and issuance costs2,895 42,780 
Amortization of deferred commissions39,537 25,135 
Deferred income taxes1,539 (11,506)
Non-cash charitable contributions2,014 3,663 
Loss on conversion of debt 179 
Gain on strategic investments(1,965)(5,271)
Other, net461 (290)
Changes in operating assets and liabilities:
Accounts receivable74,015 (14,798)
Deferred commissions(50,123)(55,102)
Prepaid expenses and other assets(2,236)718 
Operating lease right-of-use assets13,568 10,732 
Accounts payable24,632 (2,044)
Accrued compensation(55,219)(6,507)
Accrued expenses and other liabilities1,144 10,092 
Operating lease liabilities(12,807)(13,489)
Deferred revenue15,062 158,360 
Net cash provided by (used in) operating activities(218)53,467 
Cash flows from investing activities:  
Capitalization of internal-use software costs(5,396)(378)
Purchases of property and equipment(7,493)(4,034)
Purchases of securities available for sale and other(571,081)(923,507)
Proceeds from maturities and redemption of securities available for sale521,815 763,607 
Proceeds from sales of securities available for sale and other 906 
Purchases of intangible assets(2,497)(113)
Payments for business acquisitions, net of cash acquired(4,060)(148,042)
Net cash used in investing activities(68,712)(311,561)
Cash flows from financing activities: 
Payments for conversions of convertible senior notes(6)(15)
Proceeds from hedges related to convertible senior notes1 2 
Proceeds from stock option exercises8,977 31,829 
Proceeds from shares issued in connection with employee stock purchase plan18,960 17,417 
Net cash provided by financing activities27,932 49,233 
Effects of changes in foreign currency exchange rates on cash, cash equivalents and restricted cash(6,072)193 
Net decrease in cash, cash equivalents and restricted cash(47,070)(208,668)
Cash, cash equivalents and restricted cash at beginning of period272,656 448,630 
Cash, cash equivalents and restricted cash at end of period$225,586 $239,962 
Supplementary cash flow disclosure:
Cash paid during the period for:
Interest$2,840 $2,864 
Income taxes3,303 1,642 
Non-cash activities:
Issuance of common stock and value of equity awards assumed in connection with business combination 5,409,344 
Issuance of common stock for conversions of convertible senior notes39,564 126,144 
Benefit from exercise of hedges related to convertible senior notes17,502 79,641 
Common stock issued as charitable contribution2,014  
Operating lease right-of-use assets exchanged for lease liabilities8,442 7,696 
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents$216,022 $225,265 
Restricted cash, current included in prepaid expenses and other current assets2,103 5,037 
Restricted cash, noncurrent included in other assets7,461 9,660 
Total cash, cash equivalents and restricted cash$225,586 $239,962 

See Notes to Condensed Consolidated Financial Statements.

9


OKTA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Overview and Basis of Presentation
Description of Business
Okta, Inc. (the “Company”) is the leading independent identity provider. The Okta Identity Cloud enables the Company’s customers to securely connect the right people to the right technologies and services at the right time. The Company was incorporated in January 2009 as Saasure Inc., a California corporation, and was later reincorporated in April 2010 under the name Okta, Inc. as a Delaware corporation. The Company is headquartered in San Francisco, California.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated balance sheet as of January 31, 2022, included herein, was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the results of operations for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2023 or any future period.
The Company’s fiscal year ends on January 31. References to fiscal 2023, for example, refer to the fiscal year ending January 31, 2023.
The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 7, 2022.
Certain reclassifications of components of prior period operating and investing cash flows have been made in the condensed consolidated statements of cash flows to conform to the current period presentation. These reclassifications had no impact on total operating and investing cash flows as previously reported.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. Actual results could vary from those estimates. The Company’s most significant estimates include the stand-alone selling price (“SSP”) for each distinct performance obligation included in customer contracts with multiple performance obligations, the determination of the period of benefit for deferred commissions, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation of deferred income tax assets, the valuation of goodwill and acquired intangible assets and their useful lives and the valuation of certain equity awards assumed.
10


2. Accounting Standards and Significant Accounting Policies
Significant Accounting Policies
The Company’s significant accounting policies are discussed in “Note 2. Summary of Significant Accounting Policies” in Item 8. Financial Statements and Supplementary Data of its Form 10-K for the fiscal year ended January 31, 2022. The Company no longer considers the accounting policy for its convertible senior notes to be a significant accounting policy due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2020-06 effective February 1, 2022, which simplified the accounting for convertible instruments. There have been no other significant changes to the Company’s significant accounting policies for the six months ended July 31, 2022.
Recently Adopted Accounting Pronouncements
ASU No. 2020-06
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share, which is consistent with the Company’s accounting treatment prior to the adoption of ASU 2020-06. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021.
The Company adopted ASU 2020-06 effective February 1, 2022, using the modified retrospective method. The Company recognized a cumulative effect of initially applying the ASU as an adjustment to the February 1, 2022 opening balance of accumulated deficit. Due to the elimination of the equity conversion component of the Company’s convertible senior notes outstanding as of February 1, 2022, additional paid-in capital was reduced. The elimination of the equity conversion component had the effect of increasing the Company’s net debt balance. The reduction of other liabilities is related to changes to the Company’s deferred tax liabilities. The prior period condensed consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.
The adoption of ASU 2020-06 resulted in the following changes to the Company’s February 1, 2022 condensed consolidated balance sheet (in thousands):
Balance at
January 31, 2022
Adjustments from Adoption of ASU 2020-06Balance at
February 1, 2022
Liabilities
Convertible senior notes, net$16,194 $927 $17,121 
Convertible senior notes, net, noncurrent1,815,714 371,527 2,187,241 
Other liabilities, noncurrent31,775 (866)30,909 
Stockholders’ equity
Additional paid-in capital7,749,716 (527,444)7,222,272 
Accumulated deficit(1,815,867)155,856 (1,660,011)
The impact of adoption on the condensed consolidated statements of operations for the three and six months ended July 31, 2022 was to decrease net interest expense by approximately $21.0 million and $41.8 million, respectively. This had the effect of decreasing basic and diluted net loss per share for the three and six months ended July 31, 2022 by $0.13 and $0.27, respectively.
11


ASU No. 2021-08
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers, primarily in order to align the recognition of a contract liability with the definition of a performance obligation. The ASU is effective for interim and annual periods beginning after December 15, 2022, on a prospective basis, with early adoption permitted. The Company adopted this standard effective February 1, 2022 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
ASU No. 2021-04
In May 2021, the FASB issued ASU No. 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The ASU addresses the previous lack of specific guidance in the accounting standards codification related to modifications or exchanges of freestanding equity-classified written call options (such as warrants) by specifying the accounting for various modification scenarios. The ASU is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for any periods after issuance to be applied as of the beginning of the fiscal year that includes the interim period. The Company adopted this standard effective February 1, 2022 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

3. Business Combinations
Acquisition of Auth0
On May 3, 2021, the Company acquired all outstanding shares of privately-held Auth0, Inc. (“Auth0”), an Identity-as-a-Service company. Total consideration transferred for Auth0 was $5,671.0 million, including approximately 19.2 million shares of common stock valued at $5,175.6 million, cash of $257.0 million, and assumed outstanding equity awards with vested fair value of $238.4 million. Cash consideration of $3.8 million and approximately 1.1 million shares valued at $294.6 million were held back as partial security for post-closing true-up adjustments as well as any indemnification claims made within one year of the acquisition date. The consideration held back was paid in full during the six months ended July 31, 2022. The Company incurred $29.0 million of acquisition-related costs, which were recorded as general and administrative expenses in its condensed consolidated statement of operations for the six months ended July 31, 2021.
The transaction was accounted for as a business combination. The total purchase price of $5,671.0 million was allocated to the tangible and identifiable intangible assets and liabilities based on their estimated fair values. The excess of purchase consideration over the fair value of the net tangible assets and identifiable intangible assets acquired was $5,290.1 million and was recorded as goodwill.
Acquisition of atSpoke
On August 2, 2021, the Company acquired all issued and outstanding capital stock of privately-held Townsend Street Labs, Inc. (“atSpoke”), a modern workplace operations platform. The acquisition date cash consideration for atSpoke was approximately $79.3 million, of which $13.4 million of consideration was held back as partial security for any adjustments and indemnification obligations and will be paid within 18 months of the closing date.
The Company recorded $18.3 million for developed technology intangible assets with an estimated useful life of 3 years and recorded $62.2 million of goodwill. The Company incurred $0.9 million of acquisition-related costs, which were recorded as general and administrative expenses in its condensed consolidated statement of operations in the three months ended July 31, 2021.

12


4. Cash Equivalents and Investments
Cash Equivalents and Short-term Investments
The amortized cost, unrealized gain (loss) and estimated fair value of the Company’s cash equivalents and short-term investments as of July 31, 2022 and January 31, 2022 were as follows (in thousands):
 As of July 31, 2022
 
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value 
(unaudited)
Cash equivalents:    
Money market funds$78,012 $ $ $78,012 
Total cash equivalents78,012   78,012 
Short-term investments:    
U.S. treasury securities2,022,707 85 (26,952)1,995,840 
Corporate debt securities268,685  (3,569)265,116 
Total short-term investments2,291,392 85 (30,521)2,260,956 
Total$2,369,404 $85 $(30,521)$2,338,968 
 As of January 31, 2022
 
Amortized
Cost
Unrealized
Gain
Unrealized
Loss
Estimated
Fair Value 
Cash equivalents:    
Money market funds$152,223 $ $ $152,223 
Total cash equivalents152,223   152,223 
Short-term investments:   
U.S. treasury securities1,922,344 10 (10,166)1,912,188 
Corporate debt securities331,050  (1,581)329,469 
Total short-term investments2,253,394 10 (11,747)2,241,657 
Total$2,405,617 $10 $(11,747)$2,393,880 

All short-term investments were designated as available-for-sale securities as of July 31, 2022 and January 31, 2022.
The following table presents the contractual maturities of the Company’s short-term investments as of July 31, 2022 (in thousands):
As of July 31, 2022
 
Amortized
Cost
Estimated
Fair Value
(unaudited)
Due within one year$1,743,049 $1,720,573 
Due between one to five years548,343 540,383 
 Total$2,291,392 $2,260,956 
The Company included $7.3 million and $6.0 million of interest receivable in Prepaid expenses and other current assets on the condensed consolidated balance sheets as of July 31, 2022 and January 31, 2022, respectively. The Company did not recognize an allowance for credit losses against interest receivable as of July 31, 2022 and January 31, 2022 because such potential losses were not material.
13


The following table presents the fair values and unrealized losses related to the Company’s investments in available-for-sale debt securities classified by length of time that the securities have been in a continuous unrealized loss position as of July 31, 2022 (in thousands):

 Less Than 12 MonthsMore Than 12 MonthsTotal
 
Estimated Fair Value
Unrealized
Losses
Estimated Fair Value
Unrealized
Losses
Estimated Fair Value
Unrealized
Losses
(unaudited)
U.S. treasury securities$1,658,111 $(22,352)$223,145 $(4,600)$1,881,256 $(26,952)
Corporate debt securities200,861 (2,849)64,255 (720)265,116 (3,569)
Total$1,858,972 $(25,201)$287,400 $(5,320)$2,146,372 $(30,521)
The Company had 195 and 193 short-term investments in unrealized loss positions as of July 31, 2022 and January 31, 2022, respectively. There were no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three and six months ended July 31, 2022 or 2021.
For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis and (iii) the decline in the fair value of the investment is due to credit or non-credit related factors. Based on this evaluation, the Company determined that for short-term investments, there were no material credit or non-credit related impairments as of July 31, 2022 and January 31, 2022.
Strategic Investments
The Company's strategic investments primarily include equity investments in privately-held companies, which do not have a readily determinable fair value. As of July 31, 2022 and January 31, 2022, the balance of strategic investments was $21.8 million and $15.3 million, respectively.
During the three and six months ended July 31, 2022, the Company recorded $0.6 million and $2.0 million, respectively, of gains on strategic investments. During the three and six months ended July 31, 2021, the Company recorded $2.4 million and $5.3 million, respectively, of gains on strategic investments. Gains on strategic investments consists primarily of observable price adjustments related to equity investments in privately-held companies. All gains and losses on strategic investments, whether realized or unrealized, are recognized in Interest income and other, net on the condensed consolidated statements of operations.

5. Fair Value Measurements
The Company measures its financial assets at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Three levels of inputs may be used to measure as follows:
Level 1—Valuations based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
Level 2—Valuations based on other inputs that are directly or indirectly observable in the marketplace.
Level 3—Valuations based on unobservable inputs that are supported by little or no market activity.
14


Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial assets that were measured at fair value on a recurring basis using the above input categories (in thousands):
 As of July 31, 2022
 Level 1
Level 2 
Level 3Total
(unaudited)
Assets:    
Cash equivalents:    
Money market funds$78,012 $ $ $78,012 
Total cash equivalents78,012   78,012 
Short-term investments:    
U.S. treasury securities 1,995,840  1,995,840 
Corporate debt securities 265,116  265,116 
Total short-term investments 2,260,956  2,260,956 
Total cash equivalents and short-term investments$78,012 $2,260,956 $ $2,338,968 
 As of January 31, 2022
 Level 1
Level 2 
Level 3Total
Assets:    
Cash equivalents:    
Money market funds$152,223 $ $ $152,223 
Total cash equivalents152,223   152,223 
Short-term investments:    
U.S. treasury securities 1,912,188  1,912,188 
Corporate debt securities 329,469  329,469 
Total short-term investments 2,241,657  2,241,657 
Total cash equivalents and short-term investments$152,223 $2,241,657 $ $2,393,880 
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable and accounts payable, approximate fair value due to their short-term maturities and are excluded from the fair value table above.
Fair Value Measurements of Other Financial Instruments
The following table presents the principal amounts and estimated fair values of the Company’s financial instruments that are not recorded at fair value on the condensed consolidated balance sheets (in thousands):
 As of July 31, 2022
 Principal Amount
Estimated
Fair Value 
(unaudited)
2023 convertible senior notes$5,226 $10,620 
2025 convertible senior notes1,059,997 989,215 
2026 convertible senior notes1,150,000 985,915 

The 2023 convertible senior notes (“2023 Notes”), the 2025 convertible senior notes (“2025 Notes”), and the 2026 convertible senior notes (“2026 Notes”, and together with the 2023 Notes and 2025 Notes, the “Notes”) are recorded at face value less unamortized debt issuance costs (See Note 9 for additional details). The estimated fair values of the Notes, which are Level 2 financial instruments, were determined based on the quoted bid prices of the Notes in an over-the-counter market on the last trading day of the reporting period.
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6. Deferred Commissions
Sales commissions capitalized as contract costs totaled $28.0 million and $40.0 million in the three months ended July 31, 2022 and 2021, respectively, and $49.4 million and $54.9 million in the six months ended July 31, 2022 and 2021, respectively. Amortization of contract costs was $20.4 million and $13.3 million for the three months ended July 31, 2022 and 2021, respectively, and $39.5 million and $25.1 million for the six months ended July 31, 2022 and 2021, respectively. There was no impairment loss in relation to the costs capitalized.
7. Goodwill and Intangible Assets, net
Goodwill
As of July 31, 2022 and January 31, 2022, goodwill was $5,400.3 million and $5,401.3 million, respectively. No goodwill impairments were recorded during the three and six months ended July 31, 2022 and 2021.
Intangible Assets, net
Intangible assets consisted of the following (in thousands):
 As of July 31, 2022
GrossAccumulated AmortizationNet
(unaudited)
Capitalized internal-use software costs$44,328 $(26,956)$17,372 
Purchased developed technology219,800 (69,794)150,006 
Customer relationships140,900 (43,998)96,902 
Trade name21,400 (5,350)16,050 
Software licenses1,796 (656)1,140 
 $428,224 $(146,754)$281,470 
 As of January 31, 2022
GrossAccumulated AmortizationNet
Capitalized internal-use software costs$36,319 $(24,170)$12,149 
Purchased developed technology219,100 (47,085)172,015 
Customer relationships140,900 (26,399)114,501 
Trade name21,400 (3,210)18,190 
Software licenses116 (3)113 
 $417,835 $(100,867)$316,968 
The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows:
 Weighted-Average Remaining Useful Life
As of July 31, 2022As of January 31, 2022
(unaudited)
Purchased developed technology3.5 years4.0 years
Customer relationships3.7 years4.0 years
Trade name3.8 years4.3 years
Amortization expense of intangible assets for the three months ended July 31, 2022 and 2021 was $23.2 million and $21.3 million, respectively, and $45.9 million and $24.2 million for the six months ended July 31, 2022 and 2021, respectively.
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8. Deferred Revenue and Performance Obligations
Deferred Revenue
Deferred revenue, which is a contract liability, consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s contracts with customers and is recognized as the revenue recognition criteria are met.
Subscription revenue recognized during the three months ended July 31, 2022 and 2021 that was included in the deferred revenue balances at the beginning of the respective periods was $389.5 million and $245.4 million, respectively, and $656.7 million and $359.3 million in the six months ended July 31, 2022 and 2021, respectively. Professional services and other revenue recognized during the three months ended July 31, 2022 and 2021 that was included in the deferred revenue balances at the beginning of the respective periods was $6.9 million and $4.1 million, respectively, and $11.1 million and $5.0 million in the six months ended July 31, 2022 and 2021, respectively.
Transaction Price Allocated to the Remaining Performance Obligations
Transaction price allocated to the remaining performance obligations (“RPO”) represents all future, non-cancelable contracted revenue that has not yet been recognized, inclusive of deferred revenue that has been invoiced and non-cancelable amounts that will be invoiced and recognized as revenue in future periods.
As of July 31, 2022, total remaining non-cancelable performance obligations under the Company’s subscription contracts with customers was approximately $2,790.3 million. Of this amount, the Company expects to recognize revenue of approximately $1,496.7 million, or 54%, over the next 12 months, with the balance to be recognized as revenue thereafter. Remaining performance obligations for professional services and other contracts as of July 31, 2022 were not material.
9. Convertible Senior Notes, Net
2023 Convertible Senior Notes
The 2023 Notes are senior, unsecured obligations of the Company, and bear interest at a fixed rate of 0.25% per year. Interest is payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2018. The 2023 Notes mature on February 15, 2023 unless earlier repurchased or converted. The Company may not redeem the 2023 Notes prior to maturity.
The terms of the 2023 Notes are governed by an Indenture by and between the Company and Wilmington Trust, National Association, as Trustee (the “2023 Indenture”). Upon conversion, the 2023 Notes may be settled in cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at the Company’s election.
The 2023 Notes are convertible at an initial conversion rate of 20.6795 shares of Class A common stock per $1,000 principal amount of the 2023 Notes, which is equal to an initial conversion price of approximately $48.36 per share of Class A common stock, subject to adjustment under certain circumstances in accordance with the terms of the 2023 Indenture. Prior to the close of business on the business day immediately preceding October 15, 2022, holders of the 2023 Notes may convert all or a portion of their 2023 Notes only in multiples of $1,000 principal amount, under the following circumstances:
during any fiscal quarter commencing after the fiscal quarter ending on April 30, 2018 (and only during such fiscal quarter), if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2023 Notes on each applicable trading day;
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each trading day of that five consecutive trading day period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate on such trading day; or
upon the occurrence of specified corporate events, as described in the 2023 Indenture.
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On or after October 15, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2023 Notes regardless of the foregoing circumstances. For at least 20 trading days during the period of 30 consecutive trading days ended July 31, 2022, the last reported sale price of the Company’s common stock was equal to or exceeded 130% of the conversion price of the 2023 Notes on each applicable trading day. As a result, the 2023 Notes are convertible at the option of the holders during the fiscal quarter ending October 31, 2022. The 2023 Notes were classified as current liabilities on the condensed consolidated balance sheet as of July 31, 2022.
As of July 31, 2022, $5.2 million of principal remained outstanding on the 2023 Notes. During the three months ended July 31, 2022, the Company settled an immaterial principal amount of the 2023 Notes in cash and during the six months ended July 31, 2022, the Company issued approximately 0.2 million shares of Class A common stock and paid an immaterial amount in cash to settle approximately $12.0 million principal amount of 2023 Notes. No requests to convert material amounts of the 2023 Notes are currently outstanding.
During the year ended January 31, 2022, the Company issued approximately 0.5 million shares of Class A common stock and paid an immaterial amount in cash to settle approximately $23.0 million principal amount of 2023 Notes.
Holders of the 2023 Notes who convert their 2023 Notes in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the 2023 Indenture) are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the 2023 Indenture), holders of the 2023 Notes may require the Company to repurchase all or a portion of their 2023 Notes at a price equal to 100% of the principal amount of the 2023 Notes being repurchased, plus any accrued and unpaid interest.
As of July 31, 2022, the effective interest rate on the 2023 Notes was 0.85%. As of July 31, 2021, prior to the adoption of ASU 2020-06, the effective interest rate on the liability component of the 2023 Notes was 5.68%. The following table sets forth total interest expense recognized related to the 2023 Notes (in thousands):
Three Months Ended
July 31,
Six Months Ended
July 31,
2022202120222021
(unaudited)
Contractual interest expense$3 $14 $11 $34 
Amortization of debt issuance costs11 24 27 62 
Amortization of debt discount(1)
— 241 — 624 
Total$14 $279 $38 $720 
(1) Not applicable subsequent to adoption of ASU 2020-06.
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The net carrying amount of the 2023 Notes consisted of the following (in thousands):
As of July 31, 2022As of January 31, 2022
(unaudited)
Liability component:
Principal$5,226 $17,228 
Less: unamortized debt issuance costs and debt discount(1)
(17)(1,034)
Net carrying amount$5,209 $16,194 
As of July 31, 2022As of January 31, 2022
(unaudited)
Equity component:(1)
2023 Notes$—