falsedesktopPD2020-10-31000156810020000058{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "\tAs of October 31 2020\tAs of January 31 2020\n\t(unaudited)\t\nAssets\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t336657\t124024\nAccounts receivable net of allowance for doubtful accounts of $1479 and $810 as of October 31 2020 and January 31 2020 respectively\t41500\t37128\nInvestments\t219601\t227375\nDeferred contract costs current\t11209\t9301\nPrepaid expenses and other current assets\t11926\t7163\nTotal current assets\t620893\t404991\nProperty and equipment net\t12148\t12369\nDeferred contract costs non-current\t17529\t16387\nLease right-of-use assets\t25790\t0\nGoodwill\t71946\t0\nIntangible assets net\t27508\t0\nOther assets\t2083\t1651\nTotal assets\t777897\t435398\nLiabilities and stockholders' equity\t\t\nCurrent liabilities:\t\t\nAccounts payable\t5111\t6434\nAccrued expenses and other current liabilities\t11337\t7197\nAccrued compensation\t24877\t13911\nDeferred revenue current\t104337\t87490\nLease liabilities current\t5152\t0\nTotal current liabilities\t150814\t115032\nConvertible senior notes net\t214211\t0\nDeferred revenue non-current\t3387\t5079\nLease liabilities non-current\t27775\t0\nOther liabilities\t7152\t7349\nTotal liabilities\t403339\t127460\nCommitments and contingencies (Note 11)\t\t\nStockholders' equity:\t\t\nCommon stock\t0\t0\nAdditional paid-in capital\t599886\t487008\nAccumulated other comprehensive income\t634\t137\nAccumulated deficit\t(225962)\t(179207)\nTotal stockholders' equity\t374558\t307938\nTotal liabilities and stockholders' equity\t777897\t435398\n", "q10k_tbl_1": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nRevenue\t53772\t42750\t154272\t120425\nCost of revenue\t7685\t6634\t21285\t18226\nGross profit\t46087\t36116\t132987\t102199\nOperating expenses:\t\t\t\t\nResearch and development\t16156\t12619\t46705\t35160\nSales and marketing\t34024\t27425\t88271\t72378\nGeneral and administrative\t17746\t12765\t45899\t38464\nTotal operating expenses\t67926\t52809\t180875\t146002\nLoss from operations\t(21839)\t(16693)\t(47888)\t(43803)\nInterest income\t974\t1427\t3375\t4283\nInterest expense\t(4133)\t0\t(5741)\t0\nOther (expense) income net\t(449)\t245\t(861)\t346\nLoss before benefit from (provision for) income taxes\t(25447)\t(15021)\t(51115)\t(39174)\nBenefit from (provision for) income taxes\t4839\t(244)\t4360\t(725)\nNet loss\t(20608)\t(15265)\t(46755)\t(39899)\nOther comprehensive (loss) income:\t\t\t\t\nUnrealized (loss) gain on investments\t(422)\t(50)\t497\t(50)\nTotal comprehensive loss\t(21030)\t(15315)\t(46258)\t(39949)\nNet loss per share basic and diluted\t(0.26)\t(0.20)\t(0.59)\t(0.65)\nWeighted average shares used in calculating net loss per share basic and diluted\t79937\t75992\t78835\t61628\n", "q10k_tbl_2": "\tThree Months Ended October 31 2020\t\t\t\t\t\n\tCommon Stock\t\tAdditional Paid-in Capital\tAccumulated Other Comprehensive Income\tAccumulated Deficit\tTotal Stockholders' Equity\n\tShares\tAmount\t\t\nBalances as of July 31 2020\t79355627\t0\t546169\t1056\t(205354)\t341871\nIssuance of common stock upon exercise of stock options and restricted stock agreements net of repurchases\t782554\t0\t3938\t0\t0\t3938\nVesting of restricted stock units net of employee payroll taxes\t146174\t0\t(2591)\t0\t0\t(2591)\nShares issued related to a business combination\t1499651\t0\t38875\t0\t0\t38875\nOther comprehensive loss\t0\t0\t0\t(422)\t0\t(422)\nStock-based compensation\t0\t0\t13495\t0\t0\t13495\nNet loss\t0\t0\t0\t0\t(20608)\t(20608)\nBalances as of October 31 2020\t81784006\t0\t599886\t634\t(225962)\t374558\n", "q10k_tbl_3": "\tNine Months Ended October 31 2020\t\t\t\t\t\n\tCommon Stock\t\tAdditional Paid-in Capital\tAccumulated Other Comprehensive Income\tAccumulated Deficit\tTotal Stockholders' Equity\n\tShares\tAmount\t\t\nBalances as of January 31 2020\t77793540\t0\t487008\t137\t(179207)\t307938\nIssuance of common stock upon exercise of stock options and restricted stock agreements net of repurchases\t2069446\t0\t9709\t0\t0\t9709\nVesting of restricted stock units net of employee payroll taxes\t240116\t0\t(4334)\t0\t0\t(4334)\nVesting of early exercised options\t0\t0\t507\t0\t0\t507\nEquity component of convertible senior notes net of issuance costs\t0\t0\t68478\t0\t0\t68478\nPurchases of capped calls related to convertible senior notes\t0\t0\t(35708)\t0\t0\t(35708)\nShares issued related to a business combination\t1499651\t0\t38875\t0\t0\t38875\nIssuance of common stock in connection with employee stock purchase plan\t181253\t0\t3558\t0\t0\t3558\nOther comprehensive income\t0\t0\t0\t497\t0\t497\nStock-based compensation\t0\t0\t31793\t0\t0\t31793\nNet loss\t0\t0\t0\t0\t(46755)\t(46755)\nBalances as of October 31 2020\t81784006\t0\t599886\t634\t(225962)\t374558\n", "q10k_tbl_4": "\tThree Months Ended October 31 2019\t\t\t\t\t\n\tCommon Stock\t\tAdditional Paid-in Capital\tAccumulated Other Comprehensive Loss\tAccumulated Deficit\tTotal Stockholders' Equity\n\tShares\tAmount\t\t\nBalances as of July 31 2019\t76227101\t0\t462665\t0\t(153502)\t309163\nIssuance of common stock upon exercise of stock options and restricted stock agreements net of repurchases\t920730\t0\t2965\t0\t0\t2965\nVesting of restricted stock units net of employee payroll taxes\t897\t0\t(4)\t0\t0\t(4)\nVesting of early exercised options\t0\t0\t335\t0\t0\t335\nStock-based compensation\t0\t0\t7347\t0\t0\t7347\nOther comprehensive loss\t0\t0\t0\t(50)\t0\t(50)\nNet loss\t0\t0\t0\t0\t(15265)\t(15265)\nBalances as of October 31 2019\t77148728\t0\t473308\t(50)\t(168767)\t304491\n", "q10k_tbl_5": "\tNine Months Ended October 31 2019\t\t\t\t\t\t\t\n\tRedeemable Convertible Preferred Stock\t\tCommon Stock\t\tAdditional Paid-in Capital\tAccumulated Other Comprehensive Loss\tAccumulated Deficit\tTotal Stockholders' Equity (Deficit)\n\tShares\tAmount\tShares\tAmount\t\t\nBalances as of January 31 2019\t41273345\t173023\t23189921\t0\t59938\t0\t(128868)\t(68930)\nIssuance of common stock upon exercise of stock options and restricted stock agreements net of repurchases\t0\t0\t2086075\t0\t5750\t0\t0\t5750\nVesting of restricted stock units net of employee payroll taxes\t0\t0\t1080\t0\t(14)\t0\t0\t(14)\nExercise of common stock warrants\t0\t0\t737807\t0\t0\t0\t0\t0\nRepayment of promissory note\t0\t0\t0\t0\t515\t0\t0\t515\nIssuance of common stock in connection with initial public offering net of underwriting discounts and issuance costs\t0\t0\t9860500\t0\t213697\t0\t0\t213697\nConversion of convertible preferred stock to common stock in connection with initial public offering\t(41273345)\t(173023)\t41273345\t0\t173023\t0\t0\t173023\nVesting of early exercised options\t0\t0\t0\t0\t1007\t0\t0\t1007\nStock-based compensation\t0\t0\t0\t0\t19392\t0\t0\t19392\nOther comprehensive loss\t0\t0\t0\t0\t0\t(50)\t0\t(50)\nNet loss\t0\t0\t0\t0\t0\t0\t(39899)\t(39899)\nBalances as of October 31 2019\t0\t0\t77148728\t0\t473308\t(50)\t(168767)\t304491\n", "q10k_tbl_6": "\tNine Months Ended October 31\t\n\t2020\t2019\nCash flows from operating activities\t\t\nNet loss\t(46755)\t(39899)\nAdjustments to reconcile net loss to net cash provided by (used in) operating activities:\t\t\nDepreciation and amortization\t3352\t1675\nAmortization of deferred contract costs\t7894\t5499\nAmortization of debt discount and issuance costs\t4493\t0\nStock-based compensation\t31735\t19392\nNon-cash lease expense\t3299\t0\nOther\t1897\t(383)\nChanges in operating assets and liabilities:\t\t\nAccounts receivable\t(3879)\t4333\nDeferred contract costs\t(10944)\t(10945)\nPrepaid expenses and other assets\t(3605)\t(4864)\nAccounts payable\t(210)\t(1386)\nAccrued expenses and other liabilities\t2224\t2464\nAccrued compensation\t7689\t5619\nDeferred revenue\t12475\t16520\nLease liabilities\t(2959)\t0\nNet cash provided by (used in) operating activities\t6706\t(1975)\nCash flows from investing activities\t\t\nPurchases of property and equipment\t(3402)\t(3190)\nCapitalization of internal-use software costs\t(328)\t0\nBusiness acquisitions net of cash acquired\t(49656)\t0\nPurchases of held-to-maturity investments\t0\t(45736)\nProceeds from maturities of held-to-maturity investments\t28040\t8950\nPurchases of available-for-sale investments\t(153254)\t(132706)\nProceeds from maturities of available-for-sale investments\t123352\t0\nProceeds from sales of available-for-sale investments\t9285\t0\nNet cash used in investing activities\t(45963)\t(172682)\nCash flows from financing activities\t\t\nProceeds from issuance of convertible senior notes net of issuance costs paid of $8835\t278665\t0\nPurchases of capped calls related to convertible senior notes\t(35708)\t0\nProceeds from initial public offering net of underwriters' discounts and commissions\t0\t220086\nPayments of costs related to initial public offering\t0\t(5603)\nProceeds from employee stock purchase plan\t3558\t0\nProceeds from repayment of promissory note\t0\t515\nProceeds from issuance of common stock upon exercise of stock options\t9709\t5750\nEmployee payroll taxes paid related to net share settlement of restricted stock units\t(4334)\t(14)\nNet cash provided by financing activities\t251890\t220734\nNet increase in cash cash equivalents and restricted cash\t212633\t46077\nCash cash equivalents and restricted cash at beginning of period\t124024\t130323\nCash cash equivalents and restricted cash at end of period\t336657\t176400\nSupplemental cash flow data:\t\t\nCash paid for income taxes\t0\t53\nNon-cash investing and financing activities:\t\t\nVesting of early exercised options\t507\t1007\nPurchase of property and equipment accrued but not yet paid\t274\t347\nCosts related to issuance of convertible senior notes accrued but not yet paid\t470\t0\nCosts related to initial public offering accrued but not yet paid\t0\t342\nNon-cash purchases of property and equipment\t0\t2364\nFair value of common stock issued as consideration for a business combination\t38875\t0\nReconciliation of cash cash equivalents and restricted cash to the condensed consolidated balance sheets\t\t\nCash and cash equivalents\t336657\t176347\nRestricted cash-included in other assets\t0\t53\nTotal cash cash equivalents and restricted cash\t336657\t176400\n", "q10k_tbl_7": "\tAs of October 31 2020\tAs of January 31 2020\n\t(in thousands)\t\nCash and cash equivalents\t\t\nCash\t214469\t2131\nMoney market funds\t108200\t118899\nU.S. Treasury securities\t13988\t2994\nTotal cash and cash equivalents\t336657\t124024\nAvailable-for-sale investments:\t\t\nU.S. Treasury securities\t34055\t24987\nCommercial paper\t29910\t20132\nCorporate debt securities\t155636\t149248\nU.S. Government agency securities\t0\t4973\nTotal available-for-sale investments\t219601\t199340\nHeld-to-maturity investments:\t\t\nU.S. Treasury securities\t0\t9016\nCommercial paper\t0\t5985\nCorporate debt securities\t0\t13034\nTotal held-to-maturities investments\t0\t28035\nTotal investments\t219601\t227375\n", "q10k_tbl_8": "\tAs of October 31 2020\t\t\n\tCost Basis\tUnrealized Gain Net\tRecorded Basis\n\t(in thousands)\t\t\nAvailable-for-sale investments:\t\t\t\nU.S. Treasury securities\t34043\t12\t34055\nCommercial paper\t29910\t0\t29910\nCorporate debt securities\t155014\t622\t155636\nTotal available-for-sale investments\t218967\t634\t219601\n", "q10k_tbl_9": "\tAs of January 31 2020\t\t\n\tCost Basis\tUnrealized Gain Net\tRecorded Basis\n\t(in thousands)\t\t\nAvailable-for-sale investments:\t\t\t\nU.S. Treasury securities\t24978\t9\t24987\nCommercial paper\t20128\t4\t20132\nCorporate debt securities\t149124\t124\t149248\nU.S. Government agency securities\t4973\t0\t4973\nTotal available-for-sale investments\t199203\t137\t199340\nHeld-to-maturity investments:\t\t\t\nU.S. Treasury securities\t9016\t0\t9016\nCommercial paper\t5985\t0\t5985\nCorporate debt securities\t13034\t0\t13034\nTotal held-to-maturities investments\t28035\t0\t28035\nTotal investments\t227238\t137\t227375\n", "q10k_tbl_10": "\tAs of October 31 2020\t\n\tCost Basis\tRecorded Basis\n\t(in thousands)\t\nDue within one year\t180262\t180779\nDue between one to five years\t38705\t38822\nTotal\t218967\t219601\n", "q10k_tbl_11": "\tAs of January 31 2020\t\n\tCost Basis\tRecorded Basis\n\t(in thousands)\t\nDue within one year\t128127\t128169\nDue between one to five years\t71076\t71171\nTotal\t199203\t199340\n", "q10k_tbl_12": "\tAs of October 31 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\n\t(in thousands)\t\t\t\nMoney market funds\t108200\t0\t0\t108200\nU.S. Treasury securities\t13988\t34055\t0\t48043\nCommercial paper\t0\t29910\t0\t29910\nCorporate debt securities\t0\t155636\t0\t155636\nTotal\t122188\t219601\t0\t341789\nIncluded in cash equivalents\t\t\t\t122188\nIncluded in investments\t\t\t\t219601\n", "q10k_tbl_13": "\tAs of January 31 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\n\t(in thousands)\t\t\t\nMoney market funds\t118899\t0\t0\t118899\nU.S. Treasury securities\t2994\t34003\t0\t36997\nCommercial paper\t0\t26117\t0\t26117\nCorporate debt securities\t0\t162282\t0\t162282\nU.S. Government agency securities\t0\t4973\t0\t4973\nTotal\t121893\t227375\t0\t349268\nIncluded in cash equivalents\t\t\t\t121893\nIncluded in investments\t\t\t\t227375\n", "q10k_tbl_14": "\t(in thousands)\nCash paid to common and preferred stockholders warrant holders and vested option holders\t51581\nFair value of common stock transferred\t33941\nFair value of assumed options and restricted stock attributable to pre-combination service(1)\t4934\nFair value of future cash payments to common stockholders attributable to pre-combination service\t4808\nTotal purchase consideration\t95264\n(1) The restricted shares are considered to be legally issued and outstanding on the date of issuance.\t\n", "q10k_tbl_15": "\t(in thousands)\nCash and cash equivalents\t1925\nAccounts receivable and other assets\t1879\nIntangible assets\t27800\nGoodwill\t71946\nAccounts payable and other liabilities\t(548)\nDeferred revenue\t(2680)\nDeferred tax liabilities net\t(5058)\nTotal purchase consideration\t95264\n", "q10k_tbl_16": "\t(in thousands)\nBalance as of January 31 2020\t0\nGoodwill additions\t71946\nBalance as of October 31 2020\t71946\n", "q10k_tbl_17": "\tCost\tAccumulated Amortization\tNet\tWeighted Average Remaining Useful Life\n\t(in thousands)\t\t\t(in years)\nCustomer relationships\t21800\t(182)\t21618\t9.9\nDeveloped technology\t5600\t(93)\t5507\t4.9\nTrademarks\t400\t(17)\t383\t1.9\nOther intangibles net\t27800\t(292)\t27508\t\n", "q10k_tbl_18": "Year ending January 31\t\n\t(in thousands)\nRemainder of 2021\t875\n2022\t3500\n2023\t3433\n2024\t3300\n2025\t3300\nThereafter\t13100\nTotal expected future amortization expense\t27508\n", "q10k_tbl_19": "\tAs of October 31 2020\tAs of January 31 2020\n\t(in thousands)\t\nLeasehold improvements\t12440\t12257\nComputers and equipment\t6001\t4431\nFurniture and fixtures\t3048\t2540\nCapitalized internal-use software\t775\t389\nGross property and equipment (1)\t22264\t19617\nAccumulated depreciation and amortization\t(10116)\t(7248)\nProperty and equipment net\t12148\t12369\n", "q10k_tbl_20": "\tAs of October 31 2020\n\t(in thousands)\nAssets\t\nLease right-of-use assets\t25790\nLiabilities\t\nLease liabilities\t5152\nLease liabilities non-current\t27775\n", "q10k_tbl_21": "\tThree Months Ended October 31 2020\tNine Months Ended October 31 2020\n\t(in thousands)\t\nOperating lease expense\t1448\t4335\nShort-term lease expense\t105\t665\nVariable lease expense\t335\t998\n", "q10k_tbl_22": "\tThree Months Ended October 31 2020\tNine Months Ended October 31 2020\n\t(in thousands)\t\nCash paid for amounts included in the measurement of lease liabilities\t1524\t3811\n", "q10k_tbl_23": "Year ending January 31\t\n\t(in thousands)\n2021\t1561\n2022\t6299\n2023\t6492\n2024\t6674\n2025\t6872\nThereafter\t8942\nGross lease payments\t36840\nLess: Imputed interest\t(3913)\nTotal\t32927\n", "q10k_tbl_24": "\tAs of October 31 2020\n\t(in thousands)\nPrincipal\t287500\nLess: unamortized debt discount\t(66680)\nLess: unamortized issuance costs\t(6609)\nNet carrying amount\t214211\n", "q10k_tbl_25": "\tAs of October 31 2020\n\t(in thousands)\nProceeds allocated to the conversion options (debt discount)\t70768\nLess: issuance costs\t(2290)\nCarrying amount of the equity component\t68478\n", "q10k_tbl_26": "\tThree Months Ended October 31 2020\tNine Months Ended October 31 2020\n\t(in thousands)\t\nContractual interest expense\t898\t1248\nAmortization of debt discount\t2943\t4088\nAmortization of debt issuance costs\t292\t405\nTotal interest expense related to the Notes\t4133\t5741\n", "q10k_tbl_27": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nDeferred revenue beginning of period\t101180\t77797\t92569\t64104\nBillings\t57636\t45577\t166747\t136945\nDeferred revenue assumed in the Rundeck acquisition\t2680\t0\t2680\t0\nRevenue recognized\t(53772)\t(42750)\t(154272)\t(120425)\nDeferred revenue end of period\t107724\t80624\t107724\t80624\n", "q10k_tbl_28": "\tOctober 31 2020\nOutstanding stock options and unvested RSUs outstanding\t15994999\nAvailable for future stock option and RSU grants\t13188640\nAvailable for ESPP\t2235888\nTotal common stock reserved at October 31 2020\t31419527\n", "q10k_tbl_29": "\tNumber of Shares\tWeighted Average Exercise Price\tWeighted Average Remaining Contractual Term\tAggregate Intrinsic Value\n\t\t\t\t(in thousands)\nOutstanding at January 31 2020\t14498045\t7.37\t7.8 years\t231300\nGranted\t387439\t14.06\t\t\nExercised\t(2070718)\t4.64\t\t\nCanceled\t(798328)\t11.13\t\t\nOutstanding at October 31 2020\t12016438\t7.80\t7.1 years\t231866\nVested as of October 31 2020\t7578858\t5.06\t6.5 years\t167061\n", "q10k_tbl_30": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nExpected dividend yield\t0\t-%\t0\t0\nExpected volatility\t43.0% - 44.1%\t42.2%\t43.0% - 44.1%\t42.0% - 42.8%\nExpected term (years)\t3.7 - 6.1\t6.1\t3.7 - 6.1\t5.5 - 6.9\nRisk-free interest rate\t0.20% - 0.39%\t1.39%\t0.20% - 0.47%\t1.39% - 2.48%\n", "q10k_tbl_31": "\tNumber of RSUs\tWeighted Average Grant Date Fair Value Per Share\nOutstanding at January 31 2020\t1114911\t28.10\nGranted\t3480566\t20.02\nVested net of shares withheld for employee payroll taxes\t(240116)\t22.68\nCanceled\t(376800)\t21.76\nOutstanding at October 31 2020\t3978561\t21.92\n", "q10k_tbl_32": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nCost of revenue\t488\t303\t1095\t773\nResearch and development\t2807\t1462\t7459\t3760\nSales and marketing\t6254\t2295\t11409\t6084\nGeneral and administrative\t3910\t3287\t11772\t8775\nTotal\t13459\t7347\t31735\t19392\n", "q10k_tbl_33": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands except per share amounts)\t\t\t\nNumerator:\t\t\t\t\nNet loss\t(20608)\t(15265)\t(46755)\t(39899)\nDenominator:\t\t\t\t\nWeighted average shares used in calculating net loss per share basic and diluted\t79937\t75992\t78835\t61628\nNet loss per share basic and diluted\t(0.26)\t(0.20)\t(0.59)\t(0.65)\n", "q10k_tbl_34": "\tAs of October 31\t\n\t2020\t2019\n\t(in thousands)\t\nShares subject to outstanding common stock awards\t15995\t14932\nConvertible senior notes\t7173\t0\nUnvested early exercised stock options\t0\t140\nRestricted stock awards purchased with promissory notes\t124\t216\nRestricted stock issued to Rundeck key personnel\t278\t0\nShares issuable pursuant to the 2019 Employee Stock Purchase Plan\t150\t202\nTotal\t23720\t15490\n", "q10k_tbl_35": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nUnited States\t40966\t33330\t118234\t94390\nInternational\t12806\t9420\t36038\t26035\nTotal\t53772\t42750\t154272\t120425\n", "q10k_tbl_36": "\tAs of October 31\t\n\t2020\t2019\nCustomers\t13725\t12436\nCustomers greater than $100000 in ARR\t401\t303\n", "q10k_tbl_37": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nRevenue\t53772\t42750\t154272\t120425\nCost of revenue(1)\t7685\t6634\t21285\t18226\nGross profit\t46087\t36116\t132987\t102199\nOperating expenses:\t\t\t\t\nResearch and development(1)\t16156\t12619\t46705\t35160\nSales and marketing(1)\t34024\t27425\t88271\t72378\nGeneral and administrative(1)\t17746\t12765\t45899\t38464\nTotal operating expenses\t67926\t52809\t180875\t146002\nLoss from operations\t(21839)\t(16693)\t(47888)\t(43803)\nInterest income\t974\t1427\t3375\t4283\nInterest expense\t(4133)\t0\t(5741)\t0\nOther (expense) income net\t(449)\t245\t(861)\t346\nLoss before benefit from (provision for) income taxes\t(25447)\t(15021)\t(51115)\t(39174)\nBenefit from (provision for) income taxes\t4839\t(244)\t4360\t(725)\nNet loss\t(20608)\t(15265)\t(46755)\t(39899)\n", "q10k_tbl_38": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nCost of revenue\t488\t303\t1095\t773\nResearch and development\t2807\t1462\t7459\t3760\nSales and marketing\t6254\t2295\t11409\t6084\nGeneral and administrative\t3910\t3287\t11772\t8775\nTotal\t13459\t7347\t31735\t19392\n", "q10k_tbl_39": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nRevenue\t100%\t100%\t100%\t100%\nCost of revenue\t14\t16\t14\t15\nGross profit\t86%\t84%\t86%\t85%\nOperating expenses:\t\t\t\t\nResearch and development\t30\t30\t30\t29\nSales and marketing\t63\t64\t57\t60\nGeneral and administrative\t33\t30\t30\t32\nTotal operating expenses\t126\t124\t117\t121\nLoss from operations\t(41)\t(39)\t(31)\t(36)\nInterest income\t2\t3\t2\t4\nInterest expense\t(8)\t0\t(4)\t0\nOther (expense) income net\t(1)\t1\t(1)\t0\nLoss before benefit from (provision for) income taxes\t(47)\t(35)\t(33)\t(33)\nBenefit from (provision for) income taxes\t9\t(1)\t3\t(1)\nNet loss\t(38)%\t(36)%\t(30)%\t(33)%\n", "q10k_tbl_40": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nRevenue\t53772\t42750\t11022\t26%\n", "q10k_tbl_41": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nCost of revenue\t7685\t6634\t1051\t16%\nGross margin\t86%\t84%\t\t\n", "q10k_tbl_42": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nResearch and development\t16156\t12619\t3537\t28%\nPercentage of revenue\t30%\t30%\t\t\n", "q10k_tbl_43": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nSales and marketing\t34024\t27425\t6599\t24%\nPercentage of revenue\t63%\t64%\t\t\n", "q10k_tbl_44": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nGeneral and administrative\t17746\t12765\t4981\t39%\nPercentage of revenue\t33%\t30%\t\t\n", "q10k_tbl_45": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nInterest income\t974\t1427\t(453)\t(32)%\nOther (expense) income net\t(449)\t245\t(694)\t(283)%\n", "q10k_tbl_46": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nRevenue\t154272\t120425\t33847\t28%\n", "q10k_tbl_47": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nCost of revenue\t21285\t18226\t3059\t17%\nGross margin\t86%\t85%\t\t\n", "q10k_tbl_48": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nResearch and development\t46705\t35160\t11545\t33%\nPercentage of revenue\t30%\t29%\t\t\n", "q10k_tbl_49": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nSales and marketing\t88271\t72378\t15893\t22%\nPercentage of revenue\t57%\t60%\t\t\n", "q10k_tbl_50": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nGeneral and administrative\t45899\t38464\t7435\t19%\nPercentage of revenue\t30%\t33%\t\t\n", "q10k_tbl_51": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\tChange\t% Change\n\t(dollars in thousands)\t\t\t\nInterest income\t3375\t4283\t(908)\t(21)%\nOther (expense) income net\t(861)\t346\t(1207)\t(349)%\n", "q10k_tbl_52": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nGross profit\t46087\t36116\t132987\t102199\nAdd:\t\t\t\t\nStock-based compensation\t488\t303\t1095\t773\nAmortization of acquired intangible assets\t93\t0\t93\t0\nNon-GAAP gross profit\t46668\t36419\t134175\t102972\nGross margin\t86%\t84%\t86%\t85%\nNon-GAAP gross margin\t87%\t85%\t87%\t86%\n", "q10k_tbl_53": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nLoss from operations\t(21839)\t(16693)\t(47888)\t(43803)\nAdd:\t\t\t\t\nStock-based compensation\t13459\t7347\t31735\t19392\nAmortization of acquired intangible assets\t292\t0\t292\t0\nAcquisition-related expenses\t1786\t0\t1786\t0\nNon-GAAP operating loss\t(6302)\t(9346)\t(14075)\t(24411)\nOperating margin\t(41)%\t(39)%\t(31)%\t(36)%\nNon-GAAP operating margin\t(12)%\t(22)%\t(9)%\t(20)%\n", "q10k_tbl_54": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nNet loss\t(20608)\t(15265)\t(46755)\t(39899)\nAdd:\t\t\t\t\nStock-based compensation\t13459\t7347\t31735\t19392\nAmortization of debt discount and issuance costs\t3235\t0\t4493\t0\nAmortization of acquired intangibles assets\t292\t0\t292\t0\nAcquisition-related expenses\t1786\t0\t1786\t0\nAcquisition-related tax benefit\t(5058)\t0\t(5058)\t0\nNon-GAAP net loss\t(6894)\t(7918)\t(13507)\t(20507)\n", "q10k_tbl_55": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\n\t(in thousands)\t\t\t\nNet cash used in operating activities\t4844\t3432\t6706\t(1975)\nLess:\t\t\t\t\nPurchases of property and equipment\t(110)\t(1171)\t(3402)\t(3190)\nCapitalization of internal-use software costs\t(217)\t0\t(328)\t0\nFree cash flow\t4517\t2261\t2976\t(5165)\nNet cash used in investing activities\t(45488)\t(135967)\t(45963)\t(172682)\nNet cash provided by (used in) financing activities\t663\t2566\t251890\t220734\n", "q10k_tbl_56": "\tNine Months Ended October 31\t\n\t2020\t2019\n\t(in thousands)\t\nNet cash provided by (used in) operating activities\t6706\t(1975)\nNet cash used in investing activities\t(45963)\t(172682)\nNet cash provided by financing activities\t251890\t220734\n", "q10k_tbl_57": "Exhibit Number\tDescription\tForm\tFile No.\tIncorporated by Exhibit Reference\tFiling Date\n2.1\tAgreement and Plan of Reorganization dated as of September 20 2020 by and among PagerDuty Inc. a Delaware corporation Reef Merger Sub I Inc. a Delaware corporation Reef Merger Sub II LLC a Delaware limited liability company Rundeck Inc. a Delaware corporation and Shareholder Representative Services LLC a Colorado limited liability company solely in its capacity as securityholder representative\t8-K\t001-38856\t2.1\tOctober 1 2020\n3.1\tAmended and Restated Certificate of Incorporation of PagerDuty Inc.\t8-K\t001-38856\t3.1\tApril 15 2019\n3.2\tAmended and Restated Bylaws of PagerDuty Inc.\t8-K\t001-38856\t3.2\tApril 15 2019\n31.1\tCertification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\t\t\tFiled herewith\t\n31.2\tCertification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\t\t\tFiled herewith\t\n32.1*\tCertification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\t\t\tFurnished herewith\t\n101.INS\tXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.\t\t\tFiled herewith\t\n101.SCH\tXBRL Taxonomy Extension Schema Document.\t\t\tFiled herewith\t\n101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document.\t\t\tFiled herewith\t\n101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document.\t\t\tFiled herewith\t\n101.LAB\tXBRL Taxonomy Extension Label Linkbase Document.\t\t\tFiled herewith\t\n101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document.\t\t\tFiled herewith\t\n104\tCover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.INS 101.SCH 101.CAL 101.DEF 101.LAB and 101.PRE).\t\t\t\t\n"}{"bs": "q10k_tbl_0", "is": "q10k_tbl_1", "cf": "q10k_tbl_6"}None
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2020
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: 001-38856
PAGERDUTY, INC.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
27-2793871
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
600 Townsend St., Suite 200
San Francisco, CA94103
(844) 800-3889
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
_________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.000005 par value
PD
New York Stock Exchange
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. Yesx No o
Indicate by check mark whether the registrant has submitted electronically on its corporate Web site 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 and post such files). Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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
o
Accelerated filer
o
Non-accelerated filer
x
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 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The total number of shares of common stock outstanding as of December 1, 2020, was 81,932,793.
This Quarterly Report on Form 10-Q, or this Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which statements involve substantial risk and uncertainties. All statements contained in this report other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth and trends, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “potentially,” “likely,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statement contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:
•the effect of uncertainties related to the novel coronavirus and resulting COVID-19 pandemic on U.S. and global markets, our business, operations, revenue results, cash flow, operating expenses, demand for our solutions, sales cycles, customer retention, and our customers’ businesses;
•trends in key business metrics, including number of customers and dollar-based net retention rate, and non-GAAP financial measures and their usefulness in evaluating our business;
•trends in revenue, cost of revenue, and gross margin;
•trends in operating expenses, including research and development, sales and marketing, and general and administrative expense, and expectations regarding these expenses as a percentage of revenue;
•our existing cash and cash equivalents and cash provided by sales of our subscriptions being sufficient to support working capital and capital expenditures for at least the next 12 months;
•our ability to successfully identify, acquire, and integrate companies and assets;
•our ability to service the interest on our convertible notes and repay such notes, to the extent required;
•our efforts to maintain proper and effective internal controls;
•our ability to expand our operations and increase adoption of our platform internationally;
•our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
•the increased expenses and administrative workload associated with being a public company; and
•other statements regarding our future operations, financial condition, and prospects and business strategies.
Such forward-looking statements are based on our expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, including but not limited to, risks detailed in the “Risk Factors” section of this Form 10-Q. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission, or the SEC, that disclose risks and uncertainties that may affect our business. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the effect 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 future events and trends discussed in this 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 on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or may not occur. Although we
believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update any of these forward-looking statements for any reason after the date of this Form 10-Q or to conform these statements to actual results or revised expectations.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Description of Business and Basis of Presentation
Description of Business
PagerDuty, Inc. was incorporated under the laws of the state of Delaware in May 2010.
PagerDuty acts as the central nervous system for the digital enterprise. PagerDuty harnesses digital signals from virtually any software-enabled system or device, combines it with human response data and orchestrates teams to take the right actions in real time. The Company’s products help organizations improve operations, accelerate innovation, increase revenue, mitigate security risk, and deliver a great customer experience.
As used herein, “PagerDuty”, “we”, “our”, “the Company” and similar terms include PagerDuty, Inc., unless the context indicates otherwise.
Initial Public Offering
On April 15, 2019, the Company completed its initial public offering (“IPO”), pursuant to which the Company issued and sold 9,860,500 shares of common stock, inclusive of the over-allotment option, at a public offering price of $24.00 per share. The Company received net proceeds of $213.7 million, after deducting underwriters' discounts and commissions of $16.6 million and other issuance costs of $6.4 million. Immediately prior to the closing of the Company’s IPO, all shares of the redeemable convertible preferred stock automatically converted into 41,273,345 shares of common stock.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of January 31, 2020 was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended January 31, 2020, included in the Company’s Annual Report on Form 10-K, filed with the SEC.
The condensed consolidated financial statements include the results of PagerDuty, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
In the opinion of management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows, and statements of stockholders’ equity. The results of operations for the three and nine months ended October 31, 2020 are not necessarily indicative of the results to be expected for the full year ending January 31, 2021 or for any other interim period, or for any future year.
The Company’s fiscal year ends on January 31. References to fiscal 2021, for example, refer to the fiscal year ended January 31, 2021.
Notes to Condensed Consolidated Financial Statements
(unaudited)
In June 2020, The Company issued $287.5 million aggregate principal amount of 1.25% Convertible Senior Notes due 2025 (the “Notes”). Refer to Note 10, “Debt and Financing Arrangements” for additional details.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make, on an ongoing basis, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The Company’s most significant estimates and judgments involve the valuation of the Company’s stock-based awards, including the determination of fair value of common stock (prior to the closing of the IPO) and the fair value of the employee stock purchase plan (“ESPP”) expense, period of benefit for amortizing deferred contract costs, the determination of the allowance for doubtful accounts, the provision for income taxes, including the related valuation allowance and any uncertain tax positions, fair value of the liability and equity components of the Notes, fair value of acquired assets and assumed liabilities, impairment of goodwill and intangible assets, the incremental borrowing rate for lease liabilities, and estimates related to our revenue recognition, such as the assessment of performance obligations in our revenue arrangements and the fair value assigned to each performance obligation, among others. Management bases its estimates on historical experience and on various other assumptions which management believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
In December 2019, the novel coronavirus and resulting disease (“COVID-19”) was reported and in March 2020 the World Health Organization declared it a pandemic. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers and our sales cycles, and impact on our employees, as discussed in more detail in the Overview section of our Management’s Discussion and Analysis. During the three and nine months ended October 31, 2020, this uncertainty resulted in a higher level of judgment related to our estimates and assumptions related to the estimate of credit losses for accounts receivable. As of the date of issuance of the financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments, or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.
2. Summary of Significant Accounting Policies
Concentrations of Risk and Significant Customers
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, held-to-maturity investments, available-for-sale investments, and accounts receivable. All of the Company’s cash and cash equivalents and investments are invested in money market funds, United States (“U.S.”) Treasury securities, commercial paper, corporate debt securities, or U.S. Government agency securities that management believes to be of high credit quality.
No single customer accounted for 10% of the total accounts receivable balance as of October 31, 2020 or January 31, 2020. No single customer represented 10% or more of revenue for the three and nine months ended October 31, 2020 or 2019.
Segment Information
The Company manages operations and allocates resources as one operating segment. The Company’s chief operating decision maker (“CODM”) is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating
Notes to Condensed Consolidated Financial Statements
(unaudited)
resources. Refer to Note 16, “Geographic Information” for information regarding the Company's long-lived assets and revenue by geography.
Significant Accounting Policies
There have been no significant changes to our significant accounting policies as compared to those described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2020, other than as set forth below.
Convertible Senior Notes
The Notes are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 470-20, Debt with Conversion and Other Options. Pursuant to ASC Subtopic 470-20, issuers of certain convertible debt instruments, such as the Notes, that have a net settlement feature and may be settled wholly or partially in cash upon conversion are required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The carrying amount of the liability component of the instrument is computed by estimating the fair value of a similar liability without the conversion option using a market-based approach. The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the respective term of the Notes using the effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the Notes, the allocation of issuance costs incurred between the liability and equity components was based on their relative values.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of allowance for doubtful accounts. The allowance is based upon historical loss patterns, the age of each past due invoice, and an evaluation of the potential risk of loss associated with delinquent accounts. The allowance also reflects current market conditions and reasonable and supportable forecasts of future economic conditions. As of October 31, 2020, our allowance reflects considerations related to the COVID-19 pandemic and may increase in future periods as we ascertain future impacts to our customers and business. The allowance for doubtful accounts was $1.5 million and $0.8 million as of October 31, 2020 and January 31, 2020.
Business Combinations
The Company applies the acquisition method of accounting for business combinations. Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values at the date of the acquisition. We allocate the purchase consideration to the net tangible and identifiable intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable.
Goodwill, Acquired Intangible Assets, and Impairment of Long-Lived Assets
Goodwill. Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually in the fourth quarter, 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 or a significant decrease in expected cash flows. No impairment charges were recorded during the three and nine months ended October 31, 2020 and 2019.
Acquired Intangible Assets. Acquired intangible assets consist of identifiable intangible assets, primarily developed technology and customer relationships, resulting from our business acquisition. Intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Impairment of Long-Lived Assets. The carrying amounts of our long-lived assets, including property and equipment, lease right-of-use assets, capitalized internal-use software, and acquired intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful lives are shorter than originally estimated. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If long-lived assets are considered impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value. If we reduce the estimated useful life assumption for any asset, the remaining unamortized balance would be amortized or depreciated over the revised estimated useful life.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases, (“Topic 842”) (“ASU 2016-02”), which would require lessees to recognize most leases on their balance sheets, whether operating or financing, while continuing to recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. The Company adopted the standard using the optional alternative method on a prospective basis with an effective date as of the beginning of the Company’s fiscal year, February 1, 2020, and applied it to the operating leases that existed on that date. Prior year comparative financial information was not recast under the new standard and continues to be presented under ASC 840. The Company elected to utilize the package of practical expedients available for expired or existing contracts which allowed the Company to carryforward historical assessments of (a) whether contracts are or contain leases, (b) lease classification, and (c) initial direct costs. The Company elected to apply the short-term lease exception for all leases. Under the short-term lease exception, the Company will not recognize right-of-use assets or lease liabilities for leases that, at the acquisition date, have a remaining lease term of 12 months or less. As a result of implementing this guidance, the Company recognized a net operating right-of-use asset of $29.1 million and a $35.9 million operating lease liability in its condensed consolidated balance sheets as of February 1, 2020. The adoption of this guidance did not affect our condensed consolidated statements of operations or our condensed consolidated statements of cash flows. Refer to Note 9, “Leases” for further information.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses(“Topic 326”) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. This guidance also requires new disclosures for financial assets measured at amortized cost, loans, and available-for-sale debt securities. The Company adopted the standard as of the beginning of the Company’s fiscal year, February 1, 2020. The adoption of this guidance did not have a material impact to the condensed consolidated financial statements. In connection with the adoption, for purposes of identifying and measuring impairment, the policy election was made to exclude accrued interest from both the fair value and amortized cost basis of our available-for sale debt securities. Such accrued interest is recorded in prepaid expenses and other current assets.
In January 2017, the FASB released Accounting Standards Update No. 2017-04, Intangibles— Goodwill and Other (“Topic 350”) which simplifies the subsequent measurement of goodwill, eliminating Step 2 from the goodwill impairment test. Previously, under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments of ASU 2017-04, an entity performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and an impairment charge would be recognized for any amount by which the carrying amount exceeds the reporting unit’s fair value.. The amendments in this update were effective for an entity’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or fiscal year 2021 for the Company. The Company performs their impairment test on goodwill in the fourth quarter of each fiscal year.
Notes to Condensed Consolidated Financial Statements
(unaudited)
In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (“Topic 820”) (“ASU 2018-13”), which modifies the disclosure requirements for fair value measurements for certain types of investments. We adopted this standard in the first quarter of fiscal year 2020. The adoption did not have an effect on our consolidated financial statements.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intends to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in fiscal 2022, although early adoption is permitted. The Company early adopted the standard as of the beginning of the Company’s fiscal year, February 1, 2020. The adoption of this guidance did not have a material impact to the condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued Accounting Standard Update No. 2020-06, Debt—Debt with Conversion Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity (“Subtopic 815-40”) (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. ASU 2020-06 also improves and amends the related Earnings Per Share guidance for both Subtopics. The ASU is part of the FASB's simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU 2020-06 will be effective for annual reporting periods beginning after December 15, 2021. Early adoption is permitted, but not before annual reporting periods beginning after December 15, 2020. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
3. Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following:
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following tables summarize the Company’s investments’ adjusted cost, net unrealized gains, and fair value by significant investment category as of October 31, 2020 and January 31, 2020. Gross realized gains or losses from sales of available-for-sale securities were not material for the three and nine months ended October 31, 2020.
As of October 31, 2020
Cost Basis
Unrealized Gain, Net
Recorded Basis
(in thousands)
Available-for-sale investments:
U.S. Treasury securities
$
34,043
$
12
$
34,055
Commercial paper
29,910
—
29,910
Corporate debt securities
155,014
622
155,636
Total available-for-sale investments
$
218,967
$
634
$
219,601
As of January 31, 2020
Cost Basis
Unrealized Gain, Net
Recorded Basis
(in thousands)
Available-for-sale investments:
U.S. Treasury securities
$
24,978
$
9
$
24,987
Commercial paper
20,128
4
20,132
Corporate debt securities
149,124
124
149,248
U.S. Government agency securities
4,973
—
4,973
Total available-for-sale investments
$
199,203
$
137
$
199,340
Held-to-maturity investments:
U.S. Treasury securities
$
9,016
$
—
$
9,016
Commercial paper
5,985
—
5,985
Corporate debt securities
13,034
—
13,034
Total held-to-maturities investments
$
28,035
$
—
$
28,035
Total investments
$
227,238
$
137
$
227,375
All of the Company’s held-to-maturity securities have a contractual maturity of less than one year. The following table presents the Company’s available-for-sale securities by contractual maturity date as of October 31, 2020 and January 31, 2020:
Notes to Condensed Consolidated Financial Statements
(unaudited)
When evaluating investments for impairment, we review factors such as length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not we will be required to sell, the investment before recovery of the investment’s amortized cost. No impairment loss has been recorded on the securities included in the tables above, as we believe that any decrease in fair value of these securities is temporary and we expect to recover at least up to the initial cost of the investment for these securities. We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the high-grade credit rating for each of our marketable securities as of the end of each period.
4. Fair Value Measurements
The Company measures its financial assets and liabilities 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 fair value, 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 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.
The following table presents information about the Company’s financial assets that are required to be measured or disclosed at fair value using the above input categories:
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company’s assets that are measured by management at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy.
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of October 31, 2020 and January 31, 2020, the Company’s Level 2 securities were priced by pricing vendors. These pricing vendors utilize observable market information in pricing these securities or, if specific prices are not available for these securities, use other observable inputs like market transactions involving identical or comparable securities.
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.
Convertible Senior Notes
As of October 31, 2020, the estimated fair value of the Notes was approximately $291.7 million. The fair value was determined based on the quoted price for the Notes in an inactive market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.
5. Business Combinations
On October 1, 2020, the Company completed the acquisition of Rundeck Inc. (“Rundeck”), a leading provider of DevOps automation for enterprise. The acquisition of Rundeck strengthens our product and will enable our customers to resolve faster, reduce costs, and protect the customer experience. The Company acquired Rundeck for purchase consideration of $95.3 million in a combination of cash and common stock. The total purchase price consisted of the following:
(in thousands)
Cash paid to common and preferred stockholders, warrant holders, and vested option holders
$
51,581
Fair value of common stock transferred
33,941
Fair value of assumed options and restricted stock attributable to pre-combination service(1)
4,934
Fair value of future cash payments to common stockholders attributable to pre-combination service
4,808
Total purchase consideration
$
95,264
(1) The restricted shares are considered to be legally issued and outstanding on the date of issuance.
The fair value of the stock and options recognized as purchase consideration was determined using the closing price of the Company’s common stock on the acquisition date.
In addition to the purchase consideration, a portion of cash and stock for certain Rundeck key personnel attributable to post-combination services is subject to vest over two years from the closing of the acquisition, subject to on-going employee services and achievement of certain performance conditions as follow:
•$3.7 million in future cash payments beginning in the fourth quarter of fiscal year 2021, which the Company will recognize within research and development over the vesting period of two years.
•$3.3 million related to the fair value of restricted stock issued that will vest beginning from the acquisition date, which the Company will recognize as stock-based compensation expense over the vesting period of two years.The restricted shares are considered to be legally issued and outstanding on the date of issuance.
18
In connection with the acquisition, the Company incurred transaction costs of $1.6 million within the general and administrative line of the Condensed Consolidated Statements of Operations.
The acquisition was accounted for as a business combination and the total purchase consideration was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date and the excess was recorded as goodwill. The values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of this Quarterly Report on Form 10-Q and may be adjusted during the measurement period of up to 12 months from the date of acquisition as further information becomes available. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. As of October 31, 2020, the primary area that remains preliminary relates to the valuation of certain tax-related items.
The following table presents the preliminary purchase consideration allocation recorded in the Company’s condensed consolidated balance sheet as of the acquisition date: