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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

 
      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 001-35498
 ____________________________________________________

splk-20220731_g1.jpg
Splunk Inc.
(Exact name of registrant as specified in its charter)
_____________________________________________________
Delaware 86-1106510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

270 Brannan Street
San Francisco, California 94107
(Address of principal executive offices)
(Zip Code)
 
(415) 848-8400
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareSPLKThe 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 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 filerAccelerated 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

There were 162.7 million shares of the Registrant’s Common Stock issued and outstanding as of August 18, 2022.



TABLE OF CONTENTS
 
  Page No.
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 6.
 

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Splunk Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)July 31, 2022January 31, 2022
Assets  
Current assets  
Cash and cash equivalents$747,883 $1,428,691 
Investments, current995,510 286,337 
Accounts receivable, net820,115 1,306,666 
Prepaid expenses and other current assets157,458 152,871 
Deferred commissions, current109,487 102,322 
Total current assets2,830,453 3,276,887 
Investments, non-current50,060 46,431 
Accounts receivable, non-current176,134 242,689 
Operating lease right-of-use assets206,639 229,198 
Property and equipment, net122,189 124,900 
Intangible assets, net136,672 164,769 
Goodwill1,401,628 1,401,628 
Deferred commissions, non-current202,891 200,876 
Other assets82,890 103,497 
Total assets$5,209,556 $5,790,875 
Liabilities and Stockholders’ Equity  
Current liabilities 
Accounts payable$82,835 $59,206 
Accrued compensation258,654 396,952 
Accrued expenses and other liabilities235,683 257,979 
Deferred revenue, current1,155,928 1,384,605 
Total current liabilities1,733,100 2,098,742 
Convertible senior notes, net3,870,150 3,137,731 
Operating lease liabilities205,371 225,556 
Deferred revenue, non-current62,454 86,584 
Other liabilities, non-current22,455 19,491 
Total non-current liabilities4,160,430 3,469,362 
Total liabilities5,893,530 5,568,104 
Commitments and contingencies (Note 3 and 4)
Stockholders’ equity  
Common stock: $0.001 par value; 1,000,000,000 shares authorized; 162,708,914 shares outstanding at July 31, 2022, and 160,044,675 shares outstanding at January 31, 2022
170 167 
Accumulated other comprehensive loss(7,740)(1,199)
Additional paid-in capital4,346,503 5,032,351 
Treasury stock, at cost: 6,885,414 shares at July 31, 2022 and January 31, 2022
(1,000,000)(1,000,000)
Accumulated deficit(4,022,907)(3,808,548)
Total stockholders’ equity(683,974)222,771 
Total liabilities and stockholders’ equity$5,209,556 $5,790,875 

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

Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three Months Ended July 31,Six Months Ended July 31,
(In thousands, except per share amounts)2022202120222021
Revenues
Cloud services$346,405 $217,422 $669,334 $411,380 
License281,716 219,600 467,527 362,881 
Maintenance and services170,632 168,721 335,973 333,533 
Total revenues798,753 605,743 1,472,834 1,107,794 
Cost of revenues (1)
Cloud services122,860 98,016 242,381 186,101 
License1,337 2,459 2,800 6,749 
Maintenance and services 82,594 82,932 163,766 162,463 
Total cost of revenues206,791 183,407 408,947 355,313 
Gross profit591,962 422,336 1,063,887 752,481 
Operating expenses (1)
Research and development257,057 259,709 512,748 506,907 
Sales and marketing 410,622 382,129 805,835 738,237 
General and administrative114,381 124,928 227,089 287,114 
Total operating expenses782,060 766,766 1,545,672 1,532,258 
Operating loss(190,098)(344,430)(481,785)(779,777)
Interest and other income (expense), net
Interest income4,847 507 6,219 886 
Interest expense(12,905)(39,013)(23,568)(72,603)
Other income (expense), net(3,613)1,146 (3,603)(77)
Total interest and other income (expense), net(11,671)(37,360)(20,952)(71,794)
Loss before income taxes(201,769)(381,790)(502,737)(851,571)
Income tax provision7,943 2,161 11,297 3,381 
Net loss$(209,712)$(383,951)$(514,034)$(854,952)
Basic and diluted net loss per share$(1.30)$(2.34)$(3.19)$(5.23)
Weighted-average shares used in computing basic and diluted net loss per share161,787 164,018 161,070 163,615 
 _________________________
(1)    Amounts include stock-based compensation expense, as follows:
Cost of revenues$22,937 $21,865 $42,799 $39,379 
Research and development86,521 81,001 171,384 158,047 
Sales and marketing58,059 64,436 130,873 119,622 
General and administrative31,959 37,478 68,085 70,149 


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

Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
 Three Months Ended July 31,Six Months Ended July 31,
(In thousands)2022202120222021
Net loss$(209,712)$(383,951)$(514,034)$(854,952)
Other comprehensive income (loss)
Net unrealized loss on investments (net of tax)(3,827)(116)(6,541)(272)
Total other comprehensive income (loss)(3,827)(116)(6,541)(272)
Comprehensive loss$(213,539)$(384,067)$(520,575)$(855,224)

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

Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 Six Months Ended July 31,
(In thousands)20222021
Cash flows from operating activities  
Net loss$(514,034)$(854,952)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization47,952 50,625 
Amortization of deferred commissions53,574 77,983 
Amortization of investment premiums (accretion of discounts), net(482)432 
Amortization of debt discount and issuance costs5,484 57,784 
Loss on lease termination 52,524 
Non-cash operating lease costs(2,805)571 
Stock-based compensation413,141 387,197 
Deferred income taxes(1,020)(294)
Other97 33 
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable, net553,106 384,798 
Prepaid expenses and other assets 17,078 (14,842)
Deferred commissions(62,754)(77,073)
Accounts payable 23,629 19,698 
Accrued compensation(138,298)20,170 
Accrued expenses and other liabilities(17,142)17,817 
Deferred revenue (252,807)(107,731)
Net cash provided by operating activities 124,719 14,740 
Cash flows from investing activities
Purchases of property and equipment(6,650)(4,363)
Capitalized software development costs(4,990)(5,148)
Purchases of marketable securities(923,762)(289,573)
Maturities of marketable securities209,424 87,766 
Purchases of strategic investments(6,099) 
Acquisition, net of cash acquired (80,333)
Other investment activities1,436 (1,168)
Net cash used in investing activities (730,641)(292,819)
Cash flows from financing activities
Proceeds from the exercise of stock options1,132 1,174 
Proceeds from employee stock purchase plan48,596 48,246 
Proceeds from the issuance of convertible senior notes, net of issuance costs 982,749 
Repurchases of common stock (192,208)
Taxes paid related to net share settlement of equity awards(124,614)(101,781)
Net cash (used in) provided by financing activities (74,886)738,180 
Net (decrease) increase in cash and cash equivalents (680,808)460,101 
Cash and cash equivalents at beginning of period 1,428,691 1,771,064 
Cash and cash equivalents at end of period $747,883 $2,231,165 
Supplemental disclosures
Cash paid for income taxes$6,751 $4,488 
Cash paid for interest17,659 7,116 
Non-cash investing and financing activities
Increase in accrued purchases of property and equipment2,994 3,247 
Equity consideration for acquisition 939 
Vesting of early exercised options1 63 
Costs related to issuance of convertible senior notes included in accrued expenses and other liabilities 1,034 
Unsettled repurchases of common stock included in accrued expenses and other liabilities 37,307 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Splunk Inc.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 
Three Months Ended July 31,Six Months Ended July 31,
(In thousands)2022202120222021
Common stock
Balance, beginning of period$168 $164 $167 $163 
Vesting of restricted and performance stock units1 1 2 2 
Issuance of common stock upon ESPP purchase1  1  
Balance, end of period$170 $165 $170 $165 
Additional paid-in capital
Balance, beginning of period$4,155,066 $4,187,267 $5,032,351 $4,063,885 
Cumulative-effect adjustment from adoption of Accounting Standards Update (“ASU”) 2020-06  (1,026,611) 
Stock-based compensation199,476 204,780 413,141 387,197 
Capitalized software development costs1,405 679 2,510 1,890 
Issuance of common stock upon exercise of options182 636 1,132 1,174 
Fair value of replacement equity awards attributable to pre-acquisition service 939  939 
Vesting of early exercised options 31 1 63 
Taxes paid related to net share settlement of equity awards(58,221)(40,967)(124,616)(101,783)
Issuance of common stock upon ESPP purchase48,595 48,246 48,595 48,246 
Equity component of convertible senior notes, net 287,671  287,671 
Balance, end of period$4,346,503 $4,689,282 $4,346,503 $4,689,282 
Treasury stock
Balance, beginning of period$(1,000,000)$ $(1,000,000)$ 
Repurchases of common stock (229,515) (229,515)
Balance, end of period$(1,000,000)$(229,515)$(1,000,000)$(229,515)
Accumulated other comprehensive loss
Balance, beginning of period$(3,913)$(748)$(1,199)$(592)
Unrealized loss from investments (net of tax)(3,827)(116)(6,541)(272)
Balance, end of period$(7,740)$(864)$(7,740)$(864)
Accumulated deficit
Balance, beginning of period$(3,813,195)$(2,940,452)$(3,808,548)$(2,469,451)
Cumulative-effect adjustment from adoption of ASU 2020-06  299,675  
Net loss(209,712)(383,951)(514,034)(854,952)
Balance, end of period$(4,022,907)$(3,324,403)$(4,022,907)$(3,324,403)
Total stockholders’ equity$(683,974)$1,134,665 $(683,974)$1,134,665 


The accompanying notes are an integral part of these condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
(1)    Description of the Business and Significant Accounting Policies

Business

Splunk Inc. (“we,” “us,” “our”) provides innovative cloud services and licensed software solutions that deliver and operationalize insights from the data generated by digital systems. Data is produced by nearly every software application and electronic device across an organization and contains a real-time record of various activities, such as business transactions, customer and user behavior, and security threats. This data is growing significantly as a direct result of the prevalence and importance of digital systems used by today’s organizations. Our solutions help users remove barriers between insights derived from this data and actions organizations take to thrive in an era of unprecedented digital transformation. We were incorporated in California in October 2003 and reincorporated in Delaware in May 2006.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal 2023, for example, refer to the fiscal year ended January 31, 2023.
 
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet data as of January 31, 2022 was derived from audited financial statements, but does not include all disclosures required by GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 24, 2022.
 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to state fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal 2023.

Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods covered by the financial statements and accompanying notes. In particular, we make estimates with respect to the stand-alone selling price for each distinct performance obligation included in customer contracts with multiple performance obligations, uncollectible accounts receivable, the assessment of the useful life and recoverability of long-lived assets (property and equipment, goodwill and identified intangibles), the period of benefit for deferred commissions, stock-based compensation expense, the fair value of assets acquired and liabilities assumed in business combinations, income taxes, the discount rate used for operating leases, and contingencies. Actual results could differ from those estimates.

COVID-19
 
The novel coronavirus (“COVID-19”) has created, and may continue to create, significant uncertainty in the macroeconomic environment. The extent of the impact the COVID-19 pandemic will directly or indirectly have on the global economy, our business, results of our operations, and our financial condition will depend on future developments which are highly uncertain and cannot be accurately predicted. These include the duration, spread, severity and potential recurrence of the virus and its variants, and the global availability of COVID-19 vaccines and vaccination rates. As of the date of issuance of these condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, judgments or adjust the carrying value of our assets or liabilities. These estimates may change, as new
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events occur and additional information is obtained, and will be 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 condensed consolidated financial statements.

Segments

We operate our business as one operating segment: the development and marketing of cloud services and licensed software solutions that enable our customers to gain real-time business insights by harnessing the value of their data. Our chief operating decision maker is our Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

Principles of Consolidation
 
The accompanying unaudited condensed consolidated financial statements include the accounts of Splunk Inc. and its direct and indirect wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Foreign Currency

During fiscal 2022, we reassessed the functional currency of our foreign subsidiaries and determined it was the U.S. Dollar for all our subsidiaries. The impact of this change was not material. Foreign currency transaction gains and losses are included in “Other income (expense), net” on our condensed consolidated statements of operations and were not material for the three and six months ended July 31, 2022 and 2021.

Revenue Recognition

We generate revenues in the form of cloud services fees, license and related maintenance fees, and other service fees. Cloud services are provided on a subscription basis and give our customers access to our cloud solutions, which include related customer support. Licenses for on-premises software (“licenses”) are typically term licenses and provide the customer with a right to use the software. When a term license is purchased, maintenance is bundled with the license for the term of the license period. Other services include training and professional services that are not integral to the functionality of the cloud services or licenses.

Our contracts with customers often contain multiple performance obligations, which may include a combination of cloud services, licenses, related maintenance and support services, and professional services including training. We apply significant judgment in identifying and accounting for each performance obligation, as a result of evaluating the terms and conditions in contracts. For these contracts, we account for cloud services, licenses, maintenance and support, and other services as separate performance obligations as they are each distinct. Revenue is recognized when the performance obligations are satisfied. We satisfy our cloud service performance obligation over the associated contract term and recognize the associated revenue ratably over the term of the contract once access is provided to the customer, consistent with the pattern of benefit to the customer of such services. We satisfy our obligation and recognize revenue for licenses upon transfer of control of the licenses, which occurs at delivery of the license key to customers, or when the license term commences, if later. We satisfy our maintenance and support performance obligations and recognize revenue ratably over the maintenance and support term, consistent with the pattern of benefit to the customer of such services. Professional services and training are either provided on a time and material basis or over a contract term. We satisfy our professional services and training performance obligations and recognize the associated revenue as services are delivered. With respect to contracts that include customer acceptance provisions, we recognize revenue upon customer acceptance. Our policy is to record revenues net of any applicable sales, use, goods and services, value added, and excise taxes.

Customers can purchase our products under different pricing options. Regardless of the pricing option selected, the consideration for our cloud services and license contracts is fixed and does not result in variable consideration. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine the SSP based on an observable standalone selling price when it is available, as well as other factors, including the price charged to customers, our discounting practices, and our overall pricing objectives, while maximizing observable inputs. In situations where pricing is highly variable, we estimate the SSP using the residual approach.

Most of our multi-year cloud services and license contracts are invoiced annually. A receivable for multi-year cloud services is generally recorded upon invoicing. A receivable for multi-year license contracts is recorded upon delivery, whether
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or not invoiced, to the extent we have an unconditional right to receive payment in the future related to those licenses. The non-current portion of these receivables, primarily consisting of unbilled receivables from multi-year license contracts, is included in “Accounts receivable, non-current” on our condensed consolidated balance sheets.

Payment terms and conditions vary by contract type, although our standard payment terms generally require payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of payment, we have determined our contracts do not generally include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing.

Deferred revenue is recorded when we invoice a contract or deliver a license prior to recognizing revenue. It is comprised of balances related to cloud services, maintenance, training and professional services invoiced at the beginning of each service period, as well as licenses that were delivered prior to the license term commencing.

Recently Adopted Accounting Standards

StandardDescriptionEffective DateEffect on the Condensed Consolidated Financial Statements
(or Other Significant Matters)
Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815 - 40)This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity, which reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments will no longer have to be separated into debt and equity components. Convertible debt instruments will be reported as a single liability and convertible preferred stock will be reported as a single equity instrument. Similarly, the embedded conversion feature will no longer be amortized as interest expense over the life of the instrument. Instead, a convertible debt instrument will be accounted for wholly as debt unless 1) a convertible instrument contains features that require bifurcation as a derivative, or 2) a convertible debt instrument was issued at a substantive premium. Among other potential impacts, this ASU is expected to reduce reported interest expense, decrease reported net loss, and result in a reclassification of certain conversion feature balance sheet amounts from stockholder’s equity to liabilities as it relates to the convertible senior notes. This ASU also simplifies the diluted earnings per share calculations by requiring the use of the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations.We adopted this standard as of February 1, 2022, using the modified retrospective method of transition, under which, financial results reported in periods prior to fiscal 2023 were not adjusted.Under this new standard, the previously recorded equity components of the convertible senior notes outstanding and amortization of the debt discount and issuance costs classified as equity were reclassified from equity to debt through an adjustment to the opening balance of accumulated deficit as of February 1, 2022 which will result in reduced interest expense in future periods. Adoption of the standard resulted in a decrease to accumulated deficit of $299.7 million, decrease to additional paid-in capital of $1 billion and an increase to convertible senior notes, net of $726.9 million.
ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with CustomersThis ASU amends the guidance on accounting related to contract assets and liabilities acquired in business combinations. Entities will be required to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. Prior to this ASU, an acquirer generally recognizes contract assets and contract liabilities at fair value on the acquisition date. The guidance should be applied prospectively to business combinations occurring on or after the effective date of the amendment in this update. We adopted this standard as of February 1, 2022.We will apply the standard to any contract assets and liabilities acquired in any future business combination.

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Recently Issued Accounting Pronouncements

There have been no accounting pronouncements or changes in accounting pronouncements that are significant or potentially significant to the Company.

(2)    Investments and Fair Value Measurements
 
The carrying amounts of certain of our financial instruments including cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term maturities.
 
Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels that are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
 
Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
 
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The following table sets forth the fair value of our financial assets that were measured on a recurring basis:
 
 July 31, 2022January 31, 2022
(In thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:        
Money market funds$372,277 $ $ $372,277 $1,056,296 $ $ $1,056,296 
U.S. government and agency securities 717,636  717,636  8,024  8,024 
Corporate bonds 99,259  99,259  131,015  131,015 
Commercial paper 196,546  196,546  160,230  160,230 
Reported as:        
Assets:        
Cash and cash equivalents   $381,214    $1,059,296 
Investments, current995,510 286,337 
Investments, non-current 8,994 9,932 
Total   $1,385,718    $1,355,565 

Our investments in money market funds are measured at fair value on a recurring basis. These money market funds are actively traded and reported daily through a variety of sources. The fair value of the money market fund investments is classified as Level 1.

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The following table presents our investments in available-for-sale debt securities as of July 31, 2022:
 
(In thousands)Amortized CostUnrealized GainsUnrealized LossesFair Value
Cash and cash equivalents:
U.S. government and agency securities$673 $ $ $673 
Commercial paper8,267  (3)8,264 
Investments, current:
U.S. government and agency securities722,287  (5,324)716,963 
Corporate bonds90,700 1 (436)90,265 
Commercial paper189,528 1 (1,247)188,282 
Investments, non-current:
Corporate bonds8,978 16  8,994 
Total available-for-sale investments$1,020,433 $18 $(7,010)$1,013,441 

The following table presents our investments in available-for-sale debt securities as of January 31, 2022:
 
(In thousands)Amortized CostUnrealized GainsUnrealized LossesFair Value
Cash and cash equivalents:
     Commercial paper$3,000 $ $ $3,000 
Investments, current:
     Corporate bonds131,253 2 (240)131,015 
     Commercial paper155,469  (147)155,322 
Investments, non-current:
U.S. government and agency securities8,036  (12)8,024 
     Commercial paper1,914  (6)1,908 
Total available-for-sale investments$299,672 $2 $(405)$299,269 

The following table presents the fair values and unrealized losses related to our 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:
 
Less than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. government and agency securities$716,964 $(5,324)$ $ $716,964 $(5,324)
Corporate bonds71,401 (426)17,886 (10)89,287 (436)
Commercial paper194,399 (1,250)  194,399 (1,250)
Total$982,764 $(7,000)$17,886 $(10)$1,000,650 $(7,010)

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The following table presents the fair values and unrealized losses related to our 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 January 31, 2022:

Less than 12 Months12 Months or GreaterTotal
(In thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. government and agency securities$8,024 $(12)$ $ $8,024 $(12)
Corporate bonds130,007 (240)  130,007 (240)
Commercial paper145,231 (153)  145,231 (153)
Total$283,262 $(405)$ $ $283,262 $(405)

The contractual maturities of our investments as of July 31, 2022 are as follows (in thousands):
 
Due within one year$1,004,447 
Due within one to two years8,994 
Total$1,013,441 

Investments with maturities of less than 12 months from the balance sheet date are classified as current assets, which are available for use to fund current operations. Investments with maturities greater than 12 months from the balance sheet date are classified as non-current assets.

Convertible Senior Notes

Refer to Note 7 “Convertible Senior Notes” for details regarding the fair value of our convertible senior notes.

Equity Investments

Our equity investments are included in “Investments, non-current” on our condensed consolidated balance sheets. The following table provides a summary of our equity investments:
 
(In thousands)July 31, 2022January 31, 2022
Equity investments without readily determinable fair values$37,995 $33,744 
Equity investments under the equity method of accounting3,071 2,755 
Total$41,066 $36,499 

(3)    Commitments and Contingencies
 
Legal Proceedings
 
A putative class action lawsuit alleging violations of the federal securities laws was filed on December 4, 2020 in the U.S. District Court for the Northern District of California (the “Court”) against us, our former Chief Executive Officer and our Chief Financial Officer. The initial complaint alleged violations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for allegedly making materially false and misleading statements regarding our financial guidance and asserted a putative class period of October 21, 2020 to December 2, 2020. On March 16, 2021, the Court appointed Louisiana Sheriffs’ Pension & Relief Fund as lead plaintiff and approved its selection of lead plaintiff counsel in the case. On June 7, 2021, the lead plaintiff filed an amended complaint which expanded the putative class period to run from March 26, 2020 to December 2, 2020 and alleges that defendants made materially false and misleading statements regarding our marketing efforts, hiring practices, and retention of personnel. The lead plaintiff seeks unspecified monetary damages and other relief. On July 27, 2021, defendants filed a motion to dismiss the amended complaint. On March 21, 2022, the Court issued a decision granting in part and denying in part defendants’ motion to dismiss. On July 22, 2022, the lead plaintiff filed a motion seeking to certify a class of investors who purchased Company stock between May 21, 2020 and December 2, 2020. Defendants’ response to the motion for class certification is due October 13, 2022.

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Several derivative lawsuits related to the securities class action were filed in February, March, and April 2021 in the U.S. District Court for the Northern District of California and California Superior Court, San Francisco County. The lawsuits name our former Chief Executive Officer, our Chief Financial Officer, and many of our board members as defendants, and the company as a nominal defendant. The lawsuits allege claims for breach of fiduciary duties, unjust enrichment, waste of corporate assets, abuse of control, and gross mismanagement against the defendants, and claims for contribution under Sections 10(b) and 21D of the Exchange Act against only our former Chief Executive Officer and Chief Financial Officer. The plaintiffs seek unspecified monetary damages and other relief on behalf of the Company. The court has stayed the actions pursuant to stipulation of the parties until after a ruling on the motion for class certification in the federal securities case. On August 9, 2021, we received a demand letter alleging claims similar to those in the derivative lawsuits and requesting that our board of directors launch an investigation on such matters. On May 23, 2022, the board of directors formed a committee to evaluate the stockholder’s demand and make recommendations to the full board of directors. In April, July and August, 2022, the board of directors received several demands made on behalf of stockholders to inspect the books and records of the Company pursuant to Section 220 of the Delaware General Corporation Law. The demands seek records related to the board and to the allegations at issue in the underlying putative class action.

We are also subject to certain routine legal and regulatory proceedings, as well as demands and claims that arise in the normal course of our business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. In our opinion, resolution of any pending claims (either individually or in the aggregate) is not expected to have a material adverse impact on our condensed consolidated results of operations, cash flows or financial position, nor is it possible to provide an estimated amount of any such loss. However, depending on the nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect our future financial position, results of operations or cash flows, or all, in a particular period.

Indemnification Arrangements
 
During the ordinary course of business, we may indemnify, hold harmless and agree to reimburse for losses suffered or incurred, our customers, vendors, and each of their affiliates for certain intellectual property infringement and other claims by third parties with respect to our offerings, in connection with our commercial license arrangements or related to general business dealings with those parties.

As permitted under Delaware law, we have entered into indemnification agreements with our officers, directors and certain employees, indemnifying them for certain events or occurrences in connection with their service as our officers or directors or those of our direct and indirect subsidiaries.
 
Claims and reimbursements under indemnification arrangements have not been material to our condensed consolidated financial statements; and there is no accrual of such amounts as of July 31, 2022 and January 31, 2022.

(4)    Leases
 
In April 2021, we entered into an agreement to terminate our lease of certain office space located in San Jose, CA and ceased use of the space as of April 30, 2021. As a result, the related right-of-use asset and leasehold improvements balances were written off and we have no remaining liability. In total, a $55.2 million loss was recognized during the six months ended July 31, 2021, which included certain termination-related fees. The loss is included in “General and administrative” expenses on our condensed consolidated statement of operations.

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(5)    Property and Equipment
 
Property and equipment are stated at cost, net of accumulated depreciation and amortization. These assets are depreciated and amortized using the straight-line method over their estimated useful lives. Property and equipment consisted of the following:
 
(In thousands)July 31, 2022January 31, 2022
Computer equipment and software$79,089 $73,411 
Furniture and fixtures26,949 26,840 
Leasehold and building improvements (1)
145,353 141,496 
Capitalized software development costs (2)
44,194 36,695 
Property and equipment, gross295,585 278,442 
Less: accumulated depreciation and amortization(