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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________
FORM 10-Q
___________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2021
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 001-38865
___________________________________________________________________
Zoom Video Communications, Inc.
(Exact name of registrant as specified in its Charter)
___________________________________________________________________
Delaware61-1648780
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
55 Almaden Boulevard, 6th Floor
San Jose, California 95113
(Address of principal executive offices and Zip Code)
(888) 799-9666
(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
Class A Common Stock, $0.001 par value per shareZMThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
As of November 12, 2021, the number of shares of the registrant’s Class A common stock outstanding was 242,239,793 and the number of shares of the registrant’s Class B common stock outstanding was 55,754,775.



Zoom Video Communications, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended October 31, 2021
TABLE OF CONTENTS
Page



2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition; business strategy and plans; and objectives of management for future operations, including our statements regarding the benefits and timing of the roll out of new technology, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: our future financial performance, including our revenue, cost of revenue, gross profit, margins, and operating expenses; trends in our key business metrics; the sufficiency of our cash and cash equivalents, investments, and cash provided by sales of our products and services to meet our liquidity needs; market trends; our market position and opportunity; our growth strategy and business aspirations for our communications platform; our plans, objectives, expectations and intentions with respect to the combined company; the anticipated timing of closing of the proposed acquisition; our product strategy; our efforts to enhance the security and privacy of our platform; the potential impacts of the COVID-19 pandemic and related public health measures on our business, the business of our customers, suppliers and channel partners, and the economy; our ability to become the ubiquitous platform for communications; our ability to attract new customers and retain existing customers; our ability to successfully expand into our existing markets and into new markets; our ability to effectively manage our growth and future expenses; and the impact of recent accounting pronouncements on our unaudited condensed consolidated financial statements.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.


3


SUMMARY RISK FACTORS
Investing in our Class A common stock involves numerous risks, including the risks described in “Part II—Other Information, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.
Our business depends on our ability to attract new customers and hosts, retain and upsell additional products to existing customers, and upgrade free hosts to our paid offerings. Any decline in new customers and hosts, renewals, or upgrades would harm our business.
Beginning in the fiscal quarter ended April 30, 2020, we faced unprecedented usage of our communications platform largely due to the COVID-19 pandemic. We expect our user growth rate to slow or decline once the impact of the COVID-19 pandemic tapers, particularly as vaccines become widely available and distributed, and users return to work or school or are otherwise no longer subject to limitations on in-person meetings.
Interruptions, delays, or outages in service from our co-located data centers and a variety of other factors, including increased usage stemming from the COVID-19 pandemic, would impair the delivery of our services, require us to issue credits or pay penalties, and harm our business.
We operate in competitive markets, and we must continue to compete effectively.
We may not be able to sustain our revenue growth rate in the future, and we expect our revenue growth rate to generally decline in future periods.
Failures in internet infrastructure or interference with broadband access could cause current or potential users to believe that our systems are unreliable, possibly leading our customers and hosts to switch to our competitors, or to cancel their subscriptions to our platform.
As we increase sales to large organizations, our sales cycles could lengthen, and we could experience greater deployment challenges.
We generate revenue from sales of subscriptions to our platform, and any decline in demand for our platform or for communications and collaboration technologies in general would harm our business.
We have experienced net losses in the past, and we expect to increase our expenses in the future, which could prevent us from maintaining profitability.
We may not be able to respond to rapid technological changes, extend our platform or develop new features.
Our security measures have been compromised in the past and may be compromised in the future. If our security measures are compromised in the future or if our information technology fails, this could harm our reputation, expose us to significant fines and liability, impair our sales, and harm our business. In addition, our products and services may be perceived as not being secure. This perception may result in customers and hosts curtailing or ceasing their use of our products, our incurring significant liabilities, and our business being harmed.
We have a limited operating history at the current scale of our business, which makes it difficult to evaluate our prospects and future results of operations.
The actual or perceived failure by us, our customers, partners, or vendors to comply with stringent and evolving privacy, data protection, and information security laws, regulations, standards, policies, and contractual obligations could harm our reputation and business or subject us to significant fines and liability.
If we were to lose the services of our Chief Executive Officer or other members of our senior management team, we may not be able to execute our business strategy.
We have significant and expanding operations outside the United States, which may subject us to increased business, regulatory and economic risks that could harm our business.
We may be subject to, or assist law enforcement with enforcement of, a variety of U.S. and international laws that could result in claims, increase the cost of operations, or otherwise harm our business due to changes in the laws, changes in the interpretations of the laws, greater enforcement of the laws, or investigations into compliance with the laws.
Zoom Phone is subject to U.S. federal and international regulation, and other products we may introduce in the future may also be subject to U.S. federal, state, or international laws, rules, and regulations. Any failure to comply with such laws, rules, and regulations could harm our business and expose us to liability.


4

The dual class structure of our common stock as contained in our amended and restated certificate of incorporation has the effect of concentrating voting control with those stockholders who held our stock prior to our initial public offering, including our executive officers, employees, and directors and their affiliates, limiting your ability to influence corporate matters.
If we are unable to adequately address these and other risks we face, our business may be harmed.


5

PART I—Financial Information
Item 1.    FINANCIAL STATEMENTS
ZOOM VIDEO COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
As of
October 31,
2021
January 31,
2021
Assets(unaudited)
Current assets:
Cash and cash equivalents$1,322,435 $2,240,303 
Marketable securities4,095,520 2,004,410 
Accounts receivable, net of allowances of $34,078 and $36,844 as of October 31, 2021 and January 31, 2021, respectively
377,874 294,703 
Deferred contract acquisition costs, current177,966 136,630 
Prepaid expenses and other current assets138,921 116,819 
Total current assets6,112,716 4,792,865 
Deferred contract acquisition costs, noncurrent155,541 157,262 
Property and equipment, net212,655 149,924 
Operating lease right-of-use assets88,335 97,649 
Strategic investments299,750 18,668 
Goodwill26,247 24,340 
Other assets, noncurrent83,727 57,285 
Total assets$6,978,971 $5,297,993 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$20,064 $8,664 
Accrued expenses and other current liabilities509,874 393,018 
Deferred revenue, current1,161,442 858,284 
Total current liabilities1,691,380 1,259,966 
Deferred revenue, noncurrent24,677 25,211 
Operating lease liabilities, noncurrent79,319 90,415 
Other liabilities, noncurrent69,910 61,634 
Total liabilities1,865,286 1,437,226 
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.001 par value per share, 200,000,000 shares authorized as of October 31, 2021 and January 31, 2021; zero shares issued and outstanding as of October 31, 2021 and January 31, 2021
  
Common stock, $0.001 par value per share, 2,000,000,000 Class A shares authorized as of October 31, 2021 and January 31, 2021; 242,019,615 and 215,737,924 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively; 300,000,000 Class B shares authorized as of October 31, 2021 and January 31, 2021; 55,917,342 and 77,811,299 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively
297 292 
Additional paid-in capital3,561,050 3,187,168 
Accumulated other comprehensive (loss) income(5,128)839 
Retained earnings1,557,466 672,468 
Total stockholders’ equity5,113,685 3,860,767 
Total liabilities and stockholders’ equity$6,978,971 $5,297,993 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


6

ZOOM VIDEO COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended October 31,Nine Months Ended October 31,
2021202020212020
Revenue$1,050,756 $777,196 $3,028,488 $1,768,883 
Cost of revenue270,957 258,727 797,207 554,705 
Gross profit779,799 518,469 2,231,281 1,214,178 
Operating expenses:
Research and development98,508 42,582 245,994 111,705 
Sales and marketing293,698 190,157 810,544 470,886 
General and administrative96,736 93,488 362,971 227,856 
Total operating expenses488,942 326,227 1,419,509 810,447 
Income from operations290,857 192,242 811,772 403,731 
Gains on strategic investments, net122,421  154,497 2,538 
Interest income and other, net(2,995)1,779 (3,171)7,112 
Income before provision for (benefit from) income taxes410,283 194,021 963,098 413,381 
Provision for (benefit from) income taxes69,900 (4,621)78,100 1,675 
Net income340,383 198,642 884,998 411,706 
Undistributed earnings attributable to participating securities(112)(202)(430)(531)
Net income attributable to common stockholders$340,271 $198,440 $884,568 $411,175 
Net income per share attributable to common stockholders:  
Basic$1.14 $0.70 $2.99 $1.46 
Diluted$1.11 $0.66 $2.89 $1.38 
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic297,375,011 284,783,006 295,647,626 282,564,481 
Diluted305,939,624 299,258,765 305,726,733 297,605,941 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


7

ZOOM VIDEO COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 Three Months Ended October 31,Nine Months Ended October 31,
 2021202020212020
Net income$340,383 $198,642 $884,998 $411,706 
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-sale marketable securities, net of tax(5,275)(1,455)(5,967)508 
Comprehensive income$335,108 $197,187 $879,031 $412,214 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


8

ZOOM VIDEO COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Three Months Ended October 31, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Stockholders’
Equity
SharesAmount
Balance as of July 31, 2021297,027,323 $296 $3,440,222 $147 $1,217,083 $4,657,748 
Issuance of common stock upon exercise of stock options612,056 1 3,124 — — 3,125 
Issuance of common stock upon release of restricted stock units297,578  — — —  
Stock-based compensation expense— — 117,704 — — 117,704 
Other comprehensive loss— — — (5,275)— (5,275)
Net income— — — — 340,383 340,383 
Balance as of October 31, 2021297,936,957 $297 $3,561,050 $(5,128)$1,557,466 $5,113,685 
Three Months Ended October 31, 2020
Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive IncomeRetained EarningsTotal
Stockholders’
Equity
SharesAmount
Balance as of July 31, 2020284,342,719 $283 $982,541 $2,772 $213,216 $1,198,812 
Issuance of common stock upon exercise of stock options1,333,924 1 6,609 — — 6,610 
Issuance of common stock upon release of restricted stock units268,936 — — — — — 
Stock-based compensation expense— — 97,309 — — 97,309 
Other comprehensive loss— — — (1,455)— (1,455)
Net income— — — — 198,642 198,642 
Balance as of October 31, 2020285,945,579 $284 $1,086,459 $1,317 $411,858 $1,499,918 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


9

ZOOM VIDEO COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
Nine Months Ended October 31, 2021
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained EarningsTotal
Stockholders’ Equity
SharesAmount
Balance as of January 31, 2021293,549,223 $292 $3,187,168 $839 $672,468 $3,860,767 
Issuance of common stock upon exercise of stock options2,205,249 3 11,359 — — 11,362 
Issuance of common stock upon release of restricted stock units1,480,536 1 — — — 1 
Issuance of common stock for employee stock purchase plan701,949 1 37,845 — — 37,846 
Stock-based compensation expense— — 324,678 — — 324,678 
Other comprehensive loss— — — (5,967)— (5,967)
Net income— — — — 884,998 884,998 
Balance as of October 31, 2021297,936,957 $297 $3,561,050 $(5,128)$1,557,466 $5,113,685 
Nine Months Ended October 31, 2020
Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive IncomeRetained EarningsTotal
Stockholders’
Equity
SharesAmount
Balance as of January 31, 2020278,731,143 $277 $832,705 $809 $152 $833,943 
Issuance of common stock upon exercise of stock options6,164,676 6 24,285 — — 24,291 
Issuance of common stock upon release of restricted stock units443,836 — — — — — 
Charitable donation of common stock— — 23,312 — — 23,312 
Issuance of common stock for employee stock purchase plan605,924 1 20,759 — — 20,760 
Stock-based compensation expense— — 185,398 — — 185,398 
Other comprehensive income— — — 508 — 508 
Net income— — — — 411,706 411,706 
Balance as of October 31, 2020285,945,579 $284 $1,086,459 $1,317 $411,858 $1,499,918 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


10

ZOOM VIDEO COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended October 31,
20212020
Cash flows from operating activities:
Net income$884,998 $411,706 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense315,912 179,557 
Amortization of deferred contract acquisition costs125,691 71,281 
Gains on strategic investments, net(154,497)(2,538)
Depreciation and amortization35,275 19,401 
Provision for accounts receivable allowances23,482 20,218 
Non-cash operating lease cost13,131 7,182 
Charitable donation of common stock 23,312 
Amortization on marketable securities19,546 2,787 
Other2,127 930 
Changes in operating assets and liabilities:
Accounts receivable(108,541)(190,117)
Prepaid expenses and other assets(71,998)(48,258)
Deferred contract acquisition costs(165,305)(266,294)
Accounts payable12,062 8,773 
Accrued expenses and other liabilities171,914 203,919 
Deferred revenue304,513 633,600 
Operating lease liabilities, net(12,440)(3,678)
Net cash provided by operating activities1,395,870 1,071,781 
Cash flows from investing activities:
Purchases of marketable securities(3,446,313)(1,016,109)
Maturities of marketable securities1,047,545 406,607 
Sales of marketable securities281,582 36,897 
Purchases of property and equipment(111,816)(58,517)
Purchases of strategic investments(126,349)(13,000)
Cash paid for acquisition, net of cash acquired(2,121)(26,486)
Purchase of intangible assets(9,626)(4,385)
Other 1,616 
Net cash used in investing activities(2,367,098)(673,377)
Cash flows from financing activities:
Proceeds from issuance of common stock for employee stock purchase plan37,846 20,760 
Proceeds from employee equity transactions (remitted) to be remitted to employees and tax authorities, net(28,342)251,641 
Proceeds from exercise of stock options11,044 23,841 
Other337  
Net cash provided by financing activities20,885 296,242 
Net (decrease) increase in cash, cash equivalents, and restricted cash(950,343)694,646 
Cash, cash equivalents, and restricted cash – beginning of period2,293,116 334,082 
Cash, cash equivalents, and restricted cash – end of period$1,342,773 $1,028,728 
Reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents$1,322,435 $730,506 
Restricted cash, current included in prepaid expenses and other current assets20,041 296,007 
Restricted cash, noncurrent included in other assets, noncurrent297 2,215 
Total cash, cash equivalents, and restricted cash$1,342,773 $1,028,728 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


11

ZOOM VIDEO COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.Summary of Business and Significant Accounting Policies
Description of Business
Zoom Video Communications, Inc. and its subsidiaries (collectively, “Zoom,” the “Company,” “we,” “us,” or “our”) provide a communications platform that delivers happiness and fundamentally changes how people interact. We connect people through frictionless and secure video, phone, chat, and content sharing and enable face-to-face video experiences for thousands of people in a single meeting across disparate devices and locations. We were incorporated in the state of Delaware in April 2011, and are headquartered in San Jose, California.
Fiscal Year
Our fiscal year ends on January 31. References to fiscal year 2022, for example, refer to the fiscal year ending January 31, 2022.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of Zoom Video Communications, Inc., its subsidiaries, and variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated balance sheet as of January 31, 2021 included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, statements of comprehensive income, statements of stockholders’ equity, and statements of cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period. 
The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on March 18, 2021.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, the useful lives of long-lived assets, the incremental borrowing rate for operating leases, stock-based compensation expense, sales and other tax liabilities, the fair value of marketable securities, acquired intangible assets and goodwill, the valuation of deferred income tax assets and uncertain tax positions, and accruals and contingencies. Actual results could differ from those estimates.
The COVID-19 pandemic has created, and may continue to create, significant uncertainty in macroeconomic conditions, and the extent of its impact on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the availability and distribution of vaccines, and their impact on our customers and our sales cycles. During the three and nine months ended October 31, 2021 and 2020, our estimates and assumptions required increased judgment and carried a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
Summary of Significant Accounting Policies
Our significant accounting policies are discussed in Note 1. “Summary of Business and Significant Accounting Policies” in the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on March 18, 2021. There have been no significant changes to these policies during the nine months ended October 31, 2021, except as noted below.


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Strategic Investments
We hold strategic investments in publicly held equity securities and privately held debt and equity securities in which we do not have a controlling interest. Publicly held equity securities are measured using quoted prices in their respective active markets with changes recorded through gains on strategic investments, net in the condensed consolidated statements of operations. Privately held equity securities without a readily determinable fair value are recorded at cost and adjusted for impairments and observable price changes with a same or similar security from the same issuer (i.e. using the measurement alternative) and are recorded through gains on strategic investments, net in the condensed consolidated statements of operations.
If, based on the terms of these publicly traded and privately held securities, we determine that we exercise significant influence on the entity to which these securities relate, we will apply the equity method of accounting for such investments. Privately held equity securities that are accounted for under the equity method are measured at cost less any impairment, plus or minus our share of equity method investee income or loss, which is reported in gains on strategic investments, net in the condensed consolidated statements of operations.
Privately held debt securities are recorded at fair value with changes in fair value recorded through accumulated other comprehensive income on the condensed consolidated balance sheets.
On a quarterly basis, we assess our privately held debt and equity securities in our strategic investment portfolio for impairment. As of October 31, 2021, we have not recognized any impairments to our privately held debt and equity securities.
2.    Revenue Recognition
Disaggregation of Revenue
The following table summarizes revenue by region based on the billing address of customers:
Three Months Ended October 31,Nine Months Ended October 31,
2021202020212020
AmountPercentage of
Revenue
AmountPercentage of
Revenue
AmountPercentage of
Revenue
AmountPercentage of
Revenue
(in thousands, except percentages)
Americas$699,944 67 %$538,504 69 %$2,017,143 67 %$1,238,298 70 %
Asia Pacific (“APAC”)
150,473 14 103,458 13 409,557 13 215,099 12 
Europe, Middle East, and Africa (“EMEA”)
200,339 19 135,234 18 601,788 20 315,486 18 
Total$1,050,756 100 %$777,196 100 %$3,028,488 100 %$1,768,883 100 %
Contract Balances
We receive payments from customers based on a billing schedule as established in our customer contracts. Accounts receivable are recorded when we contractually have the right to consideration. In some arrangements, a right to consideration for our performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled accounts receivable. The amount of unbilled accounts receivable included within accounts receivable, net of allowances on the condensed consolidated balance sheets was $48.6 million and $24.6 million as of October 31, 2021 and January 31, 2021, respectively.
Contract liabilities consist of deferred revenue. Revenue is deferred when we have the right to invoice in advance of performance under a customer contract. The current portion of deferred revenue balances is recognized over the next 12 months. The amount of revenue recognized during the three months ended October 31, 2021 and 2020 that was included in deferred revenue at the beginning of each period was $510.8 million and $312.0 million, respectively, and $802.0 million and $203.3 million during the nine months ended October 31, 2021 and 2020, respectively.
Remaining Performance Obligations
The terms of our subscription agreements are monthly, annual, and multiyear, and we may bill for the full term in advance or on an annual, quarterly, or monthly basis, depending on the billing terms with customers. As of October 31, 2021, the aggregate amount of the transaction price allocated to our remaining performance obligations was $2,456.5 million, which consisted of both billed consideration in the amount of $1,186.1 million and unbilled consideration in the amount of


13

$1,270.4 million that we expect to recognize as revenue. We expect to recognize 67% of our remaining performance obligations as revenue over the next 12 months and the remainder thereafter.
3.    Investments
Marketable Securities
As of October 31, 2021 and January 31, 2021, our marketable securities consisted of the following: 
As of October 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
(in thousands)
Commercial paper$23,482 $ $ $23,482 
Agency bonds437,782 13 (342)437,453 
Corporate and other debt securities314,888 56 (423)314,521 
U.S. government agency securities3,000,441 17 (4,413)2,996,045 
Treasury bills324,046  (27)324,019 
Marketable securities$4,100,639 $86 $(5,205)$4,095,520 
As of January 31, 2021
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
(in thousands)
Commercial paper$26,222 $ $ $26,222 
Agency bonds461,335 79 (49)461,365 
Corporate and other debt securities465,207 1,113 (64)466,256 
U.S. government agency securities834,894 28 (257)834,665 
Treasury bills215,902 6 (6)215,902 
Marketable securities$2,003,560 $1,226 $(376)$2,004,410 
We review the individual securities that have unrealized losses on a regular basis to evaluate whether or not any security has experienced, or is expected to experience, credit losses resulting in the decline in fair value. We evaluate, among other factors, whether we have the intention to sell any of these marketable securities and whether it is more likely than not that we will be required to sell any of them before recovery of the amortized cost basis. 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. There were no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income (loss) for the three and nine months ended October 31, 2021 and 2020.
The following table presents the contractual maturities of our marketable securities as of October 31, 2021 and January 31, 2021:
As of
October 31, 2021January 31, 2021
(in thousands)
Less than one year$2,143,667 $1,017,048 
Due in one to five years1,951,853 987,362 
Total$4,095,520 $2,004,410 


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Strategic Investments
Strategic investments by form and measurement category as of October 31, 2021 were as follows:
Measurement Category
Fair ValueMeasurement AlternativeEquity MethodTotal
(in thousands)
Equity securities$179,918 $13,349 $93,117 $286,384 
Debt securities13,366 — — 13,366 
Strategic investments$193,284 $13,349 $93,117 $299,750 
Strategic investments by form and measurement category as of January 31, 2021 were as follows:
Measurement Category
Fair ValueMeasurement AlternativeEquity MethodTotal
(in thousands)
Equity securities$ $13,538 $ $13,538 
Debt securities5,130 — — 5,130 
Strategic investments$5,130 $13,538 $ $18,668 
In the second quarter of fiscal year 2022, we made a $75.0 million strategic investment of common shares of a technology company in a private placement concurrent with the investee company’s initial public offering. The shares are subject to a 180-day lock-up agreement. We recorded a gain of $72.8 million and $104.9 million related to this investment in the three and nine months ended October 31, 2021, respectively. As of October 31, 2021, the fair value of the investment was $179.9 million and our ownership interest represents approximately one percent of the economic interest of the investee’s outstanding capital stock.
In the third quarter of fiscal year 2022, we made an additional strategic investment in equity securities of a private company. Based on the terms of these privately-held securities, we determined that we currently do not have a controlling interest but have the ability to exercise significant influence over the operating and financial policies of the investee. Therefore this investment is currently accounted for under the equity method. The fair value of the investment was remeasured immediately before adopting the equity method of accounting, based on the observable price from the most recent financing round. The carrying value of this investment was also adjusted by our share of the equity method investee’s operating result for the respective period, which was immaterial for the three months ended October 31, 2021. As a result, we recognized a total gain of $49.6 million on the existing investment during the three months ended October 31, 2021. As of October 31, 2021, the carrying amount of this investment was $93.1 million.


15

4.    Fair Value Measurements
The following tables present information about our financial instruments that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:
As of October 31, 2021
Fair ValueLevel 1Level 2Level 3
(in thousands)
Financial Assets:
Money market funds$295,943 $295,943 $ $ 
Treasury bills576,668  576,668  
Cash equivalents872,611 295,943 576,668  
Commercial paper23,482  23,482  
Agency bonds437,453  437,453  
Corporate and other debt securities314,521  314,521  
U.S. government agency securities2,996,045  2,996,045  
Treasury bills324,019  324,019  
Marketable securities4,095,520  4,095,520  
Publicly held equity securities included in strategic investments179,918 179,918 — — 
Privately held debt securities included in strategic investments13,366   13,366 
Certificates of deposit included in other assets, noncurrent297  297  
Total financial assets$5,161,712 $475,861 $4,672,485 $13,366 
As of January 31, 2021
Fair ValueLevel 1Level 2Level 3
(in thousands)
Financial Assets:
Money market funds$958,357 $958,357 $ $ 
Treasury bills618,498  618,498  
Cash equivalents1,576,855 958,357 618,498  
Commercial paper26,222  26,222  
Agency bonds461,365  461,365  
Corporate and other debt securities466,256  466,256  
U.S. government agency securities834,665  834,665  
Treasury bills215,902  215,902  
Marketable securities2,004,410  2,004,410  
Certificate of deposit included in prepaid expenses and other current assets100  100  
Certificates of deposit included in other assets, noncurrent2,238  2,238  
Privately held debt securities included in strategic investments5,130   5,130 
Total financial assets$3,588,733 $958,357 $2,625,246 $5,130 
We classify our highly liquid money market funds and publicly held equity securities within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. We classify our commercial paper, agency bonds, corporate and other debt securities, U.S. government agency securities, treasury bills, and certificates of deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security, which may not be actively traded. We classify our privately held debt securities as Level 3 due to the lack of relevant observable market data over fair value inputs, such as the probability weighting of the various scenarios that can impact settlement of the arrangement.


16

5.    Business Combinations
Keybase, Inc.
On May 7, 2020, we acquired 100% of the issued and outstanding share capital of Keybase, Inc. (“Keybase”), a secure messaging and file-sharing company, for purchase consideration of $42.9 million in cash. The acquisition helps us strengthen the security of our video communications platform by providing end-to-end encryption (“E2EE”) expertise. The acquisition has been accounted for as a business combination.
In allocating the purchase consideration, $24.3 million was attributed to goodwill, $3.3 million to intangible assets, and $15.3 million to other net assets acquired primarily consisting of cash and cash equivalents of $16.4 million. The goodwill amount represents synergies related to our existing products expected to be realized from the acquisition and assembled workforce. The associated goodwill is not deductible for tax purposes. Acquired intangible assets consisted of developed technology with an estimated useful life of