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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________________ 
FORM 10-Q
_____________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-38451
_____________________________ 
Zuora, Inc.
(Exact name of registrant as specified in its charter)
_____________________________ 
 
Delaware 20-5530976
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
101 Redwood Shores Parkway,
Redwood City, California
 94065
(Address of principal executive offices) (Zip Code)
(888) 976-9056
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
_____________________________ 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name on each exchange on which registered
Class A common stock, par value $0.0001 per shareZUONew 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.    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 July 31, 2022, the number of shares of the Registrants Class A common stock outstanding was 123.8 million and the number of shares of the Registrants Class B common stock outstanding was 8.1 million.



Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 6.




SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q (Form 10-Q) to “Zuora,” “Company,” “our,” “us,” and “we” refer to Zuora, Inc. and, where appropriate, its consolidated subsidiaries. Our fiscal year end is January 31. References to “fiscal” followed by the year refer to the fiscal year ended January 31 for the referenced year.
This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. All statements contained in this Form 10-Q, other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. Words such as “believes,” “may,” “will,” “estimates,” “potential,” “continues,” “anticipates,” “intends,” “expects,” “could,” “would,” “projects,” “plans,” “targets,” and variations of such words and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this Form 10-Q include, but are not limited to, statements about our expectations regarding:
trends in revenue, cost of revenue, and gross margin;
economic uncertainty and associated trends in macroeconomic conditions, including recession and inflation;
currency exchange rate fluctuations;
trends and expectations in our operating and financial metrics, including customers with Annual Contract Value (ACV) equal to or greater than $100,000, dollar-based retention rate, annual recurring revenue, and growth of and within our customer base;
future acquisitions, the anticipated benefits of such acquisitions and our ability to integrate the operations and technology of any acquired company, including our expected acquisition of Zephr Inc Limited (Zephr);
industry trends, projected growth, or trend analysis, including the shift to subscription business models;
the duration and impact of the coronavirus (COVID-19) pandemic on our business and the economy;
our investments in our platform and the cost of third-party hosting fees;
the expansion and functionality of our technology offering, including expected benefits of such products and technology, and our ability to further penetrate our customer base;
trends in operating expenses, including research and development expense, sales and marketing expense, and general and administrative expense, and expectations regarding these expenses as a percentage of revenue;
our existing cash and cash equivalents, investment balances, funds available under our loan and security agreement, and cash provided by subscriptions to our platform and related professional services being sufficient to meet our working capital and capital expenditure needs for at least the next 12 months; and
other statements regarding our future operations, financial condition, prospects and business strategies, including our ability to sublease office space in the San Francisco Bay Area.
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 (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 impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and circumstances 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 upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that
1


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 such statements for any reason after the date of this Form 10-Q or to conform statements to actual results or revised expectations, except as required by law.
2


PART I—FINANCIAL INFORMATION
Item 1.    Financial Statements
ZUORA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 July 31, 2022January 31, 2022
Assets
Current assets:
Cash and cash equivalents$206,936 $113,507 
Short-term investments241,707 101,882 
Accounts receivable, net of allowance for credit losses of $2,178 and $3,188 as of July 31, 2022 and January 31, 2022, respectively
67,693 82,263 
Deferred commissions, current portion15,833 15,080 
Prepaid expenses and other current assets18,851 15,603 
Total current assets551,020 328,335 
Property and equipment, net29,495 27,676 
Operating lease right-of-use assets28,573 32,643 
Purchased intangibles, net2,526 3,452 
Deferred commissions, net of current portion27,046 26,727 
Goodwill17,632 17,632 
Other assets4,639 4,787 
Total assets$660,931 $441,252 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$7,652 $6,785 
Accrued expenses and other current liabilities19,171 14,225 
Accrued employee liabilities29,197 32,425 
Debt, current portion 1,660 
Deferred revenue, current portion148,162 152,740 
Operating lease liabilities, current portion10,327 11,462 
Total current liabilities214,509 219,297 
Debt, net of current portion206,426  
Deferred revenue, net of current portion945 771 
Operating lease liabilities, net of current portion41,533 45,633 
Deferred tax liabilities3,244 3,243 
Other long-term liabilities1,609 1,701 
Total liabilities468,266 270,645 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Class A common stock12 12 
Class B common stock1 1 
Additional paid-in capital810,636 734,149 
Accumulated other comprehensive loss(1,459)(108)
Accumulated deficit(616,525)(563,447)
Total stockholders’ equity192,665 170,607 
Total liabilities and stockholders’ equity$660,931 $441,252 
See notes to unaudited condensed consolidated financial statements.
3


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share data)
(unaudited) 
 Three Months Ended July 31,Six Months Ended July 31,
 2022202120222021
Revenue:
Subscription$83,811 $71,498 $162,311 $136,640 
Professional services14,964 14,989 29,663 30,176 
Total revenue98,775 86,487 191,974 166,816 
Cost of revenue:
Subscription19,572 17,268 38,297 32,911 
Professional services19,077 18,724 36,587 35,802 
Total cost of revenue38,649 35,992 74,884 68,713 
Gross profit60,126 50,495 117,090 98,103 
Operating expenses:
Research and development26,354 20,860 49,226 39,827 
Sales and marketing45,146 36,261 85,603 68,126 
General and administrative18,816 16,376 36,106 30,561 
Total operating expenses90,316 73,497 170,935 138,514 
Loss from operations(30,190)(23,002)(53,845)(40,411)
Change in fair value of warrant liability4,524  8,896  
Interest expense(4,419)(62)(6,203)(72)
Interest and other income (expense), net704 (391)(1,089)(260)
Loss before income taxes(29,381)(23,455)(52,241)(40,743)
Income tax provision529 238 837 611 
Net loss(29,910)(23,693)(53,078)(41,354)
Comprehensive loss:
Foreign currency translation adjustment(316)(174)(675)(259)
Unrealized loss on available-for-sale securities(278) (676)(34)
Comprehensive loss$(30,504)$(23,867)$(54,429)$(41,647)
Net loss per share, basic and diluted$(0.23)$(0.19)$(0.41)$(0.34)
Weighted-average shares outstanding used in calculating net loss per share, basic and diluted130,280 123,134 129,384 122,259 
See notes to unaudited condensed consolidated financial statements.

4


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Six Months Ended July 31, 2022
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulated
Stockholders’
SharesAmountSharesAmountCapitalLossDeficitEquity
Balance, January 31, 2022119,008 $12 9,048 $1 $734,149 $(108)$(563,447)$170,607 
Conversion of Class B common stock to Class A common stock 1,165 — (1,165)— — — — — 
Issuance of common stock upon exercise of stock options49 — 239 — 1,522 — — 1,522 
RSU releases 2,895 — — — — — — — 
Purchases of common stock under the ESPP615 — — — 4,485 — — 4,485 
Charitable donation of stock101 — — — 1,000 — — 1,000 
Stock-based compensation — — — — 51,038 — — 51,038 
Issuance of warrants— — — — 18,442 — — 18,442 
Other comprehensive loss— — — — — (1,351)— (1,351)
Net loss — — — — — — (53,078)(53,078)
Balance, July 31, 2022123,833 $12 8,122 $1 $810,636 $(1,459)$(616,525)$192,665 
Three Months Ended July 31, 2022
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalLossDeficitEquity
Balance, April 30, 2022121,133 $12 8,014 $1 $776,323 $(865)$(586,615)$188,856 
Conversion of Class B common stock to Class A common stock45 — (45)— — — — — 
Issuance of common stock upon exercise of stock options— — 153 — 615 — — 615 
RSU releases1,939 — — — — — — — 
Purchases of common stock under the ESPP615 — — — 4,485 — — 4,485 
Charitable donation of stock101 — — — 1,000 — — 1,000 
Stock-based compensation— — — — 28,213 — — 28,213 
Other comprehensive loss— — — — — (594)— (594)
Net loss— — — — — — (29,910)(29,910)
Balance, July 31, 2022123,833 $12 8,122 $1 $810,636 $(1,459)$(616,525)$192,665 
5


Six Months Ended July 31, 2021
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalIncomeDeficitEquity
Balance, January 31, 2021109,900 $11 11,004 $1 $635,127 $796 $(464,022)$171,913 
Conversion of Class B common stock to Class A common stock 3,111 — (3,111)— — — — — 
Issuance of common stock upon exercise of stock options313 1 1,204 — 10,186 — — 10,187 
Lapse of restrictions on common stock related to early exercise of stock options — — — — 18 — — 18 
RSU releases 1,539 — 26 — — — — — 
Purchases of common stock under the ESPP388 — — — 4,005 — — 4,005 
Charitable donation of stock61 — — — 1,000 — — 1,000 
Stock-based compensation — — — — 31,866 — — 31,866 
Other comprehensive loss— — — — — (293)— (293)
Net loss — — — — — — (41,354)(41,354)
Balance, July 31, 2021115,312 $12 9,123 $1 $682,202 $503 $(505,376)$177,342 
Three Months Ended July 31, 2021
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalIncomeDeficitEquity
Balance, April 30, 2021111,249 $11 10,955 $1 $652,501 $677 $(481,683)$171,507 
Conversion of Class B common stock to Class A common stock 2,431 — (2,431)— — — — — 
Issuance of common stock upon exercise of stock options274 1 593 — 6,619 — — 6,620 
Lapse of restrictions on common stock related to early exercise of stock options — — — — 8 — — 8 
RSU releases 909 — 6 — — — — — 
Purchases of common stock under the ESPP388 — — — 4,005 — — 4,005 
Charitable donation of stock61 — — — 1,000 — — 1,000 
Stock-based compensation — — — — 18,069 — — 18,069 
Other comprehensive loss— — — — — (174)— (174)
Net loss — — — — — — (23,693)(23,693)
Balance, July 31, 2021115,312 $12 9,123 $1 $682,202 $503 $(505,376)$177,342 
See notes to unaudited condensed consolidated financial statements.
6


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Six Months Ended July 31,
 20222021
Cash flows from operating activities:
Net loss$(53,078)$(41,354)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization and accretion8,882 8,496 
Stock-based compensation51,038 31,866 
Provision for credit losses1,134 1,368 
Donation of common stock to charitable foundation1,000 1,000 
Amortization of deferred commissions9,346 7,859 
Reduction in carrying amount of right-of-use assets4,070 4,760 
Change in fair value of warrant liability(8,896) 
Other267 426 
Changes in operating assets and liabilities:
Accounts receivable13,436 21,253 
Prepaid expenses and other assets(2,823)(3,216)
Deferred commissions(10,629)(8,193)
Accounts payable692 1,513 
Accrued expenses and other liabilities1,848 51 
Accrued employee liabilities(3,228)(2,088)
Deferred revenue(4,404)(9,203)
Operating lease liabilities(6,473)(6,910)
Net cash provided by operating activities2,182 7,628 
Cash flows from investing activities:
Purchases of property and equipment(6,084)(3,697)
Insurance proceeds for damaged property and equipment 344 
Purchase of intangible assets (1,349)
Purchases of short-term investments(195,685)(53,650)
Maturities of short-term investments55,263 49,492 
Net cash used in investing activities(146,506)(8,860)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs233,901  
Proceeds from issuance of common stock upon exercise of stock options1,522 10,187 
Proceeds from issuance of common stock under employee stock purchase plan4,485 4,005 
Principal payments on debt(1,480)(2,222)
Net cash provided by financing activities238,428 11,970 
Effect of exchange rates on cash and cash equivalents(675)(259)
Net increase in cash and cash equivalents93,429 10,479 
Cash and cash equivalents, beginning of period113,507 94,110 
Cash and cash equivalents, end of period$206,936 $104,589 
Supplemental disclosure of non-cash investing and financing activities:
Lapse in restrictions on early exercised common stock options$ $18 
Property and equipment purchases accrued or in accounts payable$322 $44 
Purchase of intangible assets included in accrued expenses and other current liabilities$ $225 
See notes to unaudited condensed consolidated financial statements.
7


ZUORA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Overview and Basis of Presentation
Description of Business
Zuora, Inc. was incorporated in the state of Delaware in 2006 and began operations in 2007. Zuora’s fiscal year ends on January 31. Zuora is headquartered in Redwood City, California.
Zuora provides a cloud-based subscription management platform, built to help companies monetize new services and operate dynamic, recurring revenue business models. Our solution enables companies across multiple industries and geographies to launch, manage and scale a subscription business, automating the entire quote-to-cash and revenue recognition process, including quoting, billing, collections and revenue recognition. With Zuora’s solution, businesses can change pricing and packaging for products and services to grow and scale, efficiently comply with revenue recognition standards, analyze customer data to optimize their subscription offerings, and build meaningful relationships with their subscribers.
References to “Zuora”, “us”, “our”, or “we” in these notes refer to Zuora, Inc. and its subsidiaries on a consolidated basis.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements, which include the accounts of Zuora and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. All intercompany balances and transactions have been eliminated in consolidation.
The unaudited condensed consolidated balance sheet as of January 31, 2022 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 comprehensive loss, statements of cash flows and statements of stockholders' equity for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2023 or any future period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 28, 2022 (Annual Report).
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
Our most significant estimates and assumptions are related to revenue recognition with respect to the determination of the relative standalone selling prices for our services; the expected period of benefit over which deferred commissions are amortized; valuation of stock-based awards and warrants; estimates of allowance for credit losses; estimates of the fair value of goodwill and long-lived assets when evaluating for impairments; useful lives of intangibles and other long-lived assets; and the valuation of deferred income tax assets and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ materially from these estimates under different assumptions or conditions.
8



Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Our significant accounting policies are discussed in Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements in our Annual Report for the fiscal year ended January 31, 2022. There have been no significant changes to these policies during the six months ended July 31, 2022, except for updates resulting from our issuance to Silver Lake of the Initial Notes and Warrants (as defined in Note 9. Debt below) in March 2022, as discussed below. Additional information regarding our issuance of these convertible notes and warrants is included in Note 9. Debt and Note 17. Warrants to Purchase Shares of Common Stock, respectively.
Derivative Financial Instruments
The accounting treatment of derivative financial instruments requires that we record certain embedded features and warrants as assets or liabilities at their fair value as of the inception date of the agreement and at fair value as of each subsequent balance sheet date with any change in fair value recorded as income or expense. In connection with our issuance of of the Initial Notes to Silver Lake on March 24, 2022, we adopted a sequencing policy in accordance with ASC 815-40 whereby financial instruments issued will be ordered by conversion or exercise price.
Deferred Debt Issuance Costs
Costs directly associated with obtaining debt financing are deferred and amortized using the effective interest rate method over the expected term of the related debt agreement. We determine the expected term of debt agreements by assessing the contractual term of the debt as well as any non-contingent put rights provided to the lenders. Unamortized amounts related to long-term debt are reflected on the unaudited condensed consolidated balance sheets as a direct deduction from the carrying amounts of the related long-term debt liability. Amortization expense of deferred loan costs was approximately $1.9 million and $2.7 million for the three and six months ended July 31, 2022, respectively, and is included in Interest expense on the accompanying unaudited condensed consolidated statements of comprehensive loss.
Earnings per Share
Basic earnings per share (EPS) is calculated by dividing the net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period without consideration for common stock equivalents. Diluted EPS is computed by dividing the net income or loss available to common stockholders by the weighted average number of shares of common stock outstanding for the period and the weighted average number of dilutive common stock equivalents outstanding for the period determined using the if-converted (convertible debt instruments) or treasury-stock method (warrants and share-based payment arrangements). For purposes of this calculation, common stock issuable upon conversion of debt, options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted earnings per share when their effect is dilutive.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 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): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing certain separation models previously required under U.S. GAAP, including the beneficial conversion feature and cash conversion models. This ASU also simplifies the diluted earnings per share calculation in certain areas. The standard was effective for us beginning February 1, 2022 and we utilized the modified retrospective transition method of adoption. The adoption of this standard had no impact on our retained earnings or other components of equity as of the February 1, 2022 adoption date and had no impact to our earnings per share during the period of adoption.
9


In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. We retroactively adopted this standard as of February 1, 2022. The adoption of this standard had no impact on our unaudited condensed consolidated financial statements.
Note 3. Investments
The amortized costs, unrealized gains and losses and estimated fair values of our short-term investments were as follows (in thousands):
July 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. government securities$64,533 $9 $(543)$63,999 
Corporate bonds51,889  (296)51,593 
Commercial paper112,149   112,149 
Supranational bonds9,995  (12)9,983 
Foreign government securities4,043  (60)3,983 
Total short-term investments$242,609 $9 $(911)$241,707 
January 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. government securities$18,082 $ $(155)$17,927 
Corporate bonds21,225  (49)21,176 
Commercial paper55,234   55,234 
Supranational bonds3,503   3,503 
Foreign government securities4,064  (22)4,042 
Total short-term investments$102,108 $ $(226)$101,882 
There were no material realized gains or losses from sales of marketable securities that were reclassified out of accumulated other comprehensive loss into investment income during the three and six months ended July 31, 2022 and 2021. We had no significant unrealized losses on our available-for-sale securities as of July 31, 2022 and January 31, 2022, and we do not expect material credit losses on our current investments in future periods. All securities had stated effective maturities of less than one year as of July 31, 2022.
10


Note 4. Fair Value Measurements
The accounting guidance for fair value measurements establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level inputInput definition
Level 1Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2Inputs other than quoted prices included within Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date
Level 3Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date
In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly.
The following tables summarize our fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
July 31, 2022
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$180,072 $ $ $180,072 
Short-term investments:
U.S. government securities$ $63,999 $ $63,999 
Corporate bonds 51,593  51,593 
Commercial paper 112,149  112,149 
Supranational bonds 9,983  9,983 
Foreign government securities 3,983  3,983 
Total short-term investments$ $241,707 $ $241,707 
Liabilities:
Warrant liability$ $ $3,147 $3,147 
January 31, 2022
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$92,668 $ $ $92,668 
Short-term investments:
U.S. government securities$ $17,927 $ $17,927 
Corporate bonds 21,176  21,176 
Commercial paper 55,234  55,234 
Supranational bonds 3,503  3,503 
Foreign government securities 4,042  4,042 
Total short-term investments$ $101,882 $ $101,882 
11


Changes in our Level 3 fair value measurements were as follows (in thousands):
Level 3 Fair Value
Balance, January 31, 2022
$ 
Issuances12,043 
Settlements 
Gain on change in fair value(8,896)
Balance, July 31, 2022
$3,147 
The carrying amounts of certain financial instruments, including cash held in bank accounts, accounts receivable, accounts payable, and accrued expenses, approximate fair value due to their relatively short maturities. The carrying amount of debt outstanding under the Initial Notes approximates fair value as of July 31, 2022. Additional information regarding the Initial Notes and Warrant liability is included in Note 9. Debt and Note 17. Warrants to Purchase Shares of Common Stock, respectively.
Note 5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
 July 31, 2022January 31, 2022
Prepaid software subscriptions$5,896 $6,854 
Prepaid insurance4,756 3,220 
Taxes1,486 1,270 
Contract assets1,299 1,289 
Prepaid hosting costs1,245 767 
Other4,169 2,203 
Total$18,851 $15,603 
Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
 July 31, 2022January 31, 2022
Software$30,383 $25,495 
Leasehold improvements17,073 17,277 
Computer equipment15,771 14,746 
Furniture and fixtures4,335 4,424 
67,562 61,942 
Less accumulated depreciation and amortization(38,067)(34,266)
Total$29,495 $27,676 
The following table summarizes the capitalized internal-use software costs included within the Software line item in the table above (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2022202120222021
Internal-use software costs capitalized during the period$2,247 $1,038 $4,149 $1,962 
July 31, 2022January 31, 2022
Total capitalized internal-use software, net of accumulated amortization$13,890 $11,534 
12


The following table summarizes total depreciation and amortization expense related to property and equipment, including amortization of internal-use software, included in General and administrative and Cost of subscription revenue in the accompanying unaudited condensed consolidated statements of comprehensive loss (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2022202120222021
Total depreciation and amortization expense$2,186 $2,984 $4,367 $5,828 
Note 7. Purchased Intangible Assets
The following table summarizes the purchased intangible asset balances and activity (in thousands):
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Balance, January 31, 2022$14,467 $(11,015)$3,452 
Amortization expense— (926)(926)
Balance, July 31, 2022$14,467 $(11,941)$2,526 
The following table summarizes amortization expense related to purchased intangible assets included in Cost of subscription revenue in the accompanying unaudited condensed consolidated statements of comprehensive loss (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2022202120222021
Purchased intangible assets amortization expense$372