Company Quick10K Filing
Zuora
Price15.10 EPS-1
Shares112 P/E-28
MCap1,689 P/FCF-222
Net Debt-53 EBIT-59
TEV1,636 TEV/EBIT-28
TTM 2019-10-31, in MM, except price, ratios
10-Q 2020-10-31 Filed 2020-12-08
10-Q 2020-07-31 Filed 2020-09-04
10-Q 2020-04-30 Filed 2020-06-08
10-K 2020-01-31 Filed 2020-03-31
10-Q 2019-10-31 Filed 2019-12-16
10-Q 2019-07-31 Filed 2019-09-16
10-Q 2019-04-30 Filed 2019-06-11
10-K 2019-01-31 Filed 2019-04-18
10-Q 2018-10-31 Filed 2018-12-13
10-Q 2018-07-31 Filed 2018-09-12
10-Q 2018-04-30 Filed 2018-06-13
S-1 2018-03-16 Public Filing
8-K 2020-09-02
8-K 2020-07-21
8-K 2020-06-23
8-K 2020-06-03
8-K 2020-05-23
8-K 2020-04-30
8-K 2020-04-07
8-K 2020-03-12
8-K 2019-12-05
8-K 2019-09-26
8-K 2019-08-28
8-K 2019-06-18
8-K 2019-05-30
8-K 2019-05-29
8-K 2019-03-21
8-K 2019-03-21
8-K 2019-02-28
8-K 2018-11-29
8-K 2018-08-30
8-K 2018-08-15
8-K 2018-07-10
8-K 2018-05-31

ZUO 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. Overview and Basis of Presentation
Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
Note 3. Investments
Note 4. Fair Value Measurements
Note 5. Prepaid Expenses and Other Current Assets
Note 6. Property and Equipment, Net
Note 7. Purchased Intangible Assets
Note 8. Accrued Expenses and Other Current Liabilities
Note 9. Debt
Note 10. Deferred Revenue and Performance Obligations
Note 11. Geographical Information
Note 12. Leases
Note 13. Commitments and Contingencies
Note 14. Income Taxes
Note 15. Stockholders' Equity
Note 16. Employee Stock Plans
Note 17. Net Loss per Share
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits.
EX-31.1 a20201031q3-ex311.htm
EX-31.2 a20201031q3-ex312.htm
EX-32.1 a20201031q3-ex321.htm
EX-32.2 a20201031q3-ex322.htm

Zuora Earnings 2020-10-31

Balance SheetIncome StatementCash Flow
0.40.30.20.20.10.02016201720182020
Assets, Equity
0.10.10.0-0.0-0.1-0.12016201720182020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22016201720182020
Ops, Inv, Fin

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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 October 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 001-38451
_____________________________ 
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 November 30, 2020, the number of shares of the Registrant's Class A common stock outstanding was 108.2 million and the number of shares of the Registrant's Class B common stock outstanding was 11.0 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.
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:
the duration and impact of the ongoing coronavirus (COVID-19) pandemic on our business and the economy;
trends in revenue, cost of revenue, and gross margin;
our investments in our platform and the cost of third-party hosting fees;
the expansion and functionality of our technology offering;
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, and prospects and business strategies.
Such forward-looking statements are based on our expectations as of the date of this filing and are subject to a number of risks, uncertainties and assumptions, including but not limited to, risks detailed in the “Risk Factors” section of this Form 10-Q. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission (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 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.

1


PART I—FINANCIAL INFORMATION
Item 1.    Financial Statements
ZUORA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 October 31, 2020January 31, 2020
Assets
Current assets:
Cash and cash equivalents$104,047 $54,275 
Short-term investments74,710 117,662 
Accounts receivable, net59,272 68,875 
Deferred commissions, current portion11,570 9,585 
Prepaid expenses and other current assets16,887 16,387 
Total current assets266,486 266,784 
Property and equipment, net35,066 33,489 
Operating lease right-of-use assets48,992 54,286 
Purchased intangibles, net4,351 5,620 
Deferred commissions, net of current portion19,219 19,591 
Goodwill17,632 17,632 
Other assets3,588 4,825 
Total assets$395,334 $402,227 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$231 $2,098 
Accrued expenses and other current liabilities14,081 17,731 
Accrued employee liabilities26,740 24,193 
Debt, current portion4,432 4,432 
Deferred revenue, current portion107,308 111,411 
Operating lease liabilities, current portion9,181 5,755 
Total current liabilities161,973 165,620 
Debt, net of current portion2,790 6,094 
Deferred revenue, net of current portion702 1,007 
Operating lease liabilities, net of current portion55,843 62,307 
Deferred tax liabilities1,564 1,569 
Other long-term liabilities4,171 971 
Total liabilities227,043 237,568 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Class A common stock11 10 
Class B common stock1 2 
Additional paid-in capital613,413 555,307 
Accumulated other comprehensive income97 188 
Accumulated deficit(445,231)(390,848)
Total stockholders’ equity168,291 164,659 
Total liabilities and stockholders’ equity$395,334 $402,227 
See notes to unaudited condensed consolidated financial statements.
2


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share data)
(unaudited) 
 Three Months Ended October 31,Nine Months Ended October 31,
 2020201920202019
Revenue:
Subscription$62,020 $54,038 $177,228 $151,996 
Professional services15,226 17,784 48,905 53,668 
Total revenue77,246 71,822 226,133 205,664 
Cost of revenue:
Subscription15,611 13,858 43,627 38,589 
Professional services17,655 20,443 55,011 61,445 
Total cost of revenue33,266 34,301 98,638 100,034 
Gross profit43,980 37,521 127,495 105,630 
Operating expenses:
Research and development18,907 17,903 55,877 53,662 
Sales and marketing28,058 28,027 85,162 80,818 
General and administrative13,024 10,597 41,672 32,366 
Total operating expenses59,989 56,527 182,711 166,846 
Loss from operations(16,009)(19,006)(55,216)(61,216)
Interest and other (expense) income, net(352)1,190 1,962 2,294 
Loss before income taxes(16,361)(17,816)(53,254)(58,922)
Income tax provision412 421 1,129 720 
Net loss(16,773)(18,237)(54,383)(59,642)
Comprehensive loss:
Foreign currency translation adjustment18 (141)(71)(416)
Unrealized (loss) gain on available-for-sale securities(103)75 (20)121 
Comprehensive loss$(16,858)$(18,303)$(54,474)$(59,937)
Net loss per share, basic and diluted$(0.14)$(0.16)$(0.47)$(0.54)
Weighted-average shares outstanding used in calculating net loss per share, basic and diluted118,460 111,835 116,824 110,436 
See notes to unaudited condensed consolidated financial statements.

3


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)

Nine Months Ended October 31, 2020
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalIncomeDeficitEquity
Balance, January 31, 202097,134 $10 17,348 $2 $555,307 $188 $(390,848)$164,659 
Conversion of Class B common stock to Class A common stock 8,486 1 (8,486)(1)— — —  
Issuance of common stock upon exercise of stock options, net of repurchases(2)— 2,077 — 8,863 — — 8,863 
Lapse of restrictions on common stock related to early exercise of stock options — — — — 96 — — 96 
RSU releases 1,959 — 95 — — — —  
Purchases of common stock under the ESPP399 — — — 4,214 — — 4,214 
Charitable donation of stock74 — — — 1,000 — — 1,000 
Stock-based compensation — — — — 43,933 — — 43,933 
Other comprehensive loss— — — — — (91)— (91)
Net loss — — — — — — (54,383)(54,383)
Balance, October 31, 2020108,050 $11 11,034 $1 $613,413 $97 $(445,231)$168,291 
Three Months Ended October 31, 2020
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalIncomeDeficitEquity
Balance, July 31, 2020105,282 $11 12,875 $1 $597,736 $182 $(428,458)$169,472 
Conversion of Class B common stock to Class A common stock2,066 — (2,066)— — — —  
Issuance of common stock upon exercise of stock options, net of repurchases(1)— 200 — 879 — — 879 
Lapse of restrictions on common stock related to early exercise of stock options— — — — 25 — — 25 
RSU releases703 — 25 — — — —  
Stock-based compensation— — — — 14,773 — — 14,773 
Other comprehensive loss— — — — — (85)— (85)
Net loss— — — — — — (16,773)(16,773)
Balance, October 31, 2020108,050 $11 11,034 $1 $613,413 $97 $(445,231)$168,291 
See notes to unaudited condensed consolidated financial statements.





4


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
(in thousands)
(unaudited)

Nine Months Ended October 31, 2019
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalIncomeDeficitEquity
Balance, January 31, 201977,119 $8 32,575 $3 $488,776 $481 $(307,454)$181,814 
Conversion of Class B common stock to Class A common stock 15,477 — (15,477)— — — —  
Issuance of common stock upon exercise of stock options, net of repurchases(15)— 2,217 — 8,981 — — 8,981 
Lapse of restrictions on common stock related to early exercise of stock options — — — — 365 — — 365 
Purchases of common stock under the ESPP422 — — — 5,069 — — 5,069 
RSU releases 595 — 147 — — — —  
Stock-based compensation — — — — 31,413 — — 31,413 
Deferred offering costs — — — — 38 — — 38 
Other comprehensive loss— — — — — (295)— (295)
Net loss — — — — — — (59,642)(59,642)
Balance, October 31, 201993,598 $8 19,462 $3 $534,642 $186 $(367,096)$167,743 
Three Months Ended October 31, 2019
Accumulated
Class AClass BAdditionalOtherTotal
Common StockCommon StockPaid-inComprehensiveAccumulatedStockholders'
SharesAmountSharesAmountCapitalIncomeDeficitEquity
Balance, July 31, 201987,875 $8 24,422 $3 $520,812 $252 $(348,859)$172,216 
Conversion of Class B common stock to Class A common stock 5,413 — (5,413)— — — —  
Issuance of common stock upon exercise of stock options, net of repurchases(7)— 406 — 1,933 — — 1,933 
Lapse of restrictions on common stock related to early exercise of stock options — — — — 59 — — 59 
RSU releases 317 — 47 — — — —  
Stock-based compensation — — — — 11,838 — — 11,838 
Other comprehensive loss— — — — — (66)— (66)
Net loss — — — — — — (18,237)(18,237)
Balance, October 31, 201993,598 $8 19,462 $3 $534,642 $186 $(367,096)$167,743 
See notes to unaudited condensed consolidated financial statements.
5


ZUORA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended October 31,
 20202019
As Adjusted(1)
Cash flows from operating activities:
Net loss$(54,383)$(59,642)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion11,172 8,440 
Stock-based compensation43,933 31,413 
Provision for credit losses3,038 3,229 
Donation of common stock to charitable foundation1,000  
Amortization of deferred commissions8,558 7,049 
Reduction in carrying amount of right-of-use assets6,358 6,310 
Other182 121 
Changes in operating assets and liabilities:
Accounts receivable6,565 (5,044)
Prepaid expenses and other assets(204)(4,004)
Deferred commissions(10,172)(6,794)
Accounts payable(1,869)(228)
Accrued expenses and other liabilities(801)696 
Accrued employee liabilities5,697 4,624 
Deferred revenue(4,408)7,323 
Operating lease liabilities(6,515)(1,092)
Net cash provided by (used in) operating activities8,151 (7,599)
Cash flows from investing activities:
Purchases of property and equipment(12,074)(12,878)
Insurance proceeds for damaged property and equipment988  
Purchases of short-term investments(61,783)(155,936)
Sales of short-term investments2,511 3,496 
Maturities of short-term investments102,305 155,800 
Net cash provided by (used in) investing activities31,947 (9,518)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options8,876 8,981 
Proceeds of issuance of common stock under employee stock purchase plan4,214 5,069 
Repurchases of unvested common stock(15)(70)
Principal payments on long-term debt(3,330)(1,850)
Net cash provided by financing activities9,745 12,130 
Effect of exchange rates on cash and cash equivalents(71)(416)
Net increase (decrease) in cash and cash equivalents49,772 (5,403)
Cash and cash equivalents, beginning of period54,275 70,024 
Cash and cash equivalents, end of period$104,047 $64,621 
Supplemental disclosure of non-cash investing and financing activities:
Lapse in restrictions on early exercised common stock options$96 $365 
Property and equipment purchases accrued or in accounts payable$3 $3,056 
(1) Effective February 1, 2019, the Company adopted Topic 842 using the modified retrospective approach. See Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements.
See notes to unaudited condensed consolidated financial statements.
6


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.
The Company provides software that enables companies across multiple industries and geographies to launch, manage or transform to a subscription business model. Architected specifically for dynamic, recurring subscription business models, Zuora's cloud-based software functions as an intelligent subscription management hub that automates and orchestrates the entire subscription order-to-revenue process, including billing and revenue recognition. Zuora's solution enables businesses to easily change pricing and packaging for products and services to grow and scale, to efficiently comply with revenue recognition standards, and to build meaningful relationships with their subscribers.
References to Zuora, “Company”, “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 the Company 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, 2020 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, 2021 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 the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the Securities and Exchange Commission (SEC) on March 31, 2020 (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.
The Company’s most significant estimates and assumptions are related to revenue recognition with respect to the determination of the standalone selling prices for the Company’s services; estimates of the useful life of benefits of commissions; valuation inputs of stock-based awards; estimates of allowance for credit losses; estimates of the fair value of goodwill, intangible assets, investments, and other long-lived assets; and the valuation of deferred income tax assets and contingencies. The Company bases its 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.

7


Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
The Company’s significant accounting policies are discussed in Note 2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2020, filed with the SEC on March 31, 2020. There have been no significant changes to these policies during the nine months ended October 31, 2020 except for updates resulting from the adoption of Topic 326, as discussed below.
Recent Accounting Pronouncements
The Company became a large accelerated filer on January 31, 2020 and lost the ability to delay adoption of new or revised accounting pronouncements. Effective February 1, 2019, the Company adopted FASB ASU No. 2016-02, Leases (Topic 842), which supersedes the guidance in ASC 840, Leases, and requires recognition of right-of-use (ROU) assets and lease liabilities on the Company's consolidated balance sheets. Amounts presented in the unaudited condensed consolidated financial statements for fiscal year 2020 have been adjusted to reflect the adoption of Topic 842.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, and subsequently issued amendments to the initial guidance including ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11 (collectively, Topic 326). Together, this guidance introduced a new impairment model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses (CECL). The new model uses a forward-looking expected loss method rather than the incurred loss model for recognizing credit losses. Additionally, any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. The Company adopted Topic 326 beginning February 1, 2020 and the adoption of the standard did not have a material impact on its unaudited condensed consolidated financial statements. However, the adoption resulted in modifying the Company's policies for accounts receivable and available-for-sale securities as follows:
Accounts Receivable:
Trade accounts receivable are recorded at the invoiced amount. Prior to the Company’s adoption of Topic 326, the accounts receivable balance was reduced by an allowance for doubtful accounts that was determined based on the Company’s assessment of the collectability of customer accounts. Under Topic 326, the Company measures expected credit losses of accounts receivable on a collective (pool) basis, aggregating accounts receivable that have account balances above or below a certain threshold. For receivable balances below the threshold, the Company applies a credit-loss percentage that is based on its historical credit losses. For receivable balances above the threshold, the Company performs an analysis on the related customers and reserves the full receivable balance for any customer accounts where collectability may be at risk. The COVID-19 pandemic and recent economic downturn also prompted the Company to include additional reserves for customers in industries that could be more heavily impacted by these events. The Company will reassess the impact of these events and any other events that may arise in the future in developing its estimates for expected credit losses, and will make any necessary adjustments to the related reserve balance.
The allowance for credit losses balance was $4.1 million as of October 31, 2020, and the allowance for doubtful accounts balance was $2.9 million as of January 31, 2020.
Available-for-Sale Securities:
Available-for-sale securities are reported at fair value, with unrealized gains and losses and the related tax impact included as a separate component of stockholders’ equity and in comprehensive loss. Accrued interest of $0.2 million as of October 31, 2020 is excluded from both the fair value and the amortized cost of the Company’s available-for-sale securities and is recorded in prepaid expenses and other current assets in its condensed consolidated balance sheet. The Company elected not to record an allowance for credit losses for accrued interest on available-for-sale securities and will reverse the accrued interest against interest income in the period in which it is determined that the accrued interest is uncollectible.
Prior to fiscal 2021, the Company followed the guidance in ASC 320 Investments-Debt and Equity Securities in determining whether unrealized losses were other than temporary. Under Topic 326, the Company now considers whether unrealized losses have resulted from a credit loss or other factors. The Company had no significant
8


unrealized losses on its available-for-sale securities as of October 31, 2020 and as of January 31, 2020, and does not expect credit losses on its current investments in future periods. Therefore, the Company concluded that an allowance for credit losses was unnecessary as of the February 1, 2020 adoption date or as of October 31, 2020. The Company had no significant realized losses on available-for-sale securities during the three and nine months ended October 31, 2020. The Company uses the specific identification method to determine the cost basis of investments sold.
Note 3. Investments
The amortized costs, unrealized gains and losses and estimated fair values of the Company’s short-term investments were as follows (in thousands):
October 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. government securities$6,032 $49 $ $6,081 
Corporate bonds27,034 57 (4)27,087 
Commercial paper41,542   41,542 
Total short-term investments$74,608 $106 $(4)$74,710 

January 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. government securities$34,053 $41 $ $34,094 
Corporate bonds45,601 81  45,682 
Commercial paper37,886   37,886 
Total short-term investments$117,540 $122 $ $117,662 
There were no material realized gains or losses from sales of marketable securities that were reclassified out of accumulated other comprehensive income into investment income during the three and nine months ended October 31, 2020 and 2019. All securities had stated effective maturities of less than two years as of October 31, 2020.
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, the Company uses 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 the Company uses quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly.
9


The following tables summarize the Companys fair value hierarchy for its financial assets measured at fair value on a recurring basis (in thousands):
October 31, 2020
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$91,186 $ $ $91,186 
Short-term investments:
U.S. government securities$ $6,081 $ $6,081 
Corporate bonds 27,087  27,087 
Commercial paper 41,542  41,542 
Total short-term investments$ $74,710 $ $74,710 

January 31, 2020
Level 1Level 2Level 3Total
Cash equivalents:
Money market funds$37,906 $ $ $37,906 
Short-term investments:
U.S. government securities$ $34,094 $ $34,094 
Corporate bonds 45,682  45,682 
Commercial paper 37,886  37,886 
Total short-term investments$ $117,662 $ $117,662 
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 approximates fair value due to its floating interest rate.
Note 5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
 October 31, 2020January 31, 2020
Prepaid software subscriptions$5,503 $4,036 
Prepaid insurance3,388 1,630 
Prepaid hosting costs1,769 1,611 
Contract assets1,484 2,476 
Insurance recovery receivable454 1,442 
Taxes437 729 
Other3,852 4,463 
Total$16,887 $16,387 

10


Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
 October 31, 2020January 31, 2020
Software$18,965 $15,329 
Leasehold improvements18,868 16,865 
Servers14,177 14,596 
Computer equipment12,758 11,249 
Furniture and fixtures5,169 4,987 
Vehicles104 108 
70,041 63,134 
Less accumulated depreciation and amortization(34,975)(29,645)
Total$35,066 $33,489 
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 October 31,Nine Months Ended October 31,
2020201920202019
Internal-use software costs capitalized during the period$768 $1,571 $3,490 $3,187 
October 31, 2020January 31, 2020
Total capitalized internal-use software, net of accumulated amortization$8,722 $6,275 
The following table summarizes total depreciation and amortization expense related to property and equipment, including amortization of internal-use software, included in Operating expenses and Cost of subscription revenue in the accompanying unaudited condensed consolidated statements of comprehensive loss (in thousands):
Three Months Ended October 31,Nine Months Ended October 31,
2020201920202019
Total depreciation and amortization expense$2,803 $2,812 $7,627 $7,046 

Note 7. Purchased Intangible Assets
The following table summarizes the purchased intangible asset balances (in thousands):
October 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Developed technology$7,697 $(5,970)$1,727 
Customer relationships4,287 (2,128)2,159 
Trade names909 (444)465 
Total$12,893 $