falsedesktopZUO2020-10-31000142377420000110{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "\t\tPage\nPART I.\tFINANCIAL INFORMATION\t2\nItem 1.\tFinancial Statements (unaudited)\t2\n\tCondensed Consolidated Balance Sheets as of October 31 2020 and January 31 2020\t2\n\tCondensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31 2020 and 2019\t3\n\tCondensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended October 31 2020 and 2019\t4\n\tCondensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31 2020 and 2019\t6\n\tNotes to Unaudited Condensed Consolidated Financial Statements\t7\nItem 2.\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t20\nItem 3.\tQuantitative and Qualitative Disclosures About Market Risk\t36\nItem 4.\tControls and Procedures\t37\nPART II.\tOTHER INFORMATION\t39\nItem 1.\tLegal Proceedings\t39\nItem 1A.\tRisk Factors\t39\nItem 2.\tUnregistered Sales of Equity Securities and Use of Proceeds\t71\nItem 6.\tExhibits\t72\nSignatures\t\t73\n", "q10k_tbl_2": "\tOctober 31 2020\tJanuary 31 2020\nAssets\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t104047\t54275\nShort-term investments\t74710\t117662\nAccounts receivable net\t59272\t68875\nDeferred commissions current portion\t11570\t9585\nPrepaid expenses and other current assets\t16887\t16387\nTotal current assets\t266486\t266784\nProperty and equipment net\t35066\t33489\nOperating lease right-of-use assets\t48992\t54286\nPurchased intangibles net\t4351\t5620\nDeferred commissions net of current portion\t19219\t19591\nGoodwill\t17632\t17632\nOther assets\t3588\t4825\nTotal assets\t395334\t402227\nLiabilities and stockholders' equity\t\t\nCurrent liabilities:\t\t\nAccounts payable\t231\t2098\nAccrued expenses and other current liabilities\t14081\t17731\nAccrued employee liabilities\t26740\t24193\nDebt current portion\t4432\t4432\nDeferred revenue current portion\t107308\t111411\nOperating lease liabilities current portion\t9181\t5755\nTotal current liabilities\t161973\t165620\nDebt net of current portion\t2790\t6094\nDeferred revenue net of current portion\t702\t1007\nOperating lease liabilities net of current portion\t55843\t62307\nDeferred tax liabilities\t1564\t1569\nOther long-term liabilities\t4171\t971\nTotal liabilities\t227043\t237568\nCommitments and contingencies (Note 13)\t\t\nStockholders' equity:\t\t\nClass A common stock\t11\t10\nClass B common stock\t1\t2\nAdditional paid-in capital\t613413\t555307\nAccumulated other comprehensive income\t97\t188\nAccumulated deficit\t(445231)\t(390848)\nTotal stockholders' equity\t168291\t164659\nTotal liabilities and stockholders' equity\t395334\t402227\n", "q10k_tbl_3": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nRevenue:\t\t\t\t\nSubscription\t62020\t54038\t177228\t151996\nProfessional services\t15226\t17784\t48905\t53668\nTotal revenue\t77246\t71822\t226133\t205664\nCost of revenue:\t\t\t\t\nSubscription\t15611\t13858\t43627\t38589\nProfessional services\t17655\t20443\t55011\t61445\nTotal cost of revenue\t33266\t34301\t98638\t100034\nGross profit\t43980\t37521\t127495\t105630\nOperating expenses:\t\t\t\t\nResearch and development\t18907\t17903\t55877\t53662\nSales and marketing\t28058\t28027\t85162\t80818\nGeneral and administrative\t13024\t10597\t41672\t32366\nTotal operating expenses\t59989\t56527\t182711\t166846\nLoss from operations\t(16009)\t(19006)\t(55216)\t(61216)\nInterest and other (expense) income net\t(352)\t1190\t1962\t2294\nLoss before income taxes\t(16361)\t(17816)\t(53254)\t(58922)\nIncome tax provision\t412\t421\t1129\t720\nNet loss\t(16773)\t(18237)\t(54383)\t(59642)\nComprehensive loss:\t\t\t\t\nForeign currency translation adjustment\t18\t(141)\t(71)\t(416)\nUnrealized (loss) gain on available-for-sale securities\t(103)\t75\t(20)\t121\nComprehensive loss\t(16858)\t(18303)\t(54474)\t(59937)\nNet loss per share basic and diluted\t(0.14)\t(0.16)\t(0.47)\t(0.54)\nWeighted-average shares outstanding used in calculating net loss per share basic and diluted\t118460\t111835\t116824\t110436\n", "q10k_tbl_4": "\tNine Months Ended October 31 2020\t\t\t\t\t\t\t\n\t\t\t\t\t\tAccumulated\t\t\n\tClass A\t\tClass B\t\tAdditional\tOther\t\tTotal\n\tCommon Stock\t\tCommon Stock\t\tPaid-in\tComprehensive\tAccumulated\tStockholders'\n\tShares\tAmount\tShares\tAmount\tCapital\tIncome\tDeficit\tEquity\nBalance January 31 2020\t97134\t10\t17348\t2\t555307\t188\t(390848)\t164659\nConversion of Class B common stock to Class A common stock\t8486\t1\t(8486)\t(1)\t0\t0\t0\t0\nIssuance of common stock upon exercise of stock options net of repurchases\t(2)\t0\t2077\t0\t8863\t0\t0\t8863\nLapse of restrictions on common stock related to early exercise of stock options\t0\t0\t0\t0\t96\t0\t0\t96\nRSU releases\t1959\t0\t95\t0\t0\t0\t0\t0\nPurchases of common stock under the ESPP\t399\t0\t0\t0\t4214\t0\t0\t4214\nCharitable donation of stock\t74\t0\t0\t0\t1000\t0\t0\t1000\nStock-based compensation\t0\t0\t0\t0\t43933\t0\t0\t43933\nOther comprehensive loss\t0\t0\t0\t0\t0\t(91)\t0\t(91)\nNet loss\t0\t0\t0\t0\t0\t0\t(54383)\t(54383)\nBalance October 31 2020\t108050\t11\t11034\t1\t613413\t97\t(445231)\t168291\n\tThree Months Ended October 31 2020\t\t\t\t\t\t\t\n\t\t\t\t\t\tAccumulated\t\t\n\tClass A\t\tClass B\t\tAdditional\tOther\t\tTotal\n\tCommon Stock\t\tCommon Stock\t\tPaid-in\tComprehensive\tAccumulated\tStockholders'\n\tShares\tAmount\tShares\tAmount\tCapital\tIncome\tDeficit\tEquity\nBalance July 31 2020\t105282\t11\t12875\t1\t597736\t182\t(428458)\t169472\nConversion of Class B common stock to Class A common stock\t2066\t0\t(2066)\t0\t0\t0\t0\t0\nIssuance of common stock upon exercise of stock options net of repurchases\t(1)\t0\t200\t0\t879\t0\t0\t879\nLapse of restrictions on common stock related to early exercise of stock options\t0\t0\t0\t0\t25\t0\t0\t25\nRSU releases\t703\t0\t25\t0\t0\t0\t0\t0\nStock-based compensation\t0\t0\t0\t0\t14773\t0\t0\t14773\nOther comprehensive loss\t0\t0\t0\t0\t0\t(85)\t0\t(85)\nNet loss\t0\t0\t0\t0\t0\t0\t(16773)\t(16773)\nBalance October 31 2020\t108050\t11\t11034\t1\t613413\t97\t(445231)\t168291\n", "q10k_tbl_5": "\tNine Months Ended October 31 2019\t\t\t\t\t\t\t\n\t\t\t\t\t\tAccumulated\t\t\n\tClass A\t\tClass B\t\tAdditional\tOther\t\tTotal\n\tCommon Stock\t\tCommon Stock\t\tPaid-in\tComprehensive\tAccumulated\tStockholders'\n\tShares\tAmount\tShares\tAmount\tCapital\tIncome\tDeficit\tEquity\nBalance January 31 2019\t77119\t8\t32575\t3\t488776\t481\t(307454)\t181814\nConversion of Class B common stock to Class A common stock\t15477\t0\t(15477)\t0\t0\t0\t0\t0\nIssuance of common stock upon exercise of stock options net of repurchases\t(15)\t0\t2217\t0\t8981\t0\t0\t8981\nLapse of restrictions on common stock related to early exercise of stock options\t0\t0\t0\t0\t365\t0\t0\t365\nPurchases of common stock under the ESPP\t422\t0\t0\t0\t5069\t0\t0\t5069\nRSU releases\t595\t0\t147\t0\t0\t0\t0\t0\nStock-based compensation\t0\t0\t0\t0\t31413\t0\t0\t31413\nDeferred offering costs\t0\t0\t0\t0\t38\t0\t0\t38\nOther comprehensive loss\t0\t0\t0\t0\t0\t(295)\t0\t(295)\nNet loss\t0\t0\t0\t0\t0\t0\t(59642)\t(59642)\nBalance October 31 2019\t93598\t8\t19462\t3\t534642\t186\t(367096)\t167743\n\tThree Months Ended October 31 2019\t\t\t\t\t\t\t\n\t\t\t\t\t\tAccumulated\t\t\n\tClass A\t\tClass B\t\tAdditional\tOther\t\tTotal\n\tCommon Stock\t\tCommon Stock\t\tPaid-in\tComprehensive\tAccumulated\tStockholders'\n\tShares\tAmount\tShares\tAmount\tCapital\tIncome\tDeficit\tEquity\nBalance July 31 2019\t87875\t8\t24422\t3\t520812\t252\t(348859)\t172216\nConversion of Class B common stock to Class A common stock\t5413\t0\t(5413)\t0\t0\t0\t0\t0\nIssuance of common stock upon exercise of stock options net of repurchases\t(7)\t0\t406\t0\t1933\t0\t0\t1933\nLapse of restrictions on common stock related to early exercise of stock options\t0\t0\t0\t0\t59\t0\t0\t59\nRSU releases\t317\t0\t47\t0\t0\t0\t0\t0\nStock-based compensation\t0\t0\t0\t0\t11838\t0\t0\t11838\nOther comprehensive loss\t0\t0\t0\t0\t0\t(66)\t0\t(66)\nNet loss\t0\t0\t0\t0\t0\t0\t(18237)\t(18237)\nBalance October 31 2019\t93598\t8\t19462\t3\t534642\t186\t(367096)\t167743\n", "q10k_tbl_6": "\tNine Months Ended October 31\t\n\t2020\t2019\n\t\tAs Adjusted(1)\nCash flows from operating activities:\t\t\nNet loss\t(54383)\t(59642)\nAdjustments to reconcile net loss to net cash provided by (used in) operating activities:\t\t\nDepreciation amortization and accretion\t11172\t8440\nStock-based compensation\t43933\t31413\nProvision for credit losses\t3038\t3229\nDonation of common stock to charitable foundation\t1000\t0\nAmortization of deferred commissions\t8558\t7049\nReduction in carrying amount of right-of-use assets\t6358\t6310\nOther\t182\t121\nChanges in operating assets and liabilities:\t\t\nAccounts receivable\t6565\t(5044)\nPrepaid expenses and other assets\t(204)\t(4004)\nDeferred commissions\t(10172)\t(6794)\nAccounts payable\t(1869)\t(228)\nAccrued expenses and other liabilities\t(801)\t696\nAccrued employee liabilities\t5697\t4624\nDeferred revenue\t(4408)\t7323\nOperating lease liabilities\t(6515)\t(1092)\nNet cash provided by (used in) operating activities\t8151\t(7599)\nCash flows from investing activities:\t\t\nPurchases of property and equipment\t(12074)\t(12878)\nInsurance proceeds for damaged property and equipment\t988\t0\nPurchases of short-term investments\t(61783)\t(155936)\nSales of short-term investments\t2511\t3496\nMaturities of short-term investments\t102305\t155800\nNet cash provided by (used in) investing activities\t31947\t(9518)\nCash flows from financing activities:\t\t\nProceeds from issuance of common stock upon exercise of stock options\t8876\t8981\nProceeds of issuance of common stock under employee stock purchase plan\t4214\t5069\nRepurchases of unvested common stock\t(15)\t(70)\nPrincipal payments on long-term debt\t(3330)\t(1850)\nNet cash provided by financing activities\t9745\t12130\nEffect of exchange rates on cash and cash equivalents\t(71)\t(416)\nNet increase (decrease) in cash and cash equivalents\t49772\t(5403)\nCash and cash equivalents beginning of period\t54275\t70024\nCash and cash equivalents end of period\t104047\t64621\nSupplemental disclosure of non-cash investing and financing activities:\t\t\nLapse in restrictions on early exercised common stock options\t96\t365\nProperty and equipment purchases accrued or in accounts payable\t3\t3056\n", "q10k_tbl_7": "\tOctober 31 2020\t\t\t\n\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tFair Value\nU.S. government securities\t6032\t49\t0\t6081\nCorporate bonds\t27034\t57\t(4)\t27087\nCommercial paper\t41542\t0\t0\t41542\nTotal short-term investments\t74608\t106\t(4)\t74710\n", "q10k_tbl_8": "\tJanuary 31 2020\t\t\t\n\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tFair Value\nU.S. government securities\t34053\t41\t0\t34094\nCorporate bonds\t45601\t81\t0\t45682\nCommercial paper\t37886\t0\t0\t37886\nTotal short-term investments\t117540\t122\t0\t117662\n", "q10k_tbl_9": "\tOctober 31 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\nCash equivalents:\t\t\t\t\nMoney market funds\t91186\t0\t0\t91186\nShort-term investments:\t\t\t\t\nU.S. government securities\t0\t6081\t0\t6081\nCorporate bonds\t0\t27087\t0\t27087\nCommercial paper\t0\t41542\t0\t41542\nTotal short-term investments\t0\t74710\t0\t74710\n", "q10k_tbl_10": "\tJanuary 31 2020\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tTotal\nCash equivalents:\t\t\t\t\nMoney market funds\t37906\t0\t0\t37906\nShort-term investments:\t\t\t\t\nU.S. government securities\t0\t34094\t0\t34094\nCorporate bonds\t0\t45682\t0\t45682\nCommercial paper\t0\t37886\t0\t37886\nTotal short-term investments\t0\t117662\t0\t117662\n", "q10k_tbl_11": "\tOctober 31 2020\tJanuary 31 2020\nPrepaid software subscriptions\t5503\t4036\nPrepaid insurance\t3388\t1630\nPrepaid hosting costs\t1769\t1611\nContract assets\t1484\t2476\nInsurance recovery receivable\t454\t1442\nTaxes\t437\t729\nOther\t3852\t4463\nTotal\t16887\t16387\n", "q10k_tbl_12": "\tOctober 31 2020\tJanuary 31 2020\nSoftware\t18965\t15329\nLeasehold improvements\t18868\t16865\nServers\t14177\t14596\nComputer equipment\t12758\t11249\nFurniture and fixtures\t5169\t4987\nVehicles\t104\t108\n\t70041\t63134\nLess accumulated depreciation and amortization\t(34975)\t(29645)\nTotal\t35066\t33489\n", "q10k_tbl_13": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nInternal-use software costs capitalized during the period\t768\t1571\t3490\t3187\n\t\t\tOctober 31 2020\tJanuary 31 2020\nTotal capitalized internal-use software net of accumulated amortization\t\t\t8722\t6275\n", "q10k_tbl_14": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nTotal depreciation and amortization expense\t2803\t2812\t7627\t7046\n", "q10k_tbl_15": "\tOctober 31 2020\t\t\n\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\nDeveloped technology\t7697\t(5970)\t1727\nCustomer relationships\t4287\t(2128)\t2159\nTrade names\t909\t(444)\t465\nTotal\t12893\t(8542)\t4351\n", "q10k_tbl_16": "\tJanuary 31 2020\t\t\n\tGross Carrying Amount\tAccumulated Amortization\tNet Carrying Amount\nDeveloped technology\t7697\t(5152)\t2545\nCustomer relationships\t4287\t(1775)\t2512\nTrade names\t909\t(346)\t563\nTotal\t12893\t(7273)\t5620\n", "q10k_tbl_17": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nPurchased intangible assets amortization expense\t423\t423\t1269\t1353\n", "q10k_tbl_18": "\tOctober 31 2020\tJanuary 31 2020\nAccrued taxes\t4384\t4803\nAccrued outside services and consulting\t2190\t2800\nAccrued hosting and third-party licenses\t1865\t1846\nAccrued property and equipment\t1\t3442\nOther accrued expenses\t5641\t4840\nTotal\t14081\t17731\n", "q10k_tbl_19": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nRevenue recognized from deferred revenue\t57160\t42524\t101195\t73692\n", "q10k_tbl_20": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nUnited States\t49753\t49437\t148665\t142039\nOthers\t27493\t22385\t77468\t63625\nTotal\t77246\t71822\t226133\t205664\nPercentage of revenue by geographic area:\t\t\t\t\nUnited States\t64%\t69%\t66%\t69%\nOther\t36%\t31%\t34%\t31%\n", "q10k_tbl_21": "\tOctober 31 2020\tJanuary 31 2020\nOperating lease right-of-use assets\t48992\t54286\nOperating lease liabilities current portion\t9181\t5755\nOperating lease liabilities net of current portion\t55843\t62307\nTotal operating lease liabilities\t65024\t68062\n", "q10k_tbl_22": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nOperating lease cost1\t2989\t3620\t8920\t8178\n", "q10k_tbl_23": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nShort-term operating lease cost\t32\t215\t130\t517\n", "q10k_tbl_24": "\tMaturities of Operating Lease Liabilities\n2021 (remainder of the year)\t2829\n2022\t12210\n2023\t11678\n2024\t9564\n2025\t6386\nThereafter\t36139\nTotal lease payments\t78806\nLess imputed interest\t(13782)\nPresent value of lease liabilities\t65024\n", "q10k_tbl_25": "\tOctober 31 2020\tJanuary 31 2020\nWeighted-average remaining operating lease term\t7.9 years\t8.3 years\nWeighted-average operating lease discount rate\t4.7%\t4.7%\n", "q10k_tbl_26": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nSupplemental Cash Flow Information\t\t\t\t\nCash paid (received) for amounts included in the measurement of lease liabilities:\t\t\t\t\nCash paid for operating leases\t1859\t1806\t6822\t6371\nCash received on operating lease incentives\t0\t(5279)\t0\t(5279)\nOperating cash flows resulting from operating leases\t1859\t(3473)\t6822\t1092\nNew right-of-use assets obtained in exchange for lease liabilities:\t\t\t\t\nOperating leases obtained\t0\t0\t1064\t37647\n", "q10k_tbl_27": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nLoss before income taxes\t(16361)\t(17816)\t(53254)\t(58922)\nIncome tax provision\t412\t421\t1129\t720\nEffective tax rate\t(2.5)%\t(2.4)%\t(2.1)%\t(1.2)%\n", "q10k_tbl_28": "\tForeign Currency Translation Adjustment\tUnrealized Gain (Loss) on Available-for-Sale Securities\tTotal\nBalance January 31 2020\t95\t93\t188\nForeign currency translation adjustment\t(71)\t0\t(71)\nUnrealized loss on available-for-sale securities\t0\t(20)\t(20)\nBalance October 31 2020\t24\t73\t97\n", "q10k_tbl_29": "\tShares Subject To Outstanding Stock Options\tWeighted-Average Exercise Price\tAverage Remaining Contractual Term (Years)\tAggregate Intrinsic Value\nBalance as of January 31 2020\t13701\t7.64\t6.9\t107186\nGranted\t2042\t11.49\t\t\nExercised\t(2077)\t4.27\t\t\nForfeited\t(1232)\t12.23\t\t\nBalance as of October 31 2020\t12434\t8.39\t6.7\t39210\nExercisable as of October 31 2020\t7912\t4.95\t5.5\t39130\nVested and expected to vest as of October 31 2020\t12037\t8.24\t6.7\t39102\n", "q10k_tbl_30": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nWeighted-average grant date fair value per share of options granted during each respective period\t4.06\t5.55\t4.57\t7.10\nAggregate intrinsic value of options exercised during each respective period\t1245\t4164\t17564\t31490\n", "q10k_tbl_31": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nFair value of common stock\t9.99 - $10.00\t13.67 - $14.82\t9.99 - $13.51\t13.67 - $23.64\nExpected volatility\t42.3% - 42.4%\t38.3% - 38.9%\t41.4% - 42.4%\t35.0% - 39.0%\nExpected term (years)\t6.0 - 6.1\t5.6 - 6.5\t6.0 - 6.1\t5.6 - 6.5\nRisk-free interest rate\t0.4% - 0.5%\t1.4% - 1.7%\t0.4% - 0.5%\t1.4% - 2.5%\nExpected dividend yield\t0\t0\t0\t0\n", "q10k_tbl_32": "\tNumber of RSU and Restricted Shares Outstanding\tWeighted-Average Grant Date Fair Value\nBalance as of January 31 2020\t5029\t18.09\nGranted\t6925\t11.25\nVested\t(2091)\t14.87\nForfeited\t(1186)\t16.26\nBalance as of October 31 2020\t8677\t13.66\n", "q10k_tbl_33": "\tNine Months Ended October 31\t\n\t2020\t2019\nFair value of common stock\t13.50\t14.73\nExpected volatility\t50.7% - 69.1%\t36.0% - 42.6%\nExpected term (years)\t0.5 - 2.0\t0.5 - 2.0\nRisk-free interest rate\t0.2%\t1.9% - 2.2%\nExpected dividend yield\t0\t0\n", "q10k_tbl_34": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nCost of subscription revenue\t1224\t683\t3541\t1987\nCost of professional services revenue\t2508\t1814\t7290\t5157\nResearch and development\t4914\t4015\t14401\t11690\nSales and marketing\t3868\t3728\t11721\t8071\nGeneral and administrative\t2259\t1598\t6980\t4508\nTotal stock-based compensation expense\t14773\t11838\t43933\t31413\n", "q10k_tbl_35": "\tStock Options\tRSUs\tESPP\nUnrecognized compensation costs\t22657\t100700\t7006\nWeighted-average remaining recognition period\t2.6 years\t3.1 years\t1.1 years\n", "q10k_tbl_36": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nNumerator:\t\t\t\t\nNet loss\t(16773)\t(18237)\t(54383)\t(59642)\nDenominator:\t\t\t\t\nWeighted-average common shares outstanding basic and diluted\t118460\t111835\t116824\t110436\nNet loss per share basic and diluted\t(0.14)\t(0.16)\t(0.47)\t(0.54)\n", "q10k_tbl_37": "\tOctober 31\t\n\t2020\t2019\nIssued and outstanding stock options\t12434\t14098\nUnvested RSUs and restricted stock issued and outstanding\t8677\t4206\nShares committed under ESPP\t302\t313\nTotal\t21413\t18617\n", "q10k_tbl_38": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nRevenue:\t\t\t\t\nSubscription\t62020\t54038\t177228\t151996\nProfessional services\t15226\t17784\t48905\t53668\nTotal revenue\t77246\t71822\t226133\t205664\nCost of revenue:\t\t\t\t\nSubscription¹\t15611\t13858\t43627\t38589\nProfessional services¹\t17655\t20443\t55011\t61445\nTotal cost of revenue\t33266\t34301\t98638\t100034\nGross profit\t43980\t37521\t127495\t105630\nOperating expenses:\t\t\t\t\nResearch and development¹\t18907\t17903\t55877\t53662\nSales and marketing¹\t28058\t28027\t85162\t80818\nGeneral and administrative¹\t13024\t10597\t41672\t32366\nTotal operating expenses\t59989\t56527\t182711\t166846\nLoss from operations\t(16009)\t(19006)\t(55216)\t(61216)\nInterest and other (expense) income net\t(352)\t1190\t1962\t2294\nLoss before income taxes\t(16361)\t(17816)\t(53254)\t(58922)\nIncome tax provision\t412\t421\t1129\t720\nNet loss\t(16773)\t(18237)\t(54383)\t(59642)\n", "q10k_tbl_39": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nCost of subscription revenue\t1224\t683\t3541\t1987\nCost of professional services revenue\t2508\t1814\t7290\t5157\nResearch and development\t4914\t4015\t14401\t11690\nSales and marketing\t3868\t3728\t11721\t8071\nGeneral and administrative\t2259\t1598\t6980\t4508\nTotal stock-based compensation expense\t14773\t11838\t43933\t31413\n", "q10k_tbl_40": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nRevenue:\t\t\t\t\nSubscription\t80%\t75%\t78%\t74%\nProfessional services\t20\t25\t22\t26\nTotal revenue\t100\t100\t100\t100\nCost of revenue:\t\t\t\t\nSubscription\t20\t19\t19\t19\nProfessional services\t23\t28\t24\t30\nTotal cost of revenue\t43\t48\t44\t49\nGross profit\t57\t52\t56\t51\nOperating expenses:\t\t\t\t\nResearch and development\t24\t25\t25\t26\nSales and marketing\t36\t39\t38\t39\nGeneral and administrative\t17\t15\t18\t16\nTotal operating expenses\t78\t79\t81\t81\nLoss from operations\t(21)\t(26)\t(24)\t(30)\nInterest and other (expense) income net\t0\t2\t1\t1\nLoss before income taxes\t(21)\t(25)\t(24)\t(29)\nIncome tax provision\t1\t1\t0\t0\nNet loss\t(22)%\t(25)%\t(24)%\t(29)%\n", "q10k_tbl_41": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nRevenue:\t\t\t\t\nSubscription\t62020\t54038\t7982\t15%\nProfessional services\t15226\t17784\t(2558)\t(14)%\nTotal revenue\t77246\t71822\t5424\t8%\nPercentage of revenue:\t\t\t\t\nSubscription\t80%\t75%\t\t\nProfessional services\t20\t25\t\t\nTotal revenue\t100%\t100%\t\t\n", "q10k_tbl_42": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nCost of revenue:\t\t\t\t\nSubscription\t15611\t13858\t1753\t13%\nProfessional services\t17655\t20443\t(2788)\t(14)%\nTotal cost of revenue\t33266\t34301\t(1035)\t(3)%\nGross margin:\t\t\t\t\nSubscription\t75%\t74%\t\t\nProfessional services\t(16)\t(15)\t\t\nTotal gross margin\t57%\t52%\t\t\n", "q10k_tbl_43": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nResearch and development\t18907\t17903\t1004\t6%\nPercentage of total revenue\t24%\t25%\t\t\n", "q10k_tbl_44": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nSales and marketing\t28058\t28027\t31\t-%\nPercentage of total revenue\t36%\t39%\t\t\n", "q10k_tbl_45": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nGeneral and administrative\t13024\t10597\t2427\t23%\nPercentage of total revenue\t17%\t15%\t\t\n", "q10k_tbl_46": "\tThree Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nInterest and other (expense) income net\t(352)\t1190\t(1542)\t(130)%\n", "q10k_tbl_47": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nRevenue:\t\t\t\t\nSubscription\t177228\t151996\t25232\t17%\nProfessional services\t48905\t53668\t(4763)\t(9)%\nTotal revenue\t226133\t205664\t20469\t10%\nPercentage of revenue:\t\t\t\t\nSubscription\t78%\t74%\t\t\nProfessional services\t22\t26\t\t\nTotal revenue\t100%\t100%\t\t\n", "q10k_tbl_48": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nCost of revenue:\t\t\t\t\nSubscription\t43627\t38589\t5038\t13%\nProfessional services\t55011\t61445\t(6434)\t(10)%\nTotal cost of revenue\t98638\t100034\t(1396)\t(1)%\nGross margin:\t\t\t\t\nSubscription\t75%\t75%\t\t\nProfessional services\t(12)\t(14)\t\t\nTotal gross margin\t56%\t51%\t\t\n", "q10k_tbl_49": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nResearch and development\t55877\t53662\t2215\t4%\nPercentage of total revenue\t25%\t26%\t\t\n", "q10k_tbl_50": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nSales and marketing\t85162\t80818\t4344\t5%\nPercentage of total revenue\t38%\t39%\t\t\n", "q10k_tbl_51": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nGeneral and administrative\t41672\t32366\t9306\t29%\nPercentage of total revenue\t18%\t16%\t\t\n", "q10k_tbl_52": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nInterest and other (expense) income net\t1962\t2294\t(332)\t(14)%\n", "q10k_tbl_53": "\tNine Months Ended October 31\t\t\t\n\t2020\t2019\t Change\t% Change\n\t(dollars in thousands)\t\t\t\nIncome tax provision\t1129\t720\t409\t57%\n", "q10k_tbl_54": "\tNine Months Ended October 31\t\n\t2020\t2019\nNet cash provided by (used in) operating activities\t8151\t(7599)\nNet cash provided by (used in) investing activities\t31947\t(9518)\nNet cash provided by financing activities\t9745\t12130\nEffect of exchange rates on cash and cash equivalents\t(71)\t(416)\nNet increase (decrease) in cash and cash equivalents\t49772\t(5403)\n", "q10k_tbl_55": "\tTotal\tLess than 1 year\t1-3 years\t3-5 years\tMore than 5 years\nOperating lease obligations¹\t82702\t13192\t24326\t13703\t31481\nDebt principal and interest²\t7396\t4558\t2838\t0\t0\nOther contractual obligations³\t19141\t19141\t0\t0\t0\n\t109239\t36891\t27164\t13703\t31481\n", "q10k_tbl_56": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nGAAP loss from operations\t(16009)\t(19006)\t(55216)\t(61216)\nAdd / (Subtract):\t\t\t\t\nStock-based compensation expense\t14773\t11838\t43933\t31413\nAmortization of acquired intangibles\t423\t423\t1269\t1353\nInternal-use software\t(177)\t(529)\t(2446)\t(1376)\nCharitable donations\t0\t0\t1000\t0\nCertain litigation\t967\t0\t2202\t0\nNon-GAAP loss from operations\t(23)\t(7274)\t(9258)\t(29826)\n", "q10k_tbl_57": "\tThree Months Ended October 31\t\tNine Months Ended October 31\t\n\t2020\t2019\t2020\t2019\nNet cash provided by (used in) operating activities\t1360\t3509\t8151\t(7599)\nLess:\t\t\t\t\nPurchases of property and equipment net of insurance recoveries\t(1386)\t(8636)\t(11086)\t(12878)\nFree cash flow\t(26)\t(5127)\t(2935)\t(20477)\n", "q10k_tbl_58": "Exhibit Number\t\t\tIncorporated By Reference\t\t\t\tFiled or Furnished Herewith\nExhibit Description\t\tForm\t\tFile No.\tExhibit\tFiling Date\n31.1\tCertification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act\t\t\t\t\t\tX\n31.2\tCertification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act\t\t\t\t\t\tX\n32.1*\tCertification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\t\t\t\t\t\tX\n32.2*\tCertification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\t\t\t\t\t\tX\n101.INS\tInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document\t\t\t\t\t\tX\n101.SCH\tInline XBRL Taxonomy Extension Schema Document\t\t\t\t\t\tX\n101.CAL\tInline XBRL Taxonomy Extension Calculation Linkbase Document\t\t\t\t\t\tX\n101.DEF\tInline XBRL Taxonomy Extension Definition Linkbase Document\t\t\t\t\t\tX\n101.LAB\tInline XBRL Taxonomy Extension Label Linkbase Document\t\t\t\t\t\tX\n101.PRE\tInline XBRL Taxonomy Extension Presentation Linkbase Document\t\t\t\t\t\tX\n104\tCover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).\t\t\t\t\t\tX\n"}{"bs": "q10k_tbl_2", "is": "q10k_tbl_3", "cf": "q10k_tbl_6"}None
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 class
Trading Symbol(s)
Name on each exchange on which registered
Class A common stock, par value $0.0001 per share
ZUO
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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 filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
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.
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, 2020
January 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
104,047
$
54,275
Short-term investments
74,710
117,662
Accounts receivable, net
59,272
68,875
Deferred commissions, current portion
11,570
9,585
Prepaid expenses and other current assets
16,887
16,387
Total current assets
266,486
266,784
Property and equipment, net
35,066
33,489
Operating lease right-of-use assets
48,992
54,286
Purchased intangibles, net
4,351
5,620
Deferred commissions, net of current portion
19,219
19,591
Goodwill
17,632
17,632
Other assets
3,588
4,825
Total assets
$
395,334
$
402,227
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
231
$
2,098
Accrued expenses and other current liabilities
14,081
17,731
Accrued employee liabilities
26,740
24,193
Debt, current portion
4,432
4,432
Deferred revenue, current portion
107,308
111,411
Operating lease liabilities, current portion
9,181
5,755
Total current liabilities
161,973
165,620
Debt, net of current portion
2,790
6,094
Deferred revenue, net of current portion
702
1,007
Operating lease liabilities, net of current portion
55,843
62,307
Deferred tax liabilities
1,564
1,569
Other long-term liabilities
4,171
971
Total liabilities
227,043
237,568
Commitments and contingencies (Note 13)
Stockholders’ equity:
Class A common stock
11
10
Class B common stock
1
2
Additional paid-in capital
613,413
555,307
Accumulated other comprehensive income
97
188
Accumulated deficit
(445,231)
(390,848)
Total stockholders’ equity
168,291
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,
2020
2019
2020
2019
Revenue:
Subscription
$
62,020
$
54,038
$
177,228
$
151,996
Professional services
15,226
17,784
48,905
53,668
Total revenue
77,246
71,822
226,133
205,664
Cost of revenue:
Subscription
15,611
13,858
43,627
38,589
Professional services
17,655
20,443
55,011
61,445
Total cost of revenue
33,266
34,301
98,638
100,034
Gross profit
43,980
37,521
127,495
105,630
Operating expenses:
Research and development
18,907
17,903
55,877
53,662
Sales and marketing
28,058
28,027
85,162
80,818
General and administrative
13,024
10,597
41,672
32,366
Total operating expenses
59,989
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 provision
412
421
1,129
720
Net loss
(16,773)
(18,237)
(54,383)
(59,642)
Comprehensive loss:
Foreign currency translation adjustment
18
(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 diluted
118,460
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 A
Class B
Additional
Other
Total
Common Stock
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Capital
Income
Deficit
Equity
Balance, January 31, 2020
97,134
$
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 ESPP
399
—
—
—
4,214
—
—
4,214
Charitable donation of stock
74
—
—
—
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, 2020
108,050
$
11
11,034
$
1
$
613,413
$
97
$
(445,231)
$
168,291
Three Months Ended October 31, 2020
Accumulated
Class A
Class B
Additional
Other
Total
Common Stock
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Capital
Income
Deficit
Equity
Balance, July 31, 2020
105,282
$
11
12,875
$
1
$
597,736
$
182
$
(428,458)
$
169,472
Conversion of Class B common stock to Class A common stock
2,066
—
(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 releases
703
—
25
—
—
—
—
—
Stock-based compensation
—
—
—
—
14,773
—
—
14,773
Other comprehensive loss
—
—
—
—
—
(85)
—
(85)
Net loss
—
—
—
—
—
—
(16,773)
(16,773)
Balance, October 31, 2020
108,050
$
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 A
Class B
Additional
Other
Total
Common Stock
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Capital
Income
Deficit
Equity
Balance, January 31, 2019
77,119
$
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 ESPP
422
—
—
—
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, 2019
93,598
$
8
19,462
$
3
$
534,642
$
186
$
(367,096)
$
167,743
Three Months Ended October 31, 2019
Accumulated
Class A
Class B
Additional
Other
Total
Common Stock
Common Stock
Paid-in
Comprehensive
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Capital
Income
Deficit
Equity
Balance, July 31, 2019
87,875
$
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, 2019
93,598
$
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,
2020
2019
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 accretion
11,172
8,440
Stock-based compensation
43,933
31,413
Provision for credit losses
3,038
3,229
Donation of common stock to charitable foundation
1,000
—
Amortization of deferred commissions
8,558
7,049
Reduction in carrying amount of right-of-use assets
6,358
6,310
Other
182
121
Changes in operating assets and liabilities:
Accounts receivable
6,565
(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 liabilities
5,697
4,624
Deferred revenue
(4,408)
7,323
Operating lease liabilities
(6,515)
(1,092)
Net cash provided by (used in) operating activities
8,151
(7,599)
Cash flows from investing activities:
Purchases of property and equipment
(12,074)
(12,878)
Insurance proceeds for damaged property and equipment
988
—
Purchases of short-term investments
(61,783)
(155,936)
Sales of short-term investments
2,511
3,496
Maturities of short-term investments
102,305
155,800
Net cash provided by (used in) investing activities
31,947
(9,518)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options
8,876
8,981
Proceeds of issuance of common stock under employee stock purchase plan
4,214
5,069
Repurchases of unvested common stock
(15)
(70)
Principal payments on long-term debt
(3,330)
(1,850)
Net cash provided by financing activities
9,745
12,130
Effect of exchange rates on cash and cash equivalents
(71)
(416)
Net increase (decrease) in cash and cash equivalents
49,772
(5,403)
Cash and cash equivalents, beginning of period
54,275
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 Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
U.S. government securities
$
6,032
$
49
$
—
$
6,081
Corporate bonds
27,034
57
(4)
27,087
Commercial paper
41,542
—
—
41,542
Total short-term investments
$
74,608
$
106
$
(4)
$
74,710
January 31, 2020
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
U.S. government securities
$
34,053
$
41
$
—
$
34,094
Corporate bonds
45,601
81
—
45,682
Commercial paper
37,886
—
—
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 input
Input definition
Level 1
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2
Inputs 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 3
Unobservable 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 Company’s fair value hierarchy for its financial assets measured at fair value on a recurring basis (in thousands):
October 31, 2020
Level 1
Level 2
Level 3
Total
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 1
Level 2
Level 3
Total
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, 2020
January 31, 2020
Prepaid software subscriptions
$
5,503
$
4,036
Prepaid insurance
3,388
1,630
Prepaid hosting costs
1,769
1,611
Contract assets
1,484
2,476
Insurance recovery receivable
454
1,442
Taxes
437
729
Other
3,852
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, 2020
January 31, 2020
Software
$
18,965
$
15,329
Leasehold improvements
18,868
16,865
Servers
14,177
14,596
Computer equipment
12,758
11,249
Furniture and fixtures
5,169
4,987
Vehicles
104
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,
2020
2019
2020
2019
Internal-use software costs capitalized during the period
$
768
$
1,571
$
3,490
$
3,187
October 31, 2020
January 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,
2020
2019
2020
2019
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):