The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the fiscal year endedJanuary 31, 2022 included in our Annual Report on Form 10-K filed with theSecurities and Exchange Commission ("SEC") onApril 4, 2022 (the "2022 Form 10-K"). This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading " Special Note Regarding Forward-Looking Statements " in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading " Risk Factors " in this Quarterly Report on Form 10-Q and under Part I, Item 1A, "Risk Factors," in the 2022 Form 10-K for discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are at the forefront of technology innovation and thought leadership in
automation, creating an end-to-end platform that provides automation with user
emulation at its core. Our platform leverages computer vision and artificial
intelligence ("AI") to empower software robots to emulate human behavior and
execute specific business processes, eliminating the need for employees to
execute certain manual and mundane tasks and allowing them to focus on more
value-added work. Our platform enables organizations to seamlessly automate
business processes ranging from those in legacy information technology ("IT")
systems and on-premises applications to new cloud-native infrastructure and to
address a wide variety of use cases, from simple tasks to long-running, complex
processes.
Our platform is designed to transform the way humans work. We provide customers
with a robust set of capabilities to discover automation opportunities and to
build, manage, run, engage, measure, and govern automations across departments
within an organization. Our platform leverages the power of AI-based computer
vision to enable our software robots to perform a vast array of actions-
including, but not limited to, logging into applications, extracting information
from documents, and updating forms and databases- as a human would when
executing business processes, driving improved operational efficiency for our
customers and enabling them to deliver on key digital initiatives with greater
speed, agility, and accuracy.
Our platform is designed to interact with and automate processes across a
company's existing enterprise stack. As a result, our customers can leverage the
power of our platform without the need to replace or change existing business
applications and with lower overall IT infrastructure cost. Our platform is
purpose-built to be used by employees across an organization, and enables them
quickly build automations for both existing and new processes. Employees can
seamlessly maintain and scale automations across multiple deployment options,
constantly improve and evolve automations, and continuously track and measure
the performance of automations, all without substantial technical experience.
At the core of our automation platform is a set of capabilities that emulates
human behavior, which provides our customers with the ability to automate both
simple and complex use cases. Automations on our platform can be built,
consumed, managed, and governed by any employee who interacts with computers,
resulting in the potential for broad applicability of our platform across
departments within an organization. Society is at a turning point in how
organizations execute work, and we believe the ability to leverage software to
enrich the employee experience will unlock tremendous value and efficiency
opportunities, particularly in the current tight labor market. While we are
still in the early days of a multi-year journey to the fully automated
enterprise, momentum is growing as organizations across the world begin to
understand the transformational benefits of automation.
Founded in a Bucharest, Romania apartment in 2005, UiPath was incorporated in
2015 as a company principally focused on building automation scripts and
developing computer vision technology, which remains the foundation of our
platform today. Since that time, we have developed and enhanced our RPA
capabilities, launched new products, and expanded our operations across the
globe. We are continuously improving and expanding our platform and seek to
deliver technology that is integral to the business strategy of our customers;
for example, in fiscal 2023 we announced the addition of natural language
processing ("NLP") capabilities to our suite of offerings.
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We provide a comprehensive range of automation solutions via a suite of interrelated software offerings. We generate revenue from the sale of licenses for our proprietary software, maintenance and support for our software, right to access certain products that are hosted by us (i.e., software as a service, or SaaS), and other services, including professional services. Our license fees are based primarily on the number of users who access our software and the number of automations running on our platform. Our license agreements generally have annual terms, and some of our license agreements have multi-year terms. We generally do not sell standalone licenses with a term of less than one year. However, during the term of an annual contract or the last year of a multi-year contract, our customers may enter into an additional license agreement with a termination date that is coterminous with the anniversary date of such annual contract. Additionally, we provide maintenance and support for our software as well as non-recurring professional services to facilitate the adoption of our platform. Our professional services complement the capabilities of our customers and of our partners as they improve customers' time-to-market and optimize business outcomes using our platform. Our non-recurring professional services include use case development and deployment, solutions architecting, implementation consulting, and training. Our go-to-market model consists of an enterprise field sales force supplemented by an inside sales team focused on small and mid-sized customers, and a global strategic sales team focused on the largest global customers. As ofJuly 31, 2022 , we had more than 10,500 customers. Many of our customers expand the scope and size of use cases of our platform across their organizations as they quickly realize the power of our platform. We believe that the success of our land-and-expand business model is centered on our ability to deliver significant value in a very short time. We grow with our customers as they identify and expand the number of business processes to automate, which increases the number of robots deployed and the number of users interacting with our robots. A crucial component of our go-to-market strategy is our partner and channel ecosystem, which extends our local and global reach and helps to ensure that customers are able to rapidly build, deploy, and scale automations on our platform. Our business partners include global and regional system integrators, value-added resellers, and business consultants. We provide tiering recognition through Diamond, Gold, Silver, and Registered levels for partners that meet competency requirements and deliver and maintain a specified number of satisfied customers. These partnerships enhance our market presence and drive greater sales efficiencies. In addition, we have built strong technology partnerships and alliances to enable a large number of connectors and other technical capabilities necessary to meet the breadth of our customer needs. We generated revenue of$242.2 million and$195.5 million , representing a growth rate of 24%, and incurred a net loss of$120.4 million and$100.0 million in the three months endedJuly 31, 2022 and 2021, respectively. We generated revenue of$487.3 million and$381.7 million , representing a growth rate of 28%, and incurred a net loss of$242.9 million and$339.7 million in the six months endedJuly 31, 2022 and 2021, respectively. Our operating cash flows were$(76.6) million and$(23.5) million for the six months endedJuly 31, 2022 and 2021, respectively. Impact of COVID-19 When the COVID-19 pandemic began to unfold, we took decisive action across our internal and customer operations to ensure the resilience of our company and the safety of our employees. We temporarily shut down all offices and offered our employees technology stipends to encourage remote working, postponed most of our physical conferences and other customer and promotional events, implemented global travel restrictions, reduced headcount and expenses related to event marketing, and engaged in other discretionary cost-saving measures. We have now reopened offices and are again holding in-person meetings and events. We plan to continue to comply with applicable government orders and public health guidelines. The majority of our employees continue to work remotely, many on a hybrid basis. We have a distributed workforce and our employees are accustomed to remote work. Our operational rigor, digital infrastructure, and global footprint have enabled us to support our customers navigating new challenges presented by the pandemic and existing needs to automate. Global demand for automation continues as automation becomes more critical for business execution and performance in a remote working environment, and we have continued to invest in the development and marketing of our automation platform to meet that demand. For further information, see the section titled " Risk Factors " included elsewhere in this Quarterly Report on Form 10-Q. 28
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Key Performance Metrics
We track the annualized renewal run rate (“ARR”) to help us measure and evaluate the effectiveness of our operations:
ARR is the key performance metric we use in managing our business because it illustrates our ability to acquire new subscription customers and to maintain and expand our relationship with existing subscription customers. We define ARR as annualized invoiced amounts per solution SKU from subscription licenses and maintenance obligations assuming no increases or reductions in their subscriptions. ARR does not include the costs we may incur to obtain such subscription licenses or provide such maintenance, and does not reflect any actual or anticipated reductions in invoiced value due to contract non-renewals or service cancellations other than for specific bad debt or disputed amounts. AtJuly 31, 2022 and 2021, our ARR was$1,043.3 million and$726.5 million , respectively, representing a growth rate of 44%. Approximately 25% of this growth rate was due to new customers and approximately 75% of this growth rate was due to existing customers. Our dollar-based net retention rate, which represents the net expansion of ARR from existing customers over the preceding 12 months, was 132% and 144% as ofJuly 31, 2022 and 2021, respectively. We calculate dollar-based net retention rate as of a period end by starting with ARR from the cohort of all customers as of 12 months prior to such period end ("Prior Period ARR"). We then calculate ARR from these same customers as of the current period end ("Current Period ARR"). Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months, but does not include ARR from new customers in the current period. We then divide the total Current Period ARR by the total Prior Period ARR to arrive at the point-in-time dollar-based net retention rate. Our ARR may fluctuate as a result of a number of factors, including customers' satisfaction or dissatisfaction with our platform and professional services, pricing, competitive offerings, economic conditions, overall changes in our customers' spending levels, and our ability to successfully execute on our strategic goals. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or to replace these items. For clarity, we use annualized invoiced amounts per solution SKU rather than revenue calculated in accordance withU.S. GAAP to calculate our ARR. Our invoiced amounts are not matched to transfer of control of the performance obligations associated with the underlying subscription licenses and maintenance obligations as they are with respect to our GAAP revenue. This can result in timing differences between our GAAP revenue and ARR calculations. Our ARR calculation simply takes our invoiced amounts per solution SKU under a subscription license or maintenance agreement and divides that amount by the invoice term and multiplies by 365 days to derive the annualized value. In contrast, for our revenue calculated in accordance with GAAP, subscription licenses revenue derived from the sale of term-based licenses hosted on-premises is recognized at the point in time when the customer is able to use and benefit from our software, which is generally upon delivery to the customer or upon the commencement of the renewal term, and maintenance, support, and SaaS revenue is recognized ratably over the term of the arrangement. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates, duration, and renewal rates, and does not include invoiced amounts reported as perpetual licenses or professional services revenue in our condensed consolidated statements of operations. Investors should not place undue reliance on ARR as an indicator of our future or expected results. Moreover, our presentation of ARR may differ from similarly titled metrics presented by other companies and may not be comparable to such other metrics. For further information, see the section titled "Risk Factors-Risks Related to Our Business, Products, Operations, and Industry" included in the 2022 Form 10-K. 29
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A summary of data related to ARR in
At July 31,
2022 2021
(dollars in thousands)
ARR $ 1,043,286 $ 726,467
Incremental ARR 316,819 273,000
Customers with ARR greater than $1 million:
Number of customers 190
118
Percent of current period revenue 40 % 35 % Customers with ARR greater than$100 thousand: Number of customers 1,660
1,247
Percent of current period revenue 80 %
75%
Dollar-based net retention rate 132 %
144%
Key Factors Affecting Our Performance
Our results of operations and financial condition are impacted by the macro factors affecting our industry, including the proliferation of cloud-based applications, the cost of skilled human capital, and the global demand for automation solutions. While our business is influenced by these macro factors, our results of operations are more directly affected by certain company-specific factors, including:
Growing Our Global Customer Base
We believe there continues to be a substantial opportunity to continue to grow our customer base. Additionally, we believe that as more organizations adopt our automation platform and experience quantifiable competitive advantages, other organizations will also adopt automation as a necessary tool to compete. While we sell to organizations of all sizes and across a broad range of industries, our go-to-market team's key focus is on the largest organizations, including large enterprises and governments. We also use an inside sales team focused on small and mid-sized businesses. We intend to grow our customer base through revised segmentation whereby we focus on key accounts with significant expansion opportunity and leverage our emerging enterprise team to acquire new customers at a lower cost of sale. We believe this will increase sales velocity and appropriately align resources to long-term customer potential. We define our number of customers as the number of accounts with a unique account identifier for which we have an active subscription in the period indicated, and include in our customer count entities to which we have sold our products either directly or through a channel partner. Users of our free trials or tier are not included in our customer count. A single organization with multiple divisions, segments, or subsidiaries is counted as a single customer. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity, and specifically excludes non-paying partners and resellers.
Expanding Our Current Customer Base
Our customer base represents a significant opportunity for further sales expansion. We had over 10,500 and over 9,100 customers as ofJuly 31, 2022 and 2021, respectively. We employ a land-and-expand business model centered around helping customers realize business outcomes such as revenue growth, transformed cost structures, efficiency, and speed. We believe there is significant opportunity for us to become a strategic partner to our customers in their automation journeys and drive further sales expansion through the following vectors:
•deploy more robots in different departments;
•give more employees their own robot assistants;
• increase the use of the platform; and
•expand the use cases for automation in the enterprise to drive increased use of robots and capacity consumption of our various products.
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Our customers often expand the deployment of our platform across large teams and more broadly within the enterprise as they find new use cases for our platform and their employees increasingly interact with and gain confidence in working with robots. The power of our land-and-expand model is evidenced by our dollar-based net retention rate and our customers exceeding significant ARR thresholds, described in the section titled " -Key Performance Metric ." We intend to continue to invest in enhancing awareness of our brand and developing more products, features, and functionality, which we believe are important factors to achieve widespread adoption of our platform. Our ability to increase sales to existing customers will depend on a number of factors, including our customers' satisfaction with our solution, competition, pricing, and overall changes in our customers' IT spending levels. Driving Preference and Share of System Integrators, Value-Added Resellers, and Business Consultants Selling the Value Propositions and Capabilities of Digital Transformation We are focused on maintaining and growing our ecosystem of partners that build, train, and certify skills in our technology as well as deploy our technology on behalf of their customers. We have built a global partner ecosystem of systems integrators, value-added resellers, business consultants, technology partners, and public cloud vendors. Our partner network includes, among others,Accenture LLP , Capgemini SE, Cognizant Technology Solutions Corporation, Deloitte, EY, Infosys Limited, International Business Machines Corporation, PwC, Tata Consultancy Services Limited, and Wipro Limited. We provide a tiering recognition through Diamond, Gold, Silver, and Registered levels for partners that meet competency requirements and deliver and maintain a tiered number of satisfied customers. InMay 2020 , we launched the UiPath Services Network program to recognize an elite network of partners accredited with advanced delivery skills. We also offer a professional services capability that augments our partners' efforts where necessary. Our ability to grow our partnership base depends on the competitiveness of our platform and the profitability of our relationship for our partners and potential partners. Further, we form strategic alliances, under which we license our software to a third-party alliance partner and contemporaneously agree to partner together to drive future sales of our products to customers as the third-party alliance partners create or expand their RPA managed service solutions.
Sustaining Innovation and Automation Leadership
Our success is dependent on our ability to sustain innovation and automation leadership in order to maintain our competitive advantage. We believe that we have built a differentiated automation platform and intend to continually increase the value we provide to our customers by investing in extending the capabilities of our platform. We have made and plan to continue to make significant investments in research and development to bolster our existing technology and enhance usability to improve our customers' productivity. InMay 2021 , we released version 21.4 of the UiPath Platform. Innovations included the all-new Automation Ops, designed to help customers manage and govern high scale deployments of theUiPath Studio family of products and Attended Robots enterprise-wide. New AI-powered capabilities were also introduced to speed the discovery and prioritization of processes to automate, led by the general availability of Task Mining. InNovember 2021 , we released version 21.10 of the UiPath Platform. Innovations in this release included UiPath Integration Service, which delivers API automation to help companies optimize the technologies they already have. Additionally, the introduction of Robot Auto-healing allows for the detection and remediation of robot issues without human intervention, and a host of other new features make our platform simpler, faster, and more gratifying for developers and end users. InMay 2022 , we released version 22.4 of the UiPath Platform. This release introduces new SaaS robots hosted in the UiPath Automation Cloud™, which allow customers to deploy unattended robots instantly without IT, resources, or infrastructure. Other improvements include a larger library of ready-to-go automations, upleveled security and governance, and support for macOS. We also collaborate with other leading technology companies to develop integrations that simplify the interoperability of our platform with their technology. Examples of integrations available to our customers include integrations with offerings fromAmazon Web Services Inc. , Adobe Inc., Alteryx Inc., Atlassian Corp Plc, Box, Inc.,Crowdstrike Inc. , DocuSign Inc., Microsoft Corporation, Oracle Corporation,Qlik Technologies Inc. , Salesforce.com, Inc., SAP SE, ServiceNow, Inc., Snowflake, Inc., and Workday, Inc. These pre-built integrations can accelerate the adoption of our platform within our customers' environments and speed the creation of automations that span multiple technologies.
We also maintain partnerships with leading cloud vendors, such as
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customers the benefits of cloud-based AI capabilities. We are committed to maintaining and growing our ecosystem of partners to continue to expand our market presence and drive greater sales efficiency.
In addition, we intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. For example, inMarch 2021 , we acquired Cloud Elements, a provider of a leading API integration platform for SaaS application providers and the digital enterprise. This acquisition brings technology and an experienced team, which we believe will accelerate our technology roadmap in areas such as native integrations and system event automation triggers. OnJuly 29, 2022 , we acquired all of the outstanding capital stock of Re:infer LTD. ("Re:infer"), a natural language processing company focused on unstructured documents and communications. Re:infer uses machine learning technology to mine context from communication messages and transform them into actionable data. With this acquisition,UiPath gains technology and an experienced team which we believe will accelerate our technology roadmap, expand the breadth of our current AI-powered automation capabilities, and unlock new automation opportunities for our customers.
Our future success depends on our ability to successfully develop, market and sell existing and new products to new and existing customers and maintain and expand our relationships with leading technology partners.
We Will Continue To Invest To Grow And Grow Our Business
We are focused on driving our growth potential over the long term. We believe that our market opportunity is substantial. We intend to continue to invest to grow our operations globally over time. We have a history of introducing successful new products and capabilities on our platform and we believe these investments will contribute to our long-term growth. We are committed to leveraging our scale and exercising disciplined resource allocation to ensure sustainable and profitable growth.
Components of Results of Operations
Revenue
We derive revenue from the sale of software licenses for use of our proprietary software, maintenance and support for our licenses, right to access certain software products we host (i.e., SaaS), and professional services. We offer a comprehensive range of automation solutions via a suite of interrelated software offerings. Customers can license our software and deploy our platform on-premises, in a public or private cloud, or in a hybrid environment. In addition, we offer a managed, multi-tenant, SaaS version of certain products (i.e., our SaaS products), which enables our customers to begin automating without the need to provision infrastructure, install applications or perform additional configurations. We also offer maintenance and support, training, and implementation services to our customers to facilitate their adoption of our platform.
In fiscal 2021, we began offering both hybrid solutions and SaaS products. Hybrid solutions consist of three performance obligations, consisting of a term license, maintenance and support, and SaaS.
During the third quarter of fiscal 2022, maintenance and support revenue was renamed subscription services revenue, and services and other revenue was renamed professional services and other revenue. We believe that that the new captions better reflect the composition of the revenue streams included in these line items on the condensed consolidated statements of operations.
Licenses
We primarily sell term licenses, which provide customers the right to use
software for a specified period of time. From time to time, we also sell
perpetual licenses that provide customers the right to use software for an
indefinite period of time. For both types of licenses, revenue is recognized at
the point in time at which the customer is able to use and benefit from the
software, which is generally upon delivery to the customer or upon commencement
of the renewal term.
Subscription Services
Subscription services revenue consists of maintenance and support revenue
generated through technical support and the provision of unspecified updates and
upgrades on a when-and-if-available basis for both term and perpetual license
arrangements. Maintenance and support for perpetual licenses is renewable,
generally on an
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annual basis, at the option of the customer. Maintenance and support represents a stand-ready obligation for which revenue is recognized ratably over the term of the arrangement.
Subscription services revenue also consists of revenue associated with our SaaS products, including those sold as part of our hybrid offerings. Our SaaS products have ready-made obligations to provide access to our software, and the related revenue is recognized properly over the contractual period of the arrangement beginning when or as control of the promised service begins to transfer to the customer.
Professional Services and Others
Professional services and other revenue consists of fees related to professional services for process automation, customer education, and training services. Our professional services contracts are structured on a time and materials or fixed price basis and related revenue is recognized as the services are rendered.
Cost of Revenue Licenses Cost of licenses revenue consists of all direct costs to deliver our licenses to customers, amortization of capitalized software development costs, direct costs related to third-party software resales, and amortization of acquired developed technology. Subscription Services Cost of subscription services revenue primarily consists of personnel-related expenses of our customer support and technical support teams, including salaries and bonuses, stock-based compensation expense, and employee benefit costs. Cost of subscription services revenue also includes third-party consulting services, hosting costs related to our SaaS products, amortization of acquired developed technology and capitalized software development costs related to SaaS products, and allocated overhead. Overhead is allocated to cost of subscription services revenue based on applicable headcount. We recognize these expenses as they are incurred. We expect cost of subscription services revenue to continue to increase in absolute dollars for the foreseeable future as our customer base grows. In the future, we expect further expansion of our cloud-based deployments. As cloud-based software and services become a larger percentage of our total revenue, we expect the cloud offering to impact the timing of our recognition of revenue as well as impact our operating margins due to an increase in hosting fees and cloud infrastructure costs.
Professional Services and Others
Cost of professional services and other revenue primarily consists of personnel-related expenses of our professional services team, including salaries and bonuses, stock-based compensation expense, and employee benefit costs. Cost of professional services and other revenue also includes expenses related to third-party consulting services and allocated overhead. Overhead is allocated to cost of professional services and other revenue based on applicable headcount. We recognize these expenses as they are incurred. We expect cost of professional services and other revenue to continue to increase in absolute dollars for the foreseeable future as our customer base grows.
Operating costs
Our operating expenses consist of sales and marketing, research and development,
and general and administrative expenses. Personnel-related expenses are the most
significant component of operating expenses and consist of salaries and bonuses,
stock-based compensation expense, and employee benefit costs. Operating expenses
also include allocated overhead. During fiscal years 2022 and 2021, certain
operating expenses, such as travel and entertainment, decreased, primarily as a
result of the COVID-19 pandemic. We have begun permitting travel and in-person
meetings and events, and expect a resumption of travel and entertainment and
related expenses during the remainder of fiscal year 2023, although the timing
and magnitude of these expenses will depend on a number of factors including the
trend of the pandemic and potential changes to travel restrictions and
stay-at-home orders.
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Sales and Marketing
Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing teams and related sales support teams, including salaries and bonuses, stock-based compensation expense, and employee benefit costs. Sales and marketing expenses also include sales and partner commissions, marketing event costs, advertising costs, travel, trade shows, other marketing materials, and allocated overhead. Similar to travel and entertainment, trade show expenses decreased in fiscal year 2021 and through the first half of fiscal year 2022 as a result of the COVID-19 pandemic. We have since seen trade show expenses resume. We expect that our sales and marketing expenses will increase in absolute dollars but decrease as a percentage of our total revenue over the long term. Our sales and marketing expenses may fluctuate as a percentage of our total revenue from period to period due to the timing and extent of these expenses. Research and Development Research and development expenses consist primarily of personnel-related expenses, including salaries and bonuses, stock-based compensation expense, and employee benefits costs for our research and development employees. Research and development costs are expensed as incurred, with the exception of certain software development costs which are eligible for capitalization. We expect that our research and development expenses will increase in absolute dollars for the foreseeable future as we continue to invest in efforts to develop new technology and enhance the functionality and capabilities of our existing products and platform infrastructure. Our research and development expenses may fluctuate as a percentage of our total revenue from period to period due to the timing and extent of these expenses. General and Administrative General and administrative expenses consist primarily of personnel-related expenses, including salaries and bonuses, stock-based compensation expense, and employee benefits costs associated with our finance, legal, human resources, compliance, and other administrative teams, as well as accounting and legal professional services fees, other corporate-related expenses including charitable contributions in connection with our Pledge 1% commitment, and allocated overhead. We expect that our general and administrative expenses will increase in absolute dollars for the foreseeable future, but will decrease as a percentage of our total revenue as our revenue grows over the longer term. Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Interest Income
Interest income consists of interest income earned on our cash deposits, cash and cash equivalent balances, and marketable securities.
Other Expenses, Net
Other expenses, net mainly consist of foreign exchange gains and losses.
Provision For Income Taxes
Provision for income taxes consists mainly of income taxes in certain foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on ourU.S. federal and state, Romanian, andU.K. deferred tax assets as we have concluded that it is more likely than not that these deferred tax assets will not be realized. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as by non-deductible expenses as permanent differences, and by changes in our valuation allowances. 34
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Results of Operations
The following tables set forth selected condensed consolidated statement of
operations data and such data as a percentage of total revenue for each of the
periods indicated:
Three Months Ended July 31, Six Months Ended July 31,
2022 2021 2022 2021
(in thousands) (in thousands)
Revenue:
Licenses $ 103,696 $ 95,547 $ 220,700 $ 195,763
Subscription services 124,656 90,319 240,150 167,961
Professional services and other 13,870 9,655 26,438 18,014
Total revenue 242,222 195,521 487,288 381,738
Cost of revenue:
Licenses (1) 2,170 2,434 4,707 4,888
Subscription services (1)(2)(3) 22,326 12,238 43,371 26,417
Professional services and other (2)(3) 20,080 20,922 41,514 53,299
Total cost of revenue 44,576 35,594 89,592 84,604
Gross profit 197,646 159,927 397,696 297,134
Operating expenses:
Sales and marketing (1)(2)(3) 181,547 144,268 371,329 350,019
Research and development (2)(3) 67,849 57,646 136,539 150,686
General and administrative (1)(2)(3) 68,443 55,834 125,973 130,249
Total operating expenses 317,839 257,748 633,841 630,954
Operating loss (120,193) (97,821) (236,145) (333,820)
Interest income 4,505 766 5,496 1,707
Other expense, net (600) (1,225) (3,411) (4,443)
Loss before income taxes (116,288) (98,280) (234,060) (336,556)
Provision for income taxes 4,090 1,746 8,879 3,133
Net loss $ (120,378) $ (100,026) $ (242,939) $ (339,689)
(1) Includes amortization of acquired intangible assets as follows: Revenue value of licenses
$ 562$ 636 $ 1,158 $ 1,282 Cost of subscription services revenue 330 330 660 440 Sales and marketing 413 427 827 588 General and administrative 46 - 92 - Total amortization of acquired intangible assets $ 1,351$ 1,393 $ 2,737 $ 2,310
(2) Includes stock-based compensation expense as follows: Cost of subscription services revenue $ 2,841 $
1,657$ 6,057 $ 7,871 Cost of professional services and other revenue 2,528 3,904 6,402 22,835 Sales and marketing 35,889 41,006 86,647 160,299 Research and development 23,501 23,978 50,124 89,594 General and administrative 23,493 22,068 40,476 62,849
Total stock-based compensation expense
$ 189,706 $ 343,448 (3) Includes employer payroll tax expense related to equity transactions as follows: Cost of subscription services revenue $ 62$ 186 $ 146$ 186 Cost of professional services and other revenue 62 1,079 141 1,079 Sales and marketing 1,202 8,364 2,629 8,679 Research and development 320 325 801 325 General and administrative 186 590 363 590 Total employer payroll tax expense related to equity transactions $ 1,832$ 10,544 $ 4,080 $ 10,859 35
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Three Months Ended July 31, Six Months Ended July 31,
2022 2021 2022 2021
(as a percentage of revenue) (as a percentage of revenue)
Revenue:
Licenses 43 % 49 % 45 % 51 %
Subscription services 51 % 46 % 49 % 44 %
Professional services and other 6 % 5 % 6 % 5 %
Total revenue 100 % 100 % 100 % 100 %
Cost of revenue:
Licenses 1 % 1 % 1 % 1 %
Subscription services 9 % 6 % 9 % 7 %
Professional services and other 8 % 11 % 8 % 14 %
Total cost of revenue 18 % 18 % 18 % 22 %
Gross profit 82 % 82 % 82 % 78 %
Operating expenses:
Sales and marketing 75 % 74 % 76 % 92 %
Research and development 28 % 29 % 28 % 39 %
General and administrative 29 % 29 % 26 % 34 %
Total operating expenses 132 % 132 % 130 % 165 %
Operating loss (50) % (50) % (48) % (87) %
Interest income 2 % - % 1 % - %
Other expense, net - % - % (1) % (1) %
Loss before income taxes (48) % (50) % (48) % (88) %
Provision for income taxes 2 % 1 % 2 % 1 %
Net loss (50) % (51) % (50) % (89) %
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Comparison of Three Months Ended
Revenue
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Licenses $ 103,696 $ 95,547 $ 8,149 9 %
Subscription services 124,656 90,319 34,337 38 %
Professional services and other 13,870 9,655 4,215 44 %
Total revenue $ 242,222 $ 195,521 $ 46,701 24 %
Total revenue increased by $46.7 million , or 24%, for the three months ended
July 31, 2022 compared to the three months ended July 31, 2021 , primarily due to
a $34.3 million increase in subscription services revenue and an $8.1 million
increase in licenses revenue. As we continued to expand our sales efforts in the
United States and internationally, total revenue grew across all regions. Of the
growth in total revenue, approximately 38% was attributable to new customers and
the remainder to existing customers. Subscription services revenue is recognized
ratably over the subscription term; therefore, the increase in subscription
services revenue is driven both by sales in prior periods for which we continue
to provide maintenance and support and by new sales in the current period.
Revenue Amount and Gross Margin
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Licenses $ 2,170 $ 2,434 $ (264) (11) %
Subscription services 22,326 12,238 10,088 82 %
Professional services and other 20,080 20,922 (842) (4) %
Total cost of revenue $ 44,576 $ 35,594 $ 8,982 25 %
Gross Margin 82 % 82 %
Total cost of revenue increased by $9.0 million , or 25%, for the three months
ended July 31, 2022 compared to the three months ended July 31, 2021 , mainly due
to an increase in cost of subscription services revenue. The increase in cost of
subscription services revenue was primarily driven by a $6.4 million increase in
personnel-related expenses, which included a $4.5 million increase in
salary-related and bonus expenses, mainly driven by increased headcount, a
$1.2 million increase in stock-based compensation, and a $0.7 million increase
in other payroll expenses. Cost of subscription services revenue was also
impacted by a $2.9 million increase in hosting costs and software services due
to increased usage. The decrease in cost of professional services and other
revenue was driven by a $3.7 million decrease in personnel-related expenses,
which included a $1.4 million decrease in stock-based compensation, a
$1.3 million decrease in salary-related expenses, and a $1.0 million decrease in
employer payroll tax related to employee equity transactions. These decreases
were partially offset by a $2.5 million increase in costs associated with the
use of third-party vendors to deliver professional services to our customers.
For three months ended
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Operating Expenses
Sales and Marketing
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Sales and marketing $ 181,547 $ 144,268 $ 37,279 26 %
Percentage of revenue 75 % 74 %
Sales and marketing expense increased by $37.3 million , or 26%, for the three
months ended July 31, 2022 compared to the three months ended July 31, 2021 . The
increase was primarily attributable to a $15.0 million increase in
personnel-related expenses, which included a $14.5 million increase in
salary-related expenses, mainly driven by increased headcount, a $10.2 million
increase in employee termination benefits related to our restructuring actions
beginning in the second quarter of fiscal 2023, a $3.0 million increase in
employee benefit costs, and a $1.9 million increase in general employee
severance. These costs were partially offset by a $5.1 million decrease in
stock-based compensation, largely driven by forfeitures, a $7.2 million decrease
in employer payroll tax expense related to equity transactions, and a
$1.4 million decrease in other performance bonuses. Sales and marketing expense
was also impacted by a $7.8 million increase in sales commission expense as a
result of lower additions to and higher amortization of deferred contract
acquisition costs, an $8.7 million aggregate increase in brand marketing and
travel expenses due to the resumption of in-person events, a $2.5 million
increase in third-party consulting fees and strategic partnerships, a
$1.2 million increase in rent expense, and a $1.2 million increase in
sales-related software expenses.
Research and Development
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Research and development $ 67,849 $ 57,646 $ 10,203 18 %
Percentage of revenue 28 % 29 %
Research and development expense increased by $10.2 million , or 18%, for the
three months ended July 31, 2022 compared to the three months ended July 31,
2021 . The increase was primarily attributable to a $6.6 million increase in
personnel-related expenses, mainly driven by increased headcount. Research and
development expense was also impacted by a $2.0 million increase in hosting and
software service expenses, an increase of $0.7 million in third-party consulting
fees, and a $0.5 million increase in travel expenses.
General and Administrative
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
General and administrative $ 68,443 $ 55,834 $ 12,609 23 %
Percentage of revenue 29 % 29 %
General and administrative expense increased by $12.6 million , or 23%, for the
three months ended July 31, 2022 compared to the three months ended July 31,
2021 . The increase was primarily attributable to a $4.4 million increase in
charitable donations, mainly driven by our contribution of Class A common shares
to a donor-advised fund in connection with our Pledge 1% commitment. General and
administrative expense was also impacted by a $3.3 million increase in
personnel-related expenses, mainly driven by increased headcount, which included
a $1.4 million increase in stock-based compensation. A $2.2 million increase in
travel expenses, a $1.6 million increase in software service expenses, and a
$1.1 million aggregate increase in rent, third-party consulting fees, and
miscellaneous administrative costs also contributed to the overall increase in
general and administrative expense.
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Interest Income
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Interest income $ 4,505 $ 766 $ 3,739 488 %
Percentage of revenue 2 % - %
Interest income increased by $3.7 million , or 488%, for the three months ended
July 31, 2022 compared to the three months ended July 31, 2021 as a result of a
period-over-period increase in interest rates on marketable securities.
Other Expense, Net
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Other expense, net $ (600) $ (1,225) $ 625 (51) %
Percentage of revenue - % - %
Other expense, net decreased by $0.6 million , or 51%, for the three months ended
July 31, 2022 compared to the three months ended July 31, 2021 . The decrease was
primarily attributable to greater sublease income recognized in the current
period and greater foreign currency transaction losses incurred in the prior
period.
Provision For Income Taxes
Three Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Provision for income taxes $ 4,090 $ 1,746 $ 2,344 134 %
Percentage of revenue 2 % 1 %
Provision for income taxes increased by $2.3 million , or 134%, for the three
months ended July 31, 2022 compared to the three months ended July 31, 2021 . The
increase in tax expense is driven primarily by higher foreign tax expenses
resulting from higher year-over-year earnings in certain foreign jurisdictions
as we continue to scale internationally.
Comparison of Last Six Months
Revenue
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Licenses $ 220,700 $ 195,763 $ 24,937 13 %
Subscription services 240,150 167,961 72,189 43 %
Professional services and other 26,438 18,014 8,424 47 %
Total revenue $ 487,288 $ 381,738 $ 105,550 28 %
Total revenue increased by $105.6 million , or 28%, for the six months ended
July 31, 2022 compared to the six months ended July 31, 2021 , primarily due to a
$72.2 million increase in subscription services revenue and a $24.9 million
increase in licenses revenue. As we continued to expand our sales efforts in the
United States and internationally, total revenue grew across all regions. Of the
growth in total revenue, approximately 31% was attributable to new customers and
the remainder to existing customers. Subscription services revenue is recognized
ratably over the subscription term; therefore, the increase in subscription
services revenue is driven both by sales in prior periods for which we continue
to provide maintenance and support and by new sales in the current period.
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Revenue Amount and Gross Margin
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Licenses $ 4,707 $ 4,888 $ (181) (4) %
Subscription services 43,371 26,417 16,954 64 %
Professional services and other 41,514 53,299 (11,785) (22) %
Total cost of revenue $ 89,592 $ 84,604 $ 4,988 6 %
Gross Margin 82 % 78 %
Total cost of revenue increased by $5.0 million , or 6%, for the six months ended
July 31, 2022 compared to the six months ended July 31, 2021 , mainly due to an
increase in cost of subscription services revenue, partially offset by a
decrease in cost of professional services and other revenue. The increase in
cost of subscription services revenue was primarily driven by a $10.2 million
increase in personnel-related expenses, which included an $11.9 million increase
in salary and payroll-related expenses, mainly driven by increased headcount,
partially offset by a $1.8 million decrease in stock-based compensation, mostly
resulting from the satisfaction of IPO-related performance conditions for RSUs
during the first half of fiscal 2022. Cost of subscription services revenue was
also impacted by a $5.4 million increase in hosting costs and third-party
professional services and a $0.6 million increase in depreciation and
amortization expense. The decrease in cost of professional services and other
revenue was primarily driven by a $19.2 million decrease in personnel-related
expenses, which included a $16.4 million decrease in stock-based compensation
expense as a result of the satisfaction of IPO-related performance conditions
for RSUs during the first half of fiscal 2022 and a $0.9 million decrease in
employer payroll tax expense related to equity transactions. These decreases
were partially offset by a $7.2 million increase in costs associated with the
use of third-party vendors to deliver professional services to our customers.
Our gross margin increased to 82% for the six months ended July 31, 2022
compared to 78% for the six months ended July 31, 2021 , primarily due to lower
stock-based compensation expense as a result of the satisfaction of IPO-related
performance conditions for RSUs during the first half of fiscal 2022.
Operating Expenses
Sales and Marketing
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Sales and marketing $ 371,329 $ 350,019 $ 21,310 6 %
Percentage of revenue 76 % 92 %
Sales and marketing expense increased by $21.3 million , or 6%, for the six
months ended July 31, 2022 compared to the six months ended July 31, 2021 . This
increase was primarily attributable to a $17.5 million increase in sales
commission expense, a $17.4 million aggregate increase in brand marketing and
travel expenses due to the resumption of in-person events and user conferences,
and a $2.3 million increase in hosting and software services costs. Sales and
marketing expense was also impacted by a $5.8 million increase in third-party
consulting fees and strategic partnerships, a $2.2 million increase in rent
expense, and a $2.2 million increase in depreciation and amortization. These
increases were partially offset by a $26.0 million decrease in personnel-related
expenses, which included a $73.4 million decrease in stock-based compensation,
mostly resulting from the satisfaction of IPO-related performance conditions for
RSUs during the first half of fiscal 2022, and a $5.7 million decrease in
employer payroll tax expense related to equity transactions, partially offset by
a $32.9 million increase in salary-related expenses, largely due to increased
headcount, a $10.2 million increase in employee termination benefits related to
our restructuring actions beginning in the second quarter of fiscal 2023, a
$6.2 million increase in employee benefit costs, and a $3.3 million increase in
general employee severance.
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Research and Development
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Research and development $ 136,539 $ 150,686 $ (14,147) (9) %
Percentage of revenue 28 % 39 %
Research and development expense decreased by $14.1 million , or 9%, for the six
months ended July 31, 2022 compared to the six months ended July 31, 2021 . The
decrease was primarily attributable to a $22.2 million decrease in
personnel-related expenses, which included a $39.5 million decrease in
stock-based compensation, mostly resulting from the satisfaction of IPO-related
performance conditions for RSUs during the first half of fiscal 2022, partially
offset by a $13.2 million increase in salary-related expenses, which was largely
due to increased headcount. Research and development expense was also impacted
by a $5.1 million increase in third-party software service and hosting costs, a
$1.4 million increase in third-party consulting fees, and a $0.7 million
increase in travel costs.
General and Administrative
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
General and administrative $ 125,973 $ 130,249 $ (4,276) (3) %
Percentage of revenue 26 % 34 %
General and administrative expense decreased by $4.3 million , or 3%, for the six
months ended July 31, 2022 compared to the six months ended July 31, 2021 . This
decrease was primarily attributable to an $18.0 million decrease in
personnel-related expenses, which included a $22.3 million decrease in
stock-based compensation, mostly resulting from the satisfaction of IPO-related
performance conditions for RSUs during the first half of fiscal 2022, partially
offset by a $4.3 million increase in salary-related expenses, which was largely
due to increased headcount. General and administrative expense was also impacted
by a $2.5 million decrease in third-party consulting fees. These decreases were
partially offset by a $4.5 million increase in charitable donations, mainly
driven by our contribution of Class A common shares to a donor-advised fund
during the second quarter of fiscal 2023 in connection with our Pledge 1%
commitment, a $3.3 million increase in software service expense, a $2.8 million
increase in insurance expenses, and a $5.5 million aggregate increase in travel
costs, bad debt expense, depreciation and amortization, and other tax expense.
Interest Income
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Interest income $ 5,496 $ 1,707 $ 3,789 222 %
Percentage of revenue 1 % - %
Interest income increased by $3.8 million , or 222%, for the six months ended
July 31, 2022 compared to the six months ended July 31, 2021 as a result of a
period-over-period increase in interest rates on marketable securities.
Other Expense, Net
Six Months Ended July 31,
2022 2021 Change Change %
(dollars in thousands)
Other expense, net $ (3,411) $ (4,443) $ 1,032 (23) %
Percentage of revenue (1) % (1) %
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Other expense, net decreased by$1.0 million , or 23%, for the six months endedJuly 31, 2022 compared to the six months endedJuly 31, 2021 . The decrease was primarily attributable to greater sublease income recognized in the current period. Provision For Income Taxes Six Months Ended July 31, 2022 2021 Change Change % (dollars in thousands) Provision for income taxes$ 8,879 $ 3,133 $ 5,746 183 % Percentage of revenue 2 % 1 % Provision for income taxes increased by$5.7 million or 183%, for the six months endedJuly 31, 2022 compared to the six months endedJuly 31, 2021 . The increase in tax expense was primarily driven by higher foreign tax expenses resulting from higher year-over-year earnings of our cost-plus margin entities in certain foreign jurisdictions as we continue to scale internationally.
Liquidity and Capital Resources
We have financed operations since our inception primarily through customer payments and net proceeds from sales of equity securities. Our principal uses of cash in recent periods have been funding our operations, investing in capital expenditures, and engaging in various business acquisitions. As ofJuly 31, 2022 , our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling$1,723.9 million , and we had an accumulated deficit of$1,738.9 million . During the six months endedJuly 31, 2022 , we reported a net loss of$242.9 million , and net cash used in operations of$76.6 million . Our future capital requirements will depend on many factors, including our revenue growth rate, our product sales, license renewal activity, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the introduction of new and enhanced products, the continuing market adoption of our products, expenses associated with our international expansion, and the timing and extent of additional capital expenditures to invest in existing and new office spaces. We may, in the future, continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.
We believe that our current cash, cash equivalents, marketable securities, payments from customers, and borrowing capacity will be sufficient to fund our anticipated cash requirements for the next twelve months and over the long term.
Credit Facility
InOctober 2020 , we entered into a$200.0 million senior secured revolving credit facility (the "Credit Facility") withHSBC Ventures USA Inc. ,Silicon Valley Bank ,Sumitomo Mitsui Banking Corporation , andMizuho Bank, LTD , with a maturity date ofOctober 30, 2023 . Our obligations under the Credit Facility are secured by substantially all of our assets, except for our intellectual property. The Credit Facility contains certain customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. We may use the proceeds of future borrowings under the Credit Facility for refinancing other indebtedness, working capital, capital expenditures and other general corporate purposes, including permitted business acquisitions. Borrowings under the Credit Facility bear interest at a base rate, as defined in the Credit Facility, plus a margin of 2.0% or 3.0% depending on the base rate. The Credit Facility is subject to customary fees for loan facilities of this type, including ongoing commitment fees at a rate of 0.25% per annum on the daily amount available to be drawn. As ofJuly 31, 2022 , we had no outstanding debt under the Credit Facility. 42
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Cash Flows
The following table summarizes our cash flows for the periods presented:
Six Months Ended July 31,
2022 2021
(in thousands)
Net cash used in operating activities (1) $ (76,621) $ (23,523)
Net cash (used in) provided by investing activities $ (44,449) $ 21,921
Net cash (used in) provided by financing activities $ (37,153) $ 1,451,953
(1) Includes: Payments for employer payroll taxes related to employee equity transactions
$ (4,953) $ (9,064)
Net receipts (payments) of employee tax withholdings on stock option exercises
$ (5,664) $ 4,726 Cash paid for restructuring costs$ (5,196) $ - Operating Activities Our largest source of operating cash is cash generation from sales to our customers. Our primary uses of cash from operating activities are for personnel-related expenses, direct costs to deliver our licenses, and marketing expenses. To date, our operating cash flows have generally been negative and we have supplemented working capital requirements primarily through net proceeds from the sale of equity securities. Net cash used in operating activities for the six months endedJuly 31, 2022 of$76.6 million was driven by cash payments for operating expenditures, primarily associated with the compensation of our teams, including bonuses paid in the first quarter of fiscal 2023. Other cash operating expenditures included payments related to our workforce restructuring, costs for professional services, software, and office rent. These outflows were partially offset by cash collections from our customers, which were approximately 28% higher than during the six months endedJuly 31, 2021 . Net cash used in operating activities for the six months endedJuly 31, 2021 of$23.5 million was driven by cash payments for operating expenditures, primarily associated with the compensation of our teams, including year-end fiscal 2021 sales commissions and bonuses paid in the first quarter of fiscal 2022. Other cash operating expenditures included payments for professional services, software, and office rent.
Investment Activities
Net cash used in investing activities for the six months endedJuly 31, 2022 of$44.4 million was driven by$45.6 million in purchases of marketable securities,$29.5 million in cash consideration associated with the acquisition of Re:infer, which is presented net of cash acquired,$16.3 million in capital expenditures, and$0.5 million in other investing outflows. These cash outflows were partially offset by$47.4 million in maturities of marketable securities. Net cash provided by investing activities for the six months endedJuly 31, 2021 of$21.9 million was driven by$126.0 million in sales and maturities of marketable securities. This was partially offset by$94.2 million in purchases of marketable securities,$5.5 million in cash consideration associated with the acquisition of Cloud Elements, which is presented net of cash acquired, and$3.6 million in capital expenditures.
Funding Activities
Net cash used in financing activities for the six months endedJuly 31, 2022 of$37.2 million was primarily driven by payments of tax withholdings on the net settlement of equity awards of$38.7 million , net payments of tax withholdings on sell-to-cover equity award transactions of$10.1 million , and$1.5 million in repurchases of unvested early exercised stock options, partially offset by proceeds from employee stock purchase plan contributions of$8.5 million and proceeds from the exercise of stock options of$4.7 million . Net cash provided by financing activities for the six months endedJuly 31, 2021 of$1,452.0 million was primarily driven by$749.8 million in net proceeds from our issuance of Series F convertible preferred stock,$692.4 43
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million in net proceeds from our IPO after deducting underwriting expenses and commissions, net receipts of tax withholdings on sell-to-cover equity award transactions of$9.5 million , proceeds from employee stock purchase plan contributions of$6.9 million , and proceeds from the exercise of stock options of$6.7 million , partially offset by payments of tax withholdings on the net settlement of equity awards of$9.6 million and payments of costs related to our IPO of$3.7 million . Material Cash Requirements During the three and six months endedJuly 31, 2022 , we made commitments to purchase$138.1 million of cloud infrastructure services from a third-party vendor and$35.8 million of service credits from third-party alliance partners. See Note 11 , Commitments and Contingencies-Non-Cancelable Purchase Obligations, for further details on the timing of our purchase commitments. There were no other significant changes to our material cash requirements during the three and six months endedJuly 31, 2022 from the contractual obligations disclosed in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," set forth in the 2022 Form 10-K.
Critical Accounting Estimates
There are no material changes in our critical accounting estimates compared to those disclosed in the 2022 Form 10-K.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and, for so long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Because the market value of our Class A common stock held by non-affiliates exceeded$700 million as ofJuly 31, 2022 , we will be deemed a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as ofJanuary 31, 2023 . Therefore, as ofJanuary 31, 2023 , we will no longer qualify as an emerging growth company.
As a large accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies but have not previously applied to us because of our status as an emerging growth company. These requirements include, but are not limited to:
• the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act” );
• compliance with any requirement that may be adopted by thePublic Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors' report providing additional information about the audit and the financial statements;
• the requirement that we provide fuller and more detailed disclosures about executive compensation; and
• the requirement that we hold a non-binding advisory vote on executive compensation and obtain shareholder approval of any unapproved golden parachute payment.
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We expect that compliance with the additional requirements of being a large accelerated filer will increase our legal and financial compliance costs and cause management and other personnel to divert attention from operational and other business matters to devote substantial time to public company reporting requirements.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies-Recently Adopted Accounting Pronouncements and -Recently Issued Accounting Pronouncements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
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