Snowflake Inc. - Quarter Report: 2021 October (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2021


☐			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: 001-39504

SNOWFLAKE INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware						46-0636374
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Suite 3A, 106 East Babcock Street Bozeman, MT 59715
(Address of principal executive offices and Zip Code)1
(844) 766-9355
(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 of each exchange on which registered
Class A Common Stock, $0.0001 par value	SNOW	The 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

☒

Small 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 19, 2021, there were 306.3 million shares of the registrant’s Class A common stock, par value of $0.0001 per share, outstanding.

1 We are a Delaware corporation with a globally distributed workforce and no corporate headquarters. Under the Securities and Exchange Commission's rules, we are required to designate a “principal executive office.” For purposes of this report, we have designated our office in Bozeman, Montana as our principal executive office, as that is where our Chief Executive Officer and Chief Financial Officer are based.

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TABLE OF CONTENTS


			Page
PART I. Financial Information			4
ITEM 1. Financial Statements (Unaudited)			4
Condensed Consolidated Balance Sheets as of October 31, 2021 and January 31, 2021			5
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2021 and 2020			6
Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended October 31, 2021 and 2020			7
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended October 31, 2021 and 2020			8
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2021 and 2020			10
Notes to Condensed Consolidated Financial Statements			11
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			48
ITEM 4. Controls and Procedures			49
PART II. Other Information			50
ITEM 1. Legal Proceedings			50
ITEM 1A. Risk Factors			50
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			75
ITEM 3. Defaults Upon Senior Securities			75
ITEM 4. Mine Safety Disclosures			75
ITEM 5. Other Information			75
ITEM 6. Exhibits			76
Signatures			77

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “anticipate,” “believe,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•our expectations regarding our revenue, expenses, and other operating results, including statements relating to the portion of our remaining performance obligations that we expect to be recognized as revenue in future periods;

•our ability to acquire new customers and successfully retain existing customers;

•our ability to increase consumption on our platform;

•our ability to achieve or sustain our profitability;

•future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;

•the costs and success of our sales and marketing efforts, and our ability to promote our brand;

•our growth strategies for, and market acceptance of, our platform and the Data Cloud, as well as our ability to execute such strategies;

•our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;

•our ability to effectively manage our growth, including any international expansion;

•our ability to protect our intellectual property rights and any costs associated therewith;

•the effects of the ongoing COVID-19 pandemic or other public health crises and their related public health measures on our business, the business of our customers and partners, and the economy;

•our ability to compete effectively with existing competitors and new market entrants; and

•the growth rates of the markets in which we compete.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Other sections of this Quarterly Report on Form 10-Q may include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors 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 from those contained in, or implied by, any forward-looking statements.

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You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (investors.snowflake.com), our filings with the Securities and Exchange Commission (SEC), webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

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SNOWFLAKE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)


	October 31, 2021		January 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	935,217	$	820,177
Short-term investments	2,955,613		3,087,887
Accounts receivable, net	254,243		294,017
Deferred commissions, current	42,896		32,371
Prepaid expenses and other current assets	120,288		66,200
Total current assets	4,308,257		4,300,652
Long-term investments	1,211,858		1,165,275
Property and equipment, net	94,377		68,968
Operating lease right-of-use assets	184,057		186,818
Goodwill	8,449		8,449
Intangible assets, net	26,167		16,091
Deferred commissions, non-current	101,551		86,164
Other assets	228,755		89,322
Total assets	$	6,163,471	$	5,921,739
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	10,559	$	5,647
Accrued expenses and other current liabilities	163,238		125,315
Operating lease liabilities, current	25,194		19,650
Deferred revenue, current	759,744		638,652
Total current liabilities	958,735		789,264
Operating lease liabilities, non-current	178,697		184,887
Deferred revenue, non-current	7,132		4,194
Other liabilities	12,225		6,923
Total liabilities	1,156,789		985,268
Commitments and contingencies (Note 9)


Stockholders’ equity:
Preferred stock; $0.0001 par value per share; 200,000,000 shares authorized as of October 31, 2021 and January 31, 2021; zero shares issued and outstanding as of October 31, 2021 and January 31, 2021	—		—
Class A common stock; $0.0001 par value per share; 2,500,000,000 shares authorized as of October 31, 2021 and January 31, 2021; 305,899,486 and 111,374,416 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively(1)	30		11
Class B common stock; $0.0001 par value per share; 185,461,432 and 355,000,000 shares authorized as of October 31, 2021 and January 31, 2021, respectively; zero and 176,543,188 shares issued and outstanding as of October 31, 2021 and January 31, 2021, respectively(1)	—		17
Additional paid-in capital	6,797,354		6,175,425
Accumulated other comprehensive income (loss)	(3,486)		439
Accumulated deficit	(1,787,216)		(1,239,421)
Total stockholders’ equity	5,006,682		4,936,471
Total liabilities and stockholders’ equity	$	6,163,471	$	5,921,739

________________

(1)On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. See Note 11 for further details.

See accompanying notes to condensed consolidated financial statements.

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SNOWFLAKE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Revenue	$	334,441	$	159,624	$	835,553	$	401,584
Cost of revenue	120,786		66,681		324,253		159,684
Gross profit	213,655		92,943		511,300		241,900
Operating expenses:
Sales and marketing	190,971		134,727		540,678		325,267
Research and development	115,900		74,138		343,783		143,949
General and administrative	64,055		53,532		189,846		116,224
Total operating expenses	370,926		262,397		1,074,307		585,440
Operating loss	(157,271)		(169,454)		(563,007)		(343,540)
Interest income	1,985		1,517		6,787		5,654
Other income (expense), net	1,609		(519)		9,867		(1,561)
Loss before income taxes	(153,677)		(168,456)		(546,353)		(339,447)
Provision for income taxes	1,179		433		1,442		720
Net loss	$	(154,856)	$	(168,889)	$	(547,795)	$	(340,167)
Net loss per share attributable to Class A and Class B common stockholders – basic and diluted(1)	$	(0.51)	$	(1.01)	$	(1.84)	$	(3.63)
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders – basic and diluted(1)	303,006,685		166,868,200		297,435,637		93,763,599

________________

See accompanying notes to condensed consolidated financial statements.

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SNOWFLAKE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)
(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Net loss	$	(154,856)	$	(168,889)	$	(547,795)	$	(340,167)
Other comprehensive income (loss):
Foreign currency translation adjustments	(361)		—		(63)		—
Net change in unrealized gains or losses on available-for-sale securities	(4,266)		(771)		(3,862)		159
Total other comprehensive income (loss)	(4,627)		(771)		(3,925)		159
Comprehensive loss	$	(159,483)	$	(169,660)	$	(551,720)	$	(340,008)

See accompanying notes to condensed consolidated financial statements.

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SNOWFLAKE INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended October 31, 2021
	Redeemable Convertible Preferred Stock			Class A Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount

BALANCE—July 31, 2021	—	$	—	300,584,903	$	30	$	6,596,154	$	1,141	$	(1,632,360)	$	4,964,965

Issuance of common stock upon exercise of stock options	—	—		4,222,037	—		24,708		—		—		24,708
Issuance of common stock under employee stock purchase plan	—	—		111,645	—		25,829		—		—		25,829
Vesting of early exercised stock options and restricted common stock	—	—		—	—		191		—		—		191
Vesting of restricted stock units	—	—		980,901	—		—		—		—		—
Stock-based compensation	—	—		—	—		150,472		—		—		150,472
Other comprehensive loss	—	—		—	—		—		(4,627)		—		(4,627)
Net loss	—	—		—	—		—		—		(154,856)		(154,856)
BALANCE—October 31, 2021	—	$	—	305,899,486	$	30	$	6,797,354	$	(3,486)	$	(1,787,216)	$	5,006,682

	Three Months Ended October 31, 2020
	Redeemable Convertible Preferred Stock			Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount

BALANCE—July 31, 2020	182,271,099	$	1,415,047	62,257,063	$	6	$	219,046	$	1,146	$	(871,597)	$	(651,399)

Conversion of redeemable convertible preferred stock to common stock upon initial public offering	(182,271,099)	(1,415,047)		182,271,099	18		1,415,029		—		—		1,415,047
Issuance of common stock upon initial public offering and private placements, net of underwriting discounts	—	—		36,366,666	4		4,242,280		—		—		4,242,284
Issuance of common stock upon exercise of stock options	—	—		2,186,819	—		10,362		—		—		10,362

Exercise of common stock warrants	—	—		32,241	—		—		—		—		—
Vesting of early exercised stock options and restricted common stock	—	—		—	—		1,756		—		—		1,756


Vesting of restricted stock units	—	—		5,657	—		—		—		—		—
Stock-based compensation	—	—		—	—		119,425		—		—		119,425
Other comprehensive loss	—	—		—	—		—		(771)		—		(771)
Net loss	—	—		—	—		—		—		(168,889)		(168,889)
BALANCE—October 31, 2020	—	$	—	283,119,545	$	28	$	6,007,898	$	375	$	(1,040,486)	$	4,967,815

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SNOWFLAKE INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

(in thousands, except share and per share data)

(unaudited)


	Nine Months Ended October 31, 2021
	Redeemable Convertible Preferred Stock			Class A and Class B Common Stock(1)			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount

BALANCE—January 31, 2021	—	$	—	287,917,604	$	28	$	6,175,425	$	439	$	(1,239,421)	$	4,936,471

Issuance of common stock upon exercise of stock options	—	—		15,278,682	2		90,374		—		—		90,376
Issuance of common stock under employee stock purchase plan	—	—		370,452	—		52,227		—		—		52,227
Vesting of early exercised stock options and restricted common stock	—	—		—	—		614		—		—		614
Vesting of restricted stock units	—	—		2,332,748	—		—		—		—		—
Stock-based compensation	—	—		—	—		478,714		—		—		478,714
Other comprehensive loss	—	—		—	—		—		(3,925)		—		(3,925)
Net loss	—	—		—	—		—		—		(547,795)		(547,795)
BALANCE—October 31, 2021	—	$	—	305,899,486	$	30	$	6,797,354	$	(3,486)	$	(1,787,216)	$	5,006,682

	Nine Months Ended October 31, 2020
	Redeemable Convertible Preferred Stock			Class A and Class B Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount

BALANCE—January 31, 2020	169,921,272	$	936,474	55,452,421	$	6	$	155,340	$	216	$	(700,319)	$	(544,757)
Issuance of Series G-1 and Series G-2 redeemable convertible preferred stock at $38.77 per share, net of issuance costs of $230	12,349,827	478,573		—	—		—		—		—		—
Conversion of redeemable convertible preferred stock to common stock upon initial public offering	(182,271,099)	(1,415,047)		182,271,099	18		1,415,029						1,415,047
Issuance of common stock upon initial public offering and private placements, net of underwriting discounts	—	—		36,366,666	4		4,242,280						4,242,284
Issuance of common stock upon exercise of stock options	—	—		9,031,461	—		31,098		—		—		31,098
Exercise of common stock warrants	—	—		32,241	—		—						—
Repurchase of early exercised stock options	—	—		(40,000)	—		—		—		—		—
Vesting of early exercised stock options and restricted common stock	—	—		—	—		5,341		—		—		5,341


Vesting of restricted stock units				5,657	—								—
Stock-based compensation	—	—		—	—		158,810		—		—		158,810
Other comprehensive income	—	—		—	—		—		159		—		159
Net loss	—	—		—	—		—		—		(340,167)		(340,167)
BALANCE—October 31, 2020	—	$	—	283,119,545	$	28	$	6,007,898	$	375	$	(1,040,486)	$	4,967,815

________________

See accompanying notes to condensed consolidated financial statements.

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SNOWFLAKE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended October 31,
	2021		2020

Cash flows from operating activities:
Net loss	$	(547,795)	$	(340,167)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	15,586		6,611
Non-cash operating lease costs	25,895		24,840
Amortization of deferred commissions	26,824		21,233
Stock-based compensation, net of amounts capitalized	459,392		157,790
Net amortization of premiums on investments	36,938		1,117
Unrealized gains on strategic investments in equity securities	(8,515)		—
Other	2,535		4,073
Changes in operating assets and liabilities, net of effect of business combinations:
Accounts receivable	39,142		9,221
Deferred commissions	(52,892)		(27,261)
Prepaid expenses and other assets	(112,798)		(29,480)
Accounts payable	4,591		(3,806)
Accrued expenses and other liabilities	43,106		22,477
Operating lease liabilities	(24,758)		(23,418)
Deferred revenue	124,030		111,739
Net cash provided by (used in) operating activities	31,281		(65,031)
Cash flows from investing activities:
Purchases of property and equipment	(12,209)		(24,018)
Capitalized internal-use software development costs	(8,612)		(4,014)
Cash paid for business combinations, net of cash acquired	—		(6,035)
Purchases of intangible assets	(11,182)		(6,184)
Purchases of investments	(3,042,396)		(1,235,020)
Sales of investments	407,003		28,705
Maturities and redemptions of investments	2,610,429		371,528
Net cash used in investing activities	(56,967)		(875,038)
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs	—		478,573
Proceeds from initial public offering and private placements, net of underwriting discounts	—		4,242,284
Proceeds from early exercised stock options	—		159
Proceeds from exercise of stock options	90,444		31,100
Proceeds from issuance of common stock under the employee stock purchase plan	52,227		—
Proceeds from repayments of a nonrecourse promissory note	—		2,090

Repurchases of early exercised stock options	—		(30)

Payments of deferred purchase consideration for business combinations	—		(1,164)
Net cash provided by financing activities	142,671		4,753,012

Effect of exchange rate changes on cash, cash equivalents, and restricted cash	21		—
Net increase in cash, cash equivalents, and restricted cash	117,006		3,812,943
Cash, cash equivalents, and restricted cash—beginning of period	835,193		141,976
Cash, cash equivalents, and restricted cash—end of period	$	952,199	$	3,954,919


Supplemental disclosures of non-cash investing and financing activities:

Property and equipment included in accounts payable and accrued expenses	$	3,115	$	2,803

Stock-based compensation included in capitalized software development costs	$	18,923	$	1,020
Vesting of early exercised stock options and restricted common stock	$	615	$	3,251



Intangible assets included in accrued expenses and other liabilities	$	4,544	$	—
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	935,217	$	3,939,925
Restricted cash – included in other assets and prepaid expenses and other current assets	16,982		14,994
Total cash, cash equivalents, and restricted cash	$	952,199	$	3,954,919

See accompanying notes to condensed consolidated financial statements.

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SNOWFLAKE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Description of Business

Description of Business

Snowflake Inc. (Snowflake or the Company) provides a cloud-based data platform, which enables customers to consolidate data to drive meaningful business insights, build data-driven applications, and share data. The Company provides its platform through a customer-centric, consumption-based business model, only charging customers for the resources they use. Through its platform, the Company delivers the Data Cloud, an ecosystem where Snowflake customers, partners, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways. Snowflake was incorporated in the state of Delaware on July 23, 2012.

2. Basis of Presentation and Summary of Significant Accounting Policies

Fiscal Year

The Company’s fiscal year ends on January 31. For example, references to fiscal 2022 refer to the fiscal year ending January 31, 2022.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the U.S. Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, they do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, which was filed with the SEC on March 31, 2021.

In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of October 31, 2021 and the results of operations for the three and nine months ended October 31, 2021 and 2020, and cash flows for the nine months ended October 31, 2021 and 2020. The condensed balance sheet as of January 31, 2021 was derived from the audited financial statements but does not include all disclosures required by GAAP. The results of operations for the three and nine months ended October 31, 2021 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Snowflake Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Segment Information

The Company has a single operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources. For information regarding the Company’s long-lived assets and revenue by geographic area, see Note 14.

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Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, stand-alone selling prices (SSP) for each distinct performance obligation, internal-use software development costs, expected period of benefit for deferred commissions, the useful lives of long-lived assets, the carrying value of operating lease right-of-use assets, the valuation of the Company’s common stock prior to its initial public offering (IPO) in September 2020, stock-based compensation, accounting for income taxes, and the fair value of investments in marketable and non-marketable securities.

The Company bases its estimates on historical experience and also on assumptions that management considers reasonable. The Company assesses these estimates on a regular basis; however, actual results could differ from these estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the COVID-19 pandemic.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are discussed in “Note 2 – Basis of Presentation and Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021, which was filed with the SEC on March 31, 2021. There have been no significant changes to these policies during the nine months ended October 31, 2021, except for (i) the accounting policies for accounts receivable and investments that were updated below as a result of the Company’s adoption of the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective February 1, 2021, and (ii) the accounting policy for strategic investments that was updated below with respect to the Company’s strategic investment in marketable equity securities during the three months ended October 31, 2021.

Accounts Receivable

Accounts receivable includes billed and unbilled receivables, net of allowance for credit losses. Trade accounts receivable are recorded at invoiced amounts and do not bear interest. The allowance for credit losses is estimated based on the Company’s assessment of the collectibility of accounts receivable by considering various factors, including the age of each outstanding invoice, the collection history of each customer, historical write-off experience, current economic conditions, and reasonable and supportable forecasts of future economic conditions over the life of the receivable. The Company assesses collectibility by reviewing accounts receivable on an aggregate basis when similar characteristics exist and on an individual basis when specific customers with collectibility issues are identified. Accounts receivable deemed uncollectible are charged against the allowance for credit losses when identified. Allowance for credit losses was $0.9 million and $2.6 million as of October 31, 2021 and January 31, 2021, respectively.

Investments

The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale and are recorded at estimated fair value. The Company classifies its marketable debt securities as either short-term or long-term at each balance sheet date based on each instrument’s underlying contractual maturity date. Short-term investments are investments with original maturities of less than one year when purchased.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell or it is more likely than not that the Company will be required to sell the security before the recovery of its entire amortized cost basis. If either of these criteria is met, the security’s amortized cost basis is written down to fair value through other income (expense), net in the condensed consolidated statements of operations. If neither of these criteria is met, the Company further assesses whether the decline in fair value below amortized cost is due to credit or non-credit related factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically related to the security, among other factors. Credit related unrealized losses are recognized as an allowance on the condensed consolidated balance sheets with a corresponding charge in the other income (expense), net in the condensed consolidated statements of operations. Non-credit related unrealized losses and unrealized gains on available-for-sale debt securities are included in accumulated other comprehensive income (loss).

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Realized gains and losses are determined based on the specific identification method and are reported in other income (expense), net in the condensed consolidated statements of operations.

Strategic Investments

The Company’s strategic investments consist of non-marketable equity and debt securities in privately-held companies and marketable equity securities in publicly-traded companies, in each case in which the Company does not have a controlling interest or significant influence. Strategic investments are included in other assets on the condensed consolidated balance sheets.

The Company’s non-marketable equity securities are recorded at cost and adjusted for observable transactions for the same or similar investments of the same issuer (referred to as the Measurement Alternative) or impairment. For these investments, the Company recognizes remeasurement adjustments, including upward and downward adjustments, and impairments, if any, in other income (expense), net in the condensed consolidated statements of operations. Valuations of privately-held securities are inherently complex due to the lack of readily available market data and require the use of judgment. For example, determining whether an orderly transaction is for an identical or similar investment requires judgment based on the rights and obligations that attached to the securities. In determining the estimated fair value of these investments, the Company uses the most recent data available to the Company.

Marketable equity securities are measured at fair value with changes in fair value recorded in other income (expense), net in the condensed consolidated statements of operations.

Non-marketable debt securities are classified as available-for-sale and are recorded at their estimated fair value with changes in fair value recorded through accumulated other comprehensive income (loss).

Strategic investments are subject to periodic impairment analyses, which involve an assessment of both qualitative and quantitative factors, including the investee’s financial metrics, market acceptance of the investee’s product or technology, and the rate at which the investee is using its cash. If the investment is considered impaired, the Company recognizes an impairment through other income (expense), net in the condensed consolidated statements of operations and establishes a new carrying value for the investment.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications made more recently. For trade receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which reflects losses that are probable. Credit losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. This guidance is effective for the Company for its fiscal year beginning February 1, 2023 and interim periods within that fiscal year, and requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. Early adoption is permitted. The Company early adopted this guidance effective February 1, 2021 on a modified retrospective basis, and the adoption did not result in any cumulative effect adjustment in its condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by this new guidance. This new guidance is effective for the Company for its fiscal year beginning February 1, 2021 and interim periods within its fiscal year beginning February 1, 2022, and early adoption is permitted. The Company adopted this guidance effective February 1, 2021 on a prospective basis, and the adoption did not have a material impact on its condensed consolidated financial statements.

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In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes (ASC 740) in order to reduce the cost and complexity of its application. This new guidance is effective for the Company for its fiscal year beginning February 1, 2022 and interim periods within its fiscal year beginning February 1, 2023, and early adoption is permitted. Most amendments within this guidance are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company early adopted this guidance effective February 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. This new guidance is effective for the Company for its fiscal year beginning February 1, 2023 and interim periods within that fiscal year, and early adoption is permitted. The Company early adopted this guidance upon issuance to all business combinations that occur on or after the date of adoption. The adoption had no impact on the Company’s condensed consolidated financial statements as there were no acquisitions accounted for as business combinations in fiscal 2022.

3. Cash Equivalents and Investments

The following is a summary of the Company’s cash equivalents, short-term investments, and long-term investments on the condensed consolidated balance sheets (in thousands):


	October 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

Cash equivalents:
Money market funds	$	581,689	$	—	$	—	$	581,689
U.S. government securities	60,000		—		—		60,000
Commercial paper	46,992		1		—		46,993
Certificates of deposit	27,001		1		—		27,002
Corporate notes and bonds	6,193		1		(1)		6,193
Total cash equivalents	721,875		3		(1)		721,877
Investments:
Corporate notes and bonds	2,512,863		192		(3,278)		2,509,777
Commercial paper	1,066,027		82		(131)		1,065,978
U.S. government and agency securities	391,632		25		(321)		391,336
Certificates of deposit	200,382		31		(33)		200,380

Total investments	4,170,904		330		(3,763)		4,167,471
Total cash equivalents and investments	$	4,892,779	$	333	$	(3,764)	$	4,889,348

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	January 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

Cash equivalents:
Money market funds	$	334,891	$	—	$	—	$	334,891
Commercial paper	242,040		2		(5)		242,037
Corporate notes and bonds	58,969		3		(2)		58,970
U.S. government securities	23,700		—		—		23,700
Certificates of deposit	23,500		3		—		23,503
Total cash equivalents	683,100		8		(7)		683,101
Investments:
Corporate notes and bonds	2,287,006		628		(481)		2,287,153
U.S. government and agency securities	1,016,059		250		(46)		1,016,263
Commercial paper	711,389		85		(102)		711,372
Certificates of deposit	238,278		97		(1)		238,374

Total investments	4,252,732		1,060		(630)		4,253,162
Total cash equivalents and investments	$	4,935,832	$	1,068	$	(637)	$	4,936,263

As of October 31, 2021, the contractual maturities of the Company’s available-for-sale marketable debt securities did not exceed 36 months. The estimated fair values of available-for-sale debt securities, by remaining contractual maturity, are as follows (in thousands):


	October 31, 2021
	Estimated Fair Value

Due within 1 year	$	3,095,801
Due in 1 year to 3 years	1,211,858
Total	$	4,307,659

The following table shows the fair values and the gross unrealized losses of these securities, classified by the length of time that the securities have been in a continuous unrealized loss position, and aggregated by investment types, excluding those securities classified within cash and cash equivalents on the condensed consolidated balance sheets (in thousands):


	October 31, 2021
	Less than 12 Months				12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

Cash equivalents:
Commercial paper	$	17,998	$	—	$	—	$	—	$	17,998	$	—
Corporate notes and bonds	5,058		(1)		—		—		5,058		(1)

Total cash equivalents	23,056		(1)		—		—		23,056		(1)
Investments:
Corporate notes and bonds	2,170,442		(3,278)		—		—		2,170,442		(3,278)
Commercial paper	449,901		(131)		—		—		449,901		(131)
U.S. government and agency securities	230,705		(321)		—		—		230,705		(321)
Certificates of deposit	40,844		(33)		—		—		40,844		(33)
Total investments	2,891,892		(3,763)		—		—		2,891,892		(3,763)
Total cash equivalents and investments	$	2,914,948	$	(3,764)	$	—	$	—	$	2,914,948	$	(3,764)

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Gross unrealized losses on the Company’s available-for-sale marketable debt securities were $0.6 million as of January 31, 2021.

For available-for-sale marketable debt securities with unrealized loss positions, the Company does not intend to sell these securities and it is more likely than not that the Company will hold these securities until maturity or a recovery of the cost basis. The decline in fair value of these securities due to credit related factors was not material as of October 31, 2021 or January 31, 2021.

See Note 4 for information regarding the Company’s strategic investments.

4. Fair Value Measurements

The Company accounts for certain of its financial assets at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table presents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of October 31, 2021 (in thousands):


	Level 1		Level 2		Total

Cash equivalents:
Money market funds	$	581,689	$	—	$	581,689
U.S. government securities	—		60,000		60,000
Commercial paper	—		46,993		46,993
Certificates of deposit	—		27,002		27,002
Corporate notes and bonds	—		6,193		6,193
Short-term investments:
Corporate notes and bonds	—		1,454,923		1,454,923
Commercial paper	—		1,065,978		1,065,978
U.S. government and agency securities	—		243,323		243,323
Certificates of deposit	—		191,389		191,389

Long-term investments:
Corporate notes and bonds	—		1,054,854		1,054,854
U.S. government and agency securities	—		148,013		148,013
Certificates of deposit	—		8,991		8,991


Total	$	581,689	$	4,307,659	$	4,889,348

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The following table presents the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis as of January 31, 2021 (in thousands):


	Level 1		Level 2		Total

Cash equivalents:
Money market funds	$	334,891	$	—	$	334,891
Commercial paper	—		242,037		242,037
Corporate notes and bonds	—		58,970		58,970
U.S. government securities	—		23,700		23,700
Certificates of deposit	—		23,503		23,503
Short-term investments:
Corporate notes and bonds	—		1,318,573		1,318,573
U.S. government and agency securities	—		829,318		829,318
Commercial paper	—		711,372		711,372
Certificates of deposit	—		228,624		228,624
Long-term investments:
Corporate notes and bonds	—		968,580		968,580
U.S. government and agency securities	—		186,945		186,945
Certificates of deposit	—		9,750		9,750

Total	$	334,891	$	4,601,372	$	4,936,263

The Company determines the fair value of its security holdings based on pricing from the Company’s service providers and market prices from industry-standard independent data providers. Such market prices may be quoted prices in active markets for identical assets (Level 1 inputs) or pricing determined using inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs), such as yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.

Strategic Investments

The table above does not include the Company’s strategic investments in non-marketable equity securities, which are recorded at fair value on a non-recurring basis using the Measurement Alternative, or the Company's strategic investments in marketable equity securities and non-marketable debt securities, which are recorded at fair value on a recurring basis.

The non-marketable equity and debt securities that the Company holds are valued using significant unobservable inputs or data in an inactive market. As a result, the Company classifies these assets as Level 3 within the fair value hierarchy. The estimation of fair value for the Company’s non-marketable equity securities requires the use of an observable transaction price and other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. The marketable equity securities that the Company holds are valued using the quoted market price and are classified as Level 1 within the fair value hierarchy.

The following table presents the fair value hierarchy for the Company’s strategic investments measured at fair value as of October 31, 2021 (in thousands):


	Level 1		Level 3		Total

Equity securities:
Non-marketable equity securities	$	—	$	101,951	$	101,951
Marketable equity securities	20,455		—		20,455
Debt securities:
Non-marketable debt securities	—		2,250		2,250
Total strategic investments	$	20,455	$	104,201	$	124,656

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The following table presents the fair value hierarchy for the Company’s strategic investments measured at fair value as of January 31, 2021 (in thousands):


	Level 1		Level 3		Total

Non-marketable equity securities	$	—	$	41,000	$	41,000
Non-marketable debt securities	—		500		500
Total strategic investments	$	—	$	41,500	$	41,500

The cumulative amount of upward adjustments recognized on the Company’s strategic investments in non-marketable equity securities was $8.1 million, all of which was recorded during the three months ended July 31, 2021.

During the three and nine months ended October 31, 2021, the Company made a strategic investment of $20.0 million in marketable equity securities and recognized an unrealized gain of $0.5 million on this investment.

5. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	October 31, 2021		January 31, 2021

Computers, equipment, and software	$	6,642	$	3,817
Furniture and fixtures	8,051		6,627
Leasehold improvements	51,670		41,593
Capitalized internal-use software development costs	16,030		12,855
Construction in progress	31,736		16,030
Total property and equipment	114,129		80,922
Less: accumulated depreciation and amortization(1)	(19,752)		(11,954)
Total property and equipment, net	$	94,377	$	68,968

________________

(1)Includes $8.6 million and $5.5 million of accumulated amortization related to capitalized internal-use software development costs as of October 31, 2021 and January 31, 2021, respectively.

Depreciation and amortization expense was $3.6 million and $9.9 million for the three and nine months ended October 31, 2021, respectively, and $2.0 million and $4.8 million for the three and nine months ended October 31, 2020, respectively.

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6. Intangible Assets and Goodwill

Intangible Assets

Intangible assets, net consisted of the following (in thousands):


	October 31, 2021		January 31, 2021

Finite-lived intangible assets
Assembled workforce	$	15,099	$	—
Developed technology	11,332		11,332
Patents	8,174		7,948
Other	47		47
Total finite-lived intangible assets	34,652		19,327
Less: accumulated amortization	(9,311)		(3,662)
Total finite-lived intangible assets, net	25,341		15,665
Infinite-lived intangible assets - trademarks	826		426
Total intangible assets, net	$	26,167	$	16,091

During the nine months ended October 31, 2021, the Company acquired $15.1 million of assembled workforce assets with a useful life of four years, $0.4 million of infinite-lived trademark intangible assets, and $0.2 million of patents with a useful life of four years.

Amortization expense of intangible assets was $1.9 million and $5.7 million for the three and nine months ended October 31, 2021, respectively, and $0.9 million and $1.9 million for the three and nine months ended October 31, 2020, respectively.

As of October 31, 2021, future amortization expense is expected to be as follows (in thousands):


	Amount

Fiscal Year Ending January 31,
Remainder of 2022	$	1,922
2023	7,687
2024	7,687
2025	6,838
2026	1,207

Total	$	25,341

Goodwill

As of October 31, 2021 and January 31, 2021, goodwill was $8.4 million. No goodwill impairments were recorded for each of the three and nine months ended October 31, 2021 and 2020.

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7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	October 31, 2021		January 31, 2021

Accrued compensation	$	82,238	$	62,451
Accrued third-party cloud infrastructure expenses	13,977		6,648
Employee contributions under employee stock purchase plan	11,252		22,068
Employee payroll tax withheld on employee stock transactions	10,222		1,340
Accrued professional services	8,199		6,628
Accrued taxes	6,850		4,498
Accrued purchases of property and equipment	2,550		6,718
Other	27,950		14,964
Total accrued expenses and other current liabilities	$	163,238	$	125,315

8. Deferred Revenue and Remaining Performance Obligations

Revenue recognized for the three months ended October 31, 2021 from amounts included in deferred revenue as of July 31, 2021 was $255.0 million. Revenue recognized for the three months ended October 31, 2020 from amounts included in deferred revenue as of July 31, 2020 was $121.2 million.

Revenue recognized for the nine months ended October 31, 2021 from amounts included in deferred revenue as of January 31, 2021 was $464.0 million. Revenue recognized for the nine months ended October 31, 2020 from amounts included in deferred revenue as of January 31, 2020 was $222.0 million.

As of October 31, 2021, the Company’s RPO was $1.8 billion, of which approximately 75% was related to contracts with original terms that exceed one year. The weighted-average remaining life of the Company’s contracts with original terms that exceed one year was 2.4 years as of October 31, 2021. However, the amount and timing of revenue recognition are generally driven by customer consumption, which can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal.

9. Commitments and Contingencies

Operating Leases

The Company leases its facilities for office space under non-cancelable operating leases with various expiration dates through fiscal 2033. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments.

In addition, the Company subleases certain of its unoccupied facilities to third parties with various expiration dates through fiscal 2030. Such subleases have all been classified as operating leases. Sublease income is recorded as a reduction to the Company’s operating lease costs.

Sublease income was $3.4 million and $9.8 million for the three and nine months ended October 31, 2021, respectively, and $3.2 million and $9.6 million for the three and nine months ended October 31, 2020, respectively.

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Other Contractual Commitments

Other contractual commitments relate mainly to third-party cloud infrastructure agreements and subscription arrangements used to facilitate the Company’s operations at the enterprise level. There were no material contractual obligations that were entered into during the nine months ended October 31, 2021 that were outside the ordinary course of business.

401(k) Plan—The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company did not make any matching contributions to the 401(k) plan for each of the three and nine months ended October 31, 2021 and 2020.

Legal Matters—The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position, results of operations, or cash flows for each of the three and nine months ended October 31, 2021 and 2020.

Letters of Credit—As of October 31, 2021, the Company had a total of $17.0 million in cash collateralized letters of credit outstanding, substantially in favor of certain landlords for the Company’s leased facilities. These letters of credit renew annually and expire at various dates through fiscal 2033.

Indemnification—The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including business partners, investors, contractors, customers, and the Company’s officers, directors, and certain employees. The Company has agreed to indemnify and defend the indemnified party for claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims due to the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. For each of the three and nine months ended October 31, 2021 and 2020, losses recorded in the condensed consolidated statements of operations in connection with the indemnification provisions were not material.

10. Redeemable Convertible Preferred Stock

During the nine months ended October 31, 2020, the Company issued 8,480,857 shares of Series G-1 redeemable convertible preferred stock and 3,868,970 shares of Series G-2 redeemable convertible preferred stock, each at a price of $38.77 per share. Upon completion of the IPO in September 2020, all shares of the Company’s redeemable convertible preferred stock outstanding, totaling 182,271,099, were automatically converted into an equivalent number of shares of Class B common stock on one-to-one basis and their carrying value of $1.4 billion was reclassified into stockholders’ equity. As of October 31, 2021 and January 31, 2021, there were no shares of redeemable convertible preferred stock issued and outstanding.

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11. Equity

Preferred Stock—In connection with the IPO, the Company’s amended and restated certificate of incorporation became effective, which authorized the issuance of 200,000,000 shares of undesignated preferred stock with a par value of $0.0001 per share and with rights and preferences, including voting rights, designated from time to time by the board of directors.

Common Stock and Elimination of Dual-Class Structure—The Company has two classes of common stock authorized: Class A common stock and Class B common stock. In connection with the IPO, the Company’s amended and restated certificate of incorporation authorized the issuance of 2,500,000,000 shares of Class A common stock and 355,000,000 shares of Class B common stock. On March 1, 2021, all 169,538,568 shares of the Company's then-outstanding Class B common stock, par value $0.0001 per share, were automatically converted into the same number of shares of Class A common stock, par value $0.0001 per share, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion.

The shares of Class A common stock and Class B common stock were identical prior to the conversion, except with respect to voting, converting, and transfer rights. Prior to the conversion, each share of Class B common stock was entitled to cast ten votes per share on any matter submitted to a vote of the Company’s stockholders. As a result of the conversion, all former holders of shares of Class B common stock are now holders of shares of Class A common stock, which is entitled to only one vote per share on all matters subject to a stockholder vote. Class A and Class B common stock are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise indicated. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.

Prior to the conversion, shares of Class B common stock were convertible to Class A common stock at any time at the option of the stockholder, and shares of Class B common stock would automatically convert to Class A common stock upon the following: (i) sale or transfer of such share of Class B common stock; (ii) the death of the Class B common stockholder (or nine months after the date of death if the stockholder is one of the Company’s founders); and (iii) on the final conversion date, defined as the earlier to occur following an IPO of (a) the first trading day on or after the date on which the outstanding shares of Class B common stock represented less than 10% of the then outstanding Class A and Class B common stock; (b) September 15, 2027, which is the seventh anniversary of the effectiveness of the registration statement filed in connection with the IPO; or (c) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock, voting as a single class.

In addition, on March 3, 2021, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the conversion. Upon the effectiveness of the certificate, the Company’s total number of authorized shares of capital stock was reduced by the retirement of 169,538,568 shares of Class B Common Stock.

The Company had reserved shares of common stock for future issuance as follows:


	October 31, 2021	January 31, 2021



2012 Equity Incentive Plan:
Options outstanding	47,781,688	64,574,656
Restricted stock units outstanding	5,034,800	7,520,474

2020 Equity Incentive Plan:
Shares available for future grants	45,681,389	32,871,367
Restricted stock units outstanding	5,081,153	1,828,083
2020 Employee Stock Purchase Plan:
Shares available for future grants	8,208,724	5,700,000
Total shares of common stock reserved for future issuance	111,787,754	112,494,580

In February 2020, certain third parties unaffiliated with the Company commenced an offer to purchase existing outstanding shares of the Company’s Class B common stock from certain equity holders at a price of $38.77 per share. The Company was not a party to this transaction. The transaction was completed in March 2020, and an aggregate of 8.6 million shares of the Company’s Class B common stock were transferred to these third parties.

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Equity Incentive Plans—In 2012, the Company’s board of directors approved the adoption of the 2012 Equity Incentive Plan (2012 Plan). The 2012 Plan provides for the grant of stock-based awards to employees, non-employee directors, and other service providers of the Company. The 2012 Plan was terminated in September 2020 in connection with the IPO but continues to govern the terms of outstanding awards that were granted prior to the termination of the 2012 Plan. No further equity awards will be granted under the 2012 Plan. With the establishment of the 2020 Equity Incentive Plan (2020 Plan) as further discussed below, upon the expiration, forfeiture, cancellation, or reacquisition of any shares common stock underlying outstanding stock-based awards granted under the 2012 Plan, an equal number of shares of Class A common stock will become available for grant under the 2020 Plan. On March 1, 2021, all shares of the Company’s then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock. As a result of this conversion, options and restricted stock units (RSUs) that were previously denominated in shares of Class B common stock and issued under the 2012 Plan remained unchanged, except that they represent the right to receive shares of Class A common stock.

In September 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Plan, which became effective in connection with the IPO. The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance awards and other forms of equity compensation (collectively, equity awards). A total of 34,100,000 shares of the Company’s Class A common stock have been reserved for issuance under the 2020 Plan in addition to (i) any annual automatic evergreen increases in the number of shares of Class A common stock reserved for issuance under the 2020 Plan and (ii) upon the expiration, forfeiture, cancellation, or reacquisition of any shares of Class B common stock underlying outstanding stock awards granted under the 2012 Plan, an equal number of shares of Class A common stock, such number of shares not to exceed 78,816,888.

In September 2020, the Company’s board of directors adopted, and its stockholders approved, the 2020 Employee Stock Purchase Plan (2020 ESPP), which became effective in connection with the IPO. The 2020 ESPP authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees. A total of 5,700,000 shares of the Company’s Class A common stock have been reserved for future issuance under the 2020 ESPP, in addition to any annual automatic evergreen increases in the number of shares of Class A common stock reserved for future issuance under the 2020 ESPP. The price at which Class A common stock is purchased under the 2020 ESPP is equal to 85% of the fair market value of a share of the Company’s Class A common stock on the first or last day of the offering period, whichever is lower. Offering periods are generally six months long and begin on March 15 and September 15 of each year, except for the first two offering periods. The initial offering period began on September 15, 2020 and ended on February 26, 2021. The second offering period began on March 1, 2021 and ended on September 14, 2021.

Stock Options—Stock options granted under the 2012 Plan and the 2020 Plan (collectively, the Plans) generally vest based on continued service over four years and expire ten years from the date of grant. Certain stock options granted under the 2012 Plan are exercisable at any time following the date of grant and expire ten years from the date of grant.

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Stock option activity and activity regarding shares available for grant under the Plans during the nine months ended October 31, 2021 is as follows:


	Shares Available for Grant	Number of Options Outstanding	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)

Balance—January 31, 2021	32,871,367	64,574,656	$	7.04	7.7	$	17,138,896
Shares authorized	14,395,880	—

Options exercised	—	(7,081,859)	$	5.82
Options canceled	608,303	(608,303)	$	4.70

RSUs granted	(2,413,881)	—
RSUs forfeited	112,600	—
Balance—April 30, 2021	45,574,269	56,884,494	$	7.21	7.5	$	12,763,483


Options exercised	—	(3,974,786)	$	6.15
Options canceled	659,620	(659,620)	$	8.51

RSUs granted	(584,752)	—
RSUs forfeited	119,507	—
Balance—July 31, 2021	45,768,644	52,250,088	$	7.28	7.3	$	13,503,560



Options exercised	—	(4,222,037)	$	5.85
Options canceled	246,363	(246,363)	$	8.56

RSUs granted	(561,159)	—
RSUs forfeited	227,541	—
Balance—October 31, 2021	45,681,389	47,781,688	$	7.40	7.1	$	16,553,557
Vested and exercisable as of October 31, 2021		24,561,457	$	6.24	6.7	$	8,537,609

No options were granted during the nine months ended October 31, 2021 and the weighted-average grant-date fair value of options granted during the nine months ended October 31, 2020 was $22.67. The intrinsic value of options exercised for the nine months ended October 31, 2021 and 2020 was $3.8 billion and $544.5 million, respectively. The aggregate grant-date fair value of options vested for the nine months ended October 31, 2021 and 2020 was $62.7 million and $71.0 million, respectively.

Restricted Stock Awards—Restricted stock award activity during the nine months ended October 31, 2021 is as follows:


	Out of the Plans
		Number of Shares	Weighted-Average Grant Date Fair Value per Share

Unvested Balance—January 31, 2021		741,911	$	2.11

Vested		(90,412)	$	2.10

Unvested Balance—April 30, 2021		651,499	$	2.11

Vested		(90,414)	$	2.10

Unvested Balance—July 31, 2021		561,085	$	2.11

Vested		(90,412)	$	2.10

Unvested Balance—October 31, 2021		470,673	$	2.11

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In December 2017, the Company issued 1,250,000 shares of restricted common stock out of the 2012 Plan to an employee at $1.59 per share, payable by a promissory note. The promissory note accrued interest at the lower of 2.11% per annum or the maximum interest rate on commercial loans permissible by law and was partially secured by the underlying restricted stock. The promissory note was considered nonrecourse from an accounting standpoint, and therefore the note is not reflected in the condensed consolidated balance sheets and condensed consolidated statements of stockholders’ equity (deficit). Rather, the note and the share purchases are accounted for as stock option grants, with the related stock-based compensation measured using the Black-Scholes option-pricing model and recognized over the vesting period of five years. The associated shares are legally outstanding and included in the balance of Class B common stock outstanding in the condensed consolidated financial statements during the periods in which Class B common stock was outstanding and in the balance of Class A common stock outstanding thereafter. None of these shares of restricted common stock were considered vested before the underlying promissory note was repaid. In May and June 2020, the outstanding principal amount and all accrued interest under this promissory note of $2.1 million was repaid, and 312,500 shares of restricted common stock were unvested as of October 31, 2021.

In March 2019, in connection with the acquisition of a privately-held company, the Company issued 661,635 shares of restricted common stock out of the 2012 Plan. Of the total shares issued, 215,031 shares vested on the grant date, and the remaining shares vest over four years from the grant date. The related post-acquisition stock-based compensation of $1.1 million is being amortized over the requisite service period of four years in the condensed consolidated statements of operations. As of October 31, 2021, 158,173 shares of these restricted common stock were unvested.

Common Stock Subject to Repurchase—Common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The consideration received for an exercise of an option is considered to be a deposit of the exercise price and the related dollar amount is recorded in other liabilities on the condensed consolidated balance sheets. The shares issued upon the early exercise of these unvested stock option awards, which are reflected as exercises in the stock option activity table above, are considered to be legally issued and outstanding on the date of exercise. Upon termination of service, the Company may repurchase unvested shares acquired through the early exercise of stock options at a price equal to the price per share paid upon the exercise of such options. There were 66,515 and 245,633 shares subject to repurchase as of October 31, 2021 and January 31, 2021, respectively, as a result of early exercised options.

As of October 31, 2021 and January 31, 2021, the liabilities for common stock subject to repurchase were $0.5 million and $1.2 million, respectively, which were recorded as other liabilities on the condensed consolidated balance sheets.

Modification of Early Exercised Stock Options—In connection with the termination of a former executive officer in April 2019, certain shares of his early exercised stock options were vested immediately. The remaining early exercised stock options held by him were subject to continuous vesting through April 2020 as he continued to provide service to the Company as an advisor. The acceleration and continuation of vesting were accounted for as a modification of the terms of the original award. The incremental stock-based compensation related to this modification was $16.7 million, of which $2.7 million was recognized for the nine months ended October 31, 2020.

RSUs—In March 2020, the Company began granting more RSUs than options to its employees and directors. RSUs granted prior to the IPO had both service-based and performance-based vesting conditions. The service-based vesting condition for these awards is typically satisfied over four years with a cliff vesting period of one year and continued vesting quarterly thereafter. The performance-based vesting condition is satisfied on the earlier of (i) the effective date of a registration statement of the Company filed under the Securities Act for the sale of the Company’s common stock or (ii) immediately prior to the closing of a change in control of the Company. Both events were not deemed probable until consummated, and therefore, stock-based compensation related to these RSUs remained unrecognized prior to the effectiveness of the IPO. Upon the effectiveness of the IPO in September 2020, the performance-based vesting condition was satisfied, and therefore, the Company recognized cumulative stock-based compensation of $55.5 million using the accelerated attribution method for the portion of the RSU awards for which the service-based vesting condition has been fully or partially satisfied. RSUs granted after the IPO do not contain the performance-based vesting condition described above, and the related stock-based compensation is recognized on a straight-line basis over the requisite service period.

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RSU activity during the nine months ended October 31, 2021 was as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value per Share

Unvested Balance—January 31, 2021	9,348,557	$	125.06
Granted	2,413,881	$	223.93
Vested	(531,845)	$	40.02
Forfeited	(112,600)	$	134.52
Unvested Balance—April 30, 2021	11,117,993	$	150.50
Granted	584,752	$	244.05
Vested	(820,002)	$	78.84
Forfeited	(119,507)	$	169.75
Unvested Balance—July 31, 2021	10,763,236	$	160.83
Granted	561,159	$	305.15
Vested	(980,901)	$	99.49
Forfeited	(227,541)	$	180.53
Unvested Balance—October 31, 2021	10,115,953	$	174.34

Stock-Based Compensation—The following table summarizes the weighted-average assumptions used in estimating the fair value of stock options granted to employees and non-employees during the three and nine months ended October 31, 2020:


	Three Months Ended		Nine Months Ended
	October 31, 2020		October 31, 2020

Expected term (in years)	5.9		6.0
Expected volatility	38.4	%	37.2	%
Risk-free interest rate	0.4	%	1.0	%
Expected dividend yield	—	%	—	%

No stock options were granted during the nine months ended October 31, 2021.

Expected term—For stock options considered to be “plain vanilla” options, the Company estimates the expected term based on the simplified method, which is essentially the weighted average of the vesting period and contractual term, as the Company’s historical option exercise experience does not provide a reasonable basis upon which to estimate the expected term.

Expected volatility—The Company performs an analysis of using the average volatility of a peer group of representative public companies with sufficient trading history over the expected term to develop an expected volatility assumption.

Risk-free interest rate—Risk-free rate is estimated based upon quoted market yields for the United States Treasury debt securities for a term consistent with the expected life of the awards in effect at the time of grant.

Expected dividend yield—Because the Company has never paid and has no intention to pay cash dividends on common stock, the expected dividend yield is zero.

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Fair value of underlying common stock—Prior to the completion of the IPO, the board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards were approved. The factors considered included, but were not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company, given prevailing market conditions; and (vii) precedent transactions involving the Company’s shares. Since the completion of the IPO, the fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the New York Stock Exchange.

The following table summarizes the assumptions used in estimating the fair value of employee stock purchase rights granted under the 2020 ESPP during the three and nine months ended October 31, 2021 and 2020:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Expected term (in years)	0.5		0.5		0.5		0.5
Expected volatility	37.3	%	60.1	%	37.3% - 49.5%		60.1	%
Risk-free interest rate	0.1	%	0.1	%	0.1	%	0.1	%
Expected dividend yield	—	%	—	%	—	%	—	%

Stock-based compensation included in the condensed consolidated statements of operations was as follows (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Cost of revenue	$	21,163	$	13,226	$	66,380	$	15,507
Sales and marketing	43,074		39,481		141,463		49,714
Research and development	56,142		39,368		174,788		49,186
General and administrative	24,008		27,066		76,761		43,383
Stock-based compensation, net of amounts capitalized	144,387		119,141		459,392		157,790
Capitalized stock-based compensation	6,085		284		19,322		1,020
Total stock-based compensation	$	150,472	$	119,425	$	478,714	$	158,810

As of October 31, 2021, total compensation cost related to unvested stock-based awards not yet recognized was $1.5 billion, which will be recognized over a weighted-average period of 3.1 years.

12. Income Taxes

The Company computes its tax provision for interim periods by applying the estimated annual effective tax rate to year-to-date pre-tax income from recurring operations and adjusting for discrete tax items arising in that quarter.

The Company had an effective tax rate of (0.8%) and (0.3%) for the three and nine months ended October 31, 2021, respectively, and (0.3%) and (0.2%) for the three and nine months ended October 31, 2020, respectively. The Company has incurred U.S. operating losses and has minimal profits in foreign jurisdictions.

The Company has evaluated all available evidence, both positive and negative, including historical levels of income and expectations and risks associated with estimates of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States and the United Kingdom. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against its net deferred tax assets.

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The Company is subject to income taxes in the United States and numerous foreign jurisdictions. As of October 31, 2021, tax years 2012 and forward generally remain open for examination for U.S. federal and state tax purposes, and tax years 2017 and forward generally remain open for examination for foreign tax purposes.

The Company has applied ASC 740 and determined that it has uncertain tax positions giving rise to unrecognized tax benefits for each of the three and nine months ended October 31, 2021 and 2020. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. None of the unrecognized tax benefits are currently expected to impact the Company’s effective tax rate, if realized, as a result of the full valuation allowance.

13. Net Loss per Share

Basic and diluted net loss per share attributable to common stockholders is computed in conformity with the two-class method required for participating securities. Prior to the automatic conversion of all of its redeemable convertible preferred stock outstanding into Class B common stock upon the completion of the IPO, the Company considered all series of its redeemable convertible preferred stock and unvested common stock to be participating securities as the holders of such stock have the right to receive nonforfeitable dividends on a pari passu basis in the event that a dividend is declared on common stock. Under the two-class method, net loss is not allocated to the redeemable convertible preferred stock as the preferred stockholders do not have a contractual obligation to share in the Company’s losses.

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive common stock equivalents to the extent they are dilutive. For purposes of this calculation, redeemable convertible preferred stock, stock options, restricted stock awards, RSUs, employee stock purchase rights under the 2020 ESPP, early exercised stock options, and common stock warrants are considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is anti-dilutive for all periods presented.

The rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock are identical, except with respect to voting, converting, and transfer rights. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis to each class of common stock and the resulting basic and diluted net loss per share attributable to common stockholders are, therefore, the same for both Class A and Class B common stock on both individual and combined basis.

As discussed above in Note 11, on March 1, 2021, all 169,538,568 shares of the Company's then-outstanding Class B common stock, par value $0.0001 per share, were automatically converted into the same number of shares of Class A common stock, par value $0.0001 per share, pursuant to the terms of the Company’s amended and restated certificate of incorporation. No additional shares of Class B common stock will be issued following such conversion. In addition, on March 3, 2021, the Company filed a certificate with the Secretary of State of the State of Delaware effecting the retirement of the shares of Class B common stock that were issued but no longer outstanding following the conversion.

The following table presents the calculation of basic and diluted net loss per share (in thousands, except share and per share data):

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	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Numerator:
Net loss attributable to Class A and Class B common stockholders	$	(154,856)	$	(168,889)	$	(547,795)	$	(340,167)
Denominator:
Weighted-average shares used in computing net loss per share attributable to Class A and Class B common stockholders – basic and diluted	303,006,685		166,868,200		297,435,637		93,763,599
Net loss per share attributable to Class A and Class B common stockholders – basic and diluted	$	(0.51)	$	(1.01)	$	(1.84)	$	(3.63)

The following potentially dilutive securities were excluded from the computation of diluted net loss per share calculations for the periods presented because the impact of including them would have been anti-dilutive:


	October 31,
	2021	2020


Stock options	47,781,688	69,634,367

Shares subject to repurchase	537,188	1,171,124
RSUs	10,115,953	7,616,097
Employee stock purchase rights under the 2020 ESPP	40,039	85,922
Total	58,474,868	78,507,510

14. Geographic Information

Revenue by geographic area, based on the location of the Company’s customers, was as follows (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

United States	$	265,605	$	135,427	$	669,172	$	341,892
Other(1)	68,836		24,197		166,381		59,692
Total	$	334,441	$	159,624	$	835,553	$	401,584

________________

(1)No other individual country accounted for more than 10% of the Company’s revenue for all periods presented.

Long-lived assets, comprising property and equipment, net and operating lease right-of-use assets, by geographic area were as follows (in thousands):


	October 31, 2021		January 31, 2021

United States	$	268,546	$	247,457
Other	9,888		8,329
Total	$	278,434	$	255,786

15. Subsequent Events

In November 2021, certain non-marketable equity security investees of the Company raised additional funding in orderly transactions. As a result of these observable transactions, and absent any impairment or further adjustments under the Measurement Alternative that may arise, the Company expects to recognize aggregate non-cash gains of approximately $20 million on these investees’ non-marketable equity securities during the three months ended January 31, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, and (2) 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 ended January 31, 2021 included in the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on March 31, 2021. 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 About 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 for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Unless the context otherwise requires, all references in this report to “Snowflake,” the “Company”, “we,” “our,” “us,” or similar terms refer to Snowflake Inc. and its subsidiaries.

Overview

We believe in a data connected world where organizations have seamless access to explore, share, and unlock the value of data. To realize this vision, we deliver the Data Cloud, an ecosystem where Snowflake customers, partners, data providers, and data consumers can break down data silos and derive value from rapidly growing data sets in secure, governed, and compliant ways.

Our platform is the innovative technology that powers the Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data. We provide our platform through a customer-centric, consumption-based business model, only charging customers for the resources they use.

Our cloud-native architecture consists of three independently scalable layers across storage, compute, and cloud services. The storage layer ingests massive amounts and varieties of data to create a unified data record. The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases without latency. The cloud services layer intelligently optimizes each use case’s performance requirements with no administration. This architecture is built on three major public clouds across 28 regional deployments around the world. These deployments are interconnected to deliver the Data Cloud, enabling a consistent, global user experience.

We generate the substantial majority of our revenue from fees charged to our customers based on the storage, compute, and data transfer resources consumed on our platform as a single, integrated offering. For storage resources, consumption fees are based on the average terabytes per month of all of the customer’s data stored in our platform. For compute resources, consumption fees are based on the type of compute resource used and the duration of use or, for some features, the volume of data processed. For data transfer resources, consumption fees are based on terabytes of data transferred, the public cloud provider used, and the region to and from which the transfer is executed.

Our customers typically enter into capacity arrangements with a term of one to four years, or consume our platform under on-demand arrangements in which we charge for use of our platform monthly in arrears. Consumption for most customers accelerates from the beginning of their usage to the end of their contract terms and often exceeds their initial capacity commitment amounts. When this occurs, our customers have the option to amend their existing agreement with us to purchase additional capacity or request early renewals. When a customer’s consumption during the contract term does not exceed its capacity commitment amount, it may have the option to roll over any unused capacity to future periods, generally upon the purchase of additional capacity. For these reasons, we believe our deferred revenue is not a meaningful indicator of future revenue that will be recognized in any given time period.

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Our go-to-market strategy is focused on acquiring new customers and driving continued use of our platform for existing customers. We primarily focus our selling efforts on large organizations and primarily sell our platform through a direct sales force, which targets technical and business leaders who are adopting a cloud strategy and leveraging data to improve their business performance. Our sales force is comprised of sales development, inside sales, and field sales personnel and is segmented by the size, region, and industry of prospective customers. Once our platform has been adopted, we focus on increasing the migration of additional customer workloads to our platform to drive increased consumption, as evidenced by our net revenue retention rate of 173% and 168% as of October 31, 2021 and January 31, 2021, respectively.

Our platform is used globally by organizations of all sizes across a broad range of industries. As of October 31, 2021, we had 5,416 total customers, increasing from 4,139 customers as of January 31, 2021. Our platform has been adopted by many of the world’s largest organizations that view Snowflake as a key strategic partner in their cloud and data transformation initiatives. As of October 31, 2021, our customers included 223 of the Fortune 500, based on the 2021 Fortune 500 list, and those customers contributed approximately 27% of our revenue for the nine months ended October 31, 2021. Our Fortune 500 customer count is subject to adjustments for annual updates to the Fortune 500 list by Fortune, as well as acquisitions, consolidations, spin-offs, and other market activity with respect to such customers.

Elimination of Dual-Class Common Stock Structure

On March 1, 2021, all shares of our then-outstanding Class B common stock were automatically converted into the same number of shares of Class A common stock pursuant to the terms of our amended and restated certificate of incorporation. See Note 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Key Factors Affecting Our Performance

Adoption of our Platform and Expansion of the Data Cloud

Our future success depends in large part on the market adoption of our platform. While we see growing demand for our platform, particularly from large enterprises, many of these organizations have invested substantial technical, financial, and personnel resources in their legacy database products or big data offerings, despite their inherent limitations. While this makes it difficult to predict customer adoption rates and future demand, we believe that the benefits of our platform put us in a strong position to capture the significant market opportunity ahead.

Our platform powers the Data Cloud, an ecosystem of data providers, data consumers, and data application developers that enables our customers to securely share, connect, monetize, and acquire live data sets. Our future growth will be increasingly dependent on our ability to increase consumption of our platform by building and expanding this ecosystem and the types and quality of data available on the Data Cloud.

Expanding Within our Existing Customer Base

Our large base of customers represents a significant opportunity for further consumption of our platform. While we have seen a rapid increase in the number of customers that have contributed more than $1 million in product revenue in the trailing 12 months, we believe that there is a substantial opportunity to continue growing these customers further, as well as continuing to expand the usage of our platform within our other existing customers. We plan to continue investing to encourage increased consumption and adoption of new use cases among our existing customers.

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Once deployed, our customers often expand their use of our platform more broadly within the enterprise and across their ecosystem of customers and partners as they migrate more data to the public cloud, identify new use cases, and realize the benefits of our platform and the Data Cloud. However, because we generally recognize product revenue on consumption and not ratably over the term of the contract, we do not have visibility into the timing of revenue recognition from any particular customer. In any given period, there is a risk that customer consumption of our platform will be slower than we expect, which may cause fluctuations in our revenue and results of operations. New software releases or hardware improvements, like better storage compression, may make our platform more efficient, enabling customers to consume fewer compute, storage, and data transfer resources to accomplish the same workloads, potentially reducing revenue as a result. Our ability to increase usage of our platform by, and sell additional contracted capacity to, existing customers, and, in particular, large enterprise customers, will depend on a number of factors, including our customers’ satisfaction with our platform, competition, pricing, overall changes in our customers’ spending levels, the effectiveness of our and our partners’ efforts to help our customers realize the benefits of our platform, and the extent to which customers migrate new workloads to our platform over time.

Acquiring New Customers

We believe there is a substantial opportunity to further grow our customer base by continuing to make significant investments in sales and marketing and brand awareness. Our ability to attract new customers will depend on a number of factors, including our success in recruiting and scaling our sales and marketing organization, competitive dynamics in our target markets, and our ability to build and maintain partner relationships, including with global system integrators, resellers, and technology partners. We intend to expand our direct sales force, with a focus on increasing sales to large organizations. While our platform is built for organizations of all sizes and industries, we have only recently focused our selling efforts on large enterprise customers. We may not achieve anticipated revenue growth from expanding our sales force to focus on large enterprises if we are unable to hire, develop, integrate, and retain talented and effective sales personnel; if our new and existing sales personnel are unable to achieve desired productivity levels in a reasonable period of time; or if our sales and marketing programs are not effective.

Investing in Growth and Scaling our Business

We are focused on our long-term revenue potential. We believe that our market opportunity is large, and we will continue to invest significantly in scaling across all organizational functions in order to grow our operations both domestically and internationally. We have a history of introducing successful new features and capabilities on our platform, and we intend to continue to invest heavily to grow our business to take advantage of our expansive market opportunity rather than optimize for profitability or cash flow in the near future.

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Key Business Metrics

We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.

Product Revenue

Product revenue is a key metric for us because we recognize revenue based on platform consumption, which is inherently variable at our customers’ discretion, and not based on the amount and duration of contract terms. Product revenue is primarily derived from the consumption of compute, storage, and data transfer resources, which are consumed by customers on our platform as a single, integrated offering. Customers have the flexibility to consume more than their contracted capacity during the contract term and may have the ability to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. Our consumption-based business model distinguishes us from subscription-based software companies that generally recognize revenue ratably over the contract term and may not permit rollover. Because customers have flexibility in the timing of their consumption, which can exceed their contracted capacity or extend beyond the original contract term in many cases, the amount of product revenue recognized in a given period is an important indicator of customer satisfaction and the value derived from our platform. While customer use of our platform in any period is not necessarily indicative of future use, we estimate future revenue using predictive models based on customers’ historical usage to plan and determine financial forecasts. Product revenue excludes our professional services and other revenue, which has been less than 10% of revenue for each of the periods presented.

Remaining Performance Obligations

Remaining performance obligations (RPO) represent the amount of contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods. RPO excludes performance obligations from on-demand arrangements and certain time and materials contracts that are billed in arrears. RPO is not necessarily indicative of future product revenue growth because it does not account for the timing of customers’ consumption or their consumption of more than their contracted capacity. Moreover, RPO is influenced by a number of factors, including the timing of renewals, the timing of purchases of additional capacity, average contract terms, seasonality, and the extent to which customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. Due to these factors, it is important to review RPO in conjunction with product revenue and other financial metrics disclosed elsewhere herein.

Total Customers

We count the total number of customers at the end of each period. For purposes of determining our customer count, we treat each customer account, including accounts for end-customers under a reseller arrangement, that has at least one corresponding capacity contract as a unique customer, and a single organization with multiple divisions, segments, or subsidiaries may be counted as multiple customers. For purposes of determining our customer count, we do not include customers that consume our platform only under on-demand arrangements. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity. We believe that the number of customers is an important indicator of the growth of our business and future revenue trends.

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Net Revenue Retention Rate

We believe the growth in use of our platform by our existing customers is an important measure of the health of our business and our future growth prospects. We monitor our dollar-based net revenue retention rate to measure this growth. To calculate this metric, we first specify a measurement period consisting of the trailing two years from our current period end. Next, we define as our measurement cohort the population of customers under capacity contracts that used our platform at any point in the first month of the first year of the measurement period. Starting with the fiscal quarter ended October 31, 2021, the cohorts used to calculate net revenue retention rate include end-customers under a reseller arrangement. Although the impact is not material, we have adjusted all prior periods presented to reflect this inclusion. We then calculate our net revenue retention rate as the quotient obtained by dividing our product revenue from this cohort in the second year of the measurement period by our product revenue from this cohort in the first year of the measurement period. Any customer in the cohort that did not use our platform in the second year remains in the calculation and contributes zero product revenue in the second year. Our net revenue retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity. Since we will continue to attribute the historical product revenue to the consolidated contract, consolidation of capacity contracts within a customer’s organization typically will not impact our net revenue retention rate unless one of those customers was not a customer at any point in the first month of the first year of the measurement period. Although our net revenue retention rate has increased over the periods presented below, we expect our net revenue retention rate to decrease over the longer-term as customers that have consumed our platform for an extended period of time become a larger portion of both our overall customer base and our product revenue that we use to calculate net revenue retention rate, and as their consumption growth primarily relates to existing use cases rather than new use cases.

Customers with Trailing 12-Month Product Revenue Greater than $1 Million

Large customer relationships lead to scale and operating leverage in our business model. Compared with smaller customers, large customers present a greater opportunity for us to sell additional capacity because they have larger budgets, a wider range of potential use cases, and greater potential for migrating new workloads to our platform over time. As a measure of our ability to scale with our customers and attract large enterprises to our platform, we count the number of customers under capacity arrangements that contributed more than $1 million in product revenue in the trailing 12 months. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.


	Three Months Ended
	October 31, 2021		July 31, 2021		April 30, 2021		January 31, 2021		October 31, 2020

Product revenue (in millions)	$	312.5	$	254.6	$	213.8	$	178.3	$	148.5


	October 31, 2021			July 31, 2021			April 30, 2021			January 31, 2021			October 31, 2020

Remaining performance obligations (in millions)(1)	$	1,804.0		$	1,528.7		$	1,431.7		$	1,332.8		$	927.9
Total customers	5,416			4,990			4,532			4,139			3,554
Net revenue retention rate	173		%	170		%	168		%	168		%	162		%
Customers with trailing 12-month product revenue greater than $1 million	148			116			104			77			65

________________

(1)As of October 31, 2021, our RPO was approximately $1.8 billion, of which we expect approximately 55% to be recognized as revenue in the twelve months ending October 31, 2022 based on historical customer consumption patterns and revenue results. The weighted-average remaining life of our capacity contracts was 1.9 years as of October 31, 2021. However, the amount and timing of revenue recognition are generally driven by customers' consumption, which is inherently variable at our customers’ discretion and can extend beyond the original contract term in cases where customers are permitted to roll over unused capacity to future periods, generally upon the purchase of additional capacity at renewal. In addition, our historical customer consumption patterns and revenue results are not necessarily indicative of future results.

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Impact of COVID-19

The ongoing COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The full extent to which the COVID-19 pandemic, including any new variants, may continue to directly or indirectly impact our business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. Although our results of operations, cash flows, and financial condition were not adversely impacted in the three and nine months ended October 31, 2021, we have experienced, and may continue to experience, an adverse impact on certain parts of our business as a result of governmental restrictions and other measures to mitigate the spread of COVID-19, including a lengthening of the sales cycle for some prospective customers and delays in the delivery of professional services and trainings to our customers. We have also experienced, and may continue to experience, a modest positive impact on other aspects of our business, including an increase in consumption of our platform by existing customers. Moreover, during the three and nine months ended October 31, 2021, we continued to see slower growth in certain operating expenses due to reduced business travel and the virtualization or cancellation of customer, partner, and employee events. While slower growth in operating expenses had a short term benefit to our results of operations for the three and nine months ended October 31, 2021, we do not yet have visibility into the full impact this will have on our business. We cannot predict how long we will continue to experience these impacts as regulations and other measures are expected to change over time, and the availability, efficacy, and acceptance of vaccines or other preventative measures remains unclear. However, if our customers or partners experience downturns or uncertainty in their own business operations or revenue resulting from the spread or resurgence of COVID-19, they may decrease or delay their spending, request pricing discounts, or seek renegotiations of their contracts, any of which may result in decreased revenue and cash receipts for us in future periods. In addition, we may experience customer losses, including due to bankruptcy or our customers ceasing operations, which may result in an inability to collect accounts receivable from these customers.

In addition, in response to the spread of COVID-19, we required virtually all of our employees to work remotely to minimize the risk of the virus to our employees and the communities in which we operate, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. During the nine months ended October 31, 2021, a number of employees returned to offices in certain locations, but re-opening of our offices remains limited and may change at any time. Although we expect most of our employees to return to physical offices in the future, the nature and extent of that return is uncertain. As our offices reopen, we expect to incur incremental expenses as we resume onsite services and related in-office costs. Given the uncertainty regarding the length, severity, and ability to combat the COVID-19 pandemic, we cannot reasonably estimate the long-term impact on our future results of operations, cash flows, or financial condition. For additional details, see the section titled “Risk Factors.”

Components of Results of Operations

Revenue

We deliver our platform over the internet as a service. Customers choose to consume our platform under either capacity arrangements, in which they commit to a certain amount of consumption at specified prices, or under on-demand arrangements, in which we charge for use of our platform monthly in arrears. Under capacity arrangements, from which a majority of our revenue is derived, we typically bill our customers annually in advance of their consumption. However, in future periods, we expect to see an increase in capacity contracts providing for quarterly upfront billings and monthly in arrears billings as our customers increasingly want to align consumption and timing of payments. Revenue from on-demand arrangements typically relates to initial consumption as part of customer onboarding and, to a lesser extent, overage consumption beyond a customer’s contracted usage amount or following the expiration of a customer’s contract. Revenue from on-demand arrangements represented 3% of our revenue for each of the three and nine months ended October 31, 2021 and 2020.

We recognize revenue as customers consume compute, storage, and data transfer resources under either of these arrangements. In limited instances, customers pay an annual deployment fee to gain access to a dedicated instance of a virtual private deployment. We recognize the deployment fee ratably over the contract term. Such deployment revenue represented approximately 1% of our revenue for each of the three and nine months ended October 31, 2021 and 2020.

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Our customer contracts for capacity typically have a term of one to four years. The weighted-average term of capacity contracts entered into during the three and nine months ended October 31, 2021 is 2.4 years and 2.2 years, respectively. To the extent our customers enter into such contracts and either consume our platform in excess of their capacity commitments or continue to use our platform after expiration of the contract term, they are charged for their incremental consumption. In many cases, our customer contracts permit customers to roll over any unused capacity to a subsequent order, generally upon the purchase of additional capacity. For those customers who do not have a capacity arrangement, our on-demand arrangements generally have a monthly stated contract term and can be terminated at any time by either the customer or us.

We generate the substantial majority of our revenue from fees charged to our customers based on the storage, compute, and data transfer resources consumed on our platform as a single, integrated offering. We do not make any one of these resources available for consumption without the others. Instead, each of compute, storage, and data transfer work together to drive consumption on our platform. For storage resources, consumption for a given customer is based on the average terabytes per month of all of such customer’s data stored in our platform. For compute resources, consumption is based on the type of compute resource used and the duration of use or, for some features, the volume of data processed. For data transfer resources, consumption is based on terabytes of data transferred, the public cloud provider used, and the region to and from which the transfer is executed.

Because customers have flexibility in their consumption, and we generally recognize revenue on consumption and not ratably over the term of the contract, we do not have the visibility into the timing of revenue recognition from any particular customer contract that typical subscription-based software companies may have. As our customer base grows, we expect our ability to forecast customer consumption in the aggregate will improve. However, in any given period, there is a risk that customers will consume our platform more slowly than we expect, which may cause fluctuations in our revenue and results of operations.

Our revenue also includes professional services and other revenue, which consists of consulting, on-site technical solution services, and training related to our platform. Our professional services revenue is recognized over time based on input measures, including time and materials costs incurred relative to total costs, with consideration given to output measures, such as contract deliverables, when applicable. Other revenue consists of fees from customer training delivered on-site or through publicly available classes.

Allocation of Overhead Costs

Overhead costs that are not substantially dedicated for use by a specific functional group are allocated based on headcount. Such costs include costs associated with office facilities, depreciation of property and equipment, and information technology (IT) related personnel and other expenses, such as software and subscription services.

Cost of Revenue

Cost of revenue consists of cost of product revenue and cost of professional services and other revenue. Cost of revenue also includes allocated overhead costs.

Cost of product revenue. Cost of product revenue consists primarily of (i) third-party cloud infrastructure expenses incurred in connection with our customers’ use of our platform and the deployment and maintenance of our platform on public clouds, including different regional deployments, and (ii) personnel-related costs associated with customer support and maintaining service availability and security of our platform, including salaries, benefits, bonuses, and stock-based compensation. We periodically receive credits from third-party cloud providers that are recorded as a reduction to the third-party cloud infrastructure expenses. Cost of product revenue also includes amortization of internal-use software development costs, amortization of acquired developed technology intangible assets, and expenses associated with software and subscription services dedicated for use by our customer support team and our engineering team responsible for maintaining our platform.

Cost of professional services and other revenue. Cost of professional services and other revenue consists primarily of personnel-related costs associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation, and costs of contracted third-party partners and software tools.

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We intend to continue to invest additional resources in our platform infrastructure and our customer support and professional services organizations to support the growth of our business. Some of these investments, including certain support costs and costs of expanding our business internationally, are incurred in advance of generating revenue, and either the failure to generate anticipated revenue or fluctuations in the timing of revenue could affect our gross margin from period to period.

Operating Expenses

Our operating expenses consist of sales and marketing, research and development, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and sales commissions. Operating expenses also include allocated overhead costs.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel-related expenses associated with our sales and marketing staff, including salaries, benefits, bonuses, and stock-based compensation. Sales and marketing expenses also include draws and sales commissions paid to our sales force and referral fees paid to independent third parties, including amortization of deferred commissions. Sales commissions and referral fees earned upon the origination of the new customer or customer expansion contracts are deferred and then amortized over a period of benefit that we determined to be five years. A portion of the sales commissions paid to the sales force is earned based on the rate of the customers’ consumption of our platform, and a portion of the commissions paid to the sales force is earned upon the origination of the customer contracts. Sales commissions tied to customers’ consumption are expensed in the same period as they are earned. Sales and marketing expenses also include advertising costs and other expenses associated with our marketing and business development programs, including Summit, our user conference, offset by proceeds from such conferences and programs. In addition, sales and marketing expenses are comprised of travel-related expenses, software and subscription services dedicated for use by our sales and marketing organizations, and outside services contracted for sales and marketing purposes. We expect that our sales and marketing expenses will increase in absolute dollars and continue to be our largest operating expense for the foreseeable future as we grow our business. However, we expect that our sales and marketing expenses will decrease as a percentage of our revenue over time.

Research and Development

Research and development expenses consist primarily of personnel-related expenses associated with our research and development staff, including salaries, benefits, bonuses, and stock-based compensation. Research and development expenses also include contractor or professional services fees, third-party cloud infrastructure expenses incurred in developing our platform, and computer equipment, software, and subscription services dedicated for use by our research and development organization. We expect that our research and development expenses will increase in absolute dollars as our business grows, particularly as we incur additional costs related to continued investments in our platform. However, we expect that our research and development expenses will decrease as a percentage of our revenue over time. In addition, research and development expenses that qualify as internal-use software development costs are capitalized, the amount of which may fluctuate significantly from period to period.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses for our finance, legal, human resources, facilities, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation. General and administrative expenses also include external legal, accounting, and other professional services fees, software and subscription services dedicated for use by our general and administrative functions, insurance and other corporate expenses.

As a result of our initial public offering (IPO), we have incurred and expect to continue to incur additional expenses to operate as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations, and increased expenses for insurance, investor relations, and professional services. We expect that our general and administrative expenses will increase in absolute dollars as our business grows but will decrease as a percentage of our revenue over time.

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Interest Income

Interest income consists primarily of interest income earned on our cash equivalents and short-term and long-term investments, net of associated fees.

Other Income (Expense), Net

Other income (expense), net consists primarily of unrealized gains on our strategic investments in equity securities and the effect of exchange rates on our foreign currency-denominated asset and liability balances.

Provision for (Benefit from) Income Taxes

Provision for (benefit from) income taxes consists primarily of income taxes in certain foreign and U.S. state jurisdictions in which we conduct business. We maintain a full valuation allowance against our U.S. and U.K. deferred tax assets because we have concluded that it is more likely than not that the deferred tax assets will not be realized.

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Results of Operations

The following table sets forth our condensed consolidated statements of operations data for the periods indicated (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Revenue	$	334,441	$	159,624	$	835,553	$	401,584
Cost of revenue(1)	120,786		66,681		324,253		159,684
Gross profit	213,655		92,943		511,300		241,900
Operating expenses(1):
Sales and marketing	190,971		134,727		540,678		325,267
Research and development	115,900		74,138		343,783		143,949
General and administrative	64,055		53,532		189,846		116,224
Total operating expenses	370,926		262,397		1,074,307		585,440
Operating loss	(157,271)		(169,454)		(563,007)		(343,540)
Interest income	1,985		1,517		6,787		5,654
Other income (expense), net	1,609		(519)		9,867		(1,561)
Loss before income taxes	(153,677)		(168,456)		(546,353)		(339,447)
Provision for income taxes	1,179		433		1,442		720
Net loss	$	(154,856)	$	(168,889)	$	(547,795)	$	(340,167)

________________

(1)Includes stock-based compensation as follows (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Cost of revenue	$	21,163	$	13,226	$	66,380	$	15,507
Sales and marketing	43,074		39,481		141,463		49,714
Research and development	56,142		39,368		174,788		49,186
General and administrative	24,008		27,066		76,761		43,383
Total stock-based compensation	$	144,387	$	119,141	$	459,392	$	157,790

Prior to September 2020, all stock-based compensation associated with our restricted stock units (RSUs) granted prior to our IPO remained unrecognized as the performance-based vesting condition applicable to such RSUs was not deemed probable until consummated. Upon the effectiveness of our IPO in September 2020, we began recognizing, using an accelerated attribution method, stock-based compensation associated with our RSUs granted prior to our IPO as the performance-based vesting condition applicable to such RSUs was satisfied. We recognized stock-based compensation of $49.3 million and $191.3 million associated with such RSUs for the three and nine months ended October 31, 2021, respectively, compared to $97.0 million for each of the three and nine months ended October 31, 2020, of which $55.5 million related to cumulative stock-based compensation was recognized upon the effectiveness of the IPO, for the portion of the RSUs for which the service-based vesting condition had been fully or partially satisfied.

The overall increase in stock-based compensation for the three and nine months ended October 31, 2021 compared to the three and nine months ended October 31, 2020 was also attributable to additional RSUs granted after our IPO with an increased weighted-average grant date fair value. We recognized stock-based compensation of $79.9 million and $210.2 million associated with these RSUs granted after our IPO for the three and nine months ended October 31, 2021, respectively. The remaining increase was related to our 2020 Employee Stock Purchase Plan (2020 ESPP), which became effective in connection with our IPO, offset by an increase in capitalized internal-use software development costs.

As of October 31, 2021, total compensation cost related to unvested stock-based awards not yet recognized was $1.5 billion, which will be recognized over a weighted-average period of 3.1 years.

See Note 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

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The following table sets forth our condensed consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Revenue	100	%	100	%	100	%	100	%
Cost of revenue(1)	36		42		39		40
Gross profit	64		58		61		60
Operating expenses(1):
Sales and marketing	57		84		65		81
Research and development	35		46		40		36
General and administrative	19		34		23		29
Total operating expenses	111		164		128		146
Operating loss	(47)		(106)		(67)		(86)
Interest income	1		—		1		1
Other income (expense), net	—		—		1		—
Loss before income taxes	(46)		(106)		(65)		(85)
Provision for income taxes	—		—		1		—
Net loss	(46%)		(106%)		(66%)		(85%)

________________

(1)Stock-based compensation included in the table above as a percentage of revenue as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020

Cost of revenue	6	%	8	%	8	%	4	%
Sales and marketing	13		25		17		12
Research and development	17		25		21		12
General and administrative	7		17		9		11
Total stock-based compensation	43%		75%		55%		39%

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Comparison of the Three and Nine Months Ended October 31, 2021 and 2020

Revenue


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
Revenue:
Product	$	312,458	$	148,473	110%	$	780,911	$	375,506	108%
Professional services and other	21,983		11,151		97%	54,642		26,078		110%
Total	$	334,441	$	159,624	110%	$	835,553	$	401,584	108%
Percentage of revenue:
Product	93%		93%			93%		94%
Professional services and other	7%		7%			7%		6%
Total	100%		100%			100%		100%

Product revenue increased $164.0 million and $405.4 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to increased consumption of our platform by existing customers, as evidenced by our net revenue retention rate of 173% as of October 31, 2021. The increase in product revenue was also driven by an increase in capacity sales prices of approximately 4% and 5% for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to increased sales of higher editions of our offerings. We had 148 customers with product revenue of greater than $1 million for the trailing 12 months ended October 31, 2021, an increase from 65 customers as of October 31, 2020. Such customers represented approximately 53% and 46% of our product revenue for each of the trailing 12 months ended October 31, 2021 and 2020, respectively. Approximately 97% and 95% of our revenue for the three and nine months ended October 31, 2021, respectively, was derived from existing customers under capacity arrangements, compared to 95% and 92% for the same periods in the prior year, respectively. Revenue derived from new customers under capacity arrangements represented less than 1% and approximately 3% of our revenue for the three and nine months ended October 31, 2021, respectively, compared to 2% and 5% for the same periods in the prior year, respectively. The remainder was driven by on-demand arrangements. As described in the section titled “Impact of COVID-19,” we have experienced impacts from the ongoing COVID-19 pandemic, including the elongation of sales cycles, that may impact new customer acquisition, the timing of future revenue recognition, and our future growth rates. We continue to carefully monitor the impact of COVID-19 on product revenue, customer acquisitions, and net revenue retention rates.

Professional services and other revenue increased $10.8 million and $28.6 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year as we expanded our professional services organization to help our customers further realize the benefits of our platform.

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Cost of Revenue, Gross Profit (Loss), and Gross Margin


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
Cost of revenue:
Product	$	92,292	$	51,816	78%	$	245,420	$	130,065	89%
Professional services and other	28,494		14,865		92%	78,833		29,619		166%
Total cost of revenue	$	120,786	$	66,681	81%	$	324,253	$	159,684	103%
Gross profit (loss):
Product	$	220,166	$	96,657	128%	$	535,491	$	245,441	118%
Professional services and other	(6,511)		(3,714)		75%	(24,191)		(3,541)		583%
Total gross profit	$	213,655	$	92,943	130%	$	511,300	$	241,900	111%
Gross margin:
Product	70%		65%			69%		65%
Professional services and other	(30%)		(33%)			(44%)		(14%)
Total gross margin	64%		58%			61%		60%
Headcount (at period end)
Product	226		139			226		139
Professional services and other	297		143			297		143
Total headcount	523		282			523		282

Cost of product revenue increased $40.5 million and $115.4 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to an increase of $30.3 million and $68.0 million in third-party cloud infrastructure expenses as a result of increased customer consumption. Personnel-related costs and allocated overhead costs also increased $9.7 million and $43.7 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, as a result of increased stock-based compensation related to our RSUs, increased headcount, and increased overall costs to support the growth in our business.

Our product gross margin was 70% and 69% for the three and nine months ended October 31, 2021, respectively, compared to 65% for each of the three and nine months ended October 31, 2020, primarily due to (i) higher volume-based discounts for our purchases of third-party cloud infrastructure, (ii) an increased percentage of revenue from consumption of computing resources due to better storage compression and from consumption of higher editions of our offerings, and (iii) increased scale across our cloud infrastructure regions, partially offset by the increase in stock-based compensation. While we expect our product gross margin to increase for the fiscal year ending January 31, 2022, compared to the fiscal year ended January 31, 2021, fluctuations in the mix and timing of customers' consumption, which is inherently variable at our customers' discretion, whether or not a customer contracts with us through our marketplace listings, our discounting practices, including as a result of changes to the competitive environment, and the extent of our investments in our operations, including performance improvements that may make our platform more efficient, could hinder any improvement in our product gross margin.

Cost of professional services and other revenue increased $13.6 million and $49.2 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to an increase of $13.0 million and $48.2 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business and increased stock-based compensation primarily related to our RSUs.

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Professional services and other gross margins improved for the three months ended October 31, 2021, compared to the same period in the prior year, largely due to cumulative stock-based compensation recognized during the three months ended October 31, 2020 upon the effectiveness of our IPO. See Note 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details. Professional services and other gross margins declined significantly for the nine months ended October 31, 2021, compared to the same period in the prior year, primarily due to the overall increase in stock-based compensation. We do not believe the year-over-year changes in professional services and other gross margins are meaningful given that we are continuing to scale our professional services organization and our professional services and other revenue represents a small percentage of our revenue.

Sales and Marketing


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
Sales and marketing	$	190,971	$	134,727	42%	$	540,678	$	325,267	66%
Percentage of revenue	57%		84%			65%		81%
Headcount (at period end)	1,672		1,177			1,672		1,177

Sales and marketing expenses increased $56.2 million and $215.4 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to an increase of $37.4 million and $180.0 million in personnel-related costs (excluding commission expenses) and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business and increased stock-based compensation primarily related to our RSUs and the 2020 ESPP.

Expenses associated with sales commissions and draws paid to our sales force, including amortization of deferred commissions, and third-party referral fees increased $10.3 million and $23.0 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to an increase in customers’ consumption of our platform. The remainder was driven by an increase of $4.4 million and $10.3 million in advertising costs and other expenses associated with our marketing programs for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year.

The overall increase in sales and marketing expenses for the nine months ended October 31, 2021 was partially offset by lower travel and event expenses as we continue to impose certain travel restrictions and replace in-person events with digital events in response to the COVID-19 pandemic. These changes resulted in a $2.0 million reduction in travel-related expenses and a $1.8 million reduction in expenses relating to our user conferences and events, for the nine months ended October 31, 2021 compared to the same period in the prior year.

Research and Development


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
Research and development	$	115,900	$	74,138	56%	$	343,783	$	143,949	139%
Percentage of revenue	35%		46%			40%		36%
Headcount (at period end)	705		440			705		440

Research and development expenses increased $41.8 million and $199.8 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to an increase of $34.4 million and $179.3 million in personnel-related costs and allocated overhead costs, as a result of increased headcount and overall costs to support the growth in our business and increased stock-based compensation related to our RSUs, partially offset by increased capitalized internal-use software development costs.

Additionally, third-party cloud infrastructure expenses incurred in developing our platform increased $4.7 million and $14.8 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year.

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General and Administrative


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
General and administrative	$	64,055	$	53,532	20%	$	189,846	$	116,224	63%
Percentage of revenue	19%		34%			23%		29%
Headcount (at period end)	657		354			657		354

General and administrative expenses increased $10.5 million and $73.6 million for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, primarily due to an increase of $10.1 million and $28.6 million in personnel-related costs (excluding stock-based compensation) and allocated overhead costs as a result of increased headcount and overall costs to support the growth in our business.

Stock-based compensation increased $33.4 million for the nine months ended October 31, 2021, compared to the same period in the prior year, primarily attributable to additional RSUs granted as a result of increased headcount. Stock-based compensation decreased $3.1 million for the three months ended October 31, 2021, compared to the same period in the prior year, primarily driven by the cumulative stock-based compensation of $11.6 million recognized during the three months ended October 31, 2020 upon the effectiveness of our IPO. See Note 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details. The overall decrease in stock-based compensation was partially offset by an increase of $6.2 million related to additional RSUs granted after our IPO with an increased weighted-average grant date fair value.

The remaining increase of $3.5 million and $11.6 million in general and administrative expenses for the three and nine months ended October 31, 2021, respectively, compared to the same periods in the prior year, was attributable to increased insurance expenses, other corporate expenses, and outside services primarily related to external legal, accounting, and other professional services fees, to support the normal course of operating as a public company and our continued growth.

Other Income (Expense), Net


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
Unrealized gains on strategic investments in equity securities	$	455	$	—	NM	$	8,515	$	—	NM
Other	1,154		(519)		(322%)	1,352		(1,561)		(187%)
Other income (expense), net	$	1,609	$	(519)	(410%)	$	9,867	$	(1,561)	(732%)

NM - Not meaningful.

Other income (expense), net increased $2.1 million for the three months ended October 31, 2021 compared to the same period in the prior year, as we had net gains on foreign currency transactions for the three months ended October 31, 2021 and net losses on foreign currency transactions for the three months ended October 31, 2020.

Other income (expense), net increased $11.4 million for the nine months ended October 31, 2021 compared to the same period in the prior year, primarily due to unrealized gains on our strategic investments in equity securities recorded during the nine months ended October 31, 2021.

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Provision for Income Taxes


	Three Months Ended October 31,					Nine Months Ended October 31,
	2021		2020		% Change	2021		2020		% Change

	(dollars in thousands)					(dollars in thousands)
Loss before income taxes	$	(153,677)	$	(168,456)	(9%)	$	(546,353)	$	(339,447)	61%
Provision for income taxes	1,179		433		172%	1,442		720		100%
Effective tax rate	(0.8%)		(0.3%)			(0.3%)		(0.2%)

We maintain a full valuation allowance on our U.S. and U.K. deferred tax assets, and the significant components of our recorded tax expense are current cash taxes in various jurisdictions. The cash tax expenses are impacted by each jurisdiction’s individual tax rates, laws on the timing of recognition of income and deductions, and availability of net operating losses and tax credits. Our effective tax rate might fluctuate significantly on a quarterly basis and could be adversely affected to the extent earnings are lower than forecasted in countries that have lower statutory rates and higher than forecasted in countries that have higher statutory rates.

Liquidity and Capital Resources

Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers as further detailed below.

Our IPO resulted in aggregate net proceeds of $3.7 billion, after underwriting discounts of $121.7 million. We also received aggregate proceeds of $500.0 million related to certain concurrent private placements, and did not pay any underwriting discounts or commissions with respect to the shares that were sold in these private placements.

As of October 31, 2021, our principal sources of liquidity were cash, cash equivalents, and short-term and long-term investments totaling $5.1 billion. Our investments primarily consist of corporate notes and bonds, commercial paper, money market funds, U.S. government and agency securities, and certificates of deposit.

We believe that our existing cash, cash equivalents, and short-term and long-term investments will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, expenditures related to our headcount growth, 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 price at which we are able to purchase public cloud capacity, expenses associated with our international expansion, the introduction of platform enhancements, and the continuing market adoption of our platform. We may continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may, as a result of those arrangements or the general expansion of our business, 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, results of operations, and financial condition.

The following table shows a summary of our cash flows for the periods presented (in thousands):


	Nine Months Ended October 31,
	2021		2020

Net cash provided by (used in) operating activities	$	31,281	$	(65,031)
Net cash used in investing activities	$	(56,967)	$	(875,038)
Net cash provided by financing activities	$	142,671	$	4,753,012

Operating Activities

Our largest source of operating cash is payments received from our customers. Our primary uses of cash from operating activities are for personnel-related expenses, sales and marketing expenses, third-party cloud infrastructure expenses, and overhead costs. We have supplemented working capital through net proceeds from the sale of equity securities.

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Net cash provided by (used in) operating activities mainly consists of our net loss adjusted for certain non-cash items, primarily consisting of (i) stock-based compensation, net of amounts capitalized, (ii) net amortization of premiums on investments, (iii) amortization of deferred commissions, (iv) amortization of operating lease right-of-use assets, and (v) depreciation of property and equipment and amortization of acquired intangible assets, and changes in operating assets and liabilities during each period.

For the nine months ended October 31, 2021, net cash provided by operating activities was $31.3 million, primarily consisting of our net loss of $547.8 million, adjusted for non-cash charges of $558.7 million, and net cash inflows of $20.4 million provided by changes in our operating assets and liabilities. The main drivers of the changes in operating assets and liabilities during the nine months ended October 31, 2021 were (i) a $124.0 million increase in deferred revenue due to invoicing for prepaid capacity agreements outpacing revenue recognition, (ii) a $43.1 million increase in accrued expenses and other liabilities primarily due to increased headcount and growth in our business, and (iii) a $39.1 million decrease in accounts receivable primarily due to timing of billings, as we have received a higher volume of orders from new and existing customers in the fourth fiscal quarter of each year as a result of industry buying patterns, partially offset by (i) a $112.8 million increase in prepaid expenses and other assets primarily driven by increased prepaid third-party cloud infrastructure expenses, (ii) a $52.9 million increase in deferred commissions earned on bookings, and (iii) a $24.8 million decrease in operating lease liabilities due to payments related to our operating lease obligations.

For the nine months ended October 31, 2020, net cash used in operating activities was $65.0 million, primarily consisting of our net loss of $340.2 million, adjusted for non-cash charges of $215.7 million and net cash inflows of $59.5 million provided by changes in our operating assets and liabilities, net of the effect of business combinations. The main drivers of the changes in operating assets and liabilities, net of the effect of business combinations, during the nine months ended October 31, 2020 were (i) a $111.7 million increase in deferred revenue, resulting primarily from increased prepaid capacity arrangements, (ii) a $22.5 million increase in accrued expenses and other liabilities due to increased headcount, growth in our business, and employee contributions under the 2020 ESPP which became effective in connection with our IPO, and (iii) a $9.2 million decrease in accounts receivable due to timing of collections, partially offset by (i) a $29.5 million increase in prepaid expenses and other assets, primarily driven by prepaid insurance as a result of becoming a public company, (ii) a $27.3 million increase in deferred commissions earned on bookings, and (iii) a $23.4 million decrease in operating lease liabilities due to payments related to our operating lease obligations.

Net cash provided by operating activities was $31.3 million for the nine months ended October 31, 2021, compared to the net cash used in operating activities of $65.0 million for the nine months ended October 31, 2020, primarily due to an increase of $485.9 million in cash collected from customers resulting from increased sales. This was partially offset by increased expenditures due to an increase in headcount and growth in our business. We expect net cash used in operating activities to decrease for the fiscal year ending January 31, 2022 compared to the fiscal year ended January 31, 2021.

Investing Activities

Net cash used in investing activities for the nine months ended October 31, 2021 was $57.0 million, primarily as a result of net purchases of investments, and, to a lesser extent, purchases of property and equipment to support our office facilities, purchases of intangible assets, and capitalized internal-use software development costs.

Net cash used in investing activities for the nine months ended October 31, 2020 was $875.0 million, primarily as a result $834.8 million of net purchases of investments, and, to a lesser extent, purchases of property and equipment to support additional office facilities, purchases of intangible assets, cash paid for a business combination, and capitalized internal-use software development costs.

Financing Activities

Net cash provided by financing activities for the nine months ended October 31, 2021 was $142.7 million, primarily as a result of proceeds from the issuance of equity securities under our equity incentive plans.

Net cash provided by financing activities for the nine months ended October 31, 2020 was $4.8 billion, primarily as a result of $4.2 billion of aggregate net proceeds from our IPO and the concurrent private placements completed in September 2020, net of underwriting discounts, as well as $509.8 million in proceeds from the issuance of equity securities.

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Contractual Obligations and Commitments

There were no material changes outside of the ordinary course of business in our commitments and contractual obligations for the nine months ended October 31, 2021 from the commitments and contractual obligations disclosed in the section titled “Management's Discussion and Analysis of Financial Condition and Results of Operations,” set forth in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, which was filed with the SEC on March 31, 2021.

Off-Balance Sheet Arrangements

We did not have, during any of the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

There have been no material changes to our critical accounting policies and estimates as compared to those described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, which was filed with the SEC on March 31, 2021.

Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included elsewhere on this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) 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. Based on the market value of our Class A common stock held by non-affiliates as of the last business day of our fiscal second quarter ended July 31, 2021, we will cease to be an emerging growth company as of January 31, 2022.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.

Interest Rate Risk

As of October 31, 2021, we had $5.1 billion of cash, cash equivalents, and short-term and long-term investments in a variety of securities, including corporate notes and bonds, commercial paper, money market funds, U.S. government and agency securities, and certificates of deposit. In addition, we had $17.0 million of restricted cash primarily due to outstanding letters of credit established in connection with lease agreements for our facilities. Our cash, cash equivalents, and short-term and long-term investments are held for working capital purposes. We do not enter into investments for trading or speculative purposes. A hypothetical 10% increase or decrease in interest rates would have resulted in a decrease of $244.9 million or an increase of $10.8 million, respectively, in the market value of our cash equivalents, and short-term and long-term investments as of October 31, 2021.

Foreign Currency Exchange Risk

Our reporting currency is the United States dollar. The functional currency of our foreign subsidiaries is the U.S. dollar, the Euro, or the Indian Rupee. The majority of our sales are currently denominated in U.S. dollars, although we have recently started executing sales in Euros. Therefore our revenue is not currently subject to significant foreign currency risk, but that may change in the future. Our operating expenses are denominated in the currencies of the countries in which our operations are located, which is primarily in the United States and to a lesser extent in Europe, Canada, and the Asia Pacific region. Our condensed consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments, although we may choose to do so in the future. We do not believe a 10% increase or decrease in the relative value of the U.S. dollar would currently have a material impact on our operating results.

Other Market Risk

Our strategic investments portfolio includes investments in privately-held and publicly-traded companies. We plan to continue these types of strategic investments as part of our corporate development program. We anticipate additional volatility to our condensed consolidated statements of operations as a result of changes in market prices, changes resulting from observable transactions for the same or similar investments of the same issuer, and impairments to our strategic investments. As of October 31, 2021 and January 31, 2021, the carrying amount of these investments was $124.7 million and $41.5 million, respectively.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the disclosure controls and procedures are met. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we have been and will continue to be subject to legal proceedings and claims. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners, and our customers by determining the scope, enforceability, and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described below. You should consider and read carefully all of the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes, before making an investment decision. The risks described below are not the only ones we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, or results of operations. In such case, the trading price of our common stock could decline. You should not interpret our disclosure of any of the following risks to imply that such risks have not already materialized.

Risk Factors Summary

Below is a summary of the principal factors that make an investment in our common stock speculative or risky:

•We have a limited operating history, which makes it difficult to forecast our future results of operations.

•We may not have visibility into our future financial position and results of operations.

•We have a history of operating losses and may not achieve or sustain profitability in the future.

•The markets in which we operate are highly competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed.

•If we fail to innovate in response to changing customer needs and new technologies and other market requirements, our business, financial condition, and results of operations could be harmed.

•If we or our third-party service providers experience an actual or perceived security breach or unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform, our platform may be perceived as not being secure, our reputation may be harmed, demand for our platform may be reduced, and we may incur significant liabilities.

•We could suffer disruptions, outages, defects, and other performance and quality problems with our platform or with the public cloud and internet infrastructure on which it relies.

•We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price could decline.

•Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products and platform.

•Sales efforts to large customers involve risks that may not be present or that are present to a lesser extent with respect to sales to smaller organizations.

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•The ongoing COVID-19 pandemic could have an adverse impact on our business, operations, and the markets and communities in which we, our partners, and customers operate.

Risks Related to Our Business and Operations

We have a limited operating history, which makes it difficult to forecast our future results of operations.

We were founded in 2012 and first offered our platform for sale in 2014. Our revenue was $334.4 million and $159.6 million for the three months ended October 31, 2021 and 2020, respectively, and $835.6 million and $401.6 million for the nine months ended October 31, 2021 and 2020, respectively. However, you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. As a result of our limited operating history, our ability to accurately forecast our future results of operations, including revenue, RPO, and the percentage of RPO we expect to be recognized as revenue in future periods, is limited and subject to a number of uncertainties, including our ability to plan for and model future growth and platform consumption. Our historical revenue growth should not be considered indicative of our future performance.

Further, in future periods, our revenue growth could slow or our revenue could decline for a number of reasons, including slowing demand for our platform, increased competition, changes to technology, a decrease in the growth of our overall market, or our failure, for any reason, to continue to take advantage of growth opportunities. We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described below. If our assumptions regarding these risks and uncertainties and our future revenue growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, and our business could suffer.

We may not have visibility into our future financial position and results of operations.

Customers consume our platform by using compute, storage, and data transfer resources. Unlike a subscription-based business model, in which revenue is recognized ratably over the term of the subscription, we generally recognize revenue on consumption. Because our customers have flexibility in the timing of their consumption, we do not have the visibility into the timing of revenue recognition that a typical subscription-based software company has. There is a risk that customers will consume our platform more slowly than we expect, and our actual results may differ from our forecasts. Further, investors and securities analysts may not understand how our consumption-based business model differs from a subscription-based business model, and our business model may be compared to subscription-based business models. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class actions.

We have a history of operating losses and may not achieve or sustain profitability in the future.

We have experienced net losses in each period since inception. We generated net losses of $154.9 million and $168.9 million for the three months ended October 31, 2021 and 2020, respectively, and $547.8 million and $340.2 million for the nine months ended October 31, 2021 and 2020, respectively. As of October 31, 2021 and January 31, 2021, we had an accumulated deficit of $1.8 billion and $1.2 billion, respectively. We expect our costs and expenses to increase in future periods. In particular, we intend to continue to invest significant resources to further develop our platform and expand our sales, marketing, and professional services teams. In addition, our platform currently operates on public cloud infrastructure provided by Amazon Web Services (AWS), Microsoft Azure (Azure), and Google Cloud Platform (GCP), and our costs and gross margins are significantly influenced by the prices we are able to negotiate with these public cloud providers, which in certain cases are also our competitors. If we fail to meet any minimum commitments under these cloud infrastructure contracts, we may be required to pay the difference, and our results of operations could be negatively impacted. We will also incur increased general and administrative expenses associated with our growth, including costs related to internal systems and operating as a public company. Our efforts to grow our business may be costlier than we expect, or our revenue growth rate may be slower than we expect, and we may not be able to increase our revenue enough to offset the increase in operating expenses resulting from these investments. If we are unable to achieve and sustain profitability, or if we are unable to achieve the revenue growth that we expect from these investments, the value of our business and common stock may significantly decrease.

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The markets in which we operate are highly competitive, and if we do not compete effectively, our business, financial condition, and results of operations could be harmed.

The markets in which we operate are rapidly evolving and highly competitive. As these markets continue to mature and new technologies and competitors enter such markets, we expect competition to intensify. Our current competitors include:

•large, well-established, public cloud providers that generally compete in all of our markets, including AWS, Azure, and GCP;

•less-established public and private cloud companies with products that compete in some of our markets;

•other established vendors of legacy database solutions or big data offerings; and

•new or emerging entrants seeking to develop competing technologies.

We compete based on various factors, including price, performance, breadth of use cases, multi-cloud availability, brand recognition and reputation, customer support, and differentiated capabilities, including ease of implementation and data migration, ease of administration and use, scalability and reliability, data governance, security, and compatibility with existing standards and third-party products. Many of our competitors have substantially greater brand recognition, customer relationships, and financial, technical, and other resources than we do, and may be able to respond more effectively than us to new or changing opportunities, technologies, standards, customer requirements, and buying practices.

We currently only offer our platform on the public clouds provided by AWS, Azure, and GCP, which are also some of our primary competitors. Currently, a substantial majority of our business is run on the AWS public cloud. There is risk that one or more of these public cloud providers could use its respective control of its public clouds to embed innovations or privileged interoperating capabilities in competing products, bundle competing products, provide us unfavorable pricing, leverage its public cloud customer relationships to exclude us from opportunities, and treat us and our customers differently with respect to terms and conditions or regulatory requirements than it would treat its similarly situated customers. Further, they have the resources to acquire, invest in, or partner with existing and emerging providers of competing technology and thereby accelerate adoption of those competing technologies. All of the foregoing could make it difficult or impossible for us to provide products and services that compete favorably with those of the public cloud providers.

For all of these reasons, competition may negatively impact our ability to maintain and grow consumption of our platform or put downward pressure on our prices and gross margins, any of which could materially harm our reputation, business, results of operations, and financial condition.

If we fail to innovate in response to changing customer needs and new technologies and other market requirements, our business, financial condition, and results of operations could be harmed.

We compete in markets that evolve rapidly. We believe that the pace of innovation will continue to accelerate as customers increasingly base their purchases of cloud data platforms on a broad range of factors, including performance and scale, markets addressed, types of data processed, ease of data ingestion, user experience, and data governance and regulatory compliance. We introduced data warehousing on our platform in 2014 as our core use case, and our customers subsequently began using our platform for additional use cases, including data lake, data engineering, data science, data application development, and data sharing. Our future success depends on our ability to continue to innovate and increase customer adoption of our platform and the Data Cloud. Further, the value of our platform to customers is increased to the extent they are able to use it for all of their data. We need to continue to invest in technologies, services, and partnerships that increase the types of data available and processed on our platform and the ease with which customers can ingest data into our platform. We must also continue to enhance our data sharing and data marketplace capabilities so customers can share their data with internal business units, customers, and other third parties, and acquire additional third-party data to combine with their own data in order to gain additional business insights. In addition, our platform requires third-party public cloud infrastructure to operate. Currently, we use public cloud offerings provided by AWS, Azure, and GCP. We will need to continue to innovate to optimize our offerings for these and other public clouds that our customers require, particularly as we expand internationally. Further, the markets in which we compete are subject to evolving industry standards and regulations, resulting in increasing data governance and compliance requirements for us and our customers and partners. To the extent we expand further into the public sector and highly regulated industries, our platform may need to address additional requirements specific to those industries.

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If we are unable to enhance our platform to keep pace with these rapidly evolving customer requirements, or if new technologies emerge that are able to deliver competitive products at lower prices, more efficiently, more conveniently, or more securely than our platform, our business, financial condition, and results of operations could be adversely affected.

If we or our third-party service providers experience an actual or perceived security breach or unauthorized parties otherwise obtain access to our customers’ data, our data, or our platform, our platform may be perceived as not being secure, our reputation may be harmed, demand for our platform may be reduced, and we may incur significant liabilities.

Our platform processes, stores, and transmits our customers’ and partners’ proprietary, confidential, and sensitive data, such as personal information, protected health information, and financial data. Our platform is built to be available on the infrastructure of third-party public cloud providers, such as AWS, Azure, and GCP. We also use third-party service providers and sub-processors to help us deliver services to our customers and their end-users, as well as for our internal business operations. These vendors may store or process proprietary, confidential, and sensitive data such as personal information, protected health information, or other information of our employees, our partners, our customers, or our customers’ end-users. We collect such information from individuals located both in the United States and abroad and may store or process such information outside the country in which it was collected. While we, our third-party service providers, and our sub-processors have implemented or are contractually obligated to implement security measures designed to protect against security breaches, these measures could fail or may be insufficient, resulting in the unauthorized disclosure, access, acquisition, modification, misuse, destruction, or loss of our, our customers’, our customers’ end users’, or our partners’ data. Any security breach of our platform, our operational systems, our software (including open source software), physical facilities, or the systems of our third-party service providers or sub-processors, or the perception that one has occurred, could result in litigation, indemnity obligations, regulatory enforcement actions, investigations, fines, penalties, mitigation and remediation costs, disputes, reputational harm, diversion of management’s attention, and other liabilities and damage to our business. Even though we may not control the security measures of our third-party service providers or sub-processors, we may be responsible for any breach of such measures.

Cyber-attacks, denial-of-service attacks, ransomware attacks, including those from organized criminal threat actors, nation-states, and nation-state supported actors, business email compromises, computer malware, viruses, and social engineering (including phishing) are prevalent in our industry and our customers’ and partners’ industries. In addition to such attacks, we may experience unavailable systems, unauthorized accidental or unlawful access, acquisition, or disclosure of information due to employee error, theft or misuse, sophisticated nation-state and nation-state supported actors, and advanced persistent threat intrusions. The techniques used to sabotage or to obtain unauthorized access to our platform, systems, networks, or physical facilities in which data is stored or through which data is transmitted change frequently, and we may be unable to implement adequate preventative measures or stop security breaches prior to or while they are occurring. The recovery systems, security protocols, network protection mechanisms, and other security measures that we have integrated into our platform, systems, networks, and physical facilities, which are designed to protect against, detect, and minimize security breaches, may not be adequate to prevent, detect, or minimize service interruption, system failure, or data loss. We have previously been, and may in the future become, the target of cyber-attacks by third parties seeking unauthorized access to our or our customers’ or partners’ data or to disrupt our operations or ability to provide our services. Third parties may also exploit vulnerabilities in, or obtain unauthorized access to, platforms, systems, networks, or physical facilities utilized by our third-party processors.

We have contractual and other legal obligations to notify relevant stakeholders of security breaches. Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data. In addition, our agreements with certain customers and partners may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers or partners to lose confidence in the effectiveness of our security measures, divert management’s attention, lead to governmental investigations, and require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach. Any security breach or effort to mitigate security vulnerabilities could result in unexpected interruptions, delays, cessation of service, and other harm to our business and our competitive position.

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A security breach may cause us to breach customer contracts. Our agreements with certain customers may require us to use industry-standard or reasonable measures to safeguard proprietary, personal, or confidential information. A security breach could lead to claims by our customers, their end-users, or other relevant stakeholders that we have failed to comply with such contractual or other legal obligations. As a result, we could be subject to legal action (including the imposition of fines or penalties) and our customers could end their relationships with us. There can be no assurance that any limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.

Litigation resulting from security breaches may adversely affect our business. Unauthorized access to our platform, systems, networks, or physical facilities could result in litigation with our customers, our customers’ end-users, or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our platform capabilities in response to such litigation, which could have an adverse effect on our business. If a security breach were to occur, and the confidentiality, integrity or availability of our data or the data of our partners, our customers, or our customers’ end-users was disrupted, we could incur significant liability, or our platform, systems, or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.

If we fail to detect or remediate a security breach in a timely manner, or a breach otherwise affects a large amount of data of one or more customers or partners, or if we suffer a cyber-attack that impacts our ability to operate our platform, we may suffer material damage to our reputation, business, financial condition, and results of operations. Further, our insurance coverage may not be adequate for data security, indemnification obligations, or other liabilities. The successful assertion of one or more large claims against us that exceeds our available insurance coverage or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements) could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim. Our risks are likely to increase as we continue to expand our platform and geographic footprint, grow our customer and partner base, and process, store, and transmit increasingly large amounts of data.

In addition, our workforce is generally working remotely and may continue to do so following the COVID-19 pandemic, which could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to security breaches or business disruptions. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, or prospects.

We could suffer disruptions, outages, defects, and other performance and quality problems with our platform or with the public cloud and internet infrastructure on which it relies.

Our business depends on our platform to be available without disruption. We have experienced, and may in the future experience, disruptions, outages, defects, and other performance and quality problems with our platform. We have also experienced, and may in the future experience, disruptions, outages, defects, and other performance and quality problems with the public cloud and internet infrastructure on which our platform relies. These problems can be caused by a variety of factors, including introductions of new functionality, vulnerabilities and defects in proprietary and open source software, human error or misconduct, natural disasters (such as tornadoes, earthquakes, or fires), capacity constraints, design limitations, or denial of service attacks or other security-related incidents.

Further, if our contractual and other business relationships with our public cloud providers are terminated, suspended, or suffer a material change to which we are unable to adapt, such as the elimination of services or features on which we depend, we could be unable to provide our platform and could experience significant delays and incur additional expense in transitioning customers to a different public cloud provider.

Any disruptions, outages, defects, and other performance and quality problems with our platform or with the public cloud and internet infrastructure on which it relies, or any material change in our contractual and other business relationships with our public cloud providers, could result in reduced use of our platform, increased expenses, including service credit obligations, and harm to our brand and reputation, any of which could have a material adverse effect on our business, financial condition, and results of operations.

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We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price could decline.

Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:

•fluctuations in demand for or pricing of our platform;

•fluctuations in usage of our platform;

•our ability to attract new customers;

•our ability to retain existing customers;

•customer expansion rates;

•timing, amount, and cost of our investments to expand the capacity of our public cloud providers;

•seasonality;

•investments in new features and functionality;

•fluctuations in consumption resulting from our introduction of new features or capabilities to our systems, including features or capabilities that may increase or decrease the consumption required to execute existing or future workloads, like better storage compression;

•the timing of purchases;

•the speed with which customers are able to migrate data onto our platform;

•fluctuations or delays in purchasing decisions in anticipation of new products or enhancements by us or our competitors;

•changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;

•our ability to control costs, including our operating expenses;

•the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including commissions;

•the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments, and other non-cash charges;

•the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining and motivating existing employees;

•the effects and timing of acquisitions and their integration;

•general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers and partners participate;

•health epidemics or pandemics, such as the COVID-19 pandemic;

•the impact, or timing of our adoption, of new accounting pronouncements;

•changes in regulatory or legal environments that may cause us to incur, among other things, expenses associated with compliance;

•the overall tax rate for our business, which may be affected by the mix of income we earn in the United States and in jurisdictions with different tax rates, the effects of stock-based compensation, and the effects of changes in our business;

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•the impact of changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued and may significantly affect the effective tax rate of that period;

•rising inflation and our ability to control costs, including our operating expenses;

•fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;

•fluctuations or impairments in the market values of our portfolio or strategic investments, or in interest rates;

•changes in the competitive dynamics of our market, including consolidation among competitors or customers; and

•significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our platform.

Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class actions.

Failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our products and platform.

We must expand our sales and marketing organization to increase our sales to new and existing customers. We plan to continue expanding our direct sales force, both domestically and internationally, particularly our direct enterprise sales organization focused on sales to the world’s largest organizations. It may require significant time and resources to effectively onboard new sales and marketing personnel, and our continued remote working conditions could result in less effective, more operationally complicated, or lengthier onboarding processes. We also plan to continue to dedicate significant resources to sales and marketing programs that are focused on these large organizations. Once a new customer begins using our platform, our sales team will need to continue to focus on expanding consumption with that customer. All of these efforts will require us to invest significant financial and other resources, including in industries and sales channels in which we have limited experience to date. Our business and results of operations will be harmed if our sales and marketing efforts generate increases in revenue that are smaller than anticipated. We may not achieve anticipated revenue growth from expanding our sales force if we are unable to hire, develop, integrate, and retain talented and effective sales personnel, if our new and existing sales personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective.

Sales efforts to large customers involve risks that may not be present or that are present to a les